TMI Tax Updates e-Newsletter
Apr 18,2026

Entitlement to invoke writ jurisdiction against recovery proceedings arising from the GST demand order - Plea of non-communication of GST order - knowledge of the proceedings - Alternate statutory remedy - HELD THAT: - The Court held that the earlier decision in Eagle Trans Shipping and Logistics India Private Ltd. Vs. Union of India & Ors. [2025 (11) TMI 1979 - RAJASTHAN HIGH COURT] did not apply because, in the present case, no appeal had been filed and no attempt had even been made to file one. The petitioner had only moved a rectification application. The Court found the plea of lack of knowledge unsupported by documentary proof and unacceptable on facts, particularly when the petitioner, being a company holding GST registration, would necessarily be filing regular monthly and annual returns. On that factual premise, the Court concluded that there was deliberate ignorance of the show cause notice and the adjudication order, and therefore no equitable indulgence could be granted in writ jurisdiction. [Paras 4]

The challenge was rejected and no indulgence was granted, the Court holding that the petitioner did not deserve relief on facts.

Final Conclusion: The writ petition was dismissed. The Court declined to interfere with the recovery action since the petitioner had neither pursued the statutory appeal nor established its plea that the adjudication order had not been communicated.

Summary order. Delay was condoned, and the special leave petition was dismissed in view of the dismissal of the special leave petitions against the High Court decision relied upon in the impugned order.

Tax collected but not paid to Government - Writ against show cause notice - Distinct persons under multiple GST registrations - Payment of GST using another registration number of the same assessee

Writ against show cause notice - Pure question of law - Interference at the show cause notice stage was warranted in the special facts of the case. - HELD THAT: - The Court held that, though a writ petition ordinarily would not be entertained against a show cause notice, the matter had already been pending for several years, pleadings were complete, and no further factual enquiry was required. The show cause notice itself recorded that the amount collected from customers towards the GST component tallied with the amount paid to the Government. In that background, what survived was a pure question of law on the scope of Section 76, and it was not appropriate to relegate the petitioner to the adjudicating authority at that stage. [Paras 7]

The writ petition was held maintainable notwithstanding the challenge being to a show cause notice.

Tax collected but not paid to Government - Distinct persons under multiple GST registrations - Double taxation - Section 76 of the CGST Act could not be invoked where the amount collected as representing tax had already been paid to the Government, though through another registration of the same company in the same State. - HELD THAT: - The Court held that Section 76 is directed against a situation where a person collects an amount as tax and does not pay it to the Government. On the facts recorded in the notice itself, there was no dispute as to the taxable nature of the transmission service, the rate and quantum of tax, the passing on of the incidence to customers, or the fact that the entire amount collected had been paid into the Government exchequer. Although, by virtue of Section 25(4), the trading and transmission verticals were to be treated as distinct persons for the purposes of the Act, that could at best mean that the tax was paid through the other registration. The Court held that Section 76, containing its own non-obstante clause and aimed at non-remittance of tax collected, could not be used either to ignore honest and accurate payment already made or to justify double taxation. Since the show cause notice proceeded by ignoring the admitted payment through the other registration and quantified liability afresh, the conditions for invoking Section 76 were not satisfied. [Paras 7]

The impugned show cause notice was quashed as Section 76 was inapplicable in the circumstances.

Final Conclusion: The Court entertained the writ petition despite the challenge being at the show cause notice stage, holding that only a pure question of law survived on facts already recorded in the notice itself. As the entire amount collected towards the GST component had admittedly been paid to the Government and Section 76 could not be invoked to demand it again merely because payment was routed through another registration of the same company in the same State, the show cause notice was quashed.

Validity of the notice issued under Section 79 - Recovery of tax dues from third parties - Authorization for recovery proceedings - Proper officer under Section 79 - Prior notice before garnishee recovery. - HELD THAT: - The Court held that Section 79 itself does not require any prior authorization before initiating recovery. It further examined the Gazette notification issued by the Chief Commissioner of State Tax and found that the jurisdictional Deputy Assistant Commissioner (ST) was the notified proper officer for exercising powers under Section 79. Since the impugned notice had been issued by that officer, the challenge founded on lack of competence or authorization was rejected.

The recovery notice was held to have been issued by the competent proper officer and was not invalid for want of prior authorization.

The Court read Section 79 as a recovery provision enabling collection of dues from persons from whom money is due or may become due to the defaulting dealer. It found no statutory requirement that, before issuing such a notice to a third party, the tax authorities must again issue a separate notice to the dealer. In the present case, an assessment order had already been passed against the petitioner, that order had attained finality, and there was therefore no dispute regarding determination of tax. On that basis, the impugned recovery notice was held to be lawful.

The challenge based on absence of prior notice failed, and recovery from the bank under Section 79 was upheld because the underlying assessment had already attained finality.

Final Conclusion: The writ petition was dismissed. The Court upheld the recovery notice issued to the bank under Section 79(1)(c), holding that the notice had been issued by the proper officer and that no separate prior notice to the petitioner was required after the assessment had attained finality.

Recovery of GST dues of deceased father, without prior notice, hearing, or determination of liability under Section 93 - attachment and freezing of the bank account - Principles of Natural Justice - Due Process of Law - Jurisdictional error. - HELD THAT: - The Court held that though recovery powers are available under Section 79, they presuppose an established liability against the person from whom recovery is sought. On the admitted position that the petitioner and his deceased father held separate GST registrations and operated from different registered places of business, mere similarity of trade name could not justify automatic recovery from the petitioner. Whether the petitioner had in fact continued the deceased's business so as to attract Section 93 required prior determination on material, after notice and opportunity of hearing, and could not rest on presumptions. The Court further held that freezing the petitioner's bank account, which constitutes property, without such prior adjudicatory process and without affording an opportunity to object, offended principles of natural justice and due process. Referring to Radha Krishan Industries v. State of Himachal Pradesh [2021 (4) TMI 837 - SUPREME COURT], the Court reiterated that attachment of a bank account is a drastic measure requiring formation of opinion on tangible material, and found that the impugned action suffered from a jurisdictional defect. The objection based on alternate remedy was therefore rejected, as the impugned recovery action itself was illegal. [Paras 14, 15, 16, 17, 18]

The impugned communication attaching the petitioner's bank account was quashed, the bank account was directed to be de-frozen, and liberty was reserved to the Department to proceed afresh in accordance with law if it seeks to establish liability under Section 93.

Final Conclusion: The Court allowed the writ petition and quashed the attachment of the petitioner's bank account, holding that recovery of the deceased father's tax dues could not be enforced against the petitioner without prior determination of liability in accordance with law. Liberty was reserved to the Department to initiate appropriate proceedings afresh.

Rejection of the petitioner's claim for continuation of tax incentive after introduction of GST - Failure to consider statutory saving of tax incentive - Continuation of investment-linked tax exemption on non-rescission of notification. - HELD THAT:- The Court held that on a plain reading of Section 174(2)(c) and its proviso, a tax exemption granted as an incentive against investment would continue unless the notification granting such exemption had been withdrawn or rescinded. Since the State did not place any material to show that the tax relaxation granted to the petitioner had been withdrawn prior to the appointed day, the authority was required to examine the petitioner's representations in the light of that statutory position. The impugned order was found defective because it rejected the claim without considering the effect of Section 174(2)(c) and the principle stated in Hero Motocorp Limited Versus Union of India and Others [2022 (10) TMI 677 - SUPREME COURT] that the benefit would cease only where the exemption notification stood rescinded. [Paras 5, 7, 8]

The impugned order was quashed and the matter was remitted to the respondents for fresh consideration of the petitioner's representations in accordance with Section 174(2)(c) of the CGST Act and the law declared by the Supreme Court.

Final Conclusion: The Court did not decide the petitioner's entitlement to the incentive on merits. It quashed the rejection order on the ground that the competent authority had failed to consider the statutory saving under Section 174(2)(c) of the CGST Act and remitted the matter for fresh decision.

Benefit of the exemption under Notification No. 2/2017 - supply of frozen meat - Binding effect of advance ruling - entitlement to the reimbursement of the GST paid. - HELD THAT:- The Court held that the entire controversy turned on the applicability of the exemption notification relied upon by the respondents. It noted that, in the petitioner's own case, the Rajasthan Authority for Advance Ruling and the Rajasthan Appellate Authority for Advance Ruling had specifically determined that the goods were supplied in a unit container and were not exempt, but attracted GST at five per cent. Since those advance rulings were binding on the petitioner under Section 103 of the Central Goods and Services Tax Act, 2017, the petitioner was required to deposit the tax accordingly. The respondents having refused reimbursement solely on the premise that the supplies were exempt, and that premise having stood negatived by the binding advance rulings, there was no basis to deny reimbursement of the GST already paid. [Paras 10, 12, 13, 15, 16]

The petitioner was held entitled to reimbursement of the balance GST amount paid on the supplies, to be paid within three months, failing which interest at six per cent per annum would become payable thereafter.

Final Conclusion: The writ petition was allowed on the footing that the petitioner's supplies were not covered by the claimed GST exemption and that the binding advance rulings required payment of GST. The respondents were directed to reimburse the balance GST amount, with interest becoming payable in default.

Rejection for Production of additional evidence in appeal - Interpretation of exceptions under Rule 112 - Sufficient Cause - Failure to consider material contentions. - HELD THAT:- The Court held that the appellate authority proceeded on an erroneous understanding of Rule 112, as the rule itself permits production of additional evidence in appeal in the circumstances set out in clauses (a) to (d) of sub-rule (1). The petitioner's contention that its case fell within those exceptions required consideration, and the appellate authority could also have remanded the matter to the original authority if the additional material needed examination there. Since the substantive contentions and the additional evidence were not considered in the light of Rule 112, the impugned order could not be sustained. [Paras 6, 7]

The impugned appellate order was set aside and the matter was remanded to the appellate authority to reconsider the appeal after taking into account the additional evidence in terms of Rule 112(1)(a) to (d), with all contentions kept open.

Final Conclusion: The petitions were disposed of by setting aside the appellate order and remanding the appeal for fresh decision after consideration of the additional evidence under Rule 112. All contentions were kept open for consideration by the appellate authority.

Validity of the Ex parte adjudication - mismatches and related input tax credit discrepancies - No Opportunity to file reply on factual discrepancies - HELD THAT: - The Court found that the impugned adjudication had been made ex parte on the basis of material available with the department. Since the show cause notice involved factual grounds, including alleged mismatch between returns, excess input tax credit, supplier-related default, delayed tax payment and interest liability, proper adjudication required the petitioner's reply on merits. In view of the petitioner's assertion that material was available to show that the alleged discrepancies did not exist, the Court held that allowing the order to stand would cause serious financial prejudice and that the matter should be reconsidered after affording an opportunity to participate. [Paras 4, 5, 6, 8]

The ex parte order was set aside and the matter was remitted for fresh consideration, with consequential direction to withdraw the bank attachment flowing from that order.

Final Conclusion: The petition was disposed of by setting aside the ex parte order passed under Section 73 and remitting the matter for fresh adjudication after giving the petitioner an opportunity to respond on merits. Consequential recovery action based on the impugned order was directed to be rescinded.

Availability of statutory appellate remedy - GST Appellate Tribunal - limitation for filing appeal

Availability of statutory appellate remedy - GST Appellate Tribunal - limitation for filing appeal - The writ petition was disposed of on the ground that the statutory appellate remedy before the GST Appellate Tribunal had become available. - HELD THAT: - The Court noted that the Tribunals had been constituted, Members had been appointed, and the procedure governing the functioning of the GST Appellate Tribunal had already been notified. It further recorded that the Central Government had notified 30th June, 2026 as the outer date for filing appeals before the Appellate Tribunal in cases where the orders sought to be appealed had been communicated before 1st April, 2026. In view of these developments, the Court held that no useful purpose would be served by keeping the writ petition pending and, without examining the validity or legality of the impugned orders, permitted the petitioner to pursue the statutory appeal, directing that if the appeal was filed within the notified period it should be entertained without objection as to limitation. The amount deposited pursuant to the interim order was directed to be treated as compliance with the pre-deposit requirement under section 112(8), subject to production of the certified copy of the interim order and proof of deposit.

The petitioner was relegated to the remedy of appeal before the GST Appellate Tribunal, with protection against limitation if the appeal is filed within the notified period and with adjustment of the amount already deposited towards the statutory pre-deposit.

Final Conclusion: The writ petition was disposed of without examination of the merits, in view of the constitution and operationalisation of the GST Appellate Tribunal. The petitioner was permitted to file an appeal before the Tribunal within the notified period, and such appeal was directed to be entertained without objection as to limitation.

Alternative Statutory Remedy - Pre-deposit​​​​​​​ -Coercive recovery pending expiry of appeal period - HELD THAT: - The Court held that where the statute still preserved to the petitioner a remedy of appeal, and the petitioner intended to avail that remedy within the period stated to be available under the Act read with the Government Notification, the remedy could not be rendered illusory by resorting to recovery before the appeal period expired. The Court also noted that if the petitioner filed the appeal, a pre-deposit of 10% of the tax amount would be required under the Act, and in that situation recovery could not in any case be resorted to. On the petitioner's statement that an appeal with stay application would be filed on or before 30th June 2026, the Court protected the petitioner accordingly while keeping all rival contentions on merits open. [Paras 3, 4, 5]

The petition was disposed of by protecting the petitioner from coercive recovery till the petitioner availed the statutory appellate remedy within the stated period, with liberty to the Department to recover the dues in accordance with law if no appeal was filed as permitted in law.

Final Conclusion: The Court held that coercive recovery could not be undertaken so as to defeat the petitioner's subsisting statutory right of appeal. The matter was disposed of on the petitioner's statement to file an appeal with stay application within the available period, leaving all merits open.

Validity of the assessment orders passed against a deceased registered person, without notice to the legal representative - Proceedings against legal representatives - Notice to legal representative - Principles of Natural Justice. -HELD THAT: - The Court held that Section 93 of the CGST Act permits continuation of assessment proceedings relating to a deceased person only against the legal representatives, where the business is carried on by them after the death of the registered person or where they have inherited the assets of the deceased person, subject to the statutory limitation on liability. In the present case, the assessments had been completed without any notice to the petitioner. On that ground, the assessment orders were found unsustainable and the matters required fresh assessment after due notice to the petitioner. [Paras 4, 5, 6]

The impugned assessment orders were set aside and the matters were remanded to the respective Assessing Officers for fresh assessment after due notice to the petitioner.

Final Conclusion: The writ petitions were allowed. The assessment orders passed against the deceased registered person without notice to the petitioner were set aside, and fresh assessment was directed in accordance with Section 93 of the CGST Act after giving due notice to the petitioner.

Challenged to the cancellation of GST registration - non-filing of returns and non-payment of tax - HELD THAT:- Following an earlier order [2024 (10) TMI 1387 - ANDHRA PRADESH HIGH COURT] passed in a similar circumstance, the writ petition was disposed of by directing the petitioner to apply for revocation, file draft returns, deposit the tax dues before the stipulated date, and permitting manual filing if online filing is not possible, whereupon the authority was directed to consider the revocation application within the prescribed time.

Challenged the show-cause notice proposing cancellation of registration - lack of jurisdiction - violation of principles of natural justice, or arbitrariness. - HELD THAT:- The Court held that interference with a show-cause notice is ordinarily not warranted unless the notice is ex facie without jurisdiction or suffers from violation of principles of natural justice or other similarly limited grounds. In the present case, the notice was accompanied by a communication setting out specific instances of alleged misuse of e-way bills, and the petitioner had been furnished that material to enable submission of a reply. The plea that similar proceedings had earlier been dropped did not justify quashing the fresh notice at this stage, particularly when the notice disclosed specific allegations for consideration by the authority. [Paras 4, 5, 6]

The writ petition was dismissed, with liberty to the petitioner to submit its reply or additional reply before the authority and seek dropping of the proceedings.

Final Conclusion: The Court declined to interfere with the impugned show-cause notice proposing cancellation of registration, holding that no jurisdictional error or breach of natural justice was made out at the notice stage. The petitioner was left to pursue its objections before the competent authority.

Effect of single composite assessment order covering more than one financial year - Separate assessment for each financial year - Multiple Tax Periods - Remand - Limitation Exclusion.

Composite assessment order for multiple tax periods - Separate assessment for each financial year - HELD THAT: - Following the earlier Division Bench view [2025 (9) TMI 1215 - ANDHRA PRADESH HIGH COURT], the Court held that a single show-cause notice or a single composite assessment order cannot be issued for more than one tax period, and where the due date for filing annual return has been reached, it cannot cover more than one year. Since the impugned assessment was a single order covering multiple financial years, it was unsustainable on that ground. The other grounds raised by the petitioner were left open. [Paras 4, 5, 6]

The impugned composite assessment order was set aside and the matter was remitted, leaving it open to the authorities to initiate fresh proceedings separately for each assessment year, with exclusion of the intervening period for limitation.

Final Conclusion: The writ petition was allowed on the limited ground that the assessment had been made through a single composite order for multiple financial years. The order was set aside and fresh proceedings were permitted separately for each assessment year, while leaving all other grounds open.

Validity of proceedings u/s 153C - absence of incriminating material - Satisfaction note - profit earned on sale of agricultural land - Rural agricultural land - Adventure in the nature of trade

HELD THAT: - The Court found that the satisfaction note merely referred to a partnership deed, dissolution deed and miscellaneous papers said to belong to the assessee, but did not disclose that those documents were incriminating, relatable to A.Y. 2007-08, or indicative of concealed income. The assessment order itself did not proceed on the basis of those seized documents, but on a re-examination of a land transaction already within the knowledge of the Assessing Officer. Mere recovery of documents belonging to another person was held insufficient to invoke section 153C unless the material had a bearing on determination of that person's income for the relevant year. Section 153C was therefore held unavailable as a device to revisit a concluded assessment in the absence of fresh incriminating material. [Paras 28, 29, 30, 32, 33]

The satisfaction note was vitiated and the entire proceedings initiated under section 153C were held invalid.

Nature of land sold - Rural agricultural land - Adventure in the nature of trade - Capital gains exemption - HELD THAT: - The Court held that a solitary transaction of sale of agricultural land, without frequent purchase and sale, could not be treated as an adventure in the nature of trade. It further held that agricultural land falling outside the limits specified in section 2(14)(iii) remained outside the ambit of capital asset and was therefore exempt from capital gains tax. The Revenue could not deny that position merely by relying on later non-agricultural use of the land by the purchaser or by treating the transaction as business activity without material showing any other relevant activity concerning the land. [Paras 31, 34, 35, 36]

The addition on account of sale of the land was held unsustainable and the assessee was entitled to exclusion of the income arising from the sale of rural agricultural land.

Final Conclusion: The appeal was allowed. The Court answered both substantial questions of law in favour of the assessee, held the initiation of proceedings under section 153C to be invalid, and further held that the sale of the rural agricultural land was not taxable in the manner adopted by the Revenue.

Limitation for reassessment notice - notice issued as time barred - availability of an alternate statutory remedy

HELD THAT: - The Court held that the notice issued u/s 148 for the relevant assessment year was beyond the prescribed period of limitation and therefore the very initiation of reassessment proceedings was fundamentally void.

Since the petitioner had already raised this jurisdictional objection before the AO and it remained unconsidered, the existence of a statutory appellate remedy did not bar exercise of writ jurisdiction. The Court applied the principle that where proceedings are wholly without jurisdiction, the assessee need not be relegated to the appellate forum merely to secure formal annulment of an order which is invalid on its face. [Paras 7, 8, 10]

The notice u/s 148 and the consequential assessment order were quashed, and the writ petition was allowed.

Final Conclusion: The Court entertained the writ petition notwithstanding the statutory appellate remedy, holding that the reassessment notice was barred by limitation and therefore without jurisdiction. The impugned notice and the consequential assessment order were quashed.

Validity of the Notices issued u/s 153C as barred by limitation -Satisfaction note u/s 153C - Meaning of "immediately" after completion of assessment of searched person - Satisfaction Note by the AO of the searched persons was recorded only after 21 months from the conclusion of the assessment

HELD THAT: - Applying Commissioner of Income-tax-III V/S Calcutta Knitwears [2014 (4) TMI 33 - SUPREME COURT] the Court held that though a satisfaction note may be recorded after completion of the assessment of the searched person, it must be recorded immediately thereafter, and not merely within a reasonable time. The CBDT Circular was noted as extending that principle to section 153C proceedings. The relevant point of time for testing delay was held to be the date of completion of the assessment of the searched persons, and not the later date on which the AO of the other person acted upon receipt of the note.

On the admitted dates, a delay of about 21 months from completion of the searched persons' assessments could not, in law, satisfy the requirement of recording satisfaction immediately after such completion. The decision relied upon by the Revenue was held inapplicable on facts and of no assistance. [Paras 9, 10, 11, 13]

The notices issued u/s 153C and the consequential notices and orders were quashed as unsustainable in law.

Final Conclusion: The Court allowed the writ petitions and held that the section 153C proceedings were time-barred because the satisfaction note of the AO of the searched persons had not been recorded immediately after completion of their assessments. The impugned notices and consequential proceedings therefore quashed.

Addition u/s 68 - bogus Long Term Capital Gains (LTCG) via penny stocks -need for Independent inquiry in penny stock additions - Discharge of onus - findings of the AO were based solely on the record of the Investigation Wing -Concurrent findings of fact

HELD THAT: - The Court held that there were concurrent findings in favour of the assessee and that the Assessing Officer's conclusion rested solely on material received from the Investigation Wing, without any independent inquiry. It further held that the assessee had discharged the burden u/s68 by producing material showing investment through banking channels and DEMAT, and that the Department had not placed any document to substantiate the link sought to be drawn by the Investigation Wing with other persons. In these circumstances, no ground for interference with the Tribunal's order was made out. [Paras 6, 7, 8]

The addition deleted by the appellate authorities was not restored, and the Revenue's appeal was dismissed.

Final Conclusion: The High Court declined to interfere with the Tribunal's order affirming deletion of the addition for the assessment year 2016-17. It held that the assessee had discharged the burden under Section 68 and that the Revenue's case lacked independent inquiry beyond the Investigation Wing material.

Cash deposited during the demonetization period - cash available in the books of account - Recorded sales and books of account

HELD THAT: - The Tribunal found, on examination of the books of account and bank account, that the assessee was carrying on its internet service business regularly, that sales and purchases were consistently recorded, and that cash was deposited in the bank throughout the year out of sale proceeds duly entered in the books. On that material, the source of the cash deposited during the demonetisation period stood adequately explained. The appellate authority's rejection of the explanation on the ground that the reply was short was held unsustainable, since the record itself established that the deposits formed part of accounted business receipts and not unexplained money. [Paras 5, 6]

The addition sustained in respect of cash deposited during the demonetisation period was deleted.

Final Conclusion: The Tribunal allowed the appeal and held that the cash deposits made during the demonetisation period were duly explained as recorded business receipts. The addition confirmed by the appellate authority on that issue was therefore deleted.

Penalty u/s 270A(2)(b) - No explanation/ evidences for not filing the return of income - obligation to file return by the legal heirs or executors -delayed receiving probate from High Court - executors inability to fill return in the absence of probate after assessee demise - criteria to appoint legal heir or executor in case of the deceased or estate of the deceased

HELD THAT:- Considering the provision of section 270A(6) of the Act, we are of the view that the explanation of the executors is reasonable and bonafide and the reasons for not filing of return are beyond the control and capacity of the executors. Therefore, the penalty as levied by the A.O. and confirmed by the CIT(A) cannot be sustained.

Considering the FAQs, Q4 & Q7 and the guidelines as provided by the Income Tax Department, we observe that the obligation to file return by the legal heirs or executors comes into play after the receipt of the order from the court appointing legal heir or executors. Considering the fact, we are inclined to set aside the order of CIT(A) and direct the A.O. to delete the penalty.

Before parting, we would like to mention that F.Y. 2020-21 and F.Y. 2021-22 were COVID period and, therefore, it took approximately three years to obtain probate from the Hon’ble Court after demise of assessee. Hon’ble Supreme Court has Suo moto extended the limitation from 20.03.2020 till 28.02.2022 - Since, the probate was granted on 09.03.2022, and was received on 15.03.2022, the period was covered by the order of the Hon’ble Supreme Court. Penalty to be deleted.

Final conclusion: Tribunal held that penalty u/s 270A(2)(b) is to be deleted as explanation of the executors is reasonable and bonafide and the reasons for not filing of return are beyond the control and capacity of the executors.

Rejection of books of accounts - estimation of profit at 8% of turnover -addition was made by the AO merely on the ground that the notices u/s 133(6) were not complied - AO has rejected the books of accounts merely on the ground that the assessee has not furnished certain invoices.

HELD THAT:- There is consistency in the pattern of earning/sales of the assesssee. AO has rejected the books of accounts merely on the ground that the assessee has not furnished certain invoices and estimated the income at the rate of 8% on the total turnover which in our opinion is incorrect and cannot be sustained.

Therefore, we are not in agreement with the conclusion drawn by the ld. CIT (A) on this issue.

Assessee has furnished all the documents before the ld. CIT (A) but CIT (A) instead of considering the documents furnished by the assessee only preferred to uphold the order of the AO on the ground that the assessee has not furnished the evidences before the ld. Assessing Officer.

AO has not pointed out any defect or deficiency in the books of accounts maintained by the assessee but rejected the same on the ground that certain invoices were not produced and 133(6) notices were not replied by the suppliers.

Rejection of books of account without pointing out any defect is bad in law and can not be sustained. The case of the assessee is squarely covered by the decisions of Smt Poonam Rani [2010 (5) TMI 57 - DELHI HIGH COURT] and Om Overseas [2008 (3) TMI 44 - HIGH COURT PUNJAB AND HARYANA].

Order passed by the CIT(A) upholding the assessment order is wrong and can not be sustained. Therefore, we set aside the order of CIT (A) on this issue and direct the ld. AO to delete the addition by holding that the books of accounts were wrongly rejected by the ld. Assessing Officer. [Para 4 and 5]

Final conclusion: Tribunal deleted the addition by holding that the books of accounts were wrongly rejected by the ld. Assessing Officer just on the ground that certain invoices were not produced and 133(6) notices were not replied by the suppliers.

Unexplained cash credit - Share capital and share premium - Onus u/s 68 - Non-compliance with summons by the share subscribers to the enquiry being conducted after more than six (6) years from the date of transactions

HELD THAT: - The Tribunal found that the assessee had placed on record the names, addresses, PAN, bank statements, income-tax returns, audited financial statements, confirmations and incorporation documents of the share subscribers, and that the appellate authority had also examined their net worth vis-a-vis the investments made. It further noted that notices issued u/s 133(6) were complied with by the subscribers and that there was no allegation by the AO that the subscribers were bogus or non-existent, nor any enquiry or investigation discrediting the documents produced.

In these circumstances, the statutory onus under section 68 stood discharged, and mere non-compliance with summons by the subscribers was held insufficient to treat the share capital and share premium as unexplained cash credit, particularly when no material was brought on record to show that the assessee had routed its own unaccounted money through the transactions. [Paras 6, 7, 8, 9, 10]

The order of the CIT(A) deleting the addition under section 68 was upheld and the Revenue's appeal was dismissed.

Final Conclusion: For AY 2012-13, the Tribunal held that the assessee had discharged the burden under section 68 in relation to the impugned share capital and share premium. As the documentary evidence remained uncontroverted and the addition rested essentially on non-appearance in response to summons, the deletion of the addition by the CIT(A) was affirmed and the Revenue's appeal was dismissed.

Transfer of jurisdiction u/s 127 - Assessment without jurisdiction transfer of jurisdiction from ITO, Ward 29(3), New Delhi to ITO, Ward- 30(5), New Delhi - HELD THAT: - The Tribunal held that a jurisdictional objection going to the root of the assumption of assessment power can be raised as an additional ground even at a belated stage where it involves a pure question of law capable of being decided on admitted facts. On the admitted position that no order u/s 127 had been passed, the Tribunal held that transfer of jurisdiction from one Assessing Officer to another could not be presumed.

Though the power of transfer may be administrative in nature insofar as hearing is concerned, absence of the transfer order itself means there is no valid transfer of jurisdiction, and the proceedings culminating in the assessment stand vitiated.

Reliance in this regard is rightly placed by the Ld. AR on the decision of Sanjay Kumar Singhal [2025 (5) TMI 282 - ITAT DELHI] and Rahul Tyagi [2025 (3) TMI 1156 - ITAT RAIPUR] wherein the coordinate Benches have held that an order passed by an AO in the absence of an order of transfer u/s 127 having been passed by the competent authority is invalid and the same deserves to be quashed. [Paras 5, 6, 8, 9]

The additional ground was admitted, and the assessment was quashed as without jurisdiction.

Final Conclusion: The Tribunal admitted the additional jurisdictional ground and held that, in the absence of any order transferring jurisdiction under Section 127, the Assessing Officer who framed the assessment lacked authority to do so. The impugned assessment was accordingly quashed.

Reimbursement of expenses without profit element - Retainership fee under business arrangement - Section 14A disallowance prior to Rule 8D - Short deduction of tax at source - Business promotion expenditure - Ad hoc disallowance of fuel and telephone expenses

Reimbursement of expenses without profit element - Section 40(a)(ia) - Business expenditure - Reimbursement of advertisement and promotion expenses to the group concern, made on cost-to-cost basis and after deduction of tax by that concern on the underlying expenditure - HELD THAT: - The Tribunal found that the assessee had in fact produced a movie and the promotion expenditure had been incurred for its own business. The genuineness of the expenditure was not doubted by the lower authorities; the objection was only that the arrangement was not under a specific agreement and that tax should have been deducted again by the assessee. Tribunal accepted that such group arrangements are common, that the sister concern had deducted the relevant tax on the expenditure incurred by it, and that the reimbursement was on a pure cost-to-cost basis without mark-up. On that footing, the procedural objections did not justify disallowance. [Paras 6]

The disallowance under section 40(a)(ia) in relation to the reimbursement was rightly deleted and the Revenue's ground failed.

Retainership fee under business arrangement - Accrual over relevant period - Joint venture arrangement - Retainership fee paid under the memorandum of understanding with Percept for forming and supporting the joint venture - Allowable business expenditure - HELD THAT: - On examining the memorandum of understanding, the Tribunal held that the remuneration clause was clear: the assessee had agreed to pay a fixed retainer for formation of the joint venture and deployment of resources by Percept, with later remuneration to be mutually settled once the joint venture became operational. The objection that the memorandum was vague was therefore rejected. However, since the memorandum was signed in August 2004 and, according to the Tribunal, could have been implemented from 01.09.2004, only seven months' retainership could be allowed in Assessment Year 2005-06, the balance being claimable in the succeeding year. For Assessment Years 2006-07 and 2007-08, full yearly remuneration was held allowable. [Paras 9]

The Revenue's challenge to allowability of the retainership failed on principle, but for Assessment Year 2005-06 the allowance was restricted to the proportionate amount; for Assessment Years 2006-07 and 2007-08 the full claim was upheld.

Reimbursement of joint venture operating expenses - Business nexus - fees paid to JV company as reimbursement of expense - HELD THAT: - The Tribunal treated this issue as inseparably connected with the retainership arrangement under the memorandum of understanding. Having already held that the assessee had validly entered into the arrangement with Percept, with fixed remuneration and reimbursement of related expenses, the Tribunal held that the reimbursement of the joint venture operating expenses stood justified on the same footing. [Paras 12]

The claim for reimbursement of the joint venture company's expenses was allowed and the Revenue's ground was dismissed.

Section 14A disallowance prior to Rule 8D - Administrative expenditure relatable to exempt income - HELD THAT: - The Tribunal held that section 14A was operative for the year in question even though Rule 8D applied only from Assessment Year 2008-09. It declined to accept the assessee's stand that no expenditure at all was involved in relation to the exempt income, observing that administrative expenses would necessarily be involved even where the investment had been made in earlier years. At the same time, the Tribunal regarded the AO's adoption of 20% of exempt income as excessive. It therefore applied a reasonable estimate by directing disallowance at 1% of the investment that had yielded exempt income, which in the facts corresponded to the amount originally disallowed. [Paras 15]

The addition under section 14A was sustained, and the Revenue's grounds on this issue were allowed.

Ad hoc disallowance of fuel and telephone expenses - Personal element - HELD THAT: - The Tribunal noted that the AO had proceeded only on an ad hoc assumption that personal use was involved. It accepted the finding that the expenditure had been incurred for the purposes of the business and agreed with the first appellate authority that no personal element was established in the facts of the case. [Paras 18]

The deletion of the ad hoc disallowance on fuel and telephone expenses was upheld and the Revenue's grounds were dismissed.

Business promotion expenditure - Direct nexus with business - Presentation of a watch to the director of a successful film, as appreciation linked to the film's success - HELD THAT: - The Tribunal held that the expenditure was incurred in appreciation of the artistic contribution and success of the movie produced by the assessee. It treated the payment as directly linked to the business carried on by the assessee and therefore rejected the Assessing Officer's view that it was not a business expense. [Paras 21]

The deletion of the disallowance of business promotion expenditure was affirmed and the Revenue's ground was dismissed.

Short deduction of tax at source - Section 40(a)(ia) - Section 201 - Disallowance under section 40(a)(ia) made in respect of payments on which tax had been deducted short - HELD THAT: - The Tribunal distinguished between three components. It held that an amount not claimed as expenditure in the relevant year could not be disallowed. As regards the payment on which the assessee stated that it had already made a suo motu disallowance in its computation, the Assessing Officer was directed to allow relief after verification, in line with the first appellate authority. On the principal question of proportionate disallowance for short deduction of tax, the Tribunal held that the consequence of short deduction lay under section 201(1) and not u/s 40(a)(ia), and therefore the disallowance under section 40(a)(ia) was unsustainable. [Paras 24]

The Revenue's challenge to deletion of the disallowance for short deduction of tax was rejected, subject to verification regarding the amount already disallowed by the assessee in its computation.

Final Conclusion: The Revenue's appeals were partly allowed. The Tribunal upheld deletion of the disallowances relating to reimbursement of expenses, joint venture operating expenses, fuel and telephone expenses, business promotion expenditure, and short deduction of TDS, sustained the section 14A disallowance, and restricted the retainership fee for Assessment Year 2005-06 to the proportionate period while upholding the full claim for the later years.

Non-issuance of a statutory notice u/s 143(2) - Scope of section 292BB - Reassessment validity

HELD THAT: - The Tribunal held that once a return was filed in response to notice u/s 148, issuance of notice u/s 143(2) was a legal requirement.

Relying on Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT] and Laxman Das Khandelwal [2019 (8) TMI 660 - SUPREME COURT] it held that section 292BB can cure only defects in the service of a notice that has in fact been issued, but cannot cure complete absence of such notice. Since no notice u/s 143(2) had been issued, the defect went to the root of jurisdiction and vitiated the assessment. [Paras 3]

The assessee's ground on absence of notice u/s 143(2) was allowed and the assessment was quashed.

Final Conclusion: Tribunal allowed the appeal and held that the reassessment could not survive for want of mandatory notice under section 143(2). Section 292BB was held inapplicable where no such notice had ever been issued.

Maintainability of appeal against rectification order - Scope of challenge to rectification u/s 154

HELD THAT: - The Tribunal held that the rectification order only allowed the assessee's application for correction of a computation mistake apparent from the record and did not alter the addition made in the original assessment. Since the grievance raised by the assessee was in substance directed against the addition itself, the proper course was to challenge the original assessment order and not the order passed u/s 154.

On that basis, the appellate authority was justified in dismissing the appeal filed against the rectification order. The Tribunal, however, clarified that such dismissal would not preclude the assessee from challenging the original assessment order in accordance with law, subject to limitation, and left all contentions open in that regard. [Paras 4]

The dismissal of the appeal against the rectification order was upheld, with liberty to the assessee to challenge the original assessment order in accordance with law.

Final Conclusion: The Tribunal dismissed the assessee's appeal, holding that the challenge to the addition could not be maintained in an appeal against the rectification order which had only corrected a computation error. It clarified that the assessee may, if so advised and subject to limitation, challenge the original assessment order independently.

Unexplained credit - Accounting mistake - Interest expenditure - Alternative claim for house property deduction - TDS threshold under professional fees - Ad hoc disallowance of business expenditure

Unexplained credit - Accounting mistake - Sale proceeds of capital asset - addition made by treating the amount shown under current liabilities as unexplained credit - HELD THAT: - The Tribunal found that the assessee had produced the relevant material to show that the amount represented sale proceeds of a flat sold during the year and not any unexplained liability. The purchaser had himself confirmed that he had purchased the flat from the assessee and paid the consideration. The amount was reflected under current liabilities only because of an accounting error committed in the books. A mistaken accounting entry, when the underlying transaction stands explained, cannot be brought to tax as unexplained income. [Paras 10]

The addition was deleted.

Disallowance of Interest expenditure - Business purpose test - only reason assigned by the AO for disallowance of interest expenditure is that loan was taken in the personal account - HELD THAT: - The Tribunal held that the sole basis of disallowance was that the loans had been raised in the personal account. The Assessing Officer had not recorded any finding that the borrowed funds were not used for business purposes. Since the assessee's claim regarding business user remained undisturbed by the revenue authorities, the interest expenditure could not be disallowed merely because of the form in which the loan was obtained. [Paras 13]

The disallowance of interest was deleted.

Alternative claim for house property deduction - Interest on borrowed capital - HELD THAT: - The Tribunal observed that there was no dispute that the loan had been taken for purchase of property. It held that, if the Assessing Officer considered the claim not allowable as business expenditure, the alternative plea for allowance of interest under the statutory provision governing house property ought to have been examined. Rejection of that plea merely on the ground that the return had not been revised was not accepted, and the issue of admissible interest was directed to be worked out afresh. [Paras 17]

The issue was restored to the Assessing Officer to compute and allow the admissible interest under section 24.

TDS u/s 194J - threshold under professional fees - Disallowance for non-deduction of tax on payments to the concerned professionals - HELD THAT: - The Tribunal noted that, apart from the payment to the advocate on which tax had been deducted, the remaining payments were made to tax consultants and other professionals and each such payment was below the threshold limit under the relevant provision. Since no liability to deduct tax arose on those payments, the consequential disallowance could not be sustained. [Paras 19]

The disallowance was deleted.

Ad hoc disallowance of business expenditure @ 20% - Personal use disallowance - HELD THAT: - The Tribunal held that the Assessing Officer had disallowed a fixed percentage of telephone, travelling, car running and similar expenses without pointing out any specific defect. It further observed that such a blanket approach was untenable, particularly when items such as depreciation and insurance could not be reduced in that manner. In the absence of a proper factual examination and reasoned basis, the ad hoc disallowance was unjustified. [Paras 22]

The ad hoc disallowance was deleted.

Final Conclusion: The appeal was partly allowed. The additions and disallowances on account of unexplained credit, interest on personal loans used for business, non-deduction of tax on professional payments, and ad hoc expenditure disallowance were deleted, while the claim relating to interest on property loan was restored to the Assessing Officer for computation of admissible relief.

Exemption u/s 11 - Charitable purpose - statutory concept of education - vocational training and skill development activities constituted education OR advancement of any other object of general public utility - HELD THAT: - The Tribunal examined the trust objects and the activities actually carried on, and found that the assessee was imparting systematic instruction and training through teaching and learning, including vocational training, skill development and a university-affiliated course. It held that such activities answered the statutory concept of education.

The fact that fees were charged, service tax was paid, or that the authorities treated the activities as skill development rather than formal education did not displace the educational character of the activities, particularly when the record also showed absence of consistent surplus.

Following the jurisdictional High Court in the assessee's own case [2025 (12) TMI 1290 - KARNATAKA HIGH COURT] the Tribunal held that the assessee was engaged in charitable activity falling within education u/s 2(15), and was therefore entitled to exemption under sections 11 and 12 for all the three assessment years. [Paras 14, 15, 16, 20]

The assessee was held entitled to exemption under sections 11 and 12 for Assessment Years 2015-16, 2016-17 and 2017-18.

Final Conclusion: All three appeals were allowed. The Tribunal held that the assessee-trust was carrying on educational charitable activities and directed grant of exemption under sections 11 and 12.

Validity of notice u/s 148A(b) - lesser time given to respond -Limitation for reassessment notice under section 148 - unexplained investment u/s. 69 -Joint ownership and assessability of investment

Minimum time to respond u/s 148A(b) - Mandatory procedural compliance - notice granted a 5 days time to file the response - HELD THAT: - The Tribunal held that section 148A(b) requires that the assessee be given not less than seven days from the date of issue of notice to respond. The notice in the present case granted only five days. The Revenue's contention that the assessee later sought extension was rejected, since the Assessing Officer had not considered that request and failure by the assessee to object earlier could not cure a proceeding initiated contrary to the statute. The defect went to the validity of the notice itself, rendering the subsequent order under section 148A(d) and the reassessment proceedings unsustainable. [Paras 9]

The notice under section 148A(b) was held bad in law, and the consequential proceedings were vitiated.

Limitation for notice under section 148 - Expiry of six-year period - HELD THAT: - The Tribunal held that, on the amended reassessment provisions, the time limit for issuance of notice for A.Y. 2015-16 expired on 31/03/2022. Since the notice under section 148 was issued only on 04/04/2022, it was beyond limitation. The Tribunal further observed that, even on the material relied upon by the Assessing Officer, the alleged escapement attributable to the assessee alone would not reach the level assumed in the reassessment, because the property stood jointly in the names of the assessee and his wife. On that basis also, the proceedings could not be sustained. The reassessment, being founded on a time-barred notice, did not survive in law. [Paras 10]

The notice under section 148 was held time-barred and the reassessment was therefore invalid.

Unexplained investment - Joint ownership of immovable property -Addition based on stamp duty value - sale deed showed joint purchase by the assessee and his wife - HELD THAT: - On merits, the Tribunal found that the Assessing Officer had himself obtained the sale deed and that document showed joint acquisition of the property by the assessee and his wife with equal rights. In spite of that material, the Assessing Officer treated the whole investment and the entire difference between the stated consideration and the stamp value as taxable in the hands of the assessee alone. Since the very document relied upon by the Revenue established joint ownership, the whole addition in the hands of the assessee was unsustainable. The later sale documents and consideration details were also found to support the position that the property was jointly owned. [Paras 12]

The additions were held unsustainable on merits in the hands of the assessee alone.

Final Conclusion: The Tribunal allowed the assessee's appeal. It held that the notice u/s 148A(b) was contrary to the statutory minimum time requirement, the notice u/s 148 was barred by limitation for A.Y. 2015-16, and, in any event, the entire additions could not be sustained against the assessee alone in view of the admitted joint ownership of the property. Appeal filed by the assessee is allowed.

Maintainability of customs appeal - Dispute relating to exemption notification in relation to imported goods - Appeal involving rate of duty.

Whether imported goods are covered by an exemption notification is not maintainable in an appeal before the High Court under Section 130 of the Customs Act. - HELD THAT: - The Court followed the view taken by a Division Bench of this Court in [2026 (2) TMI 1403 - ANDHRA PRADESH HIGH COURT] and held that a controversy concerning applicability of an exemption notification is a dispute falling within the class of matters that must be carried to the Supreme Court, and not to the High Court. On that determination, the appeal was held to be incompetent before the High Court. [Paras 9, 10]

The appeal was held not maintainable before the High Court, leaving it open to be filed before the Supreme Court.

Final Conclusion: The Court dismissed the appeal as not maintainable, holding that the controversy regarding applicability of the exemption notification could be agitated only before the Supreme Court.

Preventive detention - Legal representation before Advisory Board - Supply of relied upon documents - Communication of decision on representation - Subjective satisfaction and live link

Legal representation before Advisory Board - Article 22(3)(b) - Section 8(e) bar - The detenus had no right to be represented by a legal practitioner before the Advisory Board in the facts of the case. - HELD THAT: - The Court held that, under the constitutional scheme read with Section 8(e) of the COFEPOSA Act, a detenu cannot claim legal assistance before the Advisory Board as a matter of right. That position changes only where the Detaining Authority or Government actively participates before the Board through a legal practitioner or legal adviser. Mere presence of officers for production of records and assistance to the Board does not amount to such participation. Since the respondents specifically stated that their officers only produced records and did not participate in the hearing, refusal of legal representation did not vitiate the proceedings. [Paras 19, 21, 22]

The challenge founded on denial of legal assistance before the Advisory Board was rejected.

Supply of relied upon documents - Electronic record disclosure - Substantial compliance - There was no invalidating non-supply of the pen drive or other relied upon documents. - HELD THAT: - The Court accepted that fresh grounds could be raised in habeas corpus proceedings, but found that the present case did not involve complete withholding of relied upon material. The contents of the pen drive were shown to the detenus in prison, efforts were made to hand over the pen drive to their representatives, and no renewed request was made for further viewing. In the absence of any prison facility permitting unrestricted access to electronic gadgets, and in view of the display already made before representations were submitted, the Court treated the requirement as substantially complied with. It also held more generally that only relied upon documents need be furnished, and found that such documents, including translated copies, had been duly supplied. [Paras 26, 28, 29, 33, 34]

The contention that the detention stood vitiated for non-supply of the pen drive or relied upon documents was rejected.

Communication of decision on representation - Ministerial act - Consideration by competent authority - The rejections of the representations were not invalid merely because the communications were sent by an officer other than the Detaining Authority or the Central Government. - HELD THAT: - The Court held that the impugned memoranda only conveyed decisions actually taken by the competent authorities. The officer who signed and issued the communications did not decide the representations, but merely performed a ministerial function of conveying the decisions of the Joint Secretary, COFEPOSA and the Director General, CEIB on behalf of the Central Government. The additional affidavit explaining the internal procedure and confirming examination of the representations by the competent authorities was accepted. [Paras 30, 31]

The objection to the competence of the communicating officer was negatived.

Subjective satisfaction and live link - Preventive detention in custody - Likelihood of release on bail - The detention orders were supported by adequate subjective satisfaction, including live and proximate nexus and the possibility of release on bail. - HELD THAT: - On examining the grounds of detention, the Court found that adequate reasons had been recorded. The material disclosed prior instances involving disposal of foreign-marked gold bars and established a live and proximate link with the present incident insofar as the concerned detenu was involved. The Court further held that the detention orders were clear regarding the imminent possibility of the detenus being released on bail. In that view, the attack on the orders for want of material, absence of nexus, or lack of proper subjective satisfaction was not accepted. [Paras 32, 34, 35]

The detention orders were upheld on merits.

Final Conclusion: The Court upheld both detention orders under the COFEPOSA Act, finding no illegality in the denial of legal representation before the Advisory Board, the supply of relied upon materials, the communication of rejection of representations, or the formation of subjective satisfaction. Both Special Leave Petitions were dismissed.

Jurisdiction over MEIS incentives - Customs action against subsisting DGFT scrips - Invocation of duty demand provisions in export incentive cases - Penalty under Section 114AA - Mens rea for penalty on customs broker

Jurisdiction over MEIS incentives - Customs action against subsisting DGFT scrips - Invocation of duty demand provisions in export incentive cases - The customs authorities had no jurisdiction to initiate proceedings founded on alleged wrongful availment of MEIS benefits when the MEIS scrips granted by DGFT remained valid and had not been revoked, and the Tribunal was wrong in invoking the duty demand provisions in such a case. - HELD THAT: - The Court held that MEIS rewards and benefits are conferred by the DGFT under the foreign trade policy, and therefore any alleged unfair advantage in relation to such scrips must be dealt with by that authority. So long as the MEIS scrips granted to the exporter continued to be valid and subsisting, the customs department could not enter the field occupied by DGFT and commence proceedings on the basis of an alleged wrong classification. The Court further held that Section 28 of the Customs Act was wrongly invoked because the case did not involve import into India or any duty short paid, short levied, not paid, or not levied; and Section 28AAA also could not be invoked in the manner adopted by the Tribunal in the facts of the case. Applying the principle stated in Titan Medical Systems Pvt. Ltd. v. Collector of Customs, New Delhi [2002 (11) TMI 108 - SUPREME COURT] and noticing the reasoning in Nitta Geletin India Ltd., v. Commissioner of Customs, [2025 (6) TMI 1855 - KERALA HIGH COURT] the Court held that in the absence of action by the licensing authority, customs could not deny or reopen the benefit flowing from the subsisting grant. [Paras 20, 21, 23]

The proceedings initiated by the customs department and sustained by the Tribunal on the footing of wrongful MEIS benefit were held to be without jurisdiction and unsustainable.

Penalty under Section 114AA - Mens rea for penalty on customs broker - Penalty under Section 114AA could not be sustained against the customs broker merely for misdescription in classification when the broker had acted as the exporter's agent and the required wilful intent was absent. - HELD THAT: - The Court held that a mere misdescription of classification does not by itself establish mens rea for the purposes of Section 114AA. Since the appellant had acted only as an agent of the exporter, the essential element of wilful intent, which is a sine qua non for penalty under that provision, was not made out. On that reasoning, the finding of guilt recorded against the appellant for sustaining penalty under Section 114AA was held to be unsustainable. [Paras 22, 23]

The penalty imposed on the appellant under Section 114AA was set aside.

Final Conclusion: The appeal was allowed. The Tribunal's order was set aside, the customs action founded on alleged wrongful availment of MEIS benefits was held to be without jurisdiction, and the penalty against the customs broker under Section 114AA was held unsustainable.

Reasonable belief of smuggling - foreign origin smuggled gold - Burden of proof in seizure of gold - Admissibility of retracted statement - confiscation and penalties.

Reasonable belief of smuggling - HELD THAT:- In the case of M/s Tata Chemicals Ltd Vs Commissioner of Customs (Preventive), Jamnagar [2015 (5) TMI 557 - SUPREME COURT] held as under: - “reason to believe” by opining it to be not the subjective satisfaction of the officer concerned, for “such power given to the officer concerned is not an arbitrary power and has to be exercised in accordance with their strains imposed by law” and that such belief must be that of an honest and reasonable person based upon reasonable grounds. Further, if the authority would be acting without jurisdiction or there is no existence of any material or conditions leading to the belief, it would be open for the Court to examine the same, though sufficiency of the reasons for the belief cannot be investigated.

The Tribunal held that, though seizure in a town is not barred in law, a town seizure by itself does not furnish the same strength of inference as seizure at a customs station or notified customs area. In the present case, there were no foreign markings on the seized goods, no evidence regarding the place of smuggling, the person who smuggled the goods, or the place where the alleged melting took place, and the follow-up searches at the residence and shops of the respondents yielded no corroborative material. The case rested substantially on the initial statement of one respondent, later retracted, while the respondents' claim of licit acquisition supported by invoices was not verified at the seller's end so as to dislodge it. On these facts, the foundational requirement of reasonable belief at the time of seizure was not shown, and the Commissioner (Appeals) was justified in holding that the goods were not proved to be smuggled or liable to confiscation. [Paras 11, 12, 13, 14]

The finding of the Commissioner (Appeals) that the Revenue had not shown valid reasonable belief of smuggling was affirmed.

Admissibility of retracted statement - Compliance with Section 138B - HELD THAT:- Hon’ble Punjab and Haryana High Court held, in the case of G-Tech Industries Vs. Union of India [2016 (6) TMI 957 - PUNJAB & HARYANA HIGH COURT] that the statement of any person cannot be relied upon directly.

The Tribunal found that the adjudicating authority had relied on the statement of the respondent without following the procedure under Section 138B of the Customs Act. It further noted that the statement had been retracted and that there was no rebuttal to the retraction, while no joint confrontation or further evidentiary steps were taken despite contradictory stands of the other respondents. Applying the principle noticed in the decisions referred to, the Tribunal held that an untested statement, not proved in accordance with law, could not by itself sustain the confiscation and penalties. [Paras 11, 14, 15]

Reliance on the respondent's statement was held unsustainable, and the Department's challenge on that basis failed.

Final Conclusion: The Tribunal found no ground to interfere with the order of the Commissioner (Appeals). Holding that the Revenue had failed to establish reasonable belief of smuggling and had impermissibly relied on an unproved retracted statement, the departmental appeals were dismissed.

Interest on refund - Duty paid under protest - Refund of deposit collected without authority of law

Interest on refund - Duty paid under protest - Refund of deposit collected without authority of law - The grant of interest at 12% on the refunded amount, arising from excess customs duty paid under protest in the course of a classification dispute, was held to be sustainable. - HELD THAT: - The Tribunal held that the payment made by the importer was not voluntary, but was made under protest for clearance of goods when the Department did not accept the declared classification. Once the classification dispute stood finally resolved in favour of the importer, the amount so collected became refundable, and the refund was treated as a natural consequence of the adjudication. The Tribunal reasoned that where the Revenue had retained money collected contrary to law and enjoyed the benefit of such deposit from the dates of import, interest could not be denied merely by stating that the statute did not expressly cover the claim in the manner urged by the adjudicating authority. It distinguished the decisions cited by the Revenue as largely relating to interest on interest or arising on different factual matrices. Relying on the line of authorities noticed in the order, including decisions recognising 12% as an appropriate rate in cases of refund of deposits or amounts wrongly retained, the Tribunal found no infirmity in the appellate order awarding interest at 12% and upheld it. [Paras 12, 13, 14, 15, 16]

The Revenue's challenge failed, and the order directing payment of interest at 12% on the refund was sustained.

Final Conclusion: The Tribunal upheld the appellate order granting interest at 12% on the refund arising from duty paid under protest and dismissed the Revenue's appeal. It held that the Revenue could not retain money collected contrary to law without compensating the importer by way of interest.

Imposition of penalty on the customs broker under Regulation 18 - Vicarious liability of customs broker - prohibited acts were committed by employees without the broker's knowledge or authorisation - Unauthorised acts of employees. - HELD THAT: - The Tribunal recorded that the impugned order itself found that the two employees had independently taken clients and filed Bills of Entry without informing or obtaining approval from the appellant, and that they had admitted having done so without authorisation from the Managing Director. It further noted the Commissioner's own finding that the investigation had produced no evidence of any more active role of the appellant in the filing of the Bills of Entry. In the absence of material showing knowledge, authorisation, or involvement of the appellant, and having regard also to the action taken by the appellant against the erring employees, the Tribunal held that there was no justification for imposing penalty on the appellant. [Paras 4]

The penalty imposed on the appellant was set aside.

Final Conclusion: The Tribunal allowed the appeal and held that, in the absence of evidence showing knowledge, authorisation, or active involvement of the appellant in the acts committed by its employees, penalty on the customs broker was not justified.

Delay and laches in oppression and mismanagement proceedings - Tribunal's jurisdiction to examine fraud and forgery - Acquiescence and estoppel - Perversity of findings under Section 10F - Preponderance of Probabilities - Additional evidence in appeal - Appointment of special auditor - Clean hands doctrine - application filed under Order XLI, Rule 27 of the CPC.

Delay and laches - Continuous oppression and mismanagement - HELD THAT: - The question of limitation would not arise in the light of the position of law clarified by this Court in the case of Sulochana Neelkanth Kalyani Vs. Takle Investments Company and others [2016 (6) TMI 1061 - BOMBAY HIGH COURT] In the said judgment, after referring to various precedents, it was held that the CLB is not a ‘Court’ for the purposes of Article 137 read with Sections 3, 4 and 5 of the Limitation Act, 1963 and there is no particular limitation period for filing application or petition under the Companies Act. Thus, the submissions made on behalf of the appellants with regard to limitation, are without any basis.

The Court held that, though no prescribed limitation period applied to a petition before the Company Law Board, inordinate and unexplained delay could still be relevant because the reliefs are discretionary. On the pleadings, however, the grievance was not founded on an isolated stale act but on a continuing course of conduct by which the petitioner was sidelined, his shareholding was clandestinely diluted and he was excluded from the affairs of the company. In that situation, the Court found no acquiescence or estoppel, and held that the respondents could not avoid scrutiny of continuous acts of oppression and mismanagement by invoking delay and laches. [Paras 30, 31, 32, 33, 34]

The objection of delay and laches was rejected and the finding of maintainability was upheld.

Fraud and forgery - Summary jurisdiction - Oppression and mismanagement - HELD THAT: - The Court drew a distinction between cases requiring detailed oral and documentary evidence and cases where fraud or forgery is apparent from admitted documents and surrounding circumstances. It held that the Company Law Board, while dealing with oppression and mismanagement, was entitled to examine the record and draw conclusions when the material itself disclosed mala fide action and a deliberate design to oust the petitioner. The findings regarding removal of the petitioner as director, conduct of meetings without proper notice, inconsistencies in company records, and failure to produce original share certificates were based on the documents before the Board; therefore, this was not a case requiring relegation to a civil suit. [Paras 38, 39, 40, 41, 42]

The challenge to the Board's jurisdiction on the ground of fraud and forgery was rejected.

Perversity of findings - Burden of proof - Shareholding rights - HELD THAT: - Applying the limited scope of interference under Section 10F, the Court held that the Board's findings were grounded in company minutes, annual returns, balance sheets and correspondence acknowledging the petitioner's status as shareholder and director. Since the appellants themselves accepted that the petitioner stood recorded as holding 30% shares, the burden lay on them to establish that he held them only in trust or as custodian for others; the Court found that no such material was produced. The Board's conclusions regarding clandestine meetings, reduction of the petitioner's shareholding from 30% to 0.03%, and the lack of bona fides in the appellants' conduct were all based on record evidence and could not be characterised as arbitrary, based on no evidence, or perverse. [Paras 28, 43, 44, 45, 46]

No substantial question of law arose from the factual findings, and the Board's conclusions on shareholding, oppression and mismanagement were affirmed.

Additional evidence in appeal - Due diligence - Clean hands doctrine - HELD THAT: - The Court held that additional evidence could not be admitted as a matter of course and that the appellants failed to show due diligence or credible lack of prior knowledge. The explanation that the agreements were discovered much later during shifting of the office was found to be unbelievable, especially when they were said to have been executed by persons central to the dispute and had already been produced in arbitral proceedings to the knowledge of the appellants' representative. The Court also held that the appellants had not approached the Court with clean hands. Independently, the Court found that the contents of the agreements did not support the case that the petitioner held the shares in trust, nor were they necessary for enabling the Court to pronounce judgment or for any other substantial cause. [Paras 50, 51, 52, 53, 54]

The application under Order XLI Rule 27 was dismissed.

Special auditor - Consequential relief - Siphoning of funds inquiry - HELD THAT: - The Court held that the appointment of a special auditor was only a consequential step after the Company Law Board had already recorded findings of oppression and mismanagement on the basis of the material before it. The Board's determination on merits was not made contingent upon the auditor's report, and the special audit was directed only for inquiry into the question of siphoning of company funds. In that view, the direction could not furnish an independent ground for setting aside the order. [Paras 55, 56]

The appointment of the special auditor was upheld and did not affect the validity of the impugned order.

Final Conclusion: The appeal under Section 10F and the application for additional evidence were dismissed. The Court upheld the Company Law Board's findings on continuous oppression and mismanagement, rejected the challenges on jurisdiction and perversity, and sustained the consequential direction appointing a special auditor.

Interim protection of subject matter - Status quo in oppression and mismanagement proceedings - Non-interference with discretionary interim order - HELD THAT:- The Appellate Tribunal held that the grievance that the appellants' case had not been noticed was unfounded, since the impugned order did record their stand. It further found that the order under challenge was only an interim protective measure intended to preserve the status of Respondent No. 1 as existing on the date of filing of the company petition and to protect the subject matter of the pending proceedings before the NCLT, where the validity of the EOGM resolution removing him from directorship was yet to be examined. The Tribunal also noted that the earlier restraint order had not been challenged. On that reasoning, no error warranting appellate interference was made out. [Paras 10, 11]

The appeal was disposed of without interference, and the impugned interim order, as modified earlier regarding operation of the bank accounts, was directed to continue.

Final Conclusion: The Appellate Tribunal declined to interfere with the interim arrangement made by the NCLT, holding that it was passed to preserve the subject matter pending adjudication of the company petition. The modified directions already issued in relation to the bank accounts were continued.

Confirmation of provisional attachment - Status quo order - Possession of attached property - Equivalent value property - Confiscation - Multiplicity of litigation - Case-to-case basis - Interim protection - HELD THAT:- The appeal was disposed of without interference with the provisional attachment order or the impugned confirmation order, as the appellant did not press the challenge. The interim protection regarding possession of the attached properties was directed to continue to the extent indicated, subject to the outcome of the trial under PMLA.

Provisional attachment of the fixed deposits - proceeds of crime - Corporate shareholding nexus - Common directorship - no direct evidence of transfer of tainted funds from the accused company - illegal mining caused a loss to the Government Exchequer - HELD THAT: - The Tribunal held that the fraud committed by M/s ILC Industries Ltd. stood established in the predicate case and that the appellant company had a substantial nexus with the accused company through common directorship and shareholding, the accused company holding 49.90% share in the appellant. It further held that, having regard to the magnitude of the fraud and the absence of available assets of the accused company and its Director, the appellant's fixed deposits could be attached as the value of proceeds of crime. The Tribunal therefore rejected the contention that the deposits were liable to be released merely because they were created from the appellant company's own bank account and even though there was no direct evidence of transfer from the accused company. [Paras 5, 6]

The attachment of the appellant company's fixed deposits was sustained and the appeal was dismissed.

Final Conclusion: The Tribunal upheld the confirmation of attachment of the appellant company's fixed deposits, holding that they were attachable as value of the proceeds of crime in view of the nexus arising from common directorship and shareholding with the accused company. The appeal was accordingly dismissed.

Provisional Attachment Order (PAO) - PMLA attachment vis-a-vis secured creditor's charge - Bona fide third-party secured interest - proceeds of crime - secured creditor - harmonious construction - Property acquired prior to alleged criminal activity.

PMLA attachment vis-a-vis secured creditor's charge - HELD THAT: - The Tribunal accepted the principle that the PMLA has overriding effect in matters concerning money-laundering and proceeds of crime, yet the statutory regimes governing secured creditors must be construed harmoniously. Relying on Deputy Director, Directorate of Enforcement of Delhi Vs. 1. Axis Bank and Others 2. State Bank of India and Others 3. IDBI Bank Ltd. [2019 (4) TMI 250 - DELHI HIGH COURT], it held that a prior mortgage or charge does not by itself invalidate attachment under the PMLA; equally, the secured creditor's prior interest is not extinguished merely because attachment has been ordered. The secured creditor's entitlement survives to the extent of its bona fide claim, and recovery of the outstanding loan liability may be pursued in accordance with law. [Paras 6, 7, 9]

The appellant's plea that the mortgaged property was incapable of attachment under the PMLA was rejected, while leaving it free to seek relief before the Special Court under Sections 8(7) and 8(8).

Property acquired prior to alleged criminal activity - Proceeds of crime - HELD THAT:- The Tribunal found from the record that the first illegal transplantation attributed to Dr. V.M. Ganesan was in 2010, whereas the impugned property was acquired in 2011. On that factual basis, the appellant's reliance on Pawana Dibbur [2023 (12) TMI 49 - SUPREME COURT] did not assist it. The Tribunal also held that the impugned order did not suffer from non-application of mind, since the Adjudicating Authority had recorded detailed findings. [Paras 8]

The challenge to attachment on the ground that the property pre-dated the criminal activity failed.

Final Conclusion: The appeal was disposed of by holding that attachment of the mortgaged property under the PMLA was not invalid merely because the appellant was a secured creditor, though its bona fide security interest could be worked out before the Special Court. The challenge based on the property having been acquired before the criminal activity was also rejected.

Taxability of works contract services - cum-duty benefit - Commercial or industrial use - Imposition of Penalty under Section 80 - Construction of warehouses/godowns for Haryana State Warehousing Corporation - benefit for exemption under Entry 12 of Notification No. 25/2012-ST.

Whether the activity undertaken by the appellants in providing works contract services to various organizations/ authorities viz. Executive Engineer Panchayat Raj, Haryana State Warehousing Corporation, Executive Engineer Public Health Engineering Division is taxable under Commercial and Industrial Construction service before 01-07-2012. - HELD THAT: - The Tribunal held that the decision in Kamra Construction was not applicable because that case turned on classification of an indivisible works contract wrongly confirmed under Commercial and Industrial Construction Service, whereas the present notice itself proceeded under Works Contract Service. Following its earlier decision in VR constructions [2026 (2) TMI 1402 - CESTAT CHANDIGARH], the Tribunal treated Haryana State Warehousing Corporation as not confined to purely non-commercial activity, noting that warehousing was linked with storage of multiple commodities and that commercial use of the warehouses could not be ruled out. Applying the CBEC circular referred to by the appellant, the Tribunal concluded that the relevant test was whether the building was used, or to be used, for commerce or industry, and on the facts found that the service was taxable up to 30.06.2012. [Paras 5, 6, 7]

The service tax demand on merits was sustained for the period up to 30.06.2012.

Penalty waiver - Section 80 relief - HELD THAT: - While deciding the taxability issue in favour of the Revenue, the Tribunal noted that the appellant had deposited the duty along with 25% of the penalty and that the issue of limitation was not pressed during arguments. On that basis, it held that the appellant was entitled to the benefit of Section 80 and that the penalty required to be set aside. [Paras 7, 8]

The penalty was set aside and the appeal was partly allowed to that extent.

Final Conclusion: The Tribunal sustained the service tax liability on the works contract services in relation to construction of warehouses for Haryana State Warehousing Corporation up to 30.06.2012, following its earlier view that such use could not be treated as exclusively non-commercial. The appeal was partly allowed only to the extent of setting aside the penalty under Section 80.

Manufacture vis-a -vis mining service - Mutually exclusive indirect tax levies - Joint venture - co-venturer transactions

Manufacture vis-a -vis mining service - Mutually exclusive levies - Excisable goods - The appellant's activity of preparation for mining, extraction, raising, sizing and dispatch of coal was held to amount to manufacture and not to a taxable mining service. - HELD THAT: - The Tribunal applied its earlier decision in M/s. Integrated Coal Mining Ltd. v. Commissioner of C.G.S.T. & C.Ex., Kolkata North, [2025 (6) TMI 2049 - CESTAT KOLKATA], and held that extraction of coal together with crushing/sizing and allied processes constitutes a process incidental or ancillary to completion of the manufactured product. Since the activity amounted to manufacture and central excise duty on the same activity had already been accepted as payable through the joint venture companies, the same transaction could not again be subjected to service tax. The Tribunal also noted that no dispute regarding excise duty liability on the activity was before it. [Paras 17, 18, 19]

Service tax demand on the coal production activity was held unsustainable.

Joint venture - co-venturer transactions - Service for consideration - Co-venturer obligations - The appellant, being a co-venturer, was not providing a taxable service to the joint venture companies merely by discharging its obligations in furtherance of the joint venture. - HELD THAT: - Following B.G. Exploration and Production India Ltd. v. Commissioner of CGST & CX, Navi Mumbai [2022 (1) TMI 207 - CESTAT MUMBAI] the Tribunal held that where each co-venturer discharges obligations, responsibilities and liabilities as part of the joint venture arrangement, such acts are in furtherance of the common venture and in the co-venturer's own interest, and not by way of service rendered to the joint venture. On that basis, the essential requirement of a taxable service to another for consideration was not satisfied. [Paras 20, 21, 22]

The appellant was held not liable to service tax on the footing of rendering services to the joint venture companies.

Consequential penalty - Once the service tax demand failed, the penalties imposed on the appellant could not survive. - HELD THAT: - The Tribunal treated the penalties as consequential to the tax demand and, after holding the demand itself unsustainable, concluded that no penalty could be imposed. [Paras 23]

The penalties were held not imposable.

Final Conclusion: The Tribunal held that the appellant's coal extraction and allied activities amounted to manufacture and, in any event, did not constitute taxable services rendered to the joint venture companies. The impugned service tax demand, interest and penalties were therefore set aside, and the appeal was allowed with consequential reliefs.

Liability to pay service tax - Valuation of taxable services - ​​​​​​​sale of processed material by the service recipient to the appellant's sister concern, on payment of excise duty - Extra consideration - Double taxation - HELD THAT: - The Tribunal found that the appellant's service contract was for excavation and processing of slag dumps at a fixed rate per metric tonne, on which service tax was charged and deposited. It was also undisputed that the processed material was subsequently purchased by the sister concern from SAIL under excise invoices on which excise duty was paid. On these facts, any alleged breach of tender conditions was a matter between SAIL and the appellant, and could not enlarge the appellant's service tax liability. Since the clearance of goods was by SAIL and the duty paid thereon had been accepted by the Revenue, fastening service tax on the appellant with reference to that sale would amount to double taxation. The Tribunal therefore rejected the attempt to treat the sister concern's trading transaction as additional consideration for the appellant's taxable service. [Paras 6, 7, 8, 9]

The service tax demand, interest and penalty were held unsustainable and the impugned order was set aside.

Final Conclusion: The Tribunal held that the appellant's taxable value was confined to the agreed service charges received for excavation and processing, and could not be enhanced by the separate sale of goods by SAIL to the appellant's sister concern. The appeal was accordingly allowed with consequential relief.

Service taxability of trading activity - receipts from sale and supply of stone chips and allied trading activity -invocation of the extended period of limitation - Suppression of facts - absence of suppression or wilful misstatement.

Service taxability of trading activity - HELD THAT:- The Tribunal found that, during adjudication, the appellant had specifically explained that besides rendering clearing and forwarding agent service and business auxiliary service, it was also engaged in trading of stone chips, and had produced audit reports, Form 26AS, income-tax returns, VAT turnover calculations and VAT returns in support of that claim. The adjudicating authority failed to consider this material and proceeded on the premise that the entire turnover reflected in the accounts represented taxable service receipts. Since the appellant's trading activity stood supported by the documents and VAT-paid invoices, the Tribunal held that sale of goods forming part of such trading turnover was not liable to Service Tax, and that Service Tax had already been paid on the taxable service component. [Paras 10]

The Service Tax demand was unsustainable to the extent it was founded on inclusion of trading turnover as taxable value.

Extended period of limitation - Suppression of facts - Time-barred demand -HELD THAT:- The Tribunal noted that the investigation had commenced in 2015 and that the appellant had responded to the departmental queries based on the income-tax data during the course of investigation. Despite this, the show cause notice was issued later by invoking the extended period, without any substantive material to establish suppression of facts or wilful mis-statement. The allegation of suppression was held to be a mere assumption unsupported by evidence. On that reasoning, invocation of the extended period was held legally unsustainable and the demand was also liable to be set aside as barred by limitation. [Paras 11]

The show cause notice was held to be beyond limitation, and the confirmed demand could not survive on that ground as well.

Final Conclusion: The Tribunal set aside the impugned order and held that Service Tax could not be demanded on the appellant's trading turnover, while the invocation of the extended period of limitation was also untenable for want of evidence of suppression or wilful mis-statement. The appeal was accordingly allowed with consequential relief.

Declared service under section 66E(e) of the Finance Act, 1994 - Agreement to tolerate an act - Forfeiture of advance on cancellation - Liquidated damages and Compensation for Breach of Contract -HELD THAT: - The Tribunal held that section 66E(e) applies only where the contract itself contemplates tolerating an act for a consideration paid in return for such tolerance. In the present case, the contract was for provision of accommodation on payment of room tariff, and not for permitting the customer to cancel or breach the booking on payment of a charge. When the customer did not avail the booking, the retained amount represented compensation or liquidated damages for the loss caused by the breach and not consideration for any service. On that basis, the forfeited booking advance received as retention or cancellation charges was held to be outside the service tax net. [Paras 4, 5, 6, 7]

The demand on forfeited booking advances was unsustainable, and the impugned order was set aside.

Final Conclusion: The Tribunal held that forfeiture of booking advances on cancellation of hotel accommodation amounted to compensation for breach and not consideration for tolerating an act. The service tax demand was therefore set aside and the appeal was allowed.

Determination of the service tax liability - Renting of immovable property service - Residential use exclusion -use as a residence by the Managing Director of the lessee company - Whether the appellant has sufficiently proved that the premises at AL-61 was let out for residential purposes so as to exclude the said property from the ambit of “immovable property” under Section 65(105)(zzzz) -HELD THAT: - The Tribunal held that, under Section 65(105)(zzzz), the exclusion turns on the use of the building. The lease agreement itself recorded that the premises were demised for use as a residence by the Managing Director, and it was not the Department's case that the property was partly used for business or commerce. Mere execution of the lease in favour of a company could not justify an assumption that the premises were not for residential use, particularly when there was no evidence to the contrary. The notarised affidavit confirming residential use till 31.03.2011 was also accepted, and the adjudicating authority was found to have erred in denying the exclusion on conjecture. [Paras 10, 11, 12]

The demand founded on treating the premises as taxable rented immovable property could not be sustained, and the impugned order was set aside.

Final Conclusion: The Tribunal held that the property in question was used solely for residential purposes and was therefore excluded from the scope of taxable renting of immovable property service. The appeal was accordingly allowed with consequential relief.

Remand directions - Fraudulent availment of MODVAT/CENVAT credit - Extended period of limitation - Applicability of repealed and substituted credit provisions

Remand directions - Burden of proof - Statutory records vis-a-vis balance sheet - The demand could not be sustained where the adjudicating authority, despite a prior remand, failed to reconcile the alleged discrepancies and did not produce cogent evidence of non-receipt, non-consumption, suppression, or clandestine removal of inputs or final products. - HELD THAT: - The Tribunal held that the earlier remand had confined the enquiry to reconciliation of the figures, examination of limitation, and consideration whether the allegation could survive in the absence of evidence of suppression or clandestine activity. Since that remand order had not been challenged, the adjudicating authority could not travel beyond it. The impugned order nevertheless attempted to disown the balance sheet as the basis of the case while simultaneously rejecting the appellant's reconciliation based on entries made shortly after the close of the financial year, even though those entries were made well before investigation and could not be treated as a later cover-up. The reliance on shortages allegedly noticed on 04.04.2001 to justify discrepancies for earlier years was held impermissible, and there was no discussion or evidence showing manipulation of receipt or consumption records, non-procurement of inputs, or clandestine removal. In the absence of such concrete material, the allegation of fraudulent availment of credit could not rest merely on book entries. [Paras 11, 12]

The impugned order was held unsustainable for failure to adhere to the remand directions and for want of evidence supporting denial of credit.

Extended period of limitation - Suppression of facts - The extended period was not invocable on the facts found by the Tribunal. - HELD THAT: - The Tribunal found that the adjudicating authority had merely asserted suppression without establishing it. The corrective entries relied on by the department had been made before the investigation commenced and therefore could not be treated as manipulative acts intended to evade duty. The appellants had been regularly filing RT-12 returns, and the records were open to departmental scrutiny; the Tribunal also noted that audits had been conducted and it was not the department's case that any discrepancy had been pointed out at the relevant time. On these facts, the ingredients necessary to invoke the extended period were held absent. [Paras 13]

The demand was held barred by limitation insofar as it depended on the extended period.

Applicability of repealed and substituted credit provisions - Jurisdictional defect - Penalty under inapplicable provision - Proceedings based on Rule 12 of the CENVAT Credit Rules, 2001 and penalty under Rule 26 could not be sustained for a period when the appellants had availed MODVAT credit under the earlier regime. - HELD THAT: - The Tribunal held that the credit in question had been availed during the MODVAT regime and, if the department sought to deny that credit, it was required to proceed under the provisions in force during the relevant period. A person could not be proceeded against or penalised by invoking provisions that were not then available. The Revenue's contention that the later penalty provision was similarly worded, and that wrong or incomplete citation of the provision did not matter, was rejected in view of the judicial pronouncements relied upon by the appellants. The Tribunal further held that this objection was a pure legal plea and could be raised even at this stage. [Paras 14, 15, 16]

The proceedings were held unsustainable also on the legal ground that inapplicable CENVAT provisions had been invoked for a MODVAT-period dispute.

Final Conclusion: The Tribunal held that the impugned order could not stand on merits, on limitation, and on the legal ground that later CENVAT provisions had been invoked for a MODVAT-period dispute. Both appeals were accordingly allowed.

Entitlement to the benefit of Small Scale Exemption under Notification No. 8/2003-C.E. - Clandestine Removal - Cum Duty Price Benefit - Manufacturing sales and trading sales - Demand based on assumptions and presumptions - Demand of duty, interest and penalties - Claim of the appellants is that they are receiving various tenders, through work orders, for supply of various Electrical Overhead Materials / Hardware Fittings of Electrical Transmission Line to various Electricity Boards, for supply of electricity.

HELD THAT:- The Tribunal held that the demand proceeded on the assumption that all clearances under T-series invoices represented manufactured goods. It found that, if the appellant's claim of direct supply of purchased goods from the market was correct, the value of manufactured clearances would remain within the exemption threshold. On that question, the Revenue had not investigated the suppliers, transporters, or the appellant's manufacturing capacity and infrastructure, though such inquiry was necessary to disprove the plea of trading. The audited balance sheets, produced during adjudication, separately reflected manufacturing sale and trading sale, but were not considered as a whole. Relying on its decision in M/s. Wintek Enterprises v. Commissioner of Central Excise, Kolkata-II [2024 (5) TMI 365 - CESTAT KOLKATA] and the principle stated in M/s. Super Poly Fabriks Ltd. v. Commissioner of C.Ex. [2008 (4) TMI 31 - SUPREME COURT], the Tribunal held that the material on record did not justify clubbing trading turnover with manufacturing turnover. Since the traded value, when excluded, brought the manufacturing clearances within the scope of Notification No. 08/2003-C.E., the appellant was entitled to SSI exemption. [Paras 9, 10, 11, 12, 13]

The duty demand was held unsustainable, as trading sales could not be treated as manufacturing sales on mere assumptions and the benefit of SSI exemption was available to the appellant-company.

Having found that the basic allegation of suppression of manufactured clearances by showing them as traded goods was not established, the Tribunal held that no duty was payable by the company. On that basis, the penalties imposed on the company and on its director could not be sustained. [Paras 14]

The penalties on both appellants were set aside as a consequence of the failure of the duty demand.

Final Conclusion: The Tribunal held that the impugned demand was founded on inadequate investigation and unwarranted clubbing of trading turnover with manufacturing turnover. The appellant-company was held entitled to SSI exemption, and the demand of duty, interest and penalties against both appellants was set aside.

Clandestine removal of goods - differences between VAT returns and ER-1 returns - Corroborative evidence - Chartered Accountant's certificate - Extended period of limitation - demand of central excise duty, along with interest and penalty thereon under Section 11AC -HELD THAT: - The Tribunal held that the entire allegation rested only on a comparison of figures in VAT returns and ER-1 returns, without any investigation or independent evidence to establish clandestine manufacture or clearance. It found that the appellant had produced a Chartered Accountant's certificate showing that part of the differential turnover related to trading and other non-excisable transactions, and that such certificate could not be brushed aside in the absence of any material rebutting it. Since trading activity does not attract central excise duty, and no corroborative evidence such as evidence of excess production, procurement, transport, buyers, or other tangible material was brought on record, the charge of clandestine removal could not be sustained merely on presumptions arising from return comparison. [Paras 9, 10, 11]

The issues relating to clandestine removal and non-consideration of the appellant's evidence were answered in favour of the appellant, and the duty demand failed on merits.

Extended period of limitation - HELD THAT: - The Tribunal noted that a spot audit memo had been issued and replied to long before issuance of the show cause notice, yet the notice was later issued by invoking the extended period. It held that when the foundation of the demand is the assessee's statutory returns and audit scrutiny by the Department itself, the Department cannot subsequently allege suppression so as to invoke the extended period. On that basis, the show cause notice and the impugned demand were held to be barred by limitation. [Paras 12]

The issue of limitation was also decided in favour of the appellant, and the impugned demand was held barred by limitation.

Final Conclusion: The Tribunal held that the allegation of clandestine removal could not be sustained merely on comparison of VAT and ER-1 returns, particularly when the appellant's reconciliation and Chartered Accountant's certificate showed trading and other non-excisable transactions. It further held that the extended period was not available since the case arose from audit scrutiny and disclosed records; accordingly, the demand, interest and penalty were set aside and the appeal was allowed.

Territorial Jurisdiction - Trading activity on the basis of High Sea Sale - Availing Cenvat Credit of Service Tax on the common input services - HELD THAT:- It has been contended by the appellant that the trading was effected by them on “High Sea Sales basis before the goods entered the territory of India; that the services provided outside India cannot be said to be service, much less “exempted service”, to treat such trading on “High Sea Sales” basis as “exempted service” was not tenable in law; hence to treat such “High Sea Sales” as trading activity for the purpose of the Cenvat Credit Rules, 2004 has no legal validity. In this regard, the assessee themselves have accepted that their activity of “High Sea Sales” is covered under the Sale of Goods Act, 1930, which is another Act extending within the territory of India. Therefore, when an activity is covered under one statute of the land then contending that the same does not come under another statute, as the activity was carried outside the territorial limit of the land does not hold water and hence not acceptable.

After hearing both sides, the Tribunal reserved the matter for orders without recording any determination on the controversy.

Denial of Small Scale Industry Exemption - Clubbing of clearances - Proceedings against non-noticee unit - HELD THAT: - The Tribunal held that the demand proceeded on the basis that SSI exemption was unavailable to LASTPL and that its clearances had to be clubbed with those of LSCPL. Since no show cause notice had been issued to LASTPL and it was not made a party to the proceedings, the authorities could not, in law, deny SSI exemption to that unit and use its clearances for raising demand against the appellant. The very foundation of the demand thus failed, making the proceedings unsustainable. [Paras 7, 8]

The demand against LSCPL and the penalties on the appellants were held unsustainable and the impugned order was set aside.

Final Conclusion: The Tribunal held that, in the absence of a show cause notice to the other unit whose SSI exemption was denied and whose clearances were sought to be clubbed, the entire demand lacked legal foundation. The impugned order was therefore set aside and the appeals were allowed with consequential relief.

Clandestine removal based on electricity consumption - Peak production ratio - Demand of central excise duty, interest and penalty. - HELD THAT: - The Tribunal found that the show cause notice had raised the demand mainly by taking electricity consumption and applying the highest production-per-unit ratio noticed during December 2017. Following Marie Products Pvt. Ltd. vs. CCE & CGST [2026 (2) TMI 285 - CESTAT NEW DELHI], it held that such a method does not, by itself, establish actual excess production or clandestine removal. Since the very basis adopted in the notice was legally insufficient, the duty demand could not be sustained on the allegations made therein. [Paras 8, 9]

The duty demand was set aside, and with it the penalties imposed on the appellants also could not survive.

Final Conclusion: The Tribunal held that the impugned demand, being raised mainly on the basis of electricity consumption and peak production ratio, was unsustainable in law. The impugned order was set aside and the appeals were allowed with consequential relief.

Abatement of proceedings under SICA - effect of failure to approach NCLT after repeal - locus of promoter-management to deal with company assets - unauthorised sale of assets - illegality of share allotment by manager of sick company - legitimate expectation - Article 142

Abatement of proceedings under SICA - revival of winding up recommendation - failure to approach NCLT - The pending appeal before AAIFR stood abated on repeal of SICA, and in the absence of any reference to NCLT within the statutory period, the BIFR recommendation for winding up of JUL revived. - HELD THAT: - The Court held that, after repeal of SICA and enforcement of the IBC framework, all pending proceedings before BIFR and AAIFR stood abated. Since neither JUL nor GDCL initiated proceedings before NCLT within the period permitted by law, no fresh rehabilitation survived in law. The consequence was that the pending AAIFR appeal came to an end and the earlier recommendation made by BIFR for winding up stood revived. The Court further held that the lapse could not be treated as a mere technicality capable of being regularised later. [Paras 151, 166, 170, 174, 176]

The Court held that the AAIFR appeal had abated and the BIFR winding up recommendation stood revived.

Locus of promoter-management to deal with company assets - subsidiary company assets - management distinguished from ownership - GDCL, having only been entrusted with management and not ownership, had no authority to deal with the assets of JUL or to assume control over JAIL in the manner adopted by it. - HELD THAT: - The Court found that even under the 1992 sanctioned scheme, GDCL was only to manage JUL subject to the scheme terms, and the scheme itself had lost significance once winding up was recommended. JAIL was never part of that rehabilitation scheme, though it was almost wholly owned by JUL. The Court held that omission to account for JAIL in the rehabilitation process was a fundamental defect, and GDCL offered no legal basis for exercising control over JAIL or its assets. Once the winding up recommendation revived after abatement of the AAIFR appeal, GDCL had no subsisting legal locus to continue dealing with the properties of JUL or JAIL. [Paras 116, 142, 151, 152, 166]

GDCL was held to have no legal authority to treat itself as owner or to deal with the properties of JUL and JAIL.

Illegality of share allotment by manager of sick company - dilution of holding company shareholding - The allotment of fresh shares in JAIL to GDCL group companies was illegal. - HELD THAT: - The Court found that JAIL was nearly a wholly owned subsidiary of JUL, yet GDCL caused fresh shares to be issued to its own group companies, thereby reducing JUL's holding and securing majority control through those entities. The only explanation offered was that due procedure under the Companies Act had been followed, but no supporting material was produced. Since JAIL was not part of the rehabilitation scheme and GDCL had no lawful basis to alter its ownership structure, the Court held the share allotments to be bad and incapable of conferring rights on GDCL or its group companies. [Paras 114, 115, 116, 177]

The fresh share allotments in JAIL made in favour of GDCL group companies were declared illegal.

Unauthorised sale of assets - sale by person lacking authority - sale of scrap - The sales effected by GDCL of JUL and JAIL assets were unauthorised; however, the completed sales of Kanpur Jute Mill and two JAIL properties were not set aside, whereas the sale of scrap of the Sawai Madhopur unit was set aside. - HELD THAT: - The Court held that GDCL had no justification for selling the assets of JUL or JAIL. Even under the sanctioned scheme, the Kanpur Jute Mill could be sold only through the Sale Committee, and GDCL was never vested with ownership rights merely because management had been handed over to it. After the winding up recommendation and later abatement of the AAIFR appeal, the illegality became graver, yet GDCL still proceeded to alienate assets without taking the Court into confidence. The Court held that mere deposit of sale proceeds would not validate such conduct. At the same time, it declined to unsettle the completed sales of the Kanpur Jute Mill and two JAIL properties because doing so would require hearing the purchasers and adjudicating disputed questions such as undervaluation. In contrast, as the scrap had not been lifted and the sale proceeds remained with GDCL, that sale was set aside with a direction to refund the amount received with interest. [Paras 144, 145, 192, 194, 196]

The alienations were held unauthorised; the completed property sales were left undisturbed for the present, but the scrap sale was set aside and refund with interest was directed.

Article 142 - legitimate expectation - condonation of illegality - Neither Article 142 nor the doctrine of legitimate expectation could be invoked to regularise the illegalities committed by GDCL or to preserve any claim of ownership or control in its favour. - HELD THAT: - The Court rejected the plea that its extraordinary power under Article 142 should be used to condone the consequences of abatement, unauthorised sales and continued control over the assets. It held that this was not a case of mere procedural irregularity but one involving multiple illegalities. The plea of legitimate expectation was also rejected because such expectation cannot override unlawful acts, and GDCL's long management of JUL without successful revival, followed by its conduct in dealing with the assets, created no enforceable equity in its favour. [Paras 165, 166, 167, 168, 169]

The Court declined to exercise Article 142 in favour of GDCL and rejected its plea of legitimate expectation.

Workers' dues - provident fund dues - rejection of takeover proposals without valuation - The immediate priority was verification and payment of workers' dues and provident fund dues, and the competing proposals of Frost Realty LLP and Dickey Asset Management Private Limited were rejected for want of valuation and legal basis for transfer of assets. - HELD THAT: - The Court held that, at this stage, the first obligation was to identify the workers or their family members and clear their dues in a time-bound manner, with provident fund dues also to be computed with the involvement of the provident fund authorities. It found that no proposal for taking over JUL assets could be accepted without proper identification, inventory and valuation of the assets of JUL and JAIL, and without any demonstrated legal provision permitting transfer of those assets on the basis of such offers. The Court therefore rejected both takeover proposals, while directing preparation of inventory and valuation of assets and appointment of an Administrator to supervise compliance. [Paras 195, 196, 197, 198, 199]

Verification and payment of workers' and provident fund dues were directed to proceed in a time-bound manner, and the rival investor proposals were rejected.

Winding up proceedings - infructuous company petition - The winding up proceedings pending before the Rajasthan High Court were rendered infructuous in view of the finding that JUL was no longer in debt. - HELD THAT: - While noting that BIFR had recommended winding up and that the company petition remained pending before the Rajasthan High Court, the Court found that the debts had since been cleared. On that basis, it held that the pending winding up proceedings would serve no further purpose and should stand disposed of as infructuous. [Paras 184, 188, 189, 196]

The pending company petition for winding up was held to have become infructuous.

Final Conclusion: The Court held that, after repeal of SICA and failure to approach NCLT, the AAIFR proceedings abated and GDCL had no surviving authority to control or alienate the assets of JUL or JAIL. It directed time-bound verification and payment of workers' and provident fund dues, declared the JAIL share allotments illegal, set aside the scrap sale, rejected the takeover proposals, appointed an Administrator for compliance, and disposed of the pending company petition as infructuous.

Negotiable Instruments Act, 1881 - Dishonour of the cheques - Banking deficiency in service - Presentment of cheque within validity period - Reasonable compensation - Reasonable Compensation - Negligence - Consumer forum jurisdiction - Loss or injury​​​​​​​ - Duty of due diligence - definition of ‘deficiency’ in clause (g) of Section 2(1) of the Consumer Protection Act, 1986.

Banking deficiency in service - Due diligence in cheque collection - ​​​​​​​HELD THAT: - The Court held that although delay in presentment may be excused where it is caused by circumstances beyond the holder's control, such excuse operates only so long as the disabling circumstance continues, and presentment must thereafter be made within a reasonable time. The return memos showed that the cheques had been returned on account of bank strike, but once the strike ceased, the appellant furnished no satisfactory explanation for not re-submitting the cheques on the available working day or days before expiry of validity. A bank receiving cheques for collection acts as an agent of the customer and must exercise due diligence in presenting them within the prescribed validity period. Failure to do so, resulting in the cheques becoming stale, amounted to negligence in discharge of banking duties and therefore constituted deficiency in service. The concurrent factual finding of deficiency recorded by the Commission was found to be based on pleadings and evidence and not shown to be perverse. [Paras 58, 59, 60, 61, 62]

The finding of deficiency in service against the bank was affirmed.

Reasonable compensation - Consumer compensation for negligence - Indeterminate loss - HELD THAT: - The Court reiterated that compensation for deficiency in service must be fair, reasonable and commensurate to the loss or injury proved. Here, though the respondent lost the opportunity to pursue the consequences that might have followed timely dishonour of the cheques, the actual outcome of any proceeding under the Negotiable Instruments Act remained uncertain because dishonour by itself would not have completed the cause of action; further statutory steps were required, and the result of such proceedings was inherently indeterminate. The Commission itself treated the case as one fit for token compensation. In that context, the Court held that compensation computed at 10 percent of the face value did not accurately reflect the nature of the loss and was on the higher side. Having regard to the totality of circumstances, compensation at 6 percent of the total cheque amount, with interest at 6 percent per annum from the date of filing of the complaints, was held to be reasonable. [Paras 68, 69, 70, 71, 72]

The award was modified by reducing compensation and interest to 6 percent each, while leaving the rest of the Commission's order undisturbed.

Final Conclusion: The appeals were partly allowed. The finding that the bank was deficient in service for failing to re-present the cheques within their validity period was upheld, but the compensation awarded by the Commission was reduced from 10 percent to 6 percent of the cheque amount, with corresponding reduction of interest to 6 percent per annum, while the rest of the order was maintained.