TMI Tax Updates e-Newsletter
Apr 27,2026

Availability of an efficacious statutory appeal - Writ jurisdiction - Jurisdictional error - Violation of natural justice - Challenged the order under Section 74 of the CGST Act - lack of jurisdiction or patent breach of natural justice. - HELD THAT:- Admittedly, in this case, the petitioner has an alternative and efficacious remedy to appeal the impugned order. This is not even disputed by the petitioner. However, the contention is that the impugned Order-In-Original is without jurisdiction and violates the principles of natural justice. It is submitted that these are the two well-known exceptions where the petitioners are not usually relegated to avail of the alternate remedy provided by the statute.

The decisions in ITW Signode India Ltd [2003 (11) TMI 114 - Supreme Court], Tamil Nadu Housing Board [1994 (9) TMI 69 - Supreme Court] and Uniworth Textiles Limited [2013 (1) TMI 616 - Supreme Court] can admit of no dispute whatsoever. The question in this case is not whether all three conditions for invoking the powers under Section 74 ought to co-exist. These orders of the Hon’ble Supreme Court indeed provide that they should co-exist. The proper officer, upon consideration of the material on record, has concluded that they co-exist. Whether this conclusion is right or not is something that can always be tested in the statutory appeal, and no case is made out to entertain a writ petition to virtually re-evaluate or reassess the impugned Order-In-Original, as if this Court were exercising some appellate jurisdiction in this matter.

The Court held that the petitioner's challenge to the invocation of Section 74 rested on matters requiring examination of the show-cause notice, the material on record and the correctness of the findings on wrongful availment of ITC, fraud, wilful misstatement and suppression. Such questions were not sufficient to establish that the proceedings were wholly without jurisdiction. The impugned order had considered the petitioner's response, and the grievance that the conclusions were erroneous on facts or merits was a matter for the appellate forum, not for judicial review under Article 226. On the plea of breach of natural justice, the Court found that a show-cause notice had been issued, opportunity to respond had been granted, and the order dealt with the issues raised; any dispute about the adequacy or correctness of that consideration could also be urged in appeal. The recall of the matter from the call book was likewise not shown to involve any mandatory pre-decisional hearing requirement. Applying the principles governing exhaustion of alternate remedies, the Court concluded that this was not an exceptional case warranting bypass of the statutory appeal. [Paras 29, 30, 32, 33, 34]

The petition was dismissed as not entertainable in writ jurisdiction, with liberty to file a statutory appeal within four weeks, and the appellate authority was directed to consider such appeal on merits without adverting to limitation if filed within that period and upon compliance with statutory requirements.

Final Conclusion: The High Court declined to entertain the writ petition against the order under Section 74 of the CGST Act, holding that the petitioner had an efficacious alternate remedy and had failed to establish either total absence of jurisdiction or any patent breach of natural justice. Liberty was granted to file a statutory appeal within four weeks, to be considered on merits without objection on limitation if filed within that period and in compliance with the statutory requirements.

Parallel proceedings under GST - Same subject matter test - Wrongful availment of input tax credit - Natural justice - Alternative statutory remedy - proceedings initiated under Section 74 of the CGST Act - barred by Section 6(2)(b) on the ground that prior proceedings under Section 73 had already been initiated for another financial year.

Parallel proceedings under GST - HELD THAT: - The Court held that the bar against parallel proceedings applies only where both proceedings concern the same subject matter, namely the same specific tax liability arising from the same facts, relating to the same contravention and the same time period. On examining the two show cause notices and the orders passed thereon, the Court found no overlap in the relevant periods, since one proceeding related to Financial Year 2019-2020 and the other to Financial Year 2018-2019. It further held that the nature of the alleged infractions was also distinct, the earlier proceeding being founded on discrepancies in declaration of tax liability in annual returns, while the later proceeding was based on alleged wrongful availment of input tax credit on the basis of goods-less invoices from a non-existent entity. The operative part of the impugned order was also read as confining the demand to Financial Year 2018-2019. In that view, the statutory ingredients necessary to attract the prohibition under Section 6(2)(b) were absent. [Paras 13, 14, 15, 16, 17]

The challenge founded on Section 6(2)(b) failed, and the impugned proceedings under Section 74 were held to be maintainable.

Natural justice - Consideration of reply - Alternative statutory remedy - HELD THAT: - Upon examining the impugned order, the Court found that the petitioner's reply had been adverted to and considered. It therefore rejected the contention that there was non-consideration of the petitioner's submissions or any consequent breach of natural justice. The Court also noted that an efficacious appellate remedy was available under Section 107 of the CGST Act read with Rule 109 of the CGST Rules. [Paras 18]

The plea of procedural invalidity was rejected, leaving the petitioner to avail the statutory appeal.

Final Conclusion: The writ petition was dismissed. The Court held that the proceedings for Financial Year 2018-2019 under Section 74 were not barred by the earlier proceedings for Financial Year 2019-2020 under Section 73, and also found no breach of natural justice, while clarifying that the period spent in the writ proceedings would stand excluded for computing limitation before the appellate authority.

Personal hearing - Principles of natural justice - utilization of inadmissible ITC -Failure to intimate a separate date of personal hearing, despite a specific request by the petitioner, vitiated the adjudication order - Audi Alteram Partem. -HELD THAT: - The Court held that where a request for hearing is made, grant of hearing is mandatory under Section 75(4) of the Act. An effective hearing requires prior intimation of the date fixed for such hearing. The mere recital in the order that the petitioner was heard on the same day on which its reply was filed did not satisfy this requirement, particularly when the show-cause notice only required submission of reply and did not notify that personal hearing would also take place on that date. The procedure adopted was therefore treated as an eyewash and as violative of the principles of natural justice. [Paras 7, 8, 9]

The impugned order was set aside for breach of natural justice, with liberty to the authority to fix a fresh date of hearing after due intimation and then pass a fresh order in accordance with law; all pleas were left open.

Final Conclusion: The writ petition was disposed of by setting aside the adjudication order on the ground that no effective personal hearing was granted despite request. The authority was left free to proceed afresh after giving due notice of hearing.

Alternative statutory remedy - Statutory Pre-deposit - delay in invoking writ jurisdiction - condonation of delay - HELD THAT: - Having regard to the delay in approaching the Court and the availability of the appellate remedy under the Act, the Court was not inclined to enter into the merits of the challenge to the order passed under Section 73. It held that the petitioner could approach the appellate authority within the time granted, along with the statutory pre-deposit and a delay condonation application, and that the appellate authority should consider the explanation for delay and, if satisfied, decide the appeal on merits. [Paras 6]

The writ petition was disposed of by granting liberty to the petitioner to file an appeal with a delay condonation application, leaving all grounds on facts and law open before the appellate authority.

Final Conclusion: The Court declined to entertain the writ petition on merits and relegated the petitioner to the statutory appellate remedy. Liberty was granted to file the appeal within the stipulated time with a delay condonation application and statutory pre-deposit, for consideration by the appellate authority.

Service tax liability and declaration of charge - transportation of goods - Form 26AS as basis of tax demand - Extended limitation under proviso to Section 73(1) - Suppression of facts - Intent to evade tax - Jurisdictional error -Writ maintainability despite alternative remedy.

Service tax liability and declaration of charge - HELD THAT: - The Court held that imposition of tax necessarily presupposes a statutory declaration of liability, followed by assessment of the amount lawfully chargeable. A receipt reflected in Form 26AS or in information obtained from the Income Tax Department does not, by itself, establish service tax liability. The adjudicating authority proceeded on that material alone and did not examine the nature of the services rendered, including the petitioner's specific case that the services were outside the tax net. Since the authority failed to address the determinative question of taxability under the governing statute and treated the receipts as taxable merely on inference, the demand was contrary to law. [Paras 37, 38, 40, 58]

The demand confirmed in the impugned order was held unsustainable as it was raised without a lawful determination of taxable service.

Extended limitation under proviso to Section 73(1) - HELD THAT: - It is evident that there is no finding by the Adjudicating Authority that the case of the petitioner can be considered to be a case which falls under the conditions specified in proviso to Section 73(1). Under such circumstances, the impugned Order-in-Original appears to the Court to have been assumption of jurisdiction by the revenue authorities which was not otherwise vested on the said authority. For the revenue authorities to invoke powers under Section 73(1), there must be a finding and a conclusion arrived at based on the facts of the case that the petitioner assessee had willfully and deliberately resorted to fraud, collusion, willful misstatement, suppression of facts of contravention of any of the provision thereunder with the intent to evade payment of service tax. Therefore, for invocation of the powers proviso to Section 73(1), there must be a conclusive finding arrived at by the Revenue authorities that the petitioner assessee had resorted to any or all for these acts or omissions with the sole intention to evade payment of service tax. Such finding is not discernable from the impugned Order-in-Original passed by the Revenue Authorities. Therefore, the assumption of jurisdiction of the Revenue under the proviso to Section 73(1) has to be concluded to be a jurisdiction assumed by the Revenue authorities not vested on it by the statute. Such assumption of jurisdiction therefore, being contrary to the provisions of the statute itself, the same is colourable and therefore it is held to be unauthorized.

The Court held that invocation of the extended period is exceptional and can be resorted to only upon a conclusive finding, based on the facts, that one or more of the conditions stated in the proviso are established. Mere non-furnishing of documents or reliance on Form 26AS could not, by itself, justify assumption of such jurisdiction. On a plain reading of the impugned order, the Court found no discernible finding satisfying the statutory preconditions for extension of limitation. The revenue authorities had therefore assumed a jurisdiction not vested in them by statute, and the proceedings initiated beyond the ordinary period of limitation were unauthorized. [Paras 47, 69, 70, 71, 72]

The invocation of the extended period of limitation was declared invalid, and the consequential demand, interest and penalty were set aside.

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 the rule of relegating a party to an alternative remedy is one of discretion and not an absolute bar. Where the authority assumes jurisdiction contrary to the statute, or where the issue raised is one of jurisdictional illegality apparent on the face of the record, the High Court may exercise its powers under Article 226. Since the present proceedings were initiated by wrongly invoking the extended limitation provision without fulfilling the mandatory statutory conditions, the case fell within the recognised exceptions warranting interference in writ jurisdiction. [Paras 63, 65, 66, 68, 72]

The writ petition was held maintainable notwithstanding the existence of an appellate remedy.

Final Conclusion: The Court allowed the writ petition and held that the service tax demand, having been raised on Form 26AS data without lawful determination of taxability and by wrongly invoking the extended period of limitation, could not stand. The impugned show cause notice and the order-in-original were quashed, with the consequential interest and penalty also held not leviable.

Entitlement to a writ direction for reimbursement of differential GST - Work executed under a government contract after the introduction of GST - Proof of actual tax payment - Production of supporting documents evidencing actual payment of GST. -HELD THAT:- The Court did not adjudicate the petitioner's substantive entitlement to reimbursement on merits. It recorded the submission on behalf of the respondents that the representation could not be examined on the basis of a mere statement of payment and that supporting documents showing actual payment or deposit of GST were necessary. Accepting that course, the Court directed the petitioner to furnish such material, and directed the respondents to examine the claim and pass orders in accordance with law within the stipulated time. [Paras 5, 6]

The writ petition was allowed with a direction to the petitioner to produce proof of GST payment and to the respondents thereafter to consider and decide the reimbursement claim within the time fixed.

Final Conclusion: The Court disposed of the matter by directing the petitioner to furnish supporting proof of GST payment and requiring the respondents to examine the reimbursement claim and pass appropriate orders in accordance with law within the prescribed period. No final adjudication was made on the petitioner's substantive entitlement to GST reimbursement.

Failure to consider material response - discrepancies regarding short fall of payment of output tax as well as interest - Opportunity of personal hearing - Validity of the order of adjudication at Annexure-A - part payment reflected in GST-DRC-03 and the reply in GST-DRC-01A - HELD THAT: - The Court found that the petitioner's specific assertion of having paid a portion of the tax had not been considered by the authority. Though the adjudication order referred to GST-DRC-01A, the material relied on by the petitioner, including Annexure-C and the reply in GST-DRC-01A, had not been duly taken into account before proceeding further. In view of this omission, and the petitioner's contention that a personal hearing would enable explanation of the alleged discrepancy in output tax and interest, the matter required fresh consideration after affording such opportunity. [Paras 5, 6, 7]

The adjudication order was set aside and the matter was remitted to the stage of reply to the show cause notice for reconsideration after examining the petitioner's material and explanation.

Final Conclusion: The petition was disposed of by setting aside the adjudication order and remitting the matter for fresh consideration. The authority was directed to consider the petitioner's material, including GST-DRC-03 and GST-DRC-01A, with all contentions kept open.

Refund claim for tax collected on ocean freight under reverse charge - Interest on refund - compensation for loss of use of money - limitation inapplicability - levy embodied in Entry No. 10 of Notification No. 10 of 2017.

Refund of unconstitutional levy -HELD THAT: - The Court held that where the levy itself has been struck down as unconstitutional, the claim for return of the amount cannot be confined to the statutory scheme applicable to ordinary refund claims. Following its earlier view, it held that Section 54 would not apply to such cases, and consequently the revenue could not resist the claim for interest by contending that the refund had been granted within the time contemplated under Sections 54 and 56. The amount collected under the invalid levy had to be treated as money wrongfully retained by the State, and not merely as a statutory refund regulated by the limitation prescribed for regular tax refunds. [Paras 12, 13]

The revenue's objection founded on Sections 54 and 56 was rejected.

Interest on refund - Compensation for loss of use of money - HELD THAT: - The Court accepted the principle that interest is compensatory and is payable for the period during which the taxpayer was deprived of the use of money. Since the petitioner had paid GST on ocean freight under protest and the levy was later declared unconstitutional, the petitioner had been deprived of the use of that money from the date of payment until the refund was actually made. On that footing, interest was held payable for the entire intervening period. The rate claimed at 6% was found fair and equitable, and also in line with the rate recognised under Section 34 CPC. [Paras 14, 15, 16, 17, 18]

The order rejecting interest was set aside and the respondents were directed to pay interest at 6% per annum from the date of deposit of the tax till the date of refund.

Final Conclusion: The writ petition was allowed. The Court held that the petitioner's claim arose from collection under an unconstitutional levy and was therefore not controlled by the statutory refund limitation regime, and directed payment of interest at 6% per annum from the date of deposit of tax till the date of refund.

Violation of principles of natural justice - non-disclosure of the basis for fixing the standard yield at 94.5% and denial of an effective opportunity to object - failure to furnish the basis on which the benchmark yield of 94.5%. -HELD THAT:- The Court found that the petitioner had repeatedly sought disclosure of the source and material on the basis of which the assessing authority fixed the standard yield at 94.5%, and that this request had been reiterated in subsequent representations and during personal hearing. Since the record did not disclose any reply furnishing that material, the petitioner was denied an effective opportunity to meet the very basis of the proposed assessment. An assessment founded on undisclosed material, despite a specific request, amounts to denial of an appropriate hearing and offends principles of natural justice. [Paras 9, 10, 11]

The assessment orders were set aside and the matter was remanded to the assessing authority to disclose the source and details of the information relied upon for fixing the benchmark yield, permit objections, and pass fresh orders after giving adequate opportunity.

Final Conclusion: The writ petitions were allowed on the ground of violation of natural justice. The impugned assessment orders for the stated assessment years were set aside and the matters were remanded for fresh consideration after disclosure of the material relied upon and grant of adequate opportunity to the petitioner.

Provisional attachment of bank account - Payment of sale proceeds - Ostensibly recovering taxes demanded under the order of assessment - sale transaction between the petitioner and its purchaser has collapsed on account of the delay caused by the action of the tax authorities - HELD THAT:- The writ petition was disposed of after recording that the amount due had been refunded after retention of the pre-deposit and that the respondents would await any further deposit arising from receipt of additional sale proceeds.

Transitional input tax credit - CENVAT credit carry forward - Interpretation of Section 140 - wrongful reversal of input tax credit -HELD THAT: - The Court held that the impugned order proceeded on a fundamentally erroneous understanding of Section 140. Section 140(1) specifically permits a registered person to carry forward into the GST regime the amount of CENVAT credit of eligible duties reflected in the return relating to the period ending with the day immediately preceding the appointed day. Section 140(5) was treated by the authority as restricting transition only to taxes arising after the appointed day, but the Court held that this reading ignored Section 140(1). According to the Court, Section 140(5) merely extends a facility for taking credit in situations where inputs or input services are received on or after the appointed day though the duty or tax had been paid under the existing law; it does not exclude or nullify the entitlement already recognised under Section 140(1). [Paras 10, 11, 12, 13]

The reversal of transitioned credit founded on the view that pre-appointed day credit could not migrate under the GST regime was held unsustainable, and the impugned order was set aside with a direction for consequential proceedings to be passed expeditiously.

Final Conclusion: The Court allowed the writ petition and set aside the order reversing the transitioned credit. It held that the authority had misread Section 140 by ignoring the independent entitlement under Section 140(1) to carry forward eligible CENVAT credit available immediately before the appointed day.

Writ maintainability in absence of functional appellate forum - Statutory pre-deposit for second appeal - Writ Jurisdiction - Non-constitution of Tribunal - Availability of Appellate Forum - HELD THAT:- The Court held that though a writ petition can be entertained where the statutory appellate forum is not constituted or functional, such recourse is only to prevent the aggrieved person from being left remediless. Once the appellate forum contemplated by the statute had become functional and the time for filing appeal stood extended through the notified mechanism, it was not proper for the Writ Court to keep the matter pending. The Court further held that the absence of a functional forum at the earlier stage did not dispense with compliance with the condition attached to filing the appeal, namely payment in terms of the statutory pre-deposit requirement. The controversy was therefore left to be adjudicated by the Tribunal, subject to deposit of the amount required and filing of the appeal within the prescribed timeline. [Paras 4, 5]

The writ petition was disposed of by directing the petitioner to comply with the pre-deposit requirement and file the appeal before the GST Appellate Tribunal within the applicable timeline, without any expression on the merits of the first appellate order.

Final Conclusion: The Court declined to examine the challenge on merits in view of the now functional appellate remedy before the GST Appellate Tribunal. The petitioner was directed to file the statutory appeal within the prescribed timeline after complying with the required pre-deposit.

Concessional rate for bio-degradable bags - Benefit of the Entry No. 319 of Schedule I to Notification No. 9/2025-Central Tax (Rate) - Jurisdictional limit of advance ruling authority - Classification of goods - biodegradable bags - classifiable under Chapter 39 or Chapter 48. - HELD THAT: - The Authority held that determination of actual biodegradability or compostability is a scientific and technical matter falling within the domain of environmental authorities and outside the scope of its jurisdiction under Section 97(2). On classification, it held that bags made from polymer or compostable plastics fall under Chapter 39, specifically heading 3923 as articles for the conveyance or packing of goods, whereas bags made from paper fall under Chapter 48. This classification does not depend upon a finding by the Authority on biodegradability. [Paras 4, 5, 6, 7]

The bags were held classifiable under Chapter 39 if made of polymer or compostable plastics, and under Chapter 48 if made of paper, while the question of actual biodegradability was held to be beyond the Authority's jurisdiction.

Concessional rate for bio-degradable bags - HELD THAT: - The Authority observed that Entry No. 319 grants a concessional rate of 5% to "Paper Sacks/Bags and bio-degradable bags" under Chapters 39 and 48, but the benefit is conditional and available only if the goods are biodegradable as contemplated by the notification entry. Since the Authority could not itself certify or determine that factual and technical condition, it ruled conditionally that if the applicant's bags are biodegradable, the concessional rate would apply; if they are not biodegradable, the concessional entry would not apply and the rate under the general classification for plastic bags under Chapter 39 would govern. [Paras 8, 9]

The 5% GST rate was held applicable only if the bags supplied are biodegradable; otherwise, the concessional entry is unavailable and the general rate under the applicable classification applies.

Final Conclusion: The Authority ruled that the applicant's bags are classifiable according to their constituent material under Chapter 39 or Chapter 48, but declined to decide the scientific question whether they are biodegradable or compostable. It further held that the concessional 5% rate under Entry No. 319 is available only if the goods are in fact biodegradable; otherwise, the general rate applies.

Classification of goods - online training services delivered through live or recorded digital platforms - Classifiable as Online Information and Database Access or Retrieval Services or as Commercial Training and Coaching Services - tax liability on such supplies made to unregistered students outside Rajasthan - Place of supply of training services - Intra-State supply.

Classification of goods - HELD THAT:- The Authority found that the applicant had consistently declared and invoiced its activity as commercial training and coaching services. It further held that, in common parlance and prevailing market practice, online coaching is not treated as mere online access or retrieval of information. The nature of the applicant's supply was found to be interactive and human-dependent, involving live doubt-solving, student queries, goal-based courses, mock tests and structured guidance, and therefore not a mere electronic access facility. The dispatch of printed study material was also noticed as inconsistent with a purely digital OIDAR supply. On that basis, the service was treated by its dominant character as commercial training and coaching, and not as OIDAR. [Paras 9, 10, 11, 12, 13]

The activity was ruled to fall under SAC 999293 as commercial training and coaching services.

Place of supply of training services - Section 12(5) of the IGST Act - Intra-State supply - HELD THAT:- As per Section 12(5)(b) of the IGST Act, the place of supply of services in relation to training and performance appraisal provided to an unregistered person shall be the “location where the services are actually performed.” Based on the facts placed on record, the Applicant’s headquarters, technical infrastructure, faculty conducting the live and recorded classes, content development, and administrative operations are all centralized and executed from Kota, Rajasthan. Furthermore, the physical dispatch of study materials originates from Rajasthan. Therefore, the actual “performance” and provision of the coaching service occur strictly within the State of Rajasthan, which legally separates the statutory place of performance from the geographical location where the unregistered student merely consumes the educational content.

Having held that the service is commercial training and coaching and not OIDAR, the Authority held that the general rule under section 12(2) was inapplicable because training services are specifically governed by section 12(5). It found that the applicant's headquarters, faculty, content development, technical and administrative operations, and dispatch of study material were all from Rajasthan, and therefore the services were actually performed in Rajasthan. Since both the location of the supplier and the place of supply were in Rajasthan, the supply was held to be an intra-State supply under section 8(2), even where the unregistered student was located outside Rajasthan. [Paras 14, 15, 16]

The tax liability was held to be CGST and Rajasthan SGST at 9% each, and not IGST, even for students outside Rajasthan where the recipient's location was available on record.

Final Conclusion: The Authority ruled that the applicant's online coaching offerings are classifiable as commercial training and coaching services under SAC 999293 and not as OIDAR. It further held that such supplies to unregistered students, including those outside Rajasthan, are intra-State supplies taxable to CGST and Rajasthan SGST at 9% each.

Power u/s 263 invoked only where assessment order is erroneous and prejudicial to the revenue - requirement of independent satisfaction and non-delegability of jurisdiction under Section 263 - applicability of Section 56(2)(x) to acquisition of immovable property - valuation by stamp authority not sacrosanct; reference to valuation authority and scheme under section 50C - tax treatment of reversal/writeback of provision and operation of Section 43B

HELD THAT:- While we are not inclined to interfere with the Special Leave Petition against the judgment and order passed by the High Court [2025 (7) TMI 767 - CALCUTTA HIGH COURT], the interpretation of the High Court on Section 56(2)(x) coupled with Section 43-B of the Income Tax Act, 1961 is kept open for being considered in an appropriate case.

Special Leave Petition stands disposed of.

Reassessment notice issued within limitation - time of Service of reassessment notice - timely issue of the notice or not?

High Court [2026 (2) TMI 1407 - GUJARAT HIGH COURT] found from the postal seal on the cover that the notice dated 30.06.2025 had been dispatched on the same day to the petitioner's address. The later booking by the Postal Department on 05.07.2025 and the subsequent return with the endorsement that no such person was available at the address did not alter the fact of timely issue of the notice.

Service of notice is not a condition precedent to conferment of jurisdiction; what is material for limitation is issuance of the notice within time, while service is required before completion of reassessment.

HELD THAT:- While we are not inclined to interfere with the judgment and order passed by the High Court, the petitioner will be entitled to raise such objections as may be permissible to them in the assessment proceedings.

Assessment orders passed in the name of non-existing companies on account of amalgamation order by which these companies were merged with Reliance Industries Limited (RIL)

As decided by HC[2025 (2) TMI 612 - BOMBAY HIGH COURT] allowed the assessee's appeals for assessment years 1993-94 to 1995-96, held that assessment orders passed in the name of the amalgamating companies RPEL and RPPL after their merger into RIL were void ab initio because the revenue had knowledge of the amalgamation, admitted inter-partes documents under Order XLI Rule 27 CPC to decide the jurisdictional question, dismissed the revenue's cross-appeals as infructuous, and disposed of the writ petition as infructuous while leaving open the revenue's right to initiate fresh proceedings against RIL in accordance with law.

HELD THAT:- We are informed by respondent that pursuant to the decision of the High Court, the petitioner/revenue has issued fresh notice on 17.07.2025. In this view of the matter, we see no reason to entertain the present Special Leave Petitions and are, accordingly, dismissed.

We are informed by A.S.G. that the respondent has in fact challenged the said notice dated 17.07.2025 by filing a writ petition under Article 226 of the Constitution of India. Needless to say, that the petitioner/revenue will be entitled to raise all objections, including questions of law and fact in opposition to the writ petition. It is for the High Court to consider the same and dispose it of in accordance with law.

Reassessment on changing reasons - Foundational material for reopening -Reopening on altered grounds - Reason to believe - Formation of opinion of income having escaped assessment was based on what the respondents sought to describe as “claimed fictitious losses” in the course of trading of equity and derivatives BUT changed course while passing the final order u/s 148A(d) by now alleging that the dividend has been received from “sham transactions generated using colourable devices”, thus, final formation of opinion rested on reasoning dehors the original allegation, the reassessment was held to be founded on reasons of changing hues.

HELD THAT:- We are not inclined to interfere with the impugned judgment/order(s)[2025 (3) TMI 1649 - DELHI HIGH COURT]. The Special Leave Petition is, accordingly, dismissed.

Validity of reassessment notice - period of limitation - Prospective operation of extended reassessment period - First proviso to section 149(1) - notice issued u/s 148 for AY 2017-18 after expiry of six years from the end of the relevant assessment year - as decided by HC [2025 (5) TMI 2273 - DELHI HIGH COURT] under the new reassessment regime cannot be issued if, on the date of issuance, the time limit under the old regime had already expired. Since the period of six years from the end of AY 2017-18 expired on 31.03.2024 and the impugned notice was issued thereafter, the notice could not be sustained.

HELD THAT: - Having heard the learned counsel appearing for the petitioners and having gone through the materials available on record, we do not find any good ground to interfere with the impugned orders passed by the High Court.

Royalty - Interconnect service charges paid to a non-resident telecom operator - HC [2024 (9) TMI 1924 - KARNATAKA HIGH COURT] held that payments for interconnect services and transfer of capacity in foreign countries were not chargeable to tax as royalty - gross delay of 390 days in filing the Special Leave Petition

HELD THAT:- There is a gross delay of 390 days in filing the Special Leave Petition which has not been satisfactorily explained by the petitioner.

Even otherwise, we find no good ground to interfere with the impugned order passed by the High Court.

Review petition - HELD THAT:- Review Petition was found defective and the reasons thereof are pointed out in the said report. Despite this Registry’s communication to the counsel for the petitioner to cure the defects, the defects have not been cured so far by him.

Even otherwise, having perused the review petition, we find that there is no error apparent on the face of the record. No case for review under Order XLVII Rule 1 of the Supreme Court Rules 2013 has been established. Review Petition is dismissed being defective as well as on merits.

Final assessment order passed without supplying the draft assessment order -Mandation ofService of draft assessment order - Opportunity to approach Dispute Resolution Panel

HELD THAT: - The Court held that the present case was distinguishable from Principal Commissioner of Income Tax v. Sumitomo Corporation India Pvt. Ltd., [2024 (9) TMI 157 - DELHI HIGH COURT] because here a draft assessment order had actually been passed, though it was not served on the assessee before the final assessment order was made.

The illegality, therefore, lay in the AO proceeding to pass the final assessment order without first supplying the draft order and thereby depriving the assessee of the opportunity to raise objections before the DRP. Since the draft order already existed and limitation time still remained when it was passed, the proceedings were not liable to be quashed outright; instead, the final assessment order and consequential penalty notice were set aside, with a direction to serve the draft assessment order and permit the assessee to pursue the statutory remedy under Section 144C, while excluding the intervening period from computation of limitation. [Paras 9, 10, 11, 12, 13]

Final Conclusion: The writ petition was allowed on the ground that the final assessment order had been passed without first supplying the draft assessment order to the assessee. The matter was not quashed in entirety; instead, the assessee was restored to its statutory opportunity to object to the draft assessment order before the competent authority.

Bogus long term capital gains - Penny stock transactions - Reopening of assessment

Bogus long term capital gains - Penny stock transactions - Exemption on listed securities - Unexplained cash credit - HELD THAT: - The Tribunal held that the assessee never denied dealing in the scrip which was the subject of the investigation report identifying it as a penny stock used for laundering unaccounted money in the garb of exempt capital gains. The small difference between the figure mentioned in the investigation report and the amount stated by the assessee did not affect the substance of the transaction.

Tribunal further found that the shares were purchased for a negligible amount and sold within the relevant period for a hugely enhanced value, and that the assessee had not furnished satisfactory details regarding the purchase, the source of payment, the dematerialisation process, and the immediate sale thereafter. On these facts, the Tribunal accepted the AO's conclusion that the explanation for the credits was not satisfactory and held that the appellate authority had erred in accepting the assessee's version without proper scrutiny of the broker, the transactions, and the financial background of the scrip. [Paras 8]

The deletion of the additions was reversed and the Revenue's appeal was allowed.

Reopening of assessment - Reason to believe - HELD THAT: - The Tribunal held that the reopening was founded on information from the investigation wing concerning the assessee's transaction in the identified scrip, and that the assessee's own acceptance of having dealt in that scrip supported the action taken. The discrepancy in the amount mentioned in the information, being minor, was held insufficient to invalidate the reopening. [Paras 8, 9]

The cross-objection challenging the reassessment was rejected.

Final Conclusion: The Tribunal restored the Assessing Officer's view that the claimed exempt gain from the penny stock transaction was not genuine and upheld the consequential additions. The challenge to the reassessment proceedings was also rejected.

Nature of land sold - Agricultural land outside capital asset - Rural agricultural land - scope of section 2(14)(iii)(b) - Revenue record classification - Distance from municipal limits - Land recorded as agricultural land and situated beyond 8 kilometres from the nearest municipality

HELD THAT: - The Tribunal held that, for purposes of section 2(14)(iii), the determinative requirements are that the land should be agricultural land and should be situated beyond the prescribed distance from the municipal limits. The Assessing Officer's own enquiry recorded that the land was rural agricultural land, crops were cultivated thereon, and its aerial distance from Bhongir Municipality was 8.56 kilometres.

Once the land stood as agricultural land in the revenue record and had not been converted to non-agricultural use by the competent authority, the absence of separate proof of agricultural operations or agricultural income could not alter its character. The Tribunal further held that speculation about future non-agricultural use, or subsequent dealings by purchasers, could not justify reclassification of the land in the hands of the assessee. Since the statutory conditions for exclusion from capital asset were satisfied, capital gains tax was not chargeable on its transfer. [Paras 5]

The land transferred by the assessee was held not to be a capital asset, and the addition made towards capital gains was deleted.

Final Conclusion: The Tribunal allowed the appeal and held that the land sold by the assessee was rural agricultural land situated beyond the prescribed municipal distance, and therefore did not constitute a capital asset. The addition made on account of capital gains was accordingly deleted.

Validity of reopening on vague reasons - Independent application of mind in forming reason to believe or borrowed satisfaction - allegation of accommodation entry receipts

HELD THAT: - The Tribunal found that the recorded reasons merely stated that the assessee was a beneficiary of accommodation entries from concerns connected with Shri Shripal Vora, but did not specify the nature of the alleged entry, the relevant transaction details, or the parties through whom such entries were stated to have been taken. In the absence of these particulars, the reasons remained general and vague, and did not demonstrate that the Assessing Officer had applied his own mind to the information received or to the assessee's case before assuming jurisdiction. Applying the principle noticed from Paresh Babubhai Bahalani [2023 (10) TMI 1203 - GUJARAT HIGH COURT] the Tribunal held that such reasons were insufficient to sustain a valid reason to believe that income had escaped assessment. [Paras 7, 8]

The assumption of jurisdiction under section 147 was held invalid and the reassessment order was quashed.

Final Conclusion: The Tribunal allowed the appeal by holding that the reassessment had been initiated on vague and non-specific reasons lacking independent application of mind. The order passed under section 147 was consequently quashed, and the remaining grounds were left unexamined as academic.

Rectification u/s 154 - Merger of intimation u/s 143(1) with regular assessment - Assessment order vis-a-vis computation sheet - assessed income recorded in the scrutiny assessment increased through a rectification order by relying on an earlier adjustment made in the intimation u/s 143(1) - HELD THAT: - The Tribunal held that the assessment order u/s 143(3) expressly accepted the returned income and contained no discussion or finding making any addition or disallowance. In that situation, the computation sheet showing a higher figure could not override the clear determination contained in the assessment order. It further held that, once a regular assessment is completed u/s 143(3), the earlier intimation under section 143(1) merges with that assessment and ceases to have independent existence.

AO, therefore, could not rely on the earlier adjustment under section 143(1) to sustain the higher income in the computation sheet. The Tribunal also held that alteration of total income in these circumstances was not an obvious or patent error but involved determination of income on facts and law, and hence did not amount to a mistake apparent from record. Use of section 154 for that purpose amounted to an impermissible review of the assessment order. [Paras 12, 13, 14, 15, 16]

The rectification order was held unsustainable, the appellate order affirming it was reversed, and the Assessing Officer was directed to adopt the income as determined in the assessment order under section 143(3).

Final Conclusion: The Tribunal allowed the appeal and held that the assessed income had to remain as determined in the scrutiny assessment. The rectification made on the basis of the earlier intimation and the contrary computation sheet was set aside as beyond the scope of section 154.

Payment to self - Reimbursement of actual expenses - Taxability of fees for technical services - payment on a/c of reimbursement of salary of staff to the HO

HELD THAT: - The Tribunal treated the controversy as turning on whether the assessee could earn income from a transaction with itself. Following Sumitomo Mitsui Banking Corpn. [2012 (4) TMI 80 - ITAT MUMBAI] it held that the project office and the head office were parts of the same enterprise and, therefore, a payment by one to the other on account of reimbursement of salary cost, where no mark-up was involved, was merely a payment to self. Such internal allocation could not give rise to taxable income. On that basis, the amount assessed separately as fees for technical services was held to be not chargeable to tax. [Paras 8]

The addition made by treating the reimbursement to the head office as fees for technical services was deleted, and the same view was applied for both assessment years.

Final Conclusion: Tribunal allowed both appeals and held that reimbursement of head office staff cost by the project office to the head office, being a payment to self without mark-up, did not give rise to taxable income as fees for technical services. The separate addition made on that basis was deleted for both assessment years.

Taxability of distribution fee earned for granting distribution rights of BBC News Channel -Legitimate tax liability - Fresh claim before appellate authority - De novo consideration - HELD THAT: - The Tribunal noted that the dispute related to the taxability of the distribution fee and that the assessee had raised the claim before the appellate authority after having originally offered the amount to tax. Having considered the facts, circumstances and the CBDT circular stating that only legitimate tax should be assessed and collected, the Tribunal held that, in the interest of justice, the matter should be restored to the Jurisdictional AO for de novo consideration on merits after granting due opportunity of hearing to the assessee. [Paras 4]

The matter was remanded to the Jurisdictional Assessing Officer for fresh adjudication on merits.

Final Conclusion: The Tribunal did not decide the taxability of the distribution fee on merits. It restored the matter to the Jurisdictional Assessing Officer for de novo consideration after giving the assessee an opportunity of hearing, and the appeal was allowed for statistical purposes.

Deduction u/s 54F - Residential house ownership test - Habitable residential premises - assessee's claim for deduction denied on the ground that he owned more than one residential house - HELD THAT: - The Tribunal held that the determinative test was whether the disputed property could in law be treated as a residential premises on the relevant date. On examination of the registered purchase deed, the subsequent sale deed and the purchaser's notarized affidavit, the property was found to be open land of inhabitation and not a residential house. The circumstance that the property had been reflected in the balance sheet at a stated value did not establish that it was a residential unit. Since the property was not a residential property, the assessee was holding only one residential house, and the condition for denial of deduction u/s 54F was not attracted. [Paras 7, 8]

The deduction under section 54F was rightly allowed and the Revenue's challenge failed.

Final Conclusion: The Tribunal upheld the appellate order allowing deduction under section 54F. It found that the disputed property was not a residential house but open land, and therefore the Revenue's appeal was dismissed.

Alternative statutory remedy- Exercise of writ jurisdiction - Challenged to the Order-in-Original under the Customs Act - Doctrine of Non-Interference -HELD THAT: - It is well settled that where a statutory remedy of appeal is available under the Customs Act, 1962, the writ jurisdiction under Article 226 of the Constitution of India ought not to be invoked, save in exceptional circumstances.

The Court held that where an efficacious appellate remedy is provided under the Customs Act, writ jurisdiction ought not to be invoked except in exceptional circumstances. Since the impugned order was appealable and the petitioner failed to show any exceptional ground justifying direct interference, the objections regarding procedural irregularities, absence of reasonable belief and denial of opportunity were matters to be raised before the appellate authority, which was competent to examine both facts and law. The Court further found that entertaining the writ petition in such circumstances would permit circumvention of the statutory mechanism, particularly when the petitioner appeared to have approached the Court after expiry of the appeal limitation. [Paras 7, 8, 9, 10]

The writ petition was dismissed, with liberty to the petitioner to avail the statutory remedy of appeal in accordance with law.

Final Conclusion: The Court declined to entertain the writ petition against the Order-in-Original, holding that the petitioner had an efficacious statutory appellate remedy and had not shown any exceptional circumstance for invocation of writ jurisdiction. The petition was accordingly dismissed with liberty to pursue the appeal remedy.

Extended period of limitation under section 28(4) - assessable value in case of air freight - declaration of ex-works imports as FOB value - Transaction Value - short-levy - Penalty for wilful misstatement or suppression.

Customs valuation of air freight - FOB value - Ex-works price - HELD THAT: - The Tribunal held that the legal position on valuation was clear. Under Rule 10(2), the cost of transportation up to the place of importation had to be included in the assessable value, which necessarily covered not only the freight from the port of export to the place of importation but also the transport cost up to the port of export for arriving at the FOB value. Therefore, where the invoice price was on ex-works basis, the cost up to loading on board had first to be added to reach the FOB value, and the air-freight cap of 20% had thereafter to be reckoned with reference to that FOB value. The contention that the Valuation Rules did not permit determination from ex-works price was rejected. [Paras 12, 13]

The valuation objection of the appellants failed, and the department was right in contending that 20% freight was to be computed on the FOB value and not on the ex-works price.

Extended limitation for short-levy - HELD THAT: - The Tribunal held that invocation of the extended period required short-payment by reason of collusion, wilful misstatement or suppression of facts, and the same foundation was necessary for penalty under section 114A. Although the importer had wrongly declared the ex-works price as FOB value, the Tribunal treated this as an oversight in not adding the local transport cost up to the port of export. It also noted that for a substantial part of the period there was no self-assessment and the assessing officers themselves had not corrected the declaration while assessing the Bills of Entry. On the record, there was nothing to show that the importer, the customs broker or the officers had any intention to evade duty or reduce the duty liability. Since the entire demand had been raised only within the extended period, the demand itself was liable to fail, and the penalties also necessarily fell. [Paras 14, 15, 16]

The demand based on the extended period was set aside, and the penalties on the importer and the customs broker were also set aside.

Final Conclusion: The Tribunal allowed both appeals. While affirming the department's valuation position on computation of the freight element, it held that the extended period and the penalties were unsustainable for want of evidence of wilful suppression or intent to evade duty, and accordingly set aside the impugned orders with consequential relief.

Undervaluation and Mis-Classification of Imported Goods - mobile-phone note - contemporaneous import data - Electronic evidence under Section 138C - Rejection of transaction value - Comparable imports - Suppression of Facts - Extended period of limitation under Section 28(4).

Electronic evidence under Section 138C - HELD THAT: - The Tribunal held that the "Note" retrieved from the mobile phone could not be relied upon, since the statutory requirements of Section 138C for admissibility of electronic evidence were not shown to have been satisfied. It further found that the particulars in the retrieved note did not match the Bills of Entry in respect of specification and quantity. The comparison with imports of Shah Foils and other importers was also held insufficient, as the goods were not shown to be similar or comparable in terms of grade, dimensions, width and commercial level. In the absence of reliable electronic evidence and valid contemporaneous comparable imports, the department failed to discharge the burden for rejection of transaction value. [Paras 6]

The charge of undervaluation failed and the transaction value declared by the appellants was accepted.

Extended period of limitation - Suppression of facts - HELD THAT: - The Tribunal found that the case of the department itself was founded on the Mill Test Certificates and other documents furnished by the appellants at the time of import. Since the material on which the show cause notice proceeded had been supplied by the appellants, suppression could not be alleged. The Tribunal also noted that the dispute involved legal interpretation and that even the classification issue was not concluded on the evidence available. On that basis, the ingredients necessary for invoking the extended period, as well as for sustaining penalties founded on suppression or intent to evade, were held absent. [Paras 7, 8]

The demand raised by invoking the extended period was held time-barred, with consequential relief to the appellants and the penalised individuals.

Final Conclusion: The appeals were allowed on the grounds that undervaluation was not established and the extended period of limitation was not available to the department. The penalties consequently could not survive, while the question of classification was left open.

Statutory limitation for customs appeals- Sufficient cause - Prescribed period - Condonation of delay under section 128(1) - delay beyond the further condonable period of 30 days - Exclusion of Section 5 of the Limitation Act​​​​​​​ -HELD THAT: - The Tribunal held that the explanation offered for delay was insufficient on facts, since it was never the appellants' case that both partners were outside India, and the application as well as the later affidavit lacked specific particulars and dates. It further held that, in any event, the proviso to section 128(1) confers power to condone delay only up to a further period of 30 days after the initial 60 days, and any delay beyond that outer limit cannot be entertained by the Commissioner (Appeals). Relying on Singh Enterprises vs. Commissioner of Central Excise, Jamshedpur [2007 (12) TMI 11 - Supreme Court], the Tribunal held that section 5 of the Limitation Act stands excluded where the statute itself prescribes the maximum condonable period. The reliance placed on Saral Wire Craft Pvt Ltd vs. Commissioner of Customs, Central Excise and Service Tax [2015 (7) TMI 894 - Supreme Court] was rejected, since that decision concerned personal service by an Inspector, whereas in the present case the order had been sent by speed-post and was admittedly received in the office of the appellant-firm. [Paras 15, 16, 17, 18, 19]

The dismissal of the appeals as time-barred was upheld, as the delay extended beyond the maximum period that could legally be condoned.

Final Conclusion: The Tribunal upheld the order rejecting the appeals as barred by limitation. It held that once the appeals were filed beyond the statutory period of 60 days plus the further condonable period of 30 days, the Commissioner (Appeals) had no jurisdiction to condone the delay.

Classification of goods - imported PS mouldings, wall panels, L profiles, PVC panels, PVC sheets and PU wall panels - classifiable under heading 3921 as plates, sheets, film, foil and strip of plastics, or under heading 3925 as builders' ware of plastics - Essential character test - Builders' ware vis-a-vis decorative wall coverings - Scope of Chapter Note 10 and Chapter Note 11 to Chapter 39.

Classification - HELD THAT: - The material facts placed on record describes these goods as manufactured from polymers such as polyvinyl chloride, polystyrene and polyurethane, presented generally in the form of rectangular sheets or panels of standard sizes. While certain items are plain sheets with surface treatment such as embossing, printing or UV coating, others are moulded or provided with profiled, interlocking edges for installation on walls or ceilings. The intended use of all these products, as highlighted by the applicant, is for interior decorative purposes in residential and commercial buildings.

It is settled principle of law that the classification of any good under Customs Tariff Act, 1975 is governed by the General Rules for the Interpretation of the Import Tariff. Further, Rule 1 of GRI stipulates that "classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes." It is only when the headings and notes do not require otherwise then one may proceed to the subsequent rules.

The Authority held that classification had to be determined primarily by the terms of the competing headings read with Chapter Notes 10 and 11 to Chapter 39. On the material placed on record, the goods were found to remain essentially plates or sheets of plastics in rectangular sheet or panel form, used as interior decorative coverings. The interlocking or tongue-and-groove edges in some varieties were treated as features formed simultaneously in the original extrusion process and not as further working of the kind contemplated for exclusion from Heading 3921. The goods were also found to be lightweight decorative overlays, lacking load-bearing capacity, permanence and integration into the building framework, and therefore not answering the description of structural elements under Note 11(b). The reliance on Note 11(h) was likewise rejected, since the products were simple decorative panels for aesthetic enhancement and not complex ornamental architectural features such as flutings, cupolas or dovecotes. As Heading 3925 applies only to listed builders' ware not elsewhere specified or included, and the goods retained their essential character as cellular or plastic sheets/panels covered by Heading 3921, the specific classification under Heading 3921 prevailed. [Paras 5, 6]

Goods of polymers of styrene in sheet or panel form were ruled classifiable under 39211100, goods of polymers of vinyl chloride in sheet or panel form under 39211200, and goods of polyurethanes in sheet or panel form under 39211390, subject to verification of actual composition and structure by the field formation.

Final Conclusion: The application was allowed and the proposed goods were held classifiable under Heading 3921 of the Customs Tariff, with the respective sub-classifications depending on whether they were of styrene, vinyl chloride or polyurethane. The Department's contention that the goods were builders' ware classifiable under Heading 3925 was rejected.

Validity of the Initiation of CIRP on the basis of a money decree - Use of insolvency as a substitute for debt enforcement - execution and computation -Decree-holder invoking CIRP - Abuse of insolvency process - Disputed quantum of debt - availability of execution remedies - HELD THAT: - The Court reiterated that the IBC is intended for resolution of genuine insolvency and revival of the corporate debtor, and not as a substitute for debt enforcement or execution. Where a decree-holder has the ordinary remedy of execution available, yet invokes Section 7 solely to recover decretal dues, the insolvency process is being used for a purpose alien to the Code. In the present case, the corporate debtor was shown to be a running and solvent concern; substantial amounts had already been deposited; and the real controversy was the computation of the balance payable under the decree, including credit for prior payments. That computation dispute was already pending before the Delhi High Court, which was the appropriate forum to determine it. In these circumstances, continuation of CIRP would convert the IBC into a coercive recovery mechanism, which the Code does not permit. [Paras 28, 29, 30, 32, 33]

The Section 7 proceedings were held to be an abuse of the insolvency process and could not be sustained.

The Court accepted the general proposition stated in Dena Bank, as affirmed in Kotak Mahindra Bank Ltd. v. A. Balakrishnan [2022 (6) TMI 13 - SUPREME COURT], that a money decree may give rise to a fresh cause of action for initiating proceedings under Section 7. However, it held that this principle does not operate mechanically. Even where a decree exists, the adjudicating forum must still examine whether resort to the IBC, on the facts of the case, amounts to misuse of the process or an attempt to employ the Code as a recovery mechanism. Since the decretal liability here was entangled in a live computation dispute and execution was the natural remedy, the NCLAT erred in treating the decree as sufficient by itself to justify admission of the Section 7 application. [Paras 31, 32, 33]

The reliance on the decree as an automatic basis for CIRP was rejected, and the NCLAT's contrary approach was held erroneous.

Final Conclusion: The appeal was allowed. The Court held that, in the facts of the case, the Section 7 proceedings amounted to an impermissible use of the IBC as a recovery mechanism, set aside the NCLAT's order directing admission, restored the dismissal of the insolvency application, and left the respondent to pursue execution of the decree in accordance with law.

Interim moratorium - By Operation of Law - DRT failed to appreciate the effect of pendency of a petition filed under Section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC) before the National Company Law Tribunal, Mumbai (NCLT) - Registration of Section 95 petition - Effect of non-intimation to secured creditor - Procedural irregularity in NCLT scrutiny.

Interim moratorium - Registration of Section 95 petition - Effect of non-intimation to secured creditor - HELD THAT: - The Court held that the DRT erred in rejecting the borrowers' applications merely because filing of the Section 95 petition had not been brought to the notice of the bank on the proper email address. The commencement of an interim moratorium is by operation of law and cannot be made contingent upon the secured creditor having prior notice of it. At the same time, applying the law laid down in Bank of Baroda vs. Union of India and another [2024 (5) TMI 1001 - BOMBAY HIGH COURT] together with the NCLT scrutiny procedure, the Court held that mere filing of a petition under Section 95 does not, in such circumstances, suffice, and that the moratorium stood triggered when the petition was actually registered. Since the petition was registered on 04.11.2025 and the DRT decided the applications thereafter, the DRT was bound to consider the legal effect of the moratorium from that date. [Paras 17, 22, 27, 30, 33]

The DRT's view that absence of notice to the bank defeated the moratorium was held unsustainable, and the interim moratorium was recognised as operating from 04.11.2025.

Procedural irregularity in NCLT scrutiny - Rule 28 compliance - Non-dilution of statutory moratorium - HELD THAT: - On examining the Assistant Registrar's report and the SOP, the Court found that the Registry had failed to follow the procedure mandated by Bank of Baroda vs. Union of India and another [2024 (5) TMI 1001 - BOMBAY HIGH COURT] and the NCLT's own SOP governing defect notices, refiling, and refusal of registration. The reopening of the matter for refiling after failure to cure defects within time was found unsupported by the prescribed procedure. Even so, the Court held that the event of registration on 04.11.2025 had occurred and, by operation of law, the moratorium commenced. The effect of that moratorium could not be ignored or diluted merely because the Registry had committed serious procedural errors, particularly when the petitioners had no control over the filing and scrutiny of the third-party petition. Questions of alleged connivance or whether the moratorium should not operate against the bank and auction purchasers were left open for consideration by the NCLT if approached by them. The Court therefore also directed the NCLT Registry to scrupulously follow the earlier directions and its SOP in future. [Paras 27, 29, 32, 35, 36]

The Registry's procedural irregularities did not displace the moratorium already triggered upon registration; however, the respondents were left at liberty to approach the NCLT, and the Registry was directed to follow the prescribed scrutiny procedure strictly.

Final Conclusion: The writ petition was allowed, the DRT's orders were set aside, and the interim moratorium was held to be operating from the date of registration of the Section 95 petition. Further steps by the respondents were held impermissible unless the moratorium ceased or the NCLT held that it did not operate against them.

Provisional attachment and confirmation proceedings - meaning of ‘proceeds of crime’ under Section 2(1)(u) - absence or alleged non-survival of a scheduled offence - Value equivalent to proceeds of crime - statutory presumption​​​​​​​ - Reasons to believe - Ex-facie erroneous for being cryptic, unreasoned and templated - adjudication and appellate orders suffered from want of application of mind or invalid constitution of the Adjudicating Authority​​​​​​​.

Scheduled offence nexus - Provisional attachment - HELD THAT:- The Court held that for provisional attachment under Section 5, the controlling requirement is the existence of material indicating possession of proceeds of crime relatable to a scheduled offence, and the sweep of the provision is not confined to persons named as accused in the scheduled offence. It further accepted that the objection founded on disappearance of the scheduled offence had already been rejected in the case of a co-accused, and that the offence under Section 384 IPC could not be treated as having been dropped. The Court also noted that a fresh FIR containing scheduled offences had been incorporated into the ongoing ECIR. On that basis, the challenge to jurisdiction and to the continuance of PMLA proceedings was rejected. [Paras 46, 47, 48, 59, 66]

The objection founded on absence of a surviving scheduled offence and on non-arraying of the appellants in the predicate case was rejected.

Reasons to believe - Prima facie nexus - Section 50 statements - Burden of proof - HELD THAT:- The Court held that at the stage of attachment and adjudication, the authority is required to form a reason to believe on the basis of the material in its possession, and such belief may rest on circumstantial indicators. It found the original complaint to be exhaustive and sufficient for that purpose. It further held that in money-laundering cases direct evidence is seldom available, since the offence is ordinarily structured through layered and indirect transactions, and therefore financial patterns, property acquisition timelines, lack of legitimate sources, seized diaries, digital material and statements recorded under Section 50 could legitimately be considered. The Court recorded that both the Adjudicating Authority and the Appellate Tribunal had discussed the incriminating material and the explanations offered by the appellants, and that the explanation regarding source of funds was found unreliable and unsubstantiated. Once the property was identified as involved in money laundering, the statutory burden under Section 24 shifted, and the appellants had not discharged that burden satisfactorily. On that reasoning, the contention that the orders were templated, unsupported, or passed without mind application was rejected. [Paras 60, 62, 67, 69, 72]

The Court upheld the finding that there was prima facie material connecting the attached properties with money laundering and sustained the confirmation of attachment.

Equivalent value attachment - Property acquired prior to offence period - HELD THAT: - The Court construed the definition of proceeds of crime as extending not merely to property directly derived or obtained from criminal activity, but also to the value of such property. It held that if the directly tainted assets are unavailable, dissipated, or not recoverable, the authorities are empowered to attach any other property equivalent in value, even if such substitute property was acquired before the commission of the alleged offence or through lawful means. This interpretation was accepted as necessary to prevent frustration of the statute by siphoning off or concealing the original tainted assets. On that basis, the challenge to attachment of pre-existing properties as value thereof was rejected. [Paras 61, 64, 71]

Attachment of properties as equivalent value of the proceeds of crime was held lawful, even where such properties had been acquired before the alleged crime period.

Single-member Adjudicating Authority - Coram - HELD THAT: - The Court held that the issue was no longer open, having been concluded by decisions holding that even a single-member Bench of the Adjudicating Authority can validly adjudicate disputes under the PMLA. It therefore rejected the plea that the proceedings were coram non judice for want of a multi-member Bench. [Paras 56]

The objection to the coram of the Adjudicating Authority was rejected.

Final Conclusion: The Court found no question of law arising for consideration and upheld the provisional attachment, the confirmation order, and the appellate order under the PMLA. All the appeals were dismissed, with liberty to the appellants to take recourse to Section 8(8) of the Act, if so advised.

Mandatory pre-deposit - Compliance with statutory condition for appeal - HELD THAT: - The Court held that the petitioner was bound to comply with the mandatory pre-deposit requirement under Section 35F of the Central Excise Act, 1944 as made applicable through Section 83 of the Finance Act, 1994. Since the High Court had declined relief for want of such compliance, no interference with the impugned order was warranted. The Court nevertheless granted limited time to enable the petitioner to make the deposit in accordance with law. [Paras 1, 2, 3]

The impugned order was not interfered with, and the petitioner was granted two months' time to make the statutory pre-deposit.

Final Conclusion: The Special Leave Petition was disposed of without interfering with the order refusing relief for non-compliance with the mandatory pre-deposit requirement. Time was, however, granted to the petitioner to make the pre-deposit in accordance with law.

Ex parte adjudication - Non-service of notice - Relegation to show cause stage - Validity of the order-in-original passed ex parte without the benefit of any reply from the petitioner was decided. - HELD THAT:- The Court found that the impugned order was an ex parte order passed without the benefit of the petitioner's reply to the show cause notice. It also noted that, in the same assessee's case and in other matters involving service tax proceedings initiated on the basis of CBDT inputs, this Court had already directed reconsideration from the show cause stage with specified observations to be kept in view. Following that course, the Court did not adjudicate the merits of service tax liability, but directed that the matter be taken back to the stage of reply to the show cause notice and reconsidered after giving the petitioner opportunity to place its contentions. [Paras 5, 7, 8]

The order-in-original was set aside and the matter was remitted to the stage of reply to the show cause notice, with all contentions kept open.

Final Conclusion: The writ petition was disposed of by setting aside the ex parte order-in-original and remitting the matter to the show cause stage for fresh consideration in the light of the earlier directions of this Court. The petitioner was permitted to file a fresh reply, and all contentions on merits were left open.

Transfer of right to use goods - equipment-hiring transactions - Supply of tangible goods for use - Effective control and possession - Deemed sale and mutual exclusivity of VAT and service tax - HELD THAT: - The Tribunal held that the decisive test was whether effective control and possession of the equipments stood transferred to the customers. On the terms of the agreements, the equipments remained in the possession, control and custody of the customers during the contract period; the customer bore the risk, had to indemnify the appellant for loss or damage, and the appellant could neither use the equipments for any other purpose nor withdraw them during the tenure of the contract. The fact that the appellant undertook maintenance, supplied consumables, or in some cases provided operators did not negate transfer of effective control, especially when liability arising from operation vested in the customer. The Tribunal also treated payment of VAT as a relevant indicator of the transaction being a deemed sale. Following the earlier decisions in the appellant's own cases and the principles stated in the authorities discussed, it concluded that the transactions involved transfer of the right to use the goods and therefore fell outside the ambit of service tax under the category of supply of tangible goods for use. [Paras 40, 42, 43, 44, 45]

The service tax demands for all the disputed periods were unsustainable.

Since the levy of service tax was held not to be attracted on the hiring transactions, the Tribunal held that the consequential recovery of interest and imposition of penalties also had no basis. [Paras 46]

The interest and penalties were liable to be set aside.

Final Conclusion: The Tribunal held that the hiring arrangements involved transfer of effective control and possession of the equipments to the customers and consequently constituted deemed sales on which VAT was payable, excluding the levy of service tax. The impugned orders were set aside and the appeals were allowed with consequential relief.

Commission received from IATA agents for ticket sales - Tour Operator Service - Abatement under Notification No. 1/2006-ST on reversal of CENVAT credit - demand on incentives received - commission on fuel surcharge formed part of the taxable value for air travel agent service under Rule 6(7) - consideration received from foreign exchange dealers - CENVAT credit on guest-house interior decorator services - import of services under reverse charge - membership fee and software-related payments - Extended period of limitation - Penalty under sections 77 and 78.

Commission from IATA agents - HELD THAT:- The Tribunal followed the Larger Bench decision in Kafila Hospitality & Travels Pvt. Ltd. vs Commissioner of Service Tax, Delhi [2021 (3) TMI 773 - CESTAT NEW DELHI (LB)] and held that commission received by a ticketing agent or sub-agent from IATA agents for booking tickets does not amount to promotion of the business of the IATA agents so as to fall under Business Auxiliary Service. [Paras 4, 5]

The demand on commission received from IATA agents was set aside.

Incentive not consideration for service - HELD THAT: - The Tribunal held that incentives received on achievement of targets are not consideration for any taxable service. On that basis, the amount received from the global distribution system for achieving booking targets was held to be outside the levy. [Paras 7]

The demand on incentives received from Amadeus was set aside.

Outsourced employee travel facilitation - Normal period of limitation - Visa and passport facilitation services and travel insurance related services provided to corporate clients for their employees were taxable as Business Support Service, but only within the normal period of limitation. - HELD THAT: - The Tribunal held that the definition of Business Support Service covered services provided in relation to business or commerce and that, even on the appellant's own understanding of outsourced functions, facilitation of visas, passports and travel insurance for employees of corporate clients was in relation to the clients' business because the clients themselves bore the expenditure and would otherwise have had to perform that work through their own resources. At the same time, the Tribunal found no basis for invoking the extended period and therefore sustained these demands only for the normal period. [Paras 13, 14, 15, 16, 25]

The demands on visa and passport facilitation charges and on service charges for travel insurance policies were upheld only for the normal period of limitation.

Tour Operator Service - Outbound tours - Normal period of limitation - HELD THAT: - Following the Larger Bench ruling in Cox and Kings Ltd. vs Commissioner (TAR), Mumbai [2023 (12) TMI 427 - SUPREME COURT (LB)] the Tribunal held on merits that outbound tour operator services were taxable. However, since there had been conflicting decisions on the issue, the appellant could legitimately entertain a bona fide belief that no tax was payable, and for that reason the extended period was held to be unavailable. [Paras 18, 20]

The demand on outbound tour operator services was upheld only for the normal period of limitation.

Abatement on reversal of CENVAT credit - Exemption condition treated as complied - HELD THAT: - The Tribunal applied the settled principle stated in Chandrapur Magnet Wires (P) Ltd. vs Collector of Central Excise, Nagpur [1995 (12) TMI 72 - Supreme Court] that reversal of credit places the assessee in the same position as if credit had not been availed. Since the appellant had reversed the common input service credit with interest, the condition attached to the abatement notification was treated as satisfied. [Paras 20, 22]

The denial of abatement under Notification No. 1/2006-ST was set aside.

Air Travel Agent Service - Fuel surcharge outside basic fare - HELD THAT: - Relying on earlier Tribunal decisions, the Tribunal held that commission paid on fuel surcharge does not make that component part of the basic fare within the meaning of the explanation to Rule 6(7). The levy adopted by the department on commission relatable to fuel surcharge was therefore unsustainable. [Paras 27, 28]

The demand on air travel agent service insofar as it related to fuel surcharge was set aside.

CENVAT credit on input service nexus - Guest house services - HELD THAT: - The Tribunal found a close nexus between the guest houses maintained by the appellant for employee stay during business travel and the output services provided by it. On that reasoning, the maintenance and running of such guest houses was held to be in relation to the business of the appellant, making the impugned input service credit admissible. [Paras 33]

The denial of CENVAT credit on interior decorator services for the guest houses was set aside.

Reverse charge on import of services - Club or association membership - Imported software services - HELD THAT: - The Tribunal held that club or association membership could not be taxed in this context and therefore the demand referable to membership fee paid to the American Society of Travel Agents was unsustainable. As regards software-related services, the appellant did not dispute receipt of the software, payment in foreign currency to a party outside India, or recording of the consideration in its own books; in those circumstances, the essential elements of imported service stood established and the demand was sustainable. Since the Tribunal separately held that the extended period was not invocable, the surviving part of this demand could stand only for the normal period. [Paras 37, 39]

The reverse charge demand on membership fee was set aside, while the demand on imported software services was upheld only for the normal period of limitation.

Introduction of clients to foreign exchange dealers - HELD THAT: - The Tribunal recorded that the appellant had already paid the amount and restricted its challenge to penalty. In that situation, it declined to interfere with this part of the demand. [Paras 29, 30]

The demand on consideration received from foreign exchange dealers for introducing them to clients was upheld.

Extended period of limitation - No suppression with intent to evade - HELD THAT: - The Tribunal found that the appellant was registered, had been filing returns, and that the alleged violations could have been detected on timely scrutiny of those returns. In the absence of fraud, collusion, wilful misstatement or suppression of facts with intent to evade tax, the preconditions for invoking the extended period were held not to exist. [Paras 39]

All demands founded on the extended period of limitation were set aside.

Penalty under sections 77 and 78 - Reasonable cause - HELD THAT: - Once the Tribunal held that the ingredients necessary for invoking the extended period were absent, it followed that penalty under section 78 also could not survive because the required elements were the same. It further invoked section 80, holding that the circumstances constituted a fit case of reasonable cause, particularly since most demands had failed and the rest survived only within the normal period. [Paras 41, 42]

All penalties under sections 78 and 77 were set aside.

Final Conclusion: The appeal was partly allowed. The Tribunal set aside the demands on commission from IATA agents, incentives from Amadeus, denial of abatement, commission on fuel surcharge, the disputed guest house credit, and the reverse charge demand on association membership; sustained the demands on business support services, outbound tour operator services and imported software services only for the normal period, upheld the demand relating to foreign exchange dealers, and set aside all penalties.

Liability to pay service tax - Security services and manpower supply provided to educational institutions - Reverse charge on security services to body corporate - demand barred by limitation for want of suppression of facts. -

Exemption of services to educational institutions - HELD THAT: - The Tribunal found that the demand had been raised merely on the basis of figures reflected in the income-tax records, while the actual nature of the services showed that the appellant had mainly rendered security agency services and manpower supply to educational institutions, which were treated as covered by the negative list and the stated exemption. It further held that the services rendered to Hotel Arif Castle, being a unit of a body corporate, were covered under the reverse charge mechanism. Since the appellant was not liable to pay service tax on either category of service, the tax demand lacked legal basis; consequently, interest and penalty also could not survive. [Paras 7, 8]

The service tax demand was unsustainable on merits, and the consequential demands of interest and penalty were also liable to fail.

Limitation - Suppression of facts - HELD THAT: - The Tribunal held that the case had been booked on the basis of the appellant's income-tax return data, which was a public document, and therefore it could not be alleged that the appellant had suppressed material facts from the Department. It also noticed that the appellant was registered, had been filing returns regularly, and maintained proper financial records and statutory registers. On these facts, the allegation of suppression failed and the demand was held to be barred by limitation. [Paras 8]

The demand was barred by limitation and could not be sustained on the extended period.

Final Conclusion: The Tribunal set aside the impugned order and allowed the appeal. It held that no service tax liability arose on the services in question and, in any event, the demand was also barred by limitation.

Service tax liability on the amount received - Declared service under Section 66E(e) of the Finance Act, 1994 - Amounts received on account of bundling error, rejection and non-compliance - Toleration of an act - Consideration for service - Penal charges for breach of contract - demand duty along with interest and penalty under Section 77 and 78 of the Act. - HELD THAT: - The Tribunal held that the amounts in question were merely penal recoveries for violation or variation in performance under the supplier's agreement. For levy under declared service relating to agreeing to tolerate an act, there must be an agreement to refrain from an act, tolerate an act or situation, or do an act, with a corresponding flow of consideration for that very obligation. In the present case, no such independent agreement existed and the recovered amount had no character of consideration for any service; it was in the nature of damages for breach of contract and full and final settlement of disputes arising under the agreement. [Paras 5, 6]

The demand was held unsustainable and the impugned order was set aside.

Final Conclusion: The Tribunal held that the amounts recovered for bundling error, rejection and non-compliance were only damages or penalty for breach of contractual obligations and not consideration for any taxable service. On that basis, the service tax demand under Section 66E(e), with consequential interest and penalties, was set aside and the appeal was allowed.

Rejection of the refund claim as time-barred - Audi Alteram Partem - Principles of natural justice - Denial of Opportunity of hearing. - HELD THAT: - The Tribunal found that the Commissioner (Appeals) had passed the impugned order without giving the appellant an opportunity of being heard. Such denial of hearing amounted to a violation of principles of natural justice. Since the defect went to the validity of the appellate order itself, the Tribunal did not examine the merits of the limitation issue and directed fresh consideration after due hearing. [Paras 6]

The impugned order was set aside and the matter was remanded to the Commissioner (Appeals) for decision on merits after affording reasonable opportunity of hearing to the appellant.

Final Conclusion: The Tribunal set aside the appellate order solely on the ground of breach of natural justice, as no opportunity of hearing had been granted to the appellant. The refund dispute was remanded to the Commissioner (Appeals) for fresh decision on merits.

Assessable value - Demand based on alleged non-conformity of the appellant's cost statements with CAS-4 - Captive consumption valuation - Extended period of limitation - wilful suppression - Defective show cause notice. - HELD THAT: - The Tribunal found that the Revenue's case rested on the assertion that the appellant had not followed CAS-4 and that the cost certificates related to past periods, whereas the appellant maintained that the certificates were for the relevant period and did not reflect past-period costing. Since the controversy turned on verification of the cost statements and CAS-4 certificates, the Tribunal held that a factual examination by the adjudicating authority was necessary. It therefore considered it appropriate to remit the matter for verification of the certificates and for a fresh finding in accordance with law. [Paras 6, 7]

The impugned order was set aside on this aspect and the matter was remanded for de novo adjudication after verification of the CAS-4 certificates and the appellant's contention.

Extended period of limitation - Defective show cause notice - HELD THAT: - On examining the show cause notice, the Tribunal found that though it proposed recovery of alleged short-paid duty, it contained no reasoned basis for the allegation of wilful suppression relating to the cost of production statements or the alleged contravention of Rule 8. In the absence of any such stated basis in the notice, the invocation of the extended period was held unsustainable. The Tribunal therefore restricted the scope of the de novo proceedings to the normal period alone. [Paras 8, 9]

The extended period was held to be not invocable, and the adjudicating authority was directed to undertake de novo adjudication only for the normal period, if any.

Final Conclusion: The Tribunal set aside the impugned order and remanded the valuation dispute for fresh factual verification of the CAS-4 certificates and cost statements. It further held that the extended period of limitation was not available on the basis of the show cause notice, and directed that the de novo adjudication be confined to the normal period alone.

Service of assessment order - Coercive recovery proceedings - Recovery proceedings including attachment of the petitioner's bank account - HELD THAT: - The Court recorded the State's submission that no material was available to show service of the assessment order on the petitioner, though it was said to have been uploaded on the portal, and that the penalty order had been affixed at the business premises. On that basis, the Court held that, in the absence of service of the assessment order itself, it was not permissible for the respondents to attach the bank account or take coercive steps for recovery of the amounts demanded under that assessment. At the same time, the Court clarified that the assessment order continued to subsist and the revenue would remain entitled to recover its dues after due service and in accordance with the appellate remedies available under the Act. [Paras 5, 6, 7, 8, 9]

The respondents were directed to serve the assessment and penalty orders on the petitioner, the period for challenge was directed to run from such service, and coercive recovery was made subject to the result of any appeal and interim orders obtained therein.

Final Conclusion: The writ petition was disposed of by holding that attachment and other coercive recovery steps could not be sustained without service of the assessment order. The respondents were directed to serve the assessment and penalty orders, after which the petitioner could pursue the statutory remedies, and recovery thereafter would be governed by the course adopted under the Act.