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Issues: Whether education consultancy, marketing and recruitment support services rendered by an Indian entity to foreign universities constitute export of services or intermediary services, and whether the refund claim rejecting such services as intermediary services was sustainable.
Analysis: The Court held that the controversy was covered by its earlier decision on materially similar facts. Where the Indian entity contracts with foreign universities, raises invoices on them, receives consideration from them, and does not charge the students, the contractual recipient of the service remains the foreign university. Incidental assistance to students in India does not by itself convert the service provider into an intermediary. The same approach was consistent with the Bombay High Court decision in a similar education-consultancy context, and the factual matrix in the present case was materially identical. The impugned order proceeded on the mistaken premise that promotion of courses, counselling, and recruitment support to foreign universities necessarily amounts to acting as an agent or intermediary.
Conclusion: The petitioner was not an intermediary and the services qualified as export of services. The refund rejection was unsustainable and the refund was directed to be processed and granted with applicable statutory interest.
Ratio Decidendi: An Indian entity supplying consultancy, marketing, or recruitment support to a foreign university on a contractual basis, for consideration payable by the foreign university, does not become an intermediary merely because the services incidentally facilitate admissions or recruitment of students in India.
Rejection of refund claim - Export of services - Intermediary services - Education consultancy, marketing and recruitment support services to foreign universities - Principal-to-Principal Relationship - Whether education consultancy, marketing and recruitment support services rendered by an Indian entity to foreign universities would qualify as export of services, or would fall within the ambit of “intermediary” services under Section 2(13) of the IGST Act -HELD THAT: - The Court held that the controversy stood covered by the binding decisions of this Court and the Bombay High Court in K.C. Overseas Education Pvt. Ltd. [2025 (3) TMI 1526 - BOMBAY HIGH COURT]. The determinative test was the contractual recipient of the service, the person paying the consideration, and whether the supplier was providing services on its own account. Where the petitioner had agreements with foreign universities, raised invoices on them, received consideration from them, did not charge students, had no authority to bind the universities, and could not guarantee admission, the mere fact that students in India were incidentally assisted in the admission process did not convert the petitioner into an intermediary. On the admitted factual similarity with the earlier precedent, rejection of refund on the ground that the petitioner was acting as an agent of the foreign university was unsustainable. [Paras 16, 17, 18, 19, 20]
The impugned order rejecting refund by treating the petitioner as an intermediary was set aside, and the refund was directed to be processed and granted with applicable statutory interest in accordance with law.
Final Conclusion: The Court held that the petitioner's services to foreign universities were export of services and not intermediary services. The rejection of refund was therefore unsustainable, and the refund was directed to be granted with applicable statutory interest.
Issues: Whether GST proceedings, show-cause notices, and the impugned order issued in the name of an amalgamated company that had ceased to exist after approval of the scheme of amalgamation were valid, and whether Section 87 of the Central Goods and Services Tax Act, 2017 could sustain such action.
Analysis: The amalgamation scheme had been approved by the National Company Law Tribunal, after which the original company ceased to exist and its registration was cancelled. The notices and the impugned order were nonetheless issued against that non-existent entity. In such circumstances, proceedings initiated against a dead or non-existent person are without jurisdiction. Section 87 of the Central Goods and Services Tax Act, 2017 governs liability arising in the interregnum contemplated by that provision, but it does not authorise issuance of notices or passing of assessment orders against an entity that has already ceased to exist after amalgamation.
Conclusion: The proceedings and the impugned order against the amalgamated entity were invalid and liable to be set aside, and the writ petitions were allowed.
Validity of the Proceedings against non-existent entity - Amalgamation and cessation of corporate existence - Scope of liability in case of amalgamation or merger. - HELD THAT: - The Court held that once the scheme of amalgamation was approved, the amalgamating company ceased to exist in law, and that legal consequence had to be recognised. As the authorities had been informed of the amalgamation and cancellation of registration, the subsequent show cause notice and adjudication order issued in the name of the erstwhile company were without jurisdiction. The Court further held that section 87 of the CGST Act operates only for the limited purpose of dealing with the intervening period contemplated therein and does not authorise issuance or continuation of proceedings against a non-existent entity after amalgamation. Participation by the petitioner and the possibility of other lawful steps being available to the department did not cure the jurisdictional defect in the impugned proceedings. [Paras 15, 16, 17, 18, 24]
The impugned order was quashed, and the connected petition involving the same issue was also allowed on the same basis; all other contentions and any other lawful steps were kept open.
Final Conclusion: The Court allowed both writ petitions and quashed the impugned GST order issued in the name of the amalgamating company, holding that proceedings against a non-existent entity are void and that section 87 of the CGST Act does not save such action. All other contentions and any other lawful steps available in law were expressly kept open.
Issues: Whether the order rejecting the application for revocation of cancellation of registration was liable to be set aside and the matter remitted to provide the petitioner an opportunity to reply to the show-cause notice.
Analysis: The petitioner's registration had been cancelled, and the subsequent application for revocation was rejected on the ground that no response had been filed to the show-cause notice. Without deciding whether the time granted for response was sufficient, the Court found it in the interest of justice to afford another opportunity to file a reply. The impugned rejection order was therefore set aside, and the authority was directed to consider the objections and pass a fresh order within the stipulated time.
Conclusion: The challenge succeeded to the extent of setting aside the rejection order and securing a further opportunity for reply and reconsideration.
Rejection of the application for revocation of cancellation of registration - Adequate opportunity of hearing - Audi Alteram Partem - Natural Justice - HELD THAT: - The Court did not examine on merits whether the time originally granted by the authority was sufficient. It held that, in the interest of justice, the petitioner ought to be afforded another opportunity to submit a reply to the show-cause notice issued in the revocation proceedings, and that the authority should thereafter consider the objections and pass a fresh order. [Paras 6, 7]
The impugned order rejecting revocation was set aside, liberty was granted to file objections to the show-cause notice within the time fixed by the Court, and the authority was directed to pass a fresh order thereafter.
Final Conclusion: The writ petition was disposed of by setting aside the order rejecting revocation of cancellation of registration and by directing fresh consideration after giving the petitioner an opportunity to reply to the show-cause notice.
Issues: (i) whether an assessment order issued without the signature of the assessing officer is valid or can be sustained by reference to the curative provisions of the GST law; (ii) whether, in the circumstances of delayed approach and portal-based service, the writ petition could be entertained subject to a pre-deposit condition and consequential remand.
Issue (i): Whether an assessment order issued without the signature of the assessing officer is valid or can be sustained by reference to the curative provisions of the GST law.
Analysis: The order reiterated the settled view that a signature on the assessment order is not a dispensable formality. It noted the earlier Division Bench decisions holding that the omission of the assessing officer's signature renders the order defective and that the curative provisions under the GST statute do not cure such a foundational defect. On that basis, the impugned assessment orders were treated as suffering from an inherent illegality.
Conclusion: The unsigned assessment orders were held invalid and were set aside.
Issue (ii): Whether, in the circumstances of delayed approach and portal-based service, the writ petition could be entertained subject to a pre-deposit condition and consequential remand.
Analysis: The order recognised the practical difficulties arising under the GST portal-based regime and balanced them against the revenue interest of the State. It accepted that, where registered persons approach the Court with delay in cases involving patent irregularities, relief could be granted subject to a conditional deposit. The order also directed exclusion of the intervening period for limitation and protected any payments already made by adjusting them against the mandated deposit.
Conclusion: The writ petition was entertained, the matter was remanded, and relief was made conditional on deposit of 20% of the disputed tax within the stipulated time.
Final Conclusion: The assessment orders were annulled for want of the assessing officer's signature, the recovery measures were withdrawn, and the dispute was sent back for fresh adjudication after compliance with the stipulated deposit condition.
Ratio Decidendi: An assessment order lacking the assessing officer's signature is vitiated, and portal-based service or the GST curative provisions do not by themselves validate such a defective order; in appropriate cases, delay-related hardship may be accommodated by conditional relief and remand.
Validity of the Unsigned assessment order - Delay in invoking writ jurisdiction against patently defective assessment - Service through portal - Condonation of delay. -HELD THAT: - The Court followed its earlier Division Bench decisions in the case of A.V. Bhanoji Row Vs. The Assistant Commissioner (ST) [2023 (2) TMI 1224 - ANDHRA PRADESH HIGH COURT], M/s. SRK Enterprises Vs. Assistant Commissioner [2023 (12) TMI 156 - ANDHRA PRADESH HIGH COURT] and M/s. SRS Traders Vs The. Assistant Commissioner ST & Ors [2024 (4) TMI 894 - ANDHRA PRADESH HIGH COURT],holding that signature on an assessment order is mandatory and that absence of such signature renders the order invalid. On the objection of delay, the Court noted the practical difficulties faced by registered persons in accessing orders uploaded on the portal and held that, particularly where the assessment suffers from a patent irregularity, the writ petition could still be entertained by balancing the hardship to taxpayers with the need to protect revenue. On that basis, the impugned unsigned assessment orders were set aside and the matter was remanded for fresh assessment after opportunity of hearing, subject to deposit of 20% of the disputed tax, with adjustment of amounts already paid or recovered and exclusion of the writ period for limitation. [Paras 11, 12, 13, 14]
The impugned assessment orders were set aside as invalid for want of signature and the matter was remanded to the Assessing Officer, subject to deposit of 20% of the disputed tax within the stipulated time.
Final Conclusion: The writ petition was disposed of by setting aside the unsigned assessment orders and remanding the matter for fresh consideration after hearing. The relief was made conditional upon deposit of 20% of the disputed tax, with consequential protection against coercive recovery and exclusion of the writ period for limitation.
Issues: Whether the Appellate Authority was justified in rejecting the GST appeal as time-barred after earlier remand directions, and whether the matter required reconsideration on merits.
Analysis: The prior order required the Appellate Authority to proceed de novo and pass an appropriate, reasoned and speaking order after giving due opportunity of hearing, which necessarily contemplated adjudication of the appeal on merits. The subsequent rejection on the ground of limitation did not answer the earlier direction and defeated the purpose of the remand. The Court therefore set aside the impugned orders and directed the Appellate Authority to hear the appeal afresh, ignoring the delay in filing, and to decide it by a speaking and reasoned order after affording due hearing to all stakeholders.
Conclusion: The rejection of the appeal as time-barred was unsustainable, and the matter was directed to be heard de novo and decided on merits in favour of the assessee.
Final Conclusion: The appellate proceedings were restored for a merits-based decision, and the delay objection was not permitted to prevent substantive adjudication.
Rejection of the GST appeal as time-barred after earlier remand directions - Scope of remand - Non-compliance with remand directions -HELD THAT: - The Court held that the earlier order remanding the matter for a de novo decision by a reasoned and speaking order necessarily required adjudication of the appeal on merits. Such a direction could not be understood as permitting a fresh rejection on the admitted ground of delay, since no speaking adjudication was needed on that aspect. Giving the Appellate Authority the benefit of doubt as to its understanding of the earlier order, the Court found the impugned orders unsustainable for not carrying out the remand in its true tenor and directed fresh consideration of the appeal on merits, ignoring the delay in filing. [Paras 12, 13]
The impugned appellate orders were set aside and the Appellate Authority was directed to hear the appeal de novo and decide it on merits, ignoring the delay, after affording due opportunity of hearing.
Final Conclusion: The petition was allowed. The Court held that the earlier remand required a fresh decision on merits, and therefore the appellate rejection on the ground of limitation could not stand.
Issues: Whether the challenge to the Central GST show cause notice on the ground of parallel proceedings barred by Section 6(2)(b) of the Central Goods and Services Tax Act, 2017 required a merits adjudication, and what directions were necessary to ensure compliance with the prohibition against duplication of proceedings.
Analysis: The petition was founded on the allegation that the State authority had commenced proceedings earlier and that the later Central proceedings, including the show cause notice and connected summons and intimations, concerned the same subject matter. The controlling legal position was taken from the binding law already declared by the Supreme Court, which recognises that parallel adjudicatory proceedings on the same subject matter are barred, while permitting lawful investigative steps and requiring coordination between the Central and State tax administrations. On the facts placed before the Court, it was considered sufficient to issue directions aligned with that legal position, rather than undertake an independent merits determination on the validity of the notice or the allegations.
Conclusion: No separate adjudication on the merits of the notice was undertaken, and the petitioner was directed to respond to the Central proceedings, cooperate with the inquiry, inform the State authority, and await inter-departmental coordination in accordance with the governing law.
Multiplicity of Proceedings - Validity of the GST show cause notice - parallel proceedings barred by Section 6(2)(b) - Same subject matter - merits adjudication - Initiation of proceedings - HELD THAT: - The Court held that the controversy regarding overlap between the State and Central GST actions stood governed by the principles laid down by the Supreme Court in M/s Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East & Anr. [2025 (8) TMI 991 - SUPREME COURT] Applying those conclusions, the Court observed that the assessee must respond to the show cause notice and other communications and place before the authorities its contention that the proceedings relate to the same subject matter. The authorities were directed to communicate and verify the claim inter se, and to ensure that the assessee is not subjected to multiple adjudicatory processes on the same subject matter. The Court expressly refrained from examining the validity of the show cause notice or the summons on merits and kept all rights and contentions open. [Paras 11, 12, 13]
The writ petition was disposed of with directions to the petitioner to raise its objection before the authorities and to the State and Central authorities to coordinate and proceed in accordance with the Supreme Court guidelines, without any adjudication by the Court on the merits of the impugned proceedings.
Final Conclusion: Following the law declared in Armour Security, the Court declined to decide the validity of the impugned GST proceedings on merits and directed the petitioner to raise its objection before the authorities. The State and Central authorities were required to coordinate and ensure that no parallel adjudicatory proceedings continue on the same subject matter.
Issues: Whether assessment and consequential recovery proceedings could be sustained when the same officers who had issued the audit observations and initiated the proceedings passed the impugned orders, and whether the matter required reconsideration by another proper officer.
Analysis: The impugned orders were passed by the very officers who had earlier issued the audit observations. In the circumstances, the adjudication could not be sustained when the same officials proceeded to determine the matter against the assessee. Following the earlier coordinate bench view, the proper course was to exclude those officers from further adjudication and require reconsideration by a different proper officer. The consequential recovery action also could not survive once the assessment orders were quashed, and the matter was required to be taken up afresh from the stage of reply to the show-cause notices.
Conclusion: The assessment orders and consequential recovery proceedings were quashed, and the matter was remitted for fresh consideration by a proper officer other than the officers who had passed the impugned orders.
Final Conclusion: The writ petition succeeded in part, with the adjudication set aside, recovery nullified, and the dispute sent back for de novo consideration before an unconnected with the earlier audit action.
Ratio Decidendi: An adjudication order should not be sustained where the same officers who initiated the audit-based proceedings also pass the impugned orders, and the matter must be reconsidered by an impartial proper officer.
Lack of jurisdiction - Validity of the assessment and consequential recovery proceedings - Adjudication by the same officer who issued audit observations -HELD THAT: - The Court found from the record that the impugned orders had been passed by the very same officers who had earlier issued the audit observations before issuance of the show-cause notices. Following the view taken by the co-ordinate Bench in an identical matter [2025 (11) TMI 1987 - KARNATAKA HIGH COURT], the Court held that such officers could not have passed the ex parte assessment order against the assessee. On that basis, the impugned adjudication orders and the consequential recovery proceedings were quashed, and the matter was directed to be placed before another proper officer for fresh consideration from the stage of reply to the show-cause notices. [Paras 4, 5]
The impugned orders and consequential bank attachment were quashed, and the matter was remitted for fresh consideration by a proper officer other than the officers who had issued the audit observations and passed the impugned orders.
Final Conclusion: The writ petition was allowed. The Court quashed the adjudication and recovery proceedings and directed reassignment of the matter to another proper officer for fresh consideration in accordance with law from the stage of reply to the show-cause notices.
Issues: Whether the impugned orders cancelling and refusing to revoke GST registration were liable to be quashed and whether the petitioner was entitled to restoration of GST registration on compliance with filing of returns and payment of dues.
Analysis: The petition was disposed of in terms of earlier orders of the Court in similar matters. The impugned order of appeal, the order-in-original, and the rejection of revocation were set aside. The direction for restoration of registration was made conditional upon the petitioner filing up-to-date GST returns and paying the tax dues within the stipulated period.
Conclusion: The challenge succeeded. The impugned orders were quashed and the petitioner was entitled to reinstatement of GST registration upon compliance with the stated conditions.
Cancellation of the GST registration - HELD THAT:- The writ petition was allowed and the impugned appellate and original orders were quashed, the Court disposing of the matter in terms of earlier writ orders [2026 (3) TMI 1696 - KARNATAKA HIGH COURT ], [2024 (8) TMI 1725 - KARNATAKA HIGH COURT ] relied upon by the parties and directing restoration of GST registration if the petitioner files pending returns and pays up-to-date tax within the stipulated time.
Issues: Whether the impugned assessment and appellate orders were liable to be quashed and the matter remitted for fresh adjudication from the stage of the reply to the show-cause notice.
Analysis: The writ petition was disposed of in terms of earlier coordinate bench decisions on the same issue. The impugned orders were set aside and the matter was sent back for reconsideration by the proper officer other than the original authority. Fresh adjudication was directed under Section 73 of the Karnataka Goods and Services Tax Act, 2017, beginning from the stage of the reply submitted by the petitioner, with liberty to file additional reply, documents and written submissions. The concerned officer was also directed to afford reasonable opportunity of hearing and pass a reasoned order in accordance with law.
Conclusion: The challenge to the impugned orders succeeded, and the matter was remanded for fresh consideration in favour of the petitioner.
Final Conclusion: The decision results in quashing of the impugned orders and restoration of the dispute for de novo consideration by the competent authority under the GST framework.
Ratio Decidendi: Where the matter is required to be reconsidered from the reply stage, the prior orders cannot stand and the dispute must be decided afresh by a competent officer after affording hearing and passing a reasoned order.
Validity of Ex parte tax adjudication - No Reasonable opportunity of hearing - Proceedings before proper officer - Non- reasoned Order - HELD THAT:- The writ petition was allowed in terms of the earlier coordinate Bench orders M/S PRESIDENCY BUILDERS AND DEVELOPERS [2025 (11) TMI 1987 - KARNATAKA HIGH COURT], M/S RAJAPUR MINERALS [2026 (2) TMI 1415 - KARNATAKA HIGH COURT] relied on by the petitioner and not disputed by the respondents; the impugned orders were quashed and the matter was remitted for fresh adjudication by a proper officer other than the original officer from the stage of reply to the show-cause notice, with liberty to file additional material and with a direction to afford reasonable hearing and pass a reasoned order.
Issues: Whether time should be granted to complete the balance statutory pre-deposit for the appeal and, on such compliance, the appeal should be restored and heard on merits.
Analysis: The record showed that a substantial part of the required pre-deposit had already been paid. The remaining balance of the mandatory 10% deposit was stated to be small, and the delay in filing the appeal was only seven days. In these circumstances, the Court found it to permit compliance within a short time and to restore the appeal upon deposit of the balance amount.
Conclusion: The appellant was granted time to deposit the remaining balance of the required pre-deposit, and on such deposit the appeal is to be restored and decided on merits.
Seeking grant of time to complete the balance Statutory pre-deposit for appeal - Restoration of appeal on compliance with mandatory deposit - HELD THAT: - The Court noted that the appellant had already deposited a substantial amount towards the statutory requirement for filing the appeal and that only the balance of the required 10% pre-deposit remained to be paid. Proceeding on that basis, it held that the appellant should be permitted to deposit only the remaining balance within a short time and, on such compliance, the appeal should be restored and decided on merits in accordance with law. The Court also took note of the fact that the delay in filing the appeal was only seven days. [Paras 6]
The appellant was directed to deposit the remaining balance of the required 10% pre-deposit within three weeks, whereupon the appeal was to be restored and disposed of on merits.
Final Conclusion: The writ appeal was disposed of by modifying the condition imposed in the writ proceedings and confining the deposit requirement to the balance of the statutory 10% pre-deposit. On such deposit, the statutory appeal was directed to be restored for decision on merits.
Issues: Whether penalty could be levied under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 for payment of additional sales tax at a lower percentage than what was payable under Section 2(1)(aa) of the Tamil Nadu Additional Sales Tax Act, 1970, and whether the return filed by the dealer could be treated as incorrect or incomplete.
Analysis: The turnover disclosed by the dealer and the turnover determined by the assessing authority were the same. The dispute related only to the rate of additional sales tax paid, namely 1% instead of 1.5% payable under the applicable slab. The appellate authority held that the situation did not amount to an incorrect or incomplete return within the meaning of Section 12(3)(b). That view was affirmed by the Tribunal. Penalty provisions, being punitive in nature, require strict construction, and the provision invoked does not extend to levy of penalty merely because tax was paid at a lower percentage.
Conclusion: Penalty was not leviable on the facts found, and the challenge to the deletion of penalty failed.
Final Conclusion: The revision could not succeed, as no legal error was shown in the concurrent finding that the case did not attract penalty under the penalty provision invoked.
Ratio Decidendi: A penal provision must be strictly construed, and unless the statute clearly covers the default alleged, penalty cannot be imposed merely for payment of tax at a lower rate.
Imposition of penalty under Section 12(3)(b) - Additional sales tax short-payment - Strict construction of penalty provisions - HELD THAT: - The Court held that the dispute related only to the rate of additional sales tax payable and not to any suppression or variation in turnover. Since the turnover reported by the respondent and that determined by the assessing authority was identical, the case did not fall within the scope of an incorrect or incomplete return so as to attract penalty. The Court further held that penalty, being in the nature of punishment, requires strict construction, and Section 12(3)(b) did not contemplate levy of penalty merely for payment of a lower percentage of tax. [Paras 11]
The deletion of penalty by the appellate authority, as affirmed by the Tribunal, was upheld.
Final Conclusion: The revision filed by the State was dismissed. The Court held that no question of law arose, since mere short-payment of additional sales tax by applying a lower rate, without any difference in turnover, did not justify levy of penalty.
Issues: (i) Whether proceedings under the State GST law were barred by Section 6(2)(b) of the CGST Act on the ground that the same subject matter had already been dealt with by the central authorities. (ii) Whether the assessment and rectification orders could be sustained without a specific finding on overlap between the transactions covered by the central order and those covered by the impugned state proceedings.
Issue (i): Whether proceedings under the State GST law were barred by Section 6(2)(b) of the CGST Act on the ground that the same subject matter had already been dealt with by the central authorities.
Analysis: Section 6(2)(b) bars initiation of proceedings on the same subject matter once proceedings have already been initiated by the other tax administration. The controlling principle is that the bar applies when the later proceedings concern the same liability, contravention, or substantially overlapping subject matter, and not merely the same year or general return. On the facts, the central order had proceeded on specified transactions and return differences, while the state order did not clearly identify whether the very same infractions were being re-agitated. A blanket invocation of prior central proceedings was therefore insufficient without examining the exact overlap.
Conclusion: The plea of complete statutory bar was not accepted in absolute terms, but the court held that the overlap had to be specifically examined before sustaining the state action.
Issue (ii): Whether the assessment and rectification orders could be sustained without a specific finding on overlap between the transactions covered by the central order and those covered by the impugned state proceedings.
Analysis: The impugned orders proceeded on the footing of suppression under Section 74 of the TNGST Act, but they did not clearly record whether the alleged liability was wholly distinct from, or already covered by, the earlier central proceedings. In the absence of a clear finding on the exact transactions and subject matter, the assessment could not be sustained. The proper course was to quash the orders and remit the matter for reconsideration with directions to examine the documents and exclude any portion already covered by the central proceedings.
Conclusion: The impugned orders were quashed and the matter was remitted for fresh consideration.
Final Conclusion: State proceedings cannot be sustained merely on a general allegation of suppression when prior central proceedings exist; the authority must determine with precision whether the identical subject matter is already covered and then decide afresh.
Ratio Decidendi: The bar under Section 6(2)(b) operates only where the later proceedings concern the same identifiable subject matter or overlapping liability already taken up by the other tax administration, and a state assessment cannot be sustained without a clear finding on such overlap.
Proceedings under the State GST law - barred by Section 6(2)(b) of the CGST Act - Bar against parallel proceedings on same subject matter - Distinct infractions under GST - assessment and rectification orders -suppression under Section 74 - Failure to determine overlap of proceedings -HELD THAT: - The Court held that the statutory bar operates once proceedings have already been initiated on the same subject matter, and that the expression refers to the particular tax liability, deficiency or obligation arising from a distinct infraction, not to the year or the return in general. Applying the principles stated by the Supreme Court in Armour Security(India) Ltd. [2025 (8) TMI 991 - SUPREME COURT], the Court found that the impugned order did not specifically identify whether the transactions covered by the earlier Central action were being excluded, or whether the State proceedings related to different infractions.
It can be seen that the term 'same subject matter' has been explained by the Hon'ble Supreme Court to mean the concerned 'distinct infractions' and therefore, it does not mean 'the year in general' or 'return in general'. If the particular transaction or the infraction, if it had been dealt with by the central authority, the very same issue cannot be re-opened by the state authorities. In this case, even though it is generally pleaded that the issue is covered by the order of the Central Authority, on a perusal of the same, they have taken into account the difference in tax for the period from 01.07.2021 to 21.09.2022 and also some of the other aspects during September 2021, February 2022, August 2022 and November 2022 and they were considering Form GSTR-3B.
Since the petitioner claimed complete protection and the authority rejected the objection wholesale without recording a clear finding on overlap, the assessment and rejection of rectification were held unsustainable and required reconsideration. [Paras 10, 11, 12, 13]
The impugned assessment and rectification orders were quashed and the matter was remanded for fresh consideration after specifically examining the extent of overlap with the Central proceedings and excluding any transaction already covered thereunder.
Final Conclusion: The writ petition was allowed to the extent that the impugned orders were quashed and the matter was remanded. The respondent was directed to examine transaction-wise whether the alleged suppression was already covered by the Central authorities and to proceed afresh only in respect of any distinct subject matter not previously dealt with.
Outcome: Delay condoned and the Special Leave Petition was dismissed, with pending applications disposed of.
Bogus LTCG - addition u/s 10(38) - sale of shares as a penny stock - As decided by HC [2025 (9) TMI 1379 - GUJARAT HIGH COURT] investment was not bogus or investment made in penny stock. The shares were purchased in order to invest and not for the purpose of earning exempted income by frequent trading in short span thus decided in favour of assessee.
HELD THAT:- No good ground to interfere with the impugned order passed by the High Court.Special Leave Petition is, accordingly, dismissed.
Outcome: Delay condoned. The special leave petition was dismissed, and the pending interlocutory application(s), if any, stood disposed of.
TCS u/s 206C - compounding fees received from illegal miners/transporters of minerals - Scope of Mines and Minerals (Development and Regulation) Act, 1957/ ‘the MMDR Act’ - offenders who do illegal mining or transportation/storage without having lease or license or have not entered into the contract for transfer of right in Mines or Quarry and from whom Compounding Fine is collected as per provisions under Rule 71(5) of the Chhattisgarh Minor Mineral Rules, 2015
As decided by HC [2025 (6) TMI 2041 - CHHATTISGARH HIGH COURT] ITAT is completely unjustified in holding that compounding fee/fine (TCS) would be chargeable u/s 206C(1C) of the IT Act by relying upon the definition contained in Section 2(47). Accordingly, we are unable to uphold the judgment & order passed by the ITAT relying on Section 2(47) of the IT Act.
HELD THAT:- We are not inclined to interfere with the impugned judgment and order of the High Court; hence, the special leave petition is dismissed.
Pending interlocutory application(s), if any, shall stand disposed of.
Issues: Whether the addition made under section 69C of the Income-tax Act, 1961 on the premise that the source of purchase was unexplained, despite acceptance of the purchases as genuine and their being supported by documents and banking channels, was sustainable.
Analysis: The assessment authority had accepted that the purchases were genuine, and the appellate authorities found that the purchases were supported by bills, vouchers, import documents and payments through banking channels. On those findings, the mere fact that the assessee sold goods in cash and deposited sale proceeds in the bank did not render the purchases or their source unexplained. The existence of substantial opening stock and the import of diamonds for business purposes further negatived the premise that the expenditure on purchases was unproved. The authority could at best question the identity of retail purchasers, but that by itself did not justify an addition under section 69C.
Conclusion: The addition under section 69C was not sustainable and the assessee succeeded.
Unexplained expenditure - addition u/s 69C - purchases being the amount of cash sales was not properly explained
HELD THAT: - The Court held that once the AO himself accepted the purchases to be genuine, and the purchases were shown to have been effected through proper documents and banking channels, the source of such expenditure could not be treated as unexplained merely because the assessee had made retail sales in cash and deposited that cash in bank. Receipt of sale consideration in cash, in the absence of any statutory violation, did not justify disallowance of the corresponding purchases under unexplained expenditure.
The concurrent findings of the appellate authorities deleting the addition were therefore upheld. The Court further observed that, at the highest, non-verifiability of the buyers in cash sales would not by itself attract any statutory infraction so as to justify the addition. [Paras 11, 12]
The deletion of the addition under Section 69C was upheld and the Revenue's challenge was rejected.
Final Conclusion: The Court found no merit in the Revenue's appeals. It upheld the concurrent appellate view that genuine purchases supported by records and banking channels could not be disallowed as unexplained expenditure merely because the corresponding sales were in cash.
Issues: Whether the delay in filing Form No. 10-IC for availing the concessional regime under Section 115BAA of the Income-tax Act, 1961 was liable to be condoned and the rejection order under Section 119(2)(b) was sustainable.
Analysis: The return for the relevant assessment year had been filed within the due date and the option for taxation under Section 115BAA had been exercised in the return itself. The only lapse was the later filing of Form No. 10-IC, which was treated as a procedural requirement under Rule 21AE of the Income-tax Rules. The record showed that the form had in fact been filed on 30.01.2023, within the period contemplated by the CBDT circular governing condonation, and the competent authority had conflated the date of filing of the form with the date of the formal condonation application. The authority also failed to examine the matter on the merits of reasonable cause and genuine hardship in the manner required by the circular framework.
Conclusion: The rejection of condonation was unsustainable and the delay in filing Form No. 10-IC was liable to be condoned. The petitioner was entitled to have the matter reconsidered on merits without treating delay or limitation as a bar.
Concessional regime u/s 115BAA - Condonation of delay in filing Form No. 10-IC - Substantive compliance with option u/s 115BAA - Misconstruction of CBDT Circular No. 17/2024 - Genuine hardship
HELD THAT: - The Court held that the authority wrongly conflated the date of filing of Form No. 10-IC with the date of the formal condonation application. On the facts recorded in the impugned order itself, the assessee had filed its return within time, had expressly opted for taxation u/s115BAA in Part A-GEN of ITR-6, and had filed Form No. 10-IC on 30.01.2023, which was within three years from the end of AY 2020-21. The three substantive conditions in Circular No. 17/2024 were therefore satisfied.
The omission to file Form No. 10-IC along with the return was treated, in the circumstances of the case, as a procedural lapse not warranting denial of the beneficial regime when the assessee's intention to opt for section 115BAA was unambiguous from the return itself and the form had been filed during the proceedings.
The authority was also required to examine bona fides and genuine hardship, especially since the omission was acknowledged at the earliest opportunity before the AO, but instead rejected the matter on maintainability alone. The Court therefore held that denial of the benefit on such procedural technicality was contrary to the letter and spirit of the CBDT circulars. [Paras 13, 15, 16, 17, 18]
The impugned order was set aside, the delay in filing the declaration and Form No. 10-IC was condoned, and the matter was remanded to the competent authority for fresh decision on merits without reopening the issue of delay or limitation.
Final Conclusion: The writ petition was allowed. The Court held that the assessee's filing of Form No. 10-IC within the prescribed three-year window, coupled with timely exercise of the option u/s 115BAA in the return, entitled it to consideration under the condonation circular, and the competent authority must now decide the matter on merits without treating delay or limitation as surviving issues.
Issues: Whether the notice issued under Section 148 of the Income-tax Act, 1961 and the connected sanction note were liable to be quashed on the ground that the reopening was based on the same material already considered and adjudicated in earlier proceedings, without any fresh tangible information suggesting escapement of income.
Analysis: The assessee's entitlement to TDS credit and the treatment of the underlying interest income had already been examined in the earlier appellate proceedings, and the appellate order had attained finality. The sanction note relied on information from the Insight Portal and the same figures that were already on record, without disclosing any new material or independent basis for reopening. Reassessment under the Act cannot be used to revisit concluded issues on a mere change of opinion, and the existence of fresh tangible material is an in-built check on the power to reopen. Since the impugned notice was founded on the very same facts that had already been adjudicated, the jurisdictional requirement for reopening was not satisfied.
Conclusion: The reopening was invalid and without jurisdiction; the notice under Section 148 and the sanction note were liable to be set aside, in favour of the assessee.
Reassessment proceedings - Change of opinion - Fresh tangible material - discrepancy in interest income
HELD THAT: - The Court held that the foundation of the impugned notice and sanction note was the very same material relating to interest income and TDS mismatch which had already been examined by the appellate authority, whose order had attained finality. The sanction note disclosed no new ground, no fresh material and no tangible information subsequent to that adjudication. In such circumstances, the attempt to reopen the assessment was only a change of opinion and amounted to a collateral attack on a concluded appellate determination. Reassessment under the Act cannot be used as a second opportunity to revisit the same facts or re-appreciate material already considered. Applying that principle, the Court found the assumption of jurisdiction under Section 148 unsustainable. [Paras 16, 17, 18, 19, 20]
The notice issued under Section 148, the sanction note and consequential proceedings were quashed as being beyond jurisdiction.
Final Conclusion: The Court held that, for Assessment Year 2022-23, reassessment had been initiated only on the basis of material already considered and concluded in the appellate proceedings, without any fresh information suggesting escapement of income. The impugned notice under Section 148, the sanction note and all consequential proceedings were therefore set aside.
Issues: (i) Whether, in the absence of rejection of books of account, an ad hoc enhancement of net profit by 1% of turnover could be sustained; (ii) Whether unsecured loans received from close family concerns were liable to be added as unexplained cash credits under section 68.
Issue (i): Whether, in the absence of rejection of books of account, an ad hoc enhancement of net profit by 1% of turnover could be sustained.
Analysis: The assessee had produced regular books of account, and there was no categorical finding that the books were incorrect, incomplete, or unreliable so as to justify rejection. Mere decline in profit rate, by itself, was held insufficient to support an addition unless backed by tangible evidence of suppression of income or inflation of expenses. The explanation that increased freight, loading, unloading, and conveyance expenses arose from business expansion and free delivery services was treated as a normal commercial explanation. The defects noted by the Assessing Officer in some vouchers raised suspicion, but no specific instance of false expenditure or a reasonable scientific basis for estimating profit at 1% was shown.
Conclusion: The ad hoc profit addition was not sustainable and was deleted in favour of the assessee.
Issue (ii): Whether unsecured loans received from close family concerns were liable to be added as unexplained cash credits under section 68.
Analysis: The identity of the lenders was undisputed, and the transactions were not found to be fictitious. Creditworthiness was held not to be determinable merely by comparing the loan amount with the lenders' income of a single year, since funds may come from past savings, capital, withdrawals, or other sources. The Revenue did not bring material to show that the funds belonged to the assessee or that the lenders lacked financial capacity. In family transactions, absence of interest and formal documentation was treated as a surrounding circumstance that did not, by itself, justify an adverse inference. The initial onus under section 68 was held to have been discharged.
Conclusion: The addition under section 68 was not sustainable and was deleted in favour of the assessee.
Final Conclusion: The appeal succeeded on the substantive additions, while the remaining grounds were treated as infructuous or consequential, resulting in partial relief to the assessee.
Ratio Decidendi: Where books of account are not rejected and no specific defect is established, income cannot be enhanced on an ad hoc basis merely because profits have declined; similarly, for section 68, identity, a plausible source of funds, and surrounding circumstances must be assessed realistically, and creditworthiness cannot be judged only from one year's income.
Ad hoc disallowances of business expenses - absence of rejection of books - addition u/s 68 - unsecured loans received from close family concerns
Ad hoc estimation of profit - non Rejection of books of account - Unverifiable business expenditure - an ad hoc enhancement of net profit by 1% of turnover - primary reason for the addition is the fall in net profit rate from 3.13% in the earlier year to 1.94% in the year under consideration, despite increase in turnover - HELD THAT: - The Tribunal held that, once regular books of account had been maintained and were not rejected, the AO could not proceed to estimate income on an ad hoc basis. Mere decline in net profit, despite increase in turnover, was not by itself a ground for addition unless supported by tangible material showing suppression of income or inflation of expenses. The observations regarding self-made vouchers, absence of some particulars and uniform petrol entries might create suspicion, but in the absence of any specific finding that the expenditure was false or not incurred for business purposes, they did not justify disallowance through profit estimation. The further defect noted by the Tribunal was that the 1% enhancement had no rational or objective basis, since it was unsupported by comparable cases, industry norms or proper analysis of past results. [Paras 11]
The addition made by estimating higher profit was deleted.
Undisclosed loan - addition u/s 68 - Creditworthiness of creditors - Family loans - Addition u/s 68 in respect of unsecured loans from the assessee's husband and his HUF - HELD THAT: - The Tribunal held that the initial onus under section 68 stood discharged where the creditors were identified family members and the transactions were not shown to be fictitious. It ruled that creditworthiness cannot be tested solely with reference to the income returned by the lenders in one year, since a loan may be advanced out of past savings, accumulated capital, bank withdrawals or other sources. The Revenue had not brought any material to show that the funds actually emanated from the assessee or that the lenders lacked overall financial capacity. Non-furnishing of bank statements and absence of interest payment, by themselves, were also held insufficient in the circumstances, particularly in the context of family transactions. [Paras 18]
The section 68 addition in respect of the unsecured loans was deleted.
Final Conclusion: The Tribunal partly allowed the appeal. It deleted both the ad hoc addition made by enhancing net profit and the addition under section 68 in respect of unsecured loans, while treating the remaining grounds as infructuous or consequential.
Issues: Whether the reassessment notice issued under section 148 was invalid for want of approval from the competent authority under section 151(ii), and whether the reassessment proceedings based on such notice were liable to be quashed.
Analysis: The approval recorded for the notice and the order under section 148A(d) was by the PCIT, whereas for a notice issued after expiry of three years from the end of the relevant assessment year, the statute required approval from the specified higher authority. Sanction under section 151(ii) is a jurisdictional safeguard and not a procedural formality. Once approval is granted by an authority not prescribed by the statute, the very assumption of jurisdiction to issue the notice under section 148 is vitiated, and all consequential proceedings cannot survive.
Conclusion: The reassessment notice was invalid for want of proper approval under section 151(ii), and the reassessment proceedings were quashed, in favour of the assessee.
Validity of reassessment - valid satisfaction u/s 151 - Validity of notice u/s 148 beyond three years - sanction obtained from the specified authority
HELD THAT: - The Tribunal found that the notice under section 148 and the order under section 148A(d) themselves referred to approval of PCIT-1, Thane. For a case where reopening related to A.Y. 2018-19 and the notice was issued beyond three years from the end of the relevant assessment year, sanction had mandatorily to be obtained from the specified authority under section 151(ii).
Revenue did not place any material to show that approval of the competent authority had in fact been obtained before issuance of notice. The Tribunal held that sanction under section 151 is a mandatory jurisdictional requirement and not a procedural formality; therefore, approval by an authority not prescribed by statute vitiates the assumption of jurisdiction and renders the notice under section 148 and all consequential proceedings unsustainable. [Paras 5, 7]
The notice issued under section 148 was held invalid for want of proper approval under section 151(ii), and the reassessment proceedings were quashed; the remaining grounds on merits were left unadjudicated as academic.
Final Conclusion: The Tribunal allowed the appeal by holding that the reassessment notice issued for A.Y. 2018-19 was without valid jurisdictional sanction under section 151(ii). As the reopening itself was quashed, the grounds on merits were not examined.
Issues: Whether penalty under section 271B of the Income-tax Act, 1961 was leviable for failure to get accounts audited or to furnish the audit report when the assessee had treated the transactions as investment and claimed capital gains.
Analysis: The dispute turned on the character of the shop-sale transactions. The assessee had consistently treated the receipts as capital gains, whereas the revenue treated them as business income and invoked the audit requirement. The characterization of such transactions was regarded as a debatable issue, and the assessee's adoption of one possible view under a bona fide belief was treated as sufficient to explain the non-compliance with section 44AB. In that setting, section 273B was applied to hold that penalty was not imposable where reasonable cause was shown. The absence of any distinguishing feature from the earlier year, where the penalty had already been deleted on identical facts, also supported the same result.
Conclusion: Penalty under section 271B was not sustainable and was directed to be deleted.
Ratio Decidendi: Where an assessee's non-compliance with the audit requirement arises from a bona fide and reasonable view that the underlying transactions are capital in nature, and the issue itself is debatable, section 273B protects the assessee from penalty under section 271B.
Penalty u/s 271B - failure to get accounts audited or to furnish the audit report - Reasonable cause for failure to obtain audit report - Bona fide belief on characterization of income
HELD THAT: - The Tribunal held that the transactions in the year under consideration were identical to those in the immediately preceding year, in which penalty had already been deleted. It found that the assessee had consistently treated the sale of shops as giving rise to capital gains and that the question whether such activity amounted to business or investment was a debatable one. Where the assessee had adopted one possible view and acted under a bona fide belief that audit u/s 44AB was not required, the resulting non-compliance constituted reasonable cause within the meaning of section 273B.
In the absence of any distinguishing feature from the preceding year, no contrary view on penalty was justified. [Paras 6, 7, 8]
The penalty was directed to be deleted.
Final Conclusion: The appeal was allowed. The Tribunal deleted the penalty u/s 271B for AY 2016-17, holding that the assessee's bona fide stand on the nature of the transactions furnished reasonable cause under section 273B.
Issues: Whether reimbursement of medical expenditure incurred for the critical heart surgery of the assessee-company's full-time employee and promoter-director was allowable as business expenditure under section 37(1) of the Income-tax Act, 1961.
Analysis: The reimbursement was made to a key employee who was found to be instrumental in the assessee's business, and the medical treatment was for a prescribed ailment in an approved hospital. The expenditure was authorised by a board resolution and debited under employee benefit expenses. The amount reimbursed was only a partial part of the total medical cost, and the balance was borne personally by the employee, which negatived the allegation of undue benefit. Relying on the settled principle of commercial expediency and the view that a company cannot have personal expenses in the sense contemplated by section 37(1), the disallowance was held to be unsustainable.
Conclusion: The medical reimbursement was held allowable as a business expenditure, and the addition was deleted.
Ratio Decidendi: Expenditure incurred by a company for the medical welfare of a key employee, when authorised by the board and shown to be commercially expedient and wholly connected with business, is allowable under section 37(1) and cannot be treated as the company's personal expense.
Business expenditure u/s 37(1) - Commercial expediency - Medical reimbursement to key employee-director - Personal expenditure of company
Whether reimbursement of medical expenditure incurred for the critical heart surgery of the assessee-company's full-time employee and promoter-director was allowable as business expenditure u/s 37(1)? - HELD THAT: - The Tribunal held that the objections founded on the Board resolution having been passed after the surgery, the marginal excess over the sanctioned amount, and the plea that the expenditure was personal in nature, did not justify disallowance. It found that the resolution was passed in the normal course at the directors' meeting after taking note of the successful surgery; the excess reimbursement was only marginal and not shown to be unsupported by actual expenditure; and an expenditure incurred by an employer for the welfare of its employee could not be treated as personal expenditure of the employer, particularly when the assessee was a company incapable of having personal expenses of its own.
On merits, the Tribunal found that the concerned person was a salaried full-time employee and the driving force behind the assessee's business, that the surgery was a critical procedure at a recognised hospital, that the company reimbursed only part of the total medical cost while the balance was borne personally by him, and that the reimbursement stood authorised by Board resolution and was debited under employee benefit expenses. Applying the principle of commercial expediency, and following Steel Ingots (P) Ltd., Mehboob Productions Private Limited [1996 (1) TMI 95 - MADHYA PRADESH HIGH COURT] and M/s Roomag Motors & Controls (P) Ltd. [2025 (9) TMI 615 - ITAT AHMEDABAD] the Tribunal held that the reimbursement bore a direct business character and was deductible under section 37(1). [Paras 11, 12, 13]
The disallowance of the medical reimbursement was deleted and the assessee's claim was allowed.
Final Conclusion: The Tribunal held that the partial medical reimbursement made by the assessee-company to its key employee-director for critical surgery was incurred on grounds of commercial expediency and was allowable as business expenditure. The disallowance was therefore deleted and the appeal was allowed.
Issues: Whether the penalty under section 271D of the Income-tax Act, 1961 was barred by limitation under section 275(1)(c), and whether the date of initiation of penalty proceedings was the date of reference by the Assessing Officer or the later notice issued by the penalty authority.
Analysis: The limitation for penalty in a case not covered by clauses (a) or (b) of section 275(1) is governed by clause (c), under which the order must be passed within the later of the financial year in which the proceedings were completed or six months from the end of the month in which penalty action was initiated. The competing views were whether initiation occurred when the Assessing Officer referred the matter during assessment or when the notice under section 274 was issued by the penalty authority. The later view was adopted that the reference by the Assessing Officer constitutes initiation for the purpose of section 275(1)(c). On that footing, the last permissible date had expired long before the penalty order dated 29/03/2022. Where two interpretations are possible, the view favourable to the assessee was also preferred.
Conclusion: The penalty order was barred by limitation and was unsustainable.
Ratio Decidendi: For the purpose of section 275(1)(c), initiation of penalty proceedings occurs when the Assessing Officer makes the reference that triggers penalty action, and not when the later notice is issued by the penalty authority; consequently, a penalty order passed beyond the prescribed period is void as time-barred.
Penalty u/s 271D - Limitation for penalty - Initiation of penalty proceedings beyond the period provided in section 275 - violation of section 269SS of the Act detected during the course of the assessment proceedings
Whether the date of initiation of penalty proceedings for the purpose of section 275(1)(c) is to be reckoned from the date on which the reference is made by the AO to the Addl. DIT (Int. Taxation), Hyderabad, i.e., 23/12/2019 - the date of assessment order being taken as the outer limit; or the date when the notice u/s 274 was issued by the Addl. DIT (Int. Taxation), Hyderabad, to the assessee, i.e., 22/09/2021?
HELD THAT: - The Tribunal held that the controversy was governed by section 275(1)(c), under which the outer limit depends on the point of initiation of penalty action.
After noticing the conflict between Grihalakshmi Vision [2015 (8) TMI 1214 - KERALA HIGH COURT] and K. Umesh Shetty [2025 (1) TMI 1237 - KARNATAKA HIGH COURT] it followed the later Karnataka High Court view that the Assessing Officer's reference to the Additional Commissioner is the date of initiation for this purpose. The Tribunal also observed that, even otherwise, where two non-jurisdictional views are possible, the interpretation favourable to the assessee must be adopted. Since the assessment order itself recorded that the violation had already been referred separately, the reference had necessarily been made before completion of assessment; even if the assessment order date were taken as the outer date of reference, the penalty could validly have been passed only within six months thereafter. The penalty order having been passed much later was therefore barred by limitation. [Paras 14, 15, 16]
The penalty under section 271D was held time-barred and was quashed.
Final Conclusion: The Tribunal allowed the appeal and quashed the penalty under section 271D as barred by limitation. It held that, for section 275(1)(c), limitation had to be reckoned from the Assessing Officer's reference initiating penalty action and not from the later notice issued by the Additional Commissioner.
Issues: Whether the addition made under section 69C on the basis of the difference between the customs assessable value of imported goods and their invoice value was sustainable.
Analysis: The assessee had capitalised the imported cable harness and modules in its books, and the Revenue relied only on the difference between the customs assessable value and the purchase invoices to treat the differential amount as unexplained expenditure. The governing principle applied was that section 69C can be invoked only where the Revenue first establishes that the assessee actually incurred the expenditure and then fails to satisfactorily explain its source. Mere variation between customs valuation for duty purposes and invoice value does not by itself prove unrecorded expenditure or purchases outside the books. The record disclosed no material showing that the differential amount was in fact incurred by the assessee, and the addition was therefore unsupported.
Conclusion: The addition under section 69C was rightly deleted, and the Revenue's challenge failed.
Ratio Decidendi: Section 69C cannot be applied merely because the customs assessable value exceeds the invoice value of imported goods unless the Revenue first proves that the assessee actually incurred the alleged expenditure.
Unexplained expenditure u/s 69C - Difference between customs assessable value and invoice value
HELD THAT: - The Tribunal held that the assessable value adopted under the Customs Act is only for customs duty purposes and, by itself, cannot establish that the assessee incurred expenditure outside its books. For invoking section 69C, there must first be a finding that the assessee actually incurred the expenditure in question and that its source remained unexplained.
Since the Assessing Officer accepted the invoice value of the imports, brought no material on record to show that the differential amount was in fact spent by the assessee, and treated the customs valuation difference alone as unexplained expenditure, the statutory precondition for section 69C was not met.
In the instant case, there is no finding by the AO that the expenditures added u/s. 69C have been incurred by the assessee. In the absence of such crucial finding, the provisions of section 69C has wrongly been made applicable in the case of the assessee.
From the decision of Lubtec India Ltd [2007 (7) TMI 281 - DELHI HIGH COURT] the Court has held that provisions of section 69C can be invoked only when there is a finding that the expenditure have been actually incurred, therefore, in our considered view, in the instant case the ld. CIT(A) has rightly deleted the addition [Paras 7]
The deletion of the addition was upheld and the Revenue's challenge failed.
Final Conclusion: The Tribunal dismissed the Revenue's appeal and affirmed the deletion of the addition. It held that a mere difference between customs assessable value and invoice value, without proof of actual unexplained expenditure incurred by the assessee, does not justify addition under section 69C.
Issues: (i) Whether the cash transactions recorded in the seized diary could be treated as separate unexplained additions, or whether the income was only the brokerage element to be estimated on the gross cash receipts with telescoping of corresponding outgoings. (ii) Whether the additions made for cash found during search and for alleged cash payment towards purchase of property under section 69A could be sustained in the absence of corroborative material and proof of ownership or actual payment.
Issue (i): Whether the cash transactions recorded in the seized diary could be treated as separate unexplained additions, or whether the income was only the brokerage element to be estimated on the gross cash receipts with telescoping of corresponding outgoings.
Analysis: The seized diary contained cash receipts, cash payments, loans and expenditure entries maintained by the assessee. The Tribunal found that the receipts and outgoings formed part of the same unaccounted finance activity and that the immediate source of the outgoing cash was the cash receipts noted in the same diary. It held that the excess of expenditure over income could not be separately taxed as unexplained expenditure when the same pool of cash transactions explained the movement of funds. It further accepted that only the profit element embedded in the gross cash receipts was taxable and that brokerage income was a reasonable measure in the facts, with telescoping available against later cash deficit.
Conclusion: The separate additions towards unexplained expenditure were deleted, and the assessee was held liable only to brokerage income at 2% of the gross cash receipts recorded in the seized diary.
Issue (ii): Whether the additions made for cash found during search and for alleged cash payment towards purchase of property under section 69A could be sustained in the absence of corroborative material and proof of ownership or actual payment.
Analysis: For the cash found during search, the assessee failed to establish the source and the Tribunal accepted the addition only to the extent that telescoping of the earlier estimated brokerage income could be given effect, resulting in deletion of the separate addition. For the alleged property advance, the loose paper was unsigned by the assessee and the recipient, no effective verification was made from the property records or other independent sources, and the assessee's statement had been retracted. The Tribunal held that section 69A could not be invoked merely on the basis of possession of an uncorroborated paper or a retracted statement, especially when ownership of the property and actual payment were not established.
Conclusion: The additions for alleged unexplained cash and alleged property advance were deleted.
Final Conclusion: The appeals were disposed of by sustaining only a restricted estimation of brokerage income on the seized cash transactions and by deleting the remaining disputed additions based on telescoping, lack of corroboration, and failure to prove the prerequisites for section 69A.
Ratio Decidendi: Where seized papers show a single stream of unaccounted cash transactions forming part of the same finance activity, only the embedded profit element may be taxed and telescoping of related cash flows is permissible; a separate addition under section 69A cannot rest on an unsigned loose paper or retracted statement without independent corroboration and proof of ownership or actual payment.
Unaccounted cash transactions - Unexplained investment - Peak versus embedded income - Brokerage estimation - Telescoping and set-off - addition u/s 69A - Retracted search statement - Scope of unexplained money
Unexplained investment - Seized diary entries - whether cash payment recorded in the seized diary was rightly treated as unexplained where the assessee admitted maintenance of the diary and failed to establish the source of the cash outgo? - HELD THAT: - The Tribunal found that the seized ledger book maintained by the assessee contained entries of cash and bank transactions, including day-to-day cash loans and advances. Since the diary admittedly belonged to the assessee and the source of the cash payment recorded therein was not explained, the addition could not be faulted. On that basis, the confirmation of the addition by the appellate authority was upheld. [Paras 12]
The addition for the cash payment recorded in the diary was sustained and the ground was dismissed.
Estimation of income -Embedded income theory - Brokerage estimation - Common cash pool - separate additions on account of excess receipts, loans advanced and excess expenditure from the same seized diary - HELD THAT: - The Tribunal held that the seized diary contained all unaccounted cash receipts, cash loans advanced and cash expenditure arising out of the same stream of transactions. Once the immediate source of the loans advanced and expenditure was the cash receipts recorded in the same diary, the outgoing amounts could not again be separately treated as unexplained expenditure. Applying the principle that the entire receipts cannot be taxed and only the profit element embedded therein is liable to tax, as stated in CIT Vs The President Industries [1999 (4) TMI 8 - GUJARAT HIGH COURT] the Tribunal accepted that the assessee acted as a finance broker and directed estimation of brokerage income at 2% of the gross cash receipts. For Assessment Year 2018-19, the same reasoning was applied mutatis mutandis and the balance additions were deleted. [Paras 22, 23, 26]
Separate additions under sections 69A/69C based on the same diary were deleted, and income was directed to be computed only as brokerage at 2% of gross cash receipts.
Unexplained expenditure u/s 69C - Telescoping and set-off - Availability of earlier undisclosed income - deficit expenditure and the excess cash found during search entitled to telescoping against the brokerage income - HELD THAT: - The Tribunal treated the brokerage income estimated in the immediately preceding years from the seized diary transactions as cash available with the assessee, there being no material to show its application elsewhere except to the extent already allowed in Assessment Year 2019-20. On that footing, the deficit cash expenditure for Assessment Year 2019-20 and the excess cash found during search for Assessment Year 2021-22 could not be separately brought to tax again. The addition was therefore deleted by granting telescoping and set-off from the income already brought to tax on estimation basis. [Paras 32, 41]
The separate additions for deficit expenditure in Assessment Year 2019-20 and for cash found in Assessment Year 2021-22 were deleted by allowing telescoping.
Addition u/s 69A towards cash found during the search and u/s 69A towards unexplained payment made for purchases of property -Retracted statement without corroboration - Unsigned loose paper - addition based on an alleged cash advance for purchase of property based on loose paper - HELD THAT: - The Tribunal held that the loose paper said to evidence advance payment did not bear the assessee's signature or that of the alleged recipient, and the Assessing Officer made no effective enquiry to verify ownership of the property or the payments stated to have been made through banking channels. The addition rested substantially on the assessee's search statement, but that statement had been retracted, and following Hector Enterprises Ltd. [2026 (1) TMI 1608 - ITAT DELHI] such retracted statement could not by itself justify the addition in the absence of corroborative material. The Tribunal further held that section 69A applies only where the assessee is found to be the owner of money, bullion, jewellery or other valuable article or thing not recorded in the books; an unverified advance payment receipt did not satisfy that statutory condition. Relying on D.N Singh [2023 (5) TMI 746 - SUPREME COURT], it concluded that ownership and possession required for section 69A had not been established. [Paras 42, 43, 44, 45]
The addition towards alleged cash advance for purchase of property was deleted.
Final Conclusion: The Tribunal partly allowed the batch of appeals. It sustained the addition for Assessment Year 2016-17, confined the taxable income for Assessment Years 2017-18 and 2018-19 to estimated brokerage on gross cash receipts, granted telescoping for Assessment Years 2019-20 and 2021-22, and deleted the separate addition based on the alleged cash advance for property purchase.
Issues: (i) Whether Dividend Distribution Tax under section 115-O of the Income-tax Act, 1961 could be limited to the treaty rate under Article 10 of the applicable Double Taxation Avoidance Agreements and whether refund of excess tax was allowable; (ii) whether club membership fees were deductible as business expenditure under section 37 of the Income-tax Act, 1961.
Issue (i): Whether Dividend Distribution Tax under section 115-O of the Income-tax Act, 1961 could be limited to the treaty rate under Article 10 of the applicable Double Taxation Avoidance Agreements and whether refund of excess tax was allowable.
Analysis: The Tribunal followed the view that DDT, though collected from the company, is in substance a tax on dividend income and falls within the income-tax regime. It held that section 90(2) permits application of the more beneficial treaty provision, and that the treaty article governing dividends restricts the tax rate on such dividend-related levy. The Tribunal relied on the reasoning that the domestic levy cannot be retained in excess of the treaty cap where the treaty applies to the dividend income in question.
Conclusion: The issue was decided in favour of the assessee and the treaty rate restriction was applied to the dividend-related levy.
Issue (ii): Whether club membership fees were deductible as business expenditure under section 37 of the Income-tax Act, 1961.
Analysis: The Tribunal treated the expenditure on corporate club membership as incurred for business purposes and not as a personal or capital outlay. It applied the settled test that expenditure is allowable where it is laid out wholly and exclusively for business and does not create a capital asset, and held that corporate membership facilitates business operations.
Conclusion: The issue was decided in favour of the assessee and the disallowance was deleted.
Final Conclusion: Both appeals succeeded, with relief granted on the dividend tax issue as well as on the club membership expenditure issue.
DTAA rate on dividend distribution tax- India - Japan DTAA - Corporate club membership as business expenditure - Beneficial treaty provision
Whether assessee was entitled to apply the beneficial treaty rate to dividend distribution tax paid on dividends distributed to its non-resident shareholders? - HELD THAT: - The Tribunal noted that the assessee's claim under the India-Japan and India-Thailand treaties was identical to the issue decided in M/s. Colorcon Asia Private Ltd. [2025 (12) TMI 677 - BOMBAY HIGH COURT]
Respectfully following that decision, and the coordinate Bench decision in Mitsui Kinzoku Components India Pvt. Ltd [2026 (1) TMI 189 - ITAT DELHI] it held that dividend distribution tax, though collected from the distributing company, is in substance a tax on the shareholder's dividend income, and therefore the more beneficial treaty rate could be invoked.
On that basis, the assessee's challenge to levy of tax at the higher domestic rate was accepted for AY 2017-18, and the same finding was applied mutatis mutandis to AY 2018-19. [Paras 10, 11, 13]
The ground relating to dividend distribution tax was allowed for both assessment years.
Corporate club membership - Allowable business expenditure - Revenue expenditure u/s 37 - Personal expenditure disallowance - whether Club membership fees incurred for corporate membership were allowable as business expenditure and could not be disallowed as personal expenditure? - HELD THAT: - Tribunal held that the disallowance could not be sustained because the issue stood covered decision in Samtel Color Ltd[2009 (1) TMI 26 - DELHI HIGH COURT] - Following that ruling, it held that expenditure on corporate club membership is incurred for the benefit of the business, facilitates smooth and efficient running of the enterprise, and is not rendered capital or personal merely because the benefit may be availed through nominated employees. The authorities cited by the Revenue were found distinguishable, and the direct jurisdictional precedent on the same issue was followed. [Paras 19, 20]
The disallowance of club membership fees for AY 2018-19 was deleted.
Final Conclusion: The Tribunal allowed both appeals. It granted treaty-rate relief on dividend distribution tax for both assessment years and, for AY 2018-19, also deleted the disallowance of club membership fees as allowable business expenditure.
Issues: Whether reassessment proceedings initiated under sections 147 and 148 were valid when they were based solely on a Revenue audit objection and material already available on record, without fresh tangible material or independent satisfaction.
Analysis: The original assessment had been completed under section 143(3) after scrutiny of the assessee's records and disclosures. The reasons recorded for reopening showed that the formation of belief was founded on the same material already on record and on the audit objection, without any new factual foundation. In such circumstances, reopening amounts to a mere change of opinion. The statutory requirement of reason to believe cannot be satisfied by a review of an already examined issue, and an audit objection by itself does not substitute for independent judicial or quasi-judicial satisfaction for reassessment.
Conclusion: The reassessment notice was invalid and the consequent reassessment order was quashed. The issue was decided in favour of the assessee.
Reassessment proceedings - Change of opinion - Audit objection - Reason to believe
Whether Reopening of the completed assessment was valid as founded only on a revenue audit objection and a reappraisal of material already on record? - HELD THAT: - The Tribunal found from the recorded reasons that the Assessing Officer had reopened the assessment after revisiting the existing assessment record in response to a revenue audit objection. No fresh tangible material was referred to, and the belief of escapement was formed on the same material which had already been examined in the original assessment completed under section 143(3). Reopening amounted to a mere change of opinion.
Tribunal further held that, where the material facts had already been disclosed in the original proceedings, reopening could not be sustained merely on the basis of an audit objection. Applying the law laid down in CIT vs. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT] and the decisions of the jurisdictional High Court, the notice issued under section 148 was held invalid and the consequent reassessment was quashed. [Paras 13, 14, 15, 16]
The challenge to reopening succeeded; the notice under section 148 and the reassessment order were quashed, and the remaining grounds were left unadjudicated.
Final Conclusion: The Tribunal allowed the assessee's appeal by holding that the reassessment for Assessment Year 2013-14 had been initiated only on the basis of an audit objection and a change of opinion on existing material. The notice under section 148 and the consequent reassessment were quashed, leaving the other grounds unexamined.
Issues: (i) whether the assessee acquired goodwill along with the business and the valuation of such goodwill could be restricted to nil; (ii) whether depreciation on goodwill is allowable as an intangible asset under the Income-tax Act, 1961 for the years under consideration.
Issue (i): whether the assessee acquired goodwill along with the business and the valuation of such goodwill could be restricted to nil.
Analysis: The dispute on goodwill valuation was examined in the context of the assessee's own earlier orders and the co-ordinate bench view that the business was acquired along with goodwill, with the valuation accepted as correct. The Tribunal followed the earlier consistent approach and found no basis to disregard the cost of goodwill.
Conclusion: The issue was decided in favour of the assessee.
Issue (ii): whether depreciation on goodwill is allowable as an intangible asset under the Income-tax Act, 1961 for the years under consideration.
Analysis: The Tribunal applied the settled position that goodwill qualifies as an intangible asset for depreciation purposes under section 32(1)(ii) for the relevant assessment years. It relied on the assessee's own earlier years and on the principle that the later amendment excluding goodwill from depreciation is prospective and does not govern the years in question.
Conclusion: The issue was decided in favour of the assessee.
Final Conclusion: The grounds relating to goodwill and depreciation thereon succeeded, and the assessee obtained complete relief on the recalled issues.
Ratio Decidendi: For assessment years prior to the prospective amendment, goodwill acquired in the course of business is eligible for depreciation as an intangible asset under section 32(1)(ii) of the Income-tax Act, 1961, and the amendment excluding goodwill does not apply retrospectively.
Depreciation on goodwill - Cost of goodwill - Prospective operation of amendment excluding goodwill from depreciation -no goodwill exists in the business acquired.
HELD THAT: - The Tribunal held that both grounds stood covered in favour of the assessee by orders passed in the assessee's own case for earlier years. It accepted that the acquired business included goodwill and that the valuation of such goodwill could not be restricted to nil. It further followed the earlier view allowing depreciation on goodwill as an intangible asset and rejected the Revenue's objection founded on the later amendment to section 32(1)(ii), holding that such amendment was prospective and did not govern the year under consideration. See M/S GUJARAT NARMADA VALLEY FERTILIZERS AND CHEMICALS LTD. [2024 (1) TMI 1495 - GUJARAT HIGH COURT] [Paras 7, 8, 9]
Ground allowed and the assessee's claim regarding cost of goodwill and depreciation thereon was accepted.
Final Conclusion: Following the orders in the assessee's own case and the decisions treating the amendment excluding goodwill from depreciation as prospective, the Tribunal allowed the recalled grounds relating to goodwill. The appeal stood allowed.
Issues: (i) Whether the plaint disclosed a real cause of action and was liable to rejection under Order VII Rule 11(a) and (d) of the Code of Civil Procedure, 1908 on the ground that the suit was barred by the benami law; (ii) Whether the claimed fiduciary relationship brought the transaction within the statutory exception to the benami prohibition; (iii) Whether the arrangements reflected in the plaint and supporting documents were illegal and void for defeating the Karnataka Land Reforms Act and the Indian Contract Act, 1872; (iv) Whether the plaintiff was disentitled to succeed to the estate of the deceased in view of the disqualification against a murderer under the Hindu Succession Act, 1956.
Issue (i): Whether the plaint disclosed a real cause of action and was liable to rejection under Order VII Rule 11(a) and (d) of the Code of Civil Procedure, 1908 on the ground that the suit was barred by the benami law.
Analysis: A plaint must be read as a whole in a meaningful manner and the Court may look at the plaint along with the documents relied upon by the plaintiff. If the averments, taken at face value, disclose that the real foundation of the claim is a benami arrangement, the Court is not bound by the labels used in the pleading. The statutory bar under the benami law can arise from the substance of the plaint even if the word "benami" is not expressly used. Where the plaint itself reveals that consideration was provided by the plaintiff and the property stood in another's name, the suit falls within the mischief of the prohibition and the bar to enforcement of rights in respect of benami property.
Conclusion: The plaint was liable to rejection under Order VII Rule 11(a) and (d) of the Code of Civil Procedure, 1908.
Issue (ii): Whether the claimed fiduciary relationship brought the transaction within the statutory exception to the benami prohibition.
Analysis: The exception for property held in a fiduciary capacity is not to be enlarged by mere assertion of trust or confidence. The expression must receive a controlled construction and cannot be extended to every commercial or employment-based arrangement. An employer-employee relationship, without more, does not answer the statutory conception of fiduciary capacity for purposes of the benami law. A contractual arrangement supported by consideration and reciprocal obligations is not transformed into a fiduciary holding merely because one party claims confidence in the other. The recognized statutory exception was therefore unavailable on the pleadings.
Conclusion: The transaction did not fall within the fiduciary exception.
Issue (iii): Whether the arrangements reflected in the plaint and supporting documents were illegal and void for defeating the Karnataka Land Reforms Act and the Indian Contract Act, 1872.
Analysis: An agreement whose object is to defeat statutory restrictions is unlawful and void. The pleadings and documents showed an arrangement devised to circumvent land purchase restrictions by using another's name while the plaintiff allegedly supplied the funds, followed by conversion and transfer in his favour. Such an arrangement offends the law and cannot be enforced through civil proceedings. The Court must look to the substance of the transaction and not permit indirect enforcement of what the statute prohibits directly.
Conclusion: The underlying arrangements were illegal and void, and they could not sustain the suit.
Issue (iv): Whether the plaintiff was disentitled to succeed to the estate of the deceased in view of the disqualification against a murderer under the Hindu Succession Act, 1956.
Analysis: The disqualification under the Hindu Succession Act, 1956 applies to succession, including testamentary succession, because the statutory bar rests on the principle that no person may profit from his own wrong. Conviction is not a condition precedent for the civil consequence to operate; the Court may examine the matter on the standard of preponderance of probabilities. The plaint also suffered from suppression of the material fact that the plaintiff was accused in connection with the murder of the deceased, which by itself weakened the claim for relief.
Conclusion: The plaintiff was disentitled to claim succession to the deceased's estate on the pleaded facts.
Final Conclusion: The statutory bar against benami claims applied, the alleged fiduciary exception was unavailable, the supporting arrangements were void, and the plaintiff could not found a claim to the property or the deceased's estate on the pleaded basis.
Ratio Decidendi: A plaint that, on a meaningful reading of its own averments and relied-upon documents, discloses an unenforceable benami arrangement and no applicable statutory exception is liable to rejection at the threshold; a fiduciary exception cannot be expanded to ordinary commercial or employment relations, and illegality or disqualification apparent from the pleadings defeats the suit.
Benami Transaction - Self-acquired properties - Rejection of plaint - disclosing no cause of action - barred by the benami law - Meaningful Reading of Plaint - Retrospective operation of curative amendment - seeking a declaration for the ownership of the suit schedule properties on the strength of a Will - declaration for rectification of certain alleged mistakes said to have crept into the schedule appended to the said Will, together with consequential relief of injunction - fiduciary-capacity exception under the benami statute - Disqualification from succession - Unlawful object of contract - Confiscation distinct from prosecution - Declaratory Amendment - Mischief Rule - No One Can Benefit From Own Wrong.
Rejection of plaint - Meaningful reading of plaint - Suit barred by law - Benami transaction - HELD THAT: - The Court held that while considering an application under Order VII Rule 11 CPC, the plaint and documents filed with it must be read meaningfully and not formally. On a holistic reading, the plaintiff's case was that the suit properties were purchased in the name of the deceased with funds allegedly provided by the plaintiff, to be later conveyed for his benefit. The testamentary claim was only the form in which the underlying arrangement was projected. The pleadings and recitals also disclosed that the arrangement was structured to defeat statutory restrictions on purchase of agricultural land and was therefore hit both by the Benami law and by the principle that an agreement with an unlawful object is void. Since the bar was apparent from the plaint itself, the plaint was liable to be rejected at the threshold. [Paras 26, 28, 29]
The rejection of the plaint was restored, and the High Court erred in reviving the suit for trial.
Retrospective operation of curative amendment - Confiscation distinct from prosecution - Benami law - HELD THAT: - Both before and after the amendment, the Act contemplates two distinct deterrent measures to prohibit benami transactions, namely, confiscation and punishment. Confiscation is a civil action directed against the property itself and not against the individuals participating in the benami transaction. Personal action against such individuals is by way of prosecution contemplated under Chapter VII. The consequence of adjudication and confiscation is that the property vests in the Central Government, as the rights of both the benamidar and the beneficial owner stand extinguished. Such action is in the nature of forfeiture of property, which is a civil consequence flowing from violation of the statute with recovery as its object. Penal action imposing punishment stands on a different footing. The burden of proof and presumptions applicable to the two proceedings are independent, and one does not depend upon the outcome of the other. Unless prosecution is launched under Sections 53 or 54 of the Act, the person proceeded against in adjudicatory proceedings, cannot be termed an accused. Similar provisions are found in several other enactments.
In the adjudication process, confiscation is the eventual consequence. The substantive power to confiscate property involved in benami transactions existed even under the unamended law; what the 2016 amendment introduced was a detailed procedural framework which was earlier absent. It must be reiterated that Chapters IV and VII are self-contained codes, inasmuch as they provide independent mechanisms governed by separate procedures and remedies under law.
The Court held that the original statute had already prohibited benami transactions and contemplated confiscation, but lacked an effective procedural framework. The 2016 amendment supplied the machinery for attachment, adjudication, confiscation and appeals and was enacted to cure those defects and make the law workable. Such provisions, being curative and procedural, were held to operate retrospectively or retroactively. The Court further held that confiscation under the Act is a civil consequence directed against the property, whereas prosecution under Chapter VII is penal and directed against persons. Since the two operate in distinct spheres, are governed by different procedures and pursue different objects, simultaneous or successive action under both does not attract Article 20(2). [Paras 21, 22, 29]
The statutory machinery introduced in 2016 was held applicable to earlier benami transactions, but penal consequences under the new regime were confined to prospective operation.
Fiduciary capacity - Statutory exception - Employer-employee relationship - HELD THAT: - The scope of the exception contained in Section 4(3) of the unamended Act viz-a-vis Section 2(9) of the Act post-amendment. Section 4(3) as it stood prior to amendment, exempted certain categories of transactions, namely, those between coparceners in a Hindu Undivided Family or members of a joint family, purchases in the name of wife or unmarried daughter, and transactions involving persons standing in a fiduciary capacity. The said provision was omitted, and the relevant exclusions were incorporated into the substituted Section 2(9) which defines a “benami transaction”. We have already held that such omission and substitution would operate retrospectively.
The expression “fiduciary capacity” was not defined in the original enactment. Under the amended provision, however, the explanation refers to a trustee, executor, partner, director of a company, a depository or participant as an agent under the Depositories Act, 1996, and any other persons as may be notified by the Central Government.
Ordinarily, where the legislature employs the word “includes”, the definition is prima facie extensive and enlarging. Where the word “means” alone is used, the definition is generally exhaustive. Where the expression “means and includes” is employed, the definition is ordinarily exhaustive while also clarifying its scope. However, even where only the word “includes” is used, the context, object of the statute, and the structure of the provision may indicate a restrictive or exhaustive intention.
While explaining the category of persons standing in a fiduciary capacity, the legislature has specified identifiable classes such as trustee, executor, partner, director, depository participant, and has further expressly reserved power to the Central Government to notify additional categories. The conferment of such specific delegated power is a significant indicator that enlargement beyond the enumerated classes was intended to occur through notification rather than unrestricted judicial expansion.
The statutory exception based on fiduciary capacity was held inapplicable.
Accordingly, for the purposes of the Act, the expression “fiduciary capacity” must receive a restricted and controlled construction. Persons expressly enumerated would undoubtedly fall within the exception, and any additional category would ordinarily require notification by the Central Government. In the absence thereof, the scope of the exception cannot be widened merely on equitable considerations.
Disqualification from succession - Testamentary succession - Suppression of material facts - HELD THAT: - The Court held that the Hindu Succession Act contemplates both intestate and testamentary succession, and the statutory bar against a murderer inheriting the estate of the deceased applies equally where inheritance is claimed through a Will. The principle is founded on public policy that no person may profit from his own wrong. The Court also held that conviction is not a condition precedent for attracting the civil consequence, since the issue may be examined on the standard of preponderance of probabilities in civil proceedings. In the present case, the plaint suppressed the fact that the plaintiff was accused in the murder of the deceased, which was a material fact directly bearing on the claim to succession and furnished an additional reason why no relief could be granted. [Paras 25, 29]
The plaintiff was held disentitled from asserting rights in succession to the estate of the deceased.
Final Conclusion: The Supreme Court held that the plaintiff's claim, though dressed as one under a Will, was in substance an attempt to enforce rights flowing from a benami and unlawful arrangement, with no available fiduciary exception and with an additional bar arising from the claim to succession. The High Court's order restoring the suit was set aside, the rejection of the plaint stood restored, and the properties were directed to be taken over in accordance with the Benami Act.
Issues: Whether the impugned seizure memorandum, communication and show cause notices were liable to be quashed, and whether consequential directions for release of the imported goods and waiver of demurrage, detention and ground rent charges were warranted.
Analysis: The petitions were held to be directly covered by the common order passed in the connected writ petitions on the same set of controversy. Following that order, the seizure memorandum, communication and show cause notices were quashed. Consequential directions were issued for release of the subject imported goods and for issuance of a certificate waiving demurrage, detention and ground rent charges.
Conclusion: The impugned actions were quashed and the consequential reliefs were granted in favour of the petitioner.
Validity of the seizure memorandum, communication and show cause notices - HELD THAT:- The petitions were allowed on the ground that the controversy was directly covered by the earlier order in M/s. Vaibhav International vs. The Commissioner of Customs & others. [2026 (3) TMI 1695 - KARNATAKA HIGH COURT], and accordingly the seizure memorandum, communication and show cause notices were quashed, with consequential directions for release of the imported goods and issuance of waiver certificate for demurrage, detention and ground rent charges.
Issues: Whether interest on the refunded customs duty was payable from three months after the original refund applications were filed, or only from a later date when supporting documents and clarifications were finally furnished.
Analysis: The refund applications had been filed in 2004 and were acknowledged by the Department. The applications were kept pending for years and were not returned within the statutory time in the manner contemplated for a deficient application. Section 27A of the Customs Act, 1962 mandates payment of interest where refund is not granted within three months from the date of receipt of the application, and the Department could not defer the commencement of interest by treating later clarifications or resubmissions as the effective date of the claim when the original applications had already been received.
Conclusion: Interest was payable from three months after 02.06.2004, the date of filing of the refund applications, and not from 20.12.2017.
Final Conclusion: The assessee succeeded in obtaining interest on the refunded amount for the full statutory period commencing three months after the original refund claims were filed.
Ratio Decidendi: Under Section 27A of the Customs Act, 1962, interest on refund runs from the expiry of three months after receipt of the refund application where the claim is not disposed of within that period, unless the application is duly returned as deficient in accordance with law.
Entitlement to get interest from three months after filing of refund applications - Date of receipt of refund application - Effect of deficiency memo on refund interest as required under Notification No. 34/95-Customs (NT) - HELD THAT: - The Tribunal found that filing of the seventeen refund applications in 2004 stood acknowledged by the department, and that the applications were thereafter kept pending for years while deficiency memos were issued at long intervals. It held that Section 27A mandated payment of interest if the refund was not made within three months from receipt of the application, and that, in the absence of any deficiency memo or return of the application within the time contemplated under the notification, the department could not shift the starting point of interest to the date of later clarifications or Chartered Accountant's certificate. The Tribunal further held that expressions such as completed application or deficient application used in departmental notifications or submissions could not override the clear statutory command in Section 27A. [Paras 5, 6]
The assessee was entitled to interest at the applicable rate on the refunded amount from three months after 02.06.2004 till 01.11.2018, when the refund was granted.
Final Conclusion: The appeal was allowed. The order restricting interest to the period after the later clarification was modified, and interest was directed to be paid on the sanctioned refund from three months after filing of the refund applications on 02.06.2004 until the date of refund on 01.11.2018.
Issues: (i) Whether the seizure of gold satisfied the statutory requirement of reasonable belief under Section 110; (ii) whether the presumption under Section 123 was correctly invoked; (iii) whether foreign markings on gold were sufficient to treat the gold as smuggled; (iv) whether confiscation under Section 111 without specifying the relevant clause was valid; (v) whether absolute confiscation of gold was legally justified; (vi) whether confiscation of currency under Section 121 was sustainable; (vii) whether penalty under Section 112 was legally tenable.
Issue (i): Whether the seizure of gold satisfied the statutory requirement of reasonable belief under Section 110.
Analysis: Section 110 requires the proper officer to have objective material forming a reason to believe that the goods are liable to confiscation before seizure. The record disclosed only a general recital in the panchnama and no separate recorded reasons prior to seizure. The requirement of recording reasons before seizure is mandatory, and absence of such material vitiates the seizure.
Conclusion: The seizure did not satisfy the statutory requirement of reasonable belief and was unsustainable.
Issue (ii): Whether the presumption under Section 123 was correctly invoked.
Analysis: The burden under Section 123 can shift only when the initial seizure is valid and based on a lawful reason to believe. Since the seizure itself was held defective, the statutory presumption could not be invoked. In any event, the appellant offered a local-market explanation for possession of the gold.
Conclusion: The presumption under Section 123 was not correctly invoked.
Issue (iii): Whether foreign markings on gold were sufficient to treat the gold as smuggled.
Analysis: Foreign markings by themselves do not establish smuggled origin. No investigation linked the gold to any act of smuggling, and no corroborative evidence established illegal import. Mere suspicion cannot replace proof.
Conclusion: Foreign markings alone were insufficient to hold the gold as smuggled.
Issue (iv): Whether confiscation under Section 111 without specifying the relevant clause was valid.
Analysis: The impugned order ordered confiscation under Section 111 without identifying the specific clause attracted by the facts. A confiscation order must put the noticee on clear notice of the exact statutory basis of liability, and failure to specify the relevant clause is a serious defect.
Conclusion: Confiscation under Section 111 without specifying the applicable clause was invalid.
Issue (v): Whether absolute confiscation of gold was legally justified.
Analysis: Gold is not treated as a prohibited item in ordinary cases, and redemption under Section 125 is ordinarily required unless exceptional circumstances exist. No such exceptional circumstances were shown. Therefore, absolute confiscation was disproportionate and contrary to the statutory scheme.
Conclusion: Absolute confiscation of gold was not legally justified.
Issue (vi): Whether confiscation of currency under Section 121 was sustainable.
Analysis: Confiscation under Section 121 requires proof that the currency represents sale proceeds of smuggled goods. No nexus was established between the seized cash and any proved smuggled gold, and the Department failed to prove the essential ingredients of the provision.
Conclusion: Confiscation of currency under Section 121 was not sustainable.
Issue (vii): Whether penalty under Section 112 was legally tenable.
Analysis: Penalty under Section 112 requires clear statutory foundation and supporting findings. The order did not specify the applicable clause or establish conscious involvement in smuggling, and the retracted statement was unsupported by independent corroboration.
Conclusion: Penalty under Section 112 was not legally tenable.
Final Conclusion: The confiscation and penalty were set aside because the seizure was vitiated, the statutory presumptions and confiscatory provisions were not properly established, and the evidence did not prove smuggling or a nexus between the currency and any contraband activity.
Ratio Decidendi: Seizure and confiscation under the Customs Act require recorded objective reasons, proved statutory ingredients, and corroborated evidence; foreign markings or an uncorroborated retracted statement cannot by themselves sustain confiscation, currency forfeiture, or penalty.
Validity of Seizure of gold - statutory requirement of reasonable belief under Section 110 - presumption under Section 123 - Burden of proof under notified goods - foreign markings on gold - Proof of smuggled origin - Specification of confiscation and penalty provision - Confiscation of sale proceeds of smuggled goods - Redemption in lieu of confiscation - imposition of penalty under Section 112 and 117.
Reason to believe for seizure - Burden of proof under notified goods - HELD THAT: - The Tribunal held that the power of seizure under Section 110 requires prior formation and recording of objective reasons to believe that the goods are liable to confiscation. A general recital in the panchanama was found insufficient, and no independent reasons were shown to have been recorded before seizure. On that basis, the seizure was vitiated.
The revenue has invoked Section 123 of the Customs Act, which shifts the burden of proof upon the person from whose possession the goods are seized. However, it is well settled that the Section 123 of the Customs Act can be invoked only when the initial seizure itself is valid and based on reasonable belief. In the absence of valid seizure, the burden does not shift. Even otherwise the appellant has explained that the gold was purchased locally in the course of business.
The Hon’ble Supreme Court in Amrit Foods [2005 (10) TMI 96 - SUPREME COURT] has emphasized that penalty provisions shifting burden must be strictly construed and cannot be applied in a casual / mechanical manner. Accordingly, we hold that the invocation of Section 123 of the Customs Act is not illegal sustainable.
The seizure was held unsustainable in law, and the presumption under Section 123 was held not validly invocable.
Proof of smuggled origin - Foreign markings on gold - Retracted confession - HELD THAT: - The Tribunal held that foreign markings by themselves do not prove that the gold was smuggled, since such goods may circulate in the domestic market even when lawfully acquired. It found that no investigation had established the origin of the gold or any link with an act of smuggling.
The Adjudicating Authority has heavily relied upon the statement recorded under Section 108 of the Customs Act. It is not in dispute that the said statement was subsequently retracted by the appellant. The law is well settled that a retracted confession cannot be relied upon unless it is corroborated by independent evidence. In Gian Chand [1961 (11) TMI 1 - SUPREME COURT], the Hon’ble Supreme Court has clearly held that a confessional statement, particularly when retracted must be corroborated in material particulars before it can be relied upon. In the present case, no such corroboration exists. Therefore, the reliance placed by the Adjudicating Authority on the retracted statement is mis-placed and unsustainable.
The allegation that the seized gold was smuggled was held not proved.
Specification of confiscation provision - Redemption in lieu of confiscation - HELD THAT: - The Tribunal found that the show cause notice and the impugned order did not specify the particular clause of Section 111 under which confiscation was proposed and ordered. Relying on the principle that the noticee must be informed of the exact statutory contravention, it held that such non-specification vitiated the confiscation.
The issue is no longer res-integra, in Amrit Foods [2005 (10) TMI 96 - SUPREME COURT], the Hon’ble Supreme Court held that failure to specify the relevant clause of the confiscation provision is a serious defect which vitiates the proceedings.
Similarly, in Al-Amin Exports [2007 (1) TMI 336 - CESTAT, AHMEDABAD], affirmed by Bombay High Court, it was held that confiscation without specifying clause is not sustainable.
Following the above decisions, the confiscation in the present case is legally not sustainable.
Absolute confiscation of gold - It is a settled position that gold in not a prohibited item but a restricted item, and therefore, even where confiscation is justified, the option of redemption under Section 125 of the Customs Act must be given ordinarily. In Shaik Jamal Basha [1996 (7) TMI 153 - HIGH COURT OF ANDHRA PRADESH AT HYDERABAD], it was held that absolute confiscation of gold is not justified in routine cases. Further, in Smt. Jhansi RaniI [2025 (2) TMI 30 - MADRAS HIGH COURT], the Hon’ble Madras High Court reiterated that redemption should be allowed unless exceptional circumstances exist. Allahabad High Court in the case of Rajesh Jhamatmal Bhat [2022 (7) TMI 373 - ALLAHABAD HIGH COURT], confiscated Gold not being prohibited goods, should be offered for redemption. Therefore, absolute confiscation is not justified.
No such exceptional circumstances were found. [Paras 26, 27, 28, 29, 30]
The confiscation of the gold was held legally unsustainable, and in any event absolute confiscation was held not justified.
Confiscation of sale proceeds of smuggled goods - Nexus between currency and smuggled goods - HELD THAT: - The burden is entirely upon the Department to prove that there was a sale, the sale was smuggled gold and the money represents such sale proceeds. Tribunal Kolkata in the case of Bijoy Kumar, Agrawala [2024 (5) TMI 529 - CESTAT KOLKATA], where in, it was held that in the absence of clear nexus between cash and smuggled goods, confiscation of currency is not sustainable.
CESTAT Ahmedabad in the case of Hanumansingh Lakhavat [2024 (1) TMI 986 - CESTAT AHMEDABAD], it was held that currency cannot be confiscated merely on suspicion. In the present case, there is absolutely no evidence to establish any nexus between the seized cash and alleged smuggled gold. Therefore, confiscation of currency is also not sustainable.
The confiscation of the seized currency was set aside as unsupported by evidence of any nexus with sale proceeds of smuggled goods.
Specification of penalty provision - Penalty for conscious involvement - HELD THAT: - The Tribunal held that penalty provisions must be strictly construed and cannot be invoked without clear findings as to the precise statutory basis and the role of the noticee. Since the penalty was imposed without specifying the relevant clause of Section 112 and there was no evidence of conscious involvement in smuggling, the penalty could not be sustained. [Paras 33]
The penalty imposed on the appellant was held unsustainable.
Final Conclusion: The Tribunal held that the seizure, confiscation of gold and currency, and the penalty were all legally unsustainable. The appeal was accordingly allowed with consequential relief as per law.
Issues: Whether a self-assessed Bill of Entry, after clearance of goods and expiry of the appeal period, could be reopened through a refund claim seeking reassessment on the ground of short shipment.
Analysis: The goods were cleared on the basis of the import documents then available, all of which reflected the same quantity. The proper officer's power under Section 17 of the Customs Act, 1962 to reassess is confined to cases where verification, examination or testing shows that self-assessment was not correctly done. In the present facts, the request for reassessment was made only after clearance and after a long delay, without any timely challenge to the original self-assessment. A refund claim cannot be used to carry out a fresh assessment on merits or to reopen an assessment that was not appealed within the prescribed period. The cited precedents on different facts, including amendment of shipping bills, did not assist the appellant.
Conclusion: The request for reassessment was not maintainable, and the refund claim could not reopen the self-assessed assessment. The issue is decided against the assessee and in favour of Revenue.
Final Conclusion: The appeal failed because the self-assessed assessment remained unchallenged within limitation and could not be disturbed through refund proceedings.
Ratio Decidendi: A self-assessed customs assessment, once acted upon and not challenged within the statutory appeal period, cannot be reopened through refund proceedings, and reassessment under Section 17 is available only within the statutory scheme of verification-based correction.
Seeking reassessment of self-assessed Bill of Entry - clearance of goods and expiry of the appeal period - refund claim seeking reassessment on the ground of short shipment - Limitation for appeal against assessment.
Reassessment of self-assessed Bill of Entry - Short shipment - HELD THAT: - The Tribunal held that reassessment under Section 17(5) operates where, on departmental verification, examination, testing, or similar scrutiny, the self-assessment is found to be incorrect and the proper officer undertakes re-assessment. In the present case, the Bill of Entry had been self-assessed and the goods had been cleared, while the invoice and packing list available at the time of assessment showed the quantity as declared. The later claim of short shipment, raised after about two years, did not attract the statutory scheme of reassessment. In such circumstances, the importer ought to have challenged the assessment within the prescribed appellate period on the basis of proof of short shipment, and not seek to reopen the concluded assessment through reassessment. [Paras 6, 8, 9]
The request for reassessment was rightly rejected.
Refund claim against self-assessment - Appealability of self-assessment - Condonable period - HELD THAT: - Relying on the principle that self-assessment is nonetheless an order of assessment and that refund proceedings are not a forum for making a fresh assessment on merits, the Tribunal held that the appellant could not directly seek refund without first assailing the assessment in appeal. The Commissioner (Appeals) was also correct in holding that, even if the appellant's challenge were treated as an appeal against assessment, it had been brought beyond the period that could be condoned under the Act. The concluded self-assessment therefore could not be reopened either through the refund route or by a belated challenge. [Paras 7, 9]
The refund claim was not maintainable and the belated challenge to assessment could not be entertained.
Final Conclusion: The Tribunal upheld the rejection of reassessment and refund. It held that the self-assessed Bill of Entry, once not challenged within the statutory appellate period, could not be reopened on a later plea of short shipment, nor could refund proceedings be used to overcome the finality of assessment.
Issues: Whether the application for advance ruling was maintainable when the classification question regarding roasted areca nuts had already been decided by the High Court and the applicant relied only on recasting of the tariff entries.
Analysis: The statutory bar under Section 28-I(2)(b) of the Customs Act, 1962 prevents the Authority from entertaining an application where the question raised is the same as a matter already decided by a Court. The Authority treated that bar as applicant-agnostic and held that once a question of classification has been conclusively answered by a higher court, the same issue cannot be re-agitated before the advance ruling forum by another applicant. The prior High Court ruling on roasted areca nuts was found to squarely cover the present request, and the mere renumbering or recasting of the tariff heading was held not to create a fresh question requiring a new ruling.
Conclusion: The application was not maintainable and no ruling was issued on the classification question.
Maintainability of advance ruling application - Statutory bar under Section 28-I(2)(b) - re-agitation of question regarding roasted classification of areca nutsalready decided by Court - Binding nature of judicial precedent -
Application for advance ruling when the classification question regarding roasted areca nuts had already been decided by the High Court - HELD THAT: - It is a settled principle of law that rulings of the Tribunal and Courts are binding on subordinate authorities. The CAAR, being a statutory authority under the Customs Act, is equally bound by such precedents. To allow fresh applications on questions already adjudicated by higher judicial fora would risk the creation of conflicting rulings and introduce uncertainty, an outcome contrary to the very object of the advance ruling mechanism. Clause (b) therefore operates as a statutory reinforcement of judicial discipline, making it explicit that once a question has been conclusively determined by the Tribunal or Courts, the Authority cannot re-adjudicate the same issue at the behest of another party.
Classification of Roasted Areca Nuts - HELD THAT:- The issue raised in the instant applications is squarely covered by the judgement of Hon'ble Madras High Court in the case of M/s Shahnaz International Pvt. Ltd. [2023 (8) TMI 492 - MADRAS HIGH COURT] wherein the issue relating to the classification of Roasted Areca Nuts has already been examined and decided. The Hon'ble Court, after detailed consideration of the nature of the product and the relevant tariff provisions, held that Roasted Areca Nuts are classifiable under Heading 2008 and not under Chapter 8 of the Customs Tariff. The classification adopted by the Hon'ble Court was CTH 2008 19 20, which was the relevant tariff entry available at the material time, Further, the applicant has not demonstrated any change in the nature, composition, or processing of the goods in question that would warrant reconsideration of the classification issue. The goods continue to remain Roasted Areca Nuts, and therefore the reasoning adopted by the Hon'ble Madras High Court regarding their classification under Heading 2008 continues to apply.
The Authority held that the first proviso to section 28-I(2) bars admission of an application where the question raised is the same as one already decided by a Court, and that this bar is not confined to the applicant's own case. It found that the classification of roasted areca nuts had already been settled by the High Court under Heading 2008, and the applicant had shown no change in the nature, composition or processing of the goods so as to reopen that issue. Mere renumbering or substitution of the tariff sub-heading after the Finance Act, 2025 was treated as insufficient to generate a new classification dispute, since the underlying question of classification remained unchanged.
The Authority further held that it was not required, in advance ruling jurisdiction, to pronounce upon the legislative intent behind tariff restructuring when the judicially settled classification issue already stood covered. [Paras 6, 7]
The application was rejected as not allowable, the question being already concluded by binding judicial precedent.
Final Conclusion: The Authority declined to entertain the advance ruling application, holding that the classification issue stood concluded by an existing High Court decision. The recasting of the tariff sub-heading was held not to create a fresh question warranting a new ruling.
Issues: Whether the Enforcement Directorate can be directed to register an ECIR under the Prevention of Money Laundering Act, 2002 merely because a predicate offence is registered and scheduled offences are alleged.
Analysis: The Prevention of Money Laundering Act, 2002 creates a distinct mechanism for action on the basis of proceeds of crime. Registration of a predicate offence does not by itself compel the Enforcement Directorate to commence proceedings. The statutory scheme requires the authorised officer to form an independent prima facie satisfaction from the materials in possession and to act on recorded reasons to believe at the relevant stage. ECIR is only an internal document and the decision whether to initiate proceedings under the Act remains within the domain of the Enforcement Directorate. The existence of a scheduled offence, without more, is therefore insufficient to issue a direction compelling registration of ECIR.
Conclusion: The request for a direction to register ECIR was not maintainable on the facts pleaded and was rejected.
Final Conclusion: The petition failed because the court declined to substitute its own view for the Enforcement Directorate's statutory discretion to decide whether to proceed under the money-laundering law.
Ratio Decidendi: A court cannot compel registration of an ECIR under the Prevention of Money Laundering Act, 2002 solely on the existence of a predicate offence, because initiation of proceedings depends on the authorised officer's independent satisfaction based on materials and recorded reasons to believe.
Seeking for a direction to the ED to register an ECIR under the PML Act - predicate offence - proceeds of crime - electoral offence case by transporting huge sum of money - Reasons to Believe - Satisfaction of the Authorised Officer - judicial restraint under the PML Act. -HELD THAT: - On the scheme of the PML Act, registration of an ECIR is not an automatic consequence of registration of a scheduled offence. The Act envisages that the authorised officer may proceed under the statute only on the basis of the materials in his possession and the reasons to believe recorded in writing regarding the existence of proceeds of crime and commission of the offence under Section 3. The Court held that ECIR is an internal document and that the statutory decision to initiate proceedings lies within the domain of the Enforcement Directorate. The decision in Balaji v. Karthik Desari [2023 (6) TMI 594 - SUPREME COURT] was held not to compel registration of an ECIR in every case involving a predicate offence, since that decision upheld an already registered ECIR. Relying on R. Madhavan Pillai v. Rajendran Unnithan. S [2025 (3) TMI 1655 - SC ORDER], the Court held that a High Court cannot direct registration of an ECIR only because it prima facie finds existence of a predicate offence, as such direction would substitute the statutory satisfaction of the Enforcement Directorate. [Paras 21, 22, 23, 25, 26]
The prayer for a direction to register an ECIR was refused, leaving it to the Enforcement Directorate to decide independently whether to initiate proceedings under the PML Act on the basis of the materials available.
Final Conclusion: The writ petition was dismissed. The Court held that existence of a predicate offence does not by itself oblige the Enforcement Directorate to register an ECIR, and the decision to initiate proceedings under the PML Act must be left to the authorised officer on the basis of statutory satisfaction.
Issues: (i) Whether the 2009 amendment inserting sections 7 to 13 of the Prevention of Corruption Act, 1988 in the schedule to the Prevention of Money Laundering Act, 2002 could not be applied retrospectively to properties acquired earlier; (ii) whether prior permission or intimation from the department was obtained for acquiring the immovable properties; (iii) whether attachment by the Enforcement Directorate was invalid because the properties had already been seized by the police or were under attachment in the criminal case; (iv) whether the appellants had lawful sources of income to acquire the immovable properties; (v) whether the properties covered by the will deed belonged to Killi Raghuramudu and were not liable to attachment; and (vi) whether the properties of the other appellants were liable to be released merely because they were not named as accused in the charge-sheet.
Issue (i): Whether the 2009 amendment inserting sections 7 to 13 of the Prevention of Corruption Act, 1988 in the schedule to the Prevention of Money Laundering Act, 2002 could not be applied retrospectively to properties acquired earlier?
Analysis: The relevant inquiry was held to be the date on which the property was projected or claimed as untainted and the act of money laundering occurred, not the date of the underlying scheduled offence. Money laundering was treated as an independent and continuing offence connected with the proceeds of crime, and the scheduled offence could pre-date the inclusion of the predicate offence in the schedule without defeating action under the 2002 Act.
Conclusion: The contention of retrospective inapplicability was rejected and the issue was decided against the appellants.
Issue (ii): Whether prior permission or intimation from the department was obtained for acquiring the immovable properties?
Analysis: The Tribunal found no reliable proof that prior permission or proper intimation had been obtained. The materials relied upon by the appellants were not treated as sufficient to dislodge the investigation findings, and the burden remained on the appellant to explain lawful acquisition. The issue was also viewed as requiring proof in the predicate criminal trial.
Conclusion: The issue was decided against the appellants.
Issue (iii): Whether attachment by the Enforcement Directorate was invalid because the properties had already been seized by the police or were under attachment in the criminal case?
Analysis: Search and seizure under the criminal process and provisional attachment under the 2002 Act were held to operate in different fields. The Tribunal relied on the overriding effect of the 2002 Act and held that prior police seizure did not bar attachment by the Enforcement Directorate.
Conclusion: The issue was decided against the appellants.
Issue (iv): Whether the appellants had lawful sources of income to acquire the immovable properties?
Analysis: The claimed sources such as sale proceeds, rental income, agricultural income, commission income, provident fund withdrawals, and housing loans were found not to be satisfactorily substantiated. The Tribunal accepted the enforcement version that the appellants failed to explain the acquisition of disproportionate assets from known legal income.
Conclusion: The issue was decided against the appellants.
Issue (v): Whether the properties covered by the will deed belonged to Killi Raghuramudu and were not liable to attachment?
Analysis: The Tribunal found that the will deed did not establish a lawful independent source for the properties. On the materials considered, the claim that the properties genuinely belonged to Killi Raghuramudu was not accepted, and the surrounding circumstances indicated that the properties were traceable to the tainted funds linked with the main appellant.
Conclusion: The issue was decided against the appellants.
Issue (vi): Whether the properties of the other appellants were liable to be released merely because they were not named as accused in the charge-sheet?
Analysis: The Tribunal held that attachment under the 2002 Act is not confined to persons named as accused in the scheduled offence. Property in the hands of any person can be attached if it represents proceeds of crime and is involved in the money-laundering process.
Conclusion: The issue was decided against the appellants.
Final Conclusion: The appeals failed on all substantive grounds and the confirmation of provisional attachment was sustained.
Ratio Decidendi: Money laundering under the Prevention of Money Laundering Act, 2002 is an independent and continuing offence, and attachment may be made against proceeds of crime even where the scheduled offence predates the inclusion of the predicate offence in the schedule or the holder is not an accused in the predicate offence.
Provisional attachment - Inclusion of offences under the Prevention of Corruption Act in the Schedule to the PMLA - Applicability of 2009 amendment inserting sections 7 to 13 of the Prevention of Corruption Act, 1988 in the PMLA schedule, where the properties were acquired before 2009 - requirement of prior permission from the department for acquiring the properties - Continuing offence of money-laundering - Retrospective applicability of scheduled offence inclusion - Attachment of proceeds of crime in third-party names - lawful sources of income to acquire the properties - Distinction between seizure and attachment - Benami holding through family member - Will and beneficial ownership.
Non- application of PMLA due to amendment of 2009 -HELD THAT: - The Tribunal held that, for the purposes of Section 3 of the PMLA, the material date is not the date of acquisition of the property or the date of commission of the predicate offence, but the date on which the proceeds of crime are projected or claimed as untainted property. Proceeding on the principle that money-laundering is a continuing offence, it held that continued possession and projection of assets alleged to be disproportionate to known sources of income attracted the PMLA even if the underlying acquisitions pre-dated the inclusion of the scheduled offence. [Paras 6]
The objection to applicability of the PMLA on the ground that the properties had been acquired prior to 01.06.2009 was rejected.
Departmental permission for acquisition of property - Burden to establish lawful source - HELD THAT: - The Tribunal held that departmental permission for acquisition of property does not by itself prove that the assets were acquired from licit income or without criminal misconduct. It further observed that the documents relied upon by the appellants lacked conclusive evidentiary value in the absence of acknowledged receipt and proper proof, and that the question of disproportionate assets was already the subject of the pending predicate prosecution. On that basis, it declined to treat the plea as displacing the attachment, while leaving the appellants free to establish their defence before the trial court. [Paras 7]
The plea founded on alleged departmental permission or intimation was rejected, with liberty to raise the defence in the predicate trial.
Properties seized by police/CBI - attachment as defined u/s. 2(1)(d) of PMLA, 2002 -HELD THAT: - The Tribunal drew a distinction between seizure during investigation and attachment under the PMLA, holding that they operate in different statutory fields and for different purposes. It held that seizure by the police or in predicate proceedings cannot be equated with attachment as defined under the PMLA, and that attachment by the Enforcement Directorate after such seizure does not amount to double attachment. It also relied on the overriding clause in the PMLA to hold that the provisional attachment could validly continue. [Paras 8]
The challenge to the attachment on the ground of prior seizure or attachment in the predicate case was rejected.
Proof of lawful source of funds - Proceeds of crime - HELD THAT: - The Tribunal accepted the Enforcement Directorate's case that the purported sale proceeds of earlier properties, agricultural income, rental income, commission income, housing loans and provident fund withdrawals did not satisfactorily explain the acquisitions. It noted the finding that the properties claimed to be earlier assets were themselves linked to proceeds of crime and that the claims of agricultural and real-estate income had not been substantiated. On that basis, it held that the assertion of lawful acquisition was not established. [Paras 9]
The contention that the properties were acquired from legal sources of income was rejected.
Benami holding through family member - Will and beneficial ownership - HELD THAT: - The Tribunal held that the mere fact that the Will would operate after the testator's lifetime did not assist the appellants, because the material considered in investigation indicated that the testator did not have sufficient independent means to purchase the property. Relying on the statements recorded during investigation and the surrounding circumstances, it accepted the respondent's case that the claim of independent ownership by the father was not credible and that the property was liable to attachment. [Paras 10]
The plea that the property belonged exclusively to the testator and was therefore not attachable was rejected.
Attachment of proceeds of crime in third-party names - Non-requirement of arraignment in predicate offence - HELD THAT: - The Tribunal held that the power of provisional attachment under the PMLA is not confined to persons arrayed as accused in the scheduled offence. It applied the principle that proceeds of crime can be attached in whosoever's name they are held, provided the person is involved in a process or activity connected with such proceeds. Consequently, non-inclusion of some appellants in the predicate charge-sheet was held to be immaterial to the validity of attachment. [Paras 11]
The claim for release of properties merely because certain appellants were not named in the predicate charge-sheet was rejected.
Final Conclusion: The Tribunal upheld the confirmation of provisional attachment and dismissed the appeals. It held that the PMLA was attracted on the footing that money-laundering is a continuing offence, that prior seizure in the predicate case did not invalidate attachment under the PMLA, and that the appellants had failed to establish lawful and independent acquisition of the attached properties.
Issues: (i) whether the provisional attachment could be interfered with on the basis of an interim order passed in the predicate criminal case; (ii) whether an order passed by a single member of the Adjudicating Authority was vitiated for want of proper coram; and (iii) whether property acquired prior to the commission of the scheduled offence could still be attached as proceeds of crime or as property of equivalent value.
Issue (i): whether the provisional attachment could be interfered with on the basis of an interim order passed in the predicate criminal case.
Analysis: The interim order in the predicate proceedings did not stay the criminal case itself but merely directed adjournment of the trial. In the absence of quashing of the predicate offence, discharge, or acquittal, the provisional attachment made in accordance with the statutory procedure could not be disturbed on that ground.
Conclusion: The challenge based on the interim order failed.
Issue (ii): whether an order passed by a single member of the Adjudicating Authority was vitiated for want of proper coram.
Analysis: Divergent views of different High Courts on the competence of a single member of the Adjudicating Authority were noticed, and the issue was stated to be pending before the Supreme Court. Pending final adjudication by the Supreme Court, the appeal was disposed of with the clear understanding that the eventual decision of the Supreme Court would govern the matter.
Conclusion: The order was not set aside on this ground, and the issue was kept subject to the final outcome of the Supreme Court proceedings.
Issue (iii): whether property acquired prior to the commission of the scheduled offence could still be attached as proceeds of crime or as property of equivalent value.
Analysis: The definition of proceeds of crime was treated as having a wider statutory reach, including the value of any such property and property of equivalent value where the tainted property was not available. On that interpretation, attachment was not confined to property acquired after the offence, and earlier-acquired property could be proceeded against where the statutory conditions for equivalent-value attachment were met.
Conclusion: The objection to attachment of the prior-acquired property was rejected.
Final Conclusion: The provisional attachment and its confirmation were sustained, and the appeal was disposed of without interference, while remaining subject to the final decision of the Supreme Court on the coram issue.
Ratio Decidendi: Under the Prevention of Money Laundering Act, attachment may extend to property of equivalent value when the proceeds of crime are unavailable, and such attachment is not defeated merely because the property was acquired before the scheduled offence.
Predicate offence and provisional attachment - Coram of Adjudicating Authority - Proceeds of crime - Equivalent value attachment.
Provisional attachment - interim order passed in the predicate criminal case -HELD THAT: - The Tribunal found that the High Court had not stayed the predicate offence and had only directed adjournment before the trial court. It held that, unless the predicate offence is quashed or the accused is discharged or acquitted, a provisional attachment made after following the statutory procedure cannot be interfered with on that ground alone.
The challenge founded on the interim order in the predicate offence was rejected.
Coram of Adjudicating Authority - Single-member order - HELD THAT: - The Tribunal noted that different High Courts had taken divergent views on the legality of a single-Member order and that the issue was pending before the Supreme Court. It held that mere pendency of the matter before the Supreme Court did not conclude the issue in favour of the appellant, but the disposal of the appeal had to remain subject to the final outcome of that decision.
The appeal was not allowed on the coram objection, but the result was made subject to the final decision of the Supreme Court on that issue.
Proceeds of crime - Equivalent value attachment - HELD THAT: - The Tribunal accepted the interpretation that the definition of proceeds of crime under Section 2(1)(u) has three limbs, including the limb relating to the value of such property. Relying on Vijay Madanlal Choudhary & Ors. v. Union of India & Ors. [2022 (7) TMI 1316 - SUPREME COURT (LB)], the Punjab and Haryana High Court decision in Dilbag Singh @ Dilbag Sandhu Vs. Union of India & Ors. [2024 (11) TMI 833 - PUNJAB AND HARYANA HIGH COURT], and earlier Tribunal and Delhi High Court reasoning [2022 (7) TMI 877 - DELHI HIGH COURT], it held that confining attachment only to property directly derived from the crime would render the middle part of the definition redundant and defeat the object of the Act. Accordingly, where the actual tainted property has been laundered, siphoned off or is otherwise unavailable, attachment may extend to property of equivalent value, even if acquired before the commission of the crime. The Tribunal declined to apply Pavana Dibbur vs The Directorate Of Enforcement [2023 (12) TMI 49 - SUPREME COURT] to hold otherwise.
The contention that the pre-existing property could not be treated as attachable was rejected.
Final Conclusion: The Tribunal declined to interfere with the confirmation of provisional attachment. It held that the interim order in the predicate offence did not affect the attachment, rejected the challenge to attachment of property of equivalent value acquired prior to the crime, and made the result subject only to the final decision of the Supreme Court on the coram issue concerning the Adjudicating Authority.
Issues: Whether the confirmation of provisional attachment of properties could be interfered with when the appellants failed to establish a lawful source of funds and a credible explanation for acquisition of the properties; and whether the appellants had rebutted the statutory presumption under the money-laundering law.
Analysis: The Tribunal noted that the appellant was arrayed as an accused in the underlying investigation and that the attached properties were acquired during or around the relevant period without supporting documentary proof of independent income. The plea that the properties stood in the name of the wife and were acquired from agriculture income or salary contribution was found unsubstantiated, as no bank statements, tax returns, or other material were produced. In the absence of proof of source, the Tribunal applied the statutory presumption against the accused and held that the appellants had not discharged the reverse burden cast upon them. The Tribunal further held that the record did not show any reliable basis to dislodge the finding that the properties were liable to attachment as connected with proceeds of crime.
Conclusion: The challenge to the confirmation of provisional attachment failed, and the properties remained liable to attachment.
Final Conclusion: The Tribunal upheld the attachment order on the ground that the appellants did not rebut the statutory presumption or establish a lawful source for acquisition of the properties.
Ratio Decidendi: In proceedings under the money-laundering law, once material indicates involvement in the scheduled offence and acquisition of property without proved lawful source, the statutory presumption operates and the burden shifts to the accused to rebut it with credible evidence.
Validity of confirmation of attachment of properties - failed to establish a lawful source of funds and a credible explanation for acquisition of the properties - Proceeds of crime - Reverse burden of proof - Attachment of property standing in spouse's name - statutory presumption -HELD THAT: - The Tribunal held that, after registration of the FIR, filing of charge sheets and recording of the ECIR, the appellant Bhagwati Prasad Verma was treated as an accused involved in the commission of the offence. The appellants' objection that the attached properties were either purchased before or after the crime period, and stood in the name of the wife, was not accepted because no documentary material was produced to prove the asserted agricultural income, rental income, or contribution from salary. The Tribunal noted the admission that no supporting documents, including bank statements, had been filed, and that the wife was stated to be a housewife with no income-tax material placed on record. Applying the statutory position that underreverse burden the accused must explain the source, the Tribunal found that the source remained wholly unproved. It further held that the first property's construction was during the crime period and, in any event, none of the acquisitions was shown to have come from legitimate funds; the appellants' income was also found insufficient to justify acquisition of the attached properties. The plea of non-involvement in the crime was also rejected in view of the pending criminal proceedings and the appellant's implication in the charge sheets. [Paras 17, 18, 19, 20, 21]
The provisional attachment and its confirmation were upheld, and the appeals were dismissed.
Final Conclusion: The Tribunal found no ground to interfere with the confirmation of the provisional attachment. As the appellants failed to discharge the burden of proving a legitimate source for the properties and the appellant's involvement in the predicate offence had not been displaced, both appeals were dismissed.
Issues: Whether the appellant was entitled to exemption from service tax as a governmental authority carrying out activities in relation to functions entrusted to a municipality under Article 243W of the Constitution, and whether the demand was therefore unsustainable.
Analysis: The appellant was established by the Government of Kerala for training in the field of local governance, with more than 90% governmental control and financial support. Under Notification No. 25/2012-ST dated 20.06.2012, as expanded by Notification No. 2/2014-ST dated 30.01.2014, a body established by Government with requisite control, carrying out functions entrusted to a municipality under Article 243W, qualifies as a governmental authority eligible for exemption. The appellant's training activities fell within that description, and the demand could not be sustained.
Conclusion: The appellant was entitled to the exemption and the service tax demand was unsustainable.
Entitlement to exemption as a governmental authority - Functions entrusted to municipality under Article 243W - Grant-in-aid and service tax liability. - HELD THAT: - The Tribunal found it undisputed that the appellant was an entity promoted by the Government of Kerala and that more than 90% control and substantial interest in it rested with the State Government in terms of financial support and administrative supervision. Applying the enlarged definition of governmental authority under clause 2(s), as amended by Notification No. 2/2014-ST, the Tribunal held that an entity established by Government with such level of control to carry out functions entrusted to a municipality under Article 243W satisfied the exemption condition. Since the appellant was established for training in the field of local governance and thus fell within that description, it was held eligible for the benefit of Notification No. 25/2012-ST; consequently, the demand confirmed in the impugned order was held unsustainable. [Paras 11]
The exemption under Notification No. 25/2012-ST was held applicable, and the demand was set aside.
Final Conclusion: The Tribunal held that the appellant satisfied the amended definition of governmental authority and that its activities qualified for exemption under Notification No. 25/2012-ST in relation to functions entrusted to a municipality under Article 243W. On that basis, the service tax demand was held unsustainable and the appeal was allowed.
Issues: (i) Whether services rendered by a sub-contractor for an SEZ project were entitled to exemption under the applicable SEZ service tax notification; (ii) whether the demands relating to road construction and supply of tangible goods services were liable to be sustained; (iii) whether denial of CENVAT credit on the ground of belated availment and documentary discrepancies was sustainable; (iv) whether the remaining demand outside the SEZ and the related interest and penalties required confirmation or remand.
Issue (i): Whether services rendered by a sub-contractor for an SEZ project were entitled to exemption under the applicable SEZ service tax notification.
Analysis: The exemption notification covered taxable services provided for consumption within a Special Economic Zone, subject to the stated conditions. The services were rendered in the chain of authorised contractors for SEZ units, and the fact that the appellant acted as a sub-contractor did not alter the character of the services consumed within the SEZ. The statutory scheme under the SEZ regime, including the protection extended to contractors and sub-contractors, supported the availability of exemption where the end-use was within the SEZ and the conditions were satisfied.
Conclusion: The demand of service tax on SEZ-related sub-contract works was set aside in favour of the assessee.
Issue (ii): Whether the demands relating to road construction and supply of tangible goods services were liable to be sustained.
Analysis: The demand relating to road construction for MRPL was not disputed on facts and the tax had been collected and discharged. The demand under supply of tangible goods services was also not disputed, and only payment/appropriation aspects were raised. In the absence of a substantive challenge to taxability, the confirmed liability was upheld.
Conclusion: The service tax demands under road construction and supply of tangible goods services were sustained in favour of the Revenue.
Issue (iii): Whether denial of CENVAT credit on the ground of belated availment and documentary discrepancies was sustainable.
Analysis: For the disputed period, the CENVAT Credit Rules, 2004 did not prescribe a time bar for taking credit, and the later insertion of a restriction could not be applied retrospectively. The objection based solely on delayed availment was therefore not acceptable. However, where invoices contained discrepancies or were issued in another name, the genuineness and eligibility of credit required factual verification. The proper course was to allow the claim in principle and remand the matter for document verification and factual reconciliation.
Conclusion: The time-bar objection was rejected, and the CENVAT credit issue was remanded for verification in favour of the assessee.
Issue (iv): Whether the remaining demand outside the SEZ and the related interest and penalties required confirmation or remand.
Analysis: The admitted demand for works contract services outside the SEZ was sustainable, but the exact adjustment of payments already made and the quantum of balance liability depended on the outcome of the CENVAT credit verification. As the tax credit question was remanded, the consequential computation of interest and penalty could not be finalised at that stage. The appropriate course was to retain the confirmed tax component while remanding the arithmetical and documentary verification aspects.
Conclusion: The remaining demand was partly confirmed and partly remanded, and the penalties were set aside as consequential.
Final Conclusion: The appeal resulted in partial relief by setting aside the SEZ subcontract demand and remanding the CENVAT credit and related appropriation issues, while sustaining the undisputed tax liabilities and leaving the consequential computations to be finalised on remand.
Ratio Decidendi: Where taxable services are ultimately consumed within an SEZ and statutory conditions are met, exemption is not lost merely because the provider acts as a sub-contractor; likewise, CENVAT credit cannot be denied for the disputed period on the basis of a subsequently introduced time limit, though factual eligibility may still require verification.
Benefit of Notification No. 4/2004-S.T. - Services rendered by a sub-contractor to contractors executing authorised works for a Special Economic Zone - Denial of the cenvat credit - claimed belatedly - discrepancies in the cenvatable documents - Verification of input service documents - Works Contract Services rendered to various parties outside SEZ - Extended period of limitation - Penalty consequential to re-quantification.
SEZ exemption for subcontracted services - HELD THAT: - The Tribunal held that Notification No. 4/2004-S.T. requires that the taxable services be provided for consumption within the SEZ and the relevant conditions be satisfied. It was not disputed that the main contractors were authorised contractors rendering services to SEZ units and that the services executed by the appellant as sub-contractor were in relation to authorised operations within the SEZ. The Commissioner's objection that the appellant had not directly rendered services to the SEZ unit was rejected, especially when the record itself showed approval of the services by the Development Commissioner and actual use within the SEZ. The benefit of exemption could not therefore be denied solely because the appellant was a sub-contractor. The Tribunal also followed Commissioner of Service Tax, Mumbai-I vs. Fedco Paints and Contracts [2017 (5) TMI 338 - CESTAT MUMBAI], which in turn referred to Sujana Metal Products Ltd. v. Commissioner of Central Excise [2011 (9) TMI 724 - CESTAT, BANGALORE]. [Paras 7]
The demand under Works Contract Service on services rendered as sub-contractor to SEZ units was set aside.
Cenvat credit time limit - Verification of input service documents - HELD THAT: - The Tribunal held that, for the disputed period, Rule 4 of the Cenvat Credit Rules, 2004 did not prescribe any time limit for taking cenvat credit. The Commissioner's reading of the expression permitting credit to be taken immediately as an 18-month restriction was found unsustainable. The Tribunal noted that the time restriction was introduced only later by amendment with effect from 01.09.2014 and therefore could not govern the period in dispute. However, since the Commissioner had also pointed out invoices addressed to another person and other documentary discrepancies, and the appellant claimed to possess the necessary material to establish eligibility, the matter was remanded only for verification of documents and of tax having been paid by the appellant on the relevant service. [Paras 8]
Denial of cenvat credit on the ground of delay was rejected, and the issue was remanded only for verification of the documentary eligibility of the credit.
Extended period of limitation - Adjustment of tax against eligible cenvat credit - The undisputed service tax demand on works contract services rendered outside the SEZ was maintainable, and invocation of the extended period was upheld, but verification of subsequent payments and adjustment against admissible cenvat credit was remanded. - HELD THAT: - The Tribunal recorded that the demand on works contract services rendered outside the SEZ was not disputed by the appellant. Since the appellant itself admitted that, due to financial constraints, service tax had not been paid in time and returns were filed belatedly, the Tribunal upheld invocation of the extended period of limitation. At the same time, as the appellant claimed further payments after the impugned order and sought adjustment of the balance demand against cenvat credit whose admissibility was being separately remanded, the quantification and appropriation of the tax payable required fresh verification by the original authority. [Paras 9]
The demand on non-SEZ works contract services was upheld, limitation was sustained, and the matter was remanded for verification of payments and adjustment against eligible cenvat credit.
Collected service tax payable - Undisputed tax demand - HELD THAT: - The Tribunal noted that the appellant did not dispute the service tax collected in relation to the road work and had already discharged the same; that demand was therefore upheld with interest. Likewise, the demand under Supply of Tangible Goods Service was not disputed and was upheld with interest. Since the appellant claimed full payment but the impugned order appropriated only part of the amount, the Tribunal treated the already paid amount as discharged and left the payment position to stand in terms of the record. [Paras 5, 6]
The demands under road construction service tax collected by the appellant and under Supply of Tangible Goods Service were confirmed with interest.
Penalty consequential to re-quantification - HELD THAT: - The Tribunal held that the quantum of interest and the question of penalty were dependent upon the final quantification after verification of cenvat credit eligibility and appropriation of tax payments. Since those issues were being remanded for fresh verification, the penalties could not be maintained in the existing form. [Paras 10]
The penalties were set aside and the matter was remanded for consequential re-quantification.
Final Conclusion: The appeal was partly allowed. The demand on subcontracted works executed for SEZ authorised operations was set aside; the demands on non-SEZ works contract service, Supply of Tangible Goods Service, and the collected service tax on road work were sustained to the extent indicated, while cenvat credit, appropriation of payments, interest, and penalty were remanded for verification and fresh quantification.
Issues: Whether amounts received as penalty or liquidated damages for delay in performance under a contract constitute consideration for a declared service so as to attract service tax under section 66E(e) of the Finance Act, 1994.
Analysis: The question was treated as settled by earlier co-ordinate Bench decisions, including the appellant's own earlier case, which held that liquidated damages or penalty for contractual non-compliance do not amount to consideration for tolerating an act. Such receipts are not shown to arise from any obligation to tolerate delay or breach as a service, and therefore do not fall within the scope of the declared service provision.
Conclusion: The amount received as liquidated damages or penalty is not taxable as consideration for a declared service under section 66E(e) of the Finance Act, 1994, and the demand is unsustainable.
Chargeable to service tax as consideration for a declared service - Liquidated damages - Declared service - Tolerating an act - Whether the amount received as penalty or as liquidated damages can be considered as consideration for declared service or otherwise -HELD THAT: - In appellant’s own case for earlier period, this Bench has decided the issue in favour of the appellant, vide Final Order [2026 (2) TMI 521 - CESTAT HYDERABAD]. In the case of Bharat Dynamics Ltd also [2025 (6) TMI 1269 - CESTAT HYDERABAD], this Bench has, inter alia, examined similar issue and relying on the judgment in the case of Steel Authority of India Ltd Vs Commissioner [2021 (7) TMI 1092 - CESTAT CHENNAI], held that no service tax is payable on the amount collected towards LD.
The determinative reasoning accepted was that liquidated damages or penalty recovered for breach or delay under a contract do not, by themselves, constitute consideration for an agreement to tolerate an act; where the contract does not create an independent obligation to tolerate the breach for consideration, such recovery cannot be treated as a taxable declared service. [Paras 6, 7]
The demand founded on treating the liquidated damages as consideration for declared service was unsustainable, and the impugned order was set aside.
Final Conclusion: The Tribunal allowed the appeal and held that the amount recovered as penalty or liquidated damages for delay in contractual performance could not be subjected to service tax as consideration for tolerating an act under declared service.
Issues: Whether the demand of service tax, interest and penalty could be sustained on four receipts relating to supply of materials, and whether those receipts were exempt or outside the scope of service tax.
Analysis: The appellant produced supply orders and VAT assessment material showing that the disputed receipts were for supply of stone ballast and stone dust. The receipts were found to be directly relatable to supply of goods and had been assessed by the State VAT authorities. On that basis, they were held to fall outside the levy of service tax. The remaining receipts were treated as exempt road-construction receipts, and the disputed supply-of-material component alone was held not liable to service tax.
Conclusion: The demand raised on the four supply-of-material transactions was set aside, along with the related interest and penalty to that extent, and relief was granted in favour of the assessee.
Exemption for construction of roads - receipts relating to supply of materials - Sale of goods vis-a-vis taxable service - VAT-assessed supply outside service tax - Demand of service tax, interest and penalty.
Sale of goods vis-a-vis taxable service - HELD THAT: - The Tribunal found from the supply orders and VAT assessment produced by the appellant that the disputed receipts were in fact towards supply of material. Once those transactions related to sale of goods and had been duly assessed to VAT, they fell outside the purview of service tax. The Tribunal also recorded that these documents had been made available before the Commissioner (Appeals), and therefore the contrary finding sustaining service tax on those four instances could not be upheld. [Paras 4]
The service tax demand, with corresponding interest and penalty, insofar as it related to the four instances of supply of material, was set aside.
Scope of appellate challenge - Uncontested demand - HELD THAT: - The Tribunal noted that the appellant had confined the prayer in appeal to the demand arising from the four instances of supply of material. It specifically recorded that the demand on legal fees reflected in the balance sheet had not been challenged in the appeal filed before it. Relief was therefore confined to the disputed material-supply demand alone. [Paras 4, 5]
The demand relating to legal fees under reverse charge remained undisturbed.
Final Conclusion: The appeal was allowed only to the extent prayed for. The Tribunal set aside the service tax demand sustained on the four transactions of supply of material, holding them to be outside service tax, while leaving the unchallenged demand on legal fees untouched.
Issues: Whether service tax was payable under reverse charge mechanism on the hiring of buses for transporting employees and school children, or whether the activity was exempt as transport of passengers in a contract carriage.
Analysis: The Tribunal examined the nature of the arrangement and the relevant exemption notifications. It noted that the buses were engaged for transporting passengers on fixed routes for hire on a per-day basis, which answered to the statutory concept of a contract carriage under the Motor Vehicles Act, 1988. The Tribunal further held that the activity fell within the scope of the exemption for transport of passengers by contract carriage, and that the later amendment restricting the exemption to non-air-conditioned vehicles did not alter the position for the period in question. The Tribunal also relied on the earlier exemption framework and the retrospective validation granted by the Finance Act, 2011, read with the 2009 exemption and the TRU circular, to hold that no service tax was leviable on such transportation activity.
Conclusion: The demand of service tax and the consequential penalty could not be sustained, and the assessee succeeded on the issue.
Final Conclusion: The impugned order was set aside and the appeal was allowed.
Ratio Decidendi: Transportation of passengers in a contract carriage for non-tourism, non-conducted tour, non-charter and non-hire purposes falls within the statutory exemption framework and is not liable to service tax, including under reverse charge mechanism, for the period covered by the applicable notifications and retrospective validation.
Demand of service tax under reverse charge mechanism on buses hired for transportation of employees and school children - Benefit of Exemption for transport of passengers by contract carriage - Applicability of Reverse Charge Mechanism Notification No.30/2012. - HELD THAT: - The Tribunal followed its earlier decision in the appellant's own case [2025 (7) TMI 1713 - CESTAT NEW DELHI] and found no distinguishing fact warranting a different view. It accepted that the reverse charge notification operated only where the underlying service was taxable, whereas transportation of passengers by contract carriage, excluding tourism, conducted tour, charter or hire, stood covered by the exemption considered in the earlier order. Since the hired buses were used for transportation of employees and school-going children and not for the excluded purposes, the service itself was not taxable and the demand with consequential penalty could not survive. [Paras 7, 8]
The demand sustained in appeal was set aside and the appeal was allowed.
Final Conclusion: Following its earlier order in the appellant's own case, the Tribunal held that the disputed passenger transportation service was exempt and therefore no service tax was payable under reverse charge for the period in question. The impugned order was set aside and the appeal was allowed.
Issues: Whether licence fee or royalty paid for transfer of manufacturing rights and technology in relation to aircraft engines was taxable as Intellectual Property Rights Service under the Finance Act, 1994.
Analysis: The Tribunal held that the dispute was already settled in the appellant's own case. It noted that, for taxability under the relevant service category, the intellectual property had to be one recognised under Indian law and capable of registration or protection in India. The transferred technology and manufacturing rights were treated as confidential know-how and undisclosed information, not as a registered intellectual property right exigible to service tax. The Tribunal therefore found no basis to sustain the demand, interest, or the penalties imposed under the impugned orders.
Conclusion: The royalty and licence fee were not taxable as Intellectual Property Rights Service, and the demand and penalties could not be sustained. The issue was decided in favour of the assessee.
Intellectual property service - Liability to service tax on licence fee or royalty paid for transfer of manufacturing rights and technology for manufacture of aircraft engines and machines. - HELD THAT: -The agreement between Rolls Royce Turbomeca Ltd. (RRTL) and the President of India represented by the Secretary to the Government of India, Department of Defense (Production) is with regard to proceed with British Aerospace concerning the supply and manufacture under licence in India of the Jaguar International Aircraft. As per the license, RRTL is willing to make available certain manufacturing rights and technology in respect of Adour RT 172-58(Mark 811) version of the said Adour engine. The Revenue alleging that the transfer of Technical Know-how, design, drawing of a foreign company for which royalty is paid by the appellant is liable to tax under the category of ‘Intellectual Property Rights Service’ as defined under Section 65(55a) of the Finance Act, 1994 demanded service tax on the same. This issue is no longer res integra in as much as it stands settled in the appellant’s own case vide Hindustan Aeronautics Ltd. vs. Commissioner of Central Excise, Customs and Service Tax, Bhubaneswar-I[2024 (4) TMI 726 - CESTAT KOLKATA].
This Final Order of the Tribunal was also affirmed by Hon’ble Supreme Court vide Commissioner of Central Excise Versus Hindustan Aeronautics Ltd.[2025 (2) TMI 1797 - SC ORDER] as the department’s appeal was dismissed on account of delay.
The demand of service tax, interest and penalties founded on classification of the payment as intellectual property service was unsustainable, and the impugned orders were set aside.
Final Conclusion: Following the earlier decision in the assessee's own case on the scope of intellectual property service, the Tribunal held that the royalty or licence fee paid for transfer of technology and manufacturing rights was not taxable under that category. The impugned orders were therefore set aside and the appeals were allowed with consequential relief.
Issues: (i) Whether, after remand, the adjudicating authority complied with the Tribunal's direction by verifying only the lorry receipts in the name of the appellant and permitting inspection of the originals; (ii) whether clandestine manufacture and removal of Gutka could be sustained merely on the basis of receipts of one raw material and a theoretical consumption formula; and (iii) whether the penalties under section 11AC of the Central Excise Act, 1944 and rule 26 of the Central Excise Rules, 2002 were sustainable.
Issue (i): Whether, after remand, the adjudicating authority complied with the Tribunal's direction by verifying only the lorry receipts in the name of the appellant and permitting inspection of the originals.
Analysis: The remand was confined to adjudication of the lorry receipts standing in the appellant's name. The adjudicating authority was required to verify those receipts and determine the duty, but instead relied on re-quantification by the investigating agency. The request for inspection of the originals could not be rejected on the ground of delay, particularly when only photocopies had been supplied as relied upon documents and the receipts were not recovered from the appellant's premises.
Conclusion: The remand directions were not properly implemented, and the refusal to permit inspection of the original lorry receipts was unjustified.
Issue (ii): Whether clandestine manufacture and removal of Gutka could be sustained merely on the basis of receipts of one raw material and a theoretical consumption formula.
Analysis: Clandestine manufacture and removal require positive and corroborative evidence. Receipt of one raw material, without evidence of the required quantities of other essential raw materials and without proper evidentiary verification, does not conclusively prove manufacture and clearance of the finished product. A mathematical or hypothetical formula based only on one input could not substitute for proof of clandestine activity.
Conclusion: The finding of clandestine manufacture and the resulting duty demand were unsustainable.
Issue (iii): Whether the penalties under section 11AC of the Central Excise Act, 1944 and rule 26 of the Central Excise Rules, 2002 were sustainable.
Analysis: Penalty under section 11AC depends on a sustainable duty demand for short levy or non-levy. Once the duty demand failed, the penalty could not survive. Rule 26 penalty also could not be sustained because the goods were not held liable to confiscation.
Conclusion: Both penalties were unsustainable.
Final Conclusion: The impugned order was set aside and the connected appeals succeeded, with all duty and penalty demands falling.
Ratio Decidendi: Clandestine manufacture and removal in excise matters must be proved by positive corroborative evidence, and a demand cannot rest solely on receipt of a single raw material or on a theoretical consumption formula; penalties based on such an unsustainable demand cannot survive.
Demand of duty under the proviso to section 11A - Non-compliance with remand directions - refusal to permit inspection of the original lorry receipts -Inspection of relied upon documents - clandestine manufacture and removal of Scented Tobacco - Proof by receipt of one raw material - Penalty under section 11AC - Penalty under rule 26 - Corroborative Evidence - Burden of Proof Beyond Doubt - Benefit of Doubt - Extended Period of Limitation - Penalty for Short Levy - Penalty for Dealing with Confiscable Goods.
Non-compliance with remand directions - Inspection of relied upon documents - HELD THAT: - The remand required the adjudicating authority to verify all the lorry receipts and then adjudicate only those found to be in the name of the appellant. The appellant's request to inspect the original six lorry receipts could not be rejected merely on the ground that it would delay the proceedings, particularly when only photostat copies had been supplied and the receipts were not recovered from the appellant's premises. The adjudicating authority also failed to undertake the verification directed by the Tribunal and instead relied upon re-quantification furnished by DGGI without itself examining the evidence. [Paras 21, 22, 23, 24]
The demand could not be sustained as the adjudicating authority failed to verify the lorry receipts as directed and wrongly denied inspection of the originals.
Clandestine manufacture - Proof by receipt of one raw material - HELD THAT: - The Tribunal held that when clandestine manufacture of Gutka was alleged, it was necessary to examine the appellant's contention that production could not be worked out only from scented tobacco and kimam without evidence regarding receipt of the required quantities of other raw materials and packing material. Relying on Commissioner of Central Excise vs. Brims Products, and referring to M/s Dhariwal Industries Ltd. vs. C.C.E. & S.T. Vadodara-I and Others [2019 (10) TMI 849 - CESTAT AHMEDABAD], the Tribunal reiterated that receipt of one raw material does not conclusively establish clandestine manufacture and removal of the finished product. The Commissioner's finding based only on scented tobacco consumption was therefore unsustainable. [Paras 25, 26, 27, 28, 29]
The finding of clandestine manufacture and the consequential duty demand were set aside.
Penalty under section 11AC - Penalty under rule 26 - HELD THAT: - Penalty under section 11AC is attracted in cases of short levy or non-levy of duty; once the duty demand itself could not be confirmed, no such penalty could survive against the appellant. Penalty under rule 26 requires dealing with excisable goods known or believed to be liable to confiscation. As the goods were not held liable to confiscation in the present case, penalty on Natwar Lal Sharda under rule 26 was also impermissible. [Paras 29, 30]
Both the section 11AC penalty on the appellant and the rule 26 penalty on Natwar Lal Sharda were set aside.
Final Conclusion: The Tribunal set aside the Commissioner's order and allowed both appeals. It held that the demand had been confirmed in breach of the remand directions and without proper verification of the original lorry receipts, and that clandestine manufacture could not be established solely from alleged receipt of scented tobacco; the consequential penalties also failed.
Issues: (i) Whether the suit claims were barred by limitation. (ii) Whether the plaintiff proved entitlement to the suit claims and whether the trial court's decree called for interference.
Issue (i): Whether the suit claims were barred by limitation.
Analysis: The last payments were made in August 2017 and the suits were instituted in May 2022. The Court accepted that the limitation period would ordinarily run for three years, but held that the period stood extended by the order passed by the Supreme Court during the Covid-19 pandemic. On that basis, the suits were treated as having been filed within time.
Conclusion: The suit claims were not barred by limitation.
Issue (ii): Whether the plaintiff proved entitlement to the suit claims and whether the trial court's decree called for interference.
Analysis: The Court relied on the invoices, ledger entries and the C-form declarations to hold that the transactions and supplies were established. It further held that once the transactions stood admitted, the burden shifted to the defendants to prove full discharge of liability. The defendants' reliance on an auditor's report and their plea of full settlement were held insufficient, particularly as the auditor was not examined. Applying the civil standard of proof, the Court found that the plaintiff had proved its claim on a preponderance of probability and that no ground existed to disturb the decree.
Conclusion: The plaintiff was entitled to the suit claims and the decree did not warrant interference.
Final Conclusion: The appellate challenge failed, and the decree in favour of the plaintiff was affirmed in substance.
Ratio Decidendi: In a civil money claim, once the plaintiff establishes the transactions by acceptable documentary evidence, the burden shifts to the defendant to prove discharge of liability, and a limitation plea cannot succeed where the filing is saved by a valid judicial extension of time.
Territorial jurisdiction -Entitlement to the suit claims - barred by limitation - Limitation during pandemic period - C form declarations - Proof of outstanding sale consideration - Burden of proof in civil recovery suit - Preponderance of probability.
Limitation during pandemic period - Extension of limitation - HELD THAT: - The Court found that the commercial transactions and the making of last payments were admitted. Even on the appellants' own ledger, the last payments were in July 2017, while according to the respondent they were on 29.08.2017. Proceeding on those admitted dates, the ordinary three-year period would have expired in 2020. Since the suits were instituted after the period covered by the Supreme Court's suo motu orders.[2022 (1) TMI 385 - SC ORDER] extending limitation during the pandemic, the Court held that the filing in 2022 stood protected by that extension and the suits were not time-barred. [Paras 15]
The plea of limitation was rejected and the suits were held to be maintainable.
Whether the judgment and decree passed by the trial Court in the respective suit are liable to be interfered with by this Court? - HELD THAT: - Admittedly, the respondent is a manufacturer of Tapioca Starch, Sago (Sabudhana) Modified Starches, which is a private limited company. The appellant(s) have been purchasing sago from 2016 and they were making payments as and when ‘C’ form declarations as required under the Central Sales Tax Act for the inter-State purchases made by them from the respondent. The respondent also maintained the accounts. Based on the books of accounts maintained by the respondent, the appellant(s) were having balance due of Rs. 25,08,218/- and Rs. 33,08,069/- respectively and when the respondent made a demand, the appellant(s) failed to clear the dues. Therefore, the respondent sent the legal notice under Ex.A4. Even then the appellant(s) did not make any payment. Therefore, the respondent laid the suit claims. The main contention of the appellant(s) is that though they purchased the goods from the respondent and also made the entire payments and there is no balance due, the respondent have created concocted documents for the purpose of claim, which are not genuine. According to the appellant(s), there was no due amount for the period between 30.07.2016 and 24.06.2017, as there was no transaction post 2017. All the transactions were old transactions in respect of which there were no dues.
C form declarations - Proof of outstanding sale consideration - Burden of proof in civil recovery suit - HELD THAT: - The Court treated the inter-State transactions as established from the respondent's ledger, invoices and, importantly, the C form declarations issued by the appellants in respect of the purchases. It held that once the appellants had signed and furnished the C forms acknowledging the transactions, the burden shifted to them to prove that the entire price had been paid and no balance remained. The appellants' reliance on the auditor's report was not accepted because the auditor was not examined, and mere production of that document was held insufficient. The absence of any reply to the legal notice was also noticed. Applying the civil standard of preponderance of probability, the Court concluded that the respondent had proved supply and outstanding balance, whereas the appellants had failed to establish discharge of liability. [Paras 17, 18]
The decree for recovery passed by the trial Court was affirmed and no interference was warranted in appeal.
Final Conclusion: The High Court upheld the decrees in both commercial suits. It held that the claims were saved by the pandemic-related extension of limitation and that the respondent had proved the transactions and outstanding dues through its accounts, invoices and the appellants' own C form declarations, while the appellants failed to prove full payment.
Issues: (i) Whether a complaint under Section 138 of the Negotiable Instruments Act, 1881 remained maintainable when the cheques were filled and presented after appointment of a provisional liquidator and the company's management had ceased to control its affairs. (ii) Whether dishonour of the cheques with the remark "Account Blocked" attracted liability under Section 138 of the Negotiable Instruments Act, 1881.
Issue (i): Whether a complaint under Section 138 of the Negotiable Instruments Act, 1881 remained maintainable when the cheques were filled and presented after appointment of a provisional liquidator and the company's management had ceased to control its affairs.
Analysis: On appointment of a provisional liquidator under the Companies Act, 1956, the company's property comes under the custody and control of the liquidator and the erstwhile board of directors becomes functus officio. The authority to deal with the company's assets and instruments thereafter vests in the liquidator, and cheques issued or presented without such authority cannot sustain criminal liability under Section 138. Since the cheques in question were filled and presented after the winding-up order and after the petitioner had knowledge of the changed legal status, the directors were no longer in control of the company's banking operations.
Conclusion: The complaint was not maintainable on these facts, and the dismissal of the complaint and revision was correct.
Issue (ii): Whether dishonour of the cheques with the remark "Account Blocked" attracted liability under Section 138 of the Negotiable Instruments Act, 1881.
Analysis: Section 138 is attracted only when dishonour is referable to insufficiency of funds or an equivalent statutory condition. Where the account is blocked because of liquidation proceedings and the drawer has no authority or control over it, the dishonour is caused by a circumstance beyond the drawer's control and not by want of funds. In such a situation, the essential ingredient of the offence is not established.
Conclusion: Dishonour for "Account Blocked" did not constitute the offence under Section 138 on the facts of the case.
Final Conclusion: The criminal petition failed, as the impugned orders rightly held that the prosecution under Section 138 could not proceed in the changed liquidation circumstances and the dishonour reason did not satisfy the statutory ingredients.
Ratio Decidendi: A cheque dishonoured after the company has come under provisional liquidation, and returned for "Account Blocked" due to loss of control over the account, does not satisfy the essential ingredients of Section 138 of the Negotiable Instruments Act, 1881.
Negotiable Instruments Act - Dishonour of cheques - Account Blocked - Effect of appointment of Provisional Liquidator on cheque liability - Maintainability of complaint under Section 138 - Corporate Control and Management - Authority to issue and present cheques - Liability of erstwhile directors.
Maintainability of complaint under Section 138 - Provisional liquidation - Authority to issue and present cheques - Liability of erstwhile directors - HELD THAT: - The Court held that upon appointment of the Official Liquidator as Provisional Liquidator, the company does not cease to exist, but control of its affairs shifts to the Provisional Liquidator and the Board of Directors becomes functus officio. Thereafter, business operations and dealings on behalf of the company can be undertaken only under the supervision and authority of the Provisional Liquidator. Since the impugned cheques were presented long after the order appointing the Provisional Liquidator, and were neither issued at his instance nor by him, they could not be treated as valid cheques for presentment on behalf of the company. The earlier undertakings authorising filling up of blank cheques could not continue to operate after the company's legal status underwent this change, and the erstwhile management could not bind the company thereafter. [Paras 35, 36, 40, 41, 43]
The complaint under Section 138 was rightly held to be not maintainable against the company and its erstwhile directors in respect of cheques presented after appointment of the Provisional Liquidator.
Whether Dishonour of Cheques due to Account Closed, would Constitute an Offence Under Section 138 N.I. Act. -HELD THAT: - To constitute an offence under Section 138 N.I. Act, mere issuance of a cheque is not sufficient; it becomes punishable only when the cheque is dishonoured for the reason insufficiency of funds. Likewise, merely showing that the holder of an account with the particular bank would also not sufficient to show that it is being maintained by the account holder, unless he has the authority and control over the said account. If the holder is deprived of his authority and control over the bank account, it cannot be said that the account was being maintained by him. It was thus held that the term “Account Blocked” for the reasons not attributable to the account holder would not bring the case under Section 138 N.I. Act.
This aspect was specifically discussed in Rajesh Meena vs. State of Haryana & others [2019 (7) TMI 1617 - PUNJAB AND HARYANA HIGH COURT], wherein it was noted that the expression “account maintained by him" as appearing in Section 138 N.I. Act, carries great significance. The Oxford dictionary meaning of “maintain” is an act of making the state or situation continue. Therefore, the expression “account maintained by him” cannot be construed narrowly to mean that if the account belongs to the accused, the necessary ingredient would be complete. This expression “account maintained by him” must necessarily include that the said account is not only alive and operative, but the account holder is capable of executing a command to govern the financial transactions which include the clearance of cheques etc. The authority and control of the account holder upon the account must exist on the effective date i.e. when the cheque becomes valid for presentation in the bank.
In the present case as well, the cheques were filled up on 24.01.2017 and were dishonoured on 27.01.2017 with remarks of “Account Blocked”. The dishonour clearly occurred not due to insufficiency of funds but due to statutory prohibition on payments during winding-up proceedings and appointment of OL. This circumstance falls squarely outside the ambit of Section 138, as the essential ingredient of dishonour due to inadequate funds remains unestablished. Thus, the necessary ingredient to bring home the offence under Section 138 N.I. has not been proved.
To conclude, the dishonour of the cheques on the ground of “Account Blocked”, constitutes a fundamental defect that precludes liability under Section 138 N.I. Act. When a cheque is dishonoured due to “Account Blocked” rather than insufficiency of funds, it falls outside the statutory framework of Section 138. An account blocked by the Bank due to winding up/liquidation proceedings represents a handicap beyond the drawer’s control and it cannot be said that he is maintaining the Account. Therefore, the offence under Section 138 N.I. Act, would not be made out.
Dishonour for the reason "Account Blocked" in the circumstances of liquidation proceedings did not satisfy the statutory ingredients of Section 138.
Final Conclusion: The petition was dismissed. The Court upheld the dismissal of the complaint and the revision petition, holding that the cheques presented after appointment of the Provisional Liquidator were not enforceable under Section 138, and that dishonour on the ground of "Account Blocked" did not satisfy the statutory requirement of dishonour for insufficiency of funds.
TaxTMI 