TMI Tax Updates e-Newsletter
May 14,2026

Summary order. The Special Leave Petitions were disposed of as withdrawn, with liberty to the petitioners to file a review petition before the High Court.

Summary order. The civil appeal was dismissed, the Court finding no error in the order passed by the Tribunal, and pending applications, if any, were disposed of.

Refund rejection - Opportunity of hearing - Violation of statutory procedure

Refund rejection - Opportunity of hearing - Violation of statutory procedure - Rejection of the refund application without considering the petitioner's request for personal hearing and without fixing a date of hearing was contrary to the requirement of hearing before passing an order of rejection. - HELD THAT: - The Court found it undisputed that, in reply to the show cause notice, the petitioner had specifically sought a personal hearing through virtual mode. Despite this request, the department proceeded to reject the refund claim without considering that request and without fixing any date for hearing. Since the Rules require grant of an opportunity of hearing before a refund claim is rejected, the impugned order suffered from clear violation of the prescribed procedure. [Paras 4, 5]

The impugned refund rejection order was quashed and the matter was remitted to the competent authority for fresh decision in accordance with law.

Final Conclusion: The writ petition was allowed to the extent that the refund rejection order was set aside for breach of the mandatory opportunity of hearing, and the matter was remanded for reconsideration in accordance with law.

Interest on delayed GST payment - Net cash liability

Interest on delayed GST payment - Net cash liability - Electronic cash ledger - Interest for delayed payment of GST was liable to be computed only on that portion of tax paid through the electronic cash ledger in view of the retrospective amendment to the proviso to section 50(1) of the Act of 2017. - HELD THAT: - The Court held that, in view of the amendment substituted in the proviso to section 50(1) with deemed effect from 1st July, 2017, interest on delayed GST payment is payable only on the portion of tax paid by debiting the electronic cash ledger. Since the impugned demand had to be examined in the light of that amended legal position, the matter required fresh consideration by the authorities after giving the petitioner an opportunity of hearing. [Paras 6]

The demand was directed to be reconsidered afresh in accordance with the amended section 50, on the basis that interest is payable only on the net cash liability.

Final Conclusion: The petition was disposed of by remitting the matter to the competent authorities for fresh decision after hearing the petitioner and applying the amended proviso to section 50(1), under which interest on delayed GST is payable only on the cash portion of the tax liability.

Release of confiscated goods - Vesting of title on confiscation - Distinction between detention and confiscation proceedings

Release of confiscated goods - Vesting of title on confiscation - Distinction between detention and confiscation proceedings - The interim orders directing release on deposit of part of the demand and bank guarantee in writ petitions challenging confiscation orders under Section 130 did not require modification on the basis of orders passed in other matters arising out of detention proceedings under Section 129. - HELD THAT: - The Court held that the cases relied on by the appellants were not identical, because those matters concerned detention and notice proceedings falling under Section 129, whereas the present writ petitions challenged confiscation orders passed under Section 130. On a conjoint reading of Sections 129 and 130, and following the Co-ordinate Bench view in W.A.No.1232/2025 c/w. W.A.No.1212/2025 & other matters, the Court held that once an order of confiscation is passed under Section 130, title to the goods and conveyance vests in the Government and the release mechanism available under Section 129 ceases to operate. The principle applied was that after confiscation under Section 130, the matter is governed exclusively by that provision, and interim release terms adopted in detention cases cannot be imported into confiscation cases. [Paras 11, 12]

The refusal to modify the interim orders was upheld, and the writ appeals were dismissed.

Final Conclusion: The Court held that the appellants could not seek parity with interim orders passed in detention matters under Section 129, since the present cases arose from confiscation orders under Section 130. As the interim conditions imposed by the learned Single Judge were in accordance with law, both writ appeals were dismissed.

Statutory pre-deposit - Adjustment of payment made under protest

Statutory pre-deposit - Payment under protest - Disputed tax liability - Amounts admittedly paid and collected under protest during the period of disputed liability were liable to be taken into account in determining compliance with the pre-deposit requirement under Section 107(6)(b) of the CGST Act, 2017. - HELD THAT: - The Court noted that the applicant had admittedly collected and paid TCS under protest from 1 April 2021, and that such payments related to the period forming part of the disputed tax liability, while the same had not been included in the quantification. Referring, prima facie, to the principle in VVF (India) Ltd. v. State of Maharashtra & Ors, the Court held that, in the absence of a statutory provision excluding amounts already deposited from consideration, such payment could not be ignored while examining the requirement of deposit of 10% of the disputed tax. The respondents' contention that such payment constituted admission of liability from April 2021 onwards was not accepted at this stage for the purpose of insisting upon a further deposit, the larger legal issue being left for consideration at the hearing of the petition on merits. [Paras 8, 9, 10, 11, 12]

The earlier condition requiring a further deposit of 10% was modified, the Court holding prima facie that the applicant had already satisfied the statutory pre-deposit requirement.

Final Conclusion: The Court modified its earlier interim order and held, prima facie, that the amount already paid under protest satisfied the statutory pre-deposit requirement under Section 107(6)(b) of the CGST Act, 2017. No further deposit was required for the petition to proceed to hearing on merits.

Condonation of delay in GST appeal - Writ jurisdiction against limitation bar - Cancellation of GST registration and right to livelihood

Condonation of delay in GST appeal - Writ jurisdiction against limitation bar - Cancellation of GST registration and right to livelihood - The High Court could condone the delay in filing the appeal against cancellation of GST registration, notwithstanding the absence of power in the Appellate Authority to condone delay beyond the statutory limit. - HELD THAT: - The Court held that, though the Appellate Authority is bound by the limitation scheme under Section 107 and cannot travel beyond the statutory period, the petitioner's inability to file the appeal within time was shown to be due to circumstances beyond control. The Court followed its consistent earlier view that, in exercise of writ jurisdiction, it may direct consideration of the appeal on merits where refusal would cause grave injury and prejudice. It further noticed that cancellation of GST registration affects the assessee's ability to carry on business and earn livelihood, and that denial of a merits adjudication in such circumstances would defeat the facilitative object of the GST regime and impose disproportionate hardship. [Paras 6, 7, 8, 9, 10]

Delay of 301 days in filing the appeal was condoned, the impugned appellate order rejecting the appeal as time-barred was set aside, and the Appellate Authority was directed to entertain and decide the appeal on merits.

Final Conclusion: The writ petition was allowed to the extent of condoning the delay in filing the appeal against cancellation of GST registration. The appellate order rejecting the appeal on limitation was set aside and the appeal was directed to be heard on merits.

Special statute and general penal law - GST evasion - Bail

Special statute and general penal law - Without prejudice clause - Offences under GST law and penal law - The GST enactment did not exclude invocation of the general penal provisions in relation to the alleged acts of fake firms, fictitious invoices and wrongful availment of input tax credit. - HELD THAT: - The Court held that the contention that the allegations were confined to offences under the GST law could not be accepted. Relying on the binding Division Bench decision of the same Court, it found that the statutory provisions of the U.P. GST law preserve the operation of other penal laws and do not bar registration of an FIR for offences punishable under the general penal law, even if prosecution may also lie under the GST enactment. The Court further held that the decision cited by the applicants did not govern the case in view of the express wording of the GST provisions and that the decision of another High Court had only persuasive value. [Paras 11, 12]

The plea that prosecution under the Bharatiya Nyaya Sanhita was impermissible because the field was occupied exclusively by the GST law was rejected.

Prima facie involvement - Bail refusal - The applicants were not entitled to bail in view of the prima facie material collected during investigation. - HELD THAT: - The Court found prima facie material showing involvement of the applicants in creation of a fictitious firm, generation of false e-way bills through another bogus concern, and evasion of tax without actual movement of goods. On that assessment, the Court was not persuaded to extend the benefit of bail at that stage. [Paras 13, 14]

Bail was refused.

Final Conclusion: The Court held that the GST law did not bar prosecution under the general penal law in the facts alleged and, finding prima facie material against the applicants, declined to release them on bail.

Alternative statutory remedy - Maintainability of writ petition - Limitation for statutory appeal - Communication of adjudication order

Alternative statutory remedy - Maintainability of writ petition - Limitation for statutory appeal - The writ petition challenging the ex parte adjudication order was not entertained in view of the statutory appellate remedy, with liberty to the petitioner to file an appeal and raise the issue of limitation as well as the challenge to the ex parte order before the appellate authority. - HELD THAT: - The Court held that the adjudication order was appealable under the statutory appellate provision and that, in taxation matters, such remedy should not be lightly bypassed in writ jurisdiction. Adopting the view taken in the earlier similar matter, the Court observed that limitation for filing appeal is to be computed from the date of communication of the order sought to be challenged, and that the appellate authority must consider that issue in exercise of its quasi-judicial powers. The Court further left it open to the petitioner to urge before the appellate authority all grounds against the ex parte adjudication order on merits. [Paras 3, 4]

Interference in writ jurisdiction was declined and the petitioner was left to pursue the statutory appeal, where both limitation and merits would remain open for consideration.

Final Conclusion: The writ petition was disposed of on the same terms as the earlier similar decision, without examining the challenge on merits. The petitioner was left to avail the statutory appeal, with the questions of limitation and the ex parte nature of the adjudication order remaining open before the appellate authority.

Classification of supply of food under contractual arrangements - Restaurant service - Residual food and beverage services

Supply of food as supply of service - Contract food service - Restaurant service - Residual entry - The appellant's supply of food to corporate clients under contractual arrangements was not classifiable as restaurant service taxable at 5%, but was classifiable as supply of service under SAC 996337 falling under the residual entry for food and beverage services taxable at 18%. - HELD THAT: - The Appellate Authority held that, on the terms of the agreements with clients and kitchens, the appellant was not a mere aggregator of packed food, but was extensively involved in menu finalisation, quality and hygiene oversight, arrangement of delivery, and, under the service agreement, deployment of service personnel for serving. It held that para 6(b) of Schedule II treats supply of food, by way of or as part of any service or in any manner whatsoever, as a supply of service. The activity was found not to answer the description of restaurant service, since the appellant had no restaurant, eating joint, mess or canteen premises of its own and had itself described its business as an aggregator or facilitator, nor did it fall within outdoor catering or hotel accommodation. The supply of food to corporates on an ongoing contractual basis at industrial or commercial locations was therefore held covered by tariff heading 996337, and since it did not fit entries 7(i) to 7(v) of Notification No. 11/2017-Central Tax (Rate), it fell under entry 7(vi), the residual entry, attracting 18% GST. The comparison sought to be drawn with electronic commerce operators was rejected because the appellant had not claimed to operate any digital platform through which clients placed orders. [Paras 5]

The ruling classifying the appellant's activity as service under heading 996337 and taxable under entry 7(vi) at 18% was affirmed.

Final Conclusion: The Appellate Authority upheld the advance ruling and dismissed the appeal. It held that the appellant's contractual supply of food to corporates is a supply of service classifiable under heading 996337 and taxable under the residual entry at 18%, and not as restaurant service.

Substance over form in classification of supply - Goods Transport Agency service - Courier and logistics fulfilment service - Recipient of service - Exemption under serial No. 21A

Goods Transport Agency service - Courier and logistics fulfilment service - Substance over form in classification of supply - Consignment note - The impugned activity was held not to be classifiable as Goods Transport Agency service but as taxable courier/logistics/fulfilment service. - HELD THAT: - The Appellate Authority held that classification could not rest merely on contractual description, separate recovery of "GT charges", or issuance of a document styled as a consignment note. It examined the commercial substance of the arrangement and found that the end-customer purchases goods on the e-commerce platform for assured doorstep delivery, does not identify or appoint the transporter, does not negotiate freight, and exercises no control over the mode, route or manner of movement. The activity undertaken by the respondent involved hub-based collection, sorting, transshipment, tracking and last-mile doorstep delivery, which were found to bear the characteristics of organised courier/logistics operations rather than conventional road transport by a GTA. The Authority further noted that the respondent had not denied use of two-wheelers or electric two- or three-wheelers in the last-mile segment, and held that mere issuance of a consignment note was not decisive where the surrounding facts did not disclose a genuine GTA transaction in commercial substance. [Paras 63, 70, 71, 72, 73]

The impugned activity was held to be properly classifiable as taxable courier/logistics/fulfilment service and not as exempt GTA service.

Recipient of service - Exemption under serial No. 21A - Privity of contract - The end-customer was held not to be the recipient of an independent GTA service and, consequently, exemption under serial No. 21A was denied. - HELD THAT: - The Appellate Authority held that the respondent's claim of exemption depended on showing a legally sustainable independent supply of transportation service by the respondent to the end-customer. On examining the Buyer Terms of Use, it found only a generic reference to a "Transporter" facilitated by the platform, without certainty of the contracting party's identity, and held that such terms did not establish a concluded independent contract of carriage between the end-customer and the respondent. In the absence of a legally established independent transportation contract, the mere fact that an amount described as transportation charges was recovered from the customer could not make the customer the recipient of GTA service under section 2(93). The Authority therefore treated the supposed post-hub movement on account of the customer as a contractual fiction and concluded that the exemption meant for GTA service to unregistered recipients was unavailable. [Paras 67, 68, 69, 72, 73]

Since no independent GTA service to the end-customer was established, the end-customer could not be treated as the recipient of such service and exemption under serial No. 21A was held to be unavailable.

Final Conclusion: The appeal was entertained after condoning the delay, and the advance ruling in favour of the respondent was not accepted on merits. The impugned activity was held not to be an exempt GTA service to unregistered end-customers, but a taxable courier/logistics/fulfilment service liable to GST at the applicable rate.

Validity of reassessment for want of sanction - Invalid approval u/s 151 - AY 2016-2017 - sanction obtained from the wrong authority - delay filling SLP

HC [2023 (10) TMI 1599 - BOMBAY HIGH COURT] held that for AY 2016-2017 sanction was required u/s 151(ii) and not u/s 151(i), thus the sanction relied upon was invalid.

HELD THAT:- There is a gross delay of 651 days in filing the Special Leave Petition which has not been satisfactorily explained by the petitioner.

Even otherwise, we find no good ground to interfere with the impugned order passed by the High Court. Special Leave Petition is, therefore, dismissed on the ground of delay as well as merits.

Tax liabilities, assessed and unassessed under the Income Tax Act, 1961 for the period prior to the approval of the Resolution Plan - Extinguishment of pre-CIRP statutory dues - Binding effect of approved resolution plan - Clean slate principle

HELD THAT: - The Court found that the approved resolution plan expressly provided that all dues under the Income-tax Act for any period prior to the effective date, whether assessed or unassessed, and all pending assessment or appellate proceedings for such period, would stand extinguished and terminated. The respondents had also been informed after approval of the plan that all pre-CIRP statutory dues stood permanently extinguished.

Applying Committee of Creditors of Essar Steel India Ltd. [2019 (11) TMI 731 - SUPREME COURT] and Ghanshyam Mishra and Sons Pvt. Ltd. [2021 (4) TMI 613 - SUPREME COURT] the Court held that once a resolution plan is approved under section 31 of the IBC, claims not forming part of the plan, including statutory dues, stand extinguished and no proceedings in respect of such claims can be continued. Since the assessment related to Assessment Year 2011-12, i.e. a period prior to plan approval, the subsequent reassessment order and demand notice were without legal basis, and the merits of the assessment became academic. [Paras 6, 9]

The impugned assessment order and demand notice for Assessment Year 2011-12 were quashed as the underlying tax dues stood extinguished by operation of the approved resolution plan.

Final Conclusion: The petition was allowed. The Court held that, upon approval of the resolution plan, all income-tax dues and proceedings relating to the pre-CIRP period stood extinguished, and consequently the reassessment order and demand notice for Assessment Year 2011-12 were unsustainable and were set aside.

Validity of Assessment Order - principles of natural justice violated - Non-consideration of reply in assessment proceedings - Faceless assessment

HELD THAT: - The Court held that no breach of natural justice arose merely because the notice required response within three days. Once notice had been issued to appear on the specified date, the assessee ought either to have filed its reply or sought adjournment; having failed to do so, the Assessing Officer was justified in closing the proceedings, particularly in faceless assessment where adjournments cannot be kept open indefinitely and time schedules are system driven. However, on examining the impugned assessment order, the Court found that the assessee's earlier reply already filed on 24.02.2026 had not been considered at all.

The determinative defect, therefore, was non-consideration of the existing reply, which vitiated the assessment order for breach of natural justice. On that basis, the order was quashed and the matter was remitted for fresh assessment after considering the said reply and granting personal hearing. [Paras 9, 10, 11, 12, 13]

The assessment order was quashed for failure to consider the reply already filed by the assessee, and the AO was directed to rehear the matter and pass a fresh order in accordance with law.

Final Conclusion: The writ petition was allowed. The assessment order was set aside because the assessee's reply already on record had not been considered, and the matter was remitted to the Assessing Officer for fresh decision after hearing the assessee.

Addition of commission income - reliance on Retracted search statements - Corroborative evidence - Reassessment beyond three years - Jurisdictional threshold u/s 149(1)(b) - Electronic evidence under section 65B - Commission expenditure treated as non-genuine

Retracted search statements - Third-party tally data - Uncorroborated commission addition - additions of alleged commission income in the hands of the individual assessee on the basis of retracted statements, third-party tally data and WhatsApp material - HELD THAT: - The Tribunal held that the Revenue case rested substantially on retracted statements recorded during search and on material seized from third-party premises. Neither the tally data nor the WhatsApp communications contained any direct evidence of quantification or actual payment of commission to the assessee. In the absence of any cash trail, bank entry, or other independent documentary material establishing receipt of commission, the additions were found to rest on suspicion and uncorroborated statements, which is legally insufficient. Applying the same reasoning, the Tribunal deleted the additions under both modes for A.Y. 2019-20 and directed that the identical merit grounds for A.Ys. 2020-21 to 2022-23 be decided mutatis mutandis. [Paras 15, 19, 22]

The commission additions in the individual assessee's case were deleted on merits, and the corresponding grounds for A.Ys. 2018-19 to 2022-23 were allowed.

Validity of Reassessment beyond three years - Jurisdictional threshold under section 149(1)(b) - Invalid notice under section 148 - HELD THAT: - The Tribunal held that, once notice under section 148 is issued beyond three years from the end of the relevant assessment year, compliance with section 149(1)(b) is a jurisdictional condition and not a mere procedural requirement. Since the additions proposed and made for A.Ys. 2018-19 and 2019-20 were far below the threshold of Rs. 50 lakhs, and no material was shown to indicate escapement meeting that limit, the very assumption of jurisdiction failed. The notices and consequent reassessment proceedings were therefore without authority of law. [Paras 16, 23]

The notices under section 148 and the consequent reassessment proceedings for A.Ys. 2018-19 and 2019-20 were quashed; the remaining legal grounds for A.Ys. 2020-21 to 2022-23 were left open.

Addition of alleged commission income computed at the rate of 2% under what the Revenue terms as "Modus-1" - "corroborative" material—namely, the WhatsApp chats and the parallel Tally data seized from third-party premises, as relied upon by the Revenue - HELD THAT: - The Tribunal noted that the tally data had been recovered from the premises of the Sunrise Group and that the impugned addition in the company's hands was principally linked through the statement of the director. It further recorded that the assessee had specifically contended that the same alleged cash sales had already been considered in the hands of the Sunrise Group entities, whose appeals were pending. The Tribunal also noted absence of a certificate under section 65B in respect of the WhatsApp material relied upon as corroboration. In these circumstances, the issue required factual verification as to whether the same transactions had already been brought to tax elsewhere, and the matter was restored for fresh decision in accordance with law. [Paras 24]

The addition on alleged unaccounted cash sales for Tegh Cables Pvt. Ltd. for A.Y. 2020-21 was set aside and remanded to the Assessing Officer for fresh adjudication after verification; the legal grounds were kept open.

Disallowance of commission expenditure treated as non-genuine - Lack of inquiry - HELD THAT: - The Tribunal found that the assessee had produced documentary material such as sales details, invoices, ledger accounts, bank statements and tax deduction details in support of the commission claim, and that no specific defect in those documents had been identified. The disallowance had been sustained mainly on the statement of an employee and WhatsApp chats, without examining the recipients of commission or independently verifying the services allegedly rendered. The absence of a formal written agreement was held not to be determinative by itself. Since factual verification of the actual nature and extent of services was necessary, the matter was restored to the Assessing Officer for fresh adjudication. [Paras 27]

The disallowance of commission expenditure for Tegh Cables Pvt. Ltd. for A.Y. 2022-23 was set aside and remanded to the Assessing Officer for de novo adjudication; the legal grounds were left open.

Final Conclusion: The individual assessee's appeals were allowed, the commission additions on merits having been deleted and the reassessment notices for A.Ys. 2018-19 and 2019-20 having been held invalid for want of compliance with section 149(1)(b). In the company's case, the challenge to mere initiation of penalty proceedings was rejected as premature, while the addition on alleged unaccounted cash sales for A.Y. 2020-21 and the disallowance of commission expenditure for A.Y. 2022-23 were remanded for fresh adjudication.

Deduction u/s 54F - Capital Gain Account Scheme compliance - assessee had not deposited the unutilized amount in the Capital Gain Account Scheme before the due date prescribed u/s 139(1) - Procedural non-compliance - elevating form over substance

HELD THAT: - The Tribunal found that the discrepancy regarding the flat number stood explained by authenticated documents from the developer, which the Revenue could not rebut. It further held that the disallowance had ultimately been sustained only on the technical ground of non-deposit in the Capital Gain Account Scheme.

Construing section 54F as a beneficial provision, Tribunal held that its substance lies in investment of the capital gain in acquisition or construction of a residential house within the prescribed period. Once that substantive requirement was admittedly fulfilled and the genuineness of the investment was not disputed, denial of exemption for non-compliance with the deposit requirement amounted to adopting a pedantic and hyper-technical approach by elevating form over substance. [Paras 8, 9, 10, 11, 12]

The deduction under section 54F was held allowable in full, and the addition under the head capital gains was directed to be deleted.

Final Conclusion: The Tribunal allowed the appeal and held that exemption under section 54F could not be denied merely for failure to deposit the unutilized amount in the Capital Gain Account Scheme, since the entire capital gain had been invested in the residential house within the statutory period.

Addition of unexplained money - discharge of burden/onus cast under Sections 69 - non granting of Cross-examination of witness - denial of Principles of natural justice

HELD THAT: - The Tribunal held that the addition was primarily founded on the statement of a third party, but no opportunity of cross-examination was granted to the assessee despite specific request. Since the relied-upon statement was used without such opportunity, it could not be used against the assessee, constituting a violation of principles of natural justice.

Tribunal further noted that the person whose statement was relied upon was not a director in the lender company during the relevant assessment year. It also found that the assessee had furnished ITRs, financial statements, confirmations and bank statements, and that the loan together with interest had been repaid within the same financial year. Minor address discrepancies were held insufficient to displace the substantive documentary material. On these findings, the assessee was held to have discharged the burden cast upon it, and the addition based on an unverified third-party statement was unsustainable. [Paras 13, 14, 15, 16, 17]

The addition was deleted on merits.

Final Conclusion: The Tribunal allowed the assessee's appeal on merits and deleted the addition. In view of the deletion on merits, the other grounds, including the legal grounds relating to reopening, were treated as academic and were not adjudicated.

Penalty u/s 271D - Recording of satisfaction in assessment order -Jurisdiction to initiate penalty - returned income was accepted without any quantum addition

HELD THAT: - The Tribunal held that initiation of penalty was dependent on satisfaction arising from the assessment proceedings, and where the returned income was accepted and no quantum addition was made, no occasion arose in the assessment order to record satisfaction for penalty under section 271D. In such circumstances, the Act did not permit the Assessing Officer to separately issue a show-cause notice and thereafter sustain a penalty order.

Relying on CIT, Panchkula Vs. Jai Laxmi Rice Mills Ambala City [2015 (11) TMI 1453 - SUPREME COURT] and Bhowmick Raj Singh [2024 (2) TMI 218 - ITAT RAIPUR] the Tribunal held that absence of recorded satisfaction in the assessment order was fatal to the assumption of jurisdiction for penalty. [Paras 5, 9]

The penalty was held unsustainable in law and the assessee's appeal was allowed on this legal ground without examining the merits.

Final Conclusion: The Tribunal held that, in the absence of satisfaction recorded in the assessment order for initiating penalty under section 271D, the subsequent separate show-cause notice and penalty order could not be sustained. The assessee's appeal was accordingly allowed.

Assessment u/s 153A - Incriminating material in search assessment - Concluded assessments under section 153A - Prospective operation of section 45(5A) - Year of taxability under joint development agreement

Incriminating material in search assessment - Concluded assessments under section 153A - absence of incriminating material found during search - HELD THAT: - The Tribunal held that the documents relied upon by the Assessing Officer, namely the joint development agreements and occupancy certificates, had already been disclosed by the assessee in proceedings under section 131 before the date of search, and no fresh material was shown to have been unearthed during the search.

On the same factual matrix, the Coordinate Bench in the case of the assessee's wife [2025 (9) TMI 784 - ITAT BANGALORE] had already held that such material was not incriminating and that additions in concluded assessments were impermissible. As no distinguishing feature or change in facts was shown by the Revenue, the Tribunal followed that view and held that the additions made in the concluded search assessment years were unsustainable. [Paras 18, 19, 20]

The Revenue's appeals for Assessment Years 2017-18, 2018-19 and 2019-20 were dismissed.

Prospective operation of section 45(5A) - Year of taxability under joint development agreement - Transfer under section 2(47)(v) - HELD THAT: - The Tribunal held that section 45(5A) operates prospectively and applies only to specified agreements entered into after its commencement; it cannot be invoked for a joint development agreement executed earlier. Proceeding on the basis adopted in the impugned order, where the agreement was executed and possession was handed over in FY 2012-13, the transfer occurred in that year and the taxability had to be examined under the law then in force, not shifted to Assessment Year 2020-21 merely because the completion certificate was received in that year. The Tribunal further noted that the assessee's case arose from the same development agreement and same search as that of his wife, and the Coordinate Bench had already held on merits that no addition was sustainable for this year. The Revenue showed no infirmity in the reliance placed on that decision, and its reliance on the contrary view cited by it was not accepted in preference to the authorities followed by the Tribunal. [Paras 30, 31, 32, 33, 35]

The deletion of the capital gains addition for Assessment Year 2020-21 was upheld and the Revenue's appeal was dismissed.

Final Conclusion: The Tribunal dismissed all four appeals filed by the Revenue. It upheld that, for Assessment Years 2017-18 to 2019-20, no addition could be made in concluded search assessments without incriminating material, and for Assessment Year 2020-21, section 45(5A) could not be applied to tax capital gains arising from a joint development agreement executed prior to its commencement.

Exemption u/s 11 - charitable activity Section 2(15) - Protection of environment - commercial activity, use of ITR-6, TDS deduction, and filing under wrong provision

Exemption denied as entity engaged in advancing “object of general public utility”; and, therefore, its case is covered under the proviso read with clauses (1) and (2) thereto since it has been found to have been carried out commercial activities going by the specified 20% threshold of the total receipts - HELD THAT: - The Tribunal held that, on the assessee's stated objects, the case was covered by the fifth limb of section 2(15), namely protection of environment, and not by the last limb of advancement of any other object of general public utility. Since the proviso to section 2(15) and the 20% threshold are attracted only in cases falling under the general public utility limb, the Commissioner's approach in treating the assessee as a general public utility entity and in denying registration on the footing of commercial receipts was legally erroneous. [Paras 14]

The finding that the assessee was hit by the proviso to section 2(15) and by the 20% threshold was reversed.

TDS deduction u/s 194JB - Return filing in ITR-6 - Technical defect in application - assessee had applied for registration under a wrong proviso - HELD THAT: - Hon’ble jurisdictional high court in CIT (E) v. Aroh Foundation [2025 (4) TMI 413 - SC ORDER (LB)] has further settled the issue in the assessee’s favour and against the department that such an action deducting TDS on the deductor’s part could not adversely affect the deductee/trust’s exemption claim under section 11 of the Act.

The Tribunal held that deduction of tax at source on receipts could not, by itself, prejudice the assessee's exemption claim. It further found that filing returns in ITR-6 for the relevant years was explainable because the assessee was not registered on the date of such filing. As regards the objection that the application had been made under a wrong limb, the Tribunal treated it as a bona fide technical mistake which could not justify outright rejection, and directed verification of relevant facts on that aspect. On the Tribunal's overall reasoning, these factors did not dislodge the assessee's entitlement to registration. [Paras 15, 16]

The assessee's claim for section 12A registration was accepted, subject to verification of relevant facts regarding the technical objection and subject to just exceptions.

Final Conclusion: The Tribunal held that the assessee's objects were covered by protection of environment under section 2(15), and not by the residuary head of general public utility, making the Commissioner's reliance on the proviso and the 20% threshold unsustainable. The appeal was allowed, with the assessee held entitled to section 12A registration subject to verification of relevant facts on the technical objection and subject to just exceptions.

Addition u/s 68 - initial onus to prove - Third-party verification u/s 133(6) - Related party disallowance u/s 40A(2)(b) - Interest on borrowed capital for working capital - Ad hoc disallowance of business expenditure - CSR expenditure disallowance

Addition u/s 68 on account of issue of redeemable non-convertible debentures -Creditworthiness of lender - Assessee is a payment-gateway company, owned by a foreign entity, in which SBI is also an equity holder - AO rejected the explanation chiefly because the Assessee did not produce the fund’s balance sheet and because the fund returned NIL income - HELD THAT: - The Tribunal found that the assessee had produced the lender's SEBI registration, PAN, address details, bank statements showing receipt and onward investment of funds, debenture and mortgage documents, confirmation, return of income and material showing the source of the source. Fund's nil income could not by itself negate creditworthiness because such funds are treated as pass-through vehicles under the Act. Having regard to this material, the assessee had established identity, creditworthiness and genuineness, while the AO had made no independent enquiry to dislodge that evidence. Since the assessee had also stated that the fund's annual accounts were not in its possession and requested recourse to section 133(6), the Tribunal directed that, if the AO still wished to examine those accounts, he should call for and verify them himself and grant hearing before taking any adverse view. [Paras 22, 23, 24, 25, 26]

The section 68 issue was restored to the Assessing Officer only for limited verification through section 133(6), if he still considered the fund's annual accounts necessary; the assessee's grounds were allowed to that extent.

Related party disallowance u/s 40A(2)(b) - Excessive or unreasonable expenditure - Interest paid on the debentures disallowed u/s 40A(2)(b) - HELD THAT: - The Tribunal held that the lender was only a lender to the assessee and had no equity interest or beneficial interest in its profits. AO had not shown under which clause or nexus the lender could be treated as a concern covered by section 40A(2)(b). It also found that there was no reasoning for adopting 6% as the reasonable rate of interest in the facts of the case. On that basis, the statutory condition for invoking section 40A(2)(b) failed. [Paras 31, 32, 33, 34]

The disallowance of interest u/s 40A(2)(b) was directed to be deleted.

Interest on borrowed capital for working capital - Capital work-in-progress - Proportionate disallowance of interest u/s 36(1)(iii) - HELD THAT: - The Tribunal noted that the proviso to section 36(1)(iii) applies where capital is borrowed for acquisition of an asset and covers interest till the date of first use of such asset. On facts, it found that the borrowing of Rs. 120 crores was for working capital and the Revenue had not shown that the borrowed funds were used for acquisition of any capital asset. In the absence of that factual foundation, the proviso had no application. [Paras 37, 38]

The disallowance of proportionate interest on capital work-in-progress was directed to be deleted.

Ad hoc disallowance of business expenditure - ad hoc disallowance of 10% of the expenditure incurred by the assessee - HELD THAT: - The Tribunal observed that the Assessing Officer had examined the expenses and required confirmations, PAN, returns, vouchers, bills and agreements, but the disallowance was ultimately made on an ad hoc basis because all vouchers and bills were not furnished. It found that the AO had not specified the particular items for which the details were deficient, nor recorded any finding that identified expenses were not for business purposes. In those circumstances, a flat 10% disallowance was unsustainable, and only such expenditure as is found, on verification, not to have been incurred wholly and exclusively for business could be disallowed after hearing the assessee. [Paras 43]

The matter was restored to the AO for fresh verification of the expense details and a fresh decision in accordance with law; the ad hoc 10% disallowance was not sustained.

CSR expenditure disallowance - expenditure incurred by the assessee, but same was not disallowed in the computation of total income - HELD THAT: - The Tribunal found no infirmity in the orders of the lower authorities on this issue and upheld the disallowance. [Paras 44]

The disallowance of CSR expenditure was confirmed.

TDS credit -HELD THAT: - The Tribunal treated the remaining grounds as consequential and premature, except for the claim of TDS credit, which it directed to be verified. [Paras 45]

TDS credit was directed to be verified and allowed in accordance with law.

Final Conclusion: The appeal was partly allowed. The Tribunal deleted the disallowances under sections 40A(2)(b) and 36(1)(iii), restored the section 68 issue for limited third-party verification and the ad hoc expense disallowance for fresh examination, confirmed the CSR disallowance, and directed verification of the TDS credit claim.

Principle of mutuality - membership subscription fee received by the Assessee - Exemption of interest on tax free bonds - Powers of appellate authority to call for and examine evidence - Adjustment u/s 143(1) - Deduction under section 80G

Principle of mutuality - Membership subscription fee receipts - Membership fees received from the assessee's own members - HELD THAT: - The Tribunal noted that the controversy was a recurring one and that in earlier years the subscription received from members had consistently been held to be exempt on the principle of mutuality, while receipts from non-members had been offered to tax. As the parties fairly accepted that the facts for the year under appeal were identical, the Tribunal followed the earlier appellate and Tribunal orders, as also the jurisdictional High Court decision affirming that view, and held that the Commissioner (Appeals) had committed no error in treating the membership fees from members as exempt. [Paras 2, 3, 4]

The Revenue's challenge to exemption of membership fees from members failed.

Exemption of interest on tax free bonds - interest received from tax free bonds as exempt u/s 10(15)(iv)(h) -Powers of appellate authority to call for and examine evidence - HELD THAT: - The Tribunal found that the Commissioner (Appeals) had relied on the Central Government notifications covering the bonds for the purpose of the claimed exemption and had examined the relevant interest certificates produced in appellate proceedings. It further held that, since the original intimation had treated the interest as taxable without giving the assessee an opportunity, the Commissioner (Appeals) was entitled to exercise the statutory power of inquiry under section 250(4) and was under no obligation, in the circumstances, to obtain a remand report from the Assessing Officer. On that basis, the exemption allowed by the Commissioner (Appeals) was upheld. [Paras 5, 6]

The exemption of interest on tax free bonds was sustained and the objection regarding absence of remand report was rejected.

Deduction u/s 80G - Adjustment u/s 143(1) - HELD THAT: - The Tribunal recorded that the assessee had made the deduction claim in the return itself and had furnished the relevant particulars. The Central Processing Centre nevertheless disallowed the claim without giving any opportunity and without stating any reason for denying a deduction otherwise claimed on the face of the return. The Tribunal held that such a disallowance was contrary to the mandate of section 143(1), and therefore affirmed the deletion made by the Commissioner (Appeals). [Paras 7]

The deletion of the disallowance of deduction u/s 80G was upheld.

Final Conclusion: The Tribunal dismissed the Revenue's appeal. It upheld the exemption of membership fees received from members on the principle of mutuality, sustained the exemption of interest from tax free bonds, and affirmed deletion of the adjustment disallowing deduction under section 80G in processing under section 143(1).

Exclusive assessment jurisdiction after search - assessment u/s 147 v/s 153A -Validity of reassessment after initiation of search - Override of regular reassessment provisions in search cases

Whether reassessment notices issued after the search and the consequential assessments were without jurisdiction since the cases had already fallen within the statutory regime governing search assessments u/s 153A? - HELD THAT: - The Tribunal held that once a search under section 132 had been conducted prior to issuance of notices under section 148, the cases stood governed by the special assessment mechanism applicable to search cases. That provision operates with an overriding effect and requires the Assessing Officer to assess or reassess the six assessment years preceding the year of search under that special regime alone. Consequently, the Assessing Officer could not invoke the ordinary reassessment provisions thereafter.

Applying the principle recognised in Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] and State Bank of India [2013 (12) TMI 187 - ITAT MUMBAI] the Tribunal held that the assumption of jurisdiction under sections 147/148 after the search was contrary to the statutory scheme and rendered the consequential assessments a nullity in law. [Paras 6, 7, 8, 9]

The notices issued under section 148 and the consequential assessment orders passed under sections 147/143(3) in both appeals were quashed as invalid and without jurisdiction.

Final Conclusion: The Tribunal allowed both appeals and quashed the reassessment notices and consequential assessment orders, holding that after initiation of search the Assessing Officer could proceed only under the special search assessment provisions and not under the regular reassessment provisions.

Unexplained money u/s 69A -cash purchase of jewellery - Ownership of jewellery - WhatsApp chats as evidence - Deeming provision

HELD THAT: - The Tribunal held that the mere existence of WhatsApp chats was not sufficient to sustain the addition when the search did not yield any excess or unaccounted jewellery, no invoice or other corroborative material was found, and there was no evidence of actual payment.

It accepted that all jewellery and gold found stood reconciled and disclosed, and that there was no trace of the jewellery allegedly referred to in the chats. Since the addition had been made under a deeming provision, the basic requirement that the assessee be found to be the owner of unexplained money or jewellery was not established. In the absence of physical evidence or other material indicating ownership or possession, the provision was held inapplicable. Having deleted the addition on that ground, the Tribunal did not examine the separate objection regarding digital evidence. [Paras 11, 12, 15]

Final Conclusion: The Tribunal deleted the addition made on the basis of alleged cash jewellery purchases, holding that WhatsApp chats, without corroborative material showing ownership, possession or actual payment, could not justify an addition under the deeming provision. The same view was applied to the connected assessment years, while the other grounds not pressed were dismissed.

Alternate claim before appellate authority - Interest on borrowed capital for business

Alternate claim before appellate authority - Revised return - appellate authority competency to entertain the assessee's alternate claim for deduction of interest as business expenditure even though no revised return had been filed before the Assessing Officer - HELD THAT: - The Tribunal held that the restriction on making a fresh claim without a revised return operates only at the stage of assessment and does not curtail the powers of the appellate authorities. It accepted the view that the assessee had not raised a wholly new deduction claim but had sought allowance of the same interest expenditure under the correct head of income. Since admission of such claim in appeal is a legal matter and the underlying entitlement could be examined on the material already available, the objection founded on the absence of a revised return was rejected. [Paras 8, 11, 13]

The Revenue's objection based on non-filing of a revised return failed, and the admission of the alternate claim by the CIT(A) was upheld.

Interest on borrowed capital for business - allowable Business expenditure - HELD THAT: - Tribunal noted the categorical finding recorded by the CIT(A) that the loan had been utilized for the assessee's business and that the AO had found no infirmity in the borrowing itself. Revenue did not dislodge that factual finding before the Tribunal. Once the use of borrowed funds for business stood accepted, the interest paid thereon was held deductible against business income, and the earlier disallowance based on want of nexus with income from other sources could not survive. [Paras 7, 11, 13]

The deletion of the disallowance of interest expenditure for both years was sustained.

Final Conclusion: The Tribunal upheld the CIT(A)'s orders for Assessment Years 2017-18 and 2018-19, holding that the appellate authority could entertain the alternate claim and that the interest paid on funds used for business was deductible as business expenditure. The Revenue's appeals were dismissed.

Denial of approval u/s 80G - filling belated Form No. 10AB application

HELD THAT: - The Tribunal held that the assessee had been granted provisional registration under section 80G and that its application in Form 10AB for regular registration was filed on 11/11/2024, whereas the CBDT had extended the due date for such filing only up to 30.06.2024.

Though the delay was described as procedural, the Tribunal found that the statutory scheme read with the CBDT Circular clearly prescribed the time limit for filing Form 10AB, and on the admitted facts the application was beyond that limit. On that basis, the rejection of the application as barred by limitation was found to be in accordance with law. [Paras 14, 15, 16]

The rejection of the assessee's Form 10AB application for regular registration under section 80G on the ground of limitation was upheld.

Final Conclusion: The Tribunal dismissed the appeal and upheld the order rejecting the assessee's application in Form 10AB for regular registration under section 80G as barred by limitation.

Benami transaction - Definition of “benami transaction” u/s 2(9) - flats not existing or transferable - Property held by prior to the amendment by the Amending Act of 2016 -Provisional attachment of benami property.

Benami transaction - HELD THAT: - The Tribunal recorded that the appellant himself admitted that the consideration for the four flats was paid by him, while the agreements were registered in the names of other persons who had not paid for the flats. It further held that these facts were sufficient to attract the statutory concept of benami transaction, since the property stood in the names of benamidars, the payment came from the appellant, and the arrangement was for his future benefit, as also reflected from the later gift deeds executed in his favour. [Paras 8]

The transaction was held to be benami and the challenge on that ground was rejected.

Property held after the 2016 amendment - Prospective operation - Interpretation of benami transaction - HELD THAT: - The Tribunal held that, under Section 2(9)(A), the definition is not confined to cases where property is transferred to one person for consideration paid by another, but also extends to property held by a person where the consideration has been paid or provided by another. Proceeding on that interpretation, it held that even if the allotments originated before the amendment, the case was covered because the property continued to be held in the names of the benamidars on and after the coming into force of the amended law. The appellant's reliance on the earlier decision in Ganpati Dealcom Pvt. Ltd. [2024 (10) TMI 1120 - SC ORDER (LB)] did not assist him, particularly when the Tribunal followed its own reasoning in M/s Prism Scan Express Pvt. Ltd. [2024 (1) TMI 203 - APPELLATE TRIBUNAL FOR SAFEMA AT NEW DELHI] on the significance of the word held in the amended provision. [Paras 9, 10]

The plea that the amended provision could not apply to the transaction was rejected.

Existence of property - Allotment rights - Provisional attachment - HELD THAT: - The Tribunal held that the appellant could not deny the existence of the property when allotment letters had admittedly been issued, consideration had been paid, and the agreements stood registered in the names of the benamidars. On those admitted facts, it found no merit in the plea that the attachment was of a non-existent property. It further held that the absence of a transfer argument was immaterial because, on the Tribunal's interpretation of the amended definition, continued holding of the property by persons who had not paid the consideration was itself sufficient to attract the provision. [Paras 11, 12]

The objection to the validity of provisional attachment on the ground of non-existence of property or absence of transfer was rejected.

Final Conclusion: The Tribunal held that the admitted arrangement, under which the appellant paid the consideration while the flats were held in the names of third parties, fell within the definition of benami transaction. Since the property continued to be held after the 2016 amendment, the provisional attachment and its confirmation were upheld, and the appeal was dismissed.

Provisional release of seized conveyance under Customs Act - Special law prevailing over general criminal procedure - Jurisdiction of criminal court over property seized under Customs Act

Provisional release of seized conveyance under Customs Act - Special law prevailing over general criminal procedure - Jurisdiction of criminal court over property seized under Customs Act - Power to grant release of a vehicle seized under the Customs Act, 1962, lies under Section 110A with the competent customs authority and not with the criminal court under Section 497 of the BNSS. - HELD THAT: - The Court held that although criminal courts possess power in certain cases to order custody and disposal of property, the Customs Act, 1962 contains a specific statutory scheme governing seizure and provisional release of goods, documents and things seized under that Act. Since Section 110A expressly provides for release by the proper officer or adjudicating authority pending adjudication, recourse to the general provisions of the BNSS for release of a vehicle seized under the Customs Act is not warranted. Applying the principle that a special law prevails over the general criminal procedure, the Court found that the Additional Sessions Judge lacked jurisdiction to direct release of the seized truck. The reliance placed by the trial court on Sundarbhai Ambalal Desai v. State of Gujarat was held to be misplaced because that decision concerned custody and disposal of articles under the Code of Criminal Procedure and did not lay down that the general criminal procedure would override the Customs Act in relation to vehicles seized thereunder. [Paras 16, 18, 19]

The order directing release of the seized truck was set aside, with liberty to the owner to approach the appropriate authority under the Customs Act for redress and release on merits.

Final Conclusion: The High Court held that provisional release of a vehicle seized under the Customs Act must be sought before the competent authority under that Act, and not before the criminal court under the BNSS. The impugned release order was therefore set aside, while preserving the respondent's liberty to seek relief before the customs authority.

Hawala transactions - Mandatory procedure for admissibility of statements under section 138B - Admissibility of electronic evidence under section 138C - printouts and electronic material retrieved from the laptop - Transaction value rejection - Contemporaneous import data - Misdeclaration of description and thickness - imported PU leather fabric - evade payment of custom duty - Penalty for under-valuation and misdeclaration.

Whether the statements of Raj Kumar Anand recorded under section 108 of the Customs Act could be made the basis for rejection of the transaction value under rule 10 of the 1988 Valuation Rules? - HELD THAT: - Section 108 of the Customs Act deals with power to summon persons to give evidence and produce documents. It provides that any Gazetted Officer of customs shall have the power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry which such officer is making under the Customs Act.

The Tribunal held that statements recorded during inquiry become relevant in adjudication only after the maker is examined before the adjudicating authority, the authority forms an opinion that the statement should be admitted in evidence in the interests of justice, and the affected party is thereafter afforded cross-examination. Since that statutory procedure was not followed, the statements had no evidentiary relevance for proving the truth of their contents. The Commissioner was, therefore, not justified in relying on those statements to sustain the allegation of under-valuation or alleged remittance of differential value through hawala. [Paras 22, 25, 31, 32]

In Additional Director General (Adjudication) vs. Its My Name Pvt. Ltd. [2020 (6) TMI 72 - DELHI HIGH COURT], the Delhi High Court examined the provisions of sections 108 and 138B of the Customs Act. The department placed reliance upon the statements recorded under section 108 of the Customs Act. The Delhi High Court held that the procedure contemplated under section 138B(1)(b) has to be followed before the statements recorded under section 108 of the Customs Act can be considered as relevant.

In M/s. Drolia Electrosteel P. Ltd. vs. Commissioner, Customs, Central Excise & Service Tax, Raipur [2023 (11) TMI 10 - CESTAT NEW DELHI], a Division Bench of the Tribunal examined the provisions of section 9D of the Central Excise Act and after placing reliance upon the decision of the Punjab and Haryana High Court in Jindal Drugs Pvt. Ltd. vs. Union Of India [2016 (6) TMI 956 - PUNJAB & HARYANA HIGH COURT] observed that if the mandatory provisions of section 9D(1)(b) of the Central Excise Act are not followed, the statements cannot be used as evidence in proceedings under Central Excise Act.

The statements recorded under section 108 were inadmissible for the purpose for which they were relied upon and had to be excluded from consideration.

Admissibility of electronic evidence under section 138C - Retrieval of laptop data - Panchnama - HELD THAT: - The Tribunal found serious doubt regarding the seizure and handling of the laptop, as the show cause notice and the impugned order mentioned a different place of recovery from that recorded in the panchnama, and the laptop was not shown to have been sealed at the time of recovery. It further held that the documents were not retrieved in the presence of Raj Kumar Anand, and the Commissioner's inference that he had been given an opportunity to remain present was unsupported because no notice for such retrieval was brought on record. Apart from these factual defects, the statutory requirement under section 138C was also not complied with, as the necessary certificate for electronic records was not produced. The electronic material, therefore, lacked admissibility. [Paras 34, 35, 36, 37, 38]

The laptop printouts and retrieved documents were held unreliable and inadmissible.

Transaction value rejection - Contemporaneous import data - Misdeclaration of description and thickness - Penalty for under-valuation and misdeclaration - HELD THAT: - The Tribunal held that the charge of misdeclaration of thickness rested on the inadmissible statements and the unreliable laptop material, while the panchnamas did not record any physical measurement of thickness and the samples were not shown to have been tested through relied-upon laboratory reports. It also noticed that the consignments had been given out-of-charge after physical examination, and that the information obtained by the appellants from various ports showed examination of the goods before clearance. The Commissioner had discarded contemporaneous import data not on the ground of non-genuineness, lack of comparability, or absence of contemporaneity, but merely on speculation that the information sought under the Right to Information Act might have been selective; this, the Tribunal held, was not a valid basis, and if there were doubts the department could itself have obtained fuller data. In the absence of reliable evidence of extra consideration paid to the overseas suppliers, rejection of transaction value under rule 10 and re-determination under rules 5 and 6 could not be sustained. As the foundation of undervaluation and misdeclaration failed, the penalties imposed on the importers and on Raj Kumar Anand also failed. [Paras 40, 41, 42, 43, 44]

The value re-determination, confiscation-related findings, and penalties were unsustainable.

Final Conclusion: The Tribunal set aside the adjudication order holding that the case of under-valuation and misdeclaration had been founded on inadmissible statements and unreliable electronic material, while the contemporaneous import data had been wrongly discarded. Consequently, the re-determined value, duty demand, and penalties against all the appellants were unsustainable, and all six appeals were allowed.

Tariff classification of goods - integrated drive generator and starter generator imported for use with turboprop or turbofan engines - classifiable under CTH 8501 or under CTH 8511 - General Rules of Interpretation - HSN Explanatory Notes - Extended period of limitation - Self-assessment - Suppression of facts - Penalty on customs broker.

Tariff classification - Electric generators - HELD THAT: - The HSN Explanatory Notes to CTH 8501 also provides that the said heading does not cover the electrical generator with prime movers or generators (dynamos and alternators) used in conjunction with IC engines covered under CTH 8511 or for electrical lighting or signalling equipment’s of a kind used for cycles or motor vehicles covered under CTH 8512. The goods are not covered under CTH 8502 as it covers generating sets i.e. generators that come with prime movers. The goods that are imported by the appellant are without prime movers i.e. turboprop/turbofan engine. The goods are also not covered under CTH 8511 as this covers generators of a kind used in conjunction with spark ignition or compression ignition IC engines. The goods, as noticed above, are used in conjunction with turboprop/turbofan engines which are gas turbine engines and are different from spark-ignition or compression ignition IC engines. The Principal Commissioner has also in paragraph 25.9 observed that the goods are used in conjunction with turboprop/turbofan engine.

Rule 1 of the General Rules of Interpretation [GRI] provides that the goods should be classified in accordance with the terms of the heading of the relevant Section or Chapter Notes. CTH 8501 covers all electric generators, whereas CTH 8511 covers only those generators which are used in conjunctions with spark-ignition or compression ignition IC engines. Since the goods are not used in conjunctions with either spark-ignition or compression ignition IC engines they will be classifiable under CTH 8501 and not CTH 8511 by application of Rule I of GRI.

The Tribunal held that heading 8501 covers electric motors and generators, and the imported goods were undisputedly electrical generators. The exclusion from heading 8501 in favour of heading 8511 applies only where the generators are of a kind used in conjunction with spark-ignition or compression-ignition internal combustion engines. The goods in question were used with turboprop/turbofan engines, which are gas turbine engines and are distinct from spark-ignition and compression-ignition engines. Applying Rule 1 of the General Rules of Interpretation and the chapter scheme, the Tribunal held that the separate tariff treatment of gas turbines under heading 8411 reinforced that goods used with such engines could not be brought under heading 8511. It further held that, once reassessment was opened by the department, the appellant was entitled to claim the correct classification under heading 8501 even though some bills of entry had earlier mentioned heading 8502. [Paras 23, 24, 25, 26, 27]

The integrated drive generator was held classifiable under CTI 8501 62 00 and the starter generator under CTI 8501 32 20; the departmental classification under CTI 8511 50 00 and CTI 8511 40 00 was rejected.

Extended period of limitation - Misclassification - Penalty for suppression - HELD THAT: - The Tribunal held that the dispute was one of classification and not of misdescription of goods. A mere difference between the importer's classification and the department's view does not, by itself, justify invocation of the extended period. The finding that the importer had failed to self-assess correctly despite technical and legal support was held insufficient, since self-assessment by itself does not establish intent to evade duty. The Tribunal also noted that the appellant's classification had been found to be correct. In the absence of collusion, wilful misstatement or suppression, the extended period was not available and the statutory basis for penalty under section 114A also failed. [Paras 30, 31, 32, 33, 34]

The demand relatable to the extended period was held barred, and penalty under section 114A on the appellant was set aside.

Residuary penalty - Customs broker liability - HELD THAT: - The Tribunal held that section 117 is a residuary penal provision applicable only where a person contravenes the Act and no express penalty is otherwise provided. On the facts, the customs house agent's role was confined to making entries on the basis of documents and instructions supplied by the importer and facilitating filing of those documents. Since it had acted on the appellant's instructions, the alleged inconsistency in classification did not justify imposition of residuary penalty on it. [Paras 35, 36]

Penalty imposed on C.G. Logistics under section 117 was held unsustainable and was set aside.

Final Conclusion: The Tribunal held that the imported integrated drive generator and starter generator were correctly classifiable under heading 8501, not heading 8511. It further held that the extended period and the penalties imposed on the appellant and the customs broker were unsustainable. Accordingly, the impugned orders were set aside and all three appeals were allowed.

Tariff classification of bluetooth wireless headsets/headphones/earphones/earbuds/neck bands - Extended period of limitation - Penalty under section 114A

Tariff classification - Exemption notification eligibility - The imported bluetooth wireless headsets/headphones/earphones/earbuds/neck bands were held classifiable under CTI 8518 30 00, in line with the earlier Tribunal decision concerning identical goods. - HELD THAT: - The Tribunal recorded that the classification issue stood covered by its earlier decision in G-Mobile Devices Pvt. Ltd. vs Principal Commissioner of Customs, New Delhi, and that it was not disputed that the products involved there were the same as those imported in the present appeal. On that basis, the appeal was required to be decided on the same terms, resulting in acceptance of classification under CTI 8518 30 00 and consequent denial of the claimed exemption benefit. [Paras 4, 5, 6]

Classification under CTI 8518 30 00 was upheld and the demand for the normal period was sustained accordingly.

Extended period of limitation - Penalty under section 114A - Remand for quantification - The demand for the extended period and the penalty under section 114A were set aside, and the matter was remitted for determination of the demand falling within the normal period and the consequential interest. - HELD THAT: - Following the earlier Tribunal decision in G-Mobile Devices Pvt. Ltd. vs Principal Commissioner of Customs, New Delhi, the Tribunal accepted that in a classification dispute of this nature the extended period could not be invoked. Since the penalty under section 114A rested on the same basis as invocation of the extended period, that penalty also could not survive. The adjudicating authority was therefore required to determine what part of the demand fell within the normal period and to quantify the interest payable on the demand so confirmed. [Paras 5, 6]

The extended period demand and penalty under section 114A were set aside, with remand limited to segregation of the demand within the normal period and computation of interest under section 28AA.

Final Conclusion: The Tribunal followed its earlier decision on identical goods, upheld classification under CTI 8518 30 00, and sustained the demand only for the normal period of limitation. The demand for the extended period and the penalty under section 114A were set aside, and the matter was remitted only for segregation of the demand within limitation and computation of interest.

Principles of natural justice - Transaction value - Ad valorem export duty

Principles of natural justice - Relied upon documents - Remand - Non-supply of the relied upon laboratory material and failure to follow the prescribed procedure before rejecting the declared moisture content vitiated the assessment. - HELD THAT: - The Tribunal noted that the Commissioner (Appeals) had himself recorded that the assessing authority had not furnished the material relied upon for doubting the declared moisture content and had not followed the required procedure before rejecting it. Having accepted that the appellant was kept uninformed of the basis of assessment and that the principles of natural justice were breached, the matter could not validly be sustained on merits. The procedural defect went to the root of the assessment and required the matter to be reconsidered by the adjudicating authority. [Paras 6, 10, 11, 12]

The impugned order was held unsustainable for breach of natural justice and the matter was remanded to the adjudicating authority.

Transaction value - Ad valorem export duty - Moisture content variation - For export duty chargeable on ad valorem basis, moisture variation between load port and discharge port reports could not displace the transaction value in the absence of any valid reason to doubt the genuineness of the sale price. - HELD THAT: - The Tribunal held that Section 14 requires export goods to be valued on the transaction value, namely the price actually paid or payable, and such value cannot be rejected without valid and cogent reasons. In the present case, the full sale proceeds under the invoices had been realized, there was no allegation of relationship or flow back, and no material was shown to cast doubt on the genuineness of the transaction. Since the export duty during the relevant period was ad valorem, the duty was to be computed on value and not on quantity or composition; hence moisture and Fe content were not determinative for assessment where the transaction value itself was not in dispute. [Paras 7, 8, 9]

The Tribunal held that the transaction value was the proper basis for ad valorem export duty, subject to fresh adjudication in remand proceedings.

Final Conclusion: The Tribunal held that the assessment was vitiated by breach of natural justice since the relied upon material was not furnished before rejection of the declared moisture content. It further observed that, for ad valorem export duty, transaction value could not be discarded merely on moisture variation when the invoiced sale proceeds had been fully realized and the transaction value was not genuinely in doubt; accordingly, the impugned order was set aside and the matter remanded.

Pre-deposit compliance - Absolute confiscation of gold - Maintainability of appeal

Pre-deposit compliance - Absolute confiscation of gold - Maintainability of appeal - Value of gold absolutely confiscated in the impugned proceedings could be treated as sufficient compliance with the statutory pre-deposit requirement for maintaining the appeal. - HELD THAT: - The Tribunal held that, though post-amendment pre-deposit under section 129E is mandatory and no waiver jurisdiction exists with the appellate forum, the present case did not concern waiver but the nature of compliance. Since the seized gold had been absolutely confiscated and no option of redemption had been granted, the vesting of the goods in the Central Government was treated as tantamount to discharge of the duty element relatable to the value of the goods. The Tribunal further held that where gold seized on the allegation of smuggling continues to be retained and its confiscatory appropriation itself is under challenge, such retention stands on the same footing as deposit pending investigation. On that reasoning, the value of the absolutely confiscated gold was to be adjusted towards the extent of pre-deposit required under section 129E, and the appeal could not be rejected as non-maintainable for want of separate deposit. As the first appellate authority had dismissed the appeal only on that threshold objection and had not examined the merits, the order was set aside and the matter restored for decision on merits. [Paras 6, 7, 9]

The statutory pre-deposit requirement was held satisfied by the value of the absolutely confiscated gold; the appeal was maintainable, and the matter was remanded to the Commissioner of Customs (Appeals) for disposal on merits.

Final Conclusion: The Tribunal held that the value of the absolutely confiscated gold satisfied the requirement of pre-deposit for purposes of section 129E and that the appeal was maintainable. Since the first appellate authority had dismissed the matter only on that preliminary ground, the impugned order was set aside and the appeal was restored for decision on merits.

Provisional release of seized goods - Reasonableness of release conditions - Protection of revenue interest

Provisional release of seized goods - Reasonableness of release conditions - Protection of revenue interest - The terms imposed for provisional release of the seized imported goods were excessive once the differential duty and interest stood adequately secured. - HELD THAT: - The Tribunal noted that the seized goods were commercial goods meant for further manufacture and were neither prohibited nor subject to any import condition. It further recorded that, in one case, cash deposit had already been made in an amount exceeding the differential duty and interest, and, in the other, bond for full value of the goods together with bank guarantee covering the differential duty and interest had been furnished and release had already followed. On that basis, it held that the revenue's interest stood sufficiently protected and that insistence on anything further would be beyond the bounds of reasonableness. [Paras 6, 7, 8, 9]

The seized goods of M/s Miraya Vinyls Pvt. Ltd. were directed to be released on furnishing bond for the full value of the seized goods, and the appeals were disposed of on that basis.

Final Conclusion: The Tribunal held that the conditions imposed for provisional release were disproportionate after adequate protection of the revenue had already been secured. It accordingly modified the release terms and directed release of the seized goods of M/s Miraya Vinyls Pvt. Ltd. on execution of bond for the full value of the goods.

Essential character under Rule 2(a) - Classification of unassembled goods - Classification of elevator components as parts

Essential character under Rule 2(a) - Classification of unassembled goods - The imported elevator components in unassembled form were held not classifiable as complete lifts of a kind used in buildings under Tariff Item 84281011 by application of Rule 2(a). - HELD THAT: - The Authority held that Rule 2(a) applies only where incomplete or unassembled goods, as presented at import, possess the essential character of the finished article. On the facts, several components regarded as necessary for installation and operation of a complete elevator, including guiderails, supporting structures, structural frames and enclosures, balance weights and other installation-specific components, were not part of the import and were to be sourced locally. The imported goods by themselves could not perform vertical transportation independently and were therefore functionally incomplete. The Authority further held that continuity of model number, lump-sum invoicing, warranty terms and supplier classification could not displace the statutory test under Rule 2(a), and that the proposed imports also involved further working and integration in India beyond mere assembly of a complete article presented unassembled. [Paras 14, 16, 17]

Classification under Tariff Item 84281011 as complete elevators was rejected.

Classification of elevator components as parts - Application of Section Notes - The imported components were required to be classified individually under their respective tariff headings, including as parts suitable for use solely or principally with elevators where no more specific heading applied. - HELD THAT: - Having found Rule 2(a) inapplicable, the Authority proceeded under GRI 1 and the relevant Section Notes. It held that goods specifically covered elsewhere had to be classified in their own headings, such as anti-vibration rubber under heading 4016, rail clips under heading 7326, the weighing device under heading 8423, car and counterweight pulley under heading 8483, indicators under heading 8531, control panel, apparatus box, ALP panel and operating panel board under heading 8537, and cables under heading 8544. The remaining identified elevator-specific items, namely car frame, counterweight frame, door machine with unit controller, safety gear, buffer, overspeed governor, traction machine, machine beam, spacer and button PCB, were held classifiable as parts of elevators under heading 8431, more specifically 84313910, being suitable for use solely or principally with elevators and not more specifically covered elsewhere. [Paras 15, 16, 17]

The goods were held classifiable under headings 4016, 7326, 8423, 8431, 8483, 8531, 8537 and 8544 as set out in the classification table.

Final Conclusion: The Authority rejected the applicant's claim that the imported unassembled elevator components had the essential character of a complete elevator under Rule 2(a). It ruled that the goods were to be classified separately under the respective tariff headings identified in the order, and not under Tariff Item 84281011.

Validity of the approved scheme of arrangement, including clauses providing for release and discharge of claims and assignment of specified creditors' claims to 63 Moons Group- Opposed to public policy - withdrawal/disposal of pending civil proceedings through private arrangement - Commercial Wisdom - Binding effect of sanctioned scheme - assignment of creditors' claims - Quietus to Controversies​​​​​​​ - judicial finality.

Binding effect of sanctioned scheme - assignment of creditors' claims - release and discharge of consenting brokers - HELD THAT: - The Tribunal held that the appellants' grievance against clauses providing release of consenting brokers and assignment of specified creditors' claims could not be accepted because the claims sought to be pursued in the civil suits arose from the same NSEL payment default and formed part of the defined specified creditors' claims under the scheme. Once the settlement trigger event occurs, those claims, including claims against brokers, stand assigned to 63 Moons Group, and the right to pursue them thereafter vests in the assignee. The scheme was approved by an overwhelming majority and therefore bound all specified creditors, including dissenting creditors. The Tribunal further noted that the scheme was intended to bring quietus to the dispute and that no extraneous claims were being extinguished through it. [Paras 9, 10, 11, 12]

The appellants were not entitled to continue independent civil suits against consenting brokers in respect of claims covered by the scheme.

Judicial finality - merger of orders - HELD THAT: - The Tribunal relied on its earlier judgments upholding the same scheme and recorded that the earlier appellate decision had been affirmed by the Supreme Court on merits. In that view, any departure from the earlier determination would amount to revisiting or reviewing orders that had already attained finality. The objections raised in the present appeal, being directed against the same scheme and its operative clauses, were therefore held to have no force. [Paras 13]

The Tribunal declined to revisit the legality of the scheme and rejected the objections on that ground as well.

Final Conclusion: The appeal was dismissed. The Tribunal held that the sanctioned scheme, already upheld earlier and affirmed on merits, bound the appellants, and the covered claims against consenting brokers could not be separately pursued by them after assignment under the scheme.

Condonation of delay - First appeal as a precious right - Appellate remedy on facts and law

Condonation of delay - First appeal as a precious right - Appellate remedy on facts and law - Delay in filing the appeal before the Securities Appellate Tribunal was liable to be condoned in the circumstances of the case. - HELD THAT: - The Court held that, although the appellant had not explained the delay on a day-to-day basis, the application disclosed personal and financial difficulties, including family obligations, the father's medical condition, the impact of the Covid-19 period on the appellant's finances and business, and the change of address which was stated to have affected receipt of the impugned order. The determinative consideration was that the forum concerned provides a first appeal both on law and on facts, and such a remedy is a precious right. In that view, the appellant ought to have one appellate forum to contest the matter on facts, and the delay was therefore condoned subject to payment of costs, without any examination of the merits. [Paras 6, 7, 8, 9]

The delay was condoned on payment of costs to the specified fund, the order refusing condonation was set aside, and the appeal was restored for decision on merits by the Tribunal.

Final Conclusion: The Court condoned the delay in filing the appeal, subject to payment of costs, holding that the appellant should not be denied the valuable first appellate remedy available on facts and law. The Tribunal's order was set aside and the appeal was restored for adjudication on merits.

Summary order. Delay was condoned, and the appeal was dismissed as no grounds were made out to interfere with the impugned judgment of the National Company Law Appellate Tribunal.

Applications under Section 95 - barred by limitation - Limitation for insolvency proceedings against personal guarantors - Co-extensive liability of personal guarantor - Effect of resolution plan on guarantor liability - Maintainability of proceedings under Section 95 against personal guarantors.

Limitation for insolvency proceedings against personal guarantors - Fresh cause of action - Effect of DRT decree on limitation - HELD THAT: - It is the case of the Consortium Banks that the settlement with the Corporate Guarantor does not automatically extinguish the liability of the Personal Guarantors, unless specifically stated in the Resolution Plan and further submitted that, after reviewing the documents, no evidence was found suggesting that the Appellant's liability as personal guarantor had been fully discharged.

The Appellate Tribunal held that, though the loan account had earlier been classified as NPA and the guarantees had been invoked, the debt liability of the personal guarantors stood crystallised by the DRT judgment and recovery certificate. The Tribunal further took into account the extension of limitation during the Covid period by the suo motu orders of the Supreme Court and also noted the subsequent invocation through demand notice before filing of the Section 95 applications. On that basis, it concluded that the chain of events furnished a subsisting and timely cause of action and the plea of limitation had no merit. [Paras 39]

The objection based on limitation was rejected.

Co-extensive liability of personal guarantor - Effect of resolution plan on guarantor liability - Maintainability of proceedings under Section 95 against personal guarantors - HELD THAT: - The Appellate Tribunal accepted the consortium banks' stand that the personal guarantees furnished for the corporate debtor were not dealt with in the resolution plan of the corporate guarantor and that the rights of the creditors against the personal guarantors for the unpaid balance were therefore preserved. It held that the liability of a guarantor is co-extensive and is not extinguished merely because a resolution plan has been approved in respect of the corporate debtor or corporate guarantor. Referring to Lalit Kumar Jain v. Union of India & Ors. [2021 (5) TMI 743 - SUPREME COURT], Roshan Lal Mittal & Ors. v. Rishabh Jain & Ors.[2023 (12) TMI 1218 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI - LB], and BRS Ventures Investments Ltd. v. SREI Infrastructure Finance Ltd. [2024 (7) TMI 1408 - SUPREME COURT], the Tribunal held that partial recovery or settlement with one obligant does not wipe out the liability of the other obligants and that creditors can continue against personal guarantors for the unpaid portion. It also found that the DRT adjudication determining the liability had attained finality and that the resolution plan payments did not fully cover the amounts, particularly interest and the amount awarded by the DRT. On that reasoning, the Tribunal upheld the admission of the Section 95 petitions. [Paras 45, 47, 48, 49, 50]

The plea of full discharge on account of the corporate guarantor's resolution plan was rejected, and the admission of the Section 95 applications was sustained.

Final Conclusion: The Appellate Tribunal held that the Section 95 proceedings against the appellants as personal guarantors were within limitation and that approval of the resolution plan of the corporate guarantor did not extinguish their co-extensive liability for the unpaid debt. Finding no error in the impugned orders admitting the applications, both appeals were dismissed.

Corporate Insolvency Resolution Process - Essential requirement of a financial debt - Disbursement against time value of money - Treatment of claimant - as a financial creditor or secured financial creditor on the basis of the deed of agreement, mortgage arrangement and post-dated cheques - Third-party mortgage - Classification of creditor - rejection of the claim on the ground of delay.

Financial debt - Disbursement against time value of money - Third-party mortgage - Secured financial creditor - HELD THAT: - It is the case of Amisha that the RP had rejected their claim without properly appreciating the Deed of Agreement of 2016 and the obligation arising therefrom. That Amisha had mortgaged its properties to enable the Corporate Debtor secure its loan facilities with SBI, that shows that there was disbursement of debt. The RP had failed in its duty to consider the interest component and compensation payable to Amisha by the Corporate Debtor in terms of the Deed of Agreement which clearly demonstrated the consideration of time value for money and the commercial effect of borrowing. It was also contended by Amisha that since Clause 9 of the Deed of Agreement provided that interest was payable by the Corporate Debtor to Amisha for use of their property to secure the loan amount from SBI, the Adjudicating Authority had correctly held that there was consideration for time value of money and hence, this amounted to be a financial debt in terms of Section 5(8) of the IBC. Since there was a return in the form of interest payments for allowing their property to be used, it demonstrated commercial effect of borrowing. Furthermore, since the Corporate Debtor had agreed to indemnify Amisha against all losses and damages, this further substantiated the fact that Amisha was a secured financial creditor qua the Corporate Debtor in terms of Section 5(7) of the IBC.

The Hon’ble Supreme Court in New Okhla Industries Development Authority Vs. Anand Sonbhadra [2022 (5) TMI 875 - SUPREME COURT], has categorically held that disbursement is an indispensable requirement to constitute a financial debt within the meaning of Section 5(8) and that disbursement must be from the creditor to debtor and therefore while considering the lease which was the subject matter therein it was held that there has been no disbursement of any debt (loan) or any sums by the lessor therein to the lessee. This ratio is also applicable in this case and hence mortgage of properties by Amisha does not meet the test of treatment as a financial debt in terms of Section 5(8) of the IBC.

The Appellate Tribunal held that the essential requirement of a financial debt is disbursement to the borrower against consideration for the time value of money. In the present case, no money was disbursed by Amisha to the corporate debtor; Amisha had only permitted its properties to be used as collateral for the loan granted by the bank. The post-dated cheques said to secure payment of interest were only a promise to pay and did not create any mortgage, charge or hypothecation over any property of the corporate debtor. The guarantee agreement was also executed by Amisha in favour of the bank and not in favour of the corporate debtor. Since there was neither disbursement by Amisha to the corporate debtor nor any security interest created by the corporate debtor in favour of Amisha, the transaction did not answer the description of financial debt and Amisha could not claim the status of either financial creditor or secured financial creditor. The Adjudicating Authority therefore erred in categorising Amisha as a secured financial creditor, particularly when Amisha itself had originally filed its claim as an unsecured financial creditor. [Paras 16, 17, 18, 23, 24]

The finding classifying Amisha as a secured financial creditor was set aside, and its appeal seeking admission of its claim as such was rejected.

Delay in filing claim - Other creditor - Rejection of claim - HELD THAT: - The Appellate Tribunal found that the claim had been filed within 90 days from the invitation of claims and therefore could not be treated as belated. The resolution professional had in fact rejected the claim on merits and not on delay. The subsequent challenge to such rejection could not justify denial of the claim by treating the matter as one of late filing, especially when the claim had initially been lodged within time and was being pursued thereafter. At the same time, though Amisha was not a financial creditor, the deed of agreement and the conduct of parties showed that Amisha had mortgaged its properties to secure the corporate debtor's borrowing and was entitled to the agreed amount arising therefrom. The corporate debtor, having acted on that arrangement and obtained the facility on the strength of Amisha's property, could not later repudiate the agreement. In these circumstances, the claim was held admissible, not as a financial debt, but in the category of other creditors. The direction in relation to the resolution plan was made conditional upon whether the plan provided any treatment for claims of other creditors. [Paras 25, 26, 27, 28]

The rejection of Amisha's claim on the ground of delay was set aside, and the resolution professional was directed to admit the claim by categorising Amisha as an other creditor, subject to the terms of the resolution plan.

Final Conclusion: The appeal filed by Amisha was dismissed, and the resolution professional's appeal was partly allowed. The finding that Amisha was a secured financial creditor was set aside, but the rejection of its claim was also set aside, with a direction that the claim be admitted in the category of other creditors and dealt with in accordance with the resolution plan.

Resolution professional - Appointment of Transaction Auditor in a non-transparent manner and without the approval of CoC - lack of committee approval - Preferential transactions - RP failed to implead the sister concerns of the Corporate Debtor, which were necessary parties to the adjudication - transfer for the benefit of a creditor, surety, or guarantor - Ordinary course of business - Statutory duties of the resolution professional - appointing professionals and filing avoidance applications - Non-joinder of the two subsidiary companies of the corporate debtor.

Appointment of transaction auditor - HELD THAT: - The Tribunal held that the Code and the CIRP Regulations expressly empower the resolution professional to appoint professionals where their services are required for conduct of the insolvency process. No provision requires consultation with, or approval of, the committee of creditors for such appointment. Likewise, filing an avoidance application is part of the resolution professional's statutory duty, and the challenge founded on absence of committee approval had no legal basis. [Paras 12, 13]

The objection to the appointment of the transaction auditor and to filing of the avoidance application without committee approval was rejected.

Non-joinder of necessary parties - Summary insolvency proceedings - HELD THAT: - The Tribunal held that the Code is a complete code providing for summary proceedings, and identification of preferential transactions is undertaken from the financial statements and records of the corporate debtor within the statutory timeline. For that purpose, examination of the counterparties' financial statements was not necessary. On that reasoning, joinder of the transferee entities was held unnecessary, and the Tribunal also noticed that this plea had not been raised before the Adjudicating Authority. [Paras 15]

The plea of non-joinder failed.

Preferential transactions - Ordinary course of business - Related party transfers - HELD THAT: - Section 43 of the Code deals with the preferential transaction and relevant time. The nature of such transactions has been dealt with by the Section 43(2) & (3) and the look back period is prescribed in Section 43(4). We note that for the related party the time period of two years has been prescribed as look back period from the date of commencement of insolvency. The RP has accordingly ordered the transaction audit of the CD for the corresponding period.

The Tribunal examined Section 43 and held that a preferential transaction requires, among other things, a transfer for the benefit of a creditor, surety or guarantor on account of antecedent debt or liability, and that the ordinary-course exception must be established by material on record. As regards K. Sera Sera Digital Cinema Ltd., the record showed that it had filed a claim in the CIRP which was admitted, thereby establishing its status as creditor; the transfer was within the two-year look-back period applicable to related parties; and there was no documentary material showing that the payment was against supply of goods or services so as to bring it within the ordinary course of business. The payment therefore placed that related-party creditor in a beneficial position and was preferential. In contrast, the transfer to K. Sera Sera Miniplex Ltd., though made to a related party within the look-back period, was stated to be towards working capital and the transferee was not shown to be a creditor, surety or guarantor of the corporate debtor or a recipient on account of antecedent debt or liability. Since that statutory condition was absent, the transfer could not be treated as preferential. [Paras 26, 27, 28, 29, 30]

Only the transfer to K. Sera Sera Digital Cinema Ltd. was sustained as a preferential transaction, and the finding treating the transfer to K. Sera Sera Miniplex Ltd. as preferential was set aside.

Final Conclusion: The appeal was partly allowed. The Tribunal upheld the finding of preferential transaction only in respect of the transfer made to K. Sera Sera Digital Cinema Ltd. and restricted the repayment liability accordingly, while rejecting the challenges based on absence of committee approval and non-joinder of the transferee companies.

Maintainability of application Under Section 9 - Pre-existing dispute - quality of goods, delay in delivery, and reconciliation of accounts - Conditional acknowledgment of debt - denial of the liability and cited existence of pre-existing dispute and defective supplies - spurious or illusory dispute - approbate and reprobate. - HELD THAT: - The main ground of the Appellant, who is a Suspended Director of the CD, is that the Section 9 petition was not maintainable due to pre-existing disputes. Even the impugned order notices the pre-existing dispute but relying on a communication dated 01.11.2023 which is issued by the Appellant to the Operational Creditor, the CIRP was admitted against the CD.

The procedure laid down in the code requires an initial demand notice, and an opportunity to settle the dues was very much available with the Appellant if it was bonafide interested to settle it. However, it did not avail of that opportunity and contested the claim before the Adjudicating Authority. The Adjudicating Authority did not accept the contention of the Appellant and passed an order admitting the Corporate Debtor into insolvency under Section 9.

The Appellate Tribunal held that, although disputes regarding quality and delay had been raised, the Corporate Debtor had itself prepared and communicated a consequences sheet quantifying the impact of those issues and crystallising the balance amount payable. Once those contractual adjustments had been worked out by the Corporate Debtor itself, the alleged disputes could not continue to operate as a bar to insolvency proceedings in respect of the admitted balance. The communication requiring the Operational Creditor to accept the consequences sheet before payment was treated as a condition imposed by the Corporate Debtor and not as proof of a subsisting dispute over the crystallised amount. On the materials placed on record, the Tribunal found that the admitted amount stood acknowledged by the Corporate Debtor and that the plea of dispute was only hypothetical, spurious or illusory so far as that amount was concerned. [Paras 74, 75, 79, 80]

The plea of pre-existing dispute was rejected and the admission of the Corporate Debtor into CIRP under Section 9 was affirmed.

Final Conclusion: The Appellate Tribunal dismissed the appeal and upheld the admission of the Corporate Debtor into CIRP. It held that the alleged disputes as to quality and delay did not constitute a genuine pre-existing dispute against the crystallised and admitted amount payable to the Operational Creditor.

Rejection of the application seeking exclusion of the unsold inventory and subject property from valuation and the information memorandum - Development rights under collaboration agreement - Rights of allottees in insolvency resolution. - HELD THAT: - The Tribunal held that the project had been undertaken under the collaboration arrangement pursuant to which substantial construction had been carried out and allotments had already been made to numerous allottees whose statutory rights stood protected. HARERA had treated both the landowner and the corporate debtor as promoters and had directed them to complete the project, proceeding on the basis that the collaboration arrangement continued to govern the project. The arbitral award also did not grant the landowner a declaration that the collaboration agreement had been lawfully terminated, and the specific relief seeking transfer of the project land and related project documents to the landowner was expressly rejected. Although the arbitral tribunal observed that the agreement could not be specifically enforced and was inoperable for that purpose, that did not amount to acceptance of a lawful termination so as to efface the corporate debtor's project-related rights and obligations. In these circumstances, and having regard to the existing allotments and the project assets forming part of the insolvency estate, exclusion of the unsold inventory and subject property from valuation and the information memorandum was not warranted. The decision in A A Estates Pvt. Ltd. through its Resoltuin Professinal Harshad Shamkant Deshpande & Anr. vs. Kher Nagar Sukhsadan Co-operative Housing Society Ltd. & Ors. [2025 (12) TMI 243 - SUPREME COURT] was distinguished because, unlike that case, the present corporate debtor had carried out construction and the termination of the collaboration agreement had not been accepted by any authority. [Paras 21, 22, 24, 25, 27]

The rejection of the application seeking exclusion of the unsold inventory and subject property from valuation and the information memorandum was upheld.

Final Conclusion: The appeal was dismissed. It was held that the project assets, including the unsold inventory and subject property, formed part of the corporate debtor's project estate and were rightly retained in the valuation exercise and the information memorandum.

Entitlement of the appellant to be treated as a secured creditor vis-à-vis its VAT claim - VAT dues of the State tax authority - Statutory first charge - Security Interest Created by Operation of Law - non-disclosure of security interest in the claim form, absence of charge registration, waiver or acquiescence​​​​​​​ - Deemed relinquishment of security interest - claim to secured status - Doctrine of crown debt - Proof of statutory Charge under Sec. 48 - Liquidation Waterfall -Acquiescence and Waiver.

Whether the CST dues qualify for being treated as secured debt? - HELD THAT: - The Tribunal held that Section 48 of the GVAT Act creates a statutory first charge over the assets of the dealer, and therefore the appellant's VAT dues carry secured status by operation of law. However, no corresponding provision in the CST Act creates such a first charge. The appellant's attempt to derive secured status for CST dues through Section 9(2) of the CST Act was rejected, since that provision does not telescope the State enactment so as to create a statutory charge for CST dues.

The Constitutional Bench of the Supreme Court in Superintendent and Legal Remembrancer, State of West Bengal Vs Corporation of Calcutta [1966 (12) TMI 67 - SUPREME COURT], Where however, the Legal Remembrancer case differed from the Builders supply case is that while the latter case has held that the priority of crown debt is a common law rule and is a law in force in India within the meaning of Article 372 of the Constitution, the former case has held that crown debt’s preferential treatment is not a common law rule but only a construction of the common law, and hence it does not qualify to be termed as ‘law in force’ within Article 372.

A three Judge bench of the Supreme Court in Collector Vs Central Bank [1967 (5) TMI 43 - SUPREME COURT] had held that despite apparent divergence of views in Builders Supply case and the Legal Remembrancer case, a closer analysis of the second mentioned judgement does not indicate a divergence of view from the former. These finer aspects however, need not bother us in the context of the present case. What is significant in the context is that the governmental dues in this country are accorded priority during realization as crown debt. The next issue that arose was about the point where such priority should be accorded.

The Tribunal further held that whatever common law priority may attach to governmental dues as crown debt stands displaced, in liquidation, by the specific distribution scheme under Section 53 of the Code, and therefore CST dues must take their place only as government dues under that scheme. [Paras 14, 15, 16, 17, 18]

The appellant was held to be a secured operational creditor only for its VAT claim, while its CST claim remained payable only as operational government dues.

Proof of security interest in liquidation - Statutory charge by operation of law - Claim form disclosure - HELD THAT: - The Tribunal distinguished between creation of a charge and proof of it. It held that Regulation 21 is enabling in character and does not confine proof of security interest only to the modes there specified. Since Section 48 of the GVAT Act creates a charge by operation of law upon assessment, no further act of registration is required to bring that charge into existence, and Section 77 of the Companies Act applies to charges created by the company, not to statutory charges created by legislation. The Tribunal nevertheless held that a claimant asserting a statutory charge must bring that legal basis to the notice of the liquidator. In the present case, although the appellant entered 'N.A.' in the security interest column, it simultaneously sent communications asserting a first charge under Section 48. That was sufficient notice to require verification by the liquidator, and the omission in the form could not defeat the statutory charge. [Paras 20, 21, 22, 23, 24]

The appellant's statutory charge for VAT dues was held provable in liquidation without registration, and its claim could not be denied secured status solely because of the manner in which the form was filled.

Waiver and acquiescence - Secured operational creditor - Deemed relinquishment of security interest - HELD THAT: - The Tribunal found that the appellant had consistently asserted its claim to secured status and therefore no estoppel, waiver or acquiescence arose against it. It also noted that the liquidator himself had taken oscillating positions on the appellant's status, so the objection raised at the dissolution stage could not be rejected on that ground. On the effect of Paschimanchal Vidyut Vitran Nigam Ltd. Vs Raman Ispat Pvt. Ltd.[2023 (7) TMI 831 - SUPREME COURT], the Tribunal held that the present case involved a statutory first charge and had to be harmonised with the liquidation framework through Regulation 21A. Since the appellant, though a secured operational creditor for VAT dues, never exercised its option under Section 52(1)(b) to realise the security interest outside the common pool, the proviso to Regulation 21A(1) operated and the security stood deemed relinquished. The consequence was that the appellant had to be placed within Section 53(1)(b)(ii) for its VAT dues, while CST dues remained outside that class. [Paras 25, 26, 27, 28, 29]

The liquidator was directed to recompute the appellant's entitlement by treating VAT dues as falling with secured creditors upon deemed relinquishment, and to recall from the bank such amount as was necessary for redistribution; the rest of the order was confirmed.

Final Conclusion: The appeal was partly allowed. The Tribunal held that the appellant must be treated as a secured operational creditor only for VAT dues arising under the GVAT Act, not for CST dues, and directed the liquidator to recompute the distribution accordingly and recover from the bank such amount as was necessary for lawful redistribution; in other respects, the order under appeal was affirmed.

Simultaneous insolvency proceedings against principal borrower and corporate guarantor - Scheme of arrangement - Commercial wisdom of the Committee of Creditors - Withdrawal under Section 12A after liquidation - dismissal of the application seeking to keep the liquidation proceedings in abeyance - Non-appearance of applicant and decision on merits.

Simultaneous insolvency proceedings - Corporate guarantor - Status quo order - HELD THAT: - The Appellate Tribunal held that the order relied on by the appellant was passed in proceedings relating to the principal borrower and did not operate as a restraint in the present matter.

Hon’ble Supreme Court has delivered its judgement in ICICI Bank Ltd. v. Era Infrastructure (India) Ltd. and has not barred holding simultaneous CIRP proceedings against both principal debtor and corporate guarantor and such proceedings are maintainable under the existing provisions of the law. Thus, proceedings against both the principal borrower and also the Corporate Guarantor in this case can be proceeded against simultaneously. And therefore, the substratum on which appeal was being adjourned, no longer exists. The Appellant vehemently argues that Bank of India, which is Respondent No.1 is in the process of assigning it to some one, and for that reason this matter may be taken up after some time. The counsel on behalf of Bank of India strongly opposed the suggestion.

Once that legal issue stood settled, the very basis on which the appeal had been pressed ceased to exist. [Paras 15, 17, 18, 19]

The challenge to the liquidation proceedings on the basis of the pending proceedings concerning the principal borrower was rejected.

Withdrawal under Section 12A after liquidation - Settlement post-liquidation - Section 230 scheme - HELD THAT: - The Tribunal held that Section 12A operates only during the corporate insolvency resolution process and not after commencement of liquidation. It relied on its earlier decision holding that, during liquidation, withdrawal under Section 12A is legally impermissible and that any post-liquidation settlement can be pursued only through the statutory route of a scheme under Section 230 of the Companies Act, 2013 read with the Liquidation Regulations.

Section 12A of the Code applies only during the CIR proceedings and not in liquidation proceedings. This matter has been settled in NCLAT Asha Chopra and Ors. vs Hind Motors India Ltd. & Ors. Company Appeal (AT) (Insolvency [2024 (10) TMI 463 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI - LB], wherein it was held that withdrawal under Section 12A is legally impermissible during liquidation, and that the only available mechanism for settlement post-liquidation is a scheme under Section 230 of the Companies Act, 2013, as contemplated by Regulation 2B of the Liquidation Regulations. In the above judgement it was very clearly noted that "in view of the clear statutory scheme as delineated by 12A, section 33 of the Code and Regulation 2B of the Liquidation Regulation, we are of the view that during the liquidation period an application under section 12A is not permissible." Hence, the order of liquidation calls for no interference, and if the promoters propose to settle, they may only do so through the statutory Section 230 route of the Company’s Act, 2013.

The plea to stall liquidation on the basis of a proposed settlement under Section 12A was rejected, leaving the promoters only the statutory route available during liquidation.

Non-appearance of applicant - Decision on merits - Dismissal of interlocutory application - HELD THAT: - The Tribunal noted that the appellant was not even the actual applicant in the interlocutory application and that the application itself failed to disclose any ground justifying the relief sought. Referring to Rule 48 of the NCLT Rules, it held that, in case of non-appearance, the Tribunal may either dismiss the application for default or hear and decide it on merits. Since the adjudicating authority had acted within that discretion and no legal bar existed against proceeding further, no infirmity was made out in the rejection of the application. [Paras 15, 16]

The dismissal of IA No. 41 of 2024 was upheld.

Liquidation on unanimous CoC decision - Absence of resolution plan - Commercial decision of CoC - HELD THAT: - The Tribunal recorded that the committee of creditors had unanimously resolved to liquidate the corporate debtor because no resolution plan had been received and no prospective resolution applicant sought extension of time. Although repeated opportunities were granted to the appellants to settle with the creditors, no settlement materialised, and the resolution professional informed the adjudicating authority accordingly. In these circumstances, the adjudicating authority rightly acted on the CoC's decision and ordered liquidation under Section 33(2), and there was no ground for appellate interference. [Paras 21, 22, 23]

The liquidation order was sustained and the liquidator was permitted to proceed further.

Final Conclusion: The Appellate Tribunal found no infirmity in the adjudicating authority's orders dismissing the interlocutory applications and directing liquidation. The appeal was dismissed, and the liquidation of the corporate debtor was directed to continue.

Condonation of delay in refiling - Sufficient cause - Registry defects - applicant failed to show sufficient cause for condonation of 193 days' delay in refiling the appeal. - HELD THAT: - The Tribunal held that though applications for condonation of refiling delay are to be considered liberally, such indulgence still requires a satisfactory, coherent and credible explanation for the entire delay. On the facts, the principal explanation relating to the time taken for filing typed copies of handwritten pages and English translations of vernacular documents was found unacceptable, since the defect notices themselves indicated that the pages specifically mentioned were only illustrative by use of the expression 'etc.', and the applicant, having filed the documents, was expected to cure all such defects comprehensively without waiting for repeated reminders from the Registry. The plea that the former custodian of records had retired was also rejected as frivolous, having regard to the applicant's own statement that the employee had retired much earlier. The Tribunal further held that the applicant could not reduce the delay by excluding seven days from each round of defect curing; until all defects were completely cured, that methodology for computing delay was not correct. The repeated refiling was therefore attributed to the applicant's own inaction or deliberate non-action, and not to circumstances beyond its control. [Paras 8, 9, 10]

Condonation of the refiling delay was refused, and consequently the appeal memorandum was rejected.

Final Conclusion: The Tribunal rejected the application for condonation of 193 days' delay in refiling, holding that no sufficient or credible explanation had been furnished for the prolonged default. As a consequence, the appeal itself was rejected.

Personnel to extend cooperation to interim resolution professional - Scope of cooperation under section 19 - nature of assistance or cooperation which are required to be rendered to the IRP - Statutory auditor not associated with management - Direction to furnish information dependent on possession and necessity - Assistance and cooperation - Going concern - Custody of documents - Associated with management.

Scope of cooperation under section 19 of the Insolvency and Bankruptcy Code - Statutory auditor not associated with management - Possession of documents - HELD THAT:- The Appellate Tribunal held that section 19(1) obliges only the personnel of the corporate debtor, its promoters, or other persons associated with its management to extend assistance required for managing the corporate debtor as a going concern and for protecting its properties. A statutory auditor, by the nature of his role, is an independent professional and cannot ordinarily be treated as a person associated with the management of the corporate debtor. The provision also cannot be invoked for directing production of information unless it is shown that the material is required for the purposes contemplated by section 19 and that such information is in the custody of, or accessible to, the person from whom it is sought. In the present case, the Adjudicating Authority had not examined the auditor's status under section 19, had not ascertained whether the documents were actually with him, and had not considered the material indicating that the respondent's own auditor had acknowledged receipt of documents. In those circumstances, the coercive directions issued against the appellant were unsustainable. [Paras 9, 10, 11]

The directions issued against the appellant under section 19 were set aside, the Tribunal holding that the former statutory auditor did not fall within the category of persons compellable under that provision and, in any event, no basis had been established to assume possession of the information sought.

Necessity of information for CIRP purposes - Futility of continuing coercive directions after liquidation - HELD THAT: - The Appellate Tribunal found that the resolution professional had already prepared the information memorandum, invited expressions of interest, obtained plans, and secured approval of a resolution plan by the committee of creditors without the information sought from the appellant. This showed that the material was not demonstrated to be necessary for managing the corporate debtor as a going concern. Once liquidation had been ordered, the insistence on continuing the impugned directions served no meaningful purpose and rendered the exercise futile. [Paras 8, 10, 11]

The impugned order was also unsustainable because the information sought was not shown to be necessary for the purposes of section 19, and continuation of the directions after liquidation was pointless.

Final Conclusion: The appeal was allowed and the Adjudicating Authority's order was set aside. The Appellate Tribunal held that section 19 could not be used in the facts of the case to compel the former statutory auditor to furnish documents, complete the audit, or resign with no-objection.

Status of State tax dues in liquidation - Secured creditor in liquidation - Statutory first charge - interaction between the liquidation waterfall - Overriding effect of the Insolvency and Bankruptcy Code -HELD THAT: - The Appellate Tribunal held that the Adjudicating Authority erred in applying State Tax Officer v. Rainbow Papers Ltd.[2022 (9) TMI 317 - SUPREME COURT] to a case where the corporate debtor had already entered liquidation. Relying on Paschimanchal Vidyut Vitran Nigam Ltd. versus Raman Ispat Private Limited & Ors. [2023 (7) TMI 831 - SUPREME COURT], it held that distribution in liquidation must follow the waterfall mechanism under the Code, and that the interpretation applicable at the CIRP stage could not be transposed to liquidation in the manner adopted by the Adjudicating Authority. The Tribunal further held that the Excise and Taxation Department had no security interest within the meaning of Sections 52 and 53(1)(b)(ii), and that Section 26 of the Haryana Value Added Tax Act, 2003 could not prevail over the Code in view of Section 238. On that basis, the liquidator's withholding of sale proceeds and his request for an indemnity undertaking in case of a future contrary ruling were both found untenable. [Paras 18, 20, 21, 22]

The State Tax Department was held not entitled to be treated as a secured creditor for the impugned distribution, and the withheld sale proceeds were directed to be distributed to the secured financial creditor which had relinquished its security interest.

Final Conclusion: The appeal was allowed. The impugned order was set aside, and the liquidator was directed to distribute the entire sale proceeds under Section 53 of the Code in favour of the secured financial creditor that had relinquished its security interest, namely the appellant bank.

Statutory charge over tax dues - Secured operational creditor - Waiver of statutory right - Duty to collate and verify claims

Statutory charge over VAT dues - Secured operational creditor - Distribution under section 53 - The appellant could be treated as a secured operational creditor only to the extent of the VAT component of its claim, and not for the CST component. - HELD THAT: - The Tribunal held that the claim filed by the appellant was a composite claim comprising VAT, CST and interest. Since section 48 of the GVAT Act creates a statutory charge only in respect of VAT dues, the benefit of secured status could not extend to the CST component. The appellant was therefore entitled to secured status only qua the VAT dues. As that determination affected only the manner of distribution under section 53 of the Code, there was no occasion to reject the approved resolution plan and the exercise of recalculating distribution could be undertaken accordingly. [Paras 6, 12, 13]

The appellant was held entitled to be treated as a secured operational creditor only in respect of the VAT dues under the GVAT Act, and the resolution plan was not disturbed except to that extent.

Waiver of statutory right - Estoppel by claim form - Duty to verify claims - The appellant's indication of 'N.A.' in the security column of Form B did not amount to waiver of the statutory charge, and the Resolution Professional could not ignore the claim to secured status once informed of the statutory lien. - HELD THAT: - Relying on Motilal Padmapat Sugar Mills Co., Ltd., Vs State of UP & others, the Tribunal held that waiver requires an intentional abandonment of a right with knowledge, and a statutory charge cannot be waived by conduct unless the statute permits such waiver. At the same time, the Tribunal observed that the Resolution Professional is not presumed to know the provisions of the GVAT Act and the appellant was bound to inform him of the statutory charge. Once, however, the Resolution Professional had moved an application for removal of the lien and the appellant had asserted in reply that section 48 of the GVAT Act created a statutory charge, the answer in Form B became redundant. Following Greater NOIDA Vs Prabhjit Singh Soni & another, the Tribunal held that the Resolution Professional had a duty to collate and verify claims from available material, and after becoming aware of the lien and its statutory basis, he ought to have examined the appellant's entitlement to secured status. [Paras 8, 9, 10, 11]

The respondents' objection founded on the Form B entry was rejected, and the appellant was not precluded from asserting secured status for the VAT dues.

Final Conclusion: The appeal was partly allowed. The appellant was held entitled to secured operational creditor status only in respect of the VAT dues covered by the statutory charge under the GVAT Act, while the approved resolution plan was otherwise left undisturbed and the consequent adjustment in distribution was left to be worked out.

Modification of bail conditions - Effect of dismissal of special leave petition

Modification of bail conditions - Effect of dismissal of special leave petition - Change in circumstances - Dismissal of the Enforcement Directorate's special leave petition against the order granting bail did not bar the High Court from entertaining and deciding a subsequent application for modification of the bail conditions. - HELD THAT: - The Court held that the High Court erred in treating the earlier dismissal of the special leave petition as a reason not to consider the prayer for modification. Dismissal of a special leave petition against an order granting bail does not, by itself, amount to approval of every condition attached to bail so as to freeze those conditions until conclusion of trial. The Court reasoned that if bail granted by this Court can be cancelled by a High Court or trial court upon a change in circumstances, the High Court which originally granted bail is equally competent to consider modification of the conditions. On that basis, the appellant was held entitled to a fresh hearing of his application for modification, with all merits kept open for consideration by the High Court. [Paras 4, 5, 6, 7, 12]

The impugned order was held unsustainable, the modification application was directed to be heard afresh, and the matter was remitted to the High Court with revival of the bail application and connected interim application.

Final Conclusion: The Supreme Court held that the High Court wrongly declined to entertain the request for modification of bail conditions merely because the earlier challenge to the bail order had failed before this Court. The matter was remitted for fresh consideration in accordance with law, with all merits expressly left open.

Summary order. Application seeking relaxation of bail conditions was permitted to be withdrawn and stood disposed of as withdrawn.

Service of adjudication order - Proof of delivery by speed post - Liberty to pursue statutory appeal

Service of adjudication order - Proof of delivery by speed post - Statutory appeal - The adjudication order could not be treated as duly served merely on the basis of dispatch by speed post, in the absence of proof of delivery as required for service under the applicable statutory provisions. - HELD THAT: - The Court found that, although the respondents produced the adjudication order and the dispatch register and the record showed subsequent reminders for payment, they were unable to establish service in the manner required by Section 83 of the Finance Act, 1994 read with Section 37C of the Central Excise Act, 1944, namely service by speed post with proof of delivery. In the peculiar facts, and noting that the petitioner asserted entitlement to the exemption and had not been afforded an effective opportunity to challenge the order through the appellate remedy, the Court held that the petitioner should receive the benefit of doubt on terms. The order-in-original was therefore directed to be treated as served in Court, with liberty to the petitioner to file a statutory appeal and to place additional documents before the appellate authority to establish its claim for exemption. The Court expressly refrained from deciding the exemption issue on merits and directed that the appellate authority decide the appeal uninfluenced by the observations in the writ proceedings. [Paras 6, 7, 9, 10]

Subject to payment of costs, the petitioner was permitted to treat the order-in-original as served in Court and to avail the statutory appellate remedy; consequentially, the bank attachment notice was quashed, while preserving the respondents' right to proceed in accordance with law if no appeal is filed within time.

Final Conclusion: The writ petition was disposed of by holding that service of the adjudication order had not been proved in the statutorily prescribed manner. On payment of costs, the petitioner was granted liberty to file an appeal treating the order as served in Court, and the bank attachment notice was quashed.

CENVAT credit on input services - Deposit insurance premium - Banking services - Input service

CENVAT credit on input services - Deposit insurance premium - Banking services - Input service - Banks are entitled to avail CENVAT credit of service tax paid on the premium for deposit insurance service received from Deposit Insurance and Credit Guarantee Corporation, and the questions raised by the Revenue on the character of banking transactions and the admissibility of such credit stood concluded against the Revenue. - HELD THAT: - The Court found that the Tribunal had allowed the assessees' appeals by following the Larger Bench decision on the same controversy. It noted that the said view had thereafter been affirmed by the High Court of Kerala after extensive consideration of the Larger Bench reasoning, including the regulatory framework governing banking business, and that the Bombay High Court had also taken the same view. The Court held that the controversy was no longer res integra, found no reason to differ from the view taken by the High Court of Kerala, and rejected the Revenue's attempt to reopen the issue on the basis that reliance on an earlier Karnataka decision was misplaced, observing that such reference was only incidental and did not warrant further examination. [Paras 8, 9]

The substantial questions of law were answered in favour of the assessees and against the Revenue, and the appeals were dismissed.

Final Conclusion: Following the view taken by the High Court of Kerala and noticing the same position adopted by the Bombay High Court, the Court held that the controversy regarding availment of CENVAT credit on deposit insurance premium by banks stood concluded in favour of the assessees. The Revenue's appeals were accordingly dismissed.

Invocation of the extended period under the proviso to Section 73(1) - Bona fide belief - Suppression of facts - Exhibition expenses incurred for an exhibition - Place of provision of services relating to events -perpetual right to use - Demand on income from sale of software licences to customers - Mutual exclusivity of VAT and service tax.

Extended period of limitation - HELD THAT: - The Tribunal held that the appellant had cooperated with the audit, produced the required records, and had disclosed the relevant transactions in its books. The dispute arose from the appellant's bona fide understanding that no tax was payable on the exhibition expenditure for an event held outside the taxable territory and that the software licence transactions were, in substance, sale transactions on which VAT had been paid. The department did not produce evidence of fraud, collusion, wilful misstatement or suppression with intent to evade tax. The Tribunal therefore applied the settled principle that mere non-payment or detection in audit does not justify invocation of the extended period of limitation. [Paras 7]

It is well settled position of law that extended period of limitation can only be invoked in the cases where the assessee has failed to pay duty/tax on account of fraud, collusion, willful misstatement or suppression of facts etc.

In the case of Sand Hotel Pvt Ltd [2009 (1) TMI 216 - CESTAT MUMBAI], the Tribunal has held that mere detection by the service tax department does not mean that non-payment was with the intention to evade duty and that the bona fide belief of the assessee cannot be outrightly rejected.

Hon’ble Apex Court in the case of Uniworth Textiles [2013 (1) TMI 616 - SUPREME COURT] wherein the Hon’ble Apex Court has clarified that mere non-payment of duty is not equivalent to collusion, willful mis-representation or suppression of facts. The Hon’ble Apex Court also noted that if every case of non-payment was to be proceeded with the premise that suppression or fraud was involved then it would leave a situation where the normal period of limitation would never apply. The Hon’ble Apex Court categorically held that it is a cardinal postulate of law that the burden of proving any form of mala fide lies on the shoulders of the one alleging it. Therefore, keeping in view the above position of law, we hold that the extended period of limitation under Section 73(1) of the Act has wrongly been invoked in the present case.

The extended period of limitation was wrongly invoked.

Place of provision of services relating to events - Non-taxable territory - Service tax - exhibition expenditure incurred for the event held in Geneva, Switzerland. - HELD THAT: - The Tribunal held that Rule 6 of the Place of Provision of Services Rules, 2012 specifically governs services relating to events, and the place of provision is where the event is actually held. Since the exhibition was held in Switzerland, the place of provision was outside India and outside the taxable territory. Rule 3, being only the default rule, had no application where Rule 6 specifically covered the service. [Paras 8]

The demand on exhibition expenses was set aside on merits.

Sale of software licence with perpetual right to use - VAT and service tax - Service portion of composite arrangement - HELD THAT: - The Tribunal found that the transaction was primarily a sale of software to customers under licence with perpetual right to use, on which the appellant had paid VAT and disclosed the transactions in its books. It further found that service tax had already been paid on the distinct service portion provided under the contractual arrangement. Proceeding on that basis, the Tribunal accepted that the same transaction could not be subjected again to service tax as a sale component after VAT had been discharged, while the service component stood separately taxed. [Paras 8]

The demand on sale of software licences was set aside on merits.

Final Conclusion: The Tribunal allowed the appeal on both limitation and merits. It held that the extended period was not invocable, that no service tax was chargeable on the exhibition-related expenditure for an event held outside the taxable territory, and that the software licence transactions, being primarily sales on which VAT had been paid with service tax already discharged on the service portion, could not sustain the impugned demand.

Limitation for appeal from date of communication of order - Presumption of postal service - Service of order at correct address

Limitation for appeal from date of communication of order - Service of order at correct address - Presumption of postal service - The appeal before the Commissioner (Appeals) could not be treated as barred by limitation when there was no evidence that the order-in-original had been dispatched or served at the appellant's correct registered address. - HELD THAT: - The Tribunal held that the determinative question was whether the department had corresponded with the appellant at its known and correct address. It found no material to show that the appellant was operating from the address used in the show cause notice and adjudication order, and noted that the GSTIN-based address relied upon by the department had subsequently been cancelled, without any evidence of verification of the premises or of the appellant carrying on business there at the relevant time. The record, on the other hand, showed other addresses of the appellant in its tax records and service tax registration. In these circumstances, the Commissioner (Appeals) erred in presuming service merely on the basis that the order was said to have been sent by speed post. The presumption of service could not arise in the absence of proof that dispatch was made to the correct registered address. The reliance placed on N. Parameswaran Unni v/s G. Kannan & Another and M/s New India Sugar Mills Ltd. v/s Commissioner of Sales Tax was therefore held to be misplaced. Following Shri Narendra Dalai and noticing the principle stated in Global Construction, the Tribunal concluded that the dismissal on limitation was unsustainable. Since the Commissioner (Appeals) had not validly decided the matter on merits, the case was remanded for fresh decision on merits. [Paras 4, 5]

The impugned order rejecting the appeal as time-barred was set aside, and the matter was remanded to the Commissioner (Appeals) for decision on merits after fresh adjudication.

Final Conclusion: The Tribunal held that the appeal had been wrongly dismissed as barred by limitation because valid service of the order-in-original on the appellant was not established. The matter was remanded to the Commissioner (Appeals) for decision on merits, which were left open.

Taxability of inter-divisional services - Service to self - Revenue neutrality

Service to self - Inter-divisional services - Revenue neutrality - Maintenance or repair services rendered by one division of the assessee to its sister divisions within the same organisation were not liable to service tax. - HELD THAT: - The Tribunal held that services rendered by the appellant division to other divisions of HAL could not be regarded as services provided to another person, since all the divisions formed part of the same organisation and could not be treated as separate entities for levy of service tax. The transfer of cost through debit notes did not alter that position, particularly when such cost formed part of the recipient divisions' own cost structure. The Tribunal further noted that, even otherwise, any tax paid by the appellant and recovered from the sister divisions would be available to those units as credit, making the situation revenue neutral. On that reasoning, applying Nirlon Ltd. Vs. CCE, Mumbai, the demand was held unsustainable. [Paras 10, 11]

The demand on services rendered between divisions of the same organisation was set aside as unsustainable.

Final Conclusion: The Tribunal held that maintenance or repair services rendered by one division of HAL to its sister divisions were services within the same legal entity and not taxable as services to another person. The demand, interest and consequential liabilities were therefore set aside and the appeal was allowed.

Demand of duty, interest and penalties - Failure to consider material evidence - Burden of proof - relied upon computer printouts without satisfying the requirements for admissibility - Clandestine removal - HELD THAT: - The Tribunal found that, pursuant to the letter dated 30.06.2014, the appellant had produced substantial material including annual declarations, specimen delivery challans, balance sheet, yearly abstracts of movement of batteries, copies of delivery challans and other records, and that the mahazars also showed recovery of numerous documents including VAT-related records. In spite of the specific direction in the earlier round, the adjudicating authority made no attempt to verify this evidence and yet recorded only vague findings regarding manufacturing activity. Since the impugned order confirming clandestine manufacture and clearance was passed without proper consideration of the material on record, the confirmation of duty, interest and penalty was held to be unsustainable. The penalty on the partner, being consequential to the unsustainable case against the main appellant, was also liable to be set aside. [Paras 12, 13]

The demand of duty with interest and the penalties imposed on the firm and its partner were set aside.

Final Conclusion: The Tribunal held that the impugned de novo order was unsustainable because the adjudicating authority failed to examine the material evidence produced in terms of the earlier remand. The demand of duty with interest and the penalties on both the firm and its partner were accordingly set aside.

Input service - CENVAT credit on chartered aircraft services - Input Service Distributor

Input service - CENVAT credit on chartered aircraft services - Input Service Distributor - CENVAT credit distributed by the corporate office as Input Service Distributor on chartered aircraft services could not be denied to the respondent unit. - HELD THAT: - The Tribunal held that, even after the amendment of the definition of input service from 01.04.2011, services used directly or indirectly in or in relation to manufacture continue to fall within the main part of the definition, and business use of chartered aircraft for company personnel connected with manufacturing and allied activities has sufficient nexus with manufacture. It further held that where the credit had been distributed by the registered corporate office as Input Service Distributor, the recipient unit could not be denied such credit on that ground in the absence of any show cause notice against the Input Service Distributor itself. The inclusion of such expenditure in cost of production was treated as supporting the nexus with manufacture, though not as an independent condition for availing credit. [Paras 11, 12, 13, 15, 17]

The impugned order dropping the proceedings was upheld and the Revenue's challenge to the distributed CENVAT credit was rejected.

Final Conclusion: The Tribunal upheld the order dropping the proceedings and dismissed the Revenue's appeal. It held that the distributed CENVAT credit on chartered aircraft services was admissible and could not be denied to the respondent unit in the absence of proceedings against the Input Service Distributor.

Job work valuation - free supply of materials - extended period of limitation

Job work valuation - free supply of materials - intermediate products - Cost of parts, components and accessories supplied free by the customer to the appellant as job worker was not includible in the assessable value of the intermediate products cleared by the appellant. - HELD THAT: - The Tribunal followed M/s. International Auto Ltd Vs. CCE, Bihar and held that, where the appellant was manufacturing only intermediate products on job work basis under Rule 4(5) and the principal manufacturer discharged duty on the final products, the value of customer-supplied materials was not required to be added in the assessable value of the intermediate products. It also noted that the impugned order proceeded on the footing that the appellant had manufactured final products, though there was no such allegation in the show cause notice, and that certificates of customers showed dispatch under returnable challans and payment of duty after receipt. On that basis, the valuation demand, including the demand founded on goods covered under non-returnable gate pass, was held unsustainable. [Paras 13]

The demand based on inclusion of the value of free-supplied goods in the assessable value was set aside.

Extended period of limitation - bona fide belief - interest and penalty - Extended period of limitation was not invocable, and the consequential demand of interest and penalty could not survive. - HELD THAT: - The Tribunal held that, in view of the law applied from M/s. International Auto Ltd Vs. CCE, Bihar, where the appellant entertained a bona fide belief that the value of materials supplied by customers under Rule 4(5) of the Cenvat Credit Rules, 2004 was not includible, the extended period could not be invoked. Once the principal demand itself was found unsustainable, the consequential interest liability and penalty also became unsustainable. [Paras 13]

The invocation of the extended period was rejected, and the interest demand and penalty were also set aside.

Final Conclusion: The Tribunal held that the value of customer-supplied materials could not be added to the assessable value of the intermediate goods manufactured by the appellant on job work basis, and that the extended period was also not invocable. The impugned order was therefore set aside and the appeal was allowed with consequential relief.

Supply of Tangible Goods Service - Fixed Facility Charges - Binding nature of Board circular

Supply of Tangible Goods Service - Fixed Facility Charges - Transaction value - Binding nature of Board circular - Fixed facility charges recovered for tanks installed at the customers' premises were not liable to service tax as supply of tangible goods service. - HELD THAT: - The Tribunal found that in the appellant's own case the same controversy had already been concluded by an earlier final order, which held that fixed facility charges collected in relation to tanks used for storage of liquid gases were required to be included in the transaction value of the gases for discharge of central excise duty. Since the Board had clarified that such charges formed part of the assessable value of the manufactured gases, and that clarification was binding on the department, there was no basis to treat the same charges as consideration for a separate taxable service of supply of tangible goods. Following that binding view in the appellant's own case, the demand was held unsustainable. [Paras 5]

The impugned orders were set aside and the appeals were allowed with consequential benefits.

Final Conclusion: Following the earlier order in the appellant's own case, the Tribunal held that fixed facility charges formed part of the assessable value of the gases for central excise purposes and could not be taxed separately as supply of tangible goods service. The service tax demands for the disputed periods were therefore set aside.

Rectification of mistake - Recall of final order for factual error

Rectification of mistake - Recall of final order for factual error - The Tribunal decided whether its earlier final order was liable to be rectified and recalled on the ground that it had decided an issue which was not the subject matter of the appeal before the Commissioner (Appeals). - HELD THAT: - On examination of the miscellaneous application and the appeal records, the Tribunal found a factual mistake in its earlier order. The error consisted in recording and deciding a controversy different from the one arising out of the order-in-appeal under challenge. Since the earlier final order proceeded on an incorrect factual premise as to the issue involved, the mistake was held to be one warranting rectification by recall of that order and restoration of the appeal for fresh hearing. [Paras 3]

The miscellaneous application was allowed; the earlier final order was recalled and the appeal was directed to be restored to its original number for final hearing.

Final Conclusion: The Tribunal held that its earlier final order suffered from a factual mistake because it dealt with an issue not arising from the order-in-appeal. On that basis, the order was recalled and the appeal was restored for fresh hearing.

Entitlement to Cenvat credit on capital goods/inputs used in the manufacturing of exempted goods i.e. Power Plant - definition of capital goods as well as the inputs -Rule 6(4) and captive consumption of electricity - manufacturing dutiable final products - Suppression of facts - Bona fide belief -Invocation of the extended period of limitation - imposition of penalty.

Cenvat credit on capital goods used in captive power plant - HELD THAT: - The Tribunal held that the determinative test was whether the goods on which credit was taken fell within the definition of capital goods or inputs, were received in the factory, and were used in the factory in accordance with Rules 2(a), 2(k), 3 and 4 of the Cenvat Credit Rules, 2004. On the record, those conditions stood satisfied. The Department's basis for denial, namely that the power plant as a whole was a non-excisable or exempted immovable plant, was rejected as misplaced, since the dispute concerned credit on duty-paid components and inputs received and used in the factory, and not excisability of the completed plant.

This issue has also been decided by the Hon’ble Chhatisgarh High Court in Union of India Vs. HEG Ltd. [2009 (11) TMI 648 - CHHATTISGARH HIGH COURT], wherein, the High Court has held that where electricity generated from a captive power plant is partly used in the manufacturing of dutiable goods, the capital goods cannot be said to be used exclusively in manufacturing of exempted goods and Rule 6(4) is no bar to availment of credit. Similarly, the CESTAT Bangalore Bench, in the case of M/s Nizam Deccan Sugars Ltd. Vs. Commissioner of Central Excise Hydrabad [2008 (2) TMI 162 - CESTAT, BANGALORE] has held that when part electricity is used captively in the manufacturing of dutiable final products, credit on capital goods used in the power plant is admissible and Rule 6(4) is not attracted.

The Orissa High Court in the case of Principal Commissioner of GST and Central Excise, Bhubanesar Vs. Neelachal Ispat Nigam Ltd. [2022 (11) TMI 1091 - ORISSA HIGH COURT] has held that Cenvat credit of capital goods used in the power plant cannot be denied merely because surplus energy was sold.

The Tribunal further held that where electricity generated from the captive power plant was partly used in manufacture of dutiable goods, the capital goods could not be treated as used exclusively in manufacture of exempted goods, and Rule 6(4) was therefore not attracted. [Paras 6, 7, 8, 9]

The denial of Cenvat credit was held unsustainable and the assessee was found entitled to the credit availed.

Extended limitation and suppression - Penalty in interpretational disputes - HELD THAT: - The Tribunal found that the assessee had been regularly filing ER-1 returns and had furnished details of the credit availed, and that the case itself had arisen from audit. In those circumstances, no positive act of suppression with intent to evade duty was established, and the extended period could not be invoked merely on the basis of audit. The Tribunal also held that the dispute turned on interpretation of the Cenvat Credit Rules and that the assessee had acted under a bona fide belief supported by decisions cited in its favour; consequently, penalty was unwarranted. [Paras 9, 10]

The invocation of the extended period and the penalty were set aside.

Final Conclusion: The Tribunal held that the assessee was entitled to Cenvat credit on the capital goods and inputs used for the captive power plant, since the conditions of the Cenvat Credit Rules stood satisfied and Rule 6(4) was inapplicable where electricity was partly used in manufacture of dutiable goods. The demand, interest, extended limitation and penalty were accordingly set aside, and the appeal was allowed with consequential relief.

Assessment jurisdiction - Powers of superior officer - Competency of Deputy Commissioner of Commercial Taxes to act as the assessing authority, to pass the assessment order - barred by limitation - Burden of proof for stock transfer - Inter-State sale and consignment transfer - Powers of higher authority to exercise assessment jurisdiction - Extended limitation after inspection - Penalty under Central Sales Tax law through State sales tax law - double addition of turnover and deduction of sales returns.

Whether the Deputy Commissioner of Commercial Taxes was the competent assessment officer for the Assessment Year 2000-01 ? - HELD THAT: - Though the Deputy Commissioner was not originally notified as an assessing authority, section 4A of the 1957 AP Sales Tax Act enabled an officer superior to the officer otherwise empowered under section 4 to exercise such powers, subject to instructions of the Commissioner. The Court held that section 4A itself conferred this enabling power and did not require a separate positive order conferring jurisdiction in each case. The circular issued after insertion of section 4A also reflected that higher authorities could take over and exercise such powers where necessary. [Paras 28, 29, 31, 32, 33]

The challenge to the Deputy Commissioner's jurisdiction was rejected.

Assessment limitation - Extended period after inspection - HELD THAT: - For the relevant assessment year, the normal period under section 14(1) stood curtailed; however, section 14(3) applied where the dealer produced accounts, registers or other documents after inspection or submitted returns subsequent to inspection. On the Court's finding that the appellant had produced such material after inspection, the case fell within section 14(3), attracting the longer limitation of six years from the expiry of the relevant year. [Paras 36, 37, 38]

The plea that the assessment was time-barred was not accepted.

Stock transfer exemption - Burden under section 6A - Proof of agency transactions - Inter-State sales - HELD THAT: - Relying on Hyderabad Engineering Industries vs. State of Andhra Pradesh, the Court reiterated that where a dealer claims that movement of goods to another State was otherwise than by way of sale, the burden lies on the dealer under section 6A to prove that claim in the prescribed manner. The Tribunal had recorded a categorical finding that the documents required under rule 14(3) of the 1957 AP Rules were not produced either before the assessing authority or before it, and that finding could not be controverted. In the absence of the prescribed material to prove a genuine principal-agent relationship and stock transfer, the movement of goods had to be treated as inter-State sales. The Court further held that the grievance regarding denial of cross-examination did not assist the appellant, since even if the departmental investigation were ignored, the statutory burden under section 6A remained undischarged. [Paras 43, 44, 45, 46, 48]

The Tribunal was justified in treating the transactions as inter-State sales and in rejecting the natural justice challenge based on denial of cross-examination.

Documentary proof for turnover adjustments - Rectification of turnover - Sales returns - Claims regarding double addition of turnover and deduction of sales returns - want of supporting evidence. - HELD THAT: - The Court upheld the Tribunal's rejection of the appellant's contention that the same turnover had been added twice, since no documentary evidence had been produced to substantiate the allegation. The claim regarding sales returns was likewise rejected because the appellant could not establish, even before the Tribunal, that the relevant material had been submitted. [Paras 49, 50]

No relief was granted on the claims of double addition or sales returns.

Penalty under CST Act - Application of State penalty provisions - HELD THAT: - The Court held that section 9(2A) of the CST Act makes the general sales tax law of the State applicable, in matters of penalty, as if the tax under the CST Act were a tax under the State law. Since section 7A(2)(i) of the 1957 AP Sales Tax Act provided for levy of penalty, the contention that no penalty could be imposed under the CST regime was rejected. [Paras 51]

The penalty order was upheld.

Final Conclusion: The Tribunal's order was affirmed. The Court held that the Deputy Commissioner had jurisdiction, the assessment was within the extended period of limitation, the appellant failed to prove stock transfers otherwise than by sale, and the penalty was validly imposed; accordingly, both appeals were dismissed.

Presumption under section 139 in case of signed blank cheque - Maintainability of complaint through authorised representative - Appellate interference with acquittal on perversity

Presumption under section 139 in case of signed blank cheque - Legally enforceable debt - Security cheque - The acquittal based on the view that the cheque had been given blank as security and that liability was not proved for want of final settlement of accounts was unsustainable. - HELD THAT: - The Court held that the trial court erred in treating absence of proof of final settlement as fatal when the accused had not disputed the amount on that basis and had admitted issuance of the cheque in relation to the invoices for medicines supplied. Once the cheque was admittedly signed and issued, the statutory presumption operated, and the mere plea that it was a blank cheque given as security did not by itself displace that presumption. In the absence of cogent rebuttal evidence from the accused, the finding that the cheque was not issued towards a debt or liability was contrary to the evidence and therefore perverse. [Paras 12, 13, 14]

The Court found that the cheque was issued towards an enforceable liability and that the trial court's contrary view could not be sustained.

Maintainability of complaint through authorised representative - Complaint by payee or holder in due course - Representation of company in criminal complaint - The complaint could not be rejected on the ground that the person who instituted it lacked authority. - HELD THAT: - The Court noted that the objection regarding authorisation had already been negatived in the earlier remand order, which held that a complaint under section 138 could be made by the payee or holder in due course and that criminal law could be set in motion by a competent complaint of facts constituting the offence. It further accepted that an employee could represent the company in court proceedings and that the relationship of the persons concerned with the payee entity stood established. In that view, the challenge to the legal sanctity of the authorisation did not render the complaint invalid. [Paras 14]

The Court held that the complaint was maintainable and that the objection based on lack of authority was without merit.

Appellate interference with acquittal on perversity - Delay in disposal of appeal - Perverse finding - The prolonged pendency of the case was not by itself a ground to decline consideration of the appeal where the acquittal rested on perverse findings. - HELD THAT: - The Court considered the contention that long delay in disposal should deter interference, but held that delay alone could not justify allowing the accused to escape liability where the material on record showed admitted issuance of the cheque for a specific amount. Applying the test of perversity, the Court held that the trial court's conclusion regarding absence of legal debt and the necessity of final settlement was unsupported by the evidence and contrary to law. Since the acquittal was founded on such a perverse view, appellate interference was warranted. [Paras 15, 17, 18, 19]

The Court held that the appeal was liable to be allowed notwithstanding delay, because the acquittal was perverse.

Final Conclusion: The Court held that the trial court's acquittal rested on a perverse appreciation of the evidence, particularly in relation to the effect of the admitted signed cheque and the alleged want of final settlement. The appeal was accordingly allowed, the acquittal was set aside, and the respondents were convicted under section 138 of the Negotiable Instruments Act.