TMI Tax Updates e-Newsletter
May 09,2026

Taxability of corporate guarantee - Supply of service without consideration - Constitutional validity of valuation sub-rule (2) of Rule 28 - Related person - Supply of service - principle of valuation in case of GST - Corporate guarantee - term “services” - Delegated legislation - Contingent contract - Presumption of constitutionality.

Corporate guarantee - Consideration - Supply of service - HELD THAT: - The principle of valuation in case of GST is that the value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. When such supply is between related persons, its value will be determined by the valuation rules as prescribed.

The term “services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination to another form, currency or denomination for which a separate consideration is charged. By providing guarantee against any loan /credit facility, the guarantor basically assists the principal debtor in availing such facility, which has an element of service.

It is evident that, the Petitioner has executed a corporate guarantee which is a guarantee given by the corporate to cover their own exposure or exposure of some other related entity to their Bank. Bank guarantees are issued by Bank on a regular basis as a part of their business of Banking. It is nobody’s case that Petitioner is doing the business of providing corporate guarantee on a regular basis. The corporate guarantee that was entered into by Petitioner is only for the limited purpose of securing the loans to its subsidiaries. Corporate guarantees are issued in order to safeguard the financial health of their associate enterprises and to provide it support. For banks, providing bank guarantee is part of their regular course of business and they charge rate on the higher side. Further, these are fool proof instruments of security of the customer and failure to honour the guarantee is treated as a deficiency of services of the bank under banking laws. Corporate guarantee is actually an in-house guarantee and is not issued to customers generally.

The Court held that, though GST law taxes supply of goods or services and Rule 28 deals with valuation between related persons, the foundational requirement of a taxable supply remained material. On the admitted terms of all three guarantee deeds, the petitioner had neither received nor was to receive any security, fee, commission or other consideration for issuing the guarantees. The Court treated such corporate guarantees as in-house support extended to subsidiaries for securing loans, and not as a regular business activity of providing guarantees. Relying on Commissioner of CGST & Central Excise Vs. Edelweiss Financial Services Ltd. [2023 (4) TMI 170 - SC ORDER], the Court held that, in the absence of consideration, issuance of corporate guarantee does not constitute a taxable service. Consequently, the circular clarifying taxability of corporate guarantees without consideration could not sustain the proceedings against the petitioner, and the summons and show cause notice founded on that premise were liable to be quashed. [Paras 66, 67, 68, 70, 71]

The proceedings for levy of GST on the petitioner's corporate guarantees were unsustainable and the impugned summons and show cause notice were quashed.

Judicial review of fiscal legislation - Valuation rule - Constitutional validity of sub-rule (2) of Rule 28 - HELD THAT: - The basic principles governing legislative power in the context of the present case can be culled out by the Hon’ble Apex Court in the case of Hoechst Pharmaceuticals Ltd. Vs. State of Bihar, [1983 (5) TMI 214 - SUPREME COURT] and in the decision of the Constitution Bench in State of West Bengal Vs. Kesoram Industries Limited [2004 (1) TMI 71 - SUPREME COURT], and held that, in matters of taxation, the Court must defer to legislative judgment and policy. Where a statute empowers the Government to grant exemption from tax to any specified class, in public interest, the Court would not question the policy of the Government in exercising this power or interfere merely because the exemption granted has been confined to new units and not extended to all units doing the same business. Mere excessiveness of tax or the absence of corrective machinery would not render the tax as an unreasonable burden and thereby violative of Article 19(1)(g).

The Court held that judicial interference with fiscal legislation and delegated fiscal measures is limited, and economic legislation is entitled to greater latitude. Referring to the settled principles governing constitutional review in taxation matters, the Court observed that fiscal provisions cannot be struck down merely because hardship is alleged or because a different policy choice may appear preferable. Since the challenge to Rule 28(2) rested on a broad plea that it was contrary to law, without establishing any clear constitutional transgression, the prayer to declare it ultra vires was held to be unsustainable. [Paras 74, 76, 77, 78, 79]

The prayer to declare Rule 28(2) ultra vires was rejected.

Final Conclusion: The writ petition was partly allowed. While the challenge to the circulars and to Rule 28(2) was rejected, the Court held that the petitioner's corporate guarantees, having been issued without consideration, were not taxable as supply of service, and accordingly quashed the summons and the show cause notice.

Condonation of Delay - Delay in filing the GST appeal - term “exceptional circumstances” - Statutory limitation for GST appeals - Extraordinary writ jurisdiction to condone delay - HELD THAT: - Following Jatinder Singh Vs. Union Territory of J&K and Ors. [2024 (8) TMI 955 - JAMMU & KASHMIR AND LADAKH HIGH COURT], the Court reiterated that the Appellate Authority has no power to entertain an appeal filed beyond four months from communication of the adjudicating order. It further held that interference under Article 226 to overcome the statutory bar is confined to exceptional and extraordinary cases. On the material placed, the order was served through the GST Portal and was within the petitioner's knowledge, and the medical documents did not substantiate any disabling circumstance of such nature as would justify failure to file the appeal within time. The explanation, therefore, did not constitute exceptional circumstances warranting exercise of writ jurisdiction to condone the delay. [Paras 3, 4, 8, 9]

The rejection of the appeal as time-barred was sustained and the writ petition was dismissed.

Final Conclusion: The Court held that no exceptional ground was made out for invoking writ jurisdiction to overcome the statutory bar of limitation governing the GST appeal. The petition was accordingly dismissed.

Violation of the Show Cause Notice issued in Form GST REG-17 - Cancellation of the GST registration - suspended the registration retrospectively - wrongful availment of input tax credit - wilful misstatement or suppression of facts - HELD THAT:- The writ petition was disposed of after recording the respondent's statement that the petitioner's reply to the impugned show cause notice would be considered and a reasoned order would be passed in accordance with law, with a direction to the petitioner to appear before the competent authority with requisite documents and written submissions.

Availability of an efficacious statutory appeal - Pre- deposits - release of the deposited amount - HELD THAT: - The Court held that against the order passed by the Appellate Authority under the CGST Act, the petitioner had a statutory remedy of appeal under Section 112, and that remedy had become available as the Appellate Tribunal was now functional. On that basis, the Court declined to examine the challenge in writ jurisdiction and granted liberty to the petitioner to avail the statutory appeal. The amount deposited in the Registry was directed to be released to the petitioner to enable further recourse in accordance with law. [Paras 2, 3, 5]

The petition was disposed of with liberty to the petitioner to file an appeal before the Appellate Tribunal, and the deposited amount with accrued interest was ordered to be released to the petitioner.

Final Conclusion: The High Court declined to entertain the writ petition on the ground of availability of an efficacious statutory appellate remedy before the now functional Appellate Tribunal. Liberty was reserved to file the statutory appeal, and the amount deposited in Court was directed to be released to the petitioner.

Availability of an efficacious statutory appeal - Writ jurisdiction - Maintainability of petition - HELD THAT: - The Court noted that an appeal against the impugned order was available under the statute. Although the writ petition had earlier been entertained because the Appellate Tribunal was not functional, that circumstance no longer survived after the Tribunal became functional. On that basis, the Court held that the petitioner should avail the statutory appellate remedy instead of pursuing the writ petition. [Paras 2, 3, 5]

The petition was disposed of with liberty to the petitioner to avail the statutory remedy, including an appeal before the CGST Appellate Tribunal, and to seek interim protection before that forum.

Final Conclusion: The Court declined to continue with the writ petition after noting that the statutory appellate forum had become functional. Liberty was reserved to the petitioner to pursue the appeal before the CGST Appellate Tribunal, and the earlier interim protection was vacated.

Validity of the Provisional attachment of bank accounts - Pre-decisional hearing - Statutory bar on parallel proceedings - barred under Section 6(2) - Post-decisional remedy - violation of principles of natural justice.

Statutory bar on parallel proceedings - Burden to establish jurisdictional objection - HELD THAT: - The Court held that a jurisdictional objection founded on the statutory bar against parallel proceedings cannot be examined on a bare assertion. Since no document was produced to show initiation of adjudicatory proceedings by the State authorities, and there was no material establishing identity of subject matter, tax period or cause of action, the plea remained premature and unsubstantiated. A writ court could not record even a prima facie finding on such a bar in the absence of foundational facts. [Paras 13, 14, 15, 23, 24]

The objection based on the statutory bar was rejected at this stage as unsupported by material particulars.

Provisional attachment of bank accounts - Pre-decisional hearing - Post-decisional remedy - Writ interference at nascent stage - HELD THAT: - Relying on Principal Commissioner of Central Tax v. Narasimhan Engineering Contractors Pvt. Ltd. [2025 (11) TMI 61 - KARNATAKA HIGH COURT] and Radha Krishan Industries v. State of Himachal Pradesh [2021 (4) TMI 837 - SUPREME COURT], the Court held that Section 83 does not require a pre-decisional hearing and that the statutory scheme instead provides a complete post-decisional mechanism under Rule 159(5) for objection and hearing. The circumstance that the petitioner was in custody when the attachment was made did not, by itself, vitiate the action. Having regard to the nature of the allegations and the availability of an effective statutory remedy, the Court declined to interfere in writ jurisdiction at that stage. [Paras 20, 21, 22, 23, 24]

The challenge based on absence of prior notice failed, and the petitioner was left to pursue the post-decisional remedy under Rule 159(5).

Final Conclusion: The writ petition was disposed of with the Court declining to interfere with the provisional attachment. The petitioner was left at liberty to invoke the remedy under Rule 159(5), and the attachment was directed to remain subject to the outcome of the other pending writ petition.

Alternative statutory remedy - misuse of Credentials - availment of input tax credit - violation of principles of natural justice - No opportunity of personal hearing -writ jurisdiction in disputed questions of fact - HELD THAT: - The Court found from the impugned order that an opportunity of personal hearing had been given to the petitioner and therefore no violation of principles of natural justice was made out. It further noticed that the assessing authority had recorded findings that no business activity was found at the declared place and that fake invoices were used on the strength of the petitioner's credentials for availment of input tax credit. In view of these factual findings, the Court declined to examine the merits in writ jurisdiction and held that the petitioner should pursue the available statutory appeal. [Paras 3, 5, 8, 9]

The writ petition was disposed of with liberty to the petitioner to file a statutory appeal within the time granted, to be considered by the appellate authority after giving opportunity of hearing.

Final Conclusion: The High Court declined to interfere with the demand order in exercise of writ jurisdiction, holding that no breach of natural justice was shown and that the matter involved factual issues for consideration in the statutory appellate forum. Liberty was granted to file an appeal within one month, with a direction that the appellate authority consider it on merits after hearing the petitioner.

Retrospective cancellation of GST registration - Validity of show cause notice - Natural justice in quasi-judicial proceedings - HELD THAT: - The Court found that the show cause notice disclosed only that, on physical verification, another firm was functioning at the declared principal place of business, and it did not indicate that cancellation was proposed with retrospective effect. Applying the principle noticed in M/s Bansal Casting vs. Union of India and another [2026 (3) TMI 573 - PUNJAB AND HARYANA HIGH COURT] which in turn relied on ORYX Fisheries Pvt. Ltd. Vs. Union of India and others [2010 (10) TMI 660 - SUPREME COURT], the Court held that though the statute permits retrospective cancellation, such action must rest on specific grounds and the assessee must be clearly put to notice of the proposed retrospective effect and the basis for it. In the absence of such notice, the consequential cancellation order, rejection of revocation, and appellate order could not stand. [Paras 2, 3, 4, 5]

The impugned show cause notice, the order retrospectively cancelling registration, the order rejecting revocation, and the appellate order were set aside, with liberty to the respondents to proceed afresh in accordance with law.

Final Conclusion: The writ petition was allowed on the ground that the proposed retrospective cancellation had not been validly put to notice in the show cause notice. All consequential orders were set aside, while leaving it open to the respondents to initiate fresh proceedings in accordance with law.

Entitlement to a fresh opportunity to place its objections and supporting documents before the assessing officer against the ex parte assessment - Opportunity of hearing. - HELD THAT: - The Court did not adjudicate the merits of the proposed tax demand. Having regard to the nature of the discrepancies, the explanation stated on merits, and the reason placed before the Court for non-participation in the assessment proceedings, the Court considered it appropriate to afford the assessee one more opportunity to submit its reply and supporting records before the assessing officer. Since 35% of the disputed tax had already been recovered, the Court declined to impose any further deposit as a condition for such indulgence and directed fresh consideration by the authority in accordance with law. [Paras 4, 5, 6]

The impugned assessment order was set aside and the matter was remanded to the assessing officer for fresh consideration after giving the assessee an opportunity to file its reply and documents.

Final Conclusion: The writ petition was allowed by setting aside the ex parte assessment and remanding the matter for fresh adjudication after giving the assessee an opportunity to file its reply and supporting documents. No further pre-deposit was ordered, as part of the disputed tax had already been recovered.

Validity of the assessment order - No Opportunity of Hearing - Written request for personal hearing - Principles of natural justice - Audi Alteram Partem - Adjournment of hearing -HELD THAT: - The Court held that the record showed only two opportunities of personal hearing had been afforded, while Section 75(5) permits adjournment up to three times. More importantly, after the reminder dated 06.04.2024, the petitioner filed its response in Form GST DRC-06 on 10.04.2024 and specifically opted for personal hearing. Since Section 75(4) mandates grant of hearing where a written request is received or where an adverse decision is contemplated, the proper officer was bound to afford such hearing before passing the order. Failure to do so constituted miscarriage of justice and violation of the principles of natural justice. [Paras 8, 9]

The impugned assessment order was quashed on this procedural defect and the matter was remanded to the competent officer for fresh hearing, with a direction that on default of appearance by the petitioner on the date fixed, the earlier order would stand revived.

Final Conclusion: The writ petition was disposed of by setting aside the ex parte assessment order and remanding the matter for fresh consideration after granting the petitioner a personal hearing. The Court further directed that failure of the petitioner to appear on the date fixed would result in revival of the earlier order.

Alternate Statutory Remedy - Delay Condonation - Statutory Pre-deposit - Seeking liberty to approach the appellate authority with a delay condonation application and upon making statutory pre-deposit to assail the order-in-original and DRC-07 - HELD THAT:- The writ petition was disposed of by granting liberty to the petitioner to file an appeal before the appellate authority within two weeks with the statutory pre-deposit and an application for condonation of delay, with a direction that no coercive steps be taken pursuant to the garnishee notice during that period.

Validity of the ex parte orders passed under Section 73 - discrepancy between GSTR-3B and GSTR-2A - No Opportunity to reply to show cause notice - HELD THAT: - The Court noted that both impugned orders were passed ex parte and were based on the authority's observation that the input tax credit availed was not reflected in the supplier's GSTR-2A. In view of the petitioner's assertion that the alleged discrepancy could be demonstrated by producing material, and as both orders rested on identical observations, the Court considered it appropriate to restore the matter to the stage of reply so that the petitioner could place his stand before the authorities. The merits of the alleged discrepancy were not adjudicated and all contentions were kept open. [Paras 6, 7]

The impugned orders were set aside and the matter was remitted to the stage of reply to the show cause notices.

Final Conclusion: The writ petition was disposed of by setting aside the two ex parte orders and remitting the matter for fresh consideration from the stage of reply to the show cause notices, with all contentions left open. The challenge to the notifications was not adjudicated in view of the remand.

Deemed withdrawal of assessment - Garnishee recovery proceedings - Best judgment assessment on non-filing of returns - HELD THAT: - The Court held that Section 62(2) contemplates automatic withdrawal of an assessment made on account of non-filing of returns when the registered person files returns for the relevant period and pays the attendant dues. On the petitioner's submission that returns had been filed and tax, interest and late fee had been paid, the Court treated the provision as applicable and held that the assessment order stood deemed to have been withdrawn. Once the assessment itself was deemed withdrawn, recovery steps founded on that order, including garnishee proceedings, could not survive. The relief, however, was made subject to verification of the date of filing of returns and payment of tax, interest and late fee by the respondents. [Paras 3, 4, 5]

The assessment order was held to be deemed withdrawn under Section 62(2), and the consequential garnishee and other recovery proceedings were directed to stand withdrawn, subject to verification by the respondents.

Final Conclusion: The writ petition was disposed of by holding that the assessment made for non-filing of returns stood deemed withdrawn upon filing of returns with tax, interest and late fee, subject to verification by the authorities. Consequently, the recovery and garnishee proceedings based on that assessment could not continue.

Levy of GSTon Assignment of leasehold rights - taxable supply of service - Land development cost reimbursement - Construction and development services - Recovery of land development cost and related amounts from the transferee.

Assignment of leasehold right - HELD THAT: - The Appellate Authority held that Section 7 read with paragraph 2(a) of Schedule II treats the grant of a right to use immovable property for consideration as a supply of service. In the transaction under consideration, what stood transferred was only the right to use the demised premises for the balance lease period and not title in the land itself. On that reasoning, the transaction could not be equated with sale of land under Schedule III. The Authority further held that the Gujarat High Court decisions in Gujarat chamber of Commerce and Industry Vs Union of India [2025 (1) TMI 516 - GUJARAT HIGH COURT] and also in Dhiraj Can Co. (P) Ltd., Vs Union of India [2025 (7) TMI 622 - GUJARAT HIGH COURT] relied upon by the appellant had not attained finality since the Departmental appeal had been admitted by the Supreme Court, and that the ruling in Safari Retreats [2024 (10) TMI 286 - SUPREME COURT] was inapplicable as it concerned input tax credit on construction for leasing and not taxability of assignment of leasehold land rights. Reference by the AAR to other advance rulings and the CBIC circular was treated as permissible use of persuasive interpretative material supporting a uniform application of the statute. [Paras 7, 8]

GST was held applicable on the consideration received for transfer of the leasehold rights, and the AAR's view on this issue was upheld.

Land development cost reimbursement - Construction and development services - Consideration for services - HELD THAT: - The Appellate Authority accepted the AAR's characterisation of the underlying activities such as roads, drainage, levelling, compound wall and allied civil infrastructure as construction and development services. These works were found to enhance the usability and value of the demised premises and to possess an independent service character under the GST framework. Since the amount recovered towards land development cost was separately identifiable and distinct from the consideration for transfer of leasehold rights, it represented consideration for services rendered by the appellant and therefore attracted GST. [Paras 7, 8]

The recovery of land development cost was held taxable as supply of service, and the AAR's ruling on this aspect was affirmed.

Final Conclusion: The appeal was dismissed and the advance ruling was upheld. The Appellate Authority affirmed that transfer of the unexpired leasehold rights attracted GST as a supply of service, and that the separately recovered land development cost was likewise taxable as consideration for services.

Validity of reopening of assessment - validity of proper approval accorded u/s 151 - unexplained credit u/s 68

HELD THAT:- We see no reason to interfere with the judgment and order(s) passed by the High Court [2025 (10) TMI 478 - DELHI HIGH COURT] and [2025 (12) TMI 1533 - DELHI HIGH COURT]. The special leave petitions are, accordingly, dismissed.

Validity of reopening proceedings - "borrowed satisfaction" or "independent satisfaction" - reasons to believe - disallowances of expenses related to purchases treated as "bogus" in nature

As decide by HC [2025 (7) TMI 680 - CALCUTTA HIGH COURT] there was no intelligible nexus between the material relied on and a reasonable belief that income had escaped assessment, and the reopening could not be sustained

HELD THAT:- We find no good ground to interfere with the impugned order passed by the High Court. Special Leave Petition is, accordingly, dismissed.

TDS on land acquisition compensation- deduction of TDS from compensation awarded under the provisions of the National Highways Act, 1956 - Exemption from income-tax under land acquisition award - Arbitral award as judgment debt - amount received under an award made under the 2013 Act

HELD THAT: - The Court held that the beneficial exemption under Section 96 of the 2013 Act applied to compensation awarded after that enactment had come into force, including acquisitions under the National Highways Act in view of the statutory notification referred to by the Court. It further held that Section 194LA of the Income-tax Act did not mandate deduction in respect of agricultural land and, in any case, the later proviso and the CBDT circular only clarified an exemption that already flowed from the statute. Resolving the apparent overlap between the two enactments, the Court held that the welfare protection under the 2013 Act could not be diluted by requiring deduction at source and compelling land losers to seek refund later. The executing Court therefore erred in treating the date of the circular as controlling and in directing deduction of 10% TDS. [Paras 15, 16, 17, 18, 22]

No deduction of TDS was permissible from the compensation awarded under the arbitral award.

Arbitral award as judgment debt - Execution of decretal amount - No deduction from decretal compensation - HELD THAT: - The Court held that once compensation stood crystallized by the arbitral award and was deposited before the executing Court in satisfaction of that award, it assumed the character of a decretal debt.

In All India Reporter Ltd. vs. Ramchandra D. Datar [1960 (11) TMI 142 - SC ORDER] it has been clearly held that the decretal amount must be paid in its entirety and no deduction towards income tax can be made therefrom by the judgment debtor. A similar view qua deduction of TDS on arbitral award considering the same as ‘Judgment Debt’ has been taken by the Calcutta High Court in M/s Neo Built Corporation vs. Union of India [2023 (7) TMI 421 - CALCUTTA HIGH COURT]

Applying the aforesaid principle, once the compensation is crystallized in the form of an arbitral award, it partakes the character of a ‘Judgment Debt’ and must be paid in its entirety, without any deduction towards TDS.

No deduction of TDS is permissible from the compensation awarded under the arbitral award passed under Section 3G(5) of the National Highways Act, 1956, having regard to the provisions of Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

The Competent Authority for Land Acquisition (CALA) shall redeposit the amount, if any, already deducted towards TDS, before the Executing Court within a period of four weeks from today. [Paras 18, 19, 20, 24]

Final Conclusion: The High Court held that compensation awarded under the arbitral award passed under Section 3G(5) of the National Highways Act, 1956 could not be subjected to TDS. The direction for deduction was set aside, the deducted amount was directed to be redeposited, and the entire decretal amount with accrued interest was ordered to be disbursed to the claimants without deduction.

Condonation of delay in belated return - Delay of 7 days in filing the return, leading to denial of carry forward of loss -Misconstruction of CBDT circular - Proportionality in condonation

HELD THAT: - The Court held that the AO had misconstrued the statutory provisions together with CBDT Circular No. 11 of 2024. On the facts recorded, the delay was only of 7 days and was found to be negligible and bona fide.

Court accepted that such a short delay warranted condonation, and that the return ought to be processed in accordance with law instead of rejecting the claim for carry forward of loss on that basis. The Court expressly applied the principle of proportionality in directing condonation. [Paras 10, 11, 12]

The impugned orders were quashed, and the respondent authorities were directed to condone the delay of 7 days and process the return in accordance with law.

Final Conclusion: The Court held that the rejection of condonation was based on a misconstruction of the statutory provisions and CBDT Circular No. 11 of 2024. Treating the 7-day delay as negligible and bona fide, it quashed the impugned orders and directed the authorities to condone the delay and process the return according to law.

Administrative inaction in disposal of condonation application - Condonation of delay in filing Form 10B - Reasoned speaking order - Failure to dispose of the petitioner's pending applications for condonation of delay and rectification relating to filing of the audit report in Form 10BB instead of Form 10B

HELD THAT: - The Court held that Circular No. 16/2024 requires a condonation application to be disposed of, as far as possible, within six months from the end of the month in which it is received by the competent authority. As the petitioner's application was still pending, such inaction in deciding a statutory application justified interference.

Court did not adjudicate the merits of the petitioner's claim for exemption or condonation, and confined the relief to a direction that both applications be considered and decided by a reasoned speaking order after giving the petitioner an opportunity of hearing. [Paras 9, 10]

The competent authority was directed to consider and dispose of both applications in terms of Circular No. 16/2024 by a reasoned speaking order after hearing the petitioner.

Final Conclusion: The writ petition was disposed of by directing the competent authority to decide the pending condonation and allied applications within the time fixed by the Court and to communicate a reasoned decision thereafter. The merits of the petitioner's substantive claim were expressly left open.

Revision u/s 263 - Lack of enquiry - Substantial question of law v/s fact - deduction under section 35(2AB) with reference to the certificate in 3CL issued by DSIR

HELD THAT: - The Court held that the determinative controversy was whether the Assessing Officer had conducted enquiry on the matters for which the Principal Commissioner invoked section 263. That aspect, namely whether enquiry was made or the order was passed without enquiry, was treated as a pure question of fact. Since the Tribunal had already returned a finding on that factual issue, the appeal under section 260A could not be entertained on the footing that any substantial question of law arose from the Tribunal's order. [Paras 11, 12]

The appeal was rejected on the ground that the issues projected as substantial questions of law were in truth questions of fact.

Final Conclusion: The High Court held that the foundation of the Revenue's challenge was factual, namely whether the Assessing Officer had made enquiry before completing assessment. As no substantial question of law arose from the Tribunal's view on that aspect, the appeal failed.

Registry's power to examine maintainability - Judicial function of deciding maintainability - Registry refusing to number a case

HELD THAT: - The Court held that the position already stood settled by the Supreme Court in P. SURENDRAN VERSUS STATE [2019 (3) TMI 2058 - SUPREME COURT] and by the administrative resolution and circular governing filing practice.

Registry is confined to scrutiny of the papers for procedural regularity and compliance with filing requirements; it cannot exercise a judicial power by determining or pre-judging maintainability. Where the papers are otherwise in order but a doubt regarding maintainability persists, the petition must nevertheless be numbered with the endorsement "numbered subject to maintainability" and placed before the roster Bench, which alone can decide that question. [Paras 11, 13]

The Registry was directed to number the writ petition with the endorsement "numbered subject to maintainability" and list it before the roster Court under the caption "for maintainability".

Final Conclusion: The Court reaffirmed that maintainability is for the Court, and not the Registry, to decide. It accordingly directed numbering of the writ petition subject to maintainability and mandated adherence by the Registry to the settled procedure in all such matters.

Reassessment approval by specified authority - Invalid sanction for notice beyond three years - validity of reassessment proceedings for want of approval from the designated authority where the notice was issued after more than three years from the end of the relevant assessment year

HELD THAT: - The Tribunal held that, on the facts on record, the approval for the order u/s 148A(d) and the notice under section 148 had not been obtained from the specified authority contemplated for cases issued beyond three years. Applying Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] the Tribunal found that approval by the Principal Commissioner was not the approval required in law, and the consequential reassessment order was therefore void. [Paras 3]

The reassessment was quashed as void for lack of valid approval from the competent specified authority.

Final Conclusion: The appeal was allowed on the preliminary legal ground that the reassessment proceedings lacked valid approval from the competent specified authority. All other grounds were left open and were not adjudicated.

Block period u/s 153C - Date of satisfaction note - Jurisdiction to assess beyond six years - whether Assessment for AYs 2014-15 and 2015-16 could be initiated u/s 153C as both years fell outside the permissible six-year block period?

HELD THAT: - The Tribunal held that, for the purpose of section 153C, the six assessment years have to be computed with reference to the date on which the satisfaction note is recorded in the case of the other person, and that date is to be treated as the date of search qua such assessee.

Applying the decisions noticed by it, including the decision of the jurisdictional High Court R.B. JEWELLERS PRIVATE LIMITED VERSUS UNION OF INDIA AND ANR. [2023 (12) TMI 588 - CALCUTTA HIGH COURT], the Tribunal found that the satisfaction note in the assessee's case was recorded on 04.11.2022 and, on that reckoning, AYs 2014-15 and 2015-16 lay outside the six-year block period.

DR before us filed his written submissions stating that the decision of Hon’ble Jurisdictional Delhi High Court in the case of Ojjus Medicare Pvt Ltd [2024 (4) TMI 268 - DELHI HIGH COURT] is challenged by the revenue by way of Special Leave Petition before the Hon’ble Supreme Court. But we find that the said decision of Hon’ble Jurisdictional Delhi High Court has not been stayed by the Hon’ble Supreme Court. Hence we are inclined to follow the decision of the Hon’ble Jurisdictional Delhi High Court. DR through his written submissions is only trying to impress upon the bench by bringing on record how the 6 years or 10 years reckoning need to be understood by relying on the principles of interpretation of statutes, but when the same issue had already been considered and addressed by the Hon’ble Jurisdictional Delhi High Court, there is no reason for this Tribunal to diverge from the views of the higher forum.. [Paras 5, 6, 7]

The assumption of jurisdiction u/s 153C for AYs 2014-15 and 2015-16 was held invalid, and the assessments for both years were quashed as beyond the six-year period.

Final Conclusion: The Tribunal allowed both appeals, holding that the assessments for AYs 2014-15 and 2015-16 under section 153C were without jurisdiction as those years fell outside the six-year block period reckoned from the date of recording of satisfaction. The remaining grounds were left open as academic.

Unexplained money - Addition based on presumption - Lack of corroborative enquiry

Unexplained money - Presumption without evidence - Corroborative enquiry - addition in respect of alleged cash payment made to or on behalf of Ms. Jwala Gutta sustained u/s 69A - HELD THAT: - The Tribunal held that, though the assessee had made recorded payments to Ms. Gutta through banking channels and the Assessing Officer relied on the post-search statement to infer a cash component, the material relied upon did not establish that the assessee himself had made the alleged cash payment. The seized material only indicated payment made on behalf of Ms. Gutta, and there was no confirmation from Ms. Gutta or other supporting material to show receipt of cash from the assessee. In the absence of proper enquiry and independent corroboration, the addition rested only on presumption and was therefore unsustainable. [Paras 21]

The addition relating to the alleged cash payment to or on behalf of Ms. Jwala Gutta was deleted.

Unexplained money - Marriage expenses - Presumption without material - addition relating to alleged cash payment towards the marriage expenses of the assessee's niece - HELD THAT: - The Tribunal held that the Assessing Officer had presumed that the balance cash component of the marriage expenses was met by the assessee merely because part of the expenditure had been paid by him through cheque. No enquiry was made from the recipient of the payment to establish that the cash was paid by the assessee, and the Assessing Officer had also not examined or quantified the claim that amounts were available out of Shagun received on the occasion of marriage. On the material available, the addition was found to be based only on presumption, while there was material possibility that the payment could have been met from Shagun receipts. The addition, therefore, lacked evidentiary foundation. [Paras 22]

The addition made in respect of the alleged cash marriage expenditure was deleted.

Final Conclusion: The Tribunal held that both additions were founded on presumption and unsupported by proper enquiry or corroborative material. The assessee's appeal for AY 2017-18 was allowed, and the same view was applied mutatis mutandis to Assessment Years 2016-17 and 2018-19.

Validity of Reassessment proceedings - notice issued beyond three years -Sanction by specified authority - benefit of TOLA - Consequential penalty

Reassessment jurisdiction - Sanction by specified authority - notice issued beyond three years - approval from the PCIT v/s PCCIT -HELD THAT: - The Tribunal held that, for AY 2017-18, a notice issued beyond three years from the end of the relevant assessment year required prior approval of the PCCIT under section 151(ii). Relying on the legal position explained in Rajeev Bansal, including the illustration noticed therein for AY 2017-18, the Tribunal found that the PCIT could grant sanction only up to the period indicated thereunder and that a notice issued on 18.07.2022 could not validly rest on approval of the PCIT. On that basis, the assumption of jurisdiction was held to be illegal and the consequential assessment order was held invalid. [Paras 3]

The reassessment proceedings were quashed as having been initiated without approval from the competent authority.

Consequential penalty levied u/s 271AAC(1) - HELD THAT: - The Tribunal treated the penalty as entirely consequential to the quantum order. Since the underlying assessment was held invalid for want of lawful assumption of jurisdiction, the foundation for the penalty ceased to exist and the penalty was liable to be deleted. [Paras 3]

The penalty was directed to be deleted.

Final Conclusion: Both appeals were allowed. The reassessment for AY 2017-18 was held void for want of approval from the competent authority, and the penalty founded on that assessment was consequently deleted.

Unexplained money u/s 69A - Cash deposit during demonetization - Burden of proof on source of cash deposit - Redeposit of earlier cash withdrawals

HELD THAT: - The Tribunal found that the assessee was a salaried individual with disclosed sources of income and that the earlier withdrawals relied upon by her were reflected in the bank statement. It held that the AO had made the addition mainly on alleged non-compliance, without any independent inquiry to establish that the cash deposits represented undisclosed money.

Tribunal further held that, once the source of deposit was shown through prior withdrawals and the withdrawals exceeded the deposits, the onus shifted to the Revenue to show that the withdrawn cash had been used elsewhere. Mere time gap between withdrawal and redeposit, and absence of a cash book in the case of a salaried person, were held insufficient to reject the explanation. [Paras 7]

The addition u/s 69A was deleted and the assessee's challenge to the surviving cash-deposit addition was allowed.

Final Conclusion: The Tribunal allowed the appeal and deleted the surviving addition relating to cash deposits during the demonetisation period. It held that the deposits stood explained by prior bank withdrawals and that no material had been brought by the Revenue to prove that the cash represented unexplained money.

Addition u/s. 69A/115BBE - unaccounted unexplained money - On-money as part of sale consideration - Uncorroborated seized material - Unexplained investment in jewellery - Telescoping and set off

Addition u/s 69A - unaccounted unexplained money - Gifts through banking channel - gifts received from father-in-law held as bogus - HELD THAT: - The Tribunal held that section 69A applies only where the assessee is found to be the owner of money not recorded in the books and the source is not satisfactorily explained. The gifts in question stood credited in the regular bank accounts forming part of the books, and the donor was identified as the assessee's NRI father-in-law. The Assessing Officer's allegation that the gifts represented the assessee's own unaccounted money was found to be unsupported by corroborative material; the WhatsApp chats did not establish cash remittance by the assessee, there was no finding of cash deposit in the donor's account before remittance, and the retracted statement could not by itself sustain the addition. On that basis, the addition sustained by the Commissioner (Appeals) was deleted and the deletion of the balance addition was upheld. The same view was applied mutatis mutandis for the later year. [Paras 11, 13, 14, 36, 37]

The addition on account of gifts under section 69A was deleted, and the Revenue's challenge to the relief granted by the Commissioner (Appeals) failed.

On-money as part of sale consideration - Capital gains - applicability of section 69A - whether Cash received as on-money on sale of property could be taxed as unexplained money u/s 69A and had to be treated as part of the sale consideration for capital gains purposes? - HELD THAT: - The Tribunal held that section 69A, being a deeming provision, can be invoked only when the assessee is found to own money not recorded in the books and the source is not explained. Here, the receipt itself was accepted as part of the sale transaction, and the buyer was identified. Once the source of the cash stood explained as coming from the purchaser of the property, the amount could not be brought to tax as unexplained money. The correct treatment was to include the assessee's share of the on-money in the total sale consideration and recompute capital gains accordingly. The same reasoning was followed for the similar additions in the subsequent year. [Paras 24, 25, 26, 27, 39]

The additions made u/s 69A on account of on-money were set aside, and the AO was directed to recompute capital gains by including such amounts in the sale consideration.

Uncorroborated seized material - Estimated figures in Excel sheets - Unexplained investment in construction - HELD THAT: - The Tribunal found that the addition was founded solely on Excel sheets recovered from the contractor's side. The figures therein were in round sums, contained expressions indicating discussion, and did not establish actual cash payment by the assessee over and above what was recorded. No corroborative material was produced to show that the contractor had in fact received such cash, and no further verification was undertaken. The Tribunal also noted that if the AO doubted the declared cost of construction, recourse could have been taken to valuation proceedings, which was not done. In these circumstances, the deletion of the addition by the Commissioner (Appeals) was upheld. [Paras 17, 19, 20]

The deletion of the addition towards alleged cash expenditure on construction was upheld.

Unexplained investment in jewellery - Family jewellery and customary gifts - Telescoping and set off - HELD THAT: - The Tribunal accepted the Commissioner (Appeals)'s finding that a substantial part of the jewellery stood explained as having been received by the assessee and his wife from relatives from time to time, supported by bills and viewed in light of the family and social status and the applicable CBDT instruction. Since the Revenue produced no material to dislodge that finding, the relief granted to that extent was affirmed. However, for the balance jewellery, the assessee had not furnished evidence of acquisition, and the addition to that extent was therefore sustained. Tribunal accepted the alternative plea that telescoping and set off should be allowed against the additions confirmed on account of on-money received from property sales, since application of that cash elsewhere had not been shown. [Paras 42, 43, 44, 45]

The deletion of the major part of the jewellery addition was upheld, the remaining addition was sustained, and telescoping against the confirmed on-money additions was directed.

Cash found during search - Lack of source evidence - Telescoping and set off - HELD THAT: - The Tribunal noted that the assessee's explanation regarding ownership and accumulation of the cash was unsupported by evidence both before the authorities and before the Tribunal. The confirmation of the addition was therefore not disturbed on merits. However, applying the same principle adopted for the jewellery addition, the Tribunal held that telescoping and set off should be granted out of the on-money additions, since the use of those amounts elsewhere had not been established. [Paras 47, 48]

The addition on account of cash found was sustained in principle, but the assessee was granted telescoping and set off against the on-money additions.

Addition u/s. 69B on account of watch found during the course of the search on assessee - Ownership of seized article - Independent verification - Unexplained investment - HELD THAT: - The Tribunal recorded that the assessee had consistently stated that the watch belonged to a customer of Kapoor Watch Company and had furnished the buyer's identity details and purchase invoice, explaining that the watch was with him for servicing and polishing. The Commissioner (Appeals) accepted that explanation. As the Revenue could not dislodge those findings and the Assessing Officer had not undertaken any independent verification despite being given complete particulars of the alleged owner, the deletion of the addition was upheld. [Paras 51, 52]

The deletion of the addition relating to the watch found during search was upheld.

Final Conclusion: The assessee's appeals for Assessment Years 2019-20, 2021-22 and 2023-24 were partly allowed, while the Revenue's appeals for Assessment Years 2019-20 and 2023-24 were dismissed. The Tribunal deleted the additions on account of gifts and watch, held that on-money from property sales was taxable as capital gains and not under section 69A, upheld deletion of the construction-related addition, and granted telescoping against the additions sustained for jewellery and cash.

Unexplained share capital - addition u/s 68 -Share capital from non-resident shareholder - Identity, creditworthiness and genuineness - Right issue to existing shareholder - ESI/PF employee contribution

Whether addition u/s 68 in respect of share capital and premium received from the non-resident holding company and the existing minority shareholder was sustainable? - HELD THAT: - The Tribunal found that the shares were issued by way of right issue to the existing shareholders and that the holding company already held virtually the entire share capital of the assessee. It noted that the assessee had placed on record the shareholder details, valuation report supporting the issue price, share certificates, bank statements evidencing receipt through banking channels, FIRC documents, shareholder confirmations and material showing compliance with FDI and RBI requirements.

It was also noticed that the transfer pricing proceedings had examined the related party transactions without adverse comment and that, despite the DRP's direction to pass a speaking order after considering the material, the Assessing Officer merely repeated the draft assessment findings.

Tribunal held that the assessee had established the identity of the shareholders, their creditworthiness and the genuineness of the transaction, and that there was no basis to sustain the addition. [Paras 13]

The addition on account of share capital and premium was deleted and grounds 4 to 4.5 were allowed.

Employee contribution to ESI/PF - Double addition - HELD THAT: - The Tribunal recorded the assessee's submission that the disallowance had already been made under section 143(1) and that its repetition in the assessment resulted in double addition. However, since no submissions were advanced on the point at the hearing and the ground was treated as not pressed, the Tribunal did not enter into the merits of the controversy. [Paras 14]

Final Conclusion: The Tribunal partly allowed the appeal. The addition made under section 68 in respect of share capital and premium received from the non-resident existing shareholders was deleted, while the ground relating to employees' contribution to ESI/PF was dismissed as not pressed.

Validity of reassessment proceedings initiated u/s 148 - period of limitation - Jurisdictional validity of reassessment

HELD THAT: - The Tribunal held that, for A.Y. 2015-16, a notice u/s 148 issued on or after 01.04.2021 is not sustainable in law. It applied the binding principle laid down by the Supreme Court that the deeming fiction under Union of India v. Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] does not extend the limitation prescribed for reopening, and that notices for this assessment year issued after 01.04.2021 are liable to fail on limitation.

Following the same legal position, the Tribunal held that the original notice being invalid, the subsequent notice u/s 148A(b), the order under section 148A(d), and the assessment made u/s 147 r/w section 144B could not survive, since procedural compliance cannot cure a foundational jurisdictional defect. Having allowed the appeal on this legal ground, the Tribunal treated the grounds on merits as academic. [Paras 9, 10, 13, 14, 15]

The reassessment notice and all consequential proceedings were quashed, and the merits of the addition were left unexamined.

Final Conclusion: The Tribunal allowed the appeal by holding that the reassessment notice issued on 07.06.2021 for A.Y. 2015-16 was barred by limitation and hence without jurisdiction. Consequently, the order under section 148A(d), the reassessment order, and the appellate order were quashed, and the grounds on merits were not adjudicated.

Imposition of penalty on the freight forwarder - improper export and use of false documents - RFID e-sealing and gate-in of export containers - Burden of proof - Mens rea - Knowledge and connivance - Findings based on presumption without evidentiary linkage -HELD THAT: - The Tribunal held that the impugned findings against the appellants rested on presumption rather than logical analysis of evidence. On the Tribunal's reading of Circular No. 41/2017-Cus, where the exporter did not have self-sealing permission, mere movement of export goods to the ICD without RFID e-seal was not by itself an offence, but only attracted examination and risk-management procedure, which in fact was undertaken by de-stuffing and 100% examination. The order was also found silent as to what undue export benefits were sought to be availed and how the present appellants were linked to the so-called dummy or fake documents. The Tribunal further noticed that penalties imposed on co-noticees, who were stated to be responsible for generation of the alleged dummy documents, had already been set aside in connected appeals; in that situation, no basis survived to sustain penalties on the present appellants under sections 114 and 114AA. [Paras 4]

The penalties on M/s Lucas Maritime and Shri Surya Prakash Saxena were set aside and the appeals were allowed.

Final Conclusion: The Tribunal set aside the impugned order insofar as it imposed penalties on the freight forwarder and its authorised representative. It held that the case against them was founded on presumptions without adequate evidentiary linkage and that the alleged irregularity regarding absence of RFID e-seal did not, on the facts noted, justify the penalties.

Post-commencement disposition of company property - Validation of Post-Winding-Up Transfer - High Court affirmed that the appellant's sale deeds, having been executed after commencement of winding up and without any basis for validation, were void under Section 536(2) of the Companies Act. - Condonation of delay - HELD THAT:- Delay was condoned and the special leave petition was dismissed as no ground for interference with the impugned order [2025 (10) TMI 1406 - MADRAS HIGH COURT] was found in exercise of jurisdiction under Article 136 of the Constitution of India.

Corporate Insolvency Resolution Process - Pre-existing dispute - Section 9 operational debt - Plausible contention - moonshine defence - liability for charges claimed after the operational creditor entered CIRP -

Delay of 133 days in refiling the appeal - HELD THAT: - The appeal was filed with some delay and the same has been condoned. Thus having regard to all the facts and circumstances of the case and keeping in view that the proceedings of this appeal are running ex-parte against Respondent and the delay occurred in filing the appeal has already been condoned and also the fact that the appeal was initially filed by the OC who according to the contention of the application was running short of hands and during the pendency of the appeal the appellant has also been pushed into CIRP and the management of the appellant is now vested in the RP the delay occurred in refiling the appeal may be condoned.

In result the application is allowed and the delay of 133 days occurred in refiling the appeal is hereby condoned.

Pre-existing dispute - Section 9 operational debt - HELD THAT:- The Appellate Tribunal held that, though the leave and licence agreement and its payment clauses were admitted, the respondent had, prior to the demand notice, raised substantive grievances regarding non-availability of water supply, breakdown of central air-conditioning, lack of maintenance and interference with use of the premises, and had moved IA No. 2011 of 2019 seeking restoration of essential services and police assistance. Orders passed on that application directing restoration of services and assistance showed that the dispute was supported by contemporaneous material and could not be treated as illusory or a mere sham. Applying the principle in Mobilox Innovations Pvt. Ltd. vs. Kirusa Software Pvt. Ltd. [2017 (9) TMI 1270 - SUPREME COURT], the Tribunal held that at the Section 9 stage the only enquiry is whether there exists a plausible contention requiring further investigation and not a patently feeble defence. On that standard, the dispute concerning liability for charges arising after the appellant's admission into CIRP was a real prior dispute, and the decisions cited by the appellant on threshold were inapposite. [Paras 49, 50, 51]

The rejection of the Section 9 petition was upheld and the appeal was dismissed.

Final Conclusion: The delay in refiling the appeal was condoned, but on merits the Appellate Tribunal found a genuine pre-existing dispute as to the respondent's liability for the post-CIRP charges claimed by the appellant. The order rejecting the Section 9 application was therefore affirmed and the appeal dismissed.

Rejection of application under section 9 - Pre-existing dispute - existence of debt and default - Operational debt - Bona fide dispute - Corporate Debtor failed to produce any evidence of incorrect invoicing, uncredited payments, or discrepancies in the certified Running Account Bills- Whether the Impugned Order dated 14.01.2026 passed by the Learned Adjudicating Authority suffers from any legal infirmity warranting interference under Section 61 of the Code. -HELD THAT: - The Appellate Tribunal held that the material on record disclosed a continuous and documented dispute between the parties long before issuance of the Section 8 demand notice. The correspondence showed repeated issues relating to delay in completion, incomplete work, poor quality and defective workmanship, levy of liquidated damages, and liability concerning labour-related statutory obligations. The Appellant itself had sought extensions of time and, even subsequently, acknowledged that certain works remained incomplete. The draft minutes relied upon by the Appellant did not establish any concluded settlement or final closure, there being no executed document evidencing such closure. The Tribunal further held that certification of RA Bills by the PMC was only for interim payment on work-progress basis and did not amount to final admission of liability, since under the contract final satisfaction regarding quality and completion remained with the Respondent.

The Respondent has further relied upon by the judgment of Hon’ble Supreme Court in “Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd.[2017 (9) TMI 1270 - SUPREME COURT]” which lays down the law that once a plausible and genuine pre-existing dispute is established, the application under Section 9 must be rejected, without entering into the merits of the claims and counterclaims. In the present case, there are pre-existing disputes which were not resolved till the issuance of notice under Section 8 of the Code. The nature of disputes raised clearly requires detailed examination of evidence and contractual obligations, which falls outside the limited scope of insolvency proceedings. The present case is squarely covered by the judgment in Mobilox (supra).

In these circumstances, the dispute was found to be real and substantial, and not a sham or afterthought; hence, the matter fell outside the limited scope of insolvency proceedings, where the Adjudicating Authority is only to see whether a genuine pre-existing dispute exists and not to adjudicate contractual claims and counterclaims. [Paras 47, 48, 49, 50, 51]

A bona fide pre-existing dispute having existed prior to the demand notice, the Section 9 application was not maintainable and its dismissal called for no interference.

Final Conclusion: The appeal was dismissed. The Appellate Tribunal affirmed that the record established genuine and continuing disputes predating the demand notice, and therefore the rejection of the insolvency application under Section 9 was legally justified.

Rejection of the Section 9 application - Pre-existing dispute - Operational debt - Plausible contention requiring further investigation - Threshold for insolvency admission - Seeking initiation of Corporate Insolvency Resolution Process (‘CIRP’) - HELD THAT:- The Appellate Tribunal held that the reply sent by the Corporate Debtor to the Section 8 demand notice categorically denying liability and disputing the amount claimed constituted a valid notice of dispute, thereby attracting Section 9(5)(ii)(d). It further found that communications exchanged prior to the demand notice had already recorded deficiencies, defects and delay in performance, showing that the dispute was not an afterthought.

The object and purpose of IBC is to reorganize and revive the Corporate Debtor and Section 9 application cannot be leveraged as a tool to decide disputes between the parties regarding the operational dues. It is well settled that in a Section 9 proceeding, there is no need to enter into final adjudication with regard to existence of dispute between the parties regarding operational debt. What has to be looked into is whether the defence raises a dispute which needs further adjudication by a competent court. The law on the subject has been categorically laid down by the Hon’ble Supreme Court in Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited [2017 (9) TMI 1270 - SUPREME COURT].

Applying the settled test that the Adjudicating Authority is only required to see whether there is a plausible dispute needing further adjudication and not to finally determine its merits, the Tribunal concluded that the defence was neither moonshine nor illusory. In that view, insolvency proceedings could not be invoked as a substitute for adjudication of contractual disputes. The contention based on exclusion of invoices allegedly covered by Section 10A did not assist the Appellant, since the existence of a real dispute was itself sufficient to defeat admission of the application. [Paras 7, 8, 9, 10, 11]

The finding of pre-existing dispute was upheld and the dismissal of the Section 9 application was affirmed.

Final Conclusion: The Appellate Tribunal dismissed the appeal and affirmed the order rejecting the Section 9 application, holding that the record disclosed a genuine pre-existing dispute concerning the claimed operational debt. It was, however, left open to the Appellant to pursue such other remedies as may be available in law.

Condonation of delay - delay of 198 days in re-filing the appeal - Sufficient cause - Due diligence - IBC limitation. - HELD THAT: - The Appellate Tribunal held that, although the appeal had initially been filed within the condonable period, the subsequent refiling delay had to be justified by showing sufficient cause. The explanation that the authorised signatory was unavailable was found vague and unsupported, particularly as the appellant was a company capable of acting through other authorised persons. The further reliance on repeated scrutiny by the Registry was also rejected, since the record showed that the same defects had been pointed out on several occasions and were not cured for months, reflecting lack of seriousness and diligence rather than a bona fide procedural impediment.

It is a settled principle of law that delay can be condoned only when sufficient cause is shown. The Hon’ble Supreme Court in “Basawaraj & Anr. v. Special Land Acquisition Officer [2013 (12) TMI 274 - SUPREME COURT]”, has clearly held that the expression “sufficient cause” must be construed strictly and that delay caused by negligence, inaction or lack of bona fides cannot be condoned merely on equitable grounds. In the present case, the conduct of the Appellant does not satisfy this standard.

Having regard to the time-bound scheme of the IBC and the settled principle that negligence, inaction and want of bona fides do not justify condonation, the Tribunal found no ground to excuse such prolonged delay. [Paras 32, 33, 34, 35, 36]

The application for condonation of delay in refiling was rejected and, consequently, the appeal was dismissed.

Final Conclusion: The Appellate Tribunal declined to condone the 198 days' delay in refiling, holding that the reasons put forward disclosed negligence and lack of due diligence rather than sufficient cause. The appeal was therefore dismissed.

Entitlement to the benefit of the proviso to section 45 - Twin conditions - Woman accused of offences under Money Laundering - Benefit of Statutory Bail -Prolonged incarceration of undertrial - Interpretation of section 479 of the BNSS - Bail on parity with co-accused who had already been granted bail in the same ECIR - Seeking to release under Section 479 of the Bharatiya Nagarik Suraksha Sanhita, 2023 on account of custody already undergone and the nature of pending proceedings.

Proviso to section 45 of the PMLA - Bail to woman accused - HELD THAT: - The Court held that the proviso to section 45 vests discretion in the Court to release a woman accused on bail without insisting on the twin conditions, though such benefit is not automatic in every case. The controlling principle, as explained in K. Kavitha after considering Saumya Chaurasia [2023 (12) TMI 685 - SUPREME COURT] is that the benefit extends to women as a class and is not confined to only "vulnerable" women; if such benefit is denied, specific reasons must exist. The allegations regarding the petitioner's role and the quantum of proceeds of crime were held insufficient to displace the statutory protection, and no special circumstances were shown to justify withholding it. [Paras 8, 9, 10]

The stringent twin conditions under section 45 of the PMLA were held inapplicable to the petitioner.

Interpretation of section 479 of the BNSS - Prolonged incarceration of undertrial - Multiple pending cases - HELD THAT: - As noted by the Supreme Court, in Satinder Kumar Antil [2022 (8) TMI 152 - SUPREME COURT] and V. Senthil Balaji [2024 (9) TMI 1497 - SUPREME COURT] [in the context of Section 436A of the CrPC], the statute provides a safeguard against prolonged incarceration pending trial. While an exception can be made under the first proviso to Section 436A CrPC [now the second proviso to Section 479(1) of the BNSS], that exception must be sparingly invoked to further the constitutional guarantee of liberty. In BNSS, a further provision was made, which entitles a first-time offender to the benefit of Section 479(1), upon completion of a lesser proportion of the maximum sentence [1/3rd]. It would, in my view, be inconsistent in this approach to hold that Section 479(2) entirely eclipses Section 479(1), even if the accused is facing trial in more than one offence in the same FIR, or more than one criminal case. Instead, a harmonious reading of the various provisions contained in Section 479 of the BNSS requires the Court to take into account multiplicity of offences or pending proceedings as a significant factor, but does not altogether deprive the Court of its discretion to grant bail once the accused has crossed the custody threshold of Section 479(1) of the BNSS.

The Court found that the petitioner had crossed one-half of the maximum sentence of seven years prescribed for the offence under the PMLA. On the explanation to section 479(1), the Court held that even if the period after the prosecution concluded its arguments on charge were excluded as delay attributable to the accused, the petitioner had already completed more than half of the maximum sentence by then, and could not therefore be denied the statutory benefit on that ground. On section 479(2), the Court adopted a holistic and harmonious construction: multiplicity of offences or pending cases is a significant factor, but does not wholly eclipse section 479(1) or eliminate judicial discretion once the custody threshold is crossed. Having regard to the duration of custody, the fact that the case was still at the stage of charge, the large number of witnesses and documents, the improbability of an early conclusion of trial, and the fact that the petitioner was already on bail in the other cases except the predicate offence, the Court held that section 479 operated in her favour. The Court also declined to invoke the second proviso to continue detention, finding no compelling reason for such exceptional course. [Paras 15, 18, 25, 26, 27]

The petitioner was held entitled to bail on the strength of section 479 of the BNSS, and no exceptional ground was found to deny that relief.

Parity in bail - Similarly placed co-accused - HELD THAT: - The Court noted that a substantial number of co-accused had already been enlarged on bail, including persons alleged to have directly handled, layered, or facilitated movement of the proceeds of crime, as well as a co-accused alleged to have enjoyed those proceeds. While the allegations against the petitioner concerned handling, utilisation, and enjoyment of the proceeds of crime through her concerns and assets, the Court held that her case could not be regarded as graver than those co-accused who had already obtained bail. In that view, parity operated in her favour. [Paras 29, 30, 31, 32, 34]

Parity with similarly placed co-accused was held to support grant of bail to the petitioner.

Final Conclusion: The Court allowed the bail application and directed release of the petitioner in the PMLA case, holding that the proviso to section 45 protected her as a woman accused, section 479 of the BNSS operated in her favour on account of prolonged custody, and parity with co-accused also supported the grant of bail. Bail was made subject to the conditions imposed by the Special Court.

Validity of the Order-in-Original - Claimed exemption under Notification No. 25/2012-ST - plea of limitation - Failure to consider material contentions - Adjudication based on inputs drawn from Form 26AS and TDS statements -HELD THAT: - The Court noticed from the impugned order that the authority had relied on inputs obtained from the statement in Form-26AS relating to TDS. It further took note of the earlier order in W.P.No.11154/2023, where this Court had directed that, in matters of this nature, the authority must keep in view questions relating to the nature of taxable service, coverage under the negative list, applicability of exemption under Notification No.25/2012 or any other notification, liability to pay service tax, and limitation. Since the petitioner specifically contended that these aspects had not been considered, the Court held that the proper course was to set aside the Order-in-Original and relegate the matter to the stage of reply to the show-cause notice, with liberty to file an additional reply and with all contentions kept open. [Paras 4, 5, 6, 7]

The Order-in-Original was set aside and the matter was remitted to the stage of reply to the show-cause notice for fresh adjudication after considering the relevant aspects indicated in the earlier order.

Final Conclusion: The writ petition was disposed of by setting aside the impugned Order-in-Original and remitting the matter for fresh consideration from the stage of reply to the show-cause notice. The petitioner was permitted to file an additional reply, and all contentions on merits were kept open.

Cenvat credit on services used for construction and modernization of effluent treatment infrastructure, including works contract and civil construction services - Input Service - Admissibility of Rule 2(l) - Effluent Treatment Plant (ETP) - Pollution control compliance.

Input service - Effluent treatment infrastructure - HELD THAT: - In Cheminova India Limited Vs. C.C.E & S.T, Surat, CESTAT Ahmedabad [2023 (6) TMI 1323 - CESTAT AHMEDABAD] held that as per the provisions of Pollution Control Act, 1981 if the effluent generated in the manufacture is not treated, the appellant shall not be able to run their factory. In this undisputed position, the effluent treatment activity is necessary to carry out the uninterrupted production of the final product in the appellant’s factory. Therefore, the conclusion can be conveniently drawn that the effluent treatment activity is a vital part of overall manufacturing of the final product and if this be so then the input services used for “effluent treatment” are admissible as “input service”.

In Adroit Pharmachem Private Limited Vs. Commissioner of Central Excise & ST, Vadodara[2022 (1) TMI 59 - CESTAT AHMEDABAD], has held that the amended definition of input service from 01.04.2011 was considered and it was viewed that though the Construction Service/Works Contract Service were excluded but it was interpreted that the said service related to only new construction or setting up of a new factory. But since modernization, renovation or repair and maintenance, even after exclusion category, continue to remain in exclusion clause of definition, credit cannot be denied.

The Tribunal held that services availed for effluent treatment and pollution control are integrally connected with manufacture because compliance with pollution control norms is a statutory condition for running the factory and uninterrupted production. It followed earlier Tribunal decisions holding that services relating to effluent treatment qualify as input service. The Tribunal further accepted that, even after the amendment from 01.04.2011, construction or works contract services used in relation to modernization, renovation or repair of an existing factory are not hit by the exclusion merely because they involve construction activity. On that reasoning, the denial of credit on the footing that works contract service for effluent treatment infrastructure stood excluded was held unsustainable. [Paras 5, 6, 7]

The credit disallowed on the impugned services was held admissible, and the consequential recovery of interest and imposition of penalty were also held unsustainable.

Final Conclusion: The Tribunal allowed the appeal and held that cenvat credit on the disputed construction and works contract services used for effluent treatment infrastructure in the existing factory was admissible. The impugned order was set aside, and the assessee was held entitled to consequential relief including restoration of the reversed credit and related interest.

Demand of service tax - Classification of services rendered to the banks - classifiable under Business Auxiliary Service or were outside that category and relatable to banking and financial services - services relating to recovery of dues from borrowers - Recovery Agent Service - Extended period of limitation - Suppression of facts.

Classification of taxable service - HELD THAT: - The Tribunal held that, on the terms of the agreements with the banks, the appellant's activities did not answer any of the categories enumerated under Business Auxiliary Service. The services were found to relate to banking and financial services. However, insofar as the appellant undertook collection or recovery of cheques, payments and instalments due from borrowers, such activity squarely answered the definition of Recovery Agent Service, being a service provided to a banking company or financial institution in relation to recovery of sums due. [Paras 7]

The demand under Business Auxiliary Service was set aside, while the levy on services falling under Recovery Agent Service was upheld.

Extended period of limitation - Suppression of facts - HELD THAT: - The Tribunal noted that the show cause notice was issued on 27.04.2009 for the period 10.09.2004 to 30.09.2008 and found no evidence or stated reasons to support an allegation of suppression. On that basis, invocation of the extended period was held unjustified, and the confirmed demand for Recovery Agent Service was restricted to the normal period alone. [Paras 7]

The demand for Recovery Agent Service was confined to the normal period and the balance was not maintainable.

Final Conclusion: The appeal was partly allowed. The service tax demand under Business Auxiliary Service was set aside, and only the demand relatable to Recovery Agent Service was sustained, limited to the normal period for want of material supporting suppression.

Liability to service tax on the consideration received for transfer of marketing rights under the category of Intellectual Property Right Service - Technical Know-how - Whether appellant is liable to discharge service tax under the category of Intellectual Property Right Service for receiving consideration on transfer of marketing right of Oncology and Immunosuppressant Solutions against an agreement dated 13.02.2008 to M/s. BIOCON Ltd. during the relevant period. - HELD THAT: - The Tribunal held that the controversy stood covered by earlier decisions of the Tribunal, particularly GE BE Pvt. Ltd. v. CCE & ST, Bangalore [2024 (12) TMI 839 - CESTAT BANGALORE] which explained that taxable intellectual property service is confined to rights in intangible property recognised under a law in force in India, and that permanent transfer of such right does not amount to rendering of service. Following that principle, the consideration received for transfer of the marketing rights under the agreement could not be subjected to service tax under the category of Intellectual Property Right Service. [Paras 7, 8]

The impugned demand under Intellectual Property Right Service was set aside and the appeal was allowed with consequential relief.

Final Conclusion: Following the Tribunal's earlier decisions on the scope of Intellectual Property Right Service, the demand on the amount received for transfer of marketing rights was held unsustainable. The impugned order was accordingly set aside and the appeal was allowed with consequential relief.

Refund of service tax paid on Rent-a-Cab service used for authorised operations in the SEZ unit - input service -Benefit of Notification No. 17/2011-S.T. - HELD THAT:- The Tribunal held that the notification grants refund of service tax paid on specified services received and used for authorised operations in an SEZ. The determinative conditions under the notification were that the tax had actually been paid and that no CENVAT credit had been taken. Since it was not disputed that the appellant had discharged service tax on Rent-a-Cab service and had used that service for authorised operations in the SEZ unit, rejection of the refund claim on the ground that the service was not one of the input services was unsustainable. [Paras 5, 6]

The denial of refund on Rent-a-Cab service was set aside and the appeal was allowed with consequential relief.

Final Conclusion: The Tribunal held that, once service tax on Rent-a-Cab service had been paid and the service was used for authorised operations in the SEZ without availing CENVAT credit, refund under Notification No. 17/2011-S.T. could not be denied on the ground adopted in the impugned order. The appeal was accordingly allowed.

Entitlement to the benefit of exemption - Demand of service tax on the ground that the appellant being a sub-contractor - Construction of water treatment plant for non-commercial government project. - HELD THAT: - The Tribunal found that the impugned order itself recorded that the appellant had acted as a sub-contractor under the work order issued by M/s. Degremont Ltd. for construction of a water treatment plant for Kerala Water Authority, and that the project was non-commercial. Relying on the earlier decision in the case of the appellant's sister concern on identical facts s in the case of Shree Nandi Logistics Vs. Commissioner of Central Excise and Service Tax [2024 (12) TMI 278 - CESTAT AHMEDABAD], where the benefit had been extended to the sub-contractor, the Tribunal held that there was no reason to deny the same treatment to the appellant. The appeal was thus allowed on the basis of parity with the earlier binding factual and legal determination. [Paras 4]

The demand was held unsustainable and the appellant was granted the exemption benefit available to the sub-contractor.

Final Conclusion: Following the earlier order in the case of the appellant's sister concern on identical facts, the Tribunal held that the appellant as sub-contractor was also entitled to the exemption in respect of the non-commercial water treatment project for Kerala Water Authority. The impugned order was therefore set aside and the appeal was allowed with consequential relief.

Denial of abatement of trade discount - Assessable value - absence of transaction-wise correlation between each clearance from the factoryand documentary evidence for each clearance - Reasonable approximation - Burden of proof -Chartered Accountant certificate as evidence - sufficient to establish the claim of abatement - Reasonable method of valuation.

Whether the denial of abatement towards discounts is legally sustainable in the absence of transaction-wise correlation? - HELD THAT: - The Tribunal held that where the goods were not sold at the factory gate but were stock transferred to multiple locations and sold over a period of time, insistence on strict one-to-one correlation between each clearance and each subsequent sale was impractical and contrary to commercial realities. What was material was the actual passing on of discount, and not rigid adherence to an impossible mode of proof.

The Hon’ble Supreme Court in Union of India v. Bombay Tyres International Ltd. [1983 (11) TMI 70 - SUPREME COURT], has clearly held that trade discounts actually passed on to buyers are admissible deductions and must be considered while determining assessable value. The emphasis is on actual passing of discount and not on rigid procedural requirements. In the present case, there is no dispute that discounts have been offered to customers in the course of business.

The absence of invoice-wise linkage could not by itself justify rejection of the claim for discount abatement, since the burden of proof could not be stretched to an extent that made compliance impossible in the appellant's business model. [Paras 9]

The requirement of strict transaction-wise correlation was rejected, and the denial of discount abatement on that basis was held unsustainable.

Whether the evidence produced by the appellants, including Chartered Accountant certificates and consolidated sales data, is sufficient to establish the claim of abatement and whether the methodology adopted by the Department in denying the same is legally sustainable? - HELD THAT:- The Tribunal accepted that, in the circumstances of large-scale stock transfers and voluminous sales data, mathematical precision was neither expected nor required and a reasonable and pragmatic method had to be adopted on the basis of available material. Chartered Accountant certificates issued after verification of statutory records were treated as credible evidence, particularly when the Department had neither discredited them nor produced rebuttal material. Rejection of such evidence merely because it was not transaction-specific was held arbitrary. The Tribunal further held that, once the Department itself acknowledged the impracticability of verifying lakhs of entries, it could not insist on an unworkable method and at the same time deny the entire claim without evolving any alternative workable basis for valuation. On that reasoning, the denial of abatement in toto was held legally untenable, and remand was found unnecessary because the material already on record had not been rebutted. [Paras 10, 11]

The evidentiary material produced by the appellant was accepted as sufficient, the Department's methodology was held arbitrary and unworkable, and the denial of the entire abatement was set aside without remand.

Final Conclusion: The Tribunal held that discount abatement could not be denied merely for want of one-to-one correlation where such correlation was commercially impracticable, and that unrebutted Chartered Accountant certification supported by consolidated sales data was acceptable evidence. The impugned appellate order was therefore set aside and the appeals were allowed with consequential relief.

Rectification of ostensible mistake - Rectification of mistake apparent on record - Non-consideration of submissions in the final order [2025 (6) TMI 593 - CESTAT CHENNAI] - determining the eligibility of Cenvat credit - Deemed manufacture - Deemed manufacture by repacking from bulk packs to retail packs.

HELD THAT: - The Tribunal held that the Revenue's plea was founded on alleged non-consideration of submissions made in the earlier final order relied on in the impugned order. On examining that earlier order, it found that the omitted portions largely referred either to undisputed legal provisions or to the factual process already noticed in the adjudication order. The legal effect of such process had already been answered in the earlier order, and that view continued to hold the field unless set aside by a higher forum.

The Tribunal further held that, in view of the law stated by the Supreme Court in Jindal Drugs Ltd. [2024 (5) TMI 67 - SUPREME COURT], repacking from bulk packs to retail packs is, post-amendment, an independent process amounting to manufacture. Since the impugned order had followed that position, absence of a separate discussion on the Revenue's submissions did not constitute any apparent error rectifiable under the statutory rectification power. [Paras 2, 3]

The miscellaneous application for rectification was dismissed as no mistake, much less a mistake apparent on record, was made out.

Final Conclusion: The Tribunal rejected the Revenue's rectification application, holding that the impugned final order did not suffer from any apparent mistake. The order having followed the legal position accepted in the earlier final order and supported by the Supreme Court's ruling on deemed manufacture, no rectification was called for.

Liability of Power of Attorney holder in case of death of Principal - Denial of liability in certificate proceedings - unexecuted warrant of arrest - Statutory remedy under Section 9 of the Bengal Public Demand Recovery Act, 1913 - Principles of Natural Justice - Personal Liability - Vicarious Liability. -HELD THAT: - The Court noted that the petitioner disputed service of notice, denied having filed any reply before the taxing authority, and questioned the very basis on which liability was sought to be fastened upon him in respect of dues said to be payable by the deceased proprietor of the concern. In view of these disputed and peculiar facts, the Court considered that the proper course was to permit the petitioner to file a petition before the Certificate Officer denying liability on all available grounds. The Court therefore declined to examine the merits in writ jurisdiction, directed that such petition should be decided on merits and not rejected merely on the ground of delay, and granted temporary protection by staying the operation of any unexecuted warrant of arrest so as to enable the petitioner to approach the Certificate Officer. [Paras 9, 10, 11, 14]

The petitioner was relegated to the statutory remedy before the Certificate Officer, with a direction that his objection be decided on merits, and execution of any unexecuted arrest warrant was stayed for the period specified by the Court.

Final Conclusion: The writ petition was disposed of without adjudicating the petitioner's liability on merits. The Court directed the petitioner to pursue the statutory remedy before the Certificate Officer under Section 9 of the Bengal Public Demand Recovery Act, 1913, and granted limited interim protection against execution of the arrest warrant to facilitate that course.

Revisional jurisdiction- barred by limitation - Commencement of period - limitation set out under Section 32. - HELD THAT: - The Court found that the appellate order sought to be revised had been passed on 09.02.2018, whereas the revisional order was passed only on 21.04.2022. On that basis, the Court held that the revisional order had been made beyond the permissible period of limitation and could not be sustained. [Paras 6, 7]

The revisional order was held to be time-barred and was set aside along with the consequential orders.

Final Conclusion: The writ petition was allowed on the ground that the revisional order had been passed beyond limitation. The impugned revisional order and all consequential orders were set aside.

Negotiable Instruments Act - Dishonour of cheque - Legally Enforceable Debt -essential ingredients to constitute the offence under Section 138 - Statutory presumption - Proof of presentation - service of demand notice - Rebuttable Presumption - Reverse Onus Clause - Preponderance of Probabilities - Concurrent Findings of Fact - revisional interference with concurrent findings.

Statutory presumption in cheque dishonour - proof of presentation and dishonour of cheque - rebuttal of presumption - HELD THAT: - The Court held that the bank evidence and exhibited records established that the cheque had in fact been presented and returned unpaid for the reason that the drawer's signature differed. The absence of a signature on the reverse of the cheque, non-production of the deposit slip, or omission of a dishonour entry in the account statement did not, by themselves, discredit the bank's evidence, particularly when the Branch Manager explained that the relevant branches had merged and that, both banks being SBI branches, the cheque was not required to be sent for external clearance under CBS. The transfer of the amount to the accused's account stood corroborated by the bank records, and the demand notice was admittedly received. In these circumstances, the statutory presumption in favour of the complainant stood attracted, and the accused did not produce convincing rebuttal material sufficient, even on the standard of preponderance of probabilities, to show absence of debt or liability. [Paras 16, 17, 18, 19]

The ingredients of the offence were held proved, and the challenge founded on alleged non-presentation of the cheque and lack of liability was rejected.

Revisional interference with concurrent findings - perversity in findings - HELD THAT: - The Court held that in revisional jurisdiction it would not re-analyse or re-interpret evidence merely because another view was possible. Interference with concurrent findings is warranted only where the findings are perverse, suffer from jurisdictional error, or occasion failure of justice. On the materials on record, the discrepancies pointed out by the petitioners were treated as technical inconsistencies arising from branch merger and banking procedure, and not as defects rendering the appreciation of evidence by the courts below perverse. Since the findings on issuance of cheque, its presentation, dishonour, service of notice and non-payment were supported by evidence, no revisional interference was justified. [Paras 13, 14, 19, 20]

The concurrent conviction was affirmed, there being no perversity, jurisdictional error, or manifest injustice.

Final Conclusion: The revision was dismissed. The Court affirmed the conviction and sentence, holding that the cheque dishonour and the underlying liability stood proved and that no perversity or other revisional ground existed to disturb the concurrent findings.

Negotiable Instruments Act, 1881 - Sentence in default of payment of compensation - statutory limit applicable to an offence under Section 138 - Single Transaction Rule - Default Sentence - Consecutive or Concurrent - Consecutive running of default sentences - requirement of a fair, just and reasonable procedure under Article 21.

Limit on default imprisonment - Compensation under Section 357(3) - HELD THAT: - The Court held that the statutory restriction governing imprisonment in default of payment of fine equally controlled imprisonment imposed in default of payment of compensation. Reading Section 30 of the Code with Section 65 of the Penal Code, the Court found that where the offence under Section 138 is punishable with imprisonment up to two years, the maximum permissible default imprisonment could only be six months. The award of twelve months' imprisonment in default in each complaint was therefore contrary to the absolute statutory mandate and was illegal. [Paras 28, 29, 30, 31, 32]

The default sentence of twelve months in each complaint was held to be illegal and unsustainable.

Consecutive running of default sentences - Default sentence distinct from substantive sentence - HELD THAT: - The legal position on the aspect of the sentences in default in payment of fine running consecutively and not concurrently, is well recognized. To start with, Section 64 of the IPC, 1860 provides that, it shall be competent to the Court which sentences the offender to direct by the sentence that, in default of payment of fine, the offender shall suffer imprisonment for a certain term, which imprisonment shall be in excess of any other imprisonment to which he may have been sentenced or to which he may be liable under a commutation of a sentence. Section 64 of the Penal Code, thus, mandates that the sentence awarded for non-payment of fine, shall be in excess of any other imprisonment to which the accused may have been sentenced.

Sub-section (2) of Section 30 of the Code, provides that the imprisonment awarded under the said Section may be in addition to the substantive sentence of imprisonment for the maximum term awardable by the Magistrate under Section 29. Section 428 of the Code further clarifies the position by excluding the imprisonment in default of payment of fine, from the ambit of set off to which the accused is entitled to on account of the period of detention undergone by him during the investigation, inquiry or trial of the case. Therefore, the sentences in default of payment of fine or compensation, cannot be made to run concurrently.

In the case of Sharad Hiru Kolambe V/s. State of Maharashtra and Ors. [2018 (9) TMI 2177 - SUPREME COURT], the Supreme Court has held that the default sentences cannot be directed to run concurrently.

The contention that the default sentences across the complaints should be treated as concurrent was rejected.

Proportionality under Article 21 - Default sentence for non-payment of compensation - HELD THAT: - It is true, the offence punishable under Section 138 of the NI Act, 1881, stands on a slightly different pedestal. Ordinarily, the justice of the case demands that the drawer of the cheque be directed to pay the fine or compensation, as the case may be, to compensate the payee. The prescription of punishment for the dishonour of a cheque is predominantly for the purpose of ensuring the sanctity of the cheque as a negotiable instrument in the commercial transactions. The penal measure primarily subserves the end of compensatory justice rather than retributive or punitive element. Nonetheless, while imposing the compensation, the Court ought to have due regard to the situation in life of the parties, especially that of accused. The circumstances peculiar to the accused are of critical salience while determining the quantum of sentence of imprisonment in default of payment of fine or compensation. The maximum permissible sentence in default of payment of compensation may be legitimate. However, the Court must pose unto itself a question whether that would be reasonable and justifiable in the facts and circumstances of the given case, for there is an essential distinction between the permissibility of the action and justifiability thereof.

The Court held that default imprisonment is a penalty for failure to comply with the direction to pay compensation and not an additional substantive punishment. Even where the maximum permissible default term may in law be available, its imposition must still be justified on the facts. In the present case, requiring the petitioner to suffer an aggregate period of default imprisonment vastly exceeding the substantive sentence merely on account of inability to pay compensation was found to be ex facie unreasonable, excessively harsh and disproportionate, offending the guarantee of fair and reasonable procedure under Article 21. The Court also noted that liability to pay compensation survives and remains recoverable notwithstanding imprisonment in default. In view of the imprisonment already undergone, further detention was held to be unjust and unconscionable. [Paras 42, 43, 45, 46, 47]

The sentence in default of payment of compensation in all the complaints was modified to the period already undergone, and release was directed if the petitioner was not required in any other case.

Final Conclusion: The petition was allowed in part on the question of sentence. While the Court did not accept concurrency of default sentences, it held that the default imprisonment awarded was illegal and, having regard to the statutory limit and the disproportionality of further detention, reduced the default sentence in all the complaints to the period already undergone and directed release forthwith if not required in any other case.