TMI Tax Updates e-Newsletter
Apr 25,2026

Applicability of penalties under Section 74 of the CGST Act, 2017 - petitioner's failure to pay GST and file returns within the stipulated time - suppression of facts or not - contravention of the provisions of Section 37 of the CGST Act - it was held by High Court that 'Section 74 can be invoked for non-payment of tax if there is evidence of fraud, wilful misstatement, or suppression of facts. Non-filing of monthly returns and non-payment of GST can constitute suppression of facts if it is wilful and intended to evade tax. The statutory requirement to file monthly returns and pay GST is independent of the annual return deadline, and non-compliance can attract penalties.'

HELD THAT:- The Curative Petition was dismissed as no case for entertaining it was found within the parameters indicated in Rupa Ashok Hurra vs. Ashok Hurra & Anr [2002 (4) TMI 889 - SUPREME COURT], the pending interlocutory application, if any, also stood disposed of.

Cancellation of GST registration for non-filing of returns - Restoration of registration subject to statutory compliance. - HELD THAT: - The Court found that the registration had been cancelled solely on the ground of non-filing of returns and that it was not the case of the authorities that the petitioner had adopted any dubious process to evade tax. It held that continued cancellation would be counterproductive to the interest of revenue, since without registration the petitioner would be unable to carry on business or raise invoices, thereby affecting tax recovery itself. On that reasoning, and following the direction of the Division Bench in Subhankar Golder v. Assistant Commissioner of State Tax, Serampore Charge & Ors. [2024 (5) TMI 1262 - CALCUTTA HIGH COURT], the Court adopted a pragmatic view and directed restoration of registration, conditional upon the petitioner filing returns for the entire default period and paying the statutory dues, failing which the writ petition would stand automatically dismissed. [Paras 3, 4, 5, 6]

The cancellation order, and consequentially the appellate order, were set aside, with restoration directed upon compliance with the stipulated conditions within the time granted.

Final Conclusion: The writ petition was disposed of by setting aside the cancellation of registration and the appellate order, and by directing restoration of registration if the petitioner files all pending returns and pays the requisite dues within the time specified. The authorities were also directed to activate the portal to enable such compliance.

Entitlement to anticipatory bail - alleging large-scale fraudulent availment and passing on of input tax credit through fake invoices under the CGST Act - Economic offences - Non-compoundable GST offences - pre-trial incarceration of the applicant at the stage of investigation. -HELD THAT:- The Court held that the material collected during investigation prima facie showed that the concerned firm was used for issuance of fake invoices, that one applicant controlled GST operations and financial transactions, and that the other facilitated circulation of such invoices. The allegations were found to be supported not merely by statements, but also by bank records, GST portal material and electronic communications, including WhatsApp chats. Proceeding on the settled approach that economic offences form a distinct class and require stricter scrutiny in bail matters, the Court held that the gravity, organised nature and multi-entity character of the alleged fraud justified denial of anticipatory bail. The Court further noted that the offence under Section 132(1)(b) had been made non-compoundable, reflecting legislative seriousness, and that the documentary nature of evidence did not by itself exclude the need for custodial interrogation while investigation was still in progress. [Paras 11, 12]

Anticipatory bail was refused, the Court holding that the applicants prima facie appeared to be key conspirators in an organised GST fraud and were not entitled to pre-arrest protection.

Final Conclusion: The applications for anticipatory bail were rejected. The Court found prima facie material showing the applicants' central role in a large-scale GST fake invoice and fraudulent ITC case, warranting a strict approach at the stage of ongoing investigation.

Cancellation of GST registration for non-filing of returns - Restoration of registration on compliance - HELD THAT: - The Court noted that the sole basis for cancellation was failure to furnish returns for a continuous period of six months, as reflected in the show-cause notice and the cancellation order. In view of the stand that the petitioner was ready to cure the default by filing returns for the period in question and by making good the tax dues together with applicable penalty and interest, the Court considered it appropriate to set aside the cancellation and direct restoration of registration, subject to such compliance within the time granted. [Paras 7]

The cancellation order was set aside, and restoration of registration was directed subject to filing of returns for the default period and payment of the due tax, penalty and interest within four weeks.

Final Conclusion: The writ petition was disposed of by setting aside the cancellation of GST registration and directing restoration of registration upon the petitioner's regularising the return default and clearing the consequential dues within the stipulated time.

Cancellation of GST registration - want of reasons and observance of the prescribed procedure - Opportunity of hearing - Natural Justice - Reasoned Order - Provisional attachment lapsing by operation of law.

Reasoned order - Cancellation of GST registration - HELD THAT: - The Court held that the impugned cancellation order did not set out any reasons for cancelling registration. It treated the requirement of recording reasons while passing such an order as well settled and accepted the petitioner's challenge on that basis. The cancellation order was therefore set aside, and the matter was remanded to the designated officer with liberty to issue a fresh show cause notice and pass a fresh order in accordance with law. [Paras 4, 6]

The cancellation order was quashed and the proceedings were remanded for fresh action in accordance with law.

Provisional attachment - Lapse by operation of law - HELD THAT: - On the admitted position before the Court, the bank attachment had lapsed in terms of Section 83 of the CGST Act. The Court therefore directed that the petitioner's bank account be made operational forthwith, the lapse having occurred by operation of law. [Paras 5, 6]

The bank attachment was held to have lapsed by operation of law, and the bank account was directed to be made operational forthwith.

Final Conclusion: The Court set aside the order cancelling GST registration for want of reasons and remanded the matter for fresh proceedings in accordance with law. It also held that the bank attachment had already lapsed under Section 83(2) and directed that the account be made operational.

Validity of a single composite assessment order covering more than one financial year under the GST regime - Composite assessment order - Separate assessment for each tax period - Multiple tax periods -HELD THAT: - Following the earlier Division Bench [2025 (9) TMI 1215 - ANDHRA PRADESH HIGH COURT], the Court held that a single show-cause notice or composite assessment order cannot be passed in relation to more than one tax period, and where the due date for filing annual return has been reached, not for more than one year. As the impugned assessment covered the period from 01.04.2018 to 25.03.2025 in one order, it was liable to be set aside on that ground alone, while leaving the other grounds of challenge open. [Paras 4, 5, 6, 7]

The impugned assessment order was set aside, with liberty to the respondents to initiate fresh proceedings separately for each assessment year, and the intervening period was directed to be excluded for limitation.

Final Conclusion: The writ petition was allowed on the sole ground that the impugned GST assessment was a composite order spanning multiple financial years. The order was set aside, with liberty to proceed afresh year-wise, and the remaining grounds were left open.

Condonation of delay in GST appeal - Sufficient Cause - delay of 720-days in filing the appeal against cancellation of GST registration -Writ jurisdiction to prevent denial of statutory remedy - Cancellation of GST registration and livelihood. - HELD THAT:- The Court held that the statutory restriction on the appellate authority's power of condonation did not denude the constitutional court of its writ jurisdiction to intervene in an appropriate case. It found that the petitioner's inability to file the appeal within time was attributable to circumstances stated to be beyond its control, and that non-adjudication on merits would cause grave injury and prejudice. Following the consistent view taken in its earlier decisions, and noting that cancellation of GST registration affects the ability to carry on business and livelihood, the Court exercised writ jurisdiction to condone the delay and restore the petitioner's appellate remedy. [Paras 6, 7, 8, 9, 10]

The delay of 720 days in filing the appeal was condoned, the appellate order rejecting the appeal as time-barred was set aside, and the appellate authority was directed to entertain and decide the appeal on merits.

Final Conclusion: The writ petition was allowed to the extent of condoning the delay in filing the GST appeal. The order dismissing the appeal on limitation was set aside and the appellate authority was directed to hear and decide the appeal on merits.

Application for revocation of cancellation of GST registration - limitation for filing an appeal - condonation of procedural lapse - HELD THAT:- The writ petition was disposed of by granting liberty to the petitioner to file a fresh manual application for revocation of cancellation of registration within two weeks, to be considered in accordance with law without being prejudiced by the earlier rejection.

Maintainability of writ petition - Document Identification Number - assessment order issued without a DIN number - Non-est assessment order. -HELD THAT:- The Court noted that the effect of non-inclusion of a DIN in proceedings under the GST Act stood concluded by the decision in Pradeep Goyal Vs. Union of India & Ors [2022 (8) TMI 216 - SUPREME COURT], wherein it was held, after considering the statutory provisions and the CBIC circular, that an order not containing a DIN would be non-est and invalid. Applying that principle, the impugned assessment order could not be sustained. [Paras 3, 6]

The assessment order was set aside and the matter was remanded to the Assessing Officer for a fresh order in accordance with law.

The objection that, having availed the appellate remedy and failed therein, the petitioner could not challenge the assessment order, was not accepted. The Court followed an earlier Division Bench order of this Court [2024 (1) TMI 430 - ANDHRA PRADESH HIGH COURT] which had held in similar circumstances that a challenge to the original order would be maintainable even if the appeal had already been disposed of. [Paras 5, 6]

The writ petition was held to be maintainable notwithstanding the dismissal of the appeal on limitation.

Final Conclusion: The writ petition was allowed. The assessment order, being without DIN, was treated as unsustainable, and the matter was remanded to the Assessing Officer for fresh consideration, with exclusion of the intervening period for limitation purposes.

Bar against parallel adjudication by CGST and State GST authorities - Overlapping show cause notices - Failure to consider objection under Section 6 of the CGST Act. - HELD THAT: - The Court found it undisputed that nine entities covered by the State authority's notice overlapped with those already covered by the earlier notice issued by the CGST authority. The assessee had specifically brought this overlap to the notice of the State authority, yet the impugned order did not deal with that objection. The Court held that, having regard to the statutory mandate under Section 6 of the CGST Act, the State authority was duty-bound to verify the material available on the common GST portal, particularly when both authorities had access to the record. Since the overlap was borne out from the record and remained undisputed, continuation of the State adjudication without addressing that objection could not be sustained. [Paras 13, 14, 15, 16, 17]

The impugned order was quashed; the State show cause notice was directed to be kept in abeyance, and the CGST authority was directed to complete adjudication, after which the State authority may take a decision on its notice in conformity with Section 6 of the CGST Act.

Final Conclusion: The writ petition was allowed. The Court set aside the State GST adjudication order on account of the undisputed overlap with the prior CGST proceedings and directed that the State notice remain in abeyance until completion of the CGST adjudication, whereafter further action, if any, may be considered in accordance with Section 6 of the CGST Act.

Validity of reopening under Section 148 r/w Section 148A(d) - Period of limitation to issue notice for reopening of assessment - whether notice is issued beyond the period of limitation provided for in Section 149? - applicability of Section 3 of TOLA - inordinate delay in preferring the present petitions.

HELD THAT:- We find no good ground to interfere with the impugned order(s) passed by the High Court [2024 (3) TMI 1486 - BOMBAY HIGH COURT] wherein orders passed u/s 148A(d) and the notices issued under Section 148 in the respective petitions are hereby quashed and set aside.

The Special Leave Petition are, therefore, dismissed on the ground of delay as well as merits.

Limitation for final assessment after DRP directions - Mandatory time limit u/s 144C(13) - pending assessment proceedings pursuant to the draft assessment order when no final assessment order was passed within the time prescribed after the DRP issued directions - HELD THAT: - The Court found it undisputed that, after the DRP issued directions u/s 144C(5), no final assessment order was passed at all. It held that Section 144C(13) requires the AO to complete the assessment in conformity with the DRP directions within one month from the end of the month in which such directions are received, and that even after taking into account the extended time available under the CBDT notifications, the outer limit expired on 30.06.2021.

Since the Revenue confirmed that no such final order had been passed either on the system or manually, the assessment proceedings stood barred by limitation. [Paras 9, 10, 12]

The impugned pending assessment initiated through the draft assessment order was held to be time-barred and was quashed.

Final Conclusion: The writ petition was allowed. As no final assessment order was passed within the statutory period after the DRP directions, the pending assessment was held to be barred by limitation and the draft assessment proceedings were quashed.

Denial of exemption u/s 11 - delay in filing Form 10 - Grave hardship

HELD THAT: - The Court held that refusal to condone the delay could not be sustained when the petitioner would otherwise suffer grave hardship by being exposed to tax liability merely for delayed filing of Form 10, without deriving any benefit from such delay. The explanation that the default occurred because of the Chartered Accountant's failure, for reasons stated in his affidavit, was accepted. The Court also treated it as significant that the same officer had already condoned the delay in filing the return of income and had thus accepted the explanation for the default. On these facts, the Court found that the delay deserved to be condoned. [Paras 11, 12, 13]

The impugned order rejecting condonation was quashed, the delay in filing Form 10 was condoned, and the returns were directed to be processed in accordance with law on the basis that Form 10 had been filed within time.

Final Conclusion: The writ petition was allowed. The Court set aside the rejection of the condonation application, condoned the delay in filing Form 10 for Assessment Year 2022-23, and directed fresh processing of the return accordingly.

Cancellation of registration of charitable trust u/s 12AA - Validity of show cause notice - Prospective operation of power of cancellation

Cancellation of registration of charitable trust - Validity of show cause notice - Genuineness of trust activities - HELD THAT: - The Court held that the show cause notice was not vague or bereft of particulars, since it referred to the search, survey, gross violations of the trust deed, misuse of the trust, and the assessment findings. The assessee had in fact submitted a detailed reply, which showed that it had adequate notice of the allegations and opportunity to respond. On the record, the Court found that the case was not one of minor deviation or curable irregularity, but of gross abuse and diversion of trust funds, including material connecting the Managing Trustee's conduct with misuse of the trust corpus. The Tribunal was therefore in error in isolating the acts of the Managing Trustee from the trust and in quashing the proceedings on the ground of want of particulars. [Paras 8, 9, 10]

The Tribunal's view that the notice was invalid and that the cancellation proceedings could not be sustained was rejected.

Prospective operation of power of cancellation - Registration granted prior to amendment - Effective date of cancellation - HELD THAT: - The Court held that, since the show cause notice and the cancellation order were both issued after the statutory amendment conferring express power of cancellation, there was no lack of competence in invoking that provision against a trust registered earlier. At the same time, the Court found error in treating the cancellation as operating from the original date of registration. The legal principle applied was that the amended power could be exercised after its introduction, but its exercise could not retrospectively nullify the registration from the date on which it had originally been granted. Accordingly, the order of cancellation was upheld, but its effect was confined to the date of the cancellation order. [Paras 14, 16, 17]

The cancellation of registration was upheld, but it was directed to take effect only from the date of the cancellation order and not from the original date of registration.

Final Conclusion: The appeal filed by the Revenue was allowed. The order of the Tribunal was set aside and the Commissioner's cancellation of the trust's registration was upheld, with the clarification that the cancellation would operate only from the date of the cancellation order.

Deemed dividend u/s 2(22)(e) -advance received by the assessee from its sister concern in which the Directors of the assessee company were substantially interested - whether amounts were received in the course of business?

HELD THAT: - Court proceeded on the concurrent factual finding of the Commissioner (Appeals) and the Tribunal that the payments were made towards software testing and development in the regular course of business and were adjusted against the assessee's bills. No material was produced by the Revenue to dislodge that factual position.

On that basis, the Court held that normal business transactions giving rise to payments between business entities do not fall within the ambit of Section 2(22)(e), since such payments are neither in the nature of a loan nor an advance, and trade advances or commercial transactions stand outside the scope of the provision. [Paras 9, 10, 11]

The amounts in question were held not to be deemed dividend, and the questions of law were answered in favour of the assessee.

Final Conclusion: The appeal of the Revenue was dismissed. Court held that payments made in the course of regular business dealings and adjusted against business dues could not be brought to tax as deemed dividend u/s 2(22)(e).

Undisclosed business turnover - Estimation of profit - Unexplained expenditure

HELD THAT: - The Tribunal noted that the dispute concerned cash purchases from M/s. Ambika Ashish Tradelink LLP and that the assessee was not maintaining regular books of account, but only a computerized ledger account. In that factual background, and having regard to the trade practice and the specific facts of the case, it held that the entire amount of the unaccounted purchases was not liable to be taxed as such. The proper course was to treat the amount as undisclosed business turnover and bring to tax only the profit element embedded therein, estimated at 5%. [Paras 7]

The addition was restricted to profit at 5% of the undisclosed business turnover, and the assessee's appeal was partly allowed.

Final Conclusion: The Tribunal held that the impugned addition could not be sustained in full under section 69C on the facts found. It directed that only profit at 5% on the undisclosed business turnover be taxed, and partly allowed the appeal.

Rebate under section 87A - Special rate capital gains - Mixed income under new tax regime - Rebate under section 87A held to be available only against tax computed on income chargeable at normal rates OR against tax on capital gains chargeable at special rates, where the assessee had income from business, capital gains and other sources

HELD THAT: - The Tribunal held that eligibility for rebate under section 87A depends not merely on the head of income but on the nature of the income and the rate at which it is taxed. It found that, though section 87A does not exclude any head of income as such, tax on capital gains chargeable under special rate provisions stands separately computed and the rebate cannot be adjusted against that component. In a case of mixed income, the rebate was therefore treated as admissible only on the portion of tax relatable to income chargeable at normal rates, such as business income and income from other sources. [Paras 5, 6, 7]

The assessee was held entitled to rebate under section 87A only on the normal income portion, and not on the tax attributable to capital gains taxed at special rates; the appeal was partly allowed on that basis.

Final Conclusion: The Tribunal partly allowed the appeal and held that, for Assessment Year 2024-25, rebate under section 87A could not be granted against tax on capital gains chargeable at special rates. It directed that the rebate be allowed only with respect to income chargeable at normal rates.

Addition u/s 56(2)(viib) - share premium received - Prospective operation of section 56(2)(viib) - Enhancement without noticeby CIT(A) -DCF valuation of shares

Prospective operation of section 56(2)(viib) - Receipt of consideration for issue of shares at premium - share application money was received in financial years 2006-07 and 2007-08 - HELD THAT: - The Tribunal held that section 56(2)(viib) applies only where a company receives, in the relevant previous year, consideration from a resident for issue of shares in excess of face value. On the material on record, the entire share application money from the concerned subscribers had been received between 15/01/2007 and 03/12/2007, and not during the year under consideration. Since section 56(2)(viib) was inserted with effect from 01/04/2013, there was no statutory provision in force in the years in which the money was received to tax the excess consideration. The subsequent allotment of shares in the relevant year, delayed on account of regulatory approval, did not alter the year of receipt. The Tribunal also noted that the pending share application money had been duly disclosed in earlier financial statements and stood converted into share capital in the year of allotment. [Paras 14, 15]

The addition u/s 56(2)(viib) was unsustainable, as no consideration for issue of shares was received in the year under appeal.

Findings of the CIT(A) that the addition is sustainable u/s 68 as an unexplained credit, independent of section 56(2)(viib) - Enhancement without notice - Scope of section 251(2) - HELD THAT: - The Tribunal found that the appellate authority recorded that the addition was independently sustainable under section 68, but did so without issuing any prior notice to the assessee, resulting in a clear violation of section 251(2). On merits as well, the record showed that, in response to a specific query, the assessee had furnished details regarding the subscribers, including identification particulars, bank statements, income-tax returns of the resident subscribers, and FIRC in respect of the foreign subscriber. After receiving that material, the Assessing Officer did not invoke section 68. In these circumstances, the appellate authority's attempt to sustain the addition under section 68 through the appellate order had no basis, and its observation that the valuation report had not been produced was contrary to the assessment record. [Paras 16]

The finding sustaining the addition under section 68 was held to be invalid both for want of notice and for absence of factual basis.

DCF valuation of shares - Rule 11UA valuation method - Rejection of valuation report - HELD THAT: - The Tribunal held that the assessee had obtained a valuation report under the DCF method and had issued the shares at the value so arrived at. The Assessing Officer rejected the projections as unrealistic by comparing them with subsequent financial performance, but did not himself determine fair market value by following any method prescribed under Rule 11UA(2). The legal principle applied was that, while the valuation report is open to scrutiny, the Assessing Officer cannot discard the assessee's chosen prescribed method and arbitrarily adopt nil premium without making a fresh valuation in accordance with the Rules. The later financial results by themselves were also not a valid basis to reject a valuation founded on projections. [Paras 17, 18]

The alternative basis of addition under section 56(2)(viib) also failed, as the Assessing Officer had not determined fair market value in the manner required by law.

Final Conclusion: The Tribunal deleted the impugned addition, holding that section 56(2)(viib) was inapplicable to share application money received before the provision came into force and that the appellate authority could not sustain the addition under section 68 in the manner adopted. The alternative valuation basis taken by the Assessing Officer was also rejected, and the appeal was allowed.

TP Adjustment - Integrated business model - Transactional Net Margin Method at entity level - Segmentation of trading and service activities- assessee's trading segment carved out separately for transfer pricing purposes by rejecting its claim that the trading and service activities formed an inextricably linked integrated business model and by declining TNMM at the entity level

HELD THAT: - The Tribunal found that the issue for the year under consideration was identical to that decided in the assessee's own case for the immediately preceding assessment year [2025 (10) TMI 1108 - ITAT DELHI] including the nature of the TPO's order. Following that decision, it accepted that the assessee's trading activity and customer service functions were inextricably linked as part of an integrated business model, and therefore separate carving out of an alleged trading segment was not justified. On that basis, the assessee's claim for application of TNMM at entity level was accepted. [Paras 7, 8]

Final Conclusion: The Tribunal, following its decision in the assessee's own case for the immediately preceding year, held that the assessee's trading and service activities formed an integrated business model and that separate segmentation of the trading activity was not warranted.

Under-valuation of export sales - Notional addition to business income - Valuation without physical inspection - tolerance limit of [+][-] 5% - HELD THAT: - The Tribunal held that the addition could not be sustained where the export sales themselves were not found to be non-genuine and no material was brought on record to show receipt of any undisclosed amount over and above the declared sale consideration. The valuation relied upon by the Assessing Officer had been made only on the basis of copies of bills and without physical verification of the exported goods, whereas the exports had already undergone verification by customs authorities and no doubt had been raised by them as to the declared value. In these circumstances, the difference worked out by the valuer remained only an estimated and notional exercise and could not, by itself, form the basis for addition to business income; the Tribunal also noted that the variation was within the tolerance range referred to before it. [Paras 7, 8]

The deletion of the addition by the Commissioner (Appeals) was affirmed and the Revenue's challenge on this issue failed.

Final Conclusion: The Tribunal upheld the order deleting the addition made on alleged under-valuation of export sales, holding that a merely notional valuation report unsupported by evidence of extra consideration could not justify addition to business income. The Revenue's appeal was dismissed.

Deduction u/s 57(iii) - Direct nexus between interest expenditure and interest income - Interest on borrowed funds deployed in loans and fixed deposit -Netting of interest expenditure - Interest expenditure attributable to borrowed funds deployed for advancing loans and keeping funds in fixed deposits - HELD THAT: - The Tribunal found that, out of the total interest-bearing funds, a distinct part had been deployed for advancing loans and for fixed deposits, from which the assessee earned interest income. On those facts, the claim for deduction of the corresponding interest expenditure had a direct nexus with the earning of such income and was therefore allowable u/s 57(iii). The Tribunal also accepted that the authority below was right in holding that Tuticorin Alkali Chemicals and Fertilizers Ltd. [1997 (7) TMI 4 - SUPREME COURT] dealt with the taxability of interest income and did not govern the present question of allowability of interest expenditure, which stood covered by Vodafone South Ltd. [2015 (10) TMI 22 - DELHI HIGH COURT]

The deletion of the disallowance of interest expenditure was upheld and the Revenue's challenge failed.

Final Conclusion: The Tribunal upheld the order deleting the disallowance of interest expenditure claimed against interest income, holding that the requisite nexus under section 57(iii) was established. The Revenue's appeal was accordingly dismissed.

Amalgamation and revised computation of income - taxation on real and actual income -Apportionment of advance tax between predecessor and successor entities - Employees' contribution to provident fund - Deposit before due date but portal credit delayed due to technical glitch - Deduction on payment basis u/s 43B - Rectification of clerical error in tax computation

Amalgamation and revised computation of income - Apportionment of advance tax between predecessor and successor entities - revised computation submitted consequent to amalgamation - HELD THAT: - The Tribunal held that tax must be levied on the real and actual income. Since the amalgamation took effect during the year and the assessee had placed a revised computation for the relevant period before the Assessing Officer, and no specific provision was shown to disentitle consideration of such computation in the post-amalgamation situation, the matter required reconsideration on that basis. Once the amended income position is taken into account, the related advance tax credit was also required to be apportioned between the successor entity and the amalgamating entity in accordance with law. [Paras 3]

The issue was restored to the AO to consider the revised computation of income and to apportion or transfer the advance tax credit between the two entities as per law.

Rectification of clerical error in tax computation - HELD THAT: - The Tribunal accepted the grievance that the computation sheet reflected a figure towards total interest and fees payable even though no interest had in fact been computed under the stated provisions. The error was treated as an inadvertent clerical mistake calling for rectification. [Paras 3]

The corresponding ground was allowed and the erroneous figure in the computation was directed to be rectified.

Employees' contribution to provident fund - Deposit before due date but portal credit delayed due to technical glitch - HELD THAT: - The Tribunal found from the material placed before it that the statutory payments had been made from the bank account within the prescribed due dates and that the delay in reflection in the EPFO account was stated to be on account of technical issues on the portal. Following FIL India Business & Research Services (P.) Ltd. [2023 (9) TMI 906 - ITAT DELHI] it held that an assessee could not be penalised for delayed deposit where the initial payment had been made in time but the delay occurred because of glitches at the end of the online system. Since verification of the payment particulars was still required, the matter was remitted. [Paras 4, 5]

The issue was remitted to the AO in both AY 2020-21 appeals to verify the payments and allow the expenditure.

Deduction on payment basis under section 43B - disallowance of leave encashment, labour welfare fund, pension and gratuity - differences between Form 3CD and the return by reference to disclosed notes and inter-group balance sheet transfers - HELD THAT: - The Tribunal recorded the assessee's explanation that part of the claim arose from discharge of pre-existing liability on payment basis, part from payments made after filing Form 3CD but before the due date of filing the return, and part from inter-group transfers of pension and gratuity liabilities effected directly through balance sheets rather than through the profit and loss account. As these factual aspects were stated to have been disclosed by the tax auditor in the notes to Form 3CD available on the portal, the claim required verification by the Assessing Officer before decision. [Paras 5]

The Assessing Officer was directed to verify the stated facts and allow the expenses in accordance with law.

Final Conclusion: The appeals were allowed for statistical purposes with directions to the Assessing Officer to reconsider the revised computation arising from amalgamation, correctly apportion tax credit, verify the provident fund payments and the section 43B claims, and rectify the clerical mistake in the computation sheet.

Deduction u/s 80G - Corporate Social Responsibility expenditure - Enhanced deduction u/s 80-IA - Transfer pricing adjustment on receivables - Working capital adjustment

Deduction u/s 80G - Corporate Social Responsibility expenditure - Deduction under section 80G denied merely because the donations formed part of Corporate Social Responsibility expenditure - HELD THAT: - The Tribunal found that the issue stood covered by its order in the assessee's own case for the immediately preceding assessment year, wherein, following Interglobe Technology Quotient Pvt. Ltd. [2024 (6) TMI 8 - ITAT DELHI] it was held that disallowance of CSR expenditure under Explanation 2 to section 37(1) does not by itself bar a claim under section 80G. The Tribunal accordingly adopted the same view and allowed the assessee's claim. [Paras 9, 10]

Grounds relating to denial of deduction under section 80G were allowed.

Enhanced deduction u/s 80-IA - revised evidences and market price of electricity - HELD THAT: - The Tribunal noted that, as in the preceding year, the enhanced claim was founded on revised material and supporting documents filed before the DRP. Since those additional evidences required factual verification, the Tribunal did not adjudicate the enhanced claim on merits and restored the matter to the AO for examination and for passing an appropriate order after giving adequate opportunity to the assessee. [Paras 11, 12, 13]

The issue was remanded to the AO for verification of the additional evidence and fresh decision on the enhanced deduction claim.

Transfer pricing adjustment on receivables - Working capital adjustment - delay in realization of receivables from associated enterprises - HELD THAT: - The Tribunal followed its order for the immediately preceding assessment year, where the assessee's plea for working capital adjustment in relation to the impugned international transaction had been accepted. Adopting the same course, it directed the AO and Transfer Pricing Officer to grant working capital adjustment while re-examining the adjustment on receivables. [Paras 14, 15]

The receivables adjustment was restored for allowing working capital adjustment, and the related grounds were allowed for statistical purposes.

Rectification petition - Computation of income and interest - computation of business income, capital gains, deduction under section 80M, and levy of interest under sections 244A and 234C - HELD THAT: - On being informed that the assessee's rectification petition under section 154 was pending, the Tribunal restored the computation-related grounds to the Assessing Officer and directed disposal of the rectification petition after giving adequate opportunity to the assessee. The grounds concerning interest under sections 244A and 234C were also restored for fresh decision. [Paras 17, 18]

These computation and interest issues were remanded to the Assessing Officer for fresh consideration.

Final Conclusion: The appeal was partly allowed. Deduction under section 80G in respect of the CSR-related donations was allowed, while the enhanced claim under section 80-IA, the transfer pricing issue on receivables, and the computation and interest issues were restored to the Assessing Officer; the challenge to initiation of penalty proceedings was dismissed as premature.

TP Adjustment - selection of comparables - Persistent loss making company - Working capital adjustment - Risk adjustment - Multiple year data - Tolerance band under arm's length price

Transfer pricing comparables - Persistent loss making company - Exclusion of India Tourism Development Corporation Limited from the set of comparables - HELD THAT: - The Tribunal found that the factual position regarding losses of India Tourism Development Corporation Limited had been misquoted and that the assessee had demonstrated that the company had earned profit for A.Y. 2010-11 in the relevant segment.

Applying the principle noticed from Yazaki India Private Limited (Formely) Known Yazaki India Limited) [2019 (7) TMI 1566 - ITAT PUNE] Tribunal held that a company cannot be treated as a persistent loss maker when one of the relevant years reflects profit. Since the comparable had also been accepted in the assessee's own case for an earlier year, the matter required fresh consideration on the correct factual basis. [Paras 9]

India Tourism Development Corporation Limited was remanded to the Assessing Officer/Transfer Pricing Officer for fresh consideration as a comparable for the ARM segment after giving opportunity to the assessee.

Transfer pricing comparables - Segmental comparability - Healthcare segment of Inhouse Production Ltd. - HELD THAT: - The Tribunal accepted the assessee's contention that only the healthcare segment had been considered and that the segment had a separate revenue profile. It also recorded that the company had been accepted as a comparable in A.Y. 2010-11 and that the assessee had demonstrated functional similarity of that segment with its own activities. On that basis, rejection of the company by reference to its media division was not justified. [Paras 10]

The Transfer Pricing Officer was directed to include the healthcare segment of Inhouse Production Ltd. in the list of comparables.

Persistent loss making company - Functional suitability of comparable - Elbit Diagnostics Limited - HELD THAT: - The Tribunal held that Elbit Diagnostics Limited could not be treated as a persistent loss maker because it had earned profit in F.Y. 2008-09 and suffered losses only in the next two years. Even so, the Tribunal sustained its exclusion because the record showed that the company had not functioned for more than three months and was in the process of opening, expanding and shifting centres, resulting in accumulated losses. These peculiar circumstances rendered it unsuitable as a comparable notwithstanding the rejection of the persistent-loss reasoning. [Paras 11]

Exclusion of Elbit Diagnostics Limited from the comparables was upheld.

Working capital adjustment - HELD THAT: - The Tribunal noted that the Dispute Resolution Panel had already directed grant of working capital adjustment by applying the OECD-based methodology and that the final assessment order had failed to give effect to that direction. It found the Panel's reasoning to be based on cogent reasons and also noted that such adjustment had been granted in a subsequent year. The failure, therefore, lay in non-implementation of an express binding direction. [Paras 12]

The Assessing Officer/Transfer Pricing Officer was directed to provide working capital adjustment.

Risk adjustment - Risk mitigated service provider - HELD THAT: - Though the Dispute Resolution Panel had declined adjustment for want of robust data, the Tribunal found from the record that the assessee worked strictly under directions of Honda R&D Japan, acted as an independent contractor for rendering market research and testing services, and was remunerated on a cost-plus basis. It held that the assessee did not bear entrepreneurial risks associated with the services rendered and that its margins were not dependent on scale or size of operations. On that factual finding, the Tribunal accepted that the assessee enjoyed a no-risk status. [Paras 13]

The Tribunal held that the assessee had no-risk status and was entitled to be treated accordingly for adjustment purposes.

Multiple year data - Use of current year data instead of multiple year data for benchmarking - HELD THAT: - The Tribunal recorded that the Transfer Pricing Officer had discussed the matter at length and had applied Rule 10B(4) on the footing that prior-period data could be considered only where it revealed facts influencing determination of transfer prices for the transactions compared. Finding no infirmity in that approach, it declined interference with the view taken by the authorities below. [Paras 14]

The assessee's challenge to use of current year data was rejected.

Tolerance band under arm's length price - entitlement to the benefit of the plus/minus 5 percent standard deduction - HELD THAT: - The Tribunal accepted the view that, in light of section 92C(2A) assessee could not claim the tolerance band as a standard deduction where the statutory conditions were not satisfied. It therefore found no reason to interfere with the conclusion reached by the Transfer Pricing Officer. [Paras 15, 16]

The claim for benefit of the plus/minus 5 percent range was rejected.

Final Conclusion: The appeal was partly allowed for statistical purposes. One comparable was remanded for fresh consideration, one segmental comparable was directed to be included, exclusion of another comparable was sustained, working capital adjustment was directed to be granted, and the challenges regarding multiple year data and the 5 percent tolerance band were rejected.

Directions issued by the DRP after an inordinate delay of more than 10.5 years -Reasonable period of limitation - DRP directions in set-aside proceedings

HELD THAT: - The Tribunal held that, although the Act does not prescribe a specific time-limit for the DRP to dispose of objections in set-aside proceedings pursuant to a remand, such power must nevertheless be exercised within a reasonable period.

Since the matter was restored to the DRP for a speaking order and the DRP acted only after more than ten and a half years, the delay was held to be inordinate and legally unsustainable.

Applying the principle that where no limitation is prescribed, action must still be taken within a reasonable time, the Tribunal concluded that the DRP's directions and the assessment made in consequence thereof could not be sustained. [Paras 9, 10, 11, 13]

The DRP directions and the final assessment order were held bad in law, void ab initio and barred by limitation.

Final Conclusion: The appeal was partly allowed by holding that the DRP directions issued after an inordinate delay and the consequential final assessment order for assessment year 2006-07 were barred by limitation and void in law. In view of that finding, the remaining grounds were left open.

Condonation of Delay - sufficient cause - enormous delay of 693 days in filing the Review Petition(s) -Error Apparent on the Face of the Record - Review Jurisdiction - Defective Filing - HELD THAT:- The review petitions were dismissed as defective, barred by delay, and on merits for want of any error apparent on the face of the record or any case for review under Order XLVII Rule 1 of the Supreme Court Rules 2013.

Maintainability of writ petitions - Alternate statutory remedy under the Customs Act - Writ jurisdiction - Extension of time for adjudication under Section 28(9) of the Customs Act - Non-communication of extension order.

Whether the corrigendum dated 08.01.2024 merely corrected the SCN dated 12.10.2023 or materially supplemented it in a manner having bearing on limitation and jurisdiction - valid extension in law and on record existed so as to sustain the adjudication under Section 28(9) of the Customs Act - HELD THAT:- It is well settled that, notwithstanding the plenary nature of the jurisdiction vested in this Court under Article 226, the writ court would ordinarily refrain from entertaining a petition where an efficacious alternate statutory remedy is available. The recognised exceptions to this rule are limited and stand settled in a catena of decisions of the Hon’ble Supreme Court, including Whirlpool Corporation v. Registrar of Trade Marks, Mumbai [1998 (10) TMI 510 - SUPREME COURT] and Harbanslal Sahnia v. Indian Oil Corpn. Ltd [2002 (12) TMI 564 - SUPREME COURT]

Since the general principles governing writ interference in the face of an alternate statutory remedy stand settled, this Court now proceeds to examine the specific issues canvassed before it. The first of these is whether the corrigendum dated 08.01.2024 merely corrected the SCN dated 12.10.2023 or materially supplemented it in a manner bearing upon limitation and jurisdiction, and, allied thereto, whether a valid extension in law and on record existed so as to sustain the adjudication under Section 28(9) of the Customs Act. In this regard, it is relevant to note that, in the impugned OIO, the Adjudicating Authority took note of the objection of the noticees that the corrigendum reflected a continuation of investigation after issuance of the SCN, travelled beyond the limited scope of Section 154 of the Customs Act, was not a mere clerical correction, and in substance amounted to a supplementary SCN. The Adjudicating Authority, however, rejected the said objection and observed that the corrigendum was nothing but the statement dated 06.11.2023 of co-noticee Jitender Kumar recorded under Section 108 of the Customs Act, and that the same neither enhanced nor reduced the duty demand against Zakir Khan or any other noticee. The authority further noted that Jitender Kumar had already been referred to in the original SCN as a person actively involved in arranging and creating dummy import firms, and that such role stood corroborated by other statements already forming part of the record.

The Court reiterated that writ jurisdiction is ordinarily not exercised where an efficacious statutory remedy is available, save in settled exceptional situations. On the petitioners' objection that extension of time under Section 28(9) had not been communicated, the Court held, following Pranij Heights India Pvt. Ltd. [2025 (12) TMI 1089 - DELHI HIGH COURT], that though intimation of extension may be desirable, Section 28 does not make such communication a mandatory condition for validity of the extension, and non-communication by itself is not fatal. As regards the challenge founded on the corrigendum and Section 28BB, the Court noted that these objections had been dealt with in the impugned order and held that such contentions could appropriately be urged before the appellate authority under Section 128. In these circumstances, the case did not fall within the recognised exceptions to the rule of alternate remedy. [Paras 28, 29, 30, 31, 32]

The petitioners were relegated to the statutory appellate remedy, with exclusion of the period spent in prosecuting the writ petitions for computing limitation before the appellate authority.

Final Conclusion: The writ petitions were dismissed on the ground that the impugned adjudication order was appealable and no exceptional jurisdictional infirmity was shown to justify bypassing the statutory remedy. Liberty was reserved to the petitioners to pursue the appeal, and the period spent before the High Court was directed to be excluded for limitation purposes.

Denial of preferential duty benefit under the free trade agreement, founded on Public Notice No. 33/2024 - FOB value mismatch - Public notice inconsistent with statutory framework and CBIC instructions - HELD THAT: - In view of the CBIC Instruction No. 23/2024-Customs, dated 21st October 2024, the directions qua under public notice No. 33/2024, dated 20th March 2024, were certainly not applicable. In such context, our attention was drawn to the said public notice, to submit that the preferential duty benefit has been rejected to the Petitioner simply on a mechanical application of public notice No. 33/2024, dated 20th March 2024. To buttress this contention, our attention is drawn to observations in the order passed by the Assistant Commissioner in the impugned order dated 12th June 2024.

The Court found that the impugned assessment order expressly proceeded on the footing that the importer had not complied with the requirements introduced by Public Notice No. 33/2024. After issuance of the CBIC communication and Instruction No. 23/2024-Customs, followed by later public notices modifying the earlier position, the very foundation of the impugned order stood obliterated. The Court further observed that in matters concerning trade agreements, instructions must be in consonance with the statutory scheme and that public notices cannot be issued so as to dilute benefits available under free trade agreements or override the law and CBIC circulars. Since the impugned order rested on a basis which no longer survived, the matter required reconsideration in accordance with law. The merits of the petitioner's claim to preferential duty were not adjudicated and were left open. [Paras 21, 22, 23]

The impugned order was quashed and the assessment proceedings were restored to the proper officer for fresh assessment and a fresh order in accordance with law, with all contentions kept open.

Final Conclusion: The Court set aside the assessment order rejecting the claim for preferential duty, holding that its entire basis had ceased to survive after subsequent CBIC instructions and superseding departmental public notices. The matter was remanded for fresh assessment in accordance with law, and the merits of the preferential duty claim were left open.

Refund of excess customs duty - Principles of natural justice - Speaking order -Refund representation arising from reassessment of customs valuation - HELD THAT:- It is submitted by the petitioner that there are two streams of imports, one made for Special Economic Zone (SEZ) and other for non-SEZ. Value of imported goods declared are identical. While the respondent Authorities accepted the values for non-SEZ clearances, however doubted values declared for SEZ imports. It is submitted that after the goods have been imported into SEZ Unit, it is thereafter cleared into Domestic Tariff Area (DTA). In respect of imports to SEZ valuation was arrived by adding 90% to the declared value, in other words, identical products imported are treated differentially, the non-SEZ stream is assessed at the declared value, while the SEZ stream is assessed by adding 90% to the declared value.

The Court did not adjudicate the refund claim on merits, but permitted the petitioner to file a formal refund application and directed the respondents to consider it along with the earlier email representations and pass orders on merits in accordance with law within eight weeks.

Non-incorporation of Document Identification Number (DIN) - Binding nature of Board circulars - Transparency and Accountability​​​​​​​ - Validity of departmental orders - HELD THAT: - The Court held that the question was already covered by earlier decisions of the Court holding that DIN mandated by the Board circulars is compulsory and that failure to incorporate it is fatal to the validity of the order. The doubt whether the requirement applied only to communications and not to orders, including appellate orders, stood answered by the later decision of this Court extending the consequence of non-compliance to adjudicatory orders as well. The respondent's reliance on the later circular relaxing the requirement for orders communicated by email was rejected, since that circular came into effect subsequent to the impugned order and the governing administrative instructions were those in force when the order was issued; in any event, even the alternative requirement of a Unique Issue Number was admittedly not complied with. [Paras 2, 6, 7]

The impugned appellate order was set aside and the matter was remanded to the appellate authority for fresh consideration after affording an opportunity of hearing.

Final Conclusion: The Court held that the appellate order, having been issued without DIN, could not be sustained under the circulars governing the field at the relevant time. The order was therefore set aside and the matter remanded for fresh consideration after hearing the petitioner.

Rejection of the declared export value and finalisation of assessment - prescribed procedure under Rule 8(1) and Rule 8(2) - Non- Disclosure of relied upon material - Principles of natural justice - Reasonable opportunity of being heard - Contemporaneous export price. - HELD THAT: - The Tribunal held that it stood admitted in the impugned appellate order itself that the assessing authority had not followed the procedure under Rule 8 of the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 before rejecting the declared value. Where the authority relies on external material, including contemporaneous export data or market data, such material must be disclosed to the exporter and an effective opportunity of response and hearing must be given. Once the appellate authority itself recorded that the exporter had been kept in darkness and that the principles of natural justice had not been observed, it could not still sustain the assessment on merits. The Tribunal further noticed that enhancement based on undisclosed material and on contemporaneous exports without establishing similarity in quality, quantity and commercial level was contrary to the governing principles of transaction value under Section 14. Since the assessment stood vitiated for breach of natural justice and non-compliance with the prescribed procedure, the matter required fresh adjudication. [Paras 14, 15, 16, 17, 18]

The impugned order was set aside and the matter was remanded to the adjudicating authority for fresh decision in accordance with law and the above observations.

Final Conclusion: The Tribunal held that the rejection of the declared export value was vitiated by non-disclosure of relied upon material and non-compliance with the procedure required before discarding transaction value. The impugned order was therefore set aside and the matter was remanded for fresh adjudication.

Denial of the concessional customs duty benefit - imported motors and sensors - excluded from concessional customs duty under Notification No. 50/2017-Cus - suitable for use in motor vehicles, motor cars or motor cycles - Classification of pressure transducers/sensors - classifiable under CTH 90318000 or under CTH 90262000 - levy of interest and penalty on IGST​​​​​​​. - HELD THAT: - The Tribunal held that the exclusion in the notification turns on the expression suitable for use, which must be strictly construed in the context of an exemption. The notification excludes goods suitable for use in motor vehicles and does not require that the imported goods be directly fitted into the vehicle. The Tribunal declined to read the word "directly" into the notification. On the admitted facts, the imported goods were used solely for manufacture of ABS/MAB/ECS, which were themselves intended for motor vehicles, and the material on record showed that the products were meant for specific automotive use. Applying the principle that a part of a part can be treated as a part of the whole, and accepting that "suitable" means capable of being used, the Tribunal concluded that the goods fell within the exclusion clause and the concessional rate was unavailable. [Paras 10, 12, 16, 17, 18]

Denial of the exemption was upheld.

Classification of pressure transducers/sensors - HELD THAT:- The Tribunal noted that the importer had itself consistently declared the goods under CTH 90318000 in the bills of entry for the period in dispute. It further found that the show cause notice had not raised any dispute regarding that classification, and therefore the attempt to seek a different classification at the appellate stage could not be accepted for the relevant period. The subsequent classification adopted from January 2023 was held not to govern the disputed period. In these circumstances, the adjudicating authority's acceptance of classification under CTH 90318000 was sustained. [Paras 20]

The challenge to classification failed and classification under CTH 90318000 was affirmed.

Interest and penalty on IGST - Prospective operation of amendment - HELD THAT: - Following the Bombay High Court decision in A.R. Sulphonates Pvt. Ltd. Vs. Union of India [2025 (4) TMI 578 - BOMBAY HIGH COURT], the Tribunal held that the amended provision extending levy of interest and penalty to integrated tax operates prospectively from 16.08.2024. Consequently, while the duty demand otherwise survived, interest and penalty could not be computed on the IGST component for the period in question. [Paras 21, 22]

Interest and penalty on the IGST portion were set aside, and the computation was directed to exclude them.

Final Conclusion: The Tribunal upheld denial of the concessional customs duty benefit and affirmed the duty demand as well as the classification of pressure transducers/sensors under CTH 90318000. The appeal was partly allowed only to the extent that no interest or penalty was leviable on the IGST component for the period prior to 16.08.2024.

Rejection of the declared value and the re-determination of duty - imported goods - Misdeclared in description, quantity and value - Re-assessment of imported goods - differential duty - Recovery of short-paid duty after clearance - Discretionary confiscation for misdeclaration - Penalty linked to duty determined under section 28.

Rejection of declared value - HELD THAT: - The Tribunal held that the presence of 4.5% spandex did not take the goods outside the description of polyester knitted fabric, particularly when the import was of mixed lot or stock lot goods. However, the actual quantity was found to be about 7% higher than the quantity declared in the Bill of Entry. Since the declared value was for the lesser declared quantity, this discrepancy furnished a valid reason to doubt the truth and accuracy of the transaction value. In the circumstances, and particularly when the importer's director accepted the enhanced value and waived notice and hearing, rejection of the declared value under Rule 12 and re-determination under Rule 5 were sustained. [Paras 10, 11, 12, 13]

The re-determination of value and re-assessment of duty were upheld.

Re-assessment vis-a-vis recovery proceedings - HELD THAT: - The Tribunal explained that filing the Bill of Entry includes self-assessment, which remains open to verification and re-assessment under section 17 until an out-of-charge order under section 47 is made. Only after such clearance do the goods cease to remain imported goods, and only thereafter can a completed assessment be modified through the statutory modes including recovery proceedings under section 28. Since, in the present case, the assessment had not concluded and the preventive formation intervened before clearance, the exercise undertaken was only one of re-assessment of duty. The reference to section 28 and the treatment of the differential duty as duty recovered under that provision were therefore legally incorrect. [Paras 15, 16, 17, 18, 19]

The finding that the differential duty was recoverable under section 28 was set aside, and the proceedings were held to be only re-assessment under section 17(4).

Discretionary confiscation - Liable to confiscation - Redemption fine - HELD THAT:- The Tribunal held that, because the actual quantity exceeded the declared quantity, the goods did not correspond with the entry and therefore fell within section 111(m). At the same time, the expression that goods are 'liable to confiscation' does not mandate confiscation in every case; it leaves the adjudicating authority with discretion, which must be exercised judicially. Relying on Jain Exports Pvt. Ltd. vs Union of India [1984 (12) TMI 184 - DELHI HIGH COURT], the Tribunal held that confiscation is not automatic. Considering that the discrepancy was only about 7% and that the goods were mixed lot or stock lot goods, the Tribunal found confiscation unjustified. [Paras 20, 21, 22, 23]

The confiscation of the goods and the redemption fine were set aside.

Penalty linked to section 28 determination - HELD THAT: - The Tribunal noted that section 114A applies where duty has not been levied or has been short-paid for the specified reasons and is determined under section 28. Since the foundation for invoking section 28 was itself set aside, the penalty imposed as a consequence thereof could not survive. [Paras 24, 25]

The penalty under section 114A was set aside.

Final Conclusion: The appeal was partly allowed. The re-determination of value and re-assessment of duty were upheld, but the reference to recovery under section 28, the confiscation and redemption fine, and the penalty under section 114A were set aside, with consequential relief to the appellant.

Acts of smuggling - Imposition of penalties - Denial of Cross-examination under Section 138B - without compliance with Section 138B of the Customs Act, 1962 - knowledge or reason to believe -Evidentiary value of untested statements - facilitation or connivance of the Customs officers - rebuttal of the Authorised Representative (AR) - smuggle saffron and boxes of RMD Gutka also, in addition to gold - Preponderance of probability.

Cross-examination under Section 138B - Evidentiary value of untested statements - Penalty under Section 112(b) - HELD THAT: - The Tribunal held that once reliance was placed on statements recorded during inquiry, the procedure under Section 138B had to be followed and the makers of those statements had to be examined and offered for cross-examination, unless the statutory exceptions applied. In the present case there was complete denial of cross-examination, though the appellant had made no inculpatory statement of his own and the case against him rested substantially on statements of other persons. The Tribunal further found that the Angadiya letters were merely replies to departmental queries, were not statements recorded in accordance with law, were not shown to be regular business records, and were not properly tested for evidentiary value. There was also no proper identification of the appellant by the alleged smugglers or passengers, and the material only contained vague references such as "some Chaudhary" before his name was later introduced. The Department also failed to correlate the alleged smuggling events with passport details, dates of arrival, duty roster, or any synchronized call record showing involvement of the appellant. On these facts, even on the standard of preponderance of probability, the charge of facilitation or dealing with goods liable to confiscation was not established, and invocation of Section 112(b) was held to be misplaced. [Paras 4, 5]

The appeal of Somnath Chaudhary was held liable to succeed and the penalty against him could not be sustained.

Preponderance of probability - Untested statements - Lack of corroborative evidence - HELD THAT: - The Tribunal found that the allegation against Sujeet Kumar remained unproved because the Department did not establish his actual role, duty position, or capacity to facilitate movement of passengers through the airport system. The fact that he and another officer were of equal rank and were on duty simultaneously on several occasions weakened the allegation that he acted on another officer's directions. The nature of the recovered contraband and its concealment also did not support the theory of collusion with officers. Reliance on CCTV and other material did not establish his presence or involvement at the relevant import-side stage. The statements relied upon by the Department had not been tested through examination and cross-examination and therefore lacked reliable evidentiary value, while no inculpatory statement of the appellant himself or credible evidence of payments was available. In the absence of corroborative material, the Department's case remained unsubstantiated even on the standard of preponderance of probability. [Paras 8]

The penalty on Sujeet Kumar was set aside and he was held entitled to relief.

Final Conclusion: The Tribunal held that the penalties imposed on both appellants were unsustainable. The adjudication was found to rest on untested statements and inadequately proved material, with no sufficient corroboration to establish facilitation or conscious involvement even on the standard of preponderance of probability.

Seeking modification of the earlier order on provisional release - Rectification of mistake apparent from record - Onerous conditions - Scope of clarification vis-a-vis review.

Mistake apparent from record - HELD THAT:- The Tribunal held that the earlier order had been passed under Section 110A as an interim arrangement balancing the interests of both sides and had already dealt with the possible modes of clearance from an SEZ unit, including movement to another SEZ unit or EOU and clearance to DTA. Since the order expressly contemplated provisional assessment on such movement and also provided for return or rollback of bank guarantee to the extent goods were returned to the warehouse, the contingency now projected by the applicant could not be treated as an omission amounting to an apparent mistake. The plea that the directions may lead to double duty did not disclose a rectifiable error in the order as passed; at best, if any operational difficulty arose, the applicant could seek clarification regarding the manner in which the condition would work so as not to become onerous. [Paras 5, 6]

The Tribunal rejected the ROM application, holding that no apparent error existed in the earlier order and that any further grievance could only be addressed by seeking clarification, not rectification.

Final Conclusion: The Tribunal found no mistake apparent from the record in its earlier order governing provisional release of the goods and, therefore, dismissed the rectification application. It nevertheless observed that any practical difficulty in working the release conditions could be the subject of a clarification, and directed expeditious completion of the investigation.

Penalty u/s 112(a) - Abetment in customs violations - specific role of the appellants in the alleged attempt to clear the consignments - import of raw materials used for manufacture of pharmaceuticals which were made without import license / ADC clearance as per the provisions of Drugs and Cosmetics Act, 1940,

HELD THAT: - The Tribunal held that the show cause notice and the impugned order did not attribute any clear or specific role to the appellants bringing their conduct within the scope of omission, commission or abetment in relation to the goods.

The finding recorded against the first appellant proceeded only on an alleged attempt by another person to clear the consignments after receiving documents and filing bills of entry, without explaining the precise part played by the present appellants in that attempt. The record also did not disclose any material relating to the past imports sufficient to sustain the penalty.

On examining the adjudication findings, the Tribunal further found that active participation in clearance was attributed to other co-noticees, and that in the first appellant's own case, it had already been held that a CHA cannot be penalized under the Customs Act in the absence of positive evidence showing mala fide intention or establishing abetment. Applying the same principle, the Tribunal concluded that the Revenue had failed to make out a clear case for penalty. [Paras 5, 6, 7]

The penalty imposed on the appellants under Section 112(a) was held unsustainable and was set aside.

Final Conclusion: The Tribunal held that, in the absence of clear evidence showing omission, commission, mala fide intention or abetment by the appellants, penalty under Section 112(a) could not be sustained. The impugned order was set aside to that extent and the appeals were allowed.

Entitlement to under Section 457 of the Companies Act, 1956 to recover possession of the premises from the Official Liquidator - changed circumstances - Res judicata - Issue estoppel - Official Liquidator's retention of tenanted premises - Summary jurisdiction under Section 457 of the Companies Act.

Res judicata - Issue estoppel - Fresh application on same grounds - HELD THAT: - The Court held that a comparison of the grounds in the earlier and present applications showed that they were virtually identical, and therefore the bar of res judicata and issue estoppel applied. The earlier order merely recorded that the applicant could make alternate premises available for the Liquidator's consideration; it did not reserve any liberty to re-agitate the same claim for possession. The reduction in the number of pending cases did not displace the material basis on which the earlier application had been rejected, since the liquidation proceedings admittedly continued. [Paras 37]

The application was held not maintainable on account of res judicata and issue estoppel, and the plea of liberty under the earlier order was rejected.

Official Liquidator's retention of tenanted premises - Relevant reason test - Summary jurisdiction under Section 457 of the Companies Act - Tenancy rights - HELD THAT: - Applying Nirmala R. Bafna [1992 (2) TMI 271 - SUPREME COURT], the Court held that in proceedings of this nature the enquiry is confined to whether the Liquidator has furnished a relevant reason for continuing in possession. Since the liquidation had not ended and the premises were still being used by the Respondent, the continued requirement remained a relevant reason notwithstanding the reduction in pending litigation. The applicant's own offer of alternate accommodation was treated as indicating that the premises were in fact required. The Court further held that it could not, in exercise of summary jurisdiction, compel the Respondent to surrender vested tenancy rights and accept occupation under a leave and licence arrangement. On that footing, the authorities relied on by the applicant were found distinguishable because they concerned unused premises or cases where the Liquidator had conceded lack of requirement. The request for a local investigation regarding digitisation of records and the complaint regarding want of diligence in conduct of liquidation were also declined as falling outside the scope of these summary proceedings. [Paras 37]

The claim for possession failed on merits as the Respondent's continuing use of the premises for ongoing liquidation was a relevant ground for retention, and no summary direction to vacate could be issued.

Final Conclusion: The company application was dismissed with costs. The Court held that the claim was barred by res judicata and issue estoppel and, in any event, no summary direction for vacating the premises could be issued so long as the liquidation continued and the Respondent had shown a relevant basis to retain possession.

Replacement of resolution professional - Commercial wisdom of Committee of Creditors - Limits on adjudicating authority under Section 27 of the IBC - Coram non judice - Whether the decision of the Adjudicating Authority to reject the appointment of RP proposed by the CoC and nominating another RP of its own choice is legally sustainable. - HELD THAT:- On a plain reading of Section 27, the Court held that the statutory scheme permits replacement of the existing resolution professional by the Committee of Creditors if the decision carries the requisite voting share, the proposed professional has given written consent, and there is no pending disciplinary proceeding. In such a situation, the Adjudicating Authority is required to forward the proposed name to the Board and has no authority to replace that choice with a person of its own nomination. The reasons given in the impugned order, namely alleged commitments made by the proposed professional, legal advice rendered before appointment, and engagement of counsel after being impleaded, were found to be unsubstantial and not shown to violate any provision of the Code or the applicable code of conduct. The assurances given were held to be aligned with timely completion of the resolution process, the legal opinion was expressly stated to be independent and unconnected with securing appointment, and representation through counsel after being impleaded was treated as a legitimate exercise of the right to fair hearing. The Adjudicating Authority therefore exceeded the limits of its jurisdiction by displacing the CoC's decision on conjectural allegations and by substituting its own wisdom for the commercial wisdom of the CoC. [Paras 23, 24, 25, 26, 27]

The appointment of the resolution professional chosen by the Adjudicating Authority was held unsustainable; the impugned order was set aside and the matter was remitted with a direction to forward the CoC's choice to the IBBI in accordance with Section 27(4).

Final Conclusion: The appeal was allowed. The Tribunal held that the Adjudicating Authority acted beyond its statutory remit in substituting the CoC's chosen resolution professional with its own nominee, and directed that the CoC's decision be forwarded to the IBBI for further action in accordance with law.

Verification of claims under resolution plan - Powers of successful resolution applicant - entitlement to allotment and possession of the flats on the basis of the record already accepted in the insolvency process - Implementation of approved resolution plan.

Verification of claims under resolution plan - HELD THAT: - The power to admit a claim and the power to re-determine any amount of claim vests solely with the Resolution Professional. The SRA cannot claim a power that has been solely vested in the RP. To do so would pervert the purpose of the law and permit the SRA to reject all rightful claims made. In any case in the facts of the present case, we observe that the SRA’s rights to further scrutiny has also lapsed as per the terms and conditions of the resolution plan and the AA erred in further allowed beyond 60 days.

On a holistic reading of the verification clause in the approved resolution plan, the successful resolution applicant was only entitled to verify the original documents and enter into fresh builder-buyer agreements within the stipulated period. The power to verify and re-determine claims under the insolvency framework vests in the resolution professional under the Regulations, and not in the successful resolution applicant. Since the plan itself contemplated such verification within 60 days of approval and no such exercise was undertaken within that period, the successful resolution applicant's right to further verification had lapsed. Once the claims had already been admitted by the resolution professional, and even verified through the Monitoring Committee, the adjudicating authority erred in sending the matter back for fresh scrutiny. [Paras 67, 68, 71, 75, 78]

The direction requiring the appellants to approach the successful resolution applicant for scrutiny was unsustainable and was set aside.

Admitted homebuyer claims - HELD THAT:- SRA claims that the impugned order is not adversarial and the SRA is scrutinizing the claims of the appellant as per the approved resolution plan, which contains a verification clause as per which the adjudicating authority has been allowed it to scrutinize the claims. SRA also claims that the purpose of the verification clause was that the resolution professional had provisionally admitted the claims, and the appellant cannot seek implementation of the resolution plan while by-passing the terms of the resolution plan. It also claims that the resolution professional admitted the claim with a caveat that it could be revised at any stage of the process. And now it claims that the appellant has placed reliance on forged payment receipts and BBA and other documents and there are many procedural irregularities. SRA claims that the appellant has consented to the approval of the resolution plan, which contained a clause for verification, and delivery of homes was contingent upon verification of the original documents. SRA also claims that they have started the implementation of the resolution plan, and 95% of the plan has been implemented for about 380 home buyers. SRA also claims that they have the right to verify and it derives strength from Section 31 of the Code.

The record contained sufficient material showing payment by the appellants, their inclusion in the list of creditors, partial admission of their claims by the resolution professional, and documents evidencing allotment and subsequent payments. The Tribunal held that these materials were enough to establish their status as homebuyers and that the successful resolution applicant could not, at this belated stage, disown the documents or question the authority of the signatory to defeat liabilities already forming part of the resolution process. The adjudicating authority ought to have acted on the admitted position instead of reopening the matter through another round of scrutiny. [Paras 77, 79, 80, 84, 85]

Both appellants were directed to be allotted the flats in terms of the allotment letters and builder-buyer agreements, with implementation of the resolution plan upon payment of the differential amount and handover of possession.

Final Conclusion: The impugned order was set aside, and both appeals were allowed on the footing that the successful resolution applicant had no surviving authority to reopen or freshly scrutinise the appellants' admitted homebuyer claims. The Tribunal directed allotment and possession of the flats in accordance with the approved resolution plan, and also directed investigation by IBBI into the allegations of fraud and related systemic concerns.

Entitlement to receive contractual share of lease rentals from the amount paid by the lessee to the Corporate Debtor - Adjustment of refundable security deposit - direction to release that share -HELD THAT: - The Appellate Tribunal found from clauses 5.1 and 6.1 of the lease deed that the monthly rent payable by the lessee was a comprehensive amount, though apportioned between the corporate debtor and Respondent No. 1, and that the security deposit paid separately to both was contractually adjustable on expiry or earlier determination of the lease. The lessee's communication with tabular break-up showed payment of outstanding rent and utility charges after adjustment of the security deposit, including the share attributable to Respondent No. 1, made to the Appellant. The Tribunal also noted that rent had earlier been paid in the agreed ratio, the Appellant did not dispute receipt of the payment, and no further recovery proceeding was pursued against the lessee for the same lease rentals. On that basis, the Adjudicating Authority was held to have correctly directed release of Respondent No. 1's due share, and the Appellant could not seek any further alleged outstanding from the lessee. [Paras 34, 35, 36, 37, 38]

The challenge to the direction for payment of Respondent No. 1's share failed, and the impugned order was affirmed.

Final Conclusion: The Appellate Tribunal held that the payment received by the corporate debtor from the lessee covered the share contractually attributable to Respondent No. 1 after adjustment of the security deposit in terms of the lease deed. Finding no error in the impugned order, the appeal was dismissed.

Scope of judicial review of resolution plan - Commercial wisdom of Committee of Creditors - rejection of the resolution plan on matters of feasibility, viability, valuation, and revival strategy -Transparency and integrity of CIRP - Quality of Information Memorandum - Misuse of insolvency process - Incomplete Disclosure of Information - PUFE Proceedings - non- compliance of Regulation 6A of the CIRP Regulation by the RP - Clean Slate Doctrine - Going Concern Revival.

Scope of judicial review of resolution plan - HELD THAT:- The Appellate Tribunal held that the supervisory role of the Adjudicating Authority under Section 31 is confined to ensuring statutory compliance and procedural fairness and not to second-guessing the commercial assessment of the CoC. At the same time, where demonstrable facts logically indicate opacity, incomplete disclosure, statutory fraud, or use of CIRP as a mask for an ulterior objective, the Adjudicating Authority is entitled to probe the matter and is not bound to mechanically approve the plan. The controlling principle is that commercial wisdom deserves primacy only when it is formed on adequate, reliable and fully disclosed material, and suspicion cannot replace proof unless founded on tangible facts emerging from the record. [Paras 13, 14, 15, 16, 17]

The Adjudicating Authority had jurisdiction to scrutinise the plan on the touchstone of transparency, completeness of disclosure and integrity of the CIRP, though not to revisit mere commercial merits.

Quality of Information Memorandum - HELD THAT: - Affirming the core concern of the Adjudicating Authority, the Appellate Tribunal found that the record disclosed systematic reduction in the value of the corporate debtor's assets over consecutive financial years, disappearance of substantial liabilities during the lookback period, and absence of any proper audit that could explain these movements or test the need for avoidance or PUFE proceedings. These matters were not meaningfully placed before the CoC, and the Information Memorandum prepared without addressing them could not inspire confidence. In that backdrop, the approval of the plan by the CoC could not be treated as a protected exercise of commercial wisdom, because such wisdom assumes availability of all relevant information. The Tribunal further held that other objections raised by the appellants, viewed in isolation, did not answer the fundamental defect in the process. Since the debt and default justifying initiation of CIRP stood established, but the resolution plan was the product of a faulty resolution process, rejection of the plan and the consequent order of liquidation were liable to be confirmed. [Paras 22, 23, 24, 25, 28]

The resolution plan was rightly rejected, and the order directing liquidation of the corporate debtor was confirmed; all three appeals were dismissed.

Disclosure of claims in parallel CIRP - HELD THAT: - The Appellate Tribunal held that, apart from the obligation to update claims under the CIRP Regulations, a creditor privy to parallel insolvency processes must share information that may materially affect the fairness and transparency of the process, including matters bearing on its own claim and voting position. Such duty flows from the overarching requirement that every stakeholder act in aid of the integrity of the CIRP. However, failure to make such disclosure does not automatically vitiate a plan; rejection would require a showing that the omission fatally affected the transparency of the process. On facts, no such disclosure regarding the petitioning financial creditor's position in the principal borrower's CIRP was shown. [Paras 26]

The Tribunal recognised an implied duty of disclosure in parallel CIRPs, but held that non-disclosure is not per se sufficient to reject a resolution plan.

Final Conclusion: The Appellate Tribunal held that the resolution plan emerged from a process lacking adequate transparency and reliable financial disclosure, and therefore did not merit approval merely because it had been unanimously approved by the CoC. The rejection of the plan and the consequential liquidation of the corporate debtor were affirmed, and a direction was issued to the IBBI to investigate the conduct of the Resolution Professional independently.

Withdrawal of the resolution plan on oral request of the RP as authorised by the CoC - Binding effect of CoC-approved resolution plan - Withdrawal of plan approval application - Scope of CoC meetings after submission of resolution plan

HELD THAT: - The Appellate Tribunal held that a resolution plan approved by the CoC is binding inter se the CoC and the successful resolution applicant even before approval by the adjudicating authority. It relied on the principle stated in Ebix Singapore Private Limited Vs. Committee of Creditors of Educomp Solutions Limited & Anr. [2021 (9) TMI 672 - SUPREME COURT] and reiterated in State Bank of India & Ors. Vs. Consortium of Murarilal Jalan and Florian Fritsch & Anr. [2024 (11) TMI 410 - SUPREME COURT (LB)] that there is no scope for withdrawal or modification of such a plan after its submission to the adjudicating authority.

Tribunal further held that the explanation to Regulation 18(2) permits CoC meetings after submission of the plan only on matters which do not affect the resolution plan; therefore, the CoC had no jurisdiction to authorise the Resolution Professional to seek withdrawal of the pending plan approval application. Since the impugned order allowed withdrawal solely on the oral request of the Resolution Professional based on such mandate, without adjudicating viability or feasibility on merits, it could not be sustained. The application for plan approval was therefore revived, while leaving it open to the adjudicating authority to consider the promoter's separate application in accordance with law. [Paras 21, 22, 30, 31, 32]

The impugned order permitting withdrawal of the plan approval application was set aside, the application was revived for consideration in accordance with law, and the separate application filed by the holding company was left open to be considered by the adjudicating authority.

Final Conclusion: The Appellate Tribunal held that the CoC and the Resolution Professional had no authority to withdraw the already approved and submitted resolution plan. The order permitting such withdrawal was set aside, the plan approval application was revived, and the adjudicating authority was left free to consider the other pending application in accordance with law.

Provisional Attachment Order - Continuing offence of money-laundering - activity connected with the proceeds of crime - Relevant date for prosecution under Section 3 - Attachment of property held in name of relative - Reverse burden in respect of proceeds of crime - absence of proof of independent source of funds - provisional attachment of a flat standing in the sister's name, purchased before the asserted crime period.

Continuing offence of money-laundering - HELD THAT:- The Tribunal held that for action under Section 3, the material question is not the date of commission of the scheduled offence but the date when a person is found involved in any process or activity connected with the proceeds of crime and projects or claims them as untainted property. Relying on Dyani Antony Paul Vs. Union of India [2020 (12) TMI 1296 - KARNATAKA HIGH COURT] it held that money-laundering is a continuing activity so long as the person continues to enjoy, possess, use or project the tainted assets as untainted. On the facts, the cheating and fraud were treated as continuing in nature, since the promised returns to investors had not been settled and the benefits had not been extended. The notification adding the IPC offences to the Schedule, therefore, did not invalidate the proceedings. [Paras 11, 12]

The challenge to the ECIR and attachment on the ground of absence of a scheduled offence at the time of the original acts was rejected.

Attachment of property held in name of relative - HELD THAT: - The Tribunal found no factual basis for the appellants' contention that the crime period was confined to 05.04.2008 to 14.12.2009, noting the material referred to in the impugned order showing deposits received during the financial year 2006-07 to 2009-10. The plea that the flat had been purchased prior to the crime period was therefore not accepted. The property stood in the name of Vaishali Thakur, but no material was produced to establish her independent source for its purchase. In that situation, the Tribunal held that the property was purchased out of the proceeds generated by the main accused, and also invoked the statutory presumption and reverse burden under Section 24, which the appellants failed to discharge. [Paras 14, 15]

The attachment of the flat was upheld.

Final Conclusion: The Tribunal upheld the confirmation of the provisional attachment order. It held that the alleged money-laundering activity was continuing in nature and that the appellants had failed to rebut the case that the attached flat represented proceeds of crime.

Violation of principles of natural justice - Enhancement of liability under Sabka Vishwas (Legacy Dispute Resolution) Scheme without notice - Audi Alteram Partem - Show Cause Notice - Opportunity of Hearing -HELD THAT: - The Court found that the enhanced demand was made unilaterally, without issuance of any show cause notice and without hearing the assessee. Such enhancement, made behind the back of the assessee by issuing a fresh Form No. SVLDRS-3, amounted to a clear violation of principles of natural justice. The proper course for the designated Committee was to issue notice, including by reissuing Form No. SVLDRS-2, so as to enable the assessee to respond before a fresh Form No. SVLDRS-3 was issued. [Paras 9, 10, 11, 13]

On that short ground, the enhanced demand in Form No. SVLDRS-3 was set aside and the matter was restored to the designated Committee for fresh decision after giving reasonable opportunity of hearing to the assessee.

Final Conclusion: The Court set aside the enhanced demand raised under the Sabka Vishwas Scheme on the ground of violation of natural justice and also set aside the orders of the High Court. The proceedings were restored to the designated Committee for fresh consideration after notice and reasonable opportunity to the appellant.

Service tax liability - receipts from healthcare services rendered through its hospital and diagnostic centre - Extended limitation under proviso to section 73(1) - exemption from service tax under Notification No. 25/2012-Service Tax - receipts such as bank interest, directors' remuneration and legal expenses - basis of Form 26AS and financial statements​​​​​​​ - Exemption notification issued under Section 93​​​​​​​ - Maintainability of writ despite alternative remedy.

Service tax liability cannot be inferred from Form 26AS - HELD THAT: - The Court held that levy of tax must proceed from a statutory declaration of liability and an assessment founded on the taxing statute. Form 26AS only reflects income-tax deduction information and cannot, by itself, establish that the underlying receipts were chargeable to service tax. Since the adjudicating authority proceeded on income-tax data without examining whether the petitioner's receipts related to exempt healthcare services or otherwise attracted service tax under the Finance Act, 1994, the demand was founded on inference and analogy rather than a legally established tax liability. [Paras 43, 62]

The demand confirmed in the order-in-original was held to be contrary to law and unsustainable.

Extended limitation under proviso to section 73(1) - HELD THAT: - The Court held that the extended period is an exception and can be invoked only on satisfaction of the specific conditions enumerated in the proviso to section 73(1). Mere non-filing of returns or alleged non-furnishing of documents was not, by itself, sufficient to attract the proviso. The order-in-original did not disclose a clear and conclusive finding, based on the facts, that the petitioner had wilfully and deliberately acted with intent to evade service tax. In the absence of such statutory preconditions, the revenue authorities assumed a jurisdiction not vested in them, rendering the notice and consequential adjudication unauthorized. The Court further held that, once the levy by extended limitation failed, the consequential levy of interest and penalties also could not survive. [Paras 51, 75, 76]

The invocation of extended limitation was held invalid, and the demand, interest and penalties founded on such assumption of jurisdiction were set aside.

Maintainability of writ despite alternative remedy - HELD THAT: - The Court reiterated that existence of an alternative remedy is a rule of policy and discretion, not an absolute bar. Where the impugned action is wholly without jurisdiction or proceeds in disregard of statutory preconditions, the High Court can exercise writ jurisdiction. Since the revenue authorities had invoked the extended period without satisfying the conditions mandated by law, the challenge went to the root of jurisdiction and justified interference under Article 226 instead of relegating the petitioner to the appellate remedy. [Paras 72, 76]

The objection as to alternative remedy was rejected and the writ petition was entertained.

Final Conclusion: The Court allowed the writ petition and held that the service tax demand, founded on Form 26AS data without proper determination of taxable liability, could not be sustained. It further held that the extended period under section 73(1) had been invoked without satisfying the statutory preconditions, and accordingly quashed the show cause notice and the order-in-original along with consequential interest and penalties.

Contract services - Demand-cum-show cause notice -Tax liability on the receipts - Form 26AS as basis of service tax demand - Extended period of limitation under Section 73(1) - fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade tax -Maintainability of the writ petition - statutory remedy of appeal being provided under the Act.

Form 26AS as basis of tax demand - HELD THAT: - In Chatturam Holiram Ltd. [1955 (4) TMI 1 - SUPREME COURT] the Apex Court held that there are three stages in the imposition of tax. There has to be a declaration of liability, which is the part of the statute which determines what persons in respect of what property are liable to pay the tax. Then there has to the assessment. The liability to pay taxes does not depend on the assessment which has already been fixed by the statute. But the assessment specifies the exact sum which a person is found to be liable to pay and finally the modes of recovery of taxes which are assessed in the event the assessee refuses to pay voluntarily.

The Court held that imposition of tax must begin with a statutory declaration of liability, followed by assessment of the exact sum payable, and no tax can be imposed by inference or analogy. On the record, the demand and the appellate affirmation proceeded on third-party Form 26AS information, while failing to examine the petitioner's plea that the receipts arose from government works contracts covered by the exemption notification and failing to determine whether the services were taxable at all under the Finance Act, 1994. Since the adjudicating authority relied on Form 26AS as the sole basis and did not consider relevant materials bearing on taxability and exemption, the determination was contrary to the Act and the law declared by the Supreme Court. [Paras 37, 38, 39, 58]

The levy founded on Form 26AS alone, without a proper determination of taxable liability and consideration of exemption, was held unsustainable.

Extended limitation under recovery provisions - HELD THAT:- The Court held that the extended period can be invoked only if the case falls within the specific conditions set out in the proviso to Section 73(1), and that mere omission or non-furnishing of documents does not by itself amount to wilful suppression or evasion. Examining the impugned order, the Court found no discernible finding that the petitioner's case satisfied any of those statutory conditions. The revenue authorities had, therefore, assumed jurisdiction under the proviso without recording the necessary factual and legal conclusion mandated by the statute. Since the demand had been raised only by resort to the extended period, such assumption of jurisdiction was held unauthorized, rendering the consequent demand and allied levies invalid. [Paras 47, 69, 70, 71, 72]

The extended period was held to have been wrongly invoked, and the demand founded on such invocation was set aside as without jurisdiction.

Writ maintainability despite alternative remedy - Jurisdictional error - HELD THAT:- In Godrej Sara Lee Ltd. [2023 (2) TMI 64 - SUPREME COURT] the Apex Court held that mere availability of an alternative remedy of appeal or revision, which the party invoking the jurisdiction of the High Court under Article 226 has not pursued, would not oust the jurisdiction of the High Court and render a writ petition “not maintainable”. The Court made it clear that availability of an alternative remedy does not operate as an absolute bar to the “maintainability” of a writ petition and that the rule, which requires a party to pursue the alternative remedy provided by a statute, is a rule of policy, convenience and discretion rather than a rule of law. The Apex Court in further held that dismissal of a writ petition by a high court on the ground that the petitioner has not availed the alternative remedy without, however, examining whether an exceptional case has been made out for such entertainment would not be proper. The Apex Court further held that where the controversy is a purely legal one and it does not involve disputed questions of fact but only questions of law, then it should be decided by the high court instead of dismissing the writ petition on the ground of an alternative remedy being available.

The Court reiterated that availability of an alternative remedy is a rule of policy and discretion, not an absolute bar, particularly where the order is without jurisdiction or suffers from a patent legal infirmity. Having found that the authorities acted on irrelevant material, failed to consider relevant material, and assumed extended-period jurisdiction without satisfying the statutory preconditions, the Court held that this was a fit case for exercise of jurisdiction under Article 226. In those circumstances, the objection based on alternative remedy was rejected, and the Court proceeded to grant certiorari. [Paras 65, 66, 67, 68, 72]

The objection as to maintainability was rejected, and the Court entertained the writ petition and quashed the impugned proceedings.

Final Conclusion: The Court allowed the writ petition and held that the service tax demand, raised on the basis of Form 26AS and by wrongly invoking the extended period under Section 73, was unsustainable. Consequently, the demand-cum-show cause notice, the order-in-original and the order-in-appeal were quashed, and the consequential levy of interest and penalty also failed.

Ex parte adjudication- No Opportunity to reply to show-cause notice - challenged to the order-in-original and consequential recovery notice - HELD THAT: - The Court recorded that the impugned order was admittedly an ex parte order. Taking note of its earlier order passed in connected matters involving an identical factual and legal matrix, the Court held that the same course was required to be followed in the present case. Without adjudicating the merits of liability, limitation, exemption, or jurisdiction, it restored the matter to the stage of reply to the show-cause notice and directed the authorities to bear in mind the observations extracted from the earlier order, while keeping all contentions open. [Paras 3, 6, 7]

The order-in-original and the recovery notice were set aside, and the matter was remitted to the show-cause notice stage with liberty to the petitioner to file a fresh reply.

Final Conclusion: The writ petition was disposed of by setting aside the ex parte order-in-original and the consequential recovery notice, and by restoring the proceedings to the stage of reply to the show-cause notice. All merits contentions were expressly kept open for fresh consideration by the authority.

Export of service - reports delivered abroad and consideration received in convertible foreign exchange - testing and analysis services rendered to foreign clients - Part performance outside India - Technical Testing and Analysis Service - Cum-duty benefit - invocation of the extended period and imposition of penalty - Mandatory penalty.

Export of service - HELD THAT: - The Tribunal held that, once the classification under Technical Testing and Analysis Service was not in dispute, the determinative question was whether there was performance or part performance outside India under the Export of Service Rules, 2005. It found that the respondent carried out research and testing activities in India as part of work orders requiring deliverables such as reports, data sets and related outputs to be furnished to clients situated outside India, and that consideration was received in convertible foreign exchange. Relying on the principle accepted in CST Vs BA Research India Ltd.[2010 (2) TMI 230 - CESTAT, AHMEDABAD] and followed in other decisions, the Tribunal held that delivery of the reports and deliverables abroad formed an integrated part of the contracted service and constituted part performance outside India. Consequently, the services were treated as exported services not liable to service tax. [Paras 9, 10, 11, 12]

The departmental challenge to the export benefit was rejected and the dropping of service tax demand on services rendered to foreign clients was sustained.

Mandatory penalty - HELD THAT:- The Tribunal held that where the statute required imposition of equal penalty with reference to the duty confirmed, prior payment and later appropriation of a part of the demand did not justify proportionate reduction of the mandatory penalty. The adjudicating authority was therefore not correct in reducing the penalty to that extent. [Paras 13]

The matter was remanded only for limited re-computation of the penalty amount in accordance with the total duty confirmed.

Cum-duty benefit - HELD THAT: - The Tribunal found that the adjudicating authority had not granted cum-duty benefit and that the claim required examination on the basis of supporting material. As the necessary documents were not before the Tribunal, the issue was remitted to the original adjudicating authority for consideration of the appellant's submissions under section 67 of the Finance Act, 1994. [Paras 15, 17]

The assessee's appeal was allowed by way of remand only for limited re-determination of demand after considering cum-duty benefit and the consequential reduction in penalty.

Invocation of the extended period - imposition of penalty in relation to taxable services provided to domestic clients - HELD THAT:- The Tribunal held that, although an interpretational dispute could arise regarding taxability of services provided to foreign clients, no such ambiguity existed in respect of taxable services provided to domestic clients. It found that the assessee had failed to discharge service tax on such services and had also failed to reflect the consideration received in the statutory returns, and that payment was made only after investigation commenced. On these facts, the invocation of the extended period and the imposition of penalty were upheld. [Paras 16]

The challenge to the extended period and penalty was rejected.

Final Conclusion: The Tribunal held that the services rendered to foreign clients, though classified as Technical Testing and Analysis Service, qualified as export of service and were not taxable. The Department's appeals were partly allowed only to the limited extent of re-computation of mandatory penalty, while the assessee's appeal was remanded only for consideration of cum-duty benefit, with the findings on extended period and penalty otherwise sustained.

Taxability of recovery agency services - Non-deduction of TDS - Joint venture versus service relationship - Banking Services and Legal Consultancy Services -Extended period for non-declaration of taxable value - Penalty for suppression of taxable services.

Taxability of recovery agency services - HELD THAT: - The Tribunal held that the plea of joint venture failed for want of any documentary or other evidence showing a principal-to-principal arrangement involving shared contribution, costs, efforts and returns. On the facts found, Barclays had advanced loans, the appellant merely recovered the dues on Barclays' behalf, and received commission linked to the amounts recovered. The mode of computing consideration as a percentage did not alter the true nature of the transaction, which remained a service rendered by the appellant as recovery agent. The question whether tax was deducted at source was held to be irrelevant to the character of the transaction for service tax purposes. [Paras 9, 10, 11, 12]

The activity was rightly treated as taxable service rendered by the appellant to Barclays.

Extended period for non-declaration of taxable value- Penalty for suppression of taxable services - HELD THAT:- The Tribunal found that, despite being registered under service tax, the appellant had neither disclosed the recovery agency service nor the consideration received for it, and had not paid service tax thereon. On that finding, the invocation of the extended period was upheld, and the penalties imposed were also sustained. [Paras 13]

The extended period was validly invoked, and the demand, interest and penalty were upheld.

Final Conclusion: The Tribunal upheld the impugned order and dismissed the appeal. It held that the appellant had rendered taxable recovery services to Barclays, and that non-declaration of the consideration justified the extended period, interest and penalty.

Service tax liability under the category of Construction Services in respect of commercial or industrial building and civil structure - data received including the e-TDS, 26 AS Form of the relevant period - Non-filing of mandatory returns and failure to disclose taxable receipts - Negative list regime - Classification of taxable service - Burden to prove exemption or abatement - Extended period of limitation - Penalty for evasion of service tax.

Negative list regime - Classification of taxable service - HELD THAT: - The Tribunal held that for the period 2015-16, after introduction of the negative list concept, there was no separate requirement of classification in the manner urged by the appellant. Any activity not covered by the negative list under Section 66D and not exempted remained taxable service within the meaning of Section 65B(44). The appellant's objection founded on absence of classification was therefore untenable. [Paras 5]

The challenge based on non-classification of service was rejected.

Burden to prove exemption or abatement - Taxability from TDS data - HELD THAT:- The Tribunal noted that the appellant remained non-cooperative at every stage, did not reply to departmental letters or the show cause notice, did not substantiate its defence before the adjudicating authority or the appellate authority, and filed no supporting material even before the Tribunal. Since the income-tax return showed deduction of TDS on payments made to a contractor, the material on record established receipt against an activity amounting to taxable service. Once such receipts stood shown, the onus shifted to the appellant to establish entitlement to any exemption, abatement, or alternate tax treatment, which it failed to discharge. In these circumstances, no infirmity was found in treating the entire consideration as taxable value. [Paras 4, 6]

The demand of service tax on the receipts reflected in the income-tax material was upheld, and the appellant's claims for exclusion or concessional treatment were rejected for want of evidence.

Extended period of limitation - Penalty for evasion of service tax - HELD THAT: - The Tribunal found that the appellant had not filed service tax returns for the relevant period despite being registered and had also failed to explain or document the receipts shown in its income-tax records. In that background, invocation of Section 73 was held proper. Penalty was also sustained, the conduct being treated as evasion of tax. [Paras 6]

The invocation of the extended limitation period and the penalty imposed were affirmed.

Final Conclusion: The Tribunal upheld the appellate order and dismissed the appeal. It held that under the negative list regime the objection regarding non-classification was untenable, and in the absence of any documentary rebuttal the service tax demand, extended limitation, and penalty were rightly sustained.

Renting of Immovable Property - Taxable value of services - Notional interest on refundable security deposit - Renting of safe deposit lockers - HELD THAT: - The Tribunal held that the appellant had already discharged service tax on the annual rent received for renting the lockers, and that levy could extend only to the actual consideration for the service, namely the rent. Following the decision rendered in the appellant's own case [2023 (10) TMI 498 - CESTAT NEW DELHI] and the earlier decision in Murli Realtors Private Limited [2014 (9) TMI 461 - CESTAT MUMBAI], it held that a refundable security deposit serves a purpose distinct from consideration for the service, and in the absence of any provision deeming notional interest on such deposit to be part of taxable value, the same cannot be subjected to service tax. As no distinguishing feature was found in the present appeal, the contrary view taken in the impugned appellate order was held unsustainable. [Paras 6, 7]

The demand of service tax on notional interest on refundable security deposits was set aside and the appeal was allowed.

Final Conclusion: The Tribunal held that only the actual rent received for renting safe deposit lockers formed part of the taxable value, and that notional interest on refundable security deposits could not be taxed as additional consideration. The impugned appellate order was therefore set aside and the appeal was allowed.

Evasion of Service Tax - Works contract valuation - Exclusion of value of goods and VAT/WCT - Extended period of limitation - Penalty in absence of suppression

Value of services in works contract service - Exclusion of value of goods and VAT/WCT - Rule 2A valuation - Service tax on the works contract services demanded on the gross amount charged by including the value of goods and VAT/WCT - benefit of the Notification No. 1/2006-ST, dated 01-03-2006 - HELD THAT: - As relying on Cus. & C. Ex. &S.T., Noida Versus Interarch Building Products Pvt. Ltd [2023 (5) TMI 138 - SUPREME COURT] we hold that the value of service needs to be determined in terms of Rule 2A(i) of the Service Tax (Determination of Value) Rules 2006 by excluding the value of the goods and VAT/WCT from the gross amount charged. For this purpose, we find that the appellant has already submitted a certificate from a Chartered Accountant. However, to check the correctness of the claims made by the appellant on the value of goods used and the VAT/WCT paid, for working out the service tax liability as per our observations supra, we are of the opinion that the matter needs to be remanded back to the adjudicating authority.

Invocation of extended period of limitation to demand Service Tax - Disclosure in returns - HELD THAT:- The Tribunal found that the appellant was a registered assessee, had regularly filed ST-3 returns and paid tax, and had disclosed in those returns the payment of service tax on 33% of the value and at 4%. There was no allegation in the notice of non-filing of returns or suppression of information, and the impugned order also contained no finding of suppression or fraud. On these facts, invocation of the extended period was held impermissible. Consequently, the demand beyond the normal period of eighteen months was held barred by limitation, and only the liability, if any, within the normal period was left for recomputation on remand. [Paras 6, 7]

The demand beyond the normal period of eighteen months was set aside as time-barred, and only the normal-period liability, if any, was left open for recomputation.

Final Conclusion: The Tribunal held that the service element in the appellant's works contracts had to be valued under Rule 2A(i) by excluding the value of goods and VAT/WCT, and that the demand beyond the normal period i.e., 18 months was barred by limitation. The matter was remanded only for recomputation of the liability, if any, for the normal period, and penalty was held to be not imposable.

Non-speaking order - Failure to consider material contentions - Final fact-finding authority - HELD THAT: - The Court found, on a perusal of the impugned order, that the findings recorded by the Tribunal did not deal with all the contentions urged by the appellant. Since the Tribunal is the final fact-finding authority, it was required to consider and analyse the entire factual matrix. In the absence of such consideration, the High Court held that it was not possible to answer the substantial questions raised in appeal on the basis of the findings contained in the Tribunal's order. [Paras 6, 7, 8]

The impugned order was set aside and the matter was remitted to the Tribunal for fresh consideration, with all contentions of both parties kept open and opportunity to be granted to both sides.

Final Conclusion: The appeal was allowed solely on the ground that the Tribunal had failed to consider all the issues and contentions raised before it. The matter was remitted for fresh adjudication without any opinion being expressed on the merits.

Breach of Principles of natural justice - non-supply of relied upon documents - Opportunity of defence - sale of round/ CTD bars purchased from various re-rolling mills including clandestine purchase/ sales/ removal of goods​​​​​​​ - HELD THAT: - The seized documents show that appellant was maintaining customer wise ledger showing debit and credit details. He also accepts to have arranged transport of goods purchased from the rolling mills. The contents of seized documents resumed from the premises of the appellant have also been accepted by the proprietor of M/s A.I. Industries (main party) who also admitted to have cleared goods without issue of any invoice and without payment of Central excise duty. In his statement dated 05.08.2015, he also accepted to have sold finished goods through the appellant Shri Himanshu N Jagani. Therefore, role of the appellant cannot simply be brushed aside on the ground that the main appellant has got it’s case settled under SVLDRS, 2019.

Appellant has neither retracted his statements recorded by the officers nor disputed facts mentioned therein. In appeal book, the appellant mentioned that he requested the Adjudicating Authority for supply of relied upon documents to prepare his defence which were not provided to him. This issue he again raised during appeal proceedings before the Commissioner (Appeals) but he also ignored this request and decided the appeal against him. Thus, we are convinced that the principles of natural justice have not been followed in the instant case either during adjudication or in appeal proceedings. Therefore, we remit the matter to the Adjudicating Authority to provide relied upon documents to the appellant as requested for, and thereafter, decide the case afresh after following the Principles of Natural Justice, within a period of four months from the date of receipt of this order.

Final Conclusion: The Tribunal did not decide the penalty on merits. It set aside the impugned appellate order on the ground of breach of natural justice arising from non-supply of relied upon documents and remanded the matter for fresh adjudication.

Cenvat credit utilisation for payment of payment of National Calamity Contingent Duty (NCCD) - Prospective operation of restrictions on utilisation of basic excise duty credit - Distinction between exemption from NCCD and utilisation of credit for NCCD. -HELD THAT:- The Tribunal held that the controversy was already settled by the decisions of the Gauhati High Court in the case of CCE, Dibrugarh Vs. Prag Bosimi Synthetics Ltd. [2013 (11) TMI 487 - GAUHATI HIGH COURT], before Hon’ble Uttarakhand High Court in the case of Hero Motocorp Ltd. Vs. Commissioner of Central Excise, Dehradun [2018 (1) TMI 770 - UTTARAKHAND HIGH COURT] and coordinate Benches of the Tribunal in the case of M/s. Pamis Tex Pvt Ltd [2024 (9) TMI 61 - CESTAT AHMEDABAD], M/s. Wellknown Blyester Ltd and M/s. Welspun Syntex Ltd. [2019 (11) TMI 1268 - CESTAT AHMEDABAD], all of which recognised that under Rule 3 of the Cenvat Credit Rules, 2004, the credit pool comprised various levies and, in the absence of a specific prohibition, credit of basic excise duty could be used for payment of NCCD. Rule 3(7) only restricted utilisation of credit of NCCD towards NCCD and corresponding levies; it did not create the converse bar against use of basic excise duty credit for payment of NCCD. The Tribunal further held that the restriction was introduced only later, first in a limited form in 2008 for specified tariff items and thereafter comprehensively from 2016, and therefore no such embargo operated during the period in dispute. The reliance placed by Revenue on Unicorn Industries [2012 (5) TMI 621 - SIKKIM HIGH COURT] was rejected as that decision concerned the scope of an exemption notification under Section 5A and not the distinct question of utilisation of credit under the Cenvat Credit Rules. [Paras 5]

The respondent was entitled to utilise credit of basic excise duty for payment of NCCD, and the order dropping the proceedings was sustained.

Final Conclusion: The Tribunal held that, for the period in dispute, there was no statutory prohibition against utilisation of basic excise duty credit for payment of NCCD. Revenue's appeals were therefore dismissed and the order in favour of the respondent was sustained.

Entitlement for recredit or refund of duty paid on export invoices -duty paid under mistake - goods not removed from the factory due to cancellation of the export order - barred by limitation under section 11B. - HELD THAT: - The Tribunal found that the appellant had intimated the department at the earliest stage about cancellation of the export order and sought recredit of the duty debited. Since the goods never left the factory, the duty payment was treated as a mistake and not as duty validly payable on clearance. The departmental authorities neither acted on the initial request nor guided the appellant to adopt the proper procedural route, and therefore could not later invoke limitation under Section 11B to defeat the claim. Relying on decisions holding that tax or duty paid by mistake is not liable to be retained by the revenue merely on the ground of limitation, the Tribunal held that the appellant's letter requesting recredit had to be treated as the refund application. [Paras 4, 5]

The appeal was allowed, and the jurisdictional Assistant Commissioner was directed to treat the appellant's letter seeking recredit as a refund application and process the refund.

Final Conclusion: The Tribunal held that the duty paid on the cancelled export invoices was paid under mistake, since the goods were never exported or removed from the factory. The refund claim could not be defeated on limitation, and the appellant's earlier letter was directed to be treated as the refund application for sanction of refund.

Duty on warranty replacement of parts removed as such and demand of excise duty on amounts recovered by way of a debit notes towards repair charges on inputs damaged during transportation - Goods used for providing free warranty - Debit notes for repair charges on damaged inputs - Eligibility of CENVAT credit on damaged inputs used in production - Extended period of limitation - Consequence of included warranty value.

Warranty replacement of inputs - Goods used for providing free warranty - HELD THAT:- The Tribunal held that, under Notification No. 3/2011-CE (NT) dated 01.03.2011, inputs include goods used for providing free warranty for final products. The appellant's practice of not paying duty when the removed goods were inputs, while paying duty where the removed goods were manufactured goods, was consistent with that position and could not be treated as a divergent practice warranting demand. Since the warranty charges were already included while discharging duty on the final product, the subsequent clearance of such inputs as warranty replacements did not attract duty. [Paras 9]

The demand of duty on free warranty replacement parts was held unsustainable.

Debit notes for repair charges on damaged inputs - HELD THAT: - The Tribunal found that the debit notes were raised on account of damage to inputs during transportation, but there was no material on record to show that the damaged inputs were not subsequently used in manufacture. It also noted that, despite repeated adjudication, no finding had been recorded on the appellant's specific submission on use of the damaged inputs. In the absence of proof of non-use, the appellant remained entitled to CENVAT credit, and recovery of repair charges through debit notes could not be made the basis for demanding duty. [Paras 9]

The demand connected with debit notes for repair charges on damaged inputs was set aside and the appellant's entitlement to input tax credit was upheld.

Final Conclusion: The Tribunal held that no duty was payable on inputs supplied as free warranty replacements where their value was already embedded in the value of the final product, and that no duty could be demanded on debit notes raised for repair charges on damaged inputs absent proof of non-use in production. The impugned order was therefore set aside and the appeal was allowed with consequential relief.

Entitlement to refund of excess tax with interest for delayed refund - Administrative delay in statutory refund. - HELD THAT: - The Court held that the only reasons advanced for not releasing the refund after dismissal of the challenge to the earlier order were wholly unsustainable in law. Once the earlier proceedings had culminated in revival of the original order granting refund, and even the Special Leave Petition had been dismissed, the Department was bound to process and release the refund. The Court construed Sections 52 and 55 of the JVAT Act, 2005 to mean that excess tax paid is required to be refunded and that a dealer entitled to refund in pursuance of an order is also entitled to simple interest at 6% per annum after ninety days from the refund application until actual grant of refund. Administrative reasons such as vacancy of office or deputation of an officer could not justify stalling the Department's statutory functioning or depriving the taxpayer of the refund due. [Paras 9, 10, 18, 20, 21]

The Commissioner was directed to ensure refund of the excess tax together with interest at 6% per annum commencing after ninety days from the petitioner's first refund application, within the time fixed by the Court, failing which further interest for the default period was directed to be borne personally by the Commissioner.

Final Conclusion: The writ petition was disposed of by directing release of the refund for the assessment year 2014-15 with statutory interest under the JVAT Act, 2005, the Court holding that the departmental excuses for continued delay were frivolous and legally untenable.

Challenged to arbitral award by legal representatives - Arbitration Act as a self-contained code - extraordinary supervisory jurisdiction under Article 227 and revisional jurisdiction under Section 115 of the Code of Civil Procedure - statutory mechanism.

Legal representatives as parties claiming under deceased party - HELD THAT: - When the scheme of the Act is towards continuity of arbitral proceedings, in the event of death of a party, the natural corollary, evident from the definition clause itself, is that upon the death of a party, legal representatives’ step into the shoes of a party for the purposes of the Act. Similarly, this Court in Rahul Verma and Ors. v. Rampat Lal Verma and Ors [2025 (2) TMI 1789 - SUPREME COURT] while permitting legal heirs of a deceased partner to invoke arbitration under the agreement therein, had noted that upon the death of the deceased, the legal heirs had ‘stepped into the shoes of the deceased’ and therefore, the arbitration clause continues to bind all concerned parties.

The Court held that the Arbitration Act is a complete code and Section 34 provides the exclusive statutory recourse against an arbitral award. Reading the Act as a whole, particularly the definition of legal representative and the provisions preserving the enforceability of the arbitration agreement and award against persons claiming under a deceased party, the Court held that legal representatives step into the shoes of the deceased for the purposes of the Act. Since the award is binding and enforceable against such legal representatives, the statutory right to challenge the award must also be available to them under Section 34. Judicial interference outside that framework can be invoked only in exceptional rarity, and no such basis was made out. The appellant's own stand that he was the legal heir of the deceased also disentitled him from contending that he did not represent the estate. [Paras 19, 20, 21, 22, 23]

The High Court was right in holding that the appellant's remedy lay under the Arbitration Act; the appeal was dismissed, while reserving liberty to pursue remedies under that Act, with limitation to run from the date of the judgment.

Final Conclusion: The Court affirmed the High Court's view that a legal representative aggrieved by an arbitral award must seek recourse under Section 34 of the Arbitration Act and not invoke supervisory or revisional jurisdiction. The appeal was dismissed, with liberty to the appellant to pursue remedies under the Arbitration Act, and limitation for doing so was directed to run from the date of the judgment.

Dishonour of cheque - Rebuttal of presumption - Legally enforceable debt - Burden of proof - Statutory presumption under Sections 118 and 139 - Probabilisation of defence - Burden to examine material witness. - HELD THAT: - The Court held that once issuance of the cheque and signature thereon were admitted, the statutory presumption operated in favour of the complainant. The respondent set up a specific defence that the cheque had been given to one Narayana Reddy in connection with a chit transaction and was later misused. Since that defence rested entirely on the alleged role of Narayana Reddy, and the evidence showed that he was available, the burden to examine him for corroborating and probabilising the defence lay on the respondent. The lower appellate Court erred in treating non-examination of Narayana Reddy by the complainant as fatal. On the evidence, the trial Court had rightly accepted that the cheque was issued in discharge of liability. [Paras 12, 13]

The finding of the lower appellate Court was held to be perverse; the trial Court's conviction was restored and confirmed.

Final Conclusion: The Court allowed the appeal, set aside the order of acquittal, and restored the conviction under Section 138 of the Negotiable Instruments Act. It held that the respondent had failed to establish the defence put forward to rebut the statutory presumption arising from the admitted cheque and signature.

Dishonour of cheque - Validity of the Statutory notice under Section 138 NI Act - demands an amount different from the cheque amount - HELD THAT: - Admittedly, the petitioner had issued a cheque for a sum of Rs. 12,00,000/-. It was presented for collection and the same was returned dishonoured for the reason ‘funds insufficient’. Therefore, the respondent caused notice as contemplated under Section 138 of NI Act dated 23.10.2019.

The Court held that the expression 'said amount' in proviso (b) to Section 138 refers to the very amount covered by the dishonoured cheque. The object of the notice is to afford the drawer an opportunity to make payment of that amount, and therefore the legal notice cannot substitute the cheque amount with a larger outstanding liability. Though additional claims such as interest or other charges may be made, that is permissible only if the exact cheque amount is specifically demanded. Since the notice in the present case demanded the larger outstanding amount with interest, instead of demanding payment of the cheque amount, the notice was invalid in law and the foundational requirement for prosecution under Section 138 was not satisfied. [Paras 7, 8, 9]

The statutory notice was held invalid, with the result that no cause of action arose for the complaint under Section 138 of the NI Act.

Final Conclusion: The Court held that the statutory notice was bad in law because it demanded an amount different from the cheque amount. On that basis, the complaint lacked a valid cause of action and the criminal proceedings were quashed.