TMI Tax Updates e-Newsletter
May 08,2026

Seeking anticipatory bail - Summons under GST inquiry - Economic Offence -wrongful availment of input tax credit through fake invoices and non-cooperation with investigation - HELD THAT: - The Court held that, in view of Radhika Aggarwal v. Union of India [2025 (2) TMI 1162 - SUPREME COURT (LB)] a petition for anticipatory bail cannot be treated as not maintainable merely because only summons under Section 70 had been issued and no formal arrest had yet taken place, provided there is a concrete basis for apprehension of arrest. At the same time, the power of arrest under the GST enactment is statutory, and the stage of summons by itself does not confer immunity. On the facts, there were specific allegations of wrongful availment of ITC through fake invoices, the search had already been conducted, relevant documents had been sought, the inquiry was still at its nascent stage, and the petitioner had not appeared pursuant to summons or otherwise cooperated. The Court treated the alleged offence as a grave economic offence requiring effective investigation and held that custodial interrogation was necessary to unearth the full fraud and to prevent tampering with evidence or manipulation of records. In the absence of any exceptional or extraordinary circumstance, pre-arrest bail was not warranted. [Paras 9, 10]

The petition for anticipatory bail was held maintainable in principle but was dismissed on merits.

Final Conclusion: The Court declined anticipatory bail, holding that although such a petition was not barred merely because summons under the GST law had been issued, the seriousness of the alleged fake ITC fraud, the petitioner's non-cooperation, and the need for custodial interrogation at the ongoing inquiry stage disentitled him to that relief.

Alternative statutory remedy - Validity of show cause notice - Maintainability of writ petition against tax adjudication order - High Court dismissed the writ appeal, holding that the appellant must pursue the statutory appellate remedy against Ext.P9 - HELD THAT:- The Special Leave Petition was dismissed, the Court having found no good ground to interfere with the impugned order passed by the High Court.

Alternative statutory remedy - Maintainability of writ petition - GST Appellate Tribunal - violation of principles of natural justice - mining and supply of limestone and is duly registered under the CGST Act - Whether the writ petition is liable to be entertained on the above issues, despite the availability of the remedy of appeal before the GST Appellate Tribunal -HELD THAT: - The Court held that though the writ petition had been entertained earlier when the GST Appellate Tribunal was not functioning, the position had changed with the constitution and commencement of the Tribunal. Since the controversy raised by the petitioner concerned legal objections under the GST law against the impugned appellate order, those grounds were liable to be examined by the specialised statutory forum. Applying the settled rule that writ jurisdiction is ordinarily not exercised where an effective and efficacious statutory remedy exists, the Court found that none of the exceptions were attracted: there was no challenge to the vires of the statute, no case of lack of jurisdiction, and no violation of natural justice, as the petitioner had participated in the proceedings and filed its reply. The petitioner having already pursued the statutory process up to the appellate stage could not bypass the further remedy before the Tribunal and invoke Article 226 directly. [Paras 25, 26, 27, 28, 29]

The petitioner was relegated to the remedy of appeal before the GST Appellate Tribunal, with continuation of interim protection until the stay application is decided by the Tribunal.

Final Conclusion: The writ petition was dismissed on the ground of availability of an effective statutory appeal before the GST Appellate Tribunal now constituted and functioning. Liberty was granted to the petitioner to file such appeal, and the interim protection was directed to continue till the Tribunal decides the stay application.

Alternative statutory remedy - Maintainability of writ petition - Appeal to GST Tribunal despite non-constitution -HELD THAT: - The Court held that, in view of the Board Circular clarifying the position arising from non-constitution of the Appellate Tribunal, the right of appeal to the Tribunal remains available and the limitation for such appeal would run from the date on which the President or State President enters office, whichever is later. On that basis, the Court concluded that the petitioner could not invoke writ jurisdiction to bypass the statutory appellate remedy or avoid the condition of pre-deposit. The earlier order of the Court on identical facts was followed. [Paras 6, 8, 9]

The writ petition was dismissed with liberty to the petitioner to avail the remedy of appeal before the GST Tribunal against the impugned appellate orders.

Final Conclusion: The Court declined to entertain the writ petition against the orders of the first appellate authority, holding that the petitioner had an effective statutory remedy before the GST Tribunal. The petition was accordingly dismissed with liberty to pursue that appeal for the financial years in question.

Validity of the impugned orders passed - non-filing of reply - discrepancies in GSTR-3B and GSTR-1, including excess claim of input tax credit. -HELD THAT: - The Court noted that both sets of impugned orders were passed ex parte on the basis of the material available with the authority, one set proceeding on alleged non-reconciliation between GSTR-3B and GSTR-1 and the other on alleged excess claim of input tax credit. Since the petitioner stated that it would meet the grounds in the show cause notice and place material in support of its stand, the Court held that the orders were required to be set aside and the matter restored to the stage of reply, subject to payment of costs for the lapse in not participating earlier. [Paras 4, 5]

The impugned orders were set aside and the matter was remitted to the stage of reply to the show cause notice, with costs imposed on the petitioner.

Final Conclusion: The writ petition was disposed of by setting aside the ex parte orders for both financial years and remitting the matter for fresh consideration from the stage of reply to the show cause notice, subject to payment of costs and appearance before the authority.

Alternative statutory remedy - Maintainability of writ petition against show cause notice and adjudication order. - HELD THAT: - The Court confined itself to the question of maintainability and held that, since an appeal lay under Section 107(1) of the CGST Act, interference in writ jurisdiction was not warranted. The grounds urged by the petitioner, including denial of cross-examination, were left open to be raised before the appellate authority, and were not adjudicated on merits in the writ proceedings. [Paras 8, 9]

The writ petition was dismissed, with liberty to the petitioner to raise all legal and factual grounds before the appellate authority.

Final Conclusion: The Court declined to entertain the challenge to the show cause notice and adjudication order on the ground that an effective statutory appeal was available. The petitioner was relegated to the appellate remedy with liberty to raise all grounds before the appellate authority.

Cancellation of GST registration for non-filing of returns and non-payment of tax - Restoration of Registration - HELD THAT:- The writ petition challenging cancellation of GST registration was disposed of by following an earlier order in similar circumstances [2024 (10) TMI 1387 - ANDHRA PRADESH HIGH COURT] with directions to permit the petitioner to seek revocation, submit draft returns, deposit taxes due on or before 31.03.2026, and for the authority to consider the revocation application within the stipulated time, including by accepting manual filing if online filing was not possible.

Change in foundational facts - treatment of post-sale discounts in case of principal-principal transactions - Advance ruling on changed factual basis - Cash discount through credit note - non-monetary benefits - raising tax invoice - Consideration for Supply - HELD THAT: - The appellate authority noted that the original ruling had proceeded on the appellant's earlier statement that it was a franchise of the paint manufacturers and that there was no prior agreement regarding the non-monetary benefits. In appeal and at personal hearing, the appellant sought to substitute those facts by asserting that the transactions were on a principal-to-principal basis and that prior scheme documents existed governing the post-sale benefits. Since the facts subsequently presented were completely different and divergent from those placed before the original authority, the appellate authority held that it was not in a position to decide the correctness of the original ruling on that altered factual foundation. The matter therefore required reconsideration by the original authority after affording due opportunity and applying the principles of natural justice. [Paras 7, 8]

The matter was remanded to the Authority for Advance Ruling for fresh consideration and a fresh ruling on the basis of the facts now sought to be placed on record.

Final Conclusion: The appellate authority did not decide the GST liability of the non-monetary benefits on merits. As the appellant had materially altered the factual basis of its original application, the matter was remanded to the Authority for Advance Ruling for a fresh ruling in accordance with natural justice.

Scope of supply under the GST - Grant-in-aid as consideration - Taxable supply between distinct persons - failed to appreciate that public health promotion is a Directive Principle of State Policy under Article 47 of the Constitution - Nature of Service - Three-Limb Test - Exemption for services relating to Panchayat or Municipality functions - Classification of research and development services

Grant-in-aid as consideration - Subsidy exclusion - HELD THAT: - The Appellate Authority held that Section 2(31) expressly excludes only subsidies given by the Central Government or a State Government from the definition of consideration, and that exclusion could not be extended to grants by implication. The payments from CCRAS were found to be linked to approved proposals, defined deliverables, reporting obligations, audits, and performance of specified research activities, thereby disclosing a clear quid pro quo. Service tax decisions relied on by the appellant were held inapplicable because GST contains a broader concept of supply and a specific statutory treatment of consideration and subsidy. [Paras 7, 8]

The grant-in-aid received from CCRAS was rightly treated as consideration for identifiable supplies and not as a subsidy outside the charging provision.

Distinct taxable persons - Supply of services - HELD THAT: - The Appellate Authority rejected the plea that the arrangement was intra-departmental. It held that CCRAS, though under the Ministry of AYUSH, and the appellant were separate legal entities, and the description of the appellant as a Sub-Nodal Agency did not efface its independent legal personality. The approved scope of work, timelines, deliverables and conditions for release of funds established a functional arrangement under which the appellant carried out research activities for consideration, satisfying the ingredients of supply under Section 7(1)(a). The appellant was also found not to be acting as a pure agent. [Paras 7, 8]

The research activity undertaken by the appellant for CCRAS constituted supply between distinct taxable persons in the course or furtherance of business.

Exemption under Entry 3 and Entry 3A - Functions entrusted to Panchayat or Municipality - Strict interpretation of exemption - HELD THAT: - The Appellate Authority held that the conditions in Entries 3 and 3A are cumulative and require not only the specified class of recipient but also a direct nexus with functions entrusted to a Panchayat or Municipality. Though the expression "in relation to" is wide, it could not be used to dilute the express statutory requirement. The appellant's work under the Ayurgyan Scheme was found to be research, documentation and evaluation for CCRAS, a central autonomous research body, and not services rendered for or on behalf of local bodies in discharge of constitutional functions under Articles 243G or 243W. The rulings cited by the appellant were distinguished on facts, and the claim under Notification No. 8/2024-Central Tax (Rate) was also rejected because the stated conditions were not shown to be fulfilled. [Paras 7, 8]

The appellant failed to establish that its services were covered by Entry 3 or Entry 3A, and no exemption under Notification No. 8/2024-Central Tax (Rate) was available.

Classification of research and development services - Specific exemption not attracted - Harmonious construction - HELD THAT: - The Appellate Authority held that the principle that a specific entry prevails over a general entry applies only where both entries govern the same transaction. Since the appellant did not satisfy the conditions of Entries 3 and 3A, there was no conflict between those exemption entries and the taxable entry for research and development services. The intrinsic nature of the activity was research, analysis, validation and documentation, warranting classification under Heading 9981. It was further held that Project 1 and Project 2 did not constitute a composite supply, as they involved distinct supplies of goods and services with separate deliverables. [Paras 7, 8]

The supplies were rightly treated as taxable research and development services under Heading 9981, alongside taxable supply of goods in Project 1, and the reliance on exemption entries to displace classification failed.

Final Conclusion: The appeal was rejected and the advance ruling was upheld. The Authority held that the grant-in-aid received from CCRAS was consideration for taxable supplies, that the appellant's activities constituted taxable supply between distinct persons, and that no exemption was available under Entry 3, Entry 3A, or Notification No. 8/2024-Central Tax (Rate).

Rejection of books of account - suppression of yield - unaccounted production and sales -AO has made an addition on account of unaccounted sales based on an estimated production yield of 89% in the assessee’s SMS Division

HC [2025 (9) TMI 1787 - CHHATTISGARH HIGH COURT] held AO had worked out the alleged yield mathematically but had not brought any tangible or corroborative evidence of suppression of yield, unaccounted production, or unaccounted sales. Mere variation in consumption figures or low yield, without supporting material, could not justify rejection of books or an addition founded on guesswork.

HELD THAT:- No good ground to interfere with the impugned order/judgment in exercise of our jurisdiction under Article 136 of the Constitution of India. Accordingly, the special leave petition stands dismissed.

Condonation of delay for refund claim - delay in filing the income-tax return for claiming refund - Genuine hardship - Reasonable cause for delayed return

HELD THAT: - The Court held that while considering an application under section 119(2)(b), the authority is required to examine whether the delay occurred due to reasonable cause and resulted in genuine hardship, and whether there was any intention to evade tax.

On the material placed on record, the petitioner had supported the explanation of illness of the working partner with medical documents. The Court found that this constituted a genuine ground requiring consideration as genuine hardship. Since the return had been filed only for claiming refund of TDS and the respondents had failed to consider the treatment documents, the rejection was held to be erroneous and mechanical. [Paras 8, 9, 10]

The rejection of the condonation application was set aside, and the respondents were directed to treat the return as filed within time.

Final Conclusion: The writ petition was allowed. The order rejecting condonation was quashed, and the respondents were directed to accept the return for assessment year 2024-25 as having been filed within time.

Faceless assessment scheme - Jurisdiction of AO - Section 151A compliance

HELD THAT: - The Court held that the controversy stood covered by the earlier Division Bench decision in the case of Prameela Pasumarthi [2025 (11) TMI 51 - ANDHRA PRADESH HIGH COURT] which had ruled that proceedings undertaken contrary to Section 151A and the notified scheme were unsustainable.

Applying that binding view, the Court accepted the challenge to the assessment process on the ground that recourse to the jurisdictional AO was impermissible under the faceless assessment framework. [Paras 3, 4]

The writ petition was allowed and the impugned assessment order as well as the appellate order were set aside.

Final Conclusion: Following the earlier Division Bench ruling on Section 151A and the notified scheme, the Court held that the assessment process adopted in the present case was impermissible and set aside both the assessment order and the appellate order.

Condonation of delay - Sufficient causefor delay - Limitation in first appeal - assessee had filed the appeal before the CIT(Appeals)/NFAC after a delay of 3 years 10 days.

HELD THAT: - The Tribunal confined itself to the correctness of the refusal to condone the delay and not to the merits of the underlying disallowance. It found that the appeal before the first appellate authority had been filed after an inordinate delay of 3 years and 10 days, without any bona fide or satisfactory explanation and without any material showing diligence or absence of negligence.

The Hon’ble Apex Court in the case of H. Guruswamy & Ors. Vs. A. Krishnaish since deceased by Lrs, [2025 (1) TMI 1524 - SUPREME COURT] has held that while considering the plea for condonation of delay, the court must not start with the merits of the main matter. The court owes a duty to first ascertain the bona fides of the explanation offered by the party seeking condonation. It had further observed that once it is held that a party has lost his right to have the matter considered on merits because of his own inaction for long, it cannot be presumed to be non-deliberate delay and in such circumstances of the case, he cannot be heard to plead that the substantial justice deserves to be preferred as against the technical considerations.

Delay should not be condoned merely as an Act of generosity and that the pursuit of substantial justice must not come at the cost of causing prejudice to the opposing party. See THIRUNAGALINGAM VERSUS LINGESWARAN & ANR. [2025 (5) TMI 2262 - SUPREME COURT]

Applying the principle that condonation is discretionary and that liberal approach does not extend to negligent or inactive conduct, the Tribunal held that the assessee, having failed to establish sufficient cause, could not seek indulgence merely on a plea of substantial justice.

The fact of the matter is that the assessee cannot take advantage of its own wrong. Nothing has been brought on record to suggest any sufficient cause for condonation of such huge inordinate delay before the First Appellate Authority or before this Bench. The judicial principles enshrined in various decisions dictates that such inordinate delay combined with negligence and lack of sufficiency of cause for the delay results in dismissal of the case on the ground of limitation itself. [Paras 6, 7, 8, 9, 10]

The order dismissing the appeal in limine on the ground of limitation was upheld and the assessee's appeal before the Tribunal was dismissed.

Final Conclusion: The Tribunal upheld the refusal to condone the inordinate delay in filing the first appeal, holding that no sufficient cause or bona fide explanation had been shown. As the appeal before the Commissioner (Appeals) was rightly dismissed as time-barred, the assessee's appeal was dismissed without examining the merits of the disallowance.

Failure to mention DIN in the notice u/s. 271D - Document Identification Number defect - Retrospective validation of assessment proceedings - Penalty for cash acceptance of loan or deposit - Repayment of earlier advances vis-a-vis loan or deposit - Opportunity of hearing

Document Identification Number defect - Retrospective validation of assessment proceedings - initiating notice did not mention DIN - HELD THAT: - The Tribunal held that, in view of the retrospective insertion of section 292BA, a proceeding is not rendered invalid merely because of a mistake, defect or omission in quoting a computer generated Document Identification Number, so long as the order is referenced by such number in any manner. It also noticed that the impugned appellate order itself recorded issuance of a show-cause notice with DIN by the Assessment Unit and that this objection had not been raised before the first appellate authority. [Paras 8, 9]

Ground No. 1 was dismissed.

Penalty for cash acceptance of loan or deposit - Repayment of earlier advances vis-a-vis loan or deposit - Opportunity of hearing - HELD THAT: - The Tribunal noted the assessee's stand that the impugned receipts represented repayment of amounts earlier advanced to farmers and that, if so, the bar under section 269SS would not apply because the assessee had not taken or accepted any loan or deposit from them. Since the necessary supporting evidence was not before the Tribunal and the assessee had also raised lack of adequate opportunity before the authority imposing penalty, the matter required reconsideration. The determinative principle applied was that section 269SS is attracted on receipt of loan or deposit, not on recovery of amounts earlier lent by the assessee; therefore, the factual character of the receipts had to be verified after giving one more opportunity of hearing. [Paras 7]

The order was set aside on this aspect and the matter was remanded to the JCIT/ACIT for fresh adjudication after granting opportunity to the assessee and examining the evidence; Ground Nos. 2 and 3 were allowed for statistical purposes.

Final Conclusion: The appeal was partly allowed for statistical purposes. The objection based on absence of DIN was rejected, while the penalty issue was remanded for fresh decision after giving the assessee an opportunity to establish that the receipts were only repayment of earlier advances and not cash acceptance of any loan or deposit.

Bogus purchases - Estimation of income - unexplained expenditure u/s 69C -Estimation of profit vis-a-vis full disallowance

HELD THAT: - The Tribunal held that, once the purchases were treated as bogus and the assessee failed to establish their genuineness, the matter was governed by the principle that unexplained expenditure cannot be indirectly allowed by restricting the addition to a profit percentage.

The assessee's offer to accept an additional profit rate was rejected because the controversy was not one of low profitability but of failure to prove genuine purchases.

Relying on Drisha Impex (P.) Ltd. [2025 (4) TMI 482 - BOMBAY HIGH COURT] and Kanak Impex (India) Ltd. [2025 (3) TMI 230 - BOMBAY HIGH COURT] Tribunal accepted that where purchases are accommodation entries and the claim of deduction is not proved, section 69C permits addition of the entire amount and not merely an estimated margin. [Paras 7, 8, 9]

The addition of the entire disputed purchase amount as unexplained expenditure was upheld and the assessee's plea for estimation of profit was rejected.

Final Conclusion: The Tribunal dismissed the assessee's appeal and sustained the full addition on account of the impugned purchases. It held that, once the purchases were found to be bogus and section 69C applied, the addition could not be restricted by estimating only a profit element.

Estimated business income- estimating business income at 8% of turnover -Applicability of presumptive taxation - Rejection of book results - AO rejected the profit shown as the notices u/s 133(6) of the Act were not complied with nor any books of account were produced and there was deposit of SBNs during the demonetization period

HELD THAT: - The Tribunal held that, for AY 2017-18, section 44AD could not be applied where the assessee's turnover exceeded the prescribed limit, and therefore the appellate authority was not justified in sustaining the addition by reference to the presumptive scheme. At the same time, since the assessee had failed to produce the books of account before the AO there was justification for rejecting the disclosed book result and estimating profits.

Tribunal found that no reason had been given for adopting 8% and that such rate was excessive having regard to the nature of the business, turnover and past history; on the facts, a net profit rate of 4% on turnover was treated as reasonable. [Paras 7]

The estimation of profit at 8% was reduced to 4% of turnover; the addition was sustained only to the reduced extent, and the balance was deleted.

Final Conclusion: The appeal was partly allowed. Tribunal held that section 44AD was inapplicable to the assessee's turnover for AY 2017-18, but upheld rejection of the book result for non-production of books and restricted the profit estimation to 4% of turnover.

Penalty u/s 271C - period of Limitation u/s 275(1)(c) - Initiation of penalty proceedings as barred by limitation

Order by JM - HELD THAT: - The issue is no more “Res-Integra” for the fact that interpretation of the fiscal statutes has to be adhered to in its strictest form and there cannot be liberty provided to either of the parties for interpreting the provisions as per their own sweet will. The aforesaid provisions is clear that no order of imposition of penalty could be passed after expiry of six months from the end of the month, in which, action for imposition of penalty is initiated and in that manner, time ends on 31.12.2017 whereas, penalty has been imposed dated 30th June, 2019. This issue is squarely covered by the decision of JKD Capital & Finlease Ltd [2015 (10) TMI 1281 - DELHI HIGH COURT] wherein as held no order of penalty could have been passed under Section 271-E after the expiry of the financial year in which the quantum proceedings were completed or beyond six months after the month in which they were initiated, whichever was later. Also see Turner General Entertainment Networks India (P). Ltd [2024 (11) TMI 506 - DELHI HIGH COURT]

The penalty order and the appellate order upholding it were set aside and the penalty was deleted.

Concurrent order of AM - Initiation of penalty u/s 271C - Disallowance u/s 40(a)(ia) as assessee had not deducted tax on interest payment - inordinate delay of 18 months by the Ld. Additional Commissioner of Income Tax (TDS), Raipur, for issuing show-cause notice of penalty under section 271C - HELD THAT:- AO, in the assessment order, made disallowance of Rs. 14,11,167/- out of interest under section 69C of the Act. Thus, the sum of Rs. 14,11,167/- is beyond the scope of TDS. Consequentially, the penalty of Rs. 1,41,117/- on the disallowance of Rs. 14,11,167/- is not valid in the eyes of law as the sum of Rs. 14,11,167/- losses its nature as interest. I have also taken note of the fact that the Ld. AO’ instead of taxing the sum of Rs. 62,90,199/- (Rs.77,01,366/- minus Rs. 14,11,167/-) under section 40(a)(ia) of the Act, referred the failure to deduct tax to the Additional Commissioner of Income Tax (TDS), Raipur for penalty under section 271C of the Act. Such action of the Ld. AO does not seem justified.

Trigger point of initiation of penalty under section 271C - No justification on the part of the Additional Commissioner of Income Tax (TDS), Raipur for taking 18 months' time after receiving reference from the Ld. AO to initiate the penalty under section 271C of the Act. This inordinate delay defeats the object of section 275(1)(c) of the Act. Hence, hereby hold that the penalty order is not sustainable in such facts and circumstances. Penalty is deleted.

Validity of Reassessment - Reason to believe - New tangible material -proportionate interest expenditure has escaped assessment - assessee follows the Project Completion Method for revenue recognition - proportionate interest on loans borrowed for the reason that appellant firm had granted interest free loans and advances

HELD THAT: - The Tribunal held that the reasons recorded for reopening were founded entirely on the balance sheet, profit and loss account and other details already available during the original scrutiny assessment, and disclosed no new tangible material coming into the AO's possession after completion of the assessment u/s 143(3).

It further held that a valid reason to believe requires fresh tangible material having nexus with escapement of income, application of mind to such material, and a tentative inference of escapement.

In the present case, the assessee was admittedly following the Project Completion Method and had transferred all expenses, including interest, to closing work-in-progress since the project was not completed during the year - therefore no such interest had been claimed as deduction in computing total income for the year. On these facts, the alleged escapement had no factual basis and the reopening was merely based on suspicion and reappraisal of existing material. [Paras 11, 12, 13]

The notice issued u/s 148 and consequent reassessment were held bad in law and were quashed.

Final Conclusion: Tribunal allowed the appeal by holding that the reassessment lacked any valid foundation in law, since it was initiated without new tangible material and on a baseless assumption of escapement of income. In view of the quashing of the reassessment, the remaining grounds were left open as academic.

Disallowance of interest expenditure - Unexplained cash credits - Addition on account of difference in purchases

Disallowance of interest expenditure - Nexus with non-business use of borrowed funds - Sufficient interest-free funds - HELD THAT: - The Tribunal accepted the finding that the Assessing Officer had not brought any material on record to establish a nexus between the interest-bearing loans and any non-business use. It was found that the assessee had sufficient non-interest-bearing funds and that the borrowed funds were used for business purposes, including payments connected with licence fee and purchase of goods. In the absence of proof that the borrowed funds were diverted for non-business purposes, the disallowance of the entire interest expenditure was held to be unjustified. [Paras 4]

The Revenue's challenge to deletion of the interest disallowance failed.

Unexplained cash credits - Genuineness of unsecured loans - Banking channel transactions - addition u/s 68 in respect of unsecured loans - HELD THAT: - The Tribunal endorsed the appellate finding that the unsecured loans stood supported by bank statements, confirmations, income-tax records, TDS material and other supporting documents. The transactions were found to have moved through banking channels, and the interest payments were subjected to tax deduction at source. On that material, the loans were accepted as genuine and the addition under section 68 was held to be unwarranted. [Paras 6]

The deletion of the section 68 addition was sustained.

Addition as business income -Addition on account of difference in purchases - Reconciliation with TCS figures - Actual cost of purchases - HELD THAT: - The Tribunal agreed with the finding that purchases had been recorded at actual cost as per purchase invoices and that the difference between the purchase figure in the profit and loss account and the figure worked out from TCS arose from rebate, discount and instances where TCS was not collected by some parties. Since there was no finding of excess expenditure on purchases, the addition merely on the basis of such difference was held to be unsustainable. [Paras 8]

The Revenue's objection to deletion of the addition relating to difference in purchases was rejected.

Final Conclusion: The Tribunal upheld the order of the CIT(A) deleting the disallowance of interest, the addition under section 68, and the addition made on account of difference in purchases. The Revenue's appeal was dismissed in entirety.

Validity of assessment framed under section 143(3) and the notice under section 143(2) - Search assessment jurisdiction - Prior administrative approval for compulsory scrutiny - Third-party seized material - Satisfaction for assumption of jurisdiction - Appellate enhancement and new source of income - Uncorroborated loose papers - Estimated unexplained expenditure

Search assessment jurisdiction - Prior administrative approval for compulsory scrutiny - Void notice - - HELD THAT: - The Tribunal held that, the search having been conducted on 21.02.2023, Assessment Year 2022-23 fell within the block of years required to be dealt with under the post-01.04.2021 reassessment framework. It found that on the date of issue of notice under section 143(2), the Central Circle did not have jurisdiction, and the record did not satisfactorily establish the mandatory prior administrative approval for compulsory scrutiny through contemporaneous primary material. The Tribunal further held that section 292BB could not cure such a defect because the challenge went to the root of jurisdiction and the legality of initiation itself. [Paras 6]

The notice under section 143(2) was held void ab initio and the assessment framed under section 143(3) was annulled as without jurisdiction.

Third-party seized material - Satisfaction for assumption of jurisdiction - Prior approval - Additions based on documents seized in the case of another person HELD THAT: - The Tribunal held that under the new statutory scheme, where books or documents are seized in the case of another person and are sought to be used against the assessee, the Assessing Officer must record the requisite satisfaction with prior approval of the competent authority. It found that despite specific objection by the assessee, the additions had been made solely on third-party material without establishing the required jurisdictional nexus and without compliance with the statutory safeguards. The absence of such satisfaction and approval rendered the very assumption of jurisdiction invalid. [Paras 7]

The Tribunal held that the assumption of jurisdiction on the basis of third-party material was invalid and that additions founded on such material were liable to be deleted.

Appellate enhancement and new source of income - Change of head of income - Powers of first appellate authority - Commissioner (Appeals) power to sustain or enhance the addition by changing it from unexplained money under section 69A to a trading addition assessed as business income - HELD THAT: - The Tribunal found that the AO had made the addition as unexplained money and had never treated it as income arising from business operations. By rejecting the books and estimating profit, the Commissioner (Appeals) substituted the very nature and source of the addition and converted the head of income into business income. The Tribunal held that this was not a mere modification of quantum but an impermissible introduction of a new basis of assessment beyond the appellate power under section 251. [Paras 8]

The Tribunal held that the Commissioner (Appeals) had exceeded jurisdiction in converting the addition into a trading addition and quashed that course of action.

Uncorroborated loose papers - Suppressed sales - Deeming fiction under section 69A - Natural justice - HELD THAT: - On the first stream of additions, the Tribunal held that the departmental case rested only on a pricing hypothesis regarding packaging material and did not establish excess physical receipt, corresponding extra production, unrecorded dispatch, buyers, cash trail, or procurement of other raw materials. It therefore held that the alleged suppressed sales were unproved, that section 69A as a deeming fiction could not be used to convert an accounting hypothesis into a proved sale transaction, and that section 115BBE could not survive once the gross addition failed. On the second stream, based on third-party notepads and the notation 'MIRAJ', the Tribunal held that the material remained uncorroborated, that even the supplier's cross-examination weakened the assumed nexus with the assessee, and that the estimated turnover and embedded profit were founded on arithmetic assumptions rather than evidence. The Tribunal also accepted that reliance on such untested third-party loose papers, without effective cross-examination and without independent corroboration, could not sustain the impugned additions. [Paras 11, 13, 14, 15, 16]

The additions on account of alleged unaccounted sales, alleged unexplained money relatable thereto, alleged unaccounted purchases, and the profit estimated on the alleged enhanced turnover were deleted, and the Revenue's challenge to deletion of the section 69A additions failed.

Estimated unexplained expenditure - Section 69C - Duplication of additions - HELD THAT: - The Tribunal held that section 69C requires proof that expenditure was actually incurred and that its source remained unexplained. It found that the Commissioner (Appeals) had not identified any actual out-of-books expenditure but had only adopted a ratio method from the accounts, even after rejecting the books, to infer an initial unexplained expenditure. Tribunal regarded this approach as internally inconsistent, conjectural, and duplicative of the trading estimation, and held that the statutory preconditions of section 69C were not satisfied. [Paras 10, 12]

Both estimated additions under section 69C were deleted and the consequential application of section 115BBE did not survive.

Final Conclusion: The Tribunal allowed the assessee's appeal and dismissed the Revenue's appeal. It held that the assessment itself was without jurisdiction and, independently, that the additions sustained or sought to be restored on the basis of uncorroborated third-party material, estimated suppressed sales, and ratio-based unexplained expenditure could not survive.

Disallowance of expenditure not claimed in computation of income - Adjustment of work-in-progress in respect of TDS default - Applicability of section 40(a)(ia) to capitalised project expenditure - Percentage Completion Method -

Whether Disallowance u/s 40(a)(ia) could not be made in the year under consideration to the extent the impugned expenditure was not claimed in computation of income but was carried in work-in-progress? - HELD THAT: - The Tribunal held that section 40(a)(ia) operates only against expenditure claimed as deduction while computing business income. Mere existence of TDS default does not justify disallowance in the current year if the related expenditure has not entered the profit and loss account and continues as work-in-progress.

Though the assessee was found to be following the Percentage Completion Method, that by itself did not conclude the controversy; the decisive test was whether the expenditure had actually been claimed in the year. Accepting the broader principle emerging from Savala Associates [2009 (10) TMI 640 - ITAT MUMBAI], the Tribunal held that even under Percentage Completion Method, expenditure embedded in work-in-progress and not charged to profit and loss account cannot be disallowed in the current year, but must be adjusted in work-in-progress so as to prevent deduction in a later year without statutory compliance. The subsequent giving-effect order of the Assessing Officer, which accepted that substantial portions of the impugned expenditure remained in closing work-in-progress and only a part had been charged during the year, was treated as reinforcing the correctness of the CIT(A)'s direction.

Tribunal also rejected the Revenue's reliance on Form 3CD as determinative, noting that aggregate reporting in the audit report could not override the actual computation and accounting treatment.

Since the CIT(A) had restored the matter only for limited verification of the segregation between work-in-progress and expenditure claimed, and such verification had already been carried out, no infirmity was found in the appellate order. [Paras 25, 26, 27, 28, 29]

The order of the CIT(A) directing verification and restricting current-year disallowance under section 40(a)(ia) to expenditure actually claimed, with corresponding adjustment to work-in-progress for the balance, was upheld.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s view that section 40(a)(ia) applies only to expenditure actually claimed in computation of income for the year. To the extent the expenditure remained capitalised in work-in-progress, the proper treatment was adjustment of work-in-progress after verification, not direct addition to income for Assessment Year 2018-19.

Applicability of section 56(2)(viib) - conversion of CCDs into equity shares - Valuation date and balance sheet for NAV method under Rule 11U - equity shares were issued on conversion of pre-existing CCDs and no fresh consideration was received during the relevant year

Receipt of consideration for issue of shares - Conversion of CCDs into equity shares -Section 56(2)(viib) applicability -HELD THAT: - The Tribunal held that section 56(2)(viib) applies only where the company receives consideration for issue of shares in the relevant previous year. In the present case, the funds had been received in the preceding year on issue of CCDs and were recorded in the books; during the year under appeal, there was only conversion of that existing liability into share capital and share premium.

Since no fresh funds were received at the time of allotment of shares in the year under appeal, the charging condition of section 56(2)(viib) was not satisfied. [Paras 6, 7]

The addition under section 56(2)(viib) was held to be unsustainable.

Valuation date - Balance sheet immediately preceding valuation date - NAV method - whether the Balance Sheet as at 31.03.2016 is to be taken for the purposes of valuation or audited Balance Sheet as at 31.03.2017 is to be considered? - HELD THAT: - Interpreting Rule 11U, the Tribunal held that the relevant balance sheet is the one drawn up on the valuation date or, if not drawn up, the balance sheet drawn up on the date immediately preceding the valuation date. Since the valuation date is the date on which the consideration is received, and in this case the consideration had been received when the CCDs were issued in the preceding year, the latest audited balance sheet relevant for valuation was the balance sheet as at 31.03.2016. The balance sheet as at 31.03.2017 was not to govern the valuation for the impugned allotment. [Paras 8, 9]

The valuation report based on the balance sheet as at 31.03.2016 was accepted as correct.

Final Conclusion: The Tribunal allowed the assessee's appeal and deleted the addition made under section 56(2)(viib). It held both that no consideration for issue of shares was received during the relevant year on conversion of CCDs and that, in any event, the valuation based on the audited balance sheet as at 31.03.2016 was the correct basis under the Rules.

Renewal of registration of charitable institution - Principal Commissioner jurisdiction to decide the application for renewal -Scope of enquiry at registration stage

Principal Commissioner jurisdiction to decide the application for renewal of registration u/s 12A(1 ) -HELD THAT: - Following its earlier decision in Dera Sacha Sauda [2025 (4) TMI 1736 - ITAT CHANDIGARH] the Tribunal held that powers relating to grant or renewal of registration in exemption matters stood vested in the Commissioner of Income-tax (Exemptions) under the Board's notification issued under section 120. Centralisation of the PAN or transfer of assessment jurisdiction did not confer subject-matter jurisdiction upon the Principal Commissioner (Central) to decide renewal of registration. The impugned order was therefore without jurisdiction. [Paras 19, 20]

The impugned order was liable to be set aside on the ground of lack of jurisdiction.

Genuineness of activities - Scope of enquiry at renewal stage - Specified violations - Renewal of registration under section 12A(1)(ac)(ii) refused by importing considerations relevant to cancellation proceedings under section 12AB(4), particularly on the basis of earlier search-period material - HELD THAT: - The Tribunal held that, for renewal under section 12A(1)(ac)(ii), the competent authority had to confine itself to satisfaction regarding the genuineness of the trust's activities and compliance with material requirements of other laws. The Principal Commissioner mixed up this enquiry with the separate statutory regime governing cancellation for specified violations under section 12AB(4). The Assessing Officer's report accepted that the assessee was imparting education and did not flag violation of any allied law. The Tribunal further held that, in view of Rule 17A, emphasis on search-period records relating to A.Ys. 2014-15 to 2019-20 was misplaced, especially when the Department had already granted registration from assessment year 2022 -23 to assessment year 2026-27 after the search. The Settlement Commission's findings also did not establish siphoning of funds or absence of genuine educational activity, and the existence of minor irregularities could at best attract taxation consequences under the Act, not denial of renewal. [Paras 15, 16, 17, 18, 20]

The assessee was entitled to renewal of registration, and the Revenue was directed to renew the registration and issue the necessary certificate.

Final Conclusion: The Tribunal held that the impugned order rejecting renewal of registration was unsustainable both for want of jurisdiction and on merits. The Revenue was directed to renew the assessee's registration under section 12A(1)(ac)(ii) and issue the necessary certificate.

Revision u/s 263 - Erroneous and prejudicial order - Lack of inquiry and adequate inquiry - legal maxim “sub lato fundamento cadit opus” - as alleged AO made lack of inquiry into the cash advances received on behalf of the assessee's sons.

HELD THAT: - The Tribunal held that the very basis adopted by the Principal Commissioner for invoking revision failed on the record. The assessment order itself showed that the AO had called for and examined evidence, including agricultural records and the statements on oath of all the buyers from whom the amounts were stated to have been received. Those statements were taken on record without adverse comment, which indicated that the AO was satisfied about the nature and source of the transactions.

The registered sale deeds produced also showed acceptance by the sons of receipt of part consideration earlier, and the affidavits and notes of the sons supported the assessee's case that he had been verbally authorised to receive the advances on their behalf.

In these circumstances, the case was not one of non-inquiry, and the assessment order could not be treated as erroneous and prejudicial to the interests of the Revenue merely because the Principal Commissioner entertained doubts about the manner in which the transactions were carried out. Tribunal further noted that the land in question was agricultural land and, on the facts recorded, the original assessment order did not suffer from any error warranting revision.

In rural India, people, still do most of their transactions on verbal assurances hence revenue is not right in observing that no person shall advance money, without documentation. Suspicious, how so strong it may be, cannot take place of evidence. To our minds the assessment order dated 22.12.2017 is neither erroneous nor adverse to the interest of revenue. It is a settled legal proposition that if initial actions is not in consonance with law all subsequent and consequential proceedings would fall through for the reason that illegality strikes at the root of the order. In such a fact situation, the legal maxim “sub lato fundamento cadit opus” meaning thereby that “foundation being removed, structure/work falls”, comes into play. [Paras 10, 11, 12]

The assumption of jurisdiction u/s 263 was held to be invalid, the impugned revisional order was set aside, and the original assessment order was sustained.

Final Conclusion: The Tribunal allowed the assessee's appeal and held that the Principal Commissioner was not justified in revising the assessment, since the AO had already conducted inquiry into the cash deposits and accepted the explanation on the material placed before him. The revisional order was set aside, the original assessment was restored, and the stay application was dismissed as infructuous.

Benami Transactions - Provisional attachment - benami property - Burden of proof - Continuity of attachment - Beneficial Owner - absence of a specific finding that those properties were benami -HELD THAT: - The Tribunal noted that it was undisputed that the appellant was initially proceeded against as beneficial owner but, during adjudication, the Initiating Officer sought and obtained acceptance of the case that Smt. Shital Soni was the beneficial owner and the appellant was only an abettor. Having regard to that position, the Tribunal followed its earlier decision in connected matters and held that the scheme of the PBPT Act permits attachment only of benami property in the hands of the benamidar or the beneficial owner. The Act does not authorise attachment of property merely because it belongs to an abettor, unless such property is itself shown to be benami. Since there was no specific finding that the appellant's attached properties were benami, continuance of their attachment was unsustainable, though his exposure to the consequences under section 53 for abetment was left unaffected. [Paras 10]

The impugned order was set aside insofar as it sustained attachment of the appellant's properties, while clarifying that the appellant remained liable to consequences as an abettor under the Act.

Final Conclusion: The Tribunal allowed the appeal and held that the appellant's properties could not be attached after he was treated only as an abettor, there being no finding that those properties were benami. The attachment was therefore set aside to that extent, without affecting proceedings under section 53 of the Act.

Classification of the imported goods described as "PCC Lime 0/20MM (Quicklime)(Pulp Conversion Chemical)" - The purity of Calcium Oxide is less than 98% and therefore, the product, Quicklime, is classifiable under Customs Tariff Item No.25221000 - Delay Filling SLP - HELD THAT:- Delay was condoned, and the Civil Appeals were dismissed as the Court found no good ground to interfere with the impugned order of the Tribunal [2025 (7) TMI 648 - CESTAT KOLKATA].

Classification of "quicklime" - Binding precedent - Issue settled against Revenue - HELD THAT: - The Court recorded the appellant's fair statement that the Tribunal, while passing the impugned order [2025 (8) TMI 1010 - CESTAT KOLKATA], had relied upon its earlier decision in M/s. Viraj Profiles Ltd. v. Commissioner of Customs (Preventive) Mumbai [2023 (10) TMI 1260 - CESTAT MUMBAI], and that the said view had since been upheld by this Court in Commissioner of Customs (Preventive), Mumbai vs. Viraj Profiles Ltd. [2024 (4) TMI 187 - SC ORDER]. Proceeding on that accepted position, the Court treated the issue as settled against the Revenue and declined interference. [Paras 2, 3]

The appeals were dismissed as the issue stood settled against the Revenue by the earlier decision already upheld by the Supreme Court.

Final Conclusion: Accepting the appellant's statement that the controversy was already concluded by a precedent upheld by the Supreme Court, the Court dismissed the appeals and disposed of the pending applications.

Seeking release of detained goods and waiver of warehouse charges- detention and adjudication concerned gold articles.

Release of detained goods - Redemption of confiscated goods - HELD THAT: - The Court held that no further interference was required because the principal relief sought in the writ petition, namely return and release of the seized gold articles, already stood substantially granted by the appellate order, and that order had thereafter been affirmed in substance by the Revisional Authority. In that view, the respondent was directed to release the goods subject to the petitioner's compliance with the conditions contained in the appellate order regarding payment of the applicable customs duty, redemption fine and penalty. [Paras 10, 11]

Release of the detained gold articles was directed subject to compliance with the conditions stipulated in the appellate order.

Waiver of warehouse charges - HELD THAT: - The Court held that once the appellate authority had permitted redemption and release of the impugned gold articles on payment of redemption fine, applicable customs duty and penalty, the petitioner ought not to be burdened with warehouse charges for the period thereafter. On that basis, waiver of warehouse charges was granted from the date of the appellate order till actual release of the goods. [Paras 12]

Warehouse charges were waived for the period commencing from the date of the appellate order until actual release of the gold articles.

Final Conclusion: The writ petition was disposed of without further interference on merits since the appellate order permitting redemption and release of the detained gold had already been affirmed by the Revisional Authority. Release was directed subject to payment in terms of that order, and warehouse charges were waived for the period after the appellate order until actual release.

Provisional release of imported goods - import and local sale of food products, including areca nuts - Verification of Country of Origin - Protection of revenue pending preferential tariff verification.

HELD THAT: - The Court held that where the proper officer seeks verification of the certificate of origin under the statutory scheme governing preferential tariff claims, release of the goods during such verification must adequately protect the revenue. It emphasised that, in exercise of judicial review, the High Court is expected to show restraint in matters affecting revenue protection and that the applicable Act, Rules and Circular must be scrupulously followed. At the same time, having regard to the delay in verification and the position of the importer, the Court directed expeditious verification within a fixed time and linked the consequence to the result of such verification: if the declared country of origin is found correct, release is to follow in accordance with law; if it is found incorrect or false, provisional release would require furnishing 100% bank guarantee as stipulated in the circular. [Paras 10, 11, 12, 13]

The interim order granting release on 10% bank guarantee and bond for the balance was modified by directing completion of origin verification within three weeks, with release to follow according to law if the declaration is correct, and with 100% bank guarantee to be furnished for provisional release if the declared origin is found incorrect or false.

Final Conclusion: The writ appeal was disposed of by modifying the interim arrangement and directing prompt verification of the country of origin. The Court required revenue protection to govern provisional release and made the requirement of 100% bank guarantee operative if the declared origin is found to be incorrect or false.

Maintainability of Petition - Alternative remedy - Denial of Cross-examination of co-delinquent - violation of principles of natural justice.

HELD THAT: - The Court held that the person whose statement was sought to be tested by cross-examination was himself a co-delinquent against whom the impugned order directed action and imposed penalty. In such circumstances, there was no question of compelling that person to appear as a witness for cross-examination in the petitioner's case. On that footing, the plea of breach of natural justice was rejected. The further contention as to the extent to which that statement could be relied upon against the petitioner, and whether the department had other supporting material, was treated as involving mixed questions of fact and law falling within the domain of the appellate authority and not as a pure natural justice ground justifying bypass of the statutory appeal. [Paras 7, 8, 9]

The writ petition was not entertained and the petitioner was relegated to the appeal remedy, with liberty to file appeal and with instalment-based directions regarding the required pre-deposit.

Final Conclusion: The Court declined to entertain the writ petition, holding that the plea of denial of cross-examination did not disclose a violation of natural justice in the facts of the case and that the remaining questions were matters for the appellate authority. Liberty was preserved to file appeal, and time-bound instalment directions were issued in relation to the pre-deposit.

Rejection of request for amendment of the shipping bill - Scope of Self Certification - Post Export Conversion - claim the benefit under the Merchandise Export from India Scheme (MEIS Scheme) - failure to tick “YES” in the reward box, resulted in denying the respondent Authorities an opportunity to physically verify the goods - HELD THAT:- In view of the petitioner confining the relief to permission to proceed under the Shipping Bill (Post export conversion in relation to Instrument Based Scheme) Regulations, 2025, the Court granted liberty to file an application under the 2025 Regulations within two weeks, directed the first respondent to consider it in accordance with law after hearing the petitioner, and clarified that such consideration should be uninfluenced by the impugned order.

Classification of goods -imported chocolate flavour - classifiable under Customs Tariff Heading 3302 as a mixture of odoriferous substances Or under Customs Tariff Heading 1806 as chocolate and other food preparations containing cocoa -Residuary classification under food preparations containing cocoa- Extended period of limitation - Suppression in self-assessment and RMS clearance.

Tariff classification - HELD THAT: - The Tribunal held that a harmonious reading of the tariff description under Heading 1806 and the relevant Chapter Notes required the imported product, for classification under sub-heading 18069090, to be a food preparation containing cocoa. The imported goods were found to be natural flavours and flavouring substances meant to be added to food, and not a product for direct consumption as food. On that basis, the reclassification of the goods from the heading claimed by the appellant to the residuary entry under Heading 1806 was held to be unsustainable. [Paras 16]

The product was held not classifiable under Customs Tariff Heading 18069090.

Extended limitation - Suppression of facts - RMS clearance - HELD THAT: - The Tribunal found that the appellant had produced the entire details relating to the imported goods while filing the Bill of Entry. It therefore held that mere clearance of the goods under RMS could not by itself sustain an allegation of suppression in relation to classification so as to justify recourse to the extended period. Since the show cause notice was received after expiry of the normal period reckoned from the out-of-charge order, the demand was held to be barred by limitation. [Paras 16]

The demand was held time-barred and the extended period was found to be unavailable.

Final Conclusion: The Tribunal held that the imported chocolate flavour could not be reclassified under the residuary entry for chocolate and other food preparations containing cocoa, and further held that the demand was barred by limitation since extended period was not invocable. The impugned order was therefore set aside and the appeal was allowed with consequential relief.

Correct classification of Imported goods - manufacture of electric two-wheelers (escooters) in India and imports various components required for such manufacture -complete e-bikes in CKD condition under CTI 8711.6020 - Concept of “essential character” - Applicability of Rule 2(a) of the General Rules for Interpretation - Classification at the time of import - No clubbing of multiple consignments - Bona fide classification dispute - Extended period of limitation - redemption fine when goods not available - Misdeclaration - Redemption fine - penalty in classification dispute.

Whether impugned goods imported by Appellant should be considered as individual parts/components classifiable under Chapters 73, 84, 85, 87, 90 as declared by importer, or as complete e-bikes in CKD condition classifiable under CTI 8711.6020, as held by LAA.​​​​​​​ - HELD THAT: - It is well settled that the applicability of Rule 2(a) is fact-dependent and cannot be applied mechanically. The Hon’ble Supreme Court in Bharat Heavy Electricals Ltd. vs. Commissioner of Customs [1997 (8) TMI 252 - SUPREME COURT], has held that classification under Rule 2(a) must be determined having regard to the facts of each case and the nature of the goods as presented. Therefore, reliance on decisions rendered in different factual contexts without establishing parity of facts is not legally sustainable.

The concept of “essential character” under Rule 2(a) presupposes that the goods, as presented, must have the identity of the complete article, even if incomplete. However, the data on record demonstrates the exact opposite—what is imported are disparate, unconnected parts spread across multiple consignments, with critical components such as the battery (which is the sole source of propulsion in an electric vehicle) frequently absent. The absence of such indispensable components renders it impossible to attribute the identity of a complete electric vehicle to the imported goods. The Department’s approach of selectively aggregating components across time and consignments to artificially reconstruct a complete product is contrary to the settled principle that classification must be based on goods as presented. Therefore, the essential character test is not satisfied either factually or legally, and the very foundation of invoking Rule 2(a) stands vitiated.

It is also well settled that decisions on classification under Rule 2(a) turn on their own facts, and no universal principle can be applied across different cases. Therefore, reliance on precedents without demonstrating similarity of facts cannot be a valid basis for classification.

It is well settled that Circulars issued by the Board are binding on the Department but cannot override the statutory provisions or the settled principles of classification under the Customs Tariff. The Hon’ble Supreme Court in Commissioner of Central Excise vs. Ratan Melting & Wire Industries [2008 (10) TMI 5 - SUPREME COURT], has categorically held that Circulars contrary to statutory provisions or judicial pronouncements have no binding force. Further, the Hon’ble Supreme Court in Sony India Ltd. [2008 (9) TMI 19 - SUPREME COURT] has laid down that classification under Rule 2(a) must be based on goods as ‘presented’ and that imports across multiple consignments cannot be aggregated to treat them as a complete article. Therefore, to the extent the Circular seeks to justify classification by artificial aggregation or by presuming completeness despite absence of critical components, it cannot be relied upon.

The Tribunal held that Rule 2(a) can apply only when the goods, as presented in the import consignment, possess the essential character of the complete article. On the record, the Department failed to establish any consignment-wise or even IGM-wise correlation showing import of all critical components constituting a complete electric vehicle. Battery packs, treated by the Tribunal as an indispensable component and the sole source of propulsion in an electric vehicle, were admittedly not imported with the subject consignments and were procured separately. The Department's case rested on artificial aggregation of fragmented imports over time and on post-import assembly, which was held impermissible in view of the principle that classification must be determined on the basis of goods as presented at the time of import. Since the essential character test failed factually and legally, invocation of Rule 2(a) and reclassification under heading 8711 could not be sustained. [Paras 93, 94, 96, 98, 100]

The reclassification of the imports as complete electric vehicles in CKD condition under heading 8711 was set aside.

In case the goods are classifiable under CTI 8711.6020, whether the demand of duty should be limited to the normal period or the demand of duty should cover extended period also, as done by the LAA.​​​​​​​ - HELD THAT: - The Tribunal found that the imports were made through Bills of Entry that were assessed by the Department and the classification adopted by the importer was always within departmental knowledge. The dispute was essentially one of interpretation of Rule 2(a) and tariff classification, and there was no material to establish fraud, wilful misstatement, or suppression. The Tribunal also noted that earlier show cause notices had already been issued on substantially the same facts and issue, which demonstrated prior knowledge on the part of the Department and negatived any later allegation of suppression for invoking the extended period. [Paras 101, 102, 103, 104, 105]

The demand for the extended period was held unsustainable.

Confiscation, redemption fine, and penalties on the appellants and co-appellants - HELD THAT: - The Tribunal held that where the goods are not available for redemption, redemption fine under Section 125 cannot be imposed, and confiscation cannot be sustained for that purpose. It further held that the present matter was a bona fide classification dispute and not a case involving fraud, suppression, or deliberate misdeclaration. Once the demand failed on merits and on limitation, the foundation for confiscation and for penalties under Sections 112, 114A and 114AA necessarily collapsed. The Tribunal therefore treated all consequential penal and confiscatory actions as unsustainable. [Paras 106, 107, 108]

The confiscation, redemption fine, and all penalties were set aside.

Final Conclusion: The Tribunal allowed all the appeals and set aside the impugned order. It held that Rule 2(a) was wrongly invoked, the extended period was not available, and the consequential confiscation, redemption fine, and penalties could not survive.

Penalty on authorised person - Delay and Laches - Prejudice Test - Audi Alteram Partem - Delay in issuance of the complaint and show cause notice or by non-compliance with Rule 4 - want of effective opportunity - Definition of "person" - Denial of cross-examination - Breach of the principles of natural justice - Vicarious liability of company officer - contraventions arising from issuance of prepaid forex cards without due diligence and upon receipt of funds from third parties and unauthorised persons - KYC Compliance - Due diligence in foreign exchange transactions - De facto declarant.

Rule 4 adjudication procedure - Reasonable period - Natural justice - HELD THAT: - The Tribunal held that the record disclosed a detailed investigation into the impugned forex card transactions and that the appellants had been put to notice through summons during investigation. In that background, the challenge based on delay was rejected as untenable. It further found that after issuance of the show cause notice, relied upon documents were supplied, replies were filed, the Adjudicating Authority recorded its opinion to proceed with inquiry, and personal hearing was granted. The preliminary objection that the complaint was processed too quickly to permit application of mind was treated as conjectural. On these facts, the procedure contemplated under Rule 4 stood satisfied. [Paras 5, 6, 8]

The procedural challenge failed and the adjudication was held to be valid.

Penalty on authorised person - Authorised person within person - Concurrent contraventions - HELD THAT: - The Tribunal held that the definition of person under FEMA is wide enough to include an individual, a company and, consequently, an authorised person operating under Section 10. Chapter III, which empowers the Reserve Bank of India to issue directions and inspect authorised persons, does not exclude or curtail the adjudicatory and penal power under Section 13. The statutory scheme therefore does not grant any immunity to an authorised person from penalty merely because it is licensed by the Reserve Bank. The Tribunal also rejected the contention that different categories of contravention under Section 13 could not be invoked together, holding that nothing in the statute barred simultaneous invocation where the facts disclose such violations. [Paras 9]

The company's plea that only the Reserve Bank could deal with the alleged contraventions was rejected, and its amenability to penalty under Section 13 was affirmed.

Denial of Cross-examination and prejudice - HELD THAT: - The Tribunal held that there is no inflexible rule requiring cross-examination in every quasi-judicial proceeding and that the governing test is whether denial has caused prejudice. It found that the transactions with the third parties, the receipt of funds from them, and the issuance of forex cards in the names of persons who had not themselves approached the company were already borne out from the record and substantially admitted. Relied upon documents had also been furnished to the appellants, who failed to show what further material could have been elicited through cross-examination. In these circumstances, denial of cross-examination neither caused prejudice nor vitiated the proceedings. [Paras 12, 13, 14, 15, 16]

The objection based on refusal of cross-examination was rejected.

Due diligence in foreign exchange transactions - KYC compliance - Unauthorised dealings in foreign exchange - HELD THAT: - The Tribunal found that the company issued a large number of forex travel prepaid cards in the names of persons who either had not received them or had not travelled, and that the company received the consideration not from the named passengers but from third parties and entities. It accepted the finding that the company failed to verify original passports, identify the actual travellers, follow KYC norms, or explain to whom the cards were delivered. The plea that there was no prohibition on receiving funds from third parties was rejected, the Tribunal holding that the very scheme of such cards required prudent verification of genuine passengers and strict compliance with due diligence obligations. The established facts therefore supported the findings of contraventions against the company. [Paras 17, 21, 22, 23]

The penalties imposed on the company were upheld and its appeal was dismissed.

Vicarious liability of company officer - In-charge of conduct of business - De facto declarant - HELD THAT: - The Tribunal found on the record that the individual appellant was not in charge of the affairs of the company in the relevant southern region during the period when the impugned transactions occurred, and that the contrary view in the impugned order rested on an erroneous reading of the material. That finding displaced the foundation for penalty under Section 42(1). It further held that his later participation in the investigation as the company's representative and his inability to furnish complete details of the actual declarants could not justify treating him as a de facto declarant in place of the persons in whose names the forex cards were issued. On the facts, the statutory obligation under Section 10(6) could not be extended to him personally. [Paras 19, 20, 21, 22, 23]

All penalties against the individual appellant were set aside and his appeal was allowed.

Final Conclusion: The appeal of the company was dismissed, the Tribunal holding that the adjudication was procedurally valid and that the company, though an authorised person, was liable to penalty for the established FEMA contraventions. The appeal of the individual appellant was allowed, as he was not shown to be in charge of the company during the relevant period and could not be treated as a de facto declarant for fastening personal liability.

Admissibility for use of statements recorded under Customs law in FEMA adjudication - Retracted confession - Corroborative evidence - Preponderance of probabilities - Retraction of inculpatory statements - Independent contravention under FEMA despite Customs settlement - Contravention of Section 3(b) of FEMA - Penalty reduction on proportionality.

Use of statements recorded under Customs law in FEMA adjudication - Retraction of inculpatory statements - HELD THAT: - The Tribunal held that the respondent had conducted investigation under FEMA by recording the statement of Shri Laxmi Narayan Gupta, and in that statement he admitted the truth of the statements earlier made before the DRI regarding under-valuation and cash payments of the differential amount through the suppliers' Indian agents. Relying on Vinod M. Chitalia v. Union of India, the Tribunal held that statements made under the Customs Act in relation to the same transaction are capable of being used in FEMA adjudication. It further held that the retraction was unpersuasive because the statements had been confirmed before two authorities on different dates, no material was produced to establish coercion or duress, and the statements were corroborative of the documents and other evidence recovered in investigation. Applying the principles noticed from Vinod Solanki Vs Union of India [2008 (12) TMI 31 - SUPREME COURT] and K.T.M.S Mohamed Vs. Union of India [1992 (4) TMI 6 - SUPREME COURT], the Tribunal concluded that mere retraction does not render such statements involuntary or inadmissible. [Paras 6, 8]

The evidentiary challenge failed, and the admitted statements were accepted as reliable material for establishing the FEMA contravention.

Independent contravention under FEMA despite Customs settlement - HELD THAT: - On examining the settlement order, the Tribunal found that the immunity granted was in relation to penalty and prosecution under the Customs law in that case. It held that the action initiated by the Enforcement Directorate was for contravention of Section 3(b) of FEMA arising from compensatory payments made for under-invoiced imports, and that offence was distinct from the Customs duty evasion investigated by the DRI under the Customs Act. The Customs settlement, therefore, did not extinguish or preclude FEMA liability for the separate foreign exchange contravention. [Paras 7]

The objection founded on the Customs Settlement Commission order was rejected.

Contravention of Section 3(b) of FEMA - Penalty reduction on proportionality - The contravention of Section 3(b) of FEMA stood established against the company, the proprietary concern and Shri Laxmi Narayan Gupta, though the penalties were reduced. - HELD THAT: - The Tribunal found that Shri Laxmi Narayan Gupta had admitted the modus operandi of settling the real price with the Chinese suppliers, remitting the invoice value through banks, and paying the differential amount in cash through the suppliers' Indian agents. It held that he was actively involved in the transactions as Managing Director of PTCL and that liability under Section 42 of FEMA was made out against him; the same position applied to MLTI of which he was the proprietor. Having upheld the finding of contravention, the Tribunal nevertheless accepted the plea for reduction of penalty having regard to the circumstances stated on behalf of the appellants, including the health of the individual appellant and the condition of the business concerns, and reduced the penalties accordingly with adjustment of the pre-deposit. [Paras 9, 10]

The finding of contravention was affirmed, but the penalties were reduced and the appeals were partly allowed to that extent.

Final Conclusion: The Tribunal upheld the finding that the appellants had contravened Section 3(b) of FEMA and that the individual appellant was liable under Section 42. The appeals were partly allowed only to the extent of reduction of penalties, with adjustment of the amounts already deposited.

Competition Commission - compliance with natural justice after investigation - Audi alteram partem - Validity of the Commission’s direction in (iv) and (v) - unreasonable - non-disclosure of pricing or discounting policy - Show-cause notice - Seek to impede the appellant’s legitimate entitlement to conduct its trade and business in a commercially reasonable manner and further these directions are contrary to the explicit findings contained in the investigation report of the Director General - guilty of contravention of provisions engrafted under Section 4(2)(a)(ii), 4(2)(d) read with Section 4(1).

Principles of natural justice - Audi alteram partem - Disagreement with Director General's findings - Show-cause notice - HELD THAT: - The Appellant is the largest producer and seller of Viscose Staple Fibre (VSF). The DG and Commission have delineated the relevant market as “market of Viscose Staple Fibre (VSF)”. The allegation against the Appellant was abuse of its dominant position in the relevant market by following discriminatory pricing policy and imposing unfair conditions upon its customers whereby forcing its customers to disclose sale and production data and were refusing to sell to traders, thus not allowing competition in the market.

The DG in its investigation report has given a finding that the Appellant is indulging in unfair and discriminatory pricing of VSF in the relevant market and has imposed supplementary obligations on Indian spinners, which are in violation of Section of Section 4(2)(a)(ii) and Section 4(2)(d) read with Section 4(1) of the Competition Act.

The Tribunal confined itself to the procedural question and found that, while the Director General had treated non-disclosure of the pricing or discounting policy as not amounting in itself to a contravention, and had also held that the appellant was under no obligation to keep traders in business, the Commission nevertheless directed the appellant to publicise its policy and not impose end-use restrictions so as to permit trading by buyers. These directions were held to be in variance with the Director General's findings. Once the Commission proposed to differ from those findings, natural justice required an action-oriented notice disclosing the disagreement and a reasonable opportunity to rebut it. The omission to do so deprived the appellant of an effective opportunity to defend itself and vitiated the order to that extent, warranting remand without examination of the merits. [Paras 19, 22, 23]

The impugned order was set aside and the matter remanded to the Commission to give the appellant an opportunity wherever it proposes to differ from the Director General's findings and then decide the case afresh uninfluenced by any observation on the merits.

Final Conclusion: The appeal was allowed on the limited ground of breach of natural justice. Since the Commission had departed from parts of the Director General's findings without issuing notice of disagreement or granting an effective opportunity of hearing, the impugned order was set aside and the matter remanded for fresh decision after due notice.

Attachment of properties - objections as regards the consideration as well as the conclusions of the authority and its treatment of the properties - Entitlement to challenge the order passed by the competent authority under Rule 5(5) before the High Court, rather than pursue the special leave petition on merits - HELD THAT: - The Court noted that, pursuant to its earlier direction to avail the alternative remedy under the Act and the Rules, the competent authority had passed a detailed order on the petitioner's application. Since a statutory order had thereafter come into existence and the petitioner had objections to its consideration and conclusions, the proper course was to permit challenge to that order before the High Court under Article 226/227. The Court expressly refrained from examining the merits and clarified that all legal and factual contentions would remain open for consideration by the High Court, uninfluenced by the observations in the impugned order. [Paras 5, 6]

The special leave petition was disposed of by leaving it open to the petitioner to challenge the subsequent statutory order before the High Court, with all merits kept open.

Final Conclusion: The Court declined to examine the merits after a detailed statutory order had been passed pursuant to its earlier direction and held that the petitioner could challenge that order before the High Court. All legal and factual contentions were kept open, and the High Court was requested to consider the matter expeditiously.

Entitlement of Regular bail under section 45 of the PML Act - Twin conditions for bail under section 45 of the PML Act - petitioner was granted regular bail on conditions specified - Condonation of delay - HELD THAT:- Delay was condoned, the special leave petitions were dismissed as the Court was not inclined to interfere with the impugned judgment and orders of the High Court [2023 (9) TMI 1473 - KERALA HIGH COURT], and liberty was reserved to seek appropriate orders before the High Court if there was breach of any bail condition by respondent No. 1.

Entitlement to bail in the money-laundering case - prolonged custody - non-commencement of trial - parity with co-accused already enlarged on bail - Delay in commencement of trial - HELD THAT: - The Court found that although the prosecution complaint had been filed, charges had still not been framed, and the proposed examination of numerous witnesses indicated that the trial was likely to take time to conclude. It further noted the appellant's long incarceration and the fact that co-accused had already been granted bail, entitling the appellant to claim parity. Taking an overall view of these circumstances, the Court held that continued custody was not warranted and the appellant should be released on bail, while clarifying that the order did not amount to any finding on the merits. [Paras 5, 6, 7, 10, 11]

The refusal of bail was set aside and the appellant was directed to be released on bail on terms to be fixed by the trial court, subject to his appearance and compliance with the conditions of bail.

Final Conclusion: The appeal was allowed and the appellant was granted bail. The Court rested the relief on long incarceration, likely delay in conclusion of trial, and parity with co-accused, while leaving the merits of the prosecution case open.

Writ maintainability against show cause proceedings - Premature challenge - Show-cause notice stage - Retention of seized property - Proceed in accordance with statutory remedy -Adjudication under Section 8 of the Prevention of Money Laundering Act - HELD THAT: - The Court held that, under the scheme of the Act, once an application for retention of seized property is filed and notice is issued, the noticee is entitled to submit objections and participate in the enquiry, following which the Adjudicating Authority must consider the reply, hear the affected person, and record a finding on whether the property is involved in money laundering. In the present case, the search and seizure, the filing of the application under Section 17(4), and the issuance of notice after recording reasons under Section 8(1) were not themselves under challenge, and the petitioner had already filed objections and participated in the proceedings. In that situation, the Court found that it was for the Adjudicating Authority to complete the enquiry and pass an order under Section 8(2), and that a writ petition seeking to quash the entire original application at that interlocutory stage was misplaced. [Paras 8, 9, 10, 11, 12]

The petitioner was left to await the adjudication and pursue further remedies in accordance with the Act.

Final Conclusion: The Court dismissed the writ petition, holding that the challenge to the pending proceedings before the Adjudicating Authority was premature since the petitioner had already entered appearance, filed objections, and the statutory enquiry was yet to culminate in an order.

Recovery of CENVAT credit - show-cause cum-demand notice - Non-utilisation of CENVAT credit - Penalty - invocation of extended period as contemplated under Rule 15(3) -HELD THAT: - The Tribunal held that Section 73(3) of the Finance Act, 1994 bars issuance of a recovery notice under Section 73(1), including its proviso for extended period, where the assessee discharges the liability on being pointed out by the Department and informs it accordingly. Since Rules 14 and 15(3) of the CENVAT Credit Rules, 2004 make Section 73 applicable mutatis mutandis, that protection extended to the present recovery proceedings as well. The show cause notice itself recorded that the appellant had repaid the credit when it was pointed out in audit, and the existence of sufficient balance in the CENVAT credit account justified the finding that the credit had not been utilised. On that basis, both the recovery proceeding and the penalty demand were held to be unsustainable. [Paras 4]

The demand notice invoking the extended period and the equal penalty were held unsustainable, and the impugned appellate order was set aside.

Final Conclusion: The Tribunal allowed the appeal, holding that once the inadmissible credit had been reversed on being pointed out during audit and had not been utilised, issuance of notice under Section 73(1) with invocation of extended period and imposition of equal penalty was not sustainable. The appellate order confirming the demand was therefore set aside with consequential relief.

Demand from rent-a-cab services availed under reverse charge mechanism -Pre-notice payment of service tax and interest - Suppression of facts - Bar on show-cause notice after intimation to department - HELD THAT: - The Tribunal held that the text of Section 73(3) clearly provides that where service tax ascertained by the assessee or pointed out by the department is paid before service of notice and such payment is intimated in writing, no notice under sub-section (1) can be served in respect of that amount. In the present case, the appellant had paid the tax and interest before issuance of the show-cause notice and had informed the department in writing, and that payment was itself acknowledged in the notice. Once these statutory conditions stood satisfied, the notice ought not to have been issued and the proceedings founded on it were unsustainable in law. [Paras 6]

The show-cause notice and the proceedings based on it were held unsustainable, and the impugned appellate order was set aside.

Final Conclusion: The Tribunal allowed the appeal on the ground that, after payment of the service tax and interest before issuance of notice and written intimation thereof to the department, the show-cause notice itself was not maintainable under the statutory scheme. The impugned order was therefore set aside with consequential relief.

Visa facilitation services- Service Tax as Business Auxiliary Service -Departmental circular binding on Revenue - Extended period of limitation.

Visa facilitation services - HELD THAT: - The Tribunal found that the appellant was interacting directly with intending travellers and facilitating procurement of visas for them. Applying the Board circular reproduced in Green Channel Travel Services P. Ltd. [2011 (12) TMI 110 - CESTAT, AHMEDABAD], it held that a visa facilitator who directly assists individuals to obtain visa does not act on behalf of the embassy as an agent of the principal, and such activity does not fall within any taxable service under section 65(105). The Tribunal further noticed consistent decisions holding that charges for arranging visa for clients are not taxable as Business Auxiliary Service. Since the appellant was rendering the same nature of service contemplated in the circular, the activity was held non-taxable, and Revenue could not contend contrary to its own circular. [Paras 8, 9, 10, 11]

The demand on visa procurement charges was unsustainable and the impugned orders were liable to be set aside on merits.

Extended period of limitation - Departmental knowledge - Absence of mala fides - Invocation of the extended period in the show cause notice was not sustainable. - HELD THAT: - The Tribunal accepted the appellant's contention that earlier show cause notices, audit proceedings and the correspondence on record showed that the Department was already aware of the appellant's activities. In that situation, mala fides could not be attributed to the appellant, and the basis for invoking the extended period of limitation failed. [Paras 12]

The extended period of limitation was held to have been wrongly invoked.

Final Conclusion: The Tribunal held that the appellant's visa facilitation charges for directly assisting travellers in obtaining visas were not taxable under Business Auxiliary Service and that the Revenue was bound by the Board circular to that effect. It also held that the extended period had been wrongly invoked, and accordingly set aside the impugned orders and allowed the appeals with consequential relief.

Reverse charge liability - Service recipient - Foreign bank charges on export proceeds - Privity of contract - Transaction in Money - Demand on Assumptions and Presumptions.

Reverse charge liability - Service recipient - HELD THAT: - The Tribunal held that the show cause notice proceeded only on an assumption that the foreign banks had rendered taxable service to the assessee. No agreement, invoice, bill, or other material was produced to establish a service provider-service recipient relationship between the assessee and the foreign banks or to identify any agreed consideration payable by the assessee as quid pro quo for any service. The demand, resting on presumptions, therefore lacked the foundational requirement for levy. The Tribunal further found absence of any privity of contract between the assessee and the foreign remitting banks, and nothing on record showed that the foreign banks acted on the assessee's instructions so as to make the assessee the service recipient in India. Following the coordinate Bench decision in M/s. SKM Egg Products export (India) Ltd [2025 (6) TMI 184 - CESTAT CHENNAI], the Tribunal held that, if any banking service was rendered in the course of remittance of export proceeds, it was to the Indian bank and not to the exporter. The decisions relied on by the Revenue were distinguished as arising in different factual settings and were held inapplicable. [Paras 15, 16, 17, 18, 19]

The service tax demand, interest, and penalties based on foreign bank charges deducted from export proceeds were unsustainable and the impugned order was set aside.

Final Conclusion: The Tribunal held that the assessee could not be treated as the recipient of any taxable service from the foreign banks merely because charges were deducted from export remittances. In the absence of evidence establishing such service relationship or consideration, the demand under reverse charge was set aside and the appeal was allowed with consequential relief.

Entitlement to exemption under Notification No. 31/2012-ST in respect of GTA service used for export - delay in filing EXP-2 - absence of prior intimation - Substantial compliance - Procedural conditions - 100% EOU engaged in the business of manufacturing instant/soluble coffee.

Exemption notification - Substantial compliance - HELD THAT: - The Tribunal found that there was no dispute as to the nature of the service being GTA service or that the goods were exported. It held that, under Notification No. 31/2012-ST, the substantive requirement was production of the consignment note in the exporter's name, and that requirement stood complied with. The requirements of prior intimation and filing of EXP-2 within the prescribed time were treated as procedural conditions, comparable to similar conditions considered in the co-ordinate Bench decision in M/s Prachi Leathers Pvt Ltd. [2024 (4) TMI 1313 - CESTAT ALLAHABAD]. Applying the principle that eligibility to exemption must be strictly tested at the threshold, but procedural lapses do not defeat the benefit once substantive conditions are satisfied, the Tribunal held that delayed filing of EXP-2 and non-compliance with prior intimation could not, by themselves, deprive the appellant of the exemption. [Paras 6, 7, 8]

The demand and equal penalty were unsustainable, and the appellant's claim to exemption was allowed.

Final Conclusion: The Tribunal held that the appellant had satisfied the substantive requirements for exemption on GTA service used for export and that the lapses regarding prior intimation and timely filing of EXP-2 were merely procedural. The impugned order was set aside and the appeal was allowed.

Taxability of construction of residential complex - Composite works contract - maintenance amounts collected under the construction and sale agreement - service tax under management, maintenance or repair service.

Construction of residential complex - HELD THAT: - The Tribunal held that the controversy stood covered by the consistent view that builders undertaking construction of residential complexes were not liable to service tax prior to 01.07.2010. It accepted that where the activity was composite in nature, no levy could be sustained for the period prior to 01.06.2007, and followed the settled Tribunal view in the case of Modi Ventures vs. CCT, [2020 (3) TMI 1481 - CESTAT HYDERABAD], that no service tax was chargeable on such construction activity for the disputed period. [Paras 6, 8]

The demand under Construction of Residential Complex Service was set aside.

Management, maintenance or repair service - HELD THAT: - The Tribunal found that maintenance after completion for one year formed part of the agreement to construct and sell the flats, after which maintenance was to be handed over to the apartment owners. Since there was no separate agreement for maintenance charges and the amount formed part and parcel of the construction agreement, a separate service tax demand under management, maintenance or repair service could not be sustained. [Paras 9]

The demand under Management, Maintenance or Repair Service was held unsustainable and was set aside.

Final Conclusion: The Tribunal allowed the appeal and set aside the impugned order. It held that no service tax was payable on the appellant's construction of residential complex activity for the disputed period, and that the maintenance amount collected as part of the composite construction agreement was not separately taxable under management, maintenance or repair service.

Services rendered to the overseas parent company - Business Auxiliary Service - Export of services - Customer Care Service - Provision of Service on Behalf of Client - Convertible Foreign Exchange - Limitation Period - Extended period of limitation - demand for the later period - barred by limitation.

Business Auxiliary Service - Export of services - HELD THAT: - The Tribunal held that the services rendered by the appellant to the customers of its parent company were, by their nature, services provided on behalf of the client, for which the appellant received cost plus mark-up. On that basis, they fell within Business Auxiliary Service and not within management, maintenance or repair service. It further held that, prior to 16.05.2008, such information technology software services were not liable to service tax, and for the later period the services satisfied Rule 3(1)(iii) of the Export of Service Rules, 2005 since the recipient was located outside India and consideration was received in convertible foreign exchange. The Tribunal also noted that the Supreme Court had, on similar facts, accepted such activity as export of service. [Paras 4, 5, 6, 7, 8]

The tax demand failed because the services were held to be export of services and not taxable under management, maintenance or repair service.

Extended period of limitation - Normal period - second show-cause notice for the period 01.04.2010 to 31.03.2012. -HELD THAT: - The Tribunal found that an earlier show-cause notice had already been issued on similar facts. In that circumstance, the subsequent notice could not validly invoke the extended period, and was sustainable only within the normal period. [Paras 7]

The extended period was held to be unavailable for the second show-cause notice.

Final Conclusion: The Tribunal set aside the impugned orders and allowed both appeals. It held that the appellant's activities were business auxiliary services rendered as export of service, and that the extended period was not available for the later notice.

Conversion of ores into concentrates - Benefit of exigible to duty under Note 4 of Chapter 26 - Manufacture under Chapter Note - non-compliance with the procedure stood in the way of duty-free benefit for clearances made to 100% EOUs - Exclusion of as such clearances - Extended Period of Limitation - Bona Fide Belief - Suppression of Facts - Clandestine Removal - Substantive Benefit - Procedural Lapse.

Conversion of ores into concentrates - HELD THAT: - The Tribunal held that after insertion of Chapter Note 4 with effect from 01.03.2011, the decisive question was not whether a new commodity emerged in the traditional sense, but whether the process converted ores into concentrates. It found that the appellant's operations removed foreign matter and separated valuable mineral content from ordinary sand, thereby facilitating further metallurgical operations and economical transport, which satisfied the HSN understanding of concentrates. The contention that roasting or chemical treatment was indispensable was rejected, since physical and mechanical beneficiation resulting in separation and concentration of mineral content was sufficient. Earlier decisions rendered prior to insertion of the Chapter Note were held inapplicable, and the Tribunal followed the later line of authority treating such processes as manufacture. [Paras 9]

The process was held to amount to manufacture and the goods were held classifiable under CETH 26140020.

Procedural non-compliance and substantive exemption - Duty-free clearances to 100% EOUs - Lex non cogit ad impossibilia - Failure to follow CT-3 and allied procedure - HELD THAT: - The Tribunal found that the appellant's non-compliance with the prescribed procedure flowed from its bona fide belief that the goods were not dutiable after the tariff change, a belief reinforced by prevailing uncertainty and even departmental unawareness. Since the requirement of CT-3 and like procedures would arise only when the assessee knew the goods were liable to duty, denial of exemption solely for such non-compliance would amount to insisting on an impossible act. Applying the principle that the law does not compel performance of impossibilities, the Tribunal held that substantive benefit could not be denied on this technical ground, particularly when the appellant had furnished material for verification of receipt by the EOUs and the authority failed to examine it. [Paras 9]

Non-compliance with procedure was held not to deprive the appellant of duty-free benefit for clearances to 100% EOUs.

Exclusion of as such clearances - Burden of proof - Demand based on assumptions - HELD THAT: - The Tribunal held that the department had proceeded on assumption that supplies to electrode manufacturers must have been processed concentrates, without technical foundation or investigation. It observed that suspicion and conjecture could not substitute proof, and once the department disputed the assessee's claim of as such clearances, the burden lay on it to establish that processed goods had in fact been removed. The adjudicating authority itself accepted that the opinion produced by one buyer could at least apply to that buyer's product, yet still denied exclusion without any adequate reasoning and without addressing why the same approach should not extend to similarly placed buyers. The rejection of the exclusion claim was therefore found unsustainable. [Paras 9]

The appellant's claim for exclusion of as such clearances from turnover was accepted.

Extended limitation and bona fide belief - Suppression of facts - Interpretational dispute - HELD THAT: - The Tribunal held that suppression requires deliberate withholding of information with intent to evade duty, which was not established here. The appellant was already a registered unit, its manufacturing process remained unchanged, it amended its registration after becoming aware of the tariff change, and it started paying duty from 08.06.2012, all of which were circumstances inconsistent with wilful evasion. The allegation of clandestine removal was also rejected because there was no case that goods were unaccounted or cleared without documents, and the finding regarding misuse of dry-processing facilities travelled beyond the show cause notice. The Tribunal further held that the issue was plainly interpretational, as conflicting views had existed on whether such processes produced concentrates, and even the department had adopted different approaches in excise and customs contexts. Audit detection by itself was held insufficient to justify the extended period. [Paras 9]

The demand for the entire period was held time-barred and the invocation of the extended period was set aside.

Final Conclusion: The Tribunal held that the appellant's process amounted to manufacture and the goods were excisable concentrates, but found that clearances to 100% EOUs were entitled to duty-free benefit despite procedural lapse, and that as such sales had to be excluded from turnover. Since the entire demand rested on the extended period which was held inapplicable in view of the appellant's bona fide belief and the interpretational nature of the dispute, the demand, interest and penalty were set aside and the appeal was allowed.

CENVAT on outward transportation, courier and insurance services - determination of the place of removal - sale on FOR destination basis - Insurance service.

CENVAT credit on outward transportation -HELD THAT: - The Tribunal followed the Larger Bench view noticed through the later decision in Ramco Cements [2024 (10) TMI 807 - CESTAT CHENNAI] that, in cases of FOR destination clearances, admissibility of credit on outward transportation depends upon determination of the place of removal. In the present case, the appellant's stand that freight formed part of the invoice, risk remained with the appellant, and property in the goods passed only at the buyer's premises was not shown by the department to be incorrect. The Tribunal also noted the earlier order in the appellant's own case i.e. M/s Hydro S & S Industries Ltd. (earlier name) Vs Commr of C. Ex., Trichirapalli [2014 (3) TMI 479 - CESTAT CHENNAI] under its former name holding that goods were delivered at the customer's place. On these facts, the buyer's premises was treated as the place of removal, and credit on freight and insurance services up to that point could not be denied. [Paras 5, 6, 7]

Denial of CENVAT credit on freight and insurance services was set aside.

CENVAT credit on courier services - Input service - HELD THAT: - The Tribunal held that courier service used for despatch of goods was an input service used directly or indirectly in relation to manufacture and clearance, and therefore the credit thereon was admissible. [Paras 8]

Denial of CENVAT credit on outward courier service was set aside.

Final Conclusion: The Tribunal held that, on the facts accepted in the appeal, the buyer's premises was the place of removal in respect of FOR destination sales and therefore credit on freight and insurance services up to that point was admissible. Credit on outward courier service was also held admissible as input service, and the impugned order was set aside with consequential relief.

Extended period of limitation - Suppression of facts - Cenvat credit reversal -non-reversal of SAD component on transfer of imported inputs - Revenue neutrality. - HELD THAT: - The Tribunal recorded that the appellant had admitted that reversal of the SAD component was required when the inputs were transferred as such, but had declined to reverse or pay the amount after it was pointed out in special audit. The plea of revenue neutrality was held inapplicable because any subsequent payment after the normal period, in the face of allegation of suppression, would not entitle the receiving unit to take credit, being hit by Rule 9(1)(b) of the Cenvat Credit Rules, 2004; mere availability of credit to another unit of the same assessee was therefore insufficient. The Tribunal further held that omission to disclose the reversal in the appropriate column of the ER-1 returns, coupled with the conscious refusal to reverse the amount on the ground that the department could not recover it after the normal period, justified the finding of suppression and intent to evade, warranting invocation of the extended period. [Paras 6, 7]

The demand, interest and equal penalty were sustained, and the challenge to invocation of the extended period was rejected.

Final Conclusion: The Tribunal held that the appellant's failure to reverse the SAD component on inputs cleared as such was not protected by the plea of revenue neutrality, and that the conduct of non-disclosure and refusal to reverse justified invocation of the extended period. Both appeals were accordingly dismissed and the order confirming demand, interest and penalty was upheld.

Valuation of the plastic caps manufactured on job work basis for return to the principal manufacturer - Captive consumption under Rule 8 -Mutatis Mutandis Application- Whether the value of the blow moulded HDPE plastic caps manufactured by the Appellant has to be determined in accordance with Section 4 of the Central Excise Act, 1944 read with sub-rule (iii) of Rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 read with Rule 8 ibid by which the value of the goods ought to be 110% of the cost of production of manufacture of the goods.​​​​​​​ - HELD THAT: - The Tribunal followed the coordinate Bench decision in the appellant's own case [2025 (10) TMI 175 - CESTAT CHENNAI], which had held that Rule 8 applies only where the goods are used for consumption by the assessee or on his behalf in the manufacture of other articles. Since the goods manufactured by the appellant as job worker were returned to the principal manufacturer for its own further use, and there was no material to show that such consumption was by the appellant or on its behalf, Rule 8 was held inapplicable. The Tribunal also noted that the earlier decision between the same parties had attained finality and there was no allegation or evidence that the present transactions were of a different nature. [Paras 7, 8, 9]

The duty demand and interest sustained by the appellate authority on the basis of Rule 10A(iii) read with Rule 8 were set aside.

Final Conclusion: Following the binding coordinate Bench decision in the appellant's own case, the Tribunal held that Rule 8 could not be invoked for goods manufactured on job work basis and returned to the principal manufacturer for its own further use. The impugned order sustaining duty and interest was set aside and the appeal was allowed with consequential relief.

Demand - barred by limitation - Extended period of limitation - Suppression of facts with intent to evade duty - Jurisdiction to decide merits after holding demand time-barred

Extended period of limitation - Suppression of facts with intent to evade duty - Relevant date - HELD THAT: - The Tribunal held that invocation of the extended period under section 11A(4) required proof of a positive and deliberate act amounting to suppression of facts or other specified conduct with intent to evade duty. Mere non-declaration in ER-1 returns was insufficient.

In the decision in Rajkumar Forge Ltd v. UOI [2010 (8) TMI 796 - BOMBAY HIGH COURT], after noticing that the petitioner’s factory was audited and the audit objections were replied to, held that in the light of the audit carried out by the Respondents of the Petitioners’ factory and the correspondence that is addressed by the Petitioners to the Respondents, it cannot be said that the Petitioners have misstated facts or there is fraud practiced by the petitioners and held in favour of the petitioners on limitation.

The appellant had, from the audit stage itself, consistently disputed the proposed classification, stated its bona fide understanding of the tariff entry and chapter notes, and explained its conduct. That explanation was found not implausible and could not be treated as conscious withholding of information with intent to evade duty. Since the dispute related to April 2013 and May 2013, and there was no allegation that the return for that period was not filed within time, the show cause notice issued on 29.02.2016 was beyond the normal period of one year from the relevant date. The audit-based nature of the proceedings and departmental verification of records also militated against any case of suppression. [Paras 20, 21, 22]

The demand was held wholly time-barred; consequently, the extended period, interest and penalty were unsustainable.

Time-barred demand - Adjudication on merits - Judicial discipline - HELD THAT: - The Tribunal held that once the demand itself failed on limitation, it would be outside jurisdiction to enter upon the merits of classification or duty liability. Relying on binding precedent in Commr of Cus, C.Ex & S.Tax v. Monsanto Manufacturer Pvt Ltd [2014 (4) TMI 505 - ALLAHABAD HIGH COURT], it observed that where proceedings are barred by limitation, any finding on merits becomes inconsequential and ought not to be rendered. Although the appellant's contentions on classification appeared prima facie tenable, the Tribunal refrained from deciding them because the time-bar finding concluded the matter. [Paras 23, 24, 25]

The merits of classification were left undecided, and the appeal was allowed solely on limitation.

Final Conclusion: The Tribunal allowed the appeal, holding that the extended period of limitation had been wrongly invoked and that the show cause notice was barred by limitation. On that basis, the duty demand, interest and penalty were set aside, and the Tribunal declined to examine the classification merits.

Cenvat credit on additional customs duty - Countervailing Duty - Benefit of Notification No. 79/95-Cus - imports covered by advance licences - Notification-wise duty liability.

HELD THAT: - The Tribunal examined the settlement order on the basis of which the appellant claimed credit and found that, for imports governed by Notification No. 79/95-Cus, the exemption was only from basic customs duty, whereas CVD exemption was available under Notification No. 30/97-Cus. The settlement order and the discussion recorded therein showed that, in respect of the licences falling under Notification No. 79/95-Cus, the duty computation did not reflect any CVD component as part of the settled liability. Since the disputed amount was not shown to have been paid towards CVD, the essential condition for availing Cenvat credit was not satisfied. [Paras 5]

The denial of Cenvat credit on the disputed amount was upheld and the appeal was rejected.

Final Conclusion: The Tribunal held that the disputed amount was not shown to be CVD paid under the settlement order in respect of imports covered by Notification No. 79/95-Cus. On that basis, the denial of Cenvat credit was sustained and the appeal was rejected.