TMI Tax Updates e-Newsletter
Apr 30,2026

Breach of Principles of natural justice - Non-speaking cancellation of GST registration - rejection of its application for revocation - want of due consideration, absence of reasons, and failure to afford a personal hearing -HELD THAT: - The Court held that the show-cause notices and the consequential orders did not reflect due consideration of the petitioner's submissions. It found that the order cancelling registration and the order rejecting revocation were non-speaking and had been passed in breach of the principles of natural justice, particularly without affording the petitioner an opportunity of personal hearing. Since cancellation of GST registration entails serious civil consequences, such arbitrary exercise of power could not be sustained. On that basis, the impugned notices and consequential orders were quashed, with liberty to the department to initiate fresh proceedings and decide the matter afresh after hearing the petitioner and by passing a reasoned order. [Paras 9, 11, 13, 14]

The impugned show-cause notices and the consequential cancellation and revocation orders were set aside, and the matter was remanded to the original authority for fresh adjudication after granting an opportunity of hearing and passing a speaking order.

Final Conclusion: The petition was allowed. The show-cause notices and the consequential orders cancelling the GST registration and rejecting revocation were quashed for breach of natural justice and absence of reasons, and the matter was remanded for fresh adjudication after giving the petitioner an opportunity of hearing.

Validity of the rectification order - Failure to grant opportunity of hearing - Non-consideration of submissions in rectification proceedings- Principles of Natural Justice - HELD THAT: - The Court proceeded on the basis that the grievance against the rectification order was confined to the manner in which the rectification application had been dealt with. It accepted the position that the impugned rectification order had been made without affording a hearing and without due consideration of the petitioner's submissions and documents. In those circumstances, the determinative defect was procedural illegality in the rectification process, warranting de novo consideration by the designated authority. The authority was therefore left free to issue a fresh show cause notice, grant personal hearing, and pass a reasoned and speaking order, with all rival contentions kept open. [Paras 5, 7]

The rectification order was quashed and the matter was remanded to the designated authority for fresh adjudication after issuance of a fresh show cause notice, grant of personal hearing, and passing of a reasoned and speaking order.

Final Conclusion: The Court set aside the impugned rectification order solely on the ground that it had been passed without hearing the petitioner and without considering its submissions. The matter was remanded for fresh decision in accordance with law, with all contentions expressly kept open.

Non-speaking order - Failure to consider submissions - Reasoned adjudication - failing to comply with the earlier direction to pass a reasoned order. - HELD THAT:- The Court found, on a perusal of the impugned order, that none of the submissions made by the petitioner had been adverted to, despite the earlier remand having specifically required a fresh determination after personal hearing and a reasoned order dealing with all submissions. The determinative principle applied was that an authority conducting de novo adjudication must actually consider the assessee's replies and submissions and cannot repeat the earlier defect by issuing a bald order. Since the impugned order suffered from the same infirmity even in the second round, it was liable to be quashed and the matter remanded for fresh consideration. [Paras 6]

The impugned order was quashed and the proceedings were remanded for de novo consideration and a fresh reasoned order after hearing the parties, with all contentions kept open.

Final Conclusion: The Court held that the impugned order was a non-speaking order passed without considering the petitioner's submissions, despite an earlier remand directing a reasoned adjudication. It accordingly set aside the order and remanded the matter for fresh decision in accordance with law after hearing the parties.

Non-speaking order - tax demand made under Article 226 of the Constitution of India - Failure to consider material submissions - Principles of natural justice - HELD THAT: - The Court held that the determinative defect in the impugned order was the authority's failure to take into account the legal and factual submissions raised by the petitioner. On that basis, the order was found to suffer from the vice of a non-speaking order, warranting interference for breach of fair adjudicatory process. Since the defect went to the manner of decision-making, the matter was remanded for de novo consideration with directions to issue a fresh show cause notice, grant personal hearing, and pass a reasoned speaking order, while keeping all contentions open. [Paras 7, 8]

The impugned order was quashed and the proceedings were remanded for fresh adjudication after issuance of notice, grant of hearing, and passing of a reasoned speaking order.

Final Conclusion: The petition was allowed on the limited ground that the impugned order was non-speaking and had been passed without considering the petitioner's submissions. The matter was remanded for de novo determination, with all contentions left open.

Cancellation of the petitioner's GST registration - Speaking Order - without granting a personal hearing - Opportunity of personal hearing - non-compliance with the prescribed procedure.

Reasoned order in cancellation of GST registration - HELD THAT: - The Court held that the impugned cancellation order did not record any reasons for cancelling the GST registration, although recording reasons in such matters is a settled requirement. As the petitioner had also not been granted a personal hearing, the prescribed procedure had not been followed. On that procedural defect, the cancellation order could not stand and the matter was required to be reconsidered by issuance of a fresh show cause notice, grant of personal hearing and passing of a reasoned order in accordance with law. [Paras 5, 7]

The cancellation order was quashed, the proceedings were remanded for fresh adjudication after service of a fresh show cause notice and grant of personal hearing, and the petitioner's GST registration was directed to stand restored in the meantime, subject to lawful further action.

Final Conclusion: The Court set aside the order cancelling the petitioner's GST registration on the ground that it was unreasoned and had been passed without personal hearing. The matter was remanded for fresh proceedings in accordance with law, with restoration of registration in the meantime.

Dismissal of impugned assessment orders - Statutory limitation for appeal - De novo adjudication on deposit - Pre-Deposit - Condonation of Delay - barred by limitation - mismatch-based GST demands -delay beyond the condonable period - HELD THAT: - The Court held that the dismissal of the appeals on limitation was legally sustainable under the statutory requirement governing appeals, since the delay was beyond the condonable period and there was therefore no scope to interfere with those appellate orders on that ground. The Court also noted that the impugned assessment orders had arisen from return mismatches and that intimations had been issued, and therefore no interference was otherwise warranted at that stage. However, recording the petitioners' express consent to deposit the balance disputed tax or the required disputed tax, as the case may be, and to submit replies with supporting documents, the Court directed fresh adjudication on merits, treating the impugned orders as addenda to the show cause notices; bank attachment, if any, was directed to stand vacated only upon compliance with those conditions. [Paras 19, 20, 21, 22, 23]

The appellate rejection on limitation was not interfered with, but the matters were remitted for fresh orders on merits subject to the petitioners complying with the deposit and reply conditions stipulated by the Court.

Final Conclusion: The writ petitions were disposed of by sustaining the legal position that the statutory appeals had been rightly rejected as time-barred, while granting the petitioners a fresh opportunity before the original authority on strict deposit and compliance conditions. Fresh adjudication on merits was directed only upon such compliance.

Recovery of company tax dues from director - Personal bank account attachment - Personal liability of director -Garnishee proceedings - Repeal and saving of earlier tax liabilities - post-GST recovery provisions - HELD THAT: - The Court held that Sections 89(1) and 174(2)(e) of the CGST Act, 2017 could be invoked only to enforce liabilities that had already crystallized under the earlier enactment. On a reading of Section 87 of the Finance Act, 1994, there was no provision enabling recovery of the company's tax liability from its individual directors. The power under Section 87(b)(i) was in the nature of a garnishee provision and did not authorize attachment of a director's personal bank account for dues of the company. Accordingly, the petitioner could be proceeded against only to the extent of the separate penalty imposed on him under Section 78A of the Finance Act, 1994, and since that penalty was shown to have been paid, the lien over the balance amount was unsustainable. [Paras 15, 17, 20, 21, 23]

The recovery notice and lien over the petitioner's personal bank account were held unenforceable except to the extent of the personal penalty, and with that penalty having been discharged, the balance lien was directed to be lifted.

Final Conclusion: The writ petitions were allowed. The Court held that the petitioner's personal bank account could not be proceeded against for recovery of the company's service tax dues, and directed lifting of the lien since the only personal liability fastened on the petitioner had already been discharged.

Entitlement to a direction for supply of the inspection material - Principles of natural justice - Disclosure of relied upon material - Seeking revocation of cancellation of GST registration.

Cancellation of GST registration - HELD THAT: - The Court disposed of the writ petition by directing the respondents to consider the pending application for revocation of cancellation and, at the same time, to adjudicate the pending DRC-01 proceedings for the tax period 2022-2023. In doing so, the Court required that the information gathered during inspection, the letters of the director of M/s. Regus Pride Centres Pvt. Ltd., and the Chartered Accountant's letter be shared with the petitioner through proper channel, so that the petitioner could supplement the revocation application and be heard before orders are passed. The determinative basis of the direction was the need to ensure a fair opportunity to meet the material relied upon in relation to cancellation and its revocation. [Paras 13, 14, 15, 16, 17]

The respondents were directed to furnish the relied upon materials, permit the petitioner to file a supplementary reply, hear the petitioner, and then pass orders on the revocation application; the DRC-01 show cause notice for the tax period 2022-2023 was also directed to be adjudicated.

Final Conclusion: The writ petition was disposed of with directions to decide the petitioner's revocation application and the pending DRC-01 proceedings after supplying the materials gathered during inspection and affording a hearing. No final adjudication on the merits of the cancellation was rendered.

GST on affiliation fees - Statutory functions of university - Scope of supply in course or furtherance of business - Exemption for educational services - Jurisdiction to invoke section 74.

GST on affiliation fees - Statutory functions of university - Scope of supply in course or furtherance of business - Jurisdiction to invoke section 74 - HELD THAT: - The Court held that the petitioner is a statutory university constituted under State legislation and that grant of affiliation under Chapter X of the Maharashtra Public Universities Act, 2016 is part of its regulatory and educational mandate. Such activity, though involving collection of fees, is embedded in the statutory scheme for maintaining educational standards and is not commercial in character. Reading Section 7(1)(a) of the CGST Act as a whole, the Court held that affiliation fees cannot be equated with supply of services such as sale, transfer, licence, rental, lease or other transactions made for consideration in the course or furtherance of business. The definition of business in Section 2(17)(a) could not be read in isolation so as to convert these statutory functions into trade or commerce; applying ejusdem generis, the provision contemplates activities of commercial or pecuniary character. Since the activity itself is not a supply and not in the course or furtherance of business, Section 9, being the charging provision, was held inapplicable. Consequently, the proper officer lacked jurisdiction to invoke Section 74 and to confirm the demand on affiliation fees. [Paras 23, 24, 25, 27, 30]

The levy of GST on affiliation fees was held to be without authority of law, and the impugned order-in-original and rectification order were liable to be set aside.

Exemption for educational services - Educational institution - Affiliation services - HELD THAT: - After holding that GST itself was not attracted, the Court additionally observed that the exemption notification covering services under heading 9992 or heading 9963 in relation to education would also extend to the University. Following the view taken in Goa University [2025 (4) TMI 1056 - BOMBAY HIGH COURT], the Court held that the exemption for services by an educational institution, and for specified services relating to admission or conduct of examination, cannot be read so narrowly as to exclude the University when affiliation forms part of the educational framework through which colleges admit students, conduct courses and lead to conferment of degrees. On that construction, even on the assumption that affiliation involved a service, the activity would remain exempt. [Paras 31]

The Court held, in the alternative, that affiliation-related services would also be covered by the exemption notification applicable to educational services.

Final Conclusion: The Court allowed the writ petition and set aside the order-in-original and the rectification order, holding that affiliation fees collected by the statutory University are not liable to GST. The challenge to the circulars was not adjudicated, though the Court observed that a circular contrary to substantive law cannot be applied.

Validity of reopening of assessment - reasons to believe or suspect - scope of fishing and roving inquiry- bogus purchases - As decided HC [2025 (12) TMI 1048 - GUJARAT HIGH COURT] reopening was founded on information from the portal and on alleged bogus transactions of a third party who did not cooperate in the investigation - AO's order did not record material satisfying the statutory threshold; reliance on thirdparty non-cooperation and portal information, without material showing escapement of the petitioner's own income, amounted to a fishing and roving inquiry. The petitioner had offered explanations and documentary reconciliation for the transactions; the AO merely noted that certain matters would be looked into during assessment without articulating reasons to form a prima facie belief of escapement of the petitioner's income. In these circumstances the statutory requirements for invoking Section 147/148 were not met

HELD THAT:- We are not inclined to interfere with the impugned judgment and order of the High Court; hence, the special leave petition is dismissed.

However, question of law, if any, is kept open.

Validity of Reassessment - period of limitation - Notice u/s 148 - First proviso to Section 149(1) - notice u/s 148 issued after expiry of six years from the end of the relevant assessment year - As decided by HC [2025 (5) TMI 2275 - DELHI HIGH COURT] assessment years covered by the first proviso to Section 149(1), a notice under the new reassessment regime cannot be issued if, on the date of issuance, the time limit of six years from the end of the relevant assessment year had already expired under the earlier regime. Since for AY 2016-17 that period expired on 31.03.2023, the notice issued on 31.03.2024 was time-barred.

HELD THAT:- Having heard the learned counsel appearing for the petitioner and having gone through the materials on record, we see no reason to interfere with the impugned order passed by the High Court.

Special Leave Petition is, accordingly, dismissed.

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Reopening of assessment under Section 147/148 - Reasons to believe - Survey u/s 133A - Permanent Establishment - Dependent Agent Permanent Establishment - Fixed Place Permanent Establishment - tangible material to form belief - chargeability of business income attributable to PE

As decided by HC [2025 (5) TMI 2058 - DELHI HIGH COURT] on a plain reading of the reasons recorded, the court found that there was no tangible material before the AO sufficient to form a valid belief that the petitioners had a Dependent Agent PE or Fixed Place PE in India for the relevant previous years. The court observed that the question is covered in favour of the petitioners by earlier decisions of this court and, in the absence of tangible material forming the requisite belief, the statutory threshold for reopening u/s 147/148 was not met. Applying that reasoning, the impugned notices were held to be unsustainable.

HELD THAT:- Having heard the learned counsel appearing for the petitioners and having gone through the materials on record, we see no reason to interfere with the impugned order(s) passed by the High Court.

Special Leave Petitions are, accordingly, dismissed.

Validity of Reassessment - Reason to believe or reason to suspect - Change of opinion - Full and true disclosure - allegation of larger scam of tax evasion by way of bogus Capital Gain Generated in penny stock - HC [2025 (8) TMI 1803 - CALCUTTA HIGH COURT] upheld the Tribunal's view that the information regarding the assessee's share transactions, on which the assessing officer sought to reopen the assessment, was already on record when the assessment had originally been completed u/s 143(3) thus, recorded reasons amounted only to a reason to suspect and could not sustain reopening

HELD THAT:- We do not find a good ground to interfere with the impugned judgment in exercise of our jurisdiction under Article 136 of the Constitution of India. Accordingly, the special leave petition is dismissed.

Dividend distribution tax and DTAA applicability - Tax on distributed profits of domestic companies - Character of dividend distribution tax and the availability of DTAA benefit - Conflicting coordinate Bench decisions - Reference to Larger Bench

Whether the DDT under Section 115-O of the IT Act is a tax on the Indian company being on its profits or whether it is a tax on the dividend paid to the shareholder? - HELD THAT: - On a plain reading of Section 115-O, the Court recorded a prima facie view that the levy is an additional income-tax on the domestic company in respect of distributed profits, and not a tax paid by the company on behalf of the shareholder. The Court noted that this understanding had been clearly stated by the Bombay High Court in Godrej and Boyce Mfg. Co. Ltd.[2010 (8) TMI 77 - BOMBAY HIGH COURT] was not disturbed by the Supreme Court in Godrej & Boyce Mfg. Co. Ltd. [2017 (5) TMI 403 - SUPREME COURT] and was reiterated in Small Industries Development Bank of India [2021 (12) TMI 463 - BOMBAY HIGH COURT]

As M/s. Colorcon Asia Pvt. Ltd. [2025 (12) TMI 677 - BOMBAY HIGH COURT] had taken a contrary view that DDT is ultimately a tax on dividend income of the shareholder so as to attract treaty benefit, the Court held that there was a clear cleavage of opinion between coordinate Benches, making a reference to a Larger Bench necessary rather than deciding the appeals on merits. [Paras 37, 38, 39, 40, 41]

Following questions of law are required to be answered by the Larger Bench:

(i) Whether the decision of the Division Bench in M/s. Colorcon Asia Pvt. Ltd. vs. The Joint Commissioner of Income Tax, Panji Goa and Ors. [2025 (12) TMI 677 - BOMBAY HIGH COURT] lays down the correct position in law when it holds that, Dividend Distribution Tax (DDT) is a tax paid by the Company, on dividend income of the shareholder, entitling the shareholder of the benefit of the provisions of Double Taxation Avoidance Agreement (DTAA) between India and UK?

(ii) Considering the decision of the Supreme Court in Godrej & Boyce Pvt. Ltd. [2017 (5) TMI 403 - SUPREME COURT] whether the decision of the Division Bench in M/s. Colorcon Asia Pvt. Ltd. [2025 (12) TMI 677 - BOMBAY HIGH COURT] is per incuriam ?

Final Conclusion: Holding that M/s. Colorcon Asia Pvt. Ltd. appeared to conflict with the earlier view in Godrej & Boyce, as affirmed by the Supreme Court, and with the later Division Bench decision in Small Industries Development Bank of India, the Court found a clear cleavage of opinion on the nature of DDT and the availability of DTAA benefit. The matter was therefore directed to be placed before the Chief Justice for constitution of a Larger Bench.

Corporate personality of company and shareholders - Beneficial ownership - Piercing the corporate veil - Taxing the rental income and capital gain arising out of properties owned by the company in which respondents were the shareholders

HELD THAT: - The Court held that a company is a separate juristic entity from its shareholders, and ownership of shares does not amount to ownership of the company's properties or assets. On the facts, the respondents had invested in the shares of the company through permitted banking channels under the Liberalised Remittance Scheme, the company had itself borrowed funds, acquired the properties, earned rental income, and realised gains on sale. The Revenue could not, in the absence of a statutory provision authorising such treatment, assess the company's income in the hands of the shareholders by invoking substance over form or by attempting to pierce the corporate veil.

The Court further held that fiscal liability must rest on the statute, and since the Act of 1961 contained no provision under which these transactions could be so taxed, the respondents could not be treated as beneficial owners of the company's assets for the purpose of taxing the company's income in their hands. [Paras 23, 24, 25, 26, 27]

The Tribunal's view was affirmed and the additions made by taxing the company's rental income, capital gains and other income in the hands of the respondents were held unsustainable.

Final Conclusion: The appeals filed by the Revenue were dismissed. The Court held that, in the absence of statutory authority, the income of the foreign company from its properties could not be taxed in the hands of the respondent-shareholders by treating them as beneficial owners or by disregarding the company's separate legal identity.

Validity of Order of assessment u/s 143(3) r/w Section 144B - denial of Principles of natural justice - reasonable opportunity of hearing - personal hearing in faceless assessment

HELD THAT: - The Court found that against a proposed substantial addition in the draft assessment order, the assessee was given only 2.5 days to respond, which included Saturday and Sunday. The assessee had sought adjournment citing the volume and complexity of the proposed additions, but no response was given to that request and the final assessment order was passed directly thereafter. On these findings, the Court held that there was a breach of natural justice.

In that view, the assessee could not be relegated to the statutory appellate remedy, and the matter required fresh consideration from the stage of the draft assessment order with an opportunity to respond and a personal hearing. [Paras 8, 9, 10]

The final assessment order was quashed, and the matter was remanded to the Jurisdictional Assessing Officer for fresh consideration from the stage of the draft assessment order after granting opportunity to respond and a personal hearing.

Final Conclusion: The Court exercised writ jurisdiction on finding breach of natural justice in the faceless assessment process. The assessment order, demand notice, and consequential penalty notices were quashed, and the matter was remanded for fresh decision in accordance with law.

TDS u/s 194C v/s 194J - Short deduction of tax at source - Disallowance under section 40(a)(ia) - Strict construction of deterrent tax provision -Assessee in default u/s 201

HELD THAT: - The Court held that section 40(a)(ia) operates where tax, though deductible, has not been deducted, or after deduction has not been paid, and does not extend to cases of mere short deduction arising from a dispute as to the applicable TDS provision.

Agreeing with the Calcutta, Delhi, Karnataka and Uttarakhand High Courts like Samsung Heavy Industries Company Ltd. [2025 (7) TMI 768 - UTTARAKHAND HIGH COURT], S.K. Tekriwal [2012 (12) TMI 873 - CALCUTTA HIGH COURT], Kishore Rao & Others (HUF) [2016 (4) TMI 430 - KARNATAKA HIGH COURT] JDS Apparels (P.) Ltd. [2014 (11) TMI 732 - DELHI HIGH COURT] and with its own earlier decision in Morgan Stanley India Capital Pvt. Ltd. [2025 (8) TMI 1283 - BOMBAY HIGH COURT] the Court held that in such cases the consequence, if any, lies under section 201 and not by way of disallowance under section 40(a)(ia). The Court declined to follow the contrary Kerala view in PVS Memorial Hospital Ltd. [2015 (8) TMI 277 - KERLA HIGH COURT], and further held that where divergent non-jurisdictional High Court views exist, the interpretation favourable to the assessee must be preferred; the deterrent nature of section 40(a)(ia) also warranted strict construction against the broader interpretation canvassed by the Revenue. [Paras 14, 15, 16, 17, 18]

Final Conclusion: The appeal was dismissed on the ground that mere short deduction of tax at source cannot trigger disallowance under section 40(a)(ia). The questions relating to whether the payments were royalty and whether section 194J applied instead of section 194C were treated as academic in the facts of the case and left open.

Reassessment beyond four years - Failure to disclose fully and truly all material facts - Change of opinion - deduction u/s 35AD - HELD THAT: - The Court held that the reopening was founded entirely on material already available on the assessment record and there was no new fact or tangible material before the AO - Since the original assessment had been completed u/s 143(3) and the reopening was initiated beyond four years from the end of the relevant assessment year, the first proviso to Section 147 applied.

In such a case, reopening could be sustained only if the escaped income was attributable to the assessee's failure to disclose fully and truly all material facts necessary for assessment. The recorded reasons did not specify any such failure and contained only a bald assertion.

Court reiterated that reasons must stand on their own and cannot be supplemented later. Reopening on the same material, after the claim had already been considered in the original assessment, amounted to an impermissible change of opinion and was therefore void. [Paras 9, 11, 14, 15]

The notice under Section 148, the orders rejecting objections, and all consequential proceedings were quashed as being contrary to the first proviso to Section 147.

Final Conclusion: The Court held that the reassessment for AY 2014-15, initiated after four years on the basis of material already on record and without disclosing any specific failure by the assessee to make a full and true disclosure, was unsustainable. The impugned notice, the orders disposing of objections, and all consequential proceedings were accordingly set aside.

Binding nature of DRP directions - Writ jurisdiction despite alternate remedy - Disallowance u/s 40(a)(i)

Binding nature of DRP directions - Disallowance u/s 40(a)(i) - assessment to the extent it sustained the addition under section 40(a)(i) contrary to the DRP's direction - HELD THAT: - The Court found that the DRP had issued a clear direction that no addition on the section 40(a)(i) issue was to be made if no departmental appeal against the Tribunal's earlier orders had been preferred. The respondent's affidavit stated that no such appeal had been filed for the earlier years on that issue. In these circumstances, the Assessing Officer had failed to examine and comply with the DRP's direction. The Court held that the addition under section 40(a)(i) could not be sustained, being in teeth of the DRP's direction, which was treated as mandatory. [Paras 8, 9]

The assessment order was set aside to the extent of the demand, including interest, relatable to the addition under section 40(a)(i).

Writ jurisdiction despite alternate remedy - Patent illegality - HELD THAT: - Although the assessment order also contained a separate transfer pricing addition for which no such infirmity was shown, the Court declined to relegate the petitioner entirely to the statutory appeal because the demand under section 40(a)(i) was, on the face of the record, illegal for having been made in breach of the DRP's binding direction. The Court therefore exercised writ jurisdiction only to that limited extent, while leaving the petitioner to pursue the ordinary appellate remedy against the remaining addition. [Paras 6, 10, 12]

The writ petition was partly allowed; for the remaining addition, the petitioner was left to file an appeal, and if filed within the time granted, it was to be decided on merits without objection as to limitation.

Final Conclusion: The Court partly allowed the writ petition and annulled the assessment only to the extent the demand under section 40(a)(i) had been raised contrary to the DRP's binding direction. The petitioner was left to challenge the balance of the assessment in appeal, with protection against objection on limitation if the appeal was filed within the time granted.

Use of material recovered in search - Validity of proceedings under the second explanation to Section 148 - Effect of interim stay in searched person's case - Proceedings initiated against the petitioner on the basis of material recovered from search at a third party's premises - As in the searched person's case, an interim order had restrained passing of final assessment order and the search might later be declared invalid

HELD THAT: - The Court held that the determinative principle is that material seized or recovered during a search can be relied upon even if the search is subsequently declared illegal. An interim order in the searched person's case was only a prima facie arrangement and did not amount to a declaration that the search was illegal or void. The validity of initiation of proceedings against the petitioner had to be tested on the date when notice was issued, and on that date there was no stay of the search proceedings or of their operation. Since the order in the searched person's case merely restrained passing of final assessment order and did not stay the proceedings or nullify the search, the AO was justified in proceeding against the petitioner. The Court further held that even if the search were later invalidated, that subsequent event would neither divest the AO of jurisdiction already validly exercised nor vitiate proceedings already initiated, particularly when the material recovered could independently constitute information or material for action under Section 148.

The authorities cited by the petitioner were distinguished as they concerned direct challenge by the searched person or the assessee against the validity of the search itself, whereas the present case concerned assessment of another person founded on material recovered in that search. The Court also noticed that Echjay Industries itself clarified that revenue may use information or material gathered during an invalid search in appropriate proceedings permissible in law. [Paras 23, 24, 25, 26, 27]

The challenge to the notice and assessment order failed, and the writ petition was dismissed.

Final Conclusion: The Court dismissed the writ petition and upheld the proceedings initiated against the petitioner on the basis of material recovered from the search at the third party's premises. It clarified that the petitioner may pursue the statutory appeal on the merits of the additions made.

TDS credit - Sale of secured assets under SARFAESI - sale of properties of defaulting borrowers - Bank not owner of mortgaged property

TDS credit - Section 194IA - Sale of secured assets under SARFAESI - Tax deducted from sale proceeds of immovable property sold by the bank in exercise of its rights over secured assets under the SARFAESI Act - property sold did not belong to the bank - HELD THAT: - The Court held that the deduction was referable to Section 194IA, since the tax had been deducted from the proceeds of sale of immovable property. It further held that, in an auction or sale under the SARFAESI Act, the bank is not the owner of the property but only holds possession and a security interest for recovery of its dues. The bank acts only as a trustee or custodian of the sale proceeds, appropriating its dues and expenses and returning any surplus to the borrower, while any shortfall remains recoverable from the borrower in accordance with law. Since the asset sold was not the bank's own asset, the amount deducted from the sale proceeds could not be denied to the bank on the ground that it had not offered corresponding income from sale of the property. [Paras 10, 11, 12, 13, 14]

The bank was held entitled to refund or credit of the tax deducted from the sale proceeds, and the orders of the CIT(A) and the Tribunal were affirmed.

Final Conclusion: The appeal was dismissed. The Court upheld the grant of TDS credit or refund to the respondent-bank on the footing that the sale of the secured property under SARFAESI was not a sale of the bank's own asset and the sale proceeds did not constitute its income from transfer of the property.

Validity of the Assessment Order passed u/s 143(3) - denial of Natural justice - Quantification of proposed addition - as alleged no proper opportunity of hearing provided and for failure to quantify the proposed addition before completion of assessment

HELD THAT: - The Court noted that, though the assessee had responded to the queries, its explanation on rearing charges was rejected as general and unsupported by primary evidence, and the claim for freight expenses was also disallowed for want of invoices and transporter confirmations. At the same time, the assessee had asserted that only sample freight invoices had been produced and that further documents would be furnished if specifically called for, and had also explained that, in relation to rearing charges, farmers did not maintain formal books or issue invoices and therefore internal records and banking details had been produced.

Court held that where the authority proposes to make an addition, it would be appropriate to quantify the proposed addition so as to enable the assessee to state its case, and, having regard to the factually dense nature of the matter, an effective opportunity including personal hearing was required before completion of assessment. [Paras 9, 10, 11, 12, 13]

The assessment order and consequential notices were set aside, and the matter was remitted to the stage of enquiry under Section 143(2), with all contentions kept open.

Final Conclusion: The Court held that the assessment had been completed without adequate procedural fairness. The impugned assessment order and consequential notices were therefore set aside and the matter was remitted for fresh enquiry, leaving all contentions open.

Disallowance of deduction claimed u/s 80GGC -Deduction for political contribution - Bogus donation - claim of deduction under section 80GGC in respect of donation to Rashtriya Samajwadi Party (Secular)

HELD THAT: - The Tribunal held that the facts of the present case were pari materia with those considered by the coordinate bench in Milind Pankajbhai Shroff [2024 (5) TMI 1598 - ITAT RAJKOT] held donations received from Samajwadi Party (Secular) is bogus

Since the appellate authority had followed that decision and recorded a finding that the donation was bogus, the Tribunal found no legal or factual infirmity in the order confirming denial of the deduction claimed under section 80GGC. [Paras 6]

The disallowance of the deduction claimed under section 80GGC was upheld and the assessee's grounds on that controversy were dismissed.

Final Conclusion: The Tribunal dismissed the appeal and affirmed the appellate order upholding disallowance of the assessee's section 80GGC claim for AY 2019-20 on the footing that the donation in question was bogus.

Advances written off as business loss - MAT credit carry forward - Maintainability of appeal against rectification order in DRP cases - Breach of natural justice in rectification proceedings

Advances written off - Business loss - Primary onus of proof - Deductibility of advances, earnest money deposits and security deposits written off - HELD THAT: - The Tribunal held that the assessee could claim deduction of the amounts written off either as bad debt or as business loss only upon establishing that the amounts had been advanced for business purposes, had become irrecoverable, and satisfied the statutory conditions governing the relevant claim. Since complete details had not been furnished and the assessee had not discharged the primary onus, the matter required fresh verification by the Assessing Officer.

The issue was restored to the Assessing Officer for de novo determination after the assessee furnishes complete particulars.

MAT credit carry forward - Additional claim before appellate authority - HELD THAT: - The Tribunal held that a claim not raised before the assessing authority can be raised before the appellate authority unless there is a specific statutory bar. On that principle, the assessee's claim for correct MAT credit was admitted notwithstanding the AO's refusal based on absence of a revised return. However, the quantum and computation of the claim required verification and scrutiny by the lower authority.

The claim was admitted in principle and the matter was remanded to the Assessing Officer for verification and determination of the correct MAT credit to be carried forward.

Maintainability of appeal against a rectification order passed in respect of an assessment made pursuant to DRP directions - HELD THAT: - Rejecting the preliminary objection of the Revenue, the Tribunal held that where the rectification order is passed u/s 154 in respect of an assessment order made under section 143(3) read with section 144C pursuant to DRP directions, the appeal is maintainable before the Tribunal. The Tribunal based this conclusion on the express scope of section 253(1)(d).

The assessee's appeal against the rectification order was held to be maintainable before the Tribunal.

Natural justice - Rectification of omission to give effect to DRP directions - Additional evidence - HELD THAT: - The Tribunal accepted that the Assessing Officer was bound by the DRP's directions and that omission to make the directed additions was a mistake apparent from record capable of rectification. However, it found that the rectification proceedings were concluded ex parte within a short interval after issuance of notice, the service of notice itself was disputed, and proper opportunity had not been afforded to the assessee. Since the assessee had also produced additional evidence going to the root of the controversy, the matter required fresh consideration by the DRP, with all contentions on facts, law and merits kept open.

The rectification dispute was set aside to the DRP for fresh determination after admitting and examining the evidence and after granting proper opportunity to the assessee.

Final Conclusion: For Assessment Year 2011-12, the Tribunal restored the claim relating to advances written off and the claim for correct MAT credit to the Assessing Officer for fresh examination. The appeal against the rectification order was held maintainable, and the rectification dispute was remitted to the DRP for fresh adjudication after granting proper opportunity and considering the additional evidence.

Definition of "benami transaction" under Section 2(9)(A) and Section 2(9)(C) - substantive versus procedural provisions - retrospectivity of penal statutes - provisional attachment under Section 24 - Article 20(1) protection against retrospective penal laws - Prospective operation of amending legislation - Retrospective application of penal and confiscatory provisions - Benami transaction and benami property - In rem forfeiture / confiscation of property - Manifest arbitrariness - Protection against retrospective criminal law under Article 20(1) - Requirement of mens rea in criminal offences - Substantive due process and proportionality in deprivation of property

Petition filed by the petitioners seeking review of judgment [2023 (5) TMI 402 - SC ORDER]

HELD THAT:- Having carefully perused the petition for review and the papers connected therewith, we do not find any reason for reconsideration of the above-mentioned order. The review petition is, accordingly, dismissed.

Refund of amounts deposited towards provisional duty after finalization of provisional assessment under customs law - provisional assessment under Rule 9B - Unjust Enrichment - Substantial Questions of Law - Binding Precedent - HELD THAT:- The tax appeals were dismissed since the substantial questions proposed stood concluded in favour of the assessee by the Supreme Court decision in Commissioner of Customs vs. Hindustan Zinc Ltd.[2023 (9) TMI 1302 - SUPREME COURT].

Entitlement to writ relief against the detention notice and consequential recovery demands when the order-in-original had not been challenged - determination of penalty in terms of adjudication order.

Writ challenge to unappealed adjudication order - failure to avail appellate remedy - HELD THAT: - The Court noted that the substance of the petitioner's grievance was directed against the order-in-original. It recorded that the petitioner was fully aware of that order and had neither complied with it nor challenged it by filing an appeal. In that situation, the Court declined to entertain any challenge to the order-in-original in the present writ proceedings. [Paras 3, 5, 6]

The challenge to the order-in-original was not entertained in writ jurisdiction.

Recovery proceedings and consideration of prior payment - determination of penalty in terms of adjudication order - HELD THAT: - The Court recorded the submission that the differential duty had already been paid before issuance of the show cause notice and that the penalty liability had to be worked out in terms of the operative part of the order-in-original. Proceeding on that basis, and noting that the detention notice was stated to have been withdrawn, the Court directed the concerned Deputy Commissioner to take an appropriate view after considering the compliances already made and the issues for which recovery proceedings had been initiated. [Paras 4, 5, 6]

The authority was directed to consider the prior compliances and determine the position on recovery and penalty accordingly, while the petition itself was dismissed subject to those observations.

Final Conclusion: The Court dismissed the writ petition, refusing to entertain the challenge to the order-in-original. It nevertheless directed the concerned customs authority to consider the petitioner's prior payments and the penalty position in light of the operative terms of that order and the withdrawal of the detention notice.

Demand of duty, confiscation and penalties under the EPCG exemption - issuance of Export Obligation Discharge Certificates - Third-party exports - fulfilment of export obligation - Binding effect of EODC - Customs jurisdiction vis-a-vis DGFT - Independent Operation of Customs and DGFT Proceedings - Fraud and Misrepresentation - Exemption Notification Conditions.

EPCG export obligation - HELD THAT: - The Tribunal held that Notification No. 97/2004-Cus. had to be read together with the Foreign Trade Policy, and that while the notification required fulfilment of export obligation, the controversy in the present case was confined to whether third-party exports could be reckoned for that purpose. On a reading of the relevant provisions, the Tribunal found that, at the material time, there was ambiguity regarding the requirement that such third-party exports should be goods manufactured by using the imported capital goods, and the later policy change imposing more specific conditions could not be applied retrospectively. The DGFT appellate authority had already restored the EODC, and, following the co-ordinate Bench decision in M/s. Bestech Hospitalities Pvt. Ltd., Mr. D. Bhandari and Mr. Sunil Satija Versus Commissioner of Customs (Preventive),[2025 (8) TMI 509 - CESTAT NEW DELHI], the Tribunal held that when the validity of the licence, installation of capital goods and their use were not in dispute, Customs could not sustain demand and penalties by re-entering upon the issue of fulfilment of export obligation through third-party exports for these two licences. [Paras 22, 27, 28, 29, 30]

The impugned order was modified by setting aside the demand and penalties in respect of imports made under EPCG Licence Nos. 3530002103 and 3530002105, with consequential relief according to law.

Final Conclusion: The appeal was allowed in part. The order was modified by setting aside the demand and penalties relating to imports under the two EPCG licences dated 07.11.2006, while the portion concerning the remaining two licences was left undisturbed since the appeal stood withdrawn to that extent.

Classification of goods - imported powdered extract derived from the root of Pelargonium sidoides, with maltodextrin as carrier - classifiable under Heading 1302 or under Heading 3003 of the First Schedule to the Customs Tariff Act, 1975 - Vegetable extracts vis-a-vis therapeutic preparations - Essential character - Benefit for concessional duty under Notification No. 45/2025-Cus. dated 24.10.2025.

Tariff classification of plant extract preparations - HELD THAT: - The Authority held that although the product is plant-derived, it is not a mere botanical extract or minimally processed plant material. On the material placed before it, the product was found to be a standardized therapeutic extract obtained through controlled hydro-ethanolic extraction, concentration, drying and addition of carrier, and intended exclusively for supply to pharmaceutical manufacturers for therapeutic or prophylactic use. Applying the HSN Notes, the Authority held that Heading 1302 covers vegetable extracts as raw materials, but excludes products which, by reason of their processing, standardisation and therapeutic character, assume the nature of medicaments. The Authority further held that the goods could not fall under Chapter 12 since they were not in natural or minimally processed form. On that reasoning, the product was treated as a pharmaceutically usable intermediate possessing the essential character of a medicament, and therefore classifiable under Heading 3003, specifically CTI 30039090, under GRI 1 and GRI 3(b). [Paras 20, 21, 22, 25, 26]

Classification was ruled under CTI 30039090 as a medicament not put up in measured doses or retail packing.

Exemption linked to tariff classification - HELD THAT: - The Authority held that the claimed concession was premised on classification under Heading 1302. Since the product was instead classified under Chapter 30, the notification entry applicable to goods of Heading 1302 had no application. The denial of the exemption thus followed directly from the tariff classification adopted in the ruling. [Paras 22, 26]

The product was held ineligible for the concessional rate under Notification No. 45/2025-Cus.

Final Conclusion: The Authority ruled that Pelaforce EMA1170 is classifiable under CTI 30039090 as a medicament preparation and not as a vegetable extract under Heading 1302. Consequently, the claimed concessional customs duty under Notification No. 45/2025-Cus was held unavailable.

Binding precedent - Issue settled against Revenue - HELD THAT: - The Court recorded the appellant's fair statement that the Tribunal, while passing the impugned order, had relied, inter alia, on an earlier CESTAT decision [2024 (4) TMI 187 - SC Order], and that decision had since been upheld by this Court. On that basis, the controversy was accepted as already settled against the Revenue, and no further examination on merits was undertaken. [Paras 2, 3]

The appeal was dismissed as the issue stood settled against the Revenue.

Final Conclusion: Accepting the appellant's statement that the controversy was covered by an earlier decision already upheld by this Court, the Court dismissed the appeal as the issue stood settled against the Revenue.

Anti-dumping duty for participating exporters - non-disclosure of detailed non-injurious price workings before the disclosure statement was finalized - Principles of natural justice.

Disclosure of essential facts - Principles of natural justice - Non-injurious price - HELD THAT: - The Tribunal held that determination of non-injurious price directly affected the normal value, injury margin and the recommendation of nil duty for participating exporters. Format "L" supplied with the disclosure statement did not disclose the basis or methodology adopted, nor enable the appellant to understand the differences between the costs claimed and the figures finally adopted. Rule 16 required disclosure of the essential facts forming the basis of the decision, and that obligation was not displaced by Annexure III. Even if optimisation and best-utilisation norms were permissible under Annexure III, the factual basis and manner of their application had still to be disclosed before final findings so that the appellant could effectively respond. As the detailed working was furnished only after the final findings and the notification, prejudice was caused to the appellant and the final findings, to that extent, could not be sustained. [Paras 51, 53, 54, 55, 56]

The final findings were set aside insofar as they recommended nil anti-dumping duty for participating exporters, and the matter was remitted to the designated authority for fresh determination of non-injurious price after giving the appellant reasonable opportunity to respond.

Product under consideration - Commercial substitutability - HELD THAT: - The Tribunal found that the appellant was not manufacturing semi-finished ophthalmic lenses having refractive index above 1.6. It further held that lenses below and above refractive index 1.6 were not technically or commercially substitutable. Since a product not produced by the domestic industry cannot cause injury to it, such lenses could not be included within the product under consideration. The Tribunal also noted the operating practices of the trade remedies authority that mere competence to produce, without actual production or sales, is insufficient for inclusion in the product under consideration. [Paras 58, 59, 60]

The challenge to exclusion of semi-finished ophthalmic lenses with refractive index above 1.6 was rejected.

Final Conclusion: The appeal was allowed in part. The final findings were set aside only to the extent of the recommendation of nil anti-dumping duty on participating exporters and were remanded for fresh determination of non-injurious price after due disclosure and opportunity, while the exclusion of lenses having refractive index above 1.6 from the product under consideration was upheld.

Classification of goods - imported goods declared as Apatite (GR) Calcium Phosphate - classifiable under CTI 2510 20 30 Or under CTI 2835 26 90 - Misdeclaration in bills of entry - intention of evasion of duty - Confiscation for incorrect declaration - Penalty for deliberate misclassification.

Customs tariff classification - HELD THAT: - The Tribunal held that Chapter 25 is confined to natural products in crude form or subjected only to mechanical or physical processes without alteration of chemical structure, whereas goods that have undergone calcination or further chemical processing stand excluded. On the material relied upon by the Commissioner, particularly the email exchanges with the supplier, the goods were found to have undergone processing including calcination and chemical additions, making them classifiable as calcium phosphate under Chapter 28. The request made by the importer to remove references to calcination and the pattern of earlier and subsequent imports under CTI 2835 26 90 supported the finding of deliberate misdescription. The absence of departmental testing did not affect the conclusion, since the goods had already been cleared and the documentary evidence itself established the true nature and classification of the product. [Paras 27, 28, 29]

The demand of differential duty with interest based on classification under CTI 2835 26 90 was upheld.

Confiscation for incorrect declaration - Liability under section 111(m) - HELD THAT: - The Tribunal held that since the goods did not correspond with the particulars declared in the Bills of Entry, confiscation under section 111(m) followed from the established misdeclaration of description and classification. As the goods were not available for physical confiscation, redemption fine in lieu of confiscation was maintainable. [Paras 30]

The order of confiscation and the redemption fine imposed in lieu thereof were sustained.

Penalty for deliberate misclassification - Penalty under section 114A - HELD THAT: - The Tribunal found that the importer had deliberately misdeclared the description of the goods and their classification to avail the concessional rate of duty and thereby evade the correct duty liability. Once intentional misdeclaration with duty evasion was established, the penalty under section 114A was correctly attracted. [Paras 31]

The penalty imposed on the appellant company under section 114A was upheld.

Penalty for use of false documents - Penalty on director - HELD THAT: - The Tribunal accepted the Commissioner's finding that the email communications showed the Director had intentionally manipulated documents to be submitted to customs authorities and procured material from the supplier to support the false classification declared by the importer. On that basis, his penal liability was held to be established. [Paras 32]

The penalty imposed on Vikas Agarwal was sustained.

Abetment of misdeclaration - Penalty on manager - HELD THAT: - The Tribunal held that the email communications established that the Manager had assisted the Director in manipulating the documents connected with the imports. That participation was sufficient to sustain the penalty imposed on him. [Paras 33]

The penalty imposed on Dharam Chand Sahu was upheld.

Final Conclusion: The Tribunal found no infirmity in the Commissioner's order holding the imported goods classifiable under CTI 2835 26 90, sustaining the consequential duty demand, confiscation, and penalties. All three appeals were dismissed.

Classification of goods - gold neck chains - Classifiable under heading 7113 as articles of jewellery or under heading 7108 as gold in semi-manufactured form -Essential character of incomplete Or unfinished goods - Confiscation and penalty in classification dispute.

Classification of articles of jewellery - HELD THAT: - The Tribunal held that the imported goods, though in running length, had substantially attained the form of finished neck chains and required only cutting to the desired length and attachment of hooks to become complete articles. Applying Chapter Note 9(a) to Chapter 71 and Rule 2(a) of the General Rules of Interpretation, it held that incomplete or unfinished goods having the essential character of the finished article are classifiable as the finished article itself. On that basis, the goods were treated as articles of jewellery and not as gold in semi-manufactured form. [Paras 25, 27, 28]

The reclassification under Customs Tariff Item 7108 1300 was held to be incorrect, and the classification declared by the appellant under Customs Tariff Item 7113 1990 was accepted.

Confiscation and penalty - Redemption fine on re-export - HELD THAT: - After holding that the goods were correctly classifiable as declared by the appellant, the Tribunal concluded that the basis adopted for confiscation under sections 111(d) and 111(m) could not survive. The redemption fine imposed for permitting re-export and the penalty imposed on the appellant were therefore found to be untenable. [Paras 28]

The goods were held not liable to confiscation, and the redemption fine and penalty were set aside.

Final Conclusion: The Tribunal allowed the appeal to the extent of accepting classification of the imported goods under Customs Tariff Item 7113 1990. Consequently, confiscation, redemption fine, and penalty were held unsustainable and were set aside with consequential relief as per law.

Classification of goods - mixtures of natural rubber and synthetic rubber -Essential character test of raw rubber - Exemption under Serial No. 501 of Notification No. 46/2011-Cus - fulfilment of the applicable Rules of Origin and related conditions - General Rules for Interpretation - Conditional preferential exemption based on Rules of Origin.

Tariff classification - HELD THAT:- The Authority held that Rule 1 of the General Rules for Interpretation governed the classification because the tariff itself specifically covers mixtures of products of Heading 4001 with products of Heading 4002 under sub-heading 400280. On a conjoint reading of Chapter Note 5(A) and 5(B), goods containing prohibited compounding substances stand excluded from Headings 4001 and 4002, whereas the presence of permitted additives does not alter classification so long as the goods retain the essential character of raw rubber. Relying on M/s Mannampalakkal Rubber Latex Works [2007 (9) TMI 28 - SUPREME COURT], the Authority applied the composition test and held that such mixtures remain classifiable under Heading 4002, more specifically under tariff item 4002 80 90, and not as compounded rubber, subject to verification of actual composition, including testing where necessary, at the time of import. [Paras 7, 8, 9]

The proposed goods were held classifiable under tariff item 4002 80 90, subject to verification at import that they are unvulcanised, do not contain impermissible additives, and retain the essential character of raw rubber.

Preferential exemption - Rules of Origin - Certificate of Origin - HELD THAT: - The Authority held that the concessional rate under Serial No. 501 of Notification No. 46/2011-Cus applies to goods falling within the specified tariff range, including the subject goods once classified under tariff item 4002 80 90. It further held that the exemption is conditional and not automatic, and can be availed only upon satisfaction of the requirements prescribed under Notification No. 189/2009-Cus (N.T.), including production of a valid Certificate of Origin, fulfilment of the Rules of Origin criteria, and verification of compliance by the proper officer at the time of import. [Paras 7, 8, 9]

The applicant was held entitled in principle to the exemption under Serial No. 501 of Notification No. 46/2011-Cus, but only subject to fulfilment and verification of all prescribed origin and import conditions.

Final Conclusion: The Authority ruled that the proposed imports of mixtures of natural rubber and synthetic rubber in primary form are classifiable under tariff item 4002 80 90, provided they do not attract the exclusions in Chapter Note 5(A) and retain the essential character of raw rubber. It further held that the benefit under Serial No. 501 of Notification No. 46/2011-Cus is available only subject to compliance with the applicable Rules of Origin and verification by the proper officer at the time of import.

Auditor's remarks and Board's explanatory obligation - reservation, qualification - requirement of furnishing explanation under Section 217(3) - penal liability under Section 217(5) - Limitation for prosecution - Application of mind in taking cognizance -Abuse of process of law - Whether the order taking cognizance and the summoning order passed by the jurisdictional Magistrate discloses application of mind as envisaged by law.

Auditor's remarks and Board's explanatory obligation -HELD THAT: - The Court held that the statutory obligation under Section 217(3) is to furnish fullest information and explanations in the Board's report to the shareholders on every reservation, qualification or adverse remark contained in the auditor's report. The impugned complaint was founded solely on the observation that the company had an internal audit system which needed to be strengthened. That observation was construed as a generic and advisory comment, and not as a reservation, qualification or adverse remark attracting penal consequences. The Court further held that prosecution could not rest merely on the Registrar's dissatisfaction with the reply to the show-cause notice, since criminal liability had to arise from an independent violation of the statute. [Paras 18, 19]

No prima facie case under Section 217(3) or the penal provision in Section 217(5) was made out on the averments in the complaint.

Limitation for prosecution - Sanction to prosecute - HELD THAT: - The Court accepted the contention that there was no statutory requirement of prior sanction for launching prosecution under Section 217 of the Companies Act, 1956. The circulars, notification and internal communications relied on by the respondents could not be treated as sanction, nor did they disclose any legal basis for postponing limitation. The argument based on exclusion of time under Section 470(3) of the Cr.P.C. was also rejected as inapplicable. As no step had been taken to seek condonation of delay, the complaint was held to be time-barred. [Paras 20]

The prosecution was not maintainable as the complaint had been instituted beyond limitation.

Application of mind in taking cognizance - Issuance of process - HELD THAT: - On examining the roznama entries, the Court found that they merely recorded receipt of the complaint, listing of the matter and issuance of summons, without reflecting any judicial consideration of whether the allegations disclosed an offence. Relying on State of Gujarat V/s. Afroz Mohammed Hasanfatta [2019 (2) TMI 1936 - SUPREME COURT], the Court reiterated that though detailed reasons are unnecessary at the stage of cognizance, the order must at least indicate some application of mind before setting criminal law in motion. Since no such application of mind was discernible, both cognizance and process were held unsustainable. [Paras 21]

The cognizance order and the subsequent process were set aside as mechanical and legally unsustainable.

Final Conclusion: The writ petition was allowed. The Court quashed the complaint, the order taking cognizance, the summoning order and all consequential proceedings, holding that no offence was disclosed, the complaint was barred by limitation, and the Magistrate's orders suffered from non-application of mind.

Extension of time granted by court - Modification of Order - Laches - Bona Fide Conduct - Conditional directions - Securities and Exchange Board of India (SEBI), for raising requisite funds for establishing a clearing corporation - HELD THAT:- The special leave petitions were dismissed on the petitioner's request, with liberty to proceed in accordance with law; pending applications, if any, were also disposed of.

Entitlement to be recognised as financial creditors of the corporate debtor - Verification and proof of claims in insolvency resolution - Insufficient stamping - Curable defect - Time Value of Money - Coextensive Liability - Corporate Guarantee - Perversity in concurrent findings.

Whether the Corporate Guarantees executed by the Corporate Debtor constitute “financial debt” within the meaning of Section 5(8) of the Code. - HELD THAT: - The Court held that liability arising under a corporate guarantee falls within the ambit of financial debt under Section 5(8) of the Code, since liability in respect of guarantees for money borrowed against payment of interest is expressly covered. It found that the execution of the guarantees was beyond dispute, in view of the corporate debtor's own communication admitting their existence and stating that disclosures had been made on an ongoing basis. The objection to the timing of execution was rejected because, on the RBI restructuring norms noticed by the Court, the retrospective reckoning of NPA classification did not mean that the guarantees were executed after the account had already been declared NPA; they were executed as part of restructuring before such later declaration. Mere non-disclosure in the financial statements could not defeat the creditor's substantive claim under the guarantees and could, at best, amount to a default by the corporate debtor. [Paras 23, 24, 25, 29, 31]

The issue was answered in favour of the appellants, and they were held entitled to recognition as financial creditors on the basis of the corporate guarantees.

Whether the claims of the appellants were liable to be rejected for non-submission or improper verification of documents. - Production of documents at appellate stage - Insufficient stamping as a curable defect - HELD THAT: - Referring to the CIRP Regulations, the Court held that the resolution professional is empowered to call for evidence and verify claims, and that, in the present case, the guarantees had been confirmed by the security trustee as being in its custody and were inspected and verified by the resolution professional in New Delhi. The finding that there was no material to establish such verification was therefore held perverse. The Court further held that relevant documents could be produced even at the appellate stage, since an appeal is a continuation of the original proceeding, and no adverse inference as to genuineness could be drawn merely because the guarantees were not filed before the NCLT. On stamping, the Court held that the guarantees were executed in New Delhi and produced in proceedings there, so the Maharashtra Stamp Act was not attracted on that basis; in any event, non-stamping or improper stamping does not render the instrument void or unenforceable, since the defect is curable and the stamp law is a fiscal measure not meant to defeat substantive rights. [Paras 26, 27, 28, 29, 31]

The issue was answered against the respondents, and the rejection of the appellants' claims on these grounds was held legally unsustainable.

Perversity in concurrent findings- Whether the findings recorded by the tribunals warrant interference under Section 62 of the Code. -HELD THAT: - The Court reiterated that, although it does not ordinarily reappreciate concurrent findings of fact in an appeal under Section 62 of the Code, interference is justified where those findings are perverse. Having found that the objections regarding the existence, timing, verification and stamping of the guarantees were unsustainable, the Court concluded that the tribunals had grossly erred in negating the appellants' claim merely because the guarantees were not filed with Form C. It also noted that the plea regarding preferential transactions and fraud had already been rejected by the NCLT. The findings of the tribunals were therefore held to be manifestly perverse and liable to be set aside. [Paras 30, 31, 32]

The Court held that the impugned orders suffered from perversity, set them aside, and directed reconstitution of the committee of creditors by including the appellants.

Final Conclusion: The Court held that the corporate guarantees constituted financial debt and that the appellants were entitled to be recognised as financial creditors of the corporate debtor. The orders of the NCLT and NCLAT were set aside as perverse, and the resolution professional was directed to reconstitute the committee of creditors accordingly.

Liquidation estate - amounts payable to the sub-contractor under a back-to-back contract, out of monies received by the corporate debtor from the principal employer - Waterfall mechanism - Third-party assets in liquidation estate - CIRP costs - Operational debt - Moratorium - Whether, in the context of a back-to-back contract (B2B contract) between the corporate debtor and the sub-contractor, the dues payable to the sub-contractor by the corporate debtor from out of the payment received / to be received from the principal employer will constitute to be an asset owned by a third-party (sub-contractor in this case), which is in possession of the corporate debtor within the framework of section 36(4)(a)(i) of IBC?

Back-to-back contract - Third-party assets in liquidation estate - Operational debt - Asset held in trust - HELD THAT: - The CD, IVRCL Limited has assigned all the risks and liabilities to the appellant and also given up his claims to the profits in the said project except his margin of 4% on the consideration/ payment to be received from the client / employer from time to time. It is also clear that the CD will have claim over only 4% of the payment received on account of running bills from the employer respondent-4 and that the rest 96% will be due to the Appellant.

On the terms of the back-to-back contract, the appellant bore the investment, performance obligations, project risks and liabilities, while the corporate debtor was entitled only to a 4% margin and had expressly disclaimed any claim to project profits beyond that margin. The Tribunal held that, when receivables were created under the main contract and payment was received from the principal employer, only 4% belonged to the corporate debtor and the remaining 96% belonged to the appellant. Since the appellant was effectively rendering the construction services for the principal employer through the contractual structure, and not supplying goods or services to the corporate debtor in the sense required for operational debt, the amount payable to the appellant could not be treated as an operational debt of the corporate debtor. That 96% share was therefore treated as an asset of the appellant held in trust by the corporate debtor, falling outside the liquidation estate under section 36(4)(a)(i). [Paras 14, 15]

The withheld amount was held to remain the appellant's asset and not to form part of the liquidation estate.

CIRP costs - Infrastructure project continued during CIRP - Moratorium - HELD THAT: - The Tribunal held that, once a project is continued during CIRP for keeping the corporate debtor as a going concern and for preserving value, payment to the vendor or sub-contractor is integral to continuation of the project. In such running-account-bill arrangements, non-payment of earlier bills on the ground that they relate to pre-CIRP work would itself obstruct continuation of the project. The entire project, having been continued during CIRP and being beneficial to the corporate debtor, had therefore to be treated as an activity carried on during CIRP, and the sub-contractor's bills had to be treated as CIRP costs rather than as operational debt payable under the waterfall under section 53. On that basis, no differentiation could be made between pre-CIRP and post-CIRP portions of the work for payment purposes. [Paras 16]

The appellant was not required to file its claim in Form-C for the withheld sum, and the contrary view of the Adjudicating Authority was set aside.

Interest on withheld payment - Reasonable interest - HELD THAT: - The Tribunal found no contractual stipulation for payment of interest for delayed release under the back-to-back contract, and held that interest at 18% would be penal in nature. It also noted that the liquidator had withheld payment on the premise that the amount was operational debt subject to the Code, and not out of deliberate denial, and that after the impugned order he could not have made payment contrary to that order. In those circumstances, simple interest at 9% for the period from the date the amount became payable till the date of the impugned order was considered reasonable. [Paras 19]

Interest was restricted to simple interest at 9% from 05.01.2022 to 20.02.2024.

Final Conclusion: The appeal was allowed. The impugned order was set aside, and the liquidator was directed to pay the withheld sum to the appellant on the footing that it was the appellant's asset and not part of the liquidation estate, together with simple interest at 9% for the period specified by the Tribunal.

Realisation of security interest in liquidation - Automatic inclusion in liquidation estate - Pari Passu Charge - Joint security and majority decision of secured creditors - Distribution of liquidation proceeds - barred by limitation - Going Concern Sale - Mandatory Statutory Compliance - Inter Se Priority of Secured Creditors - Limitation in appeal under the Insolvency and Bankruptcy Code. -

Realisation of security interest in liquidation - Automatic inclusion in liquidation estate - HELD THAT:- The Tribunal held that the appellant could not establish a valid and perfected independent pari passu charge, since the asserted charge was conditional upon fulfillment of reciprocal NOCs and execution of an inter se agreement, which never materialised. Even assuming the appellant to be a secured creditor, the right under Section 52 was held to be a qualified right requiring strict compliance with the Code and the Liquidation Regulations. The appellant had merely expressed an intention not to relinquish security, but did not pay the CIRP and liquidation-related dues within the prescribed period, did not intimate any proposed realisation value, did not initiate enforcement proceedings, and did not effectively participate in the liquidation process. In a consortium structure with shared security, the Tribunal further held that Section 13(9) of SARFAESI constituted the applicable law under Section 52(4), and the decision of secured creditors representing the statutory majority to relinquish security bound the appellant. The consequence under Regulation 21A(3), therefore, followed automatically and the secured assets formed part of the liquidation estate. [Paras 125, 126, 127, 128, 129]

The challenge to the inclusion of the secured assets in the liquidation estate and to the e-auction sale failed, and the first appeal was dismissed.

Distribution of liquidation proceeds - Adjudication by the Adjudicating Authority in the first instance - HELD THAT:- The Tribunal held that, after conclusion of the auction and deposit of the sale consideration, issuance of the sale certificate was only a consequential step and did not suffer from infirmity. However, questions relating to distribution of sale proceeds, status of creditors, nature and extent of security interest, and entitlement under Section 53 involve factual and legal determination that must first be undertaken by the Adjudicating Authority. Since that question was already pending there, the Tribunal declined to adjudicate the distribution dispute at the appellate stage and confined the remand to that limited issue. [Paras 132, 133, 134, 135, 136]

The second appeal was disposed of by upholding issuance of the sale certificate and remanding the limited question of distribution of liquidation sale proceeds to the Adjudicating Authority.

Limitation in appeal under the Insolvency and Bankruptcy Code - Outer limit for condonation of delay - HELD THAT: - The Tribunal held that under Section 61 an appeal must be filed within 30 days, with a further condonable period of only 15 days on sufficient cause being shown. The impugned order gave rise to an independent cause of action, and pendency of related appeals or subsequent consequences of that order could not extend the statutory period. As the appeal had been filed with a delay of 171 days, the delay was beyond the Tribunal's jurisdiction to condone. [Paras 138, 140, 141, 142]

The third appeal was dismissed as barred by limitation and not maintainable.

Final Conclusion: The Tribunal upheld the inclusion of the appellant's asserted secured assets in the liquidation estate and found no infirmity in the liquidation sale conducted as a going concern. The dispute regarding distribution of sale proceeds was left to be decided by the Adjudicating Authority, while the separate appeal against the later order was rejected as time-barred.

Provident fund claim - Uncrystallised statutory dues - Proof of claim in CIRP - HELD THAT: - The Appellate Tribunal held that, even accepting the appellant's contention that the document dated 02.05.2025 was only an internal communication and not an assessment under section 7A, such communication could not by itself constitute the basis of a claim in the CIRP. Since the dues had not been crystallised through assessment at the relevant time, the appellant could not seek acceptance of the claim on the strength of tentative calculations alone. [Paras 9, 10]

No interference was warranted, and the rejection of the application was upheld.

Final Conclusion: The appeal was dismissed. The Appellate Tribunal held that, in the absence of an assessment crystallising the provident fund liability at the relevant time, the claim could not be sustained in the CIRP on the basis of an internal communication or tentative computation alone.

Applications seeking exclusion of time in personal guarantor insolvency resolution process - period of 208 days spent in the appellate proceedings - Actus curiae neminem gravabit - Scope of moratorium vis-a-vis extension of process period.

Opportunity of hearing - Deemed knowledge of proceedings - HELD THAT: - The Tribunal found from the cause list and the proceedings before the Adjudicating Authority that the appellants were represented by counsel on the date when the interlocutory applications were taken up along with other applications. In that situation, knowledge of the proceedings had to be attributed to them, and the option to file objections was available. Having chosen not to object at that stage, they could not subsequently contend in appeal that they were prejudiced because they were not made parties to the applications. [Paras 9]

The challenge founded on absence of notice or opportunity was rejected.

Exclusion of time in personal guarantor insolvency resolution process - Actus curiae neminem gravabit - Moratorium - HELD THAT: - The Tribunal held that the period during which the earlier appeals remained reserved before the Appellate Tribunal could validly be excluded, since the Resolution Professional had no control over that interval and the exclusion was necessary to give effect to the directions contained in the earlier appellate judgment for determination of the actual amount due and further steps in the repayment plan process. It was further held that the time limit in Section 101(1) relates to the operation of moratorium alone and cannot be read as a prohibition against exclusion of time for effective continuation of the process. The provisions relied on by the appellants from the 2019 Regulations and other procedural provisions were found inapplicable to the controversy. The exclusion was treated as a procedural facilitation of adjudication and not as something adversely affecting any material right of the appellants. [Paras 10, 11, 12, 13]

The exclusion of 208 days was upheld as valid and ancillary to effective adjudication of the personal guarantor insolvency proceedings.

Final Conclusion: The Appellate Tribunal dismissed the appeals and affirmed the order excluding 208 days from the personal guarantor insolvency resolution process. It held that the appellants had adequate opportunity before the Adjudicating Authority and that the exclusion was a lawful procedural measure to facilitate compliance with the earlier appellate directions.

Maintainability of the Section 95 proceedings against the personal guarantor - Necessary party - Entitlement to intervene in the proceedings under Section 95 - claimed coparcenary or succession rights in the assets of another guarantor. - HELD THAT: - The Appellate Tribunal held that proceedings under Section 95 are confined to the individual personal guarantor against whom the application is filed, and the creditor is entitled to choose the respondent to such proceedings. The appellant neither figured as a guarantor nor claimed any right in the assets of the personal guarantor who was the sole respondent in the Section 95 proceeding. His asserted rights were only in relation to the property of another deceased guarantor, against whom no Section 95 proceedings had been initiated, and such private claims of succession or coparcenary are not matters for adjudication in Section 95 proceedings but are to be worked out in independent civil remedies. The Tribunal further held that a contract of guarantee binds the contracting parties alone, and a non-party to that contract is not a necessary party for effective adjudication of the insolvency application. The decision in Vinayak Purushottam Dube (Deceased) Through LRs Vs Jayashree Padamkar Bhat & Ors. [2024 (3) TMI 1541 - SUPREME COURT] was found inapplicable as it dealt with survival of personal rights and obligations in a different context. [Paras 23, 24, 26, 27, 28]

The rejection of the intervention application was upheld, and the connected applications seeking recall of and stay against the admission order were rightly rejected as consequential reliefs.

Final Conclusion: The Appellate Tribunal dismissed all the company appeals, holding that the appellant was not a necessary party to the Section 95 proceedings against the personal guarantor. His asserted coparcenary rights in the property of another deceased guarantor did not confer any right of intervention, recall, or stay in those proceedings.

Unauthorised dealing in foreign exchange - liability for contravention of Section 3(a) of FEMA - Corroborative statements as evidence of contravention - Proportionality of penalty. -HELD THAT: - The Tribunal found that the adjudicating authority and the appellate authority had concurrently held the contravention proved, and that the statements of the appellant, his father and his uncle corroborated each other. It also found that the amount of US $ 10,000 seized at the premises of the shop was recovered from the personal custody of the appellant. The appellant's explanation that the money belonged to a foreign customer was not accepted, since there was nothing on record to explain why the appellant had already received and kept the foreign currency in his pocket when it was allegedly to be converted elsewhere. The plea based on the appellant's educational background was held insufficient, particularly when the persons concerned had earlier held a money changing licence and were therefore aware of the legal requirements governing foreign exchange transactions. On that basis, liability for penalty was upheld; however, having regard to the facts and circumstances, the Tribunal reduced the quantum of penalty. [Paras 6]

The finding of contravention and liability to penalty was sustained, but the penalty was reduced to Rs. 1,00,000/- with adjustment of the pre-deposit against the reduced amount.

Final Conclusion: The appeal was partly allowed. The Tribunal upheld the finding that the appellant had contravened Section 3(a) of FEMA, but reduced the penalty imposed and directed adjustment of the pre-deposit against the reduced penalty.

Design services - intellectual property rights - IPR services - permanent transfer of IPR - reverse charge mechanism - extended period of limitation under Section 73(1) proviso - fraud, collusion, wilful mis-statement and suppression of facts

Apex Court dismissed the Revenue's Appeal against the order of Tribunal [2025 (12) TMI 716 - CESTAT MUMBAI]

Condonation of delay - Double levy - Double Taxation - HELD THAT:- Delay in filing the civil appeal was condoned, and the appeal filed by the Revenue was dismissed after recording the submission that levy of service tax on the same value on which excise duty and VAT were already being levied would result in double levy on the same transaction.

Classification of goods - activities undertaken under the agreements - service as manpower recruitment or supply agency service - Non-registration and non-filing of returns - Extended period of limitation and suppression of facts - Simultaneous penalties.

Lump sum work contract - Job work contracts -HELD THAT: - The Tribunal found from the agreements that the contracts were for execution of specified jobs on a lump sum or output basis, with responsibility for execution remaining with the appellant. The agreements did not stipulate any definite number of workers to be supplied, nor was payment linked to the number of labourers or manpower deployed. Mere involvement or deployment of labour in carrying out contracted work was held insufficient to convert a work contract into manpower supply. The demand had been confirmed only because labour was used in performing the contracts, but in the absence of any contractual requirement for supply of manpower as such, the service could not be brought within MRAS. [Paras 12, 16, 19]

The service tax demand under MRAS was unsustainable on merits.

Extended period of limitation - Suppression of facts - Intent to evade tax - HELD THAT: - The Tribunal held that non-registration or failure to file returns, by itself, does not establish suppression of facts for invoking the extended period unless there is material showing intent to evade tax. In the present case, no positive evidence of suppression was available. On that basis, the extended period was held not invokable. [Paras 17, 19]

The demand for the extended period was not maintainable.

Penalty - Simultaneous penalties under Sections 76 and 78 - HELD THAT: - The Tribunal held that since the underlying demand itself was not sustainable, the penalties necessarily failed. It further recorded the settled position that simultaneous penalties under Sections 76 and 78 cannot be sustained. [Paras 18]

The penalties were set aside.

Final Conclusion: The Tribunal held that the appellant's contracts were job or work contracts and not manpower supply arrangements, and therefore the service tax demand under MRAS was not sustainable. It further held that the extended period was not invokable in the absence of evidence of suppression with intent to evade tax, and the penalties also could not survive. Consequently, the appeal was allowed with consequential relief.

Campus recruitment fees - Manpower recruitment or supply agency - Extended period of limitation - Suppression of Facts - Cum-tax benefit.

Manpower recruitment or supply agency - Campus recruitment fees - Participation fees - HELD THAT: - The Tribunal held that, under the definition applicable from 01.05.2006, any person engaged in providing service for recruitment of manpower falls within the taxable category. Relying on the Board's clarification dealing specifically with campus recruitment by institutions such as IITs and IIMs, it found that the fee collected only when recruitment was finalised had a direct nexus with recruitment and was therefore exigible to service tax. However, the participation fee was charged from all visiting corporates for use of infrastructure and for participation in the selection process irrespective of actual recruitment; hence, that amount did not constitute consideration for recruitment service under the said taxable category. [Paras 9]

Service tax was held leviable only on recruitment fees and not on participation fees.

Extended period of limitation - Suppression of facts - Penalty - Cum-tax benefit - entitlement to cum-tax benefit while computing the demand. - HELD THAT: - The Tribunal found that, on the same issue, earlier show-cause notices had already been issued and the Department was therefore aware of the collection of recruitment fees. It also noted that the appellant's records had been periodically audited and the relevant receipts were reflected in the books of account, making the allegation of suppression legally unsustainable. Since the dispute turned on interpretation of the law and the changing scope of the definition, the demand could survive only for the normal period, penalty could not be sustained, and cum-tax benefit was available in computing the tax liability. [Paras 10, 11]

The demand was restricted to the normal period, penalty was set aside, and cum-tax benefit was directed to be given.

Final Conclusion: The impugned order was modified by sustaining service tax, with interest, only on recruitment fees for the normal period. The demand on participation fees was set aside, cum-tax benefit was allowed, and penalty was deleted.

Determination of tax liability - Failure to verify documentary evidence - Non-speaking order - Principles of natural justice - Demand concerning classification of services, reverse charge liability, prior discharge of service tax by service providers, exemption for small consignments, and the consequential questions of limitation and penalty - HELD THAT:- The Tribunal found that the appellant had produced sample consignment notes, courier invoices and communications from service providers indicating payment of tax, but these documents had not been comprehensively examined by either lower authority. The orders under challenge rejected the claims on the ground of insufficiency of evidence without correlating the records or recording specific findings on the true nature of the transactions. Since the disputes on classification, prior tax payment, exemption and reverse charge were all fact-sensitive, and the question of limitation and penalty was dependent on those foundational findings, the absence of proper verification rendered the orders unsustainable as unreasoned and non-speaking. [Paras 13, 14, 15, 16, 17]

The impugned appellate and original orders were set aside and the matter was remanded to the adjudicating authority for fresh adjudication after examination of all relevant documents, personal hearing, and passing of a reasoned order, with all issues kept open.

Final Conclusion: The Tribunal did not decide the merits of taxability, exemption, limitation or penalty. It held that the matter required fresh factual examination and therefore remanded the case for de novo adjudication after proper verification of the documentary evidence and observance of natural justice.

Services rendered to South Western Railway - classifiable as management, maintenance or repair of railways - exemption under Notification No. 24/2009-ST as amended - Export of services under sub-contracting arrangement - services rendered to a foreign principal under a subcontracting arrangement in connection with the DAMEL project qualified as export of services - Extended limitation and penalty. - HELD THAT: - The Tribunal held that the activities undertaken for South Western Railway, namely maintenance, overhaul and testing of air dryers forming part of railway locomotives, were execution-oriented maintenance services and not advisory or consultancy services. Applying the principle that classification must follow the dominant nature of the transaction, the services were found to fall within management, maintenance or repair in relation to railways and therefore within Notification No. 24/2009-ST as amended. As regards the DAMEL-related work, the Tribunal found that the appellant had rendered services to a foreign principal under a sub-contract, raised invoices on that foreign entity, received consideration in convertible foreign exchange, and had no privity of contract with the Indian project owner. On that basis, and having regard to Rule 3 of the Export of Service Rules, 2005, the relevant CBEC circulars and the decisions on the point, the Tribunal held that the location of the service recipient, and not the place of performance or ultimate use in India, governed the character of the transaction. The departmental objection founded on defects in invoices or absence of registration particulars was rejected, since procedural infractions could not defeat substantive entitlement when the nature of services, contractual arrangement and receipt of consideration were not in dispute. [Paras 9]

The demand relating to both sets of services was unsustainable on merits and was liable to be set aside.

Extended period of limitation - Suppression with intent to evade - Penalty under Section 78 - HELD THAT: - The Tribunal found that the show cause notice had been issued beyond the normal period and that the entire demand arose from audit scrutiny of transactions which were already recorded in the books of account and reflected in the statutory returns. The dispute was found to be one of classification, exemption and export of services, involving interpretation of statutory provisions, notifications and contractual arrangements. In such circumstances, there was no material to establish concealment, wilful misstatement or deliberate intent to evade payment of tax. Since the ingredients necessary for invoking the extended period were absent, the demand was held to be time-barred. For the same reason, the penalty under Section 78, which presupposes fraud, suppression or wilful misstatement with intent to evade, was also held to be unsustainable. [Paras 10]

The demand was barred by limitation and the penalty imposed under Section 78 was liable to be set aside.

Final Conclusion: The Tribunal held that the services rendered to South Western Railway were exempt and that the services rendered to the foreign principal qualified as export of services. The demand was also held barred by limitation, and the penalty was consequently set aside.

Refund of service tax paid on Services Not Rendered - time-barred under section 11B(1) - Limitation - Principle of Legality of Taxation -Unjust enrichment under section 11B(2).

Refund of service tax on services not provided - HELD THAT: - The Tribunal held that the controversy stood covered by earlier decision in the case of Wave Megacity Centre Private Limited versus Commissioner (Appeals-I) Central Tax Goods and Service Tax and Central Excise, New Delhi-Final [2025 (8) TMI 1561 - CESTAT NEW DELHI], accepting that where the booking or underlying arrangement is cancelled and the amount is returned, no taxable service survives and the amount earlier paid as service tax cannot be retained merely by invoking limitation under section 11B. It accepted the settled position that such refund claims are not liable to be rejected on the ground of time bar, but the claim must still satisfy the requirement under section 11B(2), read with section 142(5) of the CGST Act, on the aspect of unjust enrichment. [Paras 7]

The impugned order was held unsustainable on limitation, and the matter was remanded to the adjudicating authority only for deciding the applicability of unjust enrichment after giving the appellant an opportunity to produce the relevant material.

Final Conclusion: The Tribunal held that the refund claim could not be denied as barred by limitation merely because service tax had been paid earlier on advances for services that were never provided. The appeal was allowed by way of remand, confined to verification of unjust enrichment under the applicable statutory provisions.

Service tax liability of sub-contractor - absence of documentary proof - main contractor discharged the tax was material - Normal Period of Limitation - Interpretation of Tax Liability - Extended period of limitation - basis of Form 26AS.

Service tax liability of sub-contractor - Double taxation plea. - HELD THAT: - The Tribunal held that the question whether a sub-contractor is liable even where the main contractor has paid service tax stood concluded by the Larger Bench decision in Melange Developers Pvt Ltd.[2019 (6) TMI 518 - CESTAT NEW DELHI-LB]. On that principle, the appellant could not avoid tax liability merely by asserting that the main contractor had paid service tax. The Tribunal also noted that no documentary evidence had been produced before it to establish such payment by the main contractor. [Paras 6, 7, 8]

On merits, the appellant's contention that no tax was payable because the main contractor had discharged service tax was rejected.

Extended period of limitation - Interpretational dispute - Remand for factual verification - HELD THAT: - The Tribunal accepted the consistent view that, in light of the Larger Bench ruling, the controversy regarding liability of a sub-contractor was interpretational in nature and, therefore, demand could be confined to the normal period where the conditions for invoking the extended period were absent. At the same time, the Tribunal directed that the appellant must first establish, by evidence, that the main contractor had discharged the service tax liability. It accordingly remanded the matter for verification, with directions that if such payment was proved, the demand should be quantified only for the normal period with interest and without penalty; if not so proved, the confirmed demand would remain sustainable with interest and penalty as per law. [Paras 8, 9]

The matter was remanded for verification, and the availability of relief from the extended period and penalty was made dependent on proof regarding payment of tax by the main contractor.

Final Conclusion: The Tribunal held that the appellant, as sub-contractor, could not escape service tax liability on the ground that the main contractor had paid tax. However, treating the dispute as interpretational for limitation purposes, it remanded the matter for verification of the appellant's claim regarding payment by the main contractor and for consequential reworking of demand, interest and penalty.

Transaction value - differential duty paid on supplementary invoices arising from a unilateral price revision - assessable value under Section 4 - Supplementary invoices - Unjust enrichment - Refund limitation.

Transaction value - HELD THAT: - The Tribunal held that under Section 4(1)(a), assessable value is the price actually paid or legally payable at the time of removal. Since the goods were cleared at the agreed price under the purchase orders, between unrelated parties and for sole consideration, the transaction value stood crystallized at that stage. The later supplementary invoices were issued unilaterally, there was no contractual clause permitting such revision, the buyer refused to accept the revised price and the enhanced amount was never realized. In those circumstances, the revised amount never became a legally enforceable price payable and could not be treated as transaction value. The decisions in Addison & Co. Ltd. [2016 (8) TMI 1071 - SUPREME COURT] and MRF Ltd.[1997 (3) TMI 104 - SUPREME COURT] were distinguished because they proceeded on completed and accepted price arrangements, whereas the principle in Commissioner of Central Excise v. Amul Industries Pvt. Ltd. [2011 (3) TMI 586 - CESTAT, AHEMDABAD] and CCE, Pune-I Versus Faurecia Automotive Seating (India) Pvt Ltd. [2017 (11) TMI 333 - CESTAT MUMBAI] was found applicable. The Department could not substitute cost-based valuation in the absence of conditions attracting Section 4(1)(b). [Paras 9, 11]

The differential duty paid on the unaccepted supplementary invoices was held not legally payable and refundable.

Unjust enrichment - Passing on of duty incidence - HELD THAT: - The Tribunal found contemporaneous evidence from the buyer confirming that the supplementary invoice was not accepted, the differential amount was not paid, it was not accounted as purchase, and no CENVAT credit was availed. The amount remained unrealized, and the Department produced no material to show that the duty incidence had been passed on. Applying the principle stated in CCE v. Allied Photographics India Ltd. [2004 (3) TMI 63 - SUPREME COURT], the Tribunal held that unjust enrichment must rest on evidence and not on presumption. On the record, the claimant had discharged the burden of showing that the duty incidence was not passed on. [Paras 10, 11]

The bar of unjust enrichment under Section 11B was held inapplicable.

Refund limitation - Relevant date - HELD THAT: - The Tribunal held that, for the refund claim in question, the relevant date under Section 11B was the date of payment of differential duty on the supplementary invoice. As the duty was paid on 31.03.2015 and the refund claim was filed on 22.09.2015, the claim was within one year and therefore not time-barred. [Paras 10]

The refund claim was held to be filed within the prescribed period.

Final Conclusion: The Tribunal held that a unilateral and unaccepted post-clearance price enhancement could not alter the transaction value under Section 4, and the differential duty paid on that basis was refundable. As the duty incidence had not been passed on and the claim was filed within time, the impugned order was set aside and the appeal was allowed.

CENVAT credit of additional duty of customs - concessional rate under Notification No. 12/2012-Cus - imported coal - Extended period of limitation - penalty under Section 11AC - Suppression of Facts - Wilful Misstatement - Mens Rea - Strict Interpretation of Taxing Statutes​​​​​​​.

CENVAT credit of additional duty of customs - HELD THAT: - The Tribunal held that Rule 3(1)(vii) of the CENVAT Credit Rules, 2004 is an independent statutory source of entitlement to credit of additional duty of customs and contains no restriction denying such credit merely because duty was paid at a concessional rate. Applying the principle stated in SRF Ltd. v. Commissioner of Customs, Chennai [2015 (4) TMI 561 - Supreme Court], it held that the legal fiction under Section 3 of the Customs Tariff Act must operate fully to maintain parity between imported and domestic goods, and the Department could not selectively import conditions from Central Excise notifications into a Customs notification. The Tribunal further followed its consistent line of decisions, including M/s. Seshasayee Paper and Boards Ltd. v. Commissioner of GST & Central Excise, Salem [2026 (1) TMI 508 - CESTAT CHENNAI], and held that restrictions applicable to excise duty on indigenous goods cannot be extended to CVD on imported coal unless expressly provided. Lonsenkiri Chemicals Industries v. CCE, Cus. & ST, Vadodara-I [2018 (9) TMI 1439 - GUJARAT HIGH COURT] was distinguished as turning on a different statutory setting. [Paras 11, 17, 18, 19, 20]

Denial of credit on the ground that the imported coal suffered concessional CVD was held unsustainable.

Extended period of limitation - Suppression of facts - Penalty under Section 11AC - HELD THAT: - Having held the credit to be admissible, the Tribunal found that the demand itself could not survive. It further held that the extended period was not invocable because the appellant had maintained statutory records and disclosed the availment of credit in returns, and there was no positive act of suppression, wilful misstatement or fraud. Relying on Uniworth Textiles Ltd. v. Commissioner of Central Excise, Raipur [2013 (1) TMI 616 - SUPREME COURT], it held that mere non-payment or wrong availment in an interpretational dispute does not amount to suppression unless accompanied by deliberate intent to evade duty. On the same reasoning, the ingredients necessary for penalty under Section 11AC read with Rule 15(2) were absent, and interest and penalty could not be sustained. [Paras 21, 22, 23, 24, 25]

The demand was unsustainable both on merits and on limitation, and the associated interest and penalty were liable to be set aside.

Final Conclusion: The Tribunal held that CENVAT credit of concessional CVD paid on imported steam coal was lawfully available under Rule 3(1)(vii) of the CENVAT Credit Rules, 2004, and that the Department could not import restrictions from Central Excise notifications into the customs scheme. Consequently, the demand, extended limitation, interest and penalty were all set aside and the appeal was allowed with consequential relief.

Trading activity - Exempted service retrospectively - reversal of common input service credit under Rule 6 of the Cenvat Credit Rules, 2004 - Benefit of Notification No. 03/2011-CE (NT) - Reversal of common input service credit - Extended period of limitation.

Trading as exempted service - HELD THAT:- The Tribunal held that, in view of the Larger Bench decision in M/s. Dorma India Pvt. Ltd. 2023 (8) TMI 1691 - CESTAT CHENNAI (LB), the explanation inserted in Rule 2(e) treating trading as an exempted service had to be applied retrospectively. It therefore rejected the contention that, for the pre-01.04.2011 period, no demand could arise merely because trading had not then been expressly mentioned in the definition. [Paras 13]

The objection to applicability of Rule 6 on the ground that trading was not an exempted service prior to 01.04.2011 was rejected.

Reversal of common input service credit - Non-availment principle - HELD THAT: - The Tribunal found from the record that the appellant had already reversed the entire service tax credit taken on the common input services used during that year and had also paid interest. In the absence of any allegation disputing that reversal, such reversal was treated as tantamounting to non-availment of credit, and no further amount could be sustained for that period. [Paras 14]

The demand for 2011-12 was held to be unsustainable.

Extended period of limitation - Departmental knowledge - Statutory returns - HELD THAT: - The Tribunal recorded that, after audit, the Department was already aware of the appellant's trading activity, the non-maintenance of separate accounts for common input services, and the non-reversal of credit attributable to trading. It further noted that the appellant had been filing ER-4 returns showing the trading activity and the credit availed on input services. In these circumstances, the Department ought to have issued notice within the normal period, and its failure to do so disentitled it from invoking the extended period. [Paras 15, 16]

The entire demand was held to be time-barred; consequently, the demand, interest and penalty could not survive.

Final Conclusion: The Tribunal held that, although trading was to be treated as an exempted service retrospectively for Rule 6 purposes, the demand could not be sustained because the credit for 2011-12 had already been fully reversed with interest and, in any event, the entire notice was barred by limitation. The impugned order was therefore set aside and the appeal was allowed with consequential relief.

Refund of excess excise duty paid on clearances made at a pre-revised price - Variable price clearances - Unjust enrichment.

Refund on post-clearance price revision - Variable price clearances - Time-bar under Section 11B - HELD THAT: - The Tribunal held that the locomotives had been cleared on prices fixed on the recommendation of the Pricing Committee and the variation in such price was known in advance. Since the price at the time of clearance was subject to later revision and was in fact reduced, excess duty stood paid on the earlier clearances. Following Commissioner of Cus. & C.Ex., Hyderbad-III v. Premier Explosives Ltd. [2008 (2) TMI 143 - CESTAT, BANGALORE], the Tribunal held that once the refund claim had been filed within time, the question whether the assessment was provisional or final was not material; the claim had to be examined on the basis that excess duty had been paid due to subsequent price reduction. [Paras 11, 12]

The appellant was entitled to refund of the excess duty paid on account of the subsequent downward revision of price.

Unjust enrichment - Book adjustment transfers - No profit no loss pricing - HELD THAT: - The Tribunal noted the Range Officer's earlier verification report, produced by the appellant, stating that the locomotives were used within the Railways, had no marketability, and that transfers were effected through inter-railway book adjustment without cash payment, with subsequent adjustment for increase or decrease in transaction price. It held that this report ought to have been followed by the authorities below, or a fresh report should have been obtained if required. On the basis of that report, the Tribunal concluded that the incidence of duty had not been passed on and the appellant had overcome the bar of unjust enrichment. [Paras 13, 14]

The finding rejecting the claim on unjust enrichment was unsustainable, and the appellant was held to have passed that bar.

Final Conclusion: The Tribunal set aside the impugned order and allowed the appeal, holding that the refund claim arising from the downward revision of transfer price was maintainable and was not hit by unjust enrichment.

Imposition of Penalty under section 11AC - Mechanical invocation of penalty - Mens rea for penalty - interest remained payable on the duty amount already paid and appropriated.

Penalty under section 11AC - Mens rea for penalty - Quasi-criminal penalty - HELD THAT:- The Tribunal found that the entire duty demand stood paid and appropriated, including a part paid before issuance of the show cause notice. It further held that the appellate authority had proceeded with evident non-application of mind by referring to an inapplicable provision and that the lower orders contained no reasoning establishing intent to evade, mala fides, or mens rea, which were vital for sustaining penalty under section 11AC. Since penalty is a quasi-criminal consequence, it could not be imposed mechanically or automatically merely because the statutory provision existed. In the absence of any finding of deliberate defiance or dishonest conduct, the penalty was liable to be deleted, though statutory interest on the duty amount remained payable if not already paid. [Paras 6, 7, 8, 9]

The penalty imposed on the appellant under section 11AC was set aside, while liability to pay applicable interest under section 11AB on the duty amount paid and appropriated was maintained.

Final Conclusion: The Tribunal held that the penalty had been imposed without any finding of intent to evade duty and with clear non-application of mind in the orders below. The penalty was therefore set aside, but the appellant remained liable for applicable interest on the duty already paid and appropriated, if not already discharged.

Entitlement to relief in the securitisation application challenging the demand notice, possession notice and the order passed under section 14 of the SARFAESI Act, 2002 - service and publication of possession notice - Contempt jurisdiction of Tribunal.

SARFAESI procedural compliance - Possession notice - HELD THAT: - The Tribunal noted that, though the applicants had admitted availing the loan and receipt of the demand notice, they had challenged the subsequent measures on the ground of procedural irregularities in the SARFAESI action, including the possession notice and the application made before the Chief Judicial Magistrate. The defendant bank, despite service, did not appear, produce records, or rebut those allegations. On that basis, the Tribunal held that the applicants had proved their case and found merit in the securitisation application. The earlier conditional stay having been complied with was also noticed as showing the applicants' bona fides. [Paras 7]

The possession notice and the order of the Chief Judicial Magistrate were set aside, while leaving it open to the bank to initiate fresh action in accordance with the SARFAESI Act and Rules.

Contempt jurisdiction of Tribunal - Violation of stay order - HELD THAT: - The Tribunal recorded that the applicants had complied with the conditional stay order and that, while the stay was operating, the bank had issued a sale notice in violation of that order. Even so, it held that, since the Tribunal is not a court, it could not initiate contempt proceedings. The determinative ground was thus absence of contempt jurisdiction, not the merits of the allegation of disobedience. [Paras 7]

The contempt petition was held not maintainable before the Tribunal and was closed.

Final Conclusion: The securitisation application was allowed and the possession notice as well as the Magistrate's order were set aside, with liberty to the bank to proceed afresh in accordance with law. The contempt petition was closed on the ground that the Tribunal could not entertain contempt proceedings.