TMI Tax Updates e-Newsletter
Apr 11,2026

Validity of Service of recovery show cause notice and the Order-in-Original - want of proper service - denial of opportunity of hearing - Principles of natural justice - non-receipt of the show cause notice, non-furnishing of the adjudication materials and absence of any hearing before the Order-in-Original.

Principles of natural justice - Opportunity of hearing - HELD THAT: - The Court held that, in the circumstances placed before it, the ends of justice required the proceedings to be undertaken afresh so that the petitioners could reply to the original show cause notice and be heard. Accepting this course, the Court directed the respondents to furnish a copy of the original show cause notice, allow time for reply, and grant personal hearing before completing the proceedings in accordance with law. The interference with the adjudication order and recovery notice thus followed from the need to secure compliance with natural justice rather than from any adjudication on the merits of the demand. [Paras 6, 7, 8, 9]

The Order-in-Original and the recovery notice were set aside, and the respondents were directed to recommence the proceedings from the stage of service of the original show cause notice, with time to reply and personal hearing.

Final Conclusion: The writ petition was disposed of by setting aside the adjudication order and the recovery notice and by directing fresh proceedings after furnishing the original show cause notice and granting adequate opportunity of reply and hearing to the petitioners.

Writ petitions challenging the GST appellate orders and recovery notices - avail the statutory mechanism under Section 112 of the CGST Act and the relevant CBIC circulars - Pre-deposit - Stay of recovery - compliance with the necessary conditions of circular No. 224/18/2024-GST of the Central Board of Indirect Taxes and Customs dated 11.07.2024 by filing an undertaking/declaration with the jurisdictional proper officer.

Recovery of outstanding GST dues pending constitution of Appellate Tribunal - HELD THAT: - The Court noted that explicit guidelines had been issued for recovery of outstanding dues in cases where the first appellate order had been passed but the Appellate Tribunal was not yet operational. In view of those guidelines, the Court held that no further adjudication survived in the writ petitions. It reserved liberty to the petitioner to avail the benefit contemplated by the circular by filing the required undertaking before the jurisdictional proper officer and by making the statutory pre-deposit under section 112(8); upon such compliance, recovery of the remaining demand would remain stayed in terms of section 112(9). The Court further directed that if the required deposit was not made within the time granted, the protection under the order would cease. [Paras 11, 12, 13]

Liberty was granted to the petitioner to comply with the circular and make the requisite pre-deposit within the stipulated time, whereupon recovery of the balance demand would remain stayed; failing such deposit, the protection would lapse.

Final Conclusion: The writ petitions were disposed of without examining the merits of the underlying input tax credit dispute, the Court holding that the matter was governed by the prevailing circular on recovery pending operationalisation of the Appellate Tribunal. Interim protection against further recovery was made conditional upon filing the prescribed undertaking and making the requisite pre-deposit within the time granted.

Levy of GST on seigniorage fee/royalty for quarrying and transporting minerals - Reverse Charge Mechanism (RCM) - abatement of proceedings pending Supreme Court decision.

GST on seigniorage fee/royalty - HELD THAT: - The Court did not decide the merits of the levy. It held that, the facts being almost identical to those in S. Pichandhi Proprietor of Sri Murugan Ready Mix Concrete and Blue Metal Industries, Vellore Vs. The Deputy State Tax Officer, Vellore Rural Assessment Circle, Vellore [2025 (9) TMI 1765 - MADRAS HIGH COURT], the same order should apply here as well. The determinative basis was that the dispute concerning levy of GST on seigniorage fee/royalty paid for quarrying mines and minerals is pending before the Supreme Court; therefore, the proceedings were to remain in abeyance and the respondent was to proceed thereafter in accordance with law on the same terms as in the earlier order. [Paras 6]

The writ petitions were disposed of on the same terms as the earlier order, with the impugned proceedings not being finally adjudicated on merits pending the Supreme Court's decision on the levy issue.

Final Conclusion: The Court declined to examine the substantive GST demand on seigniorage fee/royalty at this stage and disposed of the writ petitions by applying the earlier identical order. The proceedings are to abide by the same terms pending the Supreme Court's decision on the levy question.

Challenged the assessment order imposing late fee for non-filing of Form GSTR-9.

Late fee for delayed filing of annual return - HELD THAT: - The Court recorded the common submission of both sides that the controversy stood covered by Ms.Kandan Hardware Mart and others Vs. The Assistant Commissioner (ST) (FAC), Park Town Assessment Circle, Chennai and others [2026 (1) TMI 383 - MADRAS HIGH COURT]. Accepting that position, the Court did not independently examine the merits of the levy, but remitted the matter to the respondent to pass a fresh order on merits in the light of that decision, after giving due notice to the petitioner. [Paras 5, 6, 7]

The impugned assessment was remitted for fresh consideration in the light of the earlier binding decision, with a direction to issue notice before passing a fresh order.

Final Conclusion: The writ petition was disposed of by remitting the matter to the respondent for a fresh order on merits in the light of the earlier decision of this Court governing levy of late fee for delayed filing of annual return. The respondent was directed to give due notice before passing such order.

Validity of the assessment order confirming tax under the GST proceedings - pre-deposit and filing of supporting documents - Failure to furnish supporting documents to substantiate exemption claim.

Failure to furnish supporting documents to substantiate exemption claim - HELD THAT: - The Court held that the petitioner ought to have filed a proper reply along with supporting material to substantiate its defence regarding the income claimed to be outside or exempt from GST. At the same time, the respondent could not be faulted for having passed the order within the statutory timeline under Section 73. To balance the interests of the assessee and the revenue, the Court directed de novo adjudication limited to defect No. 1, conditional upon the petitioner depositing 5% of the disputed tax and filing a reply with the requisite documents, whereupon a fresh order on merits was to be passed and the bank attachment, if any, would stand vacated subject to compliance. [Paras 10, 11, 12, 13, 14]

The matter was remitted on the above conditions; failing compliance, the respondent was left free to recover the tax in accordance with law.

Final Conclusion: The writ petition was disposed of by setting aside the impugned determination only insofar as defect No. 1 for fresh adjudication, subject to the petitioner depositing 5% of the disputed tax and furnishing supporting documents. The respondent was directed to pass a fresh order on merits after notice.

Applicability of GST to pigmy agents - services rendered and commission paid to the pigmy agents - Employer-employee relationship - Services by employee to employer - Business facilitator - Reverse charge mechanism - Jurisdictional defect - Tax neutrality - petitioner/Bank exercises complete control over the agents as per the terms and conditions laid down in the agreements of their employment. .

Whether the petitioner is liable to discharge Goods and Services Tax, on the services rendered and commission paid to the pigmy agents? - HELD THAT: - The Court held that the nature of engagement of pigmy agents stood settled by the decision in Indian Banks Association v. Workmen of Syndicate Bank [2001 (2) TMI 1051 - SUPREME COURT], holds that the commission earned by deposit collectors/pigmy agents partakes the character of ‘wages’ under Section 2(rr) of the Industrial Disputes Act, 1947. More importantly, such collectors were held to be workmen being subject to the pervasive control and supervision of the Bank. The relationship that thus emerges is not one of detached contractual engagement, but one imbued with the attributes of a master-servant nexus. The pigmy agents operate under the command, control and disciplinary framework of the Bank, their remuneration though termed as commission, is in substance, akin to wages, further evidenced by deduction of tax at source. The issue, therefore no longer remains res integra. It has travelled beyond the pale of controversy and stands settled as on date.

Pigmy agents were held to be employees of the Bank.

Services by employee to employer - Schedule III exclusion - Reverse charge mechanism - Business facilitator -HELD THAT:- The jurisprudential thread, running through these decisions, is clear – the essence of relationship is control, supervision and economic dependence. When these elements coalesce, the relationship assumes the character of employment. Once this conclusion is reached, the inevitable corollary follows, services rendered by such agents falls squarely within the exemption carved out under Sl.No. 1 of Schedule III to the Act. Such services, being in the course of employment, are insulated from levy of GST.

The Court held that once pigmy agents were found to be employees, the services rendered by them to the Bank in the course of employment fell within Sl. No. 1 of Schedule III read with section 7(2)(a), and therefore were to be treated neither as supply of goods nor as supply of services. The State's attempt to classify pigmy agents as business facilitators was rejected, as the definition relied upon contemplated intermediaries appointed under the Reserve Bank of India regulated business facilitator or business correspondent model, whereas pigmy agents were confined to deposit collection under the Bank's own scheme and did not answer that description. Since the show cause notices proceeded on the erroneous foundation that pigmy agents were business facilitators liable under reverse charge, the very basis of the notices was held to be infirm, rendering them devoid of jurisdiction. The challenge to the notifications extending limitation was left open and not decided. [Paras 8, 12, 13, 14, 15]

GST was held inapplicable to commission paid to pigmy agents, and the impugned show cause notices were quashed; the challenge to the limitation-extension notifications was not examined.

Final Conclusion: The Court held that pigmy agents of the petitioner Bank were employees and that services rendered by them in the course of employment were excluded from GST. On that basis, the impugned show cause notices were quashed, while the challenge to the notifications extending time was left open for consideration in an appropriate case.

Rectification application - Entitlement to an opportunity to place proof of prior tax payment and seek rectification before recovery of the alleged tax demand - Principles of natural justice - non-service of proper notice which lead to imposition of tax liability - Double recovery of tax.

Rectification of GST demand - Double recovery of tax - HELD THAT: - The Court noted that the payment receipt produced by the petitioner prima facie showed payment of the same tax amount which was later alleged in the show cause notice as short payment in GSTR-3B. Since the revenue could not dispute that the amount reflected in the receipt corresponded to the amount alleged as unpaid, though it stated that the matter required verification, the Court held that the petitioner should be given an opportunity to place the details and proof of such prior payment before the proper officer through a rectification application. The direction was confined to enabling verification in accordance with law so that the petitioner is not subjected to recovery of an amount already paid. [Paras 5]

The petitioner was permitted to file a rectification application within the time granted, and the proper officer was directed to consider it in accordance with law within a reasonable period.

Final Conclusion: The writ petition was disposed of by permitting the petitioner to seek rectification on the basis of prima facie prior payment of the disputed tax amount, with a direction to the proper officer to consider such application in accordance with law.

Validity of Cancellation of GST registration based on cancelled status of suppliers' registrations, without a cogent finding on the petitioner's documents and the genuineness of the input tax credit claim - Opportunity of hearing - Non-application of mind - Failure to examine material documents.

Non-application of mind - Cancellation of GST registration - Failure to examine material documents - HELD THAT:- The Court found that the petitioner had produced relevant material including invoices, e-way bills, ledger statements and bank statements, yet the authority did not return any clear finding on whether the petitioner had validly availed ITC in the ordinary course of business. Mere cancellation of the suppliers' registrations could not, by itself, justify cancellation of the petitioner's registration unless supported by tangible material showing that the petitioner was a beneficiary of an established illegality. Since the order lacked the necessary examination of the transaction trail and specific findings on the petitioner's alleged involvement, it was held to be arbitrary and vitiated by non-application of mind, warranting remand for fresh consideration after hearing the petitioner. [Paras 4, 5, 6]

The impugned order cancelling the petitioner's registration was set aside and the matter was remanded for a fresh order after grant of hearing; the authorities were left free to continue investigation and take action in accordance with law.

Final Conclusion: The Court set aside the cancellation order as arbitrary for want of proper consideration of the petitioner's material and absence of specific findings establishing illegality. The matter was remanded for fresh adjudication after hearing, while leaving all merits open and without restraining the ongoing investigation.

Rejection of refund claims under the GST regime - contractual terms governing the service arrangement - characterisation of the supply as Export of services Or Intermediary services - applicability of Section 16 of the IGST Act, 2017 - Zero-Rated Supplies - Failure to consider material terms of agreement.

Failure to consider material terms of agreement - Intermediary services - Export of services - HELD THAT: - This Bench in Vistex Asia Pacific Pvt. Ltd. vs. Union of India & Ors.[2026 (1) TMI 1066 - BOMBAY HIGH COURT], wherein in similar circumstances considering the nature of the clauses in the agreement and the decision of this Court in Sundyne Pumps and Compressors India Pvt. Ltd.[2025 (6) TMI 1259 - BOMBAY HIGH COURT], this Court allowed the petition, whereby the order as impugned therein, of rejecting the refund, as upheld by the Appellate Authority, was quashed and set aside and the proceedings were remanded to the Appellate Authority.

The Court found substance in the petitioner's grievance that the appellate authority had not examined the agreement under which the services were rendered, although that agreement was foundational to deciding whether the supplies qualified as export of services or were liable to be treated as intermediary services. As no finding was recorded on the terms of the agreement in the context of the nature of services for which refund was claimed, and similar matters had been dealt with by this Court by requiring such examination, the impugned appellate orders could not be sustained. The proper course was to remit the matters for a de novo consideration after hearing the parties, while keeping all contentions open. [Paras 7, 9, 11]

The impugned appellate orders were quashed and the refund proceedings were remanded to the appellate authority for fresh consideration in accordance with law.

Final Conclusion: The Court held that the appellate authority had failed to examine the governing agreement and record findings on the true nature of the services before rejecting the refund claims. The appellate orders were therefore set aside and the matters remanded for fresh consideration, with all contentions kept open.

Challenge to vires without factual foundation - excess input tax credit and supplier tax compliance - Alternate appellate remedy.

Challenged to the vires of Section 16(2)(c) of the Telangana Goods and Services Tax Act, 2017/Central Goods and Services Tax Act, 2017 (‘the TGST Act/CGST Act’) - non-deposit of taxes by the supplier despite payment made against invoices raised by it and ITC availed by the petitioner consequent thereto - Factual adjudication by statutory authority - HELD THAT:- The Court found from the show cause notice and the order-in-original that the proceedings had been initiated on the footing that the petitioner had availed excess ITC as compared to the tax declared by its supplier, and not on a finding that the supplier had failed to deposit the tax collected under the invoices. In the absence of such factual foundation, the constitutional challenge to Section 16(2)(c) could not be entertained in the present proceedings. The Court further held that questions whether tax had in fact been paid under the invoices and whether goods had been received required scrutiny of material documents, which falls within the domain of the statutory and appellate authorities. [Paras 5, 6]

The writ petition was disposed of by declining to entertain the vires challenge, leaving the petitioner to pursue the statutory appeal on making the prescribed pre-deposit within the period available under Section 107.

Final Conclusion: The Court declined to entertain the writ challenge to Section 16(2)(c) in the absence of a factual basis showing supplier default in tax deposit and held that the dispute required examination by the statutory authorities. The petitioner was left to avail the appellate remedy under the Act.

Denial of the concessional GST rate on freight and time charter services - Wrong availment and utilisation of input tax credit - Benefit of concessional rate under Notification No.11/2017-Central Tax (Rate), as amended by Notification No.01/2018-Central Tax (Rate) - Interest and penalty on wrongly availed input tax credit.

Concessional GST rate subject to non-availment of input tax credit - HELD THAT:- The Court held that, though the petitioner was required to satisfy the conditions in the notification and had wrongly availed input tax credit contrary to those conditions, the notification was not merely a rate notification but also operated as an exemption notification. In that situation, the Department ought not to deny the substantive benefit of the concessional entry and augment the tax liability by applying the higher rate merely because input tax credit had been wrongly availed. Applying the principle in Chandrapur Magnet Wires Pvt Ltd., Vs. CCE Nagpur [1995 (12) TMI 72 - SUPREME COURT] and Unichem Laboratories Vs. Commissioner of Central Excise [2002 (9) TMI 110 - SUPREME COURT], the Court held that the correct course was to require reversal or payment of the input tax credit wrongly availed and utilised, together with interest and penalty under Section 74. The post facto reversal made after the impugned order did not entitle the petitioner to the reduced penalty contemplated at the earlier statutory stages, and the actual quantum of wrongly availed and utilised credit, with corresponding interest and 100% penalty, required fresh determination. [Paras 36, 37, 38, 39, 40]

The impugned order was quashed, and the matter was remitted to the respondent to determine the actual amount of input tax credit wrongly availed and utilised by the petitioner and to determine the interest and 100% penalty payable thereon.

Final Conclusion: The writ petition was partly allowed. The Court set aside the demand to the extent it denied the concessional rate by applying the higher rate of tax and remitted the matter for fresh determination of the input tax credit wrongly availed and utilised, together with the consequential interest and 100% penalty under Section 74.

Entitlement of the Input tax credit - wrongful availment of input tax credit in respect of the tax component - depreciation under the provisions of the Income Tax Act - Double benefit - Banking companies' option under section 17(4) - Reasonable classification​​​​​​​ - Interpretation to be given to Section 16(3), Section 17(2) and Section 17(4) of the CGST Act that relate to the claim of input tax credit and the restrictions in granting such reliefs.

Input tax credit - Depreciation on tax component - Deeming fiction under section 17(4) - HELD THAT: - The Court held that section 16(3) disables credit only on the said tax component on which depreciation is claimed, and not on the entire tax component. Reading sections 16(3), 17(2) and 17(4) together, it found that section 17(4) creates a statutory scheme for banking companies whereby 50% of eligible credit alone is available and the balance lapses, in substitution of the apportionment otherwise required under section 17(2). That unavailed portion stands at par with the portion relatable to exempt supplies for which credit is not attributable, and therefore its capitalisation with depreciation does not result in any double benefit. Since the unavailed 50% under section 17(4) lapses and does not retain the character of credit available for taking, claiming depreciation on that portion cannot trigger the bar in section 16(3) against the credit actually availed. Construing section 16(3) to deny credit on the entire tax component merely because depreciation was claimed on the lapsed portion was held to be beyond the scope of the provision. [Paras 13, 14, 15, 16, 17]

The impugned show cause notices were quashed, and the Order-in-Original was also quashed to the extent it imposed the bar under section 16(3) in relation to the 50% tax component on which no input tax credit had been availed under section 17(4).

Final Conclusion: The Court held that section 16(3) does not operate to deny input tax credit on the entire tax component where a banking company, having opted for section 17(4), claimed depreciation only on the unavailed 50% portion that had lapsed. On that basis, the impugned notices were set aside and the adjudication order was interfered with to that limited extent, leaving the petitioner in the remaining matter to pursue the statutory appeal with exclusion of the pendency period for limitation.

Directors' vicarious liability for company tax dues - Attachment of personal bank accounts- Recovery of the company's GST dues from the petitioners, who were its directors, by attachment of their personal bank accounts without prior notice and without satisfying the statutory conditions for fastening personal liability - Principles of natural justice - Breach of Duty - Opportunity of Hearing.

Directors' vicarious liability for company tax dues - HELD THAT: - The Court held that the petitioners could not be saddled with liability towards the company's tax, penalty or interest merely because they were directors. Personal recovery could arise only if the conditions prescribed in Section 88(3) of the respective GST enactments were satisfied. Since the petitioners had not been given an opportunity to explain that the non-recovery of tax from the company was not attributable to any gross negligence, misfeasance or breach of duty on their part, the impugned attachment of their bank accounts could not be sustained. The matter was therefore remitted to enable the petitioners to submit representations with supporting particulars, which were directed to be considered on merits after affording them a hearing. [Paras 12, 13, 14, 15]

The recovery notices attaching the petitioners' bank accounts were set aside and the matter was remitted for fresh consideration on merits after receipt of their representations and after granting them an opportunity of hearing.

Final Conclusion: The Court held that the petitioners' personal bank accounts could not be proceeded against for the company's GST dues merely because they were directors, without first satisfying the statutory conditions for such recovery and granting them an opportunity to explain. The impugned recovery notices were therefore set aside and the matter was remitted for fresh orders in accordance with law.

Alternative statutory remedy - disputed tax - Exercise of writ jurisdiction - interest under Section 50 of the respective GST enactments.

Alternative statutory remedy - Writ against appealable order - HELD THAT: - The Court found that the petitioner had already replied to the show cause notice and that the impugned order was a detailed adjudication order. On that basis, it held that there was no scope to interfere in writ proceedings. Having also noticed that the writ petition had been filed long after the impugned order, the Court confined the relief to granting liberty to the petitioner to pursue the statutory appeal, observing that the surviving controversy was only with regard to interest under Section 50 of the GST enactments. [Paras 4, 5, 6, 7]

The writ petition was disposed of without examining the merits, with liberty to the petitioner to challenge the impugned order before the appellate authority within thirty days.

Final Conclusion: The Court declined to entertain the writ petition against the detailed adjudication order and left the petitioner to the statutory appellate remedy. Liberty was granted to file an appeal within thirty days.

Fringe Benefit Tax - medical reimbursement - determination of taxable perquisite - AO added tax on the amount of medical reimbursement given to the employees, which was excluded from tax at the hands of the employees.

Whether medical reimbursement up to Rs. 15,000 per employee per annum is chargeable to Fringe Benefit Tax under Section 115WB? - HELD THAT:- The universally accepted trite principle under law of taxation in any democratic nation is that “there shall be no taxation without valid legislation.” Therefore, for taxing a person, the charging section in the statute must be clear and without any ambiguity. By corollary or by reading between the lines, the tax cannot be levied.

The question of levying Fringe Benefit Tax on the medical reimbursement given to the employees upto Rs. 15,000/- per annum has already been settled by the Karnataka High Court in Wipro Ltd [2020 (11) TMI 911 - KARNATAKA HIGH COURT] wherein held if the medical reimbursement exceeds Rs. 15,000 relating to unapproved hospital, then under section 17(1) of the Act the employees are taxed beyond Rs. 15,000 and if Rs. 15,000 which is exempt in the hands of the employees is not liable for fringe benefit tax but over and above the aforesaid amount is liable for fringe benefit tax.

Assessment orders in respect of levy of Fringe Benefit Tax on medical reimbursements to the employee upto Rs. 15,000/-per annum are set aside.

Final Conclusion: The Court allowed the appeals and held that medical reimbursement up to Rs. 15,000 per annum per employee could not be subjected to Fringe Benefit Tax in the employer's hands. The impugned levy on that component was therefore set aside for all the assessment years in question.

Penalty for concealment of income u/s 271(1)(c) -Bona fide claim of exemption - denial of exemption u/s 10 on the ground that M/s.Vision Health Services (P) Ltd., is not a listed company and no Security Transaction Tax (STT) suffered by the assessee on the sale of those shares, hence it has to be brought under the head capital gains and to be taxed accordingly, without exemption

HELD THAT: - The Court held that the determinative test for levy of penalty was the assessee's intention. Where omission is inadvertent or unintentional, penalty is not attracted; but where the return contains a conscious non-disclosure or a false exemption claim, it amounts to concealment of income and furnishing inaccurate particulars.

On the facts, the assessee had already paid advance tax on the capital gains, showing awareness of taxability, yet while filing the return she claimed exemption and sought refund. The Court treated this as a deliberate attempt to avoid tax which came to light only on scrutiny. The plea that the claim arose from a typographical error in the Chartered Accountant's computation was rejected, and the ruling in Anurag Jain, in re [2005 (3) TMI 23 - AUTHORITY FOR ADVANCE RULINGS] was held inapplicable because that ruling turned on a different factual matrix involving employment and non-compete obligations, which were absent here. [Paras 14, 15, 16]

The Tribunal was justified in restoring the penalty, and the substantial question of law was answered in favour of the Revenue.

Final Conclusion: The appeal was dismissed. The Court upheld the Tribunal's view that the exemption claim was not bona fide but a conscious attempt to evade tax, and therefore the penalty under Section 271(1)(c) was rightly sustained.

Non service of demand notice - assessee in default u/s 220(1) - denial of Natural justice - non-service of the underlying demand orders and the unexplained lapse of time

HELD THAT: - The Court held that, having regard to the magnitude of the demands and the span of time over which they were said to have remained pending, it was contrary to normal conduct to assume that the assessee would have taken no remedial steps if the demands had in fact been served.

Department's stand that the intimations and orders had been sent by e-mail was found unpersuasive, particularly when the record did not satisfactorily establish such service and the Department had also remained inactive for years despite claiming large outstanding dues. On that basis, the action u/s 220 was set aside, while preserving the petitioner's right to seek copies of the relevant documents and pursue objections, rectification or appeal, and leaving the question of liability to interest and any fresh proceeding to be considered in accordance with law. [Paras 11, 12, 13, 14, 16]

Final Conclusion: The writ petition was disposed of by quashing the impugned action under Section 220 on the ground that the underlying demands could not be treated as duly served in the circumstances noted by the Court. Liberty was reserved to the petitioner to seek documents and pursue statutory remedies, and to the Department to proceed afresh in accordance with law.

Transfer pricing of royalty - Arm's length price determination - Regulatory approval vis-a -vis arm's length price - Relevance of conduct in subsequent assessment years

Transfer pricing of royalty - Arm's length price determination - Regulatory approval vis-a -vis arm's length price -Tribunal justification in restricting the allowance of royalty on export sales to only 1% of the sales against 2.51% paid by the appellant to the AE in Gulf - HELD THAT: - The Court held that Sections 92 to 92F constitute a self-contained code for determining the arm's length price of international transactions, and such determination must be made independently on the facts of each case by applying the prescribed methodology. RBI and Government approvals operate for distinct regulatory purposes and do not create any presumption that the approved or permitted rate is at arm's length for income-tax purposes. The Court further held that the assessee's comparative analysis was found by the Transfer Pricing Officer and the Tribunal to be inadequate on comparability, since arm's length analysis requires detailed functional and economic examination and not a bare comparison of royalty percentages. The Tribunal's acceptance of 1% of export sales as the arm's length price was treated as a finding of fact, and no perversity or legal infirmity in that factual determination was shown. [Paras 18, 19, 20, 21, 22]

The restriction of royalty allowance to 1% of export sales was upheld, and the challenge to the disallowance of the excess royalty failed.

Relevance of conduct in subsequent assessment years - Substantial question of law - HELD THAT: - The Court accepted that each assessment year is separate, but held that the Tribunal had not founded its decision principally on the assessee's conduct in later years. The primary basis remained the Transfer Pricing Officer's determination of arm's length price after detailed examination; the assessee's acceptance of 1% in assessment years 2007-08 and 2008-09 was only an additional circumstance relevant to testing the claim that 2.51% was commercially necessary. The explanation that the later acceptance was only to reduce litigation was not accepted. Since the Tribunal had applied the correct legal principles and the dispute essentially turned on factual appreciation, the appeal under Section 260A did not give rise to any substantial question of law. The pendency of a Special Leave Petition in relation to an earlier year was also held to be no ground to entertain the appeal. [Paras 23, 24, 25]

The Court declined to interfere under Section 260A and dismissed the appeals for want of any substantial question of law.

Final Conclusion: The Court upheld the Tribunal's affirmation of the Transfer Pricing Officer's determination restricting export royalty to 1% of sales and held that neither regulatory approvals nor the assessee's benchmarking material displaced that factual determination. No substantial question of law arose, and both appeals were dismissed.

Reassessment proceedings as barred by limitation - Deemed notice u/s 148A(b) - Escaped income represented in the form of asset

HELD THAT: - The Court held that, in view of the law declared in Union of India Vs. Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] and re-examined in Union of India Vs. Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] the earlier notice issued under the old regime on 29.04.2021 had to be treated as a deemed notice under section 148A(b) under the substituted regime. The saving of defences u/s 149 did not assist the petitioner because, for Assessment Year 2017-2018, the notice was still issuable under the old regime up to 31.03.2024 where the escaped income exceeded the then applicable threshold.

Further, since the alleged escaped income was more than Rs. 50 lakhs and was represented in the form of immovable property, the case fell within the extended ten-year period under the new regime, which remained available up to 31.03.2028.

On that basis, the order u/s 148A(d) dated 30.07.2022, the consequential notice u/s 148 dated 31.07.2022, and the impugned assessment order could not be invalidated as time-barred. [Paras 24, 25, 26, 27, 29]

The plea of limitation was rejected and the challenge to the reassessment on that ground failed.

Final Conclusion: The writ petition was dismissed, the Court holding that the reassessment proceedings for Assessment Year 2017-2018 were within limitation under the substituted reassessment regime. As the merits involved disputed factual questions, the petitioner was left to pursue the statutory appellate remedy, with liberty to file an appeal within the time granted by the Court.

Exemption u/s 10(23G) - Liquidated Damages, Underwriting Commission and Structuring Fees - Meaning of interest - Independent computation of deductions under section 36(1)(viia)(c) and section 36(1)(viii)

Exemption u/s 10(23G) - Meaning of interest - Liquidated damages - Underwriting commission - Structuring fees - Liquidated Damages, Underwriting Commission and Structuring Fees - HELD THAT: - The Court held that the issue relating to liquidated damages stood covered by the earlier decision of this Court in the assessee's favour. As regards underwriting commission, it was held to be directly covered by the definition in the Explanation to Section 10(23G), which includes commission received by a financial institution for extending a guarantee or enhancing credit. As regards structuring fees, the Court held that the inclusive definition of interest in Section 2(28A) takes within its scope service fee or other charge in respect of monies borrowed or debts incurred, and that fees charged for restructuring credit facilities fall within such other charges. On that reasoning, all three receipts were treated as interest for the purpose of the exemption. [Paras 5, 7, 10, 14]

Substantial question of law Nos. 1 and 2 were answered in favour of the assessee and against the revenue.

Independent computation of deductions under section 36(1)(viia)(c) and section 36(1)(viii) - Deduction on total income - Deduction on profits derived from business - HELD THAT: - Following its earlier decision in the assessee's own case for another assessment year [2026 (1) TMI 1593 - MADRAS HIGH COURT] the Court held that the issue was already concluded in favour of the assessee. The reasoning adopted was that the several clauses in Section 36(1) operate independently and entitlement under one clause does not depend upon prior reduction or exhaustion under another. The amendment to Section 36(1)(viii) was held to alter only the method of computation and not the independent character of the deduction. Accordingly, the deduction under Section 36(1)(viia)(c) could not be postponed until after reducing the deduction under Section 36(1)(viii). [Paras 18, 19]

Substantial question of law Nos. 4 and 5 were answered in favour of the assessee.

Final Conclusion: The appeal was disposed of by answering substantial question of law Nos. 1, 2, 4 and 5 in favour of the assessee. The questions concerning alternative deduction under Section 36(1)(viii) and reversal of the suo motu disallowance were returned unanswered on the assessee not pressing them.

Reassessment proceedings against deceased assessee - Proceedings against legal representative - Ex parte assessment and opportunity of hearing

HELD THAT: - The Court held that, having regard to the quantum alleged to have escaped assessment, the case fell within the extended period available under the post-01.04.2021 regime. It further held that, by virtue of the proviso to Section 149, the period between issuance of notice u/s 148A(b) and the time allowed for reply had to be excluded in computing limitation, and where no reply was filed, the statute itself extended the time for issuance of notice under Section 148.

On that construction, the notice issued under the new regime was within time. The Court also found no substance in the objection founded on Section 159(2)(b), observing that proceedings which could have been taken against the deceased could be taken against the legal representative in accordance with law. [Paras 16, 17, 18, 19, 20]

The challenge to the reassessment on the grounds of limitation and invalidity of proceedings against the legal representative was rejected.

Ex parte assessment and opportunity of hearing - assessment order passed under Section 144 - HELD THAT: - Though the Court found no merit in the legal challenge to the initiation of reassessment, it noted that the impugned assessment order had been made under Section 144 in the absence of a reply to the show cause notice. In those circumstances, the Court granted the petitioner liberty to file a reply with supporting documents and directed the authority to pass a fresh order on merits after giving due notice. The remand thus followed from the need to afford an effective opportunity before finalising the assessment. [Paras 21, 22, 23]

The assessment order was set aside and the matter remanded to the assessing authority for fresh disposal after receipt of the petitioner's reply and after due notice.

Final Conclusion: The Court rejected the challenge to the reassessment on limitation and on the ground that the proceedings had been taken in relation to a deceased assessee through the legal representative. Nevertheless, since the assessment had been completed ex parte under Section 144, the assessment order was quashed and the matter was remitted for fresh adjudication after giving the petitioner an opportunity to reply.

Unexplained cash credit - unsecured loans and share application money -Creditworthiness and genuineness of transactions

HELD THAT: - The Tribunal found that the assessee had furnished documentary material relating to the lenders and the share applicants, and that the AO had also issued notices u/s133(6) to the concerned parties, to which they responded. On appraisal of the record, the Tribunal held that the documentary evidence established the genuineness of the transactions and the creditworthiness of the parties, the transactions having been carried out through banking channels.

It also noted that the loan amounts with interest had been repaid and that the sums shown as share application money were supported by documents from the applicants. On that basis, the Tribunal held that the additions under section 68 were not sustainable in law. [Paras 4]

The additions under section 68 on account of unsecured loans and share application money were deleted.

Final Conclusion: The Tribunal allowed the appeal and deleted the additions made u/s 68 for A.Y. 2012-13, holding that the assessee had satisfactorily established the genuineness of the transactions and the creditworthiness of the concerned parties.

Validity of Reassessment proceedings - Prior approval of specified authority - Jurisdiction under section 151(ii)

HELD THAT: - The Tribunal held that, after the decision in Union of India and others Vs. Ashish Aggarwal [2022 (5) TMI 240 - SUPREME COURT] and the later exposition in Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)], issuance of notice under section 148 under the new regime required compliance with the sanction structure in section 151. Where more than three years had elapsed from the end of the relevant assessment year, prior approval had to be obtained from the Principal Chief Commissioner or other equivalent authority specified in section 151(ii).

In the present case, the impugned notice dated 29.07.2022 had been approved by the Pr. CIT, Rohtak. Since Assessment Year 2016-17 was beyond the three-year period, approval by the Pr. CIT was not by the specified authority.

Following the view taken in Manish Financial [2024 (12) TMI 1539 - ITAT MUMBAI], Core Logistic Company [2025 (6) TMI 727 - MADRAS HIGH COURT] and Anurag Pandey [2025 (7) TMI 1952 - ITAT DELHI] the Tribunal held that sanction by the proper authority was a jurisdictional pre-condition, and non-compliance rendered the notice u/s 148 without authority of law. [Paras 8, 9, 10, 11, 12]

The notice under section 148 was quashed, and the consequential reassessment order under section 147 did not survive.

Final Conclusion: The Tribunal partly allowed the appeal by accepting the legal challenge to the reassessment. Since the notice under section 148 lacked sanction from the competent authority under section 151(ii), the reassessment was quashed and the addition on merits was left open as academic.

Gross profit estimation - Penalty for inaccurate particulars on estimated income

Gross profit estimation - Best judgment assessment - estimation of assessee's income from turnover -HELD THAT: - The Tribunal found that, in the immediately preceding year on identical facts and circumstances, the assessee's business model had already been examined and the gross profit had been estimated at 0.40 per cent of gross sales. Since the assessee's case for the year under appeal arose from the same line of business and no distinguishing feature was shown, the earlier determination furnished the proper basis for estimation. On that footing, the ad hoc estimation at 2 per cent of turnover was not accepted and the income was directed to be computed by applying 0.40 per cent of gross sales. [Paras 6, 7]

The quantum appeal was partly allowed by directing estimation of gross profit at 0.40 per cent of gross sales.

Penalty on estimated income - Inaccurate particulars of income - HELD THAT: - The Tribunal held that, after granting substantial relief in the quantum proceedings and reducing the assessed income by substituting the basis of estimation, the foundation for penalty did not survive. Relying on CIT vs. Aero Traders (P) Ltd. [2010 (1) TMI 32 - DELHI HIGH COURT] it applied the principle that where profit is determined on estimate and the assessee secures substantial relief in quantum, penalty for furnishing inaccurate particulars is not warranted. [Paras 10]

The penalty was deleted and the penalty appeal was allowed.

Final Conclusion: The Tribunal partly allowed the quantum appeal by rejecting estimation at 2 per cent of turnover and directing computation of income at 0.40 per cent of gross sales. In consequence, the penalty for furnishing inaccurate particulars was deleted and the penalty appeal was allowed.

Assessment u/s 153C - Reckoning of six assessment years - Handing over of seized material - proceedings against a non-searched person u/s 153C

HELD THAT: - The Tribunal upheld the appellate finding that, on the record, the material could at best be treated as having been handed over when the case was centralised, namely in FY 2020-21. Applying the settled principle in Jasjit Singh [2023 (10) TMI 572 - SUPREME COURT], RRJ Securities Ltd. [2015 (11) TMI 19 - DELHI HIGH COURT] and Ojjus Medicare Pvt. Ltd. [2024 (4) TMI 268 - DELHI HIGH COURT], it held that in the case of a non-searched person, the block of years openable under section 153C has to be computed with reference to that date of handover/recording of satisfaction. On that basis, assessment years 2010-11 and 2011-12 fell outside the permissible period, and the annulment of the assessments called for no interference. [Paras 3, 4, 5]

Final Conclusion: The Tribunal held that, for section 153C proceedings against a non-searched person, the relevant reckoning point is the date of handing over of the seized material to the AO of that person. Since the impugned assessment years fell beyond the permissible period on that basis, the Revenue's appeals were dismissed.

Addition u/s 56(2)(x)(b) - difference between the consideration and stamp duty value of the immovable property acquired by the assessee - Retrospective application of tolerance band u/s 56(2)(x) - DVO valuation in co-ownership property transaction -

HELD THAT: - The Tribunal held that once the valuation of the very same jointly purchased flats had been referred to the DVO in the co-owner's case and the DVO had determined the fair market value, that valuation was equally applicable in the assessee's case.

It further followed Sandeep Kumar Poddar v/s ITO [2023 (3) TMI 666 - ITAT KOLKATA] which in turn followed Maria Fernandes Cheryl[2021 (1) TMI 620 - ITAT MUMBAI] and accepted that the amendment made by the Finance Act, 2020 increasing the tolerance band from 5 per cent to 10 per cent u/s 56(2)(x)(b) is clarificatory and curative and therefore operates retrospectively. Since the difference between the DVO value and the agreed consideration was below 10 per cent, no addition was exigible under the provision. [Paras 8, 9, 10, 11]

The addition made under section 56(2)(x)(b) was deleted.

Final Conclusion: The Tribunal allowed the appeal and deleted the addition under section 56(2)(x)(b). It held that the DVO valuation obtained for the co-owner's case applied to the assessee as well, and since the difference from the agreed consideration was within the retrospectively applicable 10 per cent tolerance band, no addition could be made.

Computation of capital gains u/s 50B - slump sale - subsequent computation -reduction of an amount being capital work-in-progress, while computing the capital gain u/s. 50B - As per AO revised claim of the assessee cannot be accepted otherwise than through a revised return of income

HELD THAT: - The Tribunal found that the assessee had already offered capital gains on slump sale in the original return and that the subsequent computation was only to rectify an inadvertent omission of capital work-in-progress from the working of such capital gains. It was noted that the omission was explained during assessment and that the asset had been consistently reflected in the balance sheets of earlier years. Since the AO rejected the claim solely on the ground that it was not made through a revised return, without disputing its factual correctness or bringing any contrary material on record, the correction could not be refused merely for want of a revised return. [Paras 9, 10]

The appellate authority was justified in allowing reduction of the capital work-in-progress while recomputing capital gains under section 50B, and the departmental challenge was rejected.

Final Conclusion: The Tribunal upheld the appellate order accepting the assessee's revised computation of capital gains under section 50B after considering the omitted capital work-in-progress. The departmental appeal was accordingly dismissed.

Dismissal of appeal by CIT(A) by invoking the provisions of section 249(4) - requirement of paying the advance tax - dismissal of the assessee's quantum appeal by invoking section 249(4) where no return had been filed - As argued there is no taxable income in India so as to attract any obligation to pay advance tax - HELD THAT: - The Tribunal held that clause (b) of section 249(4) is attracted only where an obligation to pay advance tax existed. In the present case, the record did not show that the assessee had earned any income in India, and the assessee's consistent stand was that he was employed in Nigeria, earned income there and paid tax there.

The addition in assessment arose only because the source of investment in immovable property was not explained, and not because any returned or admitted taxable income had existed. Therefore, the precondition of payment of advance tax for admission of appeal did not arise, and the Commissioner (Appeals) erred in dismissing the appeal in limine.

Since the assessee had not participated in assessment proceedings and the appeal had not been examined on merits, the matter was restored to the jurisdictional Assessing Officer for de novo adjudication after giving due opportunity to the assessee. [Paras 10, 12, 14]

Penalty u/s 271(1)(c) which is consequential to the quantum proceedings, cannot survive independently. As we have restored the matter to the file of the jurisdictional AO in quantum proceedings, penalty proceedings are also restored to the file of the jurisdictional AO for de novo consideration

Final Conclusion: The Tribunal held that section 249(4)(b) could not be invoked where no advance tax was payable for want of taxable income in India, set aside the dismissal of the quantum appeal and penalty proceddings, and restored the assessment for fresh adjudication.

Addition u/s 68 - Estimation of profit on undisclosed bank deposits - Telescoping of estimated income against investment - Self-occupied business property and notional rental income - Double addition of business receipts

Addition u/s 68 - Estimation of profit on undisclosed bank deposits - Business receipts - Unexplained deposits in undisclosed bank accounts, claimed to be business receipts from embroidery job work - HELD THAT: - The Tribunal held that where the deposits represented business receipts and reflected rotation of funds arising from the assessee's business activity, taxing the entire gross deposits would lead to an unrealistic computation of income. Since the authorities had brought the whole of the bank deposits to tax without accounting for withdrawals or business expenditure, the proper course was to estimate the net profit embedded in such receipts. Having regard to the nature of the assessee's business, net profit was estimated at 8% of the gross receipts reflected in the undisclosed bank accounts. [Paras 6]

The addition was restricted to 8% of the bank deposits and the balance addition was deleted.

Telescoping of estimated income against investment - Unexplained investment - HELD THAT: - The Tribunal found that the assessee had not produced the necessary supporting material, such as bank statements, transaction details or confirmations, to substantiate the specific sources claimed for the investment. In the absence of documentary proof, the claim could not be accepted outright. However, since income from undisclosed business receipts had already been directed to be estimated, the Tribunal held that the matter should be examined by the Assessing Officer for the limited purpose of considering whether such estimated income could be telescoped against the investment. [Paras 7]

The issue was restored to the AO for limited examination of the telescoping claim after giving the assessee an opportunity of hearing.

Notional rental income - Self-occupied business property - Annual letting value - commercial properties were held to be self-occupied for business purposes - HELD THAT: - The Tribunal accepted the assessee's stand that the properties were used for business by the partnership firms and treated them as self-occupied for business within the statutory framework. On that basis, the annual letting value adopted by the Assessing Officer on market inquiry could not be sustained, since a property so used was not liable to be charged on a notional rent basis. [Paras 8]

The addition made towards notional rental income was deleted.

Double addition of business receipts - Difference in receipts - HELD THAT: - The Tribunal noted that the difference in receipts was also in the nature of business receipts. Since it had already directed estimation of profit on the entire deposits in the bank accounts, making a further separate addition for the same stream of receipts would amount to double taxation. The addition therefore could not survive independently. [Paras 9]

The separate addition for difference in receipts was deleted.

Final Conclusion: The appeal was partly allowed. The addition on bank deposits was restricted to profit estimated at 8%, the notional rental income addition and the separate addition for difference in receipts were deleted, and the unexplained investment issue was remanded to the Assessing Officer only for examining telescoping.

Alternative statutory remedy - writ jurisdiction - HELD THAT: - The Court held that the High Court's direction requiring the petitioner to pursue the statutory appellate remedy was unimpeachable. Proceeding on that basis, it permitted the petitioner to avail the remedy of appeal before the Commissioner (Appeals), thereby affirming that the dispute should be examined in the statutory appellate forum rather than in writ jurisdiction. [Paras 1]

The petitioner was relegated to the statutory appeal before the Commissioner (Appeals).

Final Conclusion: The Special Leave Petition was disposed of by affirming the High Court's view that the petitioner should pursue the alternative statutory remedy, with liberty to file an appeal before the Commissioner (Appeals).

Interpretation of Rule 3 of the Baggage Rules, 2016 - HELD THAT:- In one matter, the case was directed to be posted for final disposal limited to the interpretation of Rule 3 of the Baggage Rules, 2016, and interim relief was refused. In the connected matter, the Special Leave Petition was dismissed with no interference under Article 136 of the Constitution of India.

Challenged a customs duty assessment and refund dispute after the earlier order had attained finality up to the Supreme Court and had been implemented - entitlement to refund of excess customs duty - Approbate and reprobate - Cum-duty FOB value - transaction value - extra consideration or suppression - Scope of CBEC Circular No. 18.2008-Cus.

Whether the Department, after exhausting Appellate remedies up to the Hon’ble Supreme Court and implementing the order, can once again re-open the same issue through present proceedings.​​​​​​​ - HELD THAT: - The Tribunal held that the earlier order of the Commissioner (Appeals) had already been upheld in the prior round and the Department's further appeal had also failed. Thereafter, reassessment was carried out, refund was sanctioned and the consequential orders were implemented. Once the Department had exhausted appellate remedies and accepted the outcome, the matter attained finality, and the Department was not entitled to reagitate the same controversy in fresh proceedings. Having accepted and acted upon the concluded position, the Department was also barred from taking a contrary stand. [Paras 11, 12, 14, 15, 17]

The appeal was held to be devoid of merit and not legally maintainable.

The Tribunal recorded that the declared transaction value was supported by the BRC and contractual documents, and there was no allegation of extra consideration or suppression. It further held that CBEC Circular No. 18/2008-Cus had been correctly applied in treating the FOB price on a cum-duty basis. On that independent reasoning also, the impugned order was found to be legally unexceptionable. [Paras 16]

The impugned order was upheld on merits as well.

Final Conclusion: The Tribunal dismissed the Department's appeal, holding that the controversy had already attained finality after the earlier appellate proceedings and their implementation. It further held that, even independently on merits, the refund of excess export duty was correctly granted.

Imposition of Penalty under section 112(b) - branded watches of Swiss Origin were mis-declaring the Retail Sale Price [RSP] of watches at the time of import to evade payment of appropriate customs duties - Knowledge of liability to confiscation - Mens rea in customs penalty.

Penalty under section 112(b) - HELD THAT: - The Tribunal found that the appellant had purchased the watches locally from the importer and was not privy to the import declaration process. Its letter clarified that the price revision was made as per the importer's price list and that it was unaware of the duty payment position, having made only local purchases on payment of VAT. The finding that the appellant had knowledge that the goods were liable to confiscation was held to be merely assumed in the impugned order. In the absence of any documentary evidence showing that the appellant knew of the retail sale price declared at the time of import, the essential requirement for penalty under section 112(b), namely knowledge of the goods being liable to confiscation, was not established. [Paras 12, 13]

The penalty imposed on the appellant under section 112(b) was held to be unsustainable, and the appellate order upholding it was set aside.

Final Conclusion: The Tribunal held that mere local purchase of the imported goods and subsequent price revision did not justify penalty under section 112(b) without proof that the appellant knew the goods were liable to confiscation. The impugned order was set aside and the appeal was allowed.

Smuggling - Burden of proof for notified goods - possession of gold biscuits with foreign markings - absolute confiscation of gold and the penalty imposed under Section 112(b).

Burden of proof for notified goods - HELD THAT: - The Tribunal held that gold is a notified item and, therefore, the person found in possession of it must establish its licit source. Since the appellant, who was carrying the gold, failed to produce any supporting document, the goods were rightly treated as smuggled and penal liability under Section 112(b) was attracted. At the same time, the Tribunal accepted that the appellant was only a carrier earning a small amount for transportation of the gold, and on that limited consideration reduced the penalty. [Paras 8]

The penalty was upheld in principle but reduced to Rs.1,00,000/-.

Final Conclusion: The Tribunal sustained the appellant's penal liability for carrying smuggled gold, holding that he had failed to discharge the burden of proving lawful possession of a notified item. However, considering that he acted only as a carrier, the penalty was reduced.

Denial of preferential duty benefit on the basis of doubt about the value addition shown in the certificates of origin without following the verification mechanism prescribed under the Interim Rules of Origin - Reasonable Doubt - Country of Origin certificate verification - Preferential tariff concession - Retroactive verification procedure.

Whether the Country of Origin certificates issued by the competent authority can be doubted and if so, what is the mechanism available to the importing country. - HELD THAT: - The Tribunal held that where imported goods are supported by Certificates of Origin issued by the designated authority of the exporting country, any reasonable doubt as to their authenticity or the accuracy of origin particulars has to be addressed only through the retroactive check mechanism provided in Rule 15 of Annexure B to the Interim Rules of Origin. If the investigating authority doubted the value addition shown in the certificates, it was required to seek verification from the issuing authority in Thailand. Since the show cause notice was issued and the exemption was sought to be denied on the basis of statements and other material collected domestically, without resort to the prescribed verification procedure, both the notice and the impugned order were contrary to the Rules. [Paras 9, 11, 12]

The denial of the exemption and the consequential demands and penalties were set aside, and the appeals were allowed with consequential relief.

Final Conclusion: The Tribunal held that the Country of Origin certificates could not be disregarded except through the verification procedure specifically provided in the Interim Rules of Origin. As that procedure was not followed, the impugned order was set aside and both appeals were allowed.

Admission in adjudication - Proof of admitted facts - inland haulage charges being incorrectly proposed to be included in the value and dropped the demand to this extent - Mis-declaration of the value of the toothbrushes imported by the appellant in five live Bills of Entry and 19 past Bills of Entry and their redetermination - Transaction Value - Provisional Release.

Admission in adjudication - Proof of admitted facts - HELD THAT: - No dispute that the SCN was served on the appellant with all the relied upon documents and it did not file any reply and a personal hearing was fixed and it did not attend. He also does not dispute that the appellant had submitted the letter dated 9.8.2018 as above in response to the SCN.

The Tribunal found that the appellant, after service of the show cause notice and relied upon documents, neither filed a reply nor availed the personal hearing, and instead requested adjudication on the basis of available records while objecting only to inclusion of inland haulage charges in assessable value. Since that limited objection was accepted by the adjudicating authority and no other part of the notice was contested, the adjudication order was held to be just and fair. The Commissioner (Appeals) was therefore right in applying the principle that admitted facts need not be proved, particularly as the relevant admission was not merely during investigation but a clear acceptance during adjudication itself. [Paras 8, 9]

The refusal to reopen the merits was upheld and the appellant's challenge failed.

Final Conclusion: The Tribunal upheld the order of the Commissioner (Appeals), holding that once the appellant had accepted the demand in adjudication except on one limited point already granted, no further merits review was warranted. The appeal was accordingly dismissed.

Legalilty of the order dismissing a stay application involving serious allegations of smuggling - Speaking order - seizure of foreign-origin gold - without assigning any independent reasons - Non-application of mind - Failure to consider statutory presumption under Section 123 - fabricated documents.

Whether the Learned Tribunal was legally justified in dismissing a stay application involving significant revenue and serious allegations of smuggling through a summary, non-speaking order, without providing independent reasoning or addressing the statutory mandate of Section 123 of the Customs Act, 1962? - HELD THAT: - The Court held that a quasi-judicial order must disclose reasons connecting the controversy to the conclusion reached. The Tribunal's observation that the appellate order was not ex facie illegal was found to be wholly conclusory, since it did not deal with the Revenue's case concerning the disputed procurement documents or the statutory reversal of burden applicable to foreign-origin gold. The omission to examine this pivotal legal factor showed non-application of mind, and the cryptic order was therefore unsustainable. [Paras 12, 13]

The impugned order was set aside and the matter was remanded to the Tribunal for fresh consideration of the stay application and the main appeal by a reasoned and speaking order after hearing both sides.

Final Conclusion: The appeal was disposed of by holding that the Tribunal's summary rejection of the stay application was a non-speaking order vitiated by non-application of mind. The matter was remanded for de novo consideration, with interim protection continuing in favour of the Department until fresh decision.

Entitlement of the correctness of the seizure of the jewellery despite an earlier challenge to the show-cause notice having failed - Principles of Natural Justice - Failure to consider challenge to seizure - Opportunity to contest seizure in confiscation proceedings - Procedural Fairness - employee was detained, questioned and the entire consignment of jewellery was seized under the Customs Act, 1962.

Challenge to seizure - HELD THAT: - The Court found that the impugned judgment did not consider the appellant's challenge to the seizure on its own merits, but proceeded on the view that, once the writ petition against the show-cause notice had failed, the seizure was no longer liable to be examined. It held that the notice proposing confiscation was only a subsequent proceeding, and that denying the appellant an opportunity to question the seizure would effectively deprive it of a meaningful defence. As the grounds against seizure had not been entertained earlier, the appellant had to be permitted, while responding to the confiscation notice, to question the correctness of the seizure itself and the proposal for confiscation. [Paras 9, 10, 11, 12]

The appeal was disposed of with a direction that the appellant be allowed to question the validity of the seizure in the confiscation proceedings, and that reasonable time be granted if sought for effective participation.

Final Conclusion: The Court did not decide the legality of the seizure on merits, but held that the appellant could not be denied an opportunity to challenge it merely because the earlier challenge to the confiscation notice had failed. The appellant was therefore permitted to raise the validity of the seizure in the pending confiscation proceedings.

Entitlement to provisional release of the seized imported goods -Conditional release pending adjudication.

Provisional release of seized imported goods - HELD THAT: - The Court found that the matter stood on the same footing as earlier writ petitions involving seizure of imported goods, in which conditional release had been directed. Since the present case was also at the stage of seizure memo and the prayer was confined to interim release, the Court adopted the same course and directed the respondents to pass orders for provisional release on deposit of the enhanced duty as quantified, furnishing of a bank guarantee for 10 percent of the total price of the goods, and compliance with record-maintenance requirements in case of onward supply. The Court also clarified that adjudication could proceed independently and that the adjudicating authority should decide the matter uninfluenced by the conditional release order. [Paras 8, 9, 10, 11, 12]

The writ petition was allowed by directing provisional release of the seized goods on the stated conditions, while preserving the authority of Customs to continue adjudication in accordance with law.

Final Conclusion: The Court directed provisional release of the seized consignment on payment of quantified enhanced duty, furnishing of the stipulated bank guarantee, and compliance with the other conditions imposed. It further preserved the right of the adjudicating authority to continue and decide the proceedings independently in accordance with law.

Maintainabilityof writ petition seeking refund and interest - seek permission to avail of the appellate remedy, before the competent Court - necessary and proper party - invoking the statutory refund mechanism under Section 27 of the Customs Act, 1962 - alleged diversion of 25 kgs of gold sourced from M/s MMTC Ltd - petitioner alleged to have purchased gold bullion on payment of cost of bullion gold and that M/s MMTC Ltd., is the nominated authorized agency appointed by the Reserve Bank of India for importing gold from abroad, duty free, and to sell the same to local jewellery manufacturers for the purpose of preparing ornaments and exporting the same

Writ maintainability - Necessary party - Statutory refund remedy - HELD THAT: - The Court held that the order of the CESTAT only indicated that the person who paid the duty or the person who bore its incidence may seek refund by making an appropriate application under the statutory mechanism. Since the amounts had admittedly been deposited by M/s MMTC Ltd., that entity was a necessary and proper party to any proceedings seeking refund or interest in respect of the deposit. The petitioners neither impleaded M/s MMTC Ltd. nor placed any material to show that they had invoked the refund procedure before the competent authority. The Court further noticed that the writ petition had been filed even before expiry of the statutory period for availing the appellate remedy against the CESTAT order. On these grounds, no effective or enforceable direction could be issued in writ jurisdiction. [Paras 17, 18, 19, 20, 21]

The writ petition was dismissed as devoid of merit.

Final Conclusion: The Court declined to issue any direction for refund or payment of interest, holding that the claim had to be pursued through the statutory refund mechanism and that the person who made the deposit had not been impleaded. The writ petition was accordingly dismissed.

Seeking interim release of the goods - Entitlement to provisional release of the seized imported goods on conditions, while leaving the adjudication proceedings to continue independently.

Provisional release of seized imported goods - Conditional release pending adjudication - HELD THAT: - The Court found that the dispute was at the stage of seizure memo and the relief sought was only interim release of the seized goods. Since identical matters had already been dealt with by the Bench by directing release on specified conditions, and the Supreme Court [2025 (1) TMI 800 - SC ORDER] had declined to interfere with such conditional release while permitting adjudication to proceed in accordance with law, the same course was adopted in the present case. The Court therefore directed consideration of the application for provisional release subject to payment of the enhanced duty as quantified, furnishing of bank guarantee, and maintenance of transaction details after release, while expressly clarifying that the adjudicating authority would remain free to decide the proceedings on their own merits without being influenced by the conditional release order. [Paras 8, 9, 10, 11, 12]

The writ petition was allowed by directing provisional release of the goods on the stipulated conditions, without affecting the adjudicating authority's power to proceed and decide the matter in accordance with law.

Final Conclusion: The Court directed provisional release of the seized consignment on payment of the enhanced duty, furnishing of bank guarantee and compliance with the stated conditions. The adjudicating authority was left free to continue and decide the proceedings independently on their own merits.

RSP-based valuation of imported goods - Post-import upward revision of retail sale price - Differential customs duty - Applicability of rule 5 of the 2008 Rules to importers - Evidentiary use of statement under section 108 - Penalty under section 114A - Extended period of limitation - Suppression of facts - Wilful misstatement - import and sale of watches in India - transaction of watches, the appellant claims that at the time of import, the Retail Sale Price [RSP] was affixed to the imported watches according to the prices declared by the foreign exporter (i.e. Richemont Dubai, FZE), and the appellant discharged the applicable customs duty. Such imports were duly verified, finally assessed, and cleared by customs authorities without any provisional assessment, bond, or user conditions..

RSP-based valuation of imported goods - HELD THAT: - The Tribunal found that the appellant had declared the retail sale price at the time of import and discharged CVD on that basis, and the goods were thereafter sold to authorised dealers on a principal-to-principal basis. In the absence of evidence that the appellant had altered the RSP or had knowledge of any subsequent upward revision by the dealers, the importer could not be made liable for additional duty merely because the dealers later revised the price. Relying on Quantum Hi-Tech Merchandising Pvt. Ltd. [2024 (11) TMI 844 - CESTAT NEW DELHI], the Tribunal held that rule 5 of the 2008 Rules operates in relation to a manufacturer altering the declared retail sale price after removal and was wrongly invoked against an importer. The statement of the appellant's director under section 108 was also held not to be relevant since the procedure under section 138B had not been followed, and in any event the statement only indicated liability where the importer itself revised the RSP. [Paras 21, 22, 23, 24, 25]

The demand of differential duty was held to be unsustainable.

Penalty under section 114A - HELD THAT: - Having held that the differential duty demand was not justified, the Tribunal concluded that the penalty founded on that demand could not be upheld. [Paras 25]

The penalty under section 114A was set aside.

Final Conclusion: The Tribunal held that no differential duty could be demanded from the appellant on the basis of any post-import upward revision of RSP by authorised dealers in the absence of evidence connecting such revision to the importer. Consequently, the impugned order was set aside and the appeal was allowed.

Seeking a direction to the Official Liquidator (OL) to make an interim disbursement of the balance sale proceeds lying to the credit of the respondent company account as against the claim of each of the first charge holders, pending final adjudication of the claims of workmen and others - Proportionate reservation for belated secured claims - Pari passu interim dividend in liquidation.

Recovery of excess interim disbursement - Notice and hearing before refund liability - Interest on refund - HELD THAT: - The Court held that, for concluding that some secured creditors had received amounts in excess of their entitlement on the charged assets, the official liquidator had first to issue notice and determine such excess after affording an opportunity of hearing to the concerned parties. Since no such notice had been issued and the stand was taken only at the stage of third interim dividend, the creditors could not be fastened with liability to refund the amount together with interest at that stage. The official liquidator was therefore directed to recompute the dividend payable without taking into account the alleged excess payment and the interest thereon, leaving the question of excess and consequential interest to be determined separately after notice. [Paras 15, 17]

Recovery of the alleged excess amount and interest was deferred for fresh determination by the official liquidator after notice and hearing, and was excluded from the immediate computation of the third interim dividend.

Proportionate reservation for belated secured claims - Pari passu interim dividend in liquidation -HELD THAT: - The Court accepted the objection that reserving 100% of the debt for secured creditors who had not even obtained or pursued condonation of delay, while other secured creditors were being paid only proportionately, was unjustified. It held that only such proportion of the debt as was being allowed to the other secured creditors should be kept aside for meeting those claims. On that basis, the official liquidator was directed to recompute the balance dividend payable and make the third interim dividend to all secured creditors in the same proportion according to their eligibility, after obtaining undertakings regarding any later determination. [Paras 16, 17]

Only a proportionate reserve was permitted for unpaid or belated secured claims, and the third interim dividend was directed to be disbursed to secured creditors on the same proportionate basis.

Final Conclusion: The company applications were disposed of by directing the official liquidator to recompute the third interim dividend without including the alleged excess interim payments or interest thereon, and by limiting the amount to be set aside for unresolved secured claims to the same proportion applied to other secured creditors. The question of excess payment and refund with interest was left to be determined separately after notice and hearing.

Applicability of the interim moratorium contemplated under Section 96 - Moratorium under section 14 - operating against the corporate guarantor and personal guarantors - default in repayment of the facilities - Liability of principal borrower and guarantor.

Whether the order of moratorium under Section 14 of the IB Code in the proceedings initiated against defendant no. 2, who is the corporate guarantor in this suit and the interim moratorium imposed under Section 96 of the IB Code in the proceedings initiated against defendant nos. 3 and 4, who are the personal guarantors in this suit, would apply qua defendant no. 1, who is the principal borrower in this suit against whom no insolvency proceedings have been initiated? - HELD THAT: - The Court held that section 14(1)(a) prohibits institution or continuation of proceedings only against the corporate debtor in whose CIRP the moratorium has been ordered. In the present suit, the corporate insolvency proceedings were initiated against defendant No. 2 in its capacity as corporate guarantor, whereas defendant No. 1 is the principal borrower and is not the subject of any proceeding under the Code. The discharge or possible resolution of the guarantor in its insolvency proceedings does not, by itself, extinguish the separate liability of the principal borrower to the creditor. [Paras 16, 17, 47]

The section 14 moratorium was confined to defendant No. 2 and could not prevent the suit from proceeding against defendant No. 1.

Interim moratorium under section 96 - Personal guarantor - Debt of a particular debtor - HELD THAT: - Construing section 96 in the context of Part III of the Code, the Court held that the expression referring to legal action in respect of any debt must be read with the debtor against whom the insolvency resolution process has been invoked. The protection under section 96 is therefore limited to the debts of that particular debtor and cannot be stretched to confer immunity on a distinct principal borrower who has not entered insolvency. The Court distinguished the earlier Bombay decision in Tata Capital [2024 (6) TMI 962 - BOMBAY HIGH COURT] as turning on its own facts, where the principal borrower itself was under section 96 moratorium and arbitral proceedings could not be split. Applying the principles stated in Axis Trustee Services Ltd. [2022 (11) TMI 297 - DELHI HIGH COURT], Embassy Property Developments Pvt. Ltd. [2019 (12) TMI 188 - SUPREME COURT], Dilip B. Jiwrajka [2024 (1) TMI 33 - SUPREME COURT] and BRS Ventures Investments Ltd. [2024 (7) TMI 1408 - SUPREME COURT], the Court held that the guarantor's insolvency may enure to the guarantor's benefit alone and does not discharge or suspend the independent liability of the principal borrower before the civil court. [Paras 42, 43, 44, 45, 46]

The section 96 interim moratorium remained operative only in favour of defendants Nos. 3 and 4 and did not stay the suit against defendant No. 1.

Final Conclusion: The Court held that neither the section 14 moratorium operating against the corporate guarantor nor the section 96 interim moratorium operating against the personal guarantors could be invoked by the principal borrower, against whom no insolvency proceedings were pending. The suit was therefore directed to proceed against defendant No. 1 and to remain stayed only against defendants Nos. 2 to 4 so long as the respective moratorium orders continue.

Distribution to dissenting financial creditors - Finality of approved resolution plan - Powers of Monitoring Committee - Commercial Wisdom of the Committee of Creditors - Binding Nature of Approved Resolution Plan - Liquidation Value Attributable to Security Interest - distributions of payments to dissenting Financial Creditors.

Whether the distribution of the resolution amount, including to dissenting financial creditors, as decided and approved by the CoC in its commercial wisdom during the 18th and 19th CoC meetings, is valid in law and binding upon the Monitoring Committee. - HELD THAT: - The Appellate Tribunal held that the approved resolution plan, read with the decisions taken in the 18th and 19th CoC meetings, required payment to dissenting financial creditors in accordance with Section 30(2)(b) read with Section 53(1), and that such creditors were entitled to the higher of the amount provided in the plan or the liquidation value. The CoC had consciously approved a distribution mechanism based on the liquidation value attributable to each secured financial creditor, and an independent evaluation advisor quantified the amount payable to Respondent No.1 on that basis. The 20th CoC meeting did not dilute that position but reiterated that dissenting secured financial creditors would be paid as proposed under the resolution plan, which itself incorporated the statutory minimum. The payment directed was therefore treated as the dissenting creditor's statutory entitlement and not as any premium or inequitable advantage. [Paras 58, 61, 62, 63, 73]

The direction to pay the dissenting financial creditor the liquidation value determined under the approved framework was upheld as being in conformity with Section 30(2)(b) read with Section 53(1) and the CoC-approved distribution mechanism.

Finality of approved resolution plan - Powers of Monitoring Committee - Commercial wisdom of CoC - HELD THAT: - The Appellate Tribunal held that once the CoC exercises its commercial wisdom under Section 30(4) and the resolution plan is approved under Section 31, the plan becomes binding and attains finality. The Monitoring Committee is constituted only to supervise and facilitate implementation of the approved plan and cannot assume the role of the CoC or revisit the distribution terms. Its decision in the 4th meeting to reduce the amount payable to the dissenting financial creditor amounted to a modification of the approved resolution plan and was beyond its jurisdiction. The impugned order was therefore viewed as merely enforcing the already approved distribution framework, not as interfering with commercial wisdom. [Paras 66, 67, 68, 71, 73]

The Monitoring Committee's attempt to reduce the dissenting financial creditor's entitlement was held impermissible, and the approved distribution mechanism remained binding and enforceable.

Applicability of precedent - Security interest of dissenting creditor - Auto unit proceeds - HELD THAT: - The Appellate Tribunal distinguished India Resurgence ARC Pvt. Ltd. v. Amit Metaliks Ltd. [2021 (6) TMI 684 - SUPREME COURT] on the ground that, in the present case, the dissenting financial creditor was not claiming any amount beyond the liquidation value already determined within the CoC-approved framework. The challenge before the Appellate Tribunal was in substance an attempt to alter that approved framework through the Monitoring Committee. The Tribunal further found from the evaluation material that the amount computed for Respondent No.1 was based only on the liquidation value of the steel unit, while the resolution plan separately provided that proceeds of the auto unit would go to the assenting financial creditors alone. There was thus no undue benefit or claim over the auto unit in favour of the dissenting creditor. [Paras 58, 69, 70, 72]

The reliance on Amit Metaliks was held misplaced, and the contention that the dissenting financial creditor had been granted any share relatable to the auto unit was rejected.

Final Conclusion: The Appellate Tribunal dismissed the appeal and upheld the impugned order. It held that the dissenting financial creditor was entitled to payment in accordance with the CoC-approved and Adjudicating Authority-approved distribution mechanism, and that the Monitoring Committee had no jurisdiction to alter that framework at the implementation stage.

Maintainability of delayed restoration application - inherent powers or enlargement of time - Condonation of Delay -Restoration application filed beyond the 30-day period prescribed for revival of a petition dismissed for default - delay and non-appearance​​​​​​​ - Sufficient cause for condonation of delay -invoking inherent powers or the general power to extend time in derogation of the specific procedure under Rule 48(2) of the NCLT Rules -Limitation for restoration application - Inherent powers vis-a-vis express procedural provision.

Restoration of petition dismissed for non-prosecution - HELD THAT: - The Appellate Tribunal held that Rule 48(2) expressly governs restoration of a petition dismissed for non-appearance and requires such application to be filed within thirty days from the date of dismissal on showing sufficient cause. Since the main petition had been dismissed for non-prosecution and the restoration application was filed after about five months, it did not conform to that express provision. The Tribunal further held that where the rules contain a specific procedural mechanism, inherent powers under Rule 11 or the general power to extend time under Rule 15 cannot be used to bypass or override that express requirement. [Paras 44, 46, 47, 67, 68]

The restoration application was held not maintainable beyond the prescribed period under Rule 48(2), and recourse to Rules 11 or 15 was rejected.

Sufficient cause for condonation of delay - Advocate's lapse - Procedural discipline under the IBC - HELD THAT: - The Appellate Tribunal found that the appellant had remained absent on multiple dates, that the petition had earlier been disposed of after prolonged non-prosecution, and that even thereafter the appellant was not sufficiently vigilant. It held that mere reliance on the advocate's failure to inform the party could not, in the facts of the case, justify condonation, particularly in time-bound insolvency proceedings where strict adherence to limitation and procedural discipline is central. The authorities relied on by the appellant were held inapplicable because the appellant had failed to establish a bona fide and sufficient explanation, whereas the authorities cited by the respondent supported a stricter approach in the IBC context. [Paras 57, 58, 59, 65, 68]

No sufficient cause was found for the delayed restoration, and the rejection of the restoration application was upheld.

Final Conclusion: The Appellate Tribunal upheld the rejection of the restoration application and held that the appellant could neither bypass the express limitation in Rule 48(2) through inherent powers nor establish sufficient cause for the delayed restoration. The appeal was accordingly dismissed.

Maintainability of application before NCLT - Challenge to statutory order of planning authority - Jurisdiction under insolvency proceedings - application seeking cancellation of the map sanctioned by the Lucknow Development Authority under the Uttar Pradesh Urban Planning and Development Act, 1973.

Maintainability of application before NCLT - HELD THAT: - The Court held that the relief claimed was directed against a statutory order passed by the Lucknow Development Authority in exercise of its independent jurisdiction under the planning statute. Though the approved resolution plan permitted the successful resolution applicant to obtain necessary approvals including map sanction, the grant of such sanction by the statutory authority did not become a matter capable of challenge before the NCLT merely because it arose after approval of the resolution plan. A statutory decision of the planning authority had to be questioned only in the manner provided under the governing Act, particularly when a revisional remedy before the State Government was available. The reliance placed on Gujarat Urja Vikas Nigam Ltd. vs Amit Gupta and Ors. [2021 (3) TMI 340 - SUPREME COURT] was held inapplicable, since that decision concerned a dispute arising solely from insolvency, whereas the present challenge was to an order passed under an independent statutory regime. [Paras 20, 23, 24, 25, 26]

The application was rightly rejected as not maintainable, and the appellants were left to pursue remedies available under the Uttar Pradesh Urban Planning and Development Act, 1973.

Final Conclusion: The appeal was dismissed. The Appellate Tribunal affirmed that the sanction of the map by the Lucknow Development Authority, being a statutory order under the planning law, could not be challenged before the NCLT in insolvency proceedings, and any grievance had to be pursued under the remedies provided by that statute.

Validity of the continuation of proceedings under the Prevention of Money Laundering Act, 2002 in the absence of prior sanction under Section 197 of the Code of Criminal Procedure, 1973 -illegal gratification and in possession of assets disproportionate to his known sources of income - prosecution of public servants - reasonable nexus between the alleged act and the discharge of official duty -

Whether the absence of prior sanction under Section 197 Cr.P.C. vitiates the continuation of proceedings under the PMLA at the present stage? -HELD THAT: - The Court held that protection under Section 197 Cr.P.C. applies only where there is a direct and reasonable nexus between the impugned act and the discharge of official duty. Demand and acceptance of illegal gratification, possession of disproportionate assets, and laundering of proceeds of crime are prima facie criminal acts and cannot be treated as acts done in discharge of official functions merely because the accused held public office. Since official status only furnished the occasion and not the legal character of the acts, the bar of prior sanction was not attracted at this stage. The Court further held that the question of sanction, if otherwise relevant, could be examined during trial, and therefore interference in writ jurisdiction to quash the complaint was unwarranted. [Paras 9, 10, 11, 12, 13]

The plea that the complaint was liable to be quashed for want of sanction under Section 197 Cr.P.C. was rejected, and the challenge to the pending PMLA proceedings was held to be premature.

Final Conclusion: The Court dismissed the writ petition, holding that the alleged acts of bribery, disproportionate assets, and laundering of proceeds of crime did not bear the requisite nexus to official duty so as to require prior sanction under Section 197 Cr.P.C. at this stage, and that the objection on sanction could, if necessary, be examined during trial.

Taxability of service on foreign exchange profit - Suo motu adjustment of tax paid under mistake - Technical error without mala fides - refund limitation - Unjust enrichment - Lack of mala fide intention.

Service tax on foreign exchange profit - HELD THAT: - The appellant is a Nationalised Bank. During an audit conducted by the Central Excise and Service Tax Department, the audit team has instructed the appellant to pay service tax on the premise that the share of profit in transactions related to foreign exchange was tantamount to a taxable service.

The Court held that the tax had been paid solely on the instructions of the departmental audit team and that, once it was found that the share of profit in foreign exchange transactions was not exigible to service tax, the department ought to have refunded the amount. In that situation, the assessee's subsequent suo motu adjustment of the amount could not be characterised as improper so as to sustain the demand and penalty. The Court further held that the department could not be permitted to retain an amount not legally leviable by invoking limitation or by relying on the assessee's failure to challenge the order rejecting refund, since the adjustment arose from a technical mistake made without any mala fide intention. [Paras 5, 6, 7]

The order in original and the Tribunal's order were set aside, and the appeal was allowed.

Final Conclusion: The Court held that the amount paid under a mistaken understanding of taxability could not be retained by the department, and the assessee's adjustment of that amount did not justify the demand or penalty. The appeal was accordingly allowed and the impugned orders were set aside.

Valuation mechanism for works contracts under Rule 2A read with section 67 of the Finance Act, 1994 and section 66E(h) of the Finance Act, 1994 - Bifurcation of Services - Separate adoption of valuation methods for distinct components of the same invoice.

Entitlement to apply Rule 2A(i) to repair and maintenance charges - value of parts was separately shown, and Rule 2A(ii)(B) to painting charges where the value of paint was not separately ascertainable, even though the services appeared in the same invoice. - HELD THAT: - The Tribunal held that nothing in Rule 2A prohibits adoption of different valuation methods for different service components merely because they are reflected in the same invoice. Where the value of goods transferred in execution of the works contract is separately available, valuation has to be made under Rule 2A(i); where the contract is of a kind in which the value of goods is not separately determinable, valuation falls under Rule 2A(ii). Since, in respect of repair and maintenance, the assessee separately billed parts and labour, valuation under Rule 2A(i) was correctly adopted. In respect of painting, the assessee charged a consolidated amount without separately identifying the value of paint and labour, and therefore valuation under Rule 2A(ii)(B) was correctly applied. Following its earlier order in the assessee's own case on the same issue, the Tribunal found the departmental objection unsustainable. [Paras 9, 10]

The impugned order was set aside and the appeal was allowed.

Final Conclusion: The Tribunal held that distinct components of the assessee's works contract could be valued under different limbs of Rule 2A depending on whether the value of goods was separately determinable. The demand, interest and penalty founded on the contrary view were therefore not sustainable.

Power to entertain the appeal once it was filed beyond the statutory period together with the further condonable period prescribed under section 85(3A) of the Finance Act, 1994 - Sufficient Cause - Deemed Service - Functus Officio - Statutory limitation for appeal - barred by limitation - Condonation beyond prescribed period.

Limitation for appeal to Commissioner (Appeals) - Restricted power to condone delay - HELD THAT:- The Tribunal held that under section 85(3A), an appeal is required to be filed within two months from receipt of the adjudication order, with power in the Commissioner (Appeals) to condone delay only for a further period of one month on sufficient cause. On the facts recorded, even proceeding on the appellant's own stated date of receipt, the appeal before the Commissioner (Appeals) was beyond the period that could legally be condoned. The Tribunal further noted that the explanation offered for the delay was found unsatisfactory. Applying the principle that a statutory appellate authority, being a creature of the statute, cannot extend limitation beyond the express condonable period, the rejection of the appeal as time-barred was upheld. The later adjournment request sent after pronouncement of the order was also held incapable of consideration. [Paras 3, 4]

The dismissal of the appeal as barred by limitation was upheld and the appeal before the Tribunal was dismissed.

Final Conclusion: The Tribunal held that the appeal before the Commissioner (Appeals) was filed beyond the maximum period permitted by statute and that no further condonation was legally possible. The appeal was accordingly dismissed.

Validity of the Order-in-Original passed ex parte without the petitioner having filed a reply to the show cause notice or availed personal hearing - Opportunity to reply to show cause notice - Reservation of Contentions.

Ex parte adjudication - Remand to show cause notice stage - HELD THAT: - The Court recorded that the impugned Order-in-Original had admittedly been passed ex parte, with no reply to the show cause notice and without the petitioner availing personal hearing. Having regard to its earlier order in similar matters, where such orders were set aside and the proceedings were relegated to the stage of reply to the show cause notice with specified aspects left open for consideration, the Court held that the present matter also required the same course. The merits of the tax demand, including all other contentions, were not adjudicated and were expressly kept open for fresh consideration by the authority. [Paras 5, 7]

The Order-in-Original was set aside and the matter was remitted to the stage of reply to the show cause notice, with liberty to the petitioner to file a fresh reply and with all contentions kept open.

Final Conclusion: The writ petition was disposed of by setting aside the ex parte Order-in-Original and remitting the matter for fresh consideration from the stage of reply to the show cause notice. The authority was directed to proceed afresh in the light of the earlier order, while keeping all merits open.

Entitlement to invoke the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 for waiver of interest and penalty after having paid the tax only after summons had been issued in investigation- Voluntary disclosure after enquiry or investigation - Discharge of tax during investigation.

SVLDRS eligibility - Voluntary disclosure after enquiry or investigation - Discharge of tax during investigation - HELD THAT: - The Court held that Section 125(1)(f)(i) of the Finance (No.2) Act, 2019 creates an embargo against a person making a voluntary disclosure after being subjected to enquiry, investigation or audit. On the facts recorded, summons had been issued to the petitioner prior to payment of the tax, and the tax was paid only thereafter. In such circumstances, the petitioner could not invoke the Scheme merely because the tax liability had been discharged before issuance of the show cause notice. The Court followed Flinto Learning Solutions Pvt. Ltd., Vs. Joint Commissioner of Service Tax (South), Chennai [2025 (6) TMI 1817 - MADRAS HIGH COURT], and held that issuance of the prescribed form or pendency of the declaration would not override the statutory ineligibility under the Scheme. [Paras 17, 18, 19]

The claim for issuance of Form 4 under the Scheme was rejected and the writ petitions were dismissed, with liberty to challenge the adjudication order before the appellate authority.

Final Conclusion: The Court held that the petitioner was ineligible to avail the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, since the tax was paid only after summons had been issued during investigation. Both writ petitions were dismissed, while granting liberty to the petitioner to pursue the statutory appeal against the adjudication order.

Refund of excess service tax - Statutory limitation for refund claims - limitation prescribed under section 11B - doctrine of unjust enrichment.

Whether in this case, refund claim is hit by time limit prescribed under section 11B, as made applicable to service tax or otherwise. - HELD THAT:- The Tribunal held that, though there was no dispute that the respondent was not required to pay service tax beyond 50%, any claim for return of such excess payment had to be examined within the framework of section 11B, save in the exceptional category noticed in Mafatlal Industries Ltd Vs UOI [1996 (12) TMI 50 - SUPREME COURT] Since the claim was admittedly filed beyond the prescribed period, the appellate order upholding refund without applying the statutory limitation could not be sustained. The Tribunal also noted the submission based on ITC Ltd Vs CCE, Kolkata [2019 (9) TMI 802 - SUPREME COURT (LB)] that no reassessment had been sought before filing the refund claim, and directed that the claim be re-examined in the light of those observations. [Paras 7, 8, 9]

The departmental appeal was allowed on this point, the impugned order was set aside, and the refund claim was remanded for fresh examination under the statutory scheme.

Unjust enrichment - Remand for factual verification - HELD THAT: - The Tribunal found that factual details were still required to be verified before concluding whether the doctrine of unjust enrichment was attracted, particularly in view of the respondent's submissions. As that aspect had not been properly examined, the matter was remanded to the original authority to determine the refund claim in accordance with the observations made by the Tribunal. [Paras 8, 9]

The question of unjust enrichment was remanded without a final finding on merits.

Final Conclusion: The Tribunal held that the respondent's claim for refund of excess service tax was subject to section 11B, including limitation, and therefore the appellate order sustaining the refund could not stand. The matter was remanded to the original authority for fresh examination, including on unjust enrichment and the effect of the absence of reassessment.

Limitation for appeal - Condonation of delay - beyond the prescribed period - barred by limitation - sufficient cause.

Statutory limitation - Restricted power of condonation - HELD THAT:- The Tribunal held that the statutory scheme permits the Commissioner (Appeals) to condone delay only for a further period of one month on sufficient cause being shown. Relying on Singh Enterprises Vs. CCE, Jamshedpur [2007 (12) TMI 11 - SUPREME COURT] it held that this limitation is absolute and cannot be extended beyond the period expressly provided by the statute. Since the appeal before the Commissioner (Appeals) had been filed more than six months after receipt of the adjudication order, it was beyond the condonable limit, and the time spent by the appellant in pursuing rectification before the adjudicating authority could not enlarge the statutory period of appeal. [Paras 6, 7, 8]

The dismissal of the appeal as time-barred was upheld.

Final Conclusion: The Tribunal upheld the impugned order and dismissed the appeal, holding that the appeal before the Commissioner (Appeals) was filed beyond the statutorily condonable period and was therefore not maintainable.

Composite works contracts - Taxability under construction services - Extended period of limitation - Extended Period of Limitation - Suppression of Facts - Wilful Misstatement.

Composite works contracts - HELD THAT:- The Tribunal held that the projects executed by the appellant were works contract activities and covered periods both before and after introduction of Works Contract Service from 01.06.2007. Following Commissioner of C. Ex. and Cus., Kerala Vs. Larsen & Toubro [2015 (8) TMI 749 - SUPREME COURT], it held that such construction activities were not taxable under Commercial or Industrial Construction Service or Construction of Complex Service before 01.06.2007. For the period after 01.06.2007 also, once the activity was a works contract involving both supply of material and labour/services, it could not be classified under those construction service categories, but only under Works Contract Service. [Paras 9, 10]

The service tax demand raised under Commercial or Industrial Construction Service and Construction of Complex Service was held unsustainable.

Extended period of limitation - Suppression of facts - Penalty under section 78 - HELD THAT:- The Tribunal found that the department was aware of the appellant's activities and that there was no suppression of facts or wilful misstatement with intent to evade tax. On that finding, invocation of the extended period under the Finance Act, 1994 and recourse to section 78 could not be sustained for any of the three appeals. [Paras 9]

The demands raised by invoking the extended period were held unsustainable.

Final Conclusion: The Tribunal set aside the impugned orders and allowed all three appeals. It held that the appellant's activities were works contracts not taxable under the construction service categories invoked, and that the extended period could not be applied.

Eligibility of CENVAT Credit on input services used in setting up of factory - Date of provision of service vis-a-vis date of invoicing and payment - Binding nature of departmental circularsin accordance with Serial No. 12 of Circular No. 943/04/2011-CX.

Whether Cenvat Credit is admissible on services used for setting up of a factory, where services were rendered prior to 01.04.2011, but invoices/payments and credit availment occurred thereafter. - HELD THAT: - The Tribunal held that the determinative factor was thedate of provision of service and not the date of invoicing. Since the record showed that production had commenced in March 2011, the returns substantiated production, the contractor had confirmed completion of work before 01.04.2011, and the appellant had informed the Department accordingly, the services fell within the pre-amended definition of input service which expressly covered services used in relation to setting up of a factory. Rule 4(7) recognised availment of credit on or after receipt of invoice, bill or challan, and therefore delayed invoicing or payment could not convert an otherwise eligible credit into an inadmissible one. The Tribunal also relied on CBEC Circular No. 943/04/2011-CX dated 29.04.2011 and the principle in Ramade Micro Nutrients and Paper Products Ltd. that the Department is bound by its own circulars. It further noted that tribunal decisions including Pepsico India Hoding Pvt Ltd., Vs Commissioner of Central Tax, Tirupati [2021 (7) TMI 1094 - CESTAT HYDERABAD] had uniformly taken the same view. [Paras 10, 11, 12, 13, 14]

The denial of credit was held unsustainable, and the impugned order was set aside with consequential relief.

Final Conclusion: The Tribunal held that credit could not be denied merely because invoices were raised and payment was made after 01.04.2011, when the services for setting up the factory had in fact been rendered before that date. The impugned order was therefore set aside and the appeal was allowed.

Manufacture - activity of conversion of waste PET Bottles into Polyethylene Terephthalate Flakes [PET Flakes] which are obtained by the process of sorting, crushing, washing and rinsing of waste PET Bottles - Emergence of new and distinct product - Distinctive name, character or use.

Whether the process of conversion of waste PET Bottles into PET Flakes qualifies as ‘manufacture’ under section 2(f) of the Central Excise Act, 1944 [Central Excise Act] for purpose of levy of excise duty? - HELD THAT: - ‘Manufacture’ in the present case, cannot be said to have taken place as non-PET materials had been sorted out from the used PET Bottles which were, thereafter, crushed into smaller pieces called Flakes. Flakes are then dried, packed and cleared from the factory. The final product remains the same as PET Flakes; the only difference is that the waste PET Bottles are now in Flake forms. It cannot, therefore, be said that a new product emerged or that the PET form ceases to exist.

Applying the settled test that manufacture requires emergence of a new and distinct article having a different name, character or use, the Tribunal held that the process undertaken by the appellant only removed non-PET materials and reduced the waste PET Bottles into flake form. The end-product continued to remain PET; only its form changed, and the original PET identity did not cease to exist. A mere change in size or form, or cleaning and removal of impurities, does not constitute manufacture when no commercially different commodity comes into existence. The Commissioner's conclusion based on the market description of the goods as parings of PET Bottles was unsustainable, particularly since PET Flakes and parings of PET Bottles were treated as substantially the same. The Commissioner also erred in relying on Wikipedia to infer chemical change, as such source could not be used for legal dispute resolution. Since no manufacture was established, duty under section 3 could not be levied, and it was unnecessary to examine the classification dispute. [Paras 41, 43, 44, 45, 46]

The demand of duty, interest and penalty was set aside as the activity did not amount to manufacture, and the classification issue was left unexamined.

Final Conclusion: The Tribunal held that the activity of converting waste PET Bottles into PET Flakes did not amount to manufacture, as no new and distinct commodity emerged. The impugned order was set aside and all twelve appeals were allowed, leaving the classification issue unexamined.

Denial of CENVAT credit -Effect of appropriation during pendency of appeal - Payment under protest - refund claim barred by limitation under Explanation (ec) to Section 11B - Availment of CENVAT credit, in respect of excise duty paid on inputs and capital goods and service tax paid on input services under the provisions of CENVAT Credit Rules.

Refund limitation - Payment under protest - Appropriation during pendency of appeal - HELD THAT: - The Court held that, once the Tribunal had granted stay of recovery pending appeal, the Department ought not to have appropriated the rebate by including the disputed demand. Even if the Department sought to justify the appropriation on the basis of the then existing provision regarding vacation of stay, such appropriation could not be treated as a voluntary payment of duty due and payable. Since the appeal against the demand was already pending, the challenge to the demand itself amounted to protest. Therefore, the appropriation made during the pendency of the appeal had to be construed as payment under protest, attracting the second proviso to Section 11B, under which the bar of limitation does not apply. On that reasoning, the amount appropriated could not be brought within Explanation (ec) to Section 11B as a refund claim arising merely consequent to the Tribunal's final order. [Paras 21, 22, 25]

The refund claim was held not barred by limitation, and both substantial questions of law were answered in favour of the appellant.

Collateral challenge - Effect of closure of writ petitions - HELD THAT: - The Court rejected the Department's objection founded on the earlier writ petitions. It held that the present appeal did not require adjudication upon the validity of the appropriation order itself. The question in the appeal was only the legal effect of an appropriation made during the pendency of an appeal in which a stay order had been granted. Since the earlier writ petitions were closed on the statement that refund had been obtained and nothing survived, that order did not foreclose examination of the present refund claim on limitation. [Paras 26, 27]

The objection based on the earlier writ proceedings was rejected.

Final Conclusion: The appeal was allowed. The Tribunal's order was set aside, the refund claim was held not hit by limitation, and the respondent was directed to return the amount relatable to the demand arising from Order-in-Original No. 4/2012.

Claim for reimbursement under the Budgetary Support Scheme on the ground that the item M.S. Scrap does not fall within the category of “specified goods” as defined under the exemption Notification No. 519 dated 21.12.2017 - Interpretation of specified goods - Budgetary support reimbursement - Exclusionary notification - definition of “eligible unit” - residual period under the Central Notification dated 05.10.2017.

Specified goods - Manufacturing residue - Budgetary support scheme - HELD THAT: - The Court held that under SRO 519, the expression specified goods covers goods manufactured by the industrial unit except those expressly excluded in Annexure-A. Annexure-A being an exclusionary list, disqualification could arise only if the goods fell within the enumerated exclusions. The respondent itself accepted that the petitioner was manufacturing TMT/CTD Bars and that the scrap in question emerged as an inherent residue of that very manufacturing process, retaining the essential character of the manufactured product. In that view, reimbursement could not be refused solely because M.S. Scrap was not separately mentioned as a registered product, particularly when the exclusion relied upon by the respondent did not apply. [Paras 19, 20, 21, 22, 24]

The rejection of reimbursement on the sale of M.S. Scrap was held unsustainable; the impugned orders were quashed and the respondents were directed to reconsider the claims afresh by passing a reasoned order in accordance with the applicable SROs.

Final Conclusion: The Court held that reimbursement under the State budgetary support scheme could not be denied for M.S. Scrap generated during the manufacture of TMT/CTD Bars on the reasoning adopted by the respondents. The impugned orders in both writ petitions were quashed and the matter was remitted for fresh consideration in light of the Court's interpretation of the scheme.

Entitlement to interest on the delayed refund of the amount collected from the assessee - Compensation for wrongful retention of amounts - Interest on unpaid interest - violation of the conditions of Customs Notification No. 213/92.

Whether the appellant is entitled for interest for the delayed period from 02.06.1997 to 02.07.2006, and also further interest on such unpaid interest from 02.07.2006 onwards till the actual realization? - HELD THAT:- In Sandvik Asia Ltd’s case [2006 (1) TMI 55 - SUPREME COURT] it was categorically held by the Hon’ble Supreme Court that even in the absence of specific provision, the amounts collected forcefully from the assessee should not be kept with the revenue for a longer period and that the Court further held that the assessee is also entitled for interest on the said amount.

The Court held that where an amount is wrongfully collected or withheld without authority of law, the Revenue is bound to compensate the assessee. It found that the amount had been forcibly collected though the assessee was ultimately held not liable to pay it, and that the Revenue retained the amount for a long period before refunding it. Relying on the principle recognized in compensatory interest, and noting that Section 11BB mandates interest on delayed refunds after the statutory period, the Court rejected the Department's stand that no interest was payable merely because the refunded amount had been collected as interest. The Revenue could not demand interest from an assessee for delayed payments and simultaneously refuse interest when it had wrongfully retained the assessee's money. [Paras 13, 15, 17, 18, 19]

Interest at 7.5% was directed to be paid from the date of the refund claim till the date of actual refund of the principal amount.

Applying the same compensatory principle, the Court held that the assessee was entitled to further interest on the unpaid interest amount for the period during which the Revenue had failed to discharge that liability. However, the Court declined to extend such further interest for the subsequent period when the matter was pending adjudication before it, holding that the Revenue could not be penalized for that period in the absence of fault attributable to it. [Paras 19, 20]

Further interest at 6% per annum on the unpaid interest amount was granted up to the filing of the appeal before the Court, and the claim for any further interest thereafter was rejected.

Final Conclusion: The appeal was allowed. The Court held that the Revenue was liable to compensate the assessee by paying interest on the delayed refund of the wrongly collected amount and also further interest on the unpaid interest for the limited period specified, but denied any further interest for the period during which the matter remained pending before the Court.

Classification of goods - mixture of Melamine & Formaldehyde and Phenol & Formaldehyde used as Adhesives/glue in the manufacture of Final product-Laminates - availment of full duty exemption under Notification No. 50/03-CE - Area based exemption and negative list.

Whether the mixture of Melamine & Formaldehyde and Phenol & Formaldehyde used as Adhesives/glue in the manufacture of Final product-Laminates are classifiable under Chapter 35-06 as claimed by the appellant or under Chapter 39-09 as held by the Revenue. -HELD THAT: - The Tribunal found that the very same classification dispute had already been decided in favour of the appellant in its own case for the earlier period and that similar views had also been taken in other decisions of the Tribunal. Following those decisions, and noting that the Revenue had not carried the other decisions further, the Tribunal treated the issue as settled and accepted the appellant's classification of the subject mixture as adhesive or glue under Chapter 35-06. [Paras 7, 8]

The Revenue's classification under Chapter 39-09 was rejected.

Area based exemption and negative list - Captive consumption - The duty demand founded on treating the subject goods as falling in the negative list under the exemption notification could not survive once the goods were held classifiable as adhesive or glue under Chapter 35-06. - HELD THAT: - The demand had proceeded on the basis that the appellant was manufacturing resins classifiable under Chapter 39 and therefore excluded from the exemption notification. Since the Tribunal held, by following binding precedent in the appellant's own case and other Tribunal decisions, that the goods were classifiable under Chapter 35-06 as adhesive or glue, the foundation of the demand, interest and penalty failed. [Paras 7, 8]

The impugned order confirming duty, interest and penalty was set aside and the appeal was allowed with consequential relief.

Final Conclusion: Following its earlier order in the appellant's own case and other Tribunal decisions, the Tribunal held the subject mixture to be classifiable as adhesive or glue under Chapter 35-06. Consequently, the basis of the demand under the exemption notification failed, and the impugned order was set aside.

Negotiable Instruments Act - Legally Enforceable Debt - dishonour of cheque for the reason "instrument out dated stale" - Presentation Period - British Calendar - Computation of cheque validity period - Cause of action under Section 138 - Vicarious liability of non-signatory accused.

Whether the cheques were presented on time or not? - HELD THAT: - The Court held that the expression of three months for presentation of a cheque is to be reckoned as a calendar-month period and not as 90 days. Excluding the date on which the cheques were drawn, the period of three months expired on the corresponding date in the third month, and the presentation made on 27.02.2017 was therefore within time. Even so, the statutory foundation for prosecution under Section 138 was absent because the cheques were in fact returned with the endorsement 'instrument out dated stale', which reflected the bank's treatment of the instruments as having been presented beyond validity. Since the accused were not responsible for that return and the dishonour was not on the ground contemplated by Section 138, no cause of action arose to maintain the complaint. [Paras 8, 10]

The complaint under Section 138 was held not maintainable, and the proceedings were liable to be quashed on that ground.

Vicarious liability of non-signatory accused - Liability of partner under Section 141 of the Negotiable Instruments Act - HELD THAT: - The Court found that the fourth accused had specifically denied any connection with the firm, denied being a borrower, partner or signatory, and the complainant had produced no material to show that he was a partner of the first accused. In the absence of any evidence establishing his role in the firm or his connection with the cheques, he could not be fastened with vicarious liability for the alleged offence. [Paras 12]

Proceedings against the fourth accused were quashed as no basis existed to prosecute him under the provisions governing vicarious liability.

Final Conclusion: The Court quashed the complaint proceedings in entirety, holding that no cause of action under Section 138 of the Negotiable Instruments Act arose from the return of the cheques with the endorsement 'instrument out dated stale', despite timely presentation. It also held that the fourth accused could not be proceeded against in the absence of any material showing that he was a partner or signatory, while leaving liberty to the respondent to proceed against the banker in accordance with law.

Negotiable Instruments Act, 1881 - legally enforceable debt - Dishonour of cheque by company - liability of the juristic entity -Arraignment of company as accused - Vicarious liability of directors - Maintainability of complaint under Sections 138 and 141.

Arraignment of company as accused - HELD THAT:- The Supreme Court in the matter of Aneeta Handa [2012 (5) TMI 83 - SUPREME COURT],had specifically held that it is a mandatory requirement under Section 141 of the Negotiable Instruments Act, 1881 to implead the Directors of the Company. The complaint without arraigning the Company as an accused, against the directors or the authorized signatories is not maintainable. The Supreme Court has specifically held that the criminal liability on account of dishonour of cheque primarily falls on the drawer company and extends to its officers only when conditions incorporated in Section 141 of the Negotiable Instruments Act, 1881 are satisfied for maintaining prosecution.

The complaint itself proceeded on the basis that the cheque was issued towards the liability of the company and the respondent also conceded that the dishonoured cheque had been issued for and on behalf of the juristic entity, which had not been arrayed as an accused. The Court held that under Section 141, prosecution of persons sought to be made vicariously liable can continue only when the company, being the principal offender and drawer, is before the Court. Since arraignment of the company is an express condition precedent to fasten vicarious liability on its directors or authorised signatories, the complaint against the petitioner alone was not maintainable. [Paras 17, 18, 19, 20, 21]

The complaints and the summoning orders, insofar as they proceeded against the petitioner, were held to be not maintainable and were set aside, leaving the parties at liberty to avail appropriate remedy in accordance with law.

Final Conclusion: The petitions were allowed on the ground that the complaint under Section 138 could not proceed only against the director when the company, on whose behalf the cheque was issued, had not been impleaded as an accused. The complaints and the summoning orders against the petitioner were consequently set aside, without prejudice to any remedy available in law.

Negotiable Instruments Act, 1881 - Dishonour of security cheque - Existing legally enforceable debt - Post-Dated Cheque - cheques issued in connection with a loan transaction, though described as security cheques -rebuttal evidence - conviction of the respondent/accused under Section 138 of N.I. Act.

Dishonour of security cheque - HELD THAT: - The Court found from the loan agreement and the complainant's evidence that the loan had already been advanced when the cheques were issued and that the cheques were meant to assure repayment of that liability after expiry of the agreed six-month period. Merely because the agreement used the expression security, the cheques did not cease to be relatable to a subsisting debt. The agreement itself authorised their presentation if repayment was not made within time, and the cheques were in fact presented only after that period had elapsed. Applying the principle stated in Sampelly Satyanarayana Rao vs. Indian Renewable Energy Development Agency Limited [2016 (9) TMI 867 - SUPREME COURT] and Sripati Singh (since deceased) through his sons Gaurav Singh Vs. State of Jharkhand and another [2021 (11) TMI 66 - SUPREME COURT], the Court held that where a loan has been disbursed and repayment has become due, a cheque issued as security for such repayment matures for presentation on default, and dishonour thereof falls within Section 138. The variation between the recitals of the agreement and the complaint regarding the stage at which the cheques were handed over was held not to aid the accused, since that variation was not proved in cross-examination and the complainant's testimony remained unshaken. In the absence of rebuttal evidence, the complainant had duly proved the offence. [Paras 17, 18, 19, 20, 21]

The appellate court erred in treating the cheques as mere security outside the scope of Section 138; the acquittal was set aside and the trial court's conviction and sentence were restored.

Final Conclusion: The Court held that the dishonoured cheques, though termed as security in the agreement, were issued against an existing loan liability and became enforceable on default in repayment. The judgment of acquittal was therefore set aside and the conviction and sentence recorded by the trial court were restored.