TMI Tax Updates e-Newsletter
May 18,2026

Entitlement to regular bail - Chartered Accountant - filing fake GST returns, generating fake bills/e-way bills and preparing forged documents for the purpose of tax evasion - Bail is rule and jail is exception - Pendency of trial -HELD THAT: - The Court held that continued custody was not justified having regard to the nature of the case, the fact that the offence was triable by the Magistrate, and the period of custody already undergone by the petitioner as against the maximum sentence stated by the Court. Applying the principle that bail is the rule and jail is the exception, the Court found that further detention during pendency of trial would not serve the ends of justice. [Paras 6, 7, 8]

The petitioner was directed to be released on regular bail on furnishing requisite bonds, with liberty to the State to seek cancellation if he was found involved in any other criminal case while on bail.

Final Conclusion: The petition for regular bail was allowed. Considering the custody already undergone, the trial forum, and the stage of the case, the Court held that continued detention was unwarranted and released the petitioner on bail subject to conditions.

Maintainability of petition - detention and release of goods under the GST regime - Alternative statutory remedy - Principles of Natural Justice - Jurisdictional Error.​​​​​​​ - HELD THAT: - The Court held that the release order itself recorded that, after service of notice in Form GST MOV-07, the person in charge came forward and made payment of the tax and penalty as proposed, upon which the authority released the goods and conveyance. In the absence of any material showing that such payment was made under protest at the relevant time, the Court treated the proceedings as having concluded on such payment. Since the penalty order was appealable and the petitioner had not filed an appeal within the prescribed period, the Court declined to entertain the writ petition. It further found that no case of violation of principles of natural justice or jurisdictional error had been demonstrated so as to justify bypassing the statutory remedy. [Paras 6, 7]

The writ petition was dismissed as devoid of merit, the Court declining interference in view of the concluded proceedings and the unavailed statutory appellate remedy.

Final Conclusion: The High Court declined to entertain the writ petition. It held that, once the tax and penalty were paid and the goods were released without any shown contemporaneous protest, the proper course was to pursue the statutory appeal, and no ground was made out for interference in writ jurisdiction.

Defective show cause notice - non-furnishing of return for a continuous period of six months - Effect of cancellation of the GST registration without granting adequate opportunity after issuance of the show cause - Action in Haste​​​​​​​ - No personal hearing - Non-speaking Order - Principles of Natural Justice -HELD THAT: - The Court found that the show cause notice granted 30 days for filing a response, expiring on 07.08.2024, yet the date of personal hearing had been fixed even before expiry of that period and the cancellation order was passed on the very next day, i.e. 08.08.2024. The Court held that mere grant of a formal opportunity is not sufficient; what is required is an appropriate and adequate opportunity of hearing. Passing the cancellation order in such haste did not inspire confidence, and fairness required the authority to grant the petitioner a further opportunity to submit his show cause and then decide the matter by a reasoned order. [Paras 10, 11]

The cancellation order was set aside; the show cause notice was revived, and the petitioner was directed to file his response within 30 days, after which the competent authority was to grant hearing and pass a reasoned order.

Final Conclusion: The writ petition was disposed of by setting aside the order cancelling GST registration on the ground that the petitioner had not been afforded adequate opportunity of hearing. The show cause notice was revived and the competent authority was directed to reconsider the matter after receiving the petitioner's reply and granting hearing, and to pass a reasoned order.

Service of notice through GST portal - Non-compliance with the notice and hearing requirements - No Opportunity of personal hearing - Violation of principles of natural justice - HELD THAT: - The Court accepted the petitioner's grievance that the proceeding had been carried forward only through portal uploading and that the requirement of affording hearing had not been complied with. On the State also not disputing that the matter was covered by the earlier decisions of the Court in Rounak Int. Udyag & Anr. vs. The State of Bihar [2025 (8) TMI 1784 - PATNA HIGH COURT] and M/s Durga Paper Plate Industries vs. Union of India & Ors. [2025 (7) TMI 1703 - PATNA HIGH COURT], wherein this Court has taken a view on Section 169 of the BGST Act, 2017.

The impugned determination was held unsustainable for breach of the statutory requirement of hearing read with the manner of service contemplated under the Act. The matter was therefore directed to be reconsidered after granting the petitioner an appropriate opportunity of hearing. [Paras 8]

The DRC-07 order was set aside and the Assessing Officer was directed to pass a fresh order after giving an appropriate opportunity of hearing in accordance with law.

Final Conclusion: The writ petition was disposed of by setting aside the assessment embodied in DRC-07 for breach of natural justice. The Assessing Authority was directed to grant hearing to the petitioner and pass a fresh order within the time stipulated by the Court.

Entitlement to issue a supplementary show cause notice and proceed with adjudication in accordance with the earlier order - Input Tax Credit - Suspension of Registration - Coercive Recoveryin relation to the demand notices - Principles of Natural Justice - HELD THAT:- The Court disposed of the writ petition by permitting the respondents to issue the supplementary show cause notice within the time granted, directing the petitioner to file its reply thereafter, and allowing adjudication to proceed after personal hearing. The proceedings under FORM DRC-01 were permitted to continue, but no coercive steps were to be taken against the petitioner till the supplementary show cause notice is adjudicated.

Entitlement to directions for revocation of cancellation of GST registration and restoration of registration - Compliance with tax and return filing requirements - HELD THAT:- In a similar circumstance, this Court, by an Order [2024 (10) TMI 1387 - ANDHRA PRADESH HIGH COURT], had disposed of the Writ Petition with certain directions.

The writ petition was disposed of by permitting the petitioner to apply for revocation, file draft returns, deposit the taxes due within the time stipulated, and directing the registering authority to accept even manual filing if necessary and to consider the revocation application within the prescribed period.

Validity of the assessment order passed, without a reply to the show cause notice - disputed tax subsequently been recovered through bank attachment and recovery notice - No Opportunity of Hearing - Principles of Natural Justice - The assessment made in the absence of a reply was directed to be reopened for fresh consideration on merits, in view of the indication that the disputed tax had already been recovered. - HELD THAT: - The Court noted that the impugned order had confirmed the proposal in the show cause notice because no reply had been filed. It further recorded the communication showing that the bank account had been attached and the arrears for the relevant year had been fully collected and set off. In that background, the matter was remitted to the respondent for a fresh order on merits, with liberty to the petitioner to file a reply to the show cause notice with supporting documents, and with a direction that the impugned order be treated as an addendum to the show cause notice. The Court also directed that due notice be given before passing the fresh order, while making the remand conditional upon the petitioner filing the reply within the stipulated time, failing which the impugned order would stand confirmed. [Paras 6, 7, 8, 9, 10]

The matter was remitted for fresh adjudication on merits subject to the petitioner filing its reply with documents within the prescribed time; otherwise, the impugned order would stand confirmed.

Final Conclusion: The writ petition was disposed of by remitting the matter to the respondent for fresh consideration on merits for the tax period 2020 - 2021, subject to the petitioner filing a reply to the show cause notice with supporting documents within the time granted. In default, the impugned assessment order would stand confirmed.

Effect of appellate authority's non-speaking order - Non- consideration of specific contentions - Ex parte assessment - Opportunity of hearing - Natural Justice - The appellate order was held unsustainable for failure to deal with the petitioner's specific contentions and material stated to have been produced at the time of personal hearing. - HELD THAT: - The Court found, on a prima facie reading of the appellate order, that it proceeded on general observations without adverting to the specific grounds raised by the petitioner. It also accepted the grievance that the material stated to have been filed for the relevant tax period, including supporting documents, had not been considered by the appellate authority. Since the appellate order did not reflect examination of the petitioner's specific case, it could not be sustained. [Paras 5, 7]

The appellate order was set aside.

Ex parte assessment - Opportunity of hearing - HELD THAT: - The Court noted that the adjudication order was admittedly ex parte. While recording the State's contention that the petitioner had failed to respond despite service through available modes, the Court held that, having regard to the consequences of the order and its ex parte character, the matter should be reopened. At the same time, the Court attributed lapse and lack of diligence to the petitioner and, therefore, made the grant of relief conditional upon payment of costs, while keeping all contentions open on remand. [Paras 6, 7]

The adjudication order was set aside and the matter was remanded to the stage of reply to the show cause notice, with costs imposed on the petitioner.

Final Conclusion: The writ petition was disposed of by setting aside both the appellate order and the ex parte adjudication order. The matter was remitted to the stage of reply to the show cause notice with all contentions kept open, subject to payment of costs by the petitioner.

Cancellation of GST registration for non-filing of returns for a continuous period - rejection of the application for revocation - compliance with statutory tax obligations and payment of outstanding dues. - HELD THAT: - The Court held that, since the petitioner was carrying on taxable works contract activity, continuance within the GST regime was necessary to ensure discharge of statutory tax liabilities. Exclusion of the petitioner from registration would operate against revenue interest because any dues otherwise payable under the GST law would remain outside the tax system. Noting that in similar matters this Court and co-ordinate Benches had directed restoration of registration subject to payment of dues, the Court considered it appropriate to adopt the same course and require the authorities to intimate the outstanding statutory dues up to the date of cancellation, whereafter the petitioner was to deposit the same and the authority was to pass orders revoking cancellation and restoring registration. [Paras 7, 8, 9]

The orders cancelling registration and rejecting revocation were set aside, with a direction to restore the GST registration upon intimation and payment of all outstanding statutory dues, if any.

Final Conclusion: The writ petition was disposed of by setting aside the cancellation and rejection orders and directing the authorities to restore the petitioner's GST registration after intimating and receiving payment of the outstanding statutory dues, if any.

Scope of advance ruling under section 97 - Maintainability of advance ruling application - Whether for availing zero-rated supply treatment under Section 16 of the IGST Act, 2017 read with Notification No. 09/2017-Integrated Tax (Rate) dated 28.06.2017, as amended w.e.f. 01.10.2023, for services supplied from Domestic Tariff Area (DTA) to Special Economic Zone (SEZ) units/developers, the phrase “for authorized operations” can be established through documentary evidence including Letter of Approval (LOA) / Eligibility Certificate issued by SEZ authorities demonstrating that the service relates to authorised operations; or whether endorsement from the Specified Officer of SEZ on each invoice is mandatorily required irrespective of other documentary evidence available (Letter of Approval (LOA) / Eligibility Certificate) to prove that the service is supplied for “authorized operations”?. - HELD THAT: - The applicant has submitted that failure to obtain clear guidance on documentary sufficiency, Intra-SEZ supply treatment & Endorsement alternatives exposes the applicant to significant GST liability, interest, and penalties if assessment authorities or refund processing authorities subsequently hold contradictory that supplies were not “for authorized operations”/Intra-SEZ supplies do not qualify for zero-rating due to absence of endorsement. This uncertainty directly impacts working capital and liquidity due to IGST implications, refund eligibility and assessment outcomes.

The Authority held that all three questions were, in substance, confined to the nature and sufficiency of documentary evidence required to prove that the supplies were for authorised operations, including in cases of intra-SEZ supplies and absence of endorsement by the SEZ authorities. Such questions did not relate to any of the matters enumerated in section 97(2), namely classification, applicability of notification, time and value of supply, admissibility of input tax credit, determination of liability to pay tax, requirement of registration, or whether an activity amounts to supply. Since the application did not raise a question falling within the statutory categories on which an advance ruling can be sought, the Authority declined to answer any of them. [Paras 14, 15, 16]

All three questions were left unanswered as they fell outside the ambit of section 97(2) of the CGST Act.

Final Conclusion: The Authority did not examine the merits of zero-rating, authorised operations, or endorsement requirements. It held that the application merely sought guidance on documentary sufficiency, which is outside the permissible scope of advance ruling, and therefore refrained from answering all three questions.

Tariff classification - Correct and appropriate classification for product ‘AAC bricks’ - ceramic products - classifiable under Tariff Item 69041000 of Chapter 69 as building bricks, or classifiable under Heading 6810 - Trade Parlance Test - Common Parlance Test - Specific Entry Over General Entry - Classification by HSN Notes.-HELD THAT:- The Authority compared the applicant's manufacturing process with the HSN notes to headings 6810 and 6904 and the Chapter Notes to Chapter 69, and held that the process aligned with the description in heading 6810 relating to sand-lime articles subjected to steam treatment in autoclaves. It further held that Chapter 69 applies only to ceramic products fired after shaping and excludes articles heated below 800 degrees C; on that basis, AAC bricks/blocks were treated as outside Chapter 69. The Authority also rejected the applicant's reliance on the specific entry for building bricks under heading 6904, holding that a specific entry for building blocks and bricks also exists within heading 6810, so the argument of specificity did not assist the applicant. On the material placed, including the test report, the Authority concluded that the goods were not shown to be ceramic in nature and therefore could not be classified under heading 6904. [Paras 11, 14, 15]

The goods were held to be correctly classifiable under heading 6810; the claim for classification under tariff item 69041000 was rejected.

Final Conclusion: The Authority ruled that AAC bricks/blocks manufactured by the applicant do not satisfy the requirements of Chapter 69 as ceramic products and are correctly classifiable under heading 6810 of the Customs Tariff Act. The plea for classification under tariff item 69041000 as building bricks was not accepted.

Input tax credit on structural support of plant and machinery - Meaning of plant and machinery under blocked credit provisions - Works Contract Services -Foundation and structural support vis-a-vis civil structure - input services used for construction of the concrete VCV tower erected to support the VCV line used for manufacture of EHV cables. -HELD THAT: - The concrete structure in the form of VCV tower provides structural support with the necessary height and infrastructure while maintaining the structural integrity, stability, precision and overall efficiency of the support system for manufacture of EHV cables and is thus an essential structural support to the entire VCV machine line in the manufacture of EHV cables.

The Authority held that, for purposes of section 17(5)(c) and (d), the controlling question was whether the concrete tower constituted foundation or structural support of plant and machinery. On examination of the layout of the VCV line, the floor-wise process, and the load-bearing function of the tower, it found that the concrete VCV tower was indispensable for holding, stabilising and supporting the vertically laid manufacturing line and for maintaining the structural integrity, precision and efficiency of the manufacturing process. Since the Explanation to section 17 expressly includes foundation and structural supports within the expression plant and machinery, such structural support stood outside the blocked-credit bar. The exclusion of land, building or other civil structures was construed as not extending to foundation and structural support of plant and machinery. The Authority also drew support from the CBIC circular on ducts and manholes in OFC networks and from the similar ruling in M/s. KEI Industries ltd.[2025 (8) TMI 551 - APPELLATE AUTHORITY FOR ADVANCE RULING, GUJARAT]. [Paras 22, 23, 25, 26, 27]

The concrete VCV tower was treated as structural support of plant and machinery, and not as a disqualifying civil structure, with the result that input tax credit on the related inputs and input services was held allowable.

Final Conclusion: The Authority ruled that the applicant was entitled to input tax credit on inputs and input services used for construction of the concrete VCV tower. The tower was held to be the foundation and structural support of plant and machinery used in manufacture of EHV cables, and therefore outside the bar contained in section 17(5)(c) and (d) of the CGST Act.

Income tax demands against company dissolved/Insolvent - extinguishment of claims not provided for in resolution plan - no continuation of proceedings in respect of preapproval statutory dues - delay in filing the present special leave petition

HC held [2025 (5) TMI 976 - GUJARAT HIGH COURT] that demand notices and penalty orders relating to the assessment years prior to the NCLT approval of the resolution plan (04.09.2020) and not provided for in the approved plan are quashed

HELD THAT:- As delay of 231 days in filing the present special leave petition, which has not been satisfactorily explained. Even on merits, we do not see any good ground and reason to interfere with the impugned judgment.

Special leave petition is, accordingly, dismissed on the ground of delay as well as on merits.

TCS u/s 206C - compounding fees received from illegal miners/transporters of minerals - Scope of Mines and Minerals (Development and Regulation) Act, 1957/ ‘the MMDR Act’ - offenders who do illegal mining or transportation/storage without having lease or license or have not entered into the contract for transfer of right in Mines or Quarry and from whom Compounding Fine is collected as per provisions under Rule 71(5) of the Chhattisgarh Minor Mineral Rules, 2015 - HELD THAT:- We are not inclined to interfere with the impugned judgment and order of the High Court [2025 (6) TMI 2041 - CHHATTISGARH HIGH COURT] hence, the special leave petition is dismissed.

Pending interlocutory application(s), if any, shall stand disposed of.

TP Adjustment - Bright Line Test - Royalty adjustment - Comparability analysis

Bright Line Test - Transfer pricing adjustment - HELD THAT: - The Court recorded that the proposed question regarding use of the Bright Line Test stood covered by its earlier decision in the assessee's own case, wherein it had held that the test is not provided under the Income-tax Act, 1961 or the Rules and, being alien to the statutory scheme, cannot be adopted. No contrary decision of the Supreme Court was shown. [Paras 5, 7]

The proposed question on adoption of the Bright Line Test was rejected.

Royalty adjustment - Arm's length price - TP adjustment on royalty payment, including the method of computation and the basis for determining the arm's length price - HELD THAT: - The Court noted the assessee's submission that the issues relating to whether any transfer pricing adjustment was required in respect of royalty payment, and if so the method and quantum for such adjustment, had already been decided in the assessee's own cases. The Revenue was unable to dispute that position or point to any contrary decision of the Supreme Court. On that basis, the Court declined to entertain the proposed questions. [Paras 6, 7]

The proposed questions relating to royalty adjustment were rejected as covered by earlier decisions in the assessee's own case.

Comparability analysis - Substantial question of law - exclusion of Febulka Advertising Pvt. Ltd. as a comparable - HELD THAT: - The Court found that the Tribunal had excluded Febulka Advertising Pvt. Ltd. after recording that it was engaged in an entirely different business and that its figures were not available in the public domain in entirety and therefore could not be selectively used. This was held to be a finding of fact based on appreciation of material on record, beyond interference in the High Court's limited jurisdiction under Section 260A. [Paras 9, 10, 11]

The proposed question on exclusion of the comparable was rejected as purely factual.

Final Conclusion: For AY 2015-16, the appeal was dismissed. The Court held that the proposed transfer pricing questions on the Bright Line Test and royalty adjustment were already covered against the Revenue in the assessee's own cases, and that the issue relating to exclusion of a comparable was purely factual and did not raise any substantial question of law.

Reassessment limitation under amended law - Extended limitation for escaped income exceeding threshold - Stamp duty valuation in computing escaped capital gains - notice issued beyond three years for reopening the assessment - whether the escaped income crossed the threshold for the extended period, the stamp valuation adopted for the property transfer had to be taken into account and the petitioner's share exceeded fifty lakh rupees? - HELD THAT: - The Court held that, on a conjoint reading of Sections 149, 50C and 48, capital gains arising from the transfer had to be computed with reference to the guideline value adopted for stamp duty purposes. Since the property was valued at the higher stamp value and the petitioner held one-fourth share, the value attributable to her share exceeded fifty lakh rupees. On that basis, the case fell within the extended period under the amended reassessment regime, and the order under Section 148A(d) and consequential notice under Section 148 could not be said to be without jurisdiction. The objection that the petitioner's written reply was not considered was held to be of no consequence once the principal issue of limitation was answered against her. [Paras 21, 22, 23, 24, 25]

The challenge to the reassessment order and notice failed, as the extended period of limitation was validly invoked.

Final Conclusion: The writ petition was dismissed. The Court upheld the impugned order under Section 148A(d) and the notice under Section 148 for Assessment Year 2016-2017, and directed completion of the assessment with exclusion of the period during which the matter remained pending before the Court for the purpose of limitation.

Reassessment limitation - Exclusion of time u/s 149 - Meaning of asset u/s 149(1)(b)

Reassessment limitation - Exclusion of time u/s 149 - Section 148A procedure - whether notice issued under section 148 on 28.04.2022 for Assessment Year 2015-2016 was barred by limitation merely because the six-year period under the old regime ended on 31.03.2022? - HELD THAT: - The Court held that, although the last date for issuance of notice under the old regime for Assessment Year 2015-2016 was 31.03.2022, the section 148A(b) notice had in fact been issued on that very date. Under the third proviso to section 149, the time or extended time allowed to the assessee to respond to the show-cause notice has to be excluded while computing limitation, and under the fourth proviso the balance period is correspondingly extended where required. Since the assessee sought time and ultimately replied on 21.04.2022, the AO had time till 21.05.2022 to pass the order u/s 148A(d). The order u/s 148A(d) and the consequential notice u/s 148 having been issued on 28.04.2022 were therefore within time. The Court further held that the reliance placed on the concession recorded in the later Supreme Court decision Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] was misplaced and did not warrant interference with the impugned proceedings. [Paras 49, 50, 51, 52, 54]

The challenge to the reassessment proceedings on limitation was rejected.

Meaning of asset under section 149(1)(b) - Inclusive definition - Clarificatory amendment - Whether Entries found in the books or material recovered during survey were capable of being relied upon for invoking section 149(1)(b), and the plea that they were not 'assets' as on 31.03.2022 was untenable? - HELD THAT: - The Court held that the definition of asset in the Explanation to section 149(1)(b), as it stood up to 31.03.2022, was inclusive in nature because the statute used the expression 'include'. On that basis, the contention that entries in books or material recovered during survey could not be treated as falling within the statutory concept was not acceptable. The Court further held that the amendment effective from 01.04.2022 was clarificatory in nature and that, during the period in dispute, the definition of asset was broader. Consequently, the supplementary plea founded on the narrower reading of asset was rejected. [Paras 55, 56, 57, 58, 59]

The objection that the material relied upon did not answer the description of 'asset' under section 149(1)(b) was negatived.

Final Conclusion: The writ petition was dismissed. The Court upheld the section 148A(d) order and the consequential section 148 notice for Assessment Year 2015-2016 as being within limitation and rejected the contention that the material relied upon did not fall within section 149(1)(b).

Validity of Reassessment - non Disclosure of relied upon material - Section 148A procedure - denial of natural justice - as argued material relied upon for reopening was not furnished to the assessee and no effective opportunity of rebuttal or cross-examination was granted - HELD THAT: - The Tribunal found that the reopening was founded on information said to have been received from the Investigation Wing regarding alleged on-money payment, but the assessee had specifically asked for copies of the statements, seized material, coded sheets and other incriminating documents relied upon by the AO.

Revenue did not place anything on record to show that those materials were supplied, nor was it shown that the requested cross-examination was granted. Applying the principle noticed from SARA AKBARBHAI SINDKHEDAWALA [2024 (1) TMI 1557 - BOMBAY HIGH COURT] and Gedalia Multitrading Pvt. Ltd. [2026 (2) TMI 981 - ITAT MUMBAI] and Richa Finance & Investment Private Limited [2025 (12) TMI 1027 - ITAT MUMBAI] the Tribunal held that non-furnishing of the relied upon material deprived the assessee of the effective opportunity contemplated under section 148A(b) and went to the root of the jurisdiction assumed for reassessment. [Paras 5]

The order under section 148A(d), the consequential notice under section 148 and the reassessment framed under section 147 read with section 144B were quashed.

Final Conclusion: The Tribunal allowed the appeal and quashed the reassessment proceedings for failure to furnish the relied upon material and to provide an effective opportunity contemplated under section 148A. The additions on merits were not adjudicated and were left open.

Validity of reassessment proceedings -Limitation for reassessment notice - Validity of notice u/s 148 - notice issued under section 148 for A.Y. 2015-16 after expiry of six years from the end of the assessment year

HELD THAT: - The Tribunal found from the record that the notice under section 148 had been issued on 28.04.2022 for A.Y. 2015-16. Applying the view consistently taken by the coordinate Benches and by the Telangana High Court in Cyberabad Citizens Health Services Private Limited [2025 (11) TMI 1967 - TELANGANA HIGH COURT] it held that for assessments commencing on or before 01.04.2022, the notice had to be issued within six years from the end of the relevant assessment year. Since, for A.Y. 2015-16, the outer limit expired on 31.03.2022, the notice issued thereafter was barred by limitation u/s 149(1)(b) read with the proviso. Once the notice itself was invalid, the reassessment order could not survive, and the remaining grounds were left unadjudicated. [Paras 7]

The reassessment notice was quashed as barred by limitation, and the consequential assessment order was held invalid.

Final Conclusion: The Tribunal allowed the assessee's appeal by holding that the notice u/s 148 for A.Y. 2015-16 had been issued beyond limitation and was therefore invalid. The consequential reassessment order was also held unsustainable, and the other grounds were not examined.

Penalty u/s 271(1)(b) - non-compliance with notices u/s 142(1) - “reasonable cause” as per section 273B

Penalty for non-compliance of notice - Independence of penalty proceedings - HELD THAT: - The Tribunal held that the penalty proceedings arose solely from non-compliance with notices issued under section 142(1) and therefore had to be examined on that footing alone. The assessee did not dispute the non-compliance and did not advance any case of reasonable cause for such failure. In that view, the plea that the notice u/s 148 for A.Y. 2015-16 was time-barred was treated as a separate controversy not forming part of the penalty order and incapable of dislodging the penalty on the present issue. [Paras 5]

The challenge founded on the alleged invalidity of the notice under section 148 was rejected as irrelevant to the penalty proceedings under section 271(1)(b).

Multiple defaults under statutory notices - Penalty quantification - three instances of non-compliance with notices under section 142(1) were treated as a single default - HELD THAT: - While sustaining the applicability of penalty for non-compliance, the Tribunal took a lenient view on quantification. It held that, though three separate notices had been issued, the defaults could be treated as one composite default of non-compliance with notices u/s 142(1), warranting only one penalty. [Paras 5]

The penalty was reduced from Rs. 30,000/- to Rs. 10,000/- by treating the three defaults as one default.

Final Conclusion: The appeal was partly allowed. The Tribunal upheld the levy of penalty for non-compliance with notices under section 142(1), rejected the assessee's attempt to link it with the alleged invalidity of the notice under section 148, but reduced the penalty by treating the three defaults as a single default.

Peak credit theory - unexplained advances for purchase of land - Disallowance under section 40(a)(ia) - Estimation of profit on job work receipts - Cash advances for purchase of land and section 40A(3) - Interest on borrowed funds diverted for non-business purposes - Survey surrender and valuation of work-in-progress

Unexplained advances - Peak credit theory - HELD THAT: - The Tribunal found that the controversy stood covered by the earlier decision in the assessee's own case for preceding assessment years, where the peak theory had been accepted in relation to the seized material. Following that precedent [2012 (4) TMI 853 - ITAT AGRA] it held that the further addition sustained by the Commissioner (Appeals) could not survive, and the Revenue's corresponding challenge for both years also failed. [Paras 9, 22, 49]

The assessee's challenge to the balance addition was allowed, and the Revenue's grounds on the same issue for AYs 2008-09 and 2009-10 were dismissed.

Disallowance u/s 40(a)(ia) - Payee having offered income to tax - Disallowance of interest expenditure for non-deduction of tax at source where the lender had already accounted for the interest income and paid tax thereon - HELD THAT: - The Tribunal noted that the lender had deducted the interest component at the time of advancing the loan, recorded it in its books and offered it to tax. It held that, in light of the statutory amendments and the judicial view noticed by it, once the payee has already disclosed the income and paid the due tax, disallowance u/s 40(a)(ia) is not warranted unless there is a finding that the assessee is in default. As no such finding existed, the disallowance could not be sustained. [Paras 14]

The addition under section 40(a)(ia) was deleted.

Estimation of profit on job work receipts - Only income component taxable - HELD THAT: - On the assessee's objection to the rate of estimation, the Tribunal held that what mattered was the expected margin from the work executed, and it saw no reason to interfere with the estimate of profit adopted by the Commissioner (Appeals). On the Revenue's challenge to deletion of the larger addition, it held that the Assessing Officer had wrongly sought to tax the whole contract value, whereas only the income embedded in the project receipts could be assessed. The estimate at 12 per cent, with adjustment for income already declared, was therefore sustained. [Paras 18, 39]

The assessee's ground against the 12 per cent estimation failed, and the Revenue's challenge to deletion of the balance amount was also dismissed.

Cash advances for purchase of land and section 40A(3) - Advance not amounting to incurred expenditure - Cash payments made as advances for purchase of land, not claimed as expenditure and not shown to have resulted in completed purchases during the year, did not attract disallowance under section 40A(3). - HELD THAT: - The Tribunal accepted that the amounts in question were only advances towards proposed land purchases and had not been claimed as revenue expenditure. It held that an advance does not become expenditure merely on payment, since the transaction of purchase is complete only when the deal is finalized. It further held that section 40A(3) applies to payments made towards expenditure, and therefore the provision could not be invoked on such advance payments in the year under consideration. [Paras 27]

The Revenue's ground seeking disallowance under section 40A(3) was dismissed.

Interest on borrowed funds diverted for non-business purposes - Commercial expediency - Interest disallowance under section 36(1)(iii) - advances to suppliers or other business-related parties. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals) in distinguishing between advances connected with the assessee's business and advances lacking any demonstrated business purpose. It accepted that no interest could be expected on advances to suppliers and that business-related advances could not justify disallowance. At the same time, where the assessee had failed to explain the purpose of advances to certain parties, the disallowance to that limited extent was proper. [Paras 33]

The restricted disallowance sustained by the Commissioner (Appeals) was affirmed and the Revenue's ground was dismissed.

Survey surrender and valuation of work-in-progress - Artificial inflation of work-in-progress - assessee had increased work-in-progress on the basis of survey surrender - HELD THAT: - The Tribunal accepted that the assessee had offered additional income during survey and had reflected that disclosure by correspondingly increasing the work-in-progress. It held, however, that such enhancement of work-in-progress was only an adjustment entry and did not represent actual expenditure supported by vouchers. In its view, permitting the assessee to carry forward such inflated work-in-progress would confer an unwarranted benefit in the subsequent year by way of deduction of expenditure never actually incurred. On that reasoning, it held that the Assessing Officer was justified in reducing the work-in-progress to the extent of the surrendered amount, and the Revenue's ground had to succeed. The same reasoning was applied to AY 2009-10. [Paras 45, 46, 51]

The deletion of the addition on account of work-in-progress was reversed for AY 2008-09, and the Revenue's identical ground for AY 2009-10 was allowed.

Final Conclusion: The assessee's appeal for AY 2008-09 was partly allowed. The Revenue's appeals for AYs 2008-09 and 2009-10 were also partly allowed, the Tribunal sustaining relief on the issues of peak addition, job work profit estimation, section 40A(3) and section 36(1)(iii), but restoring the addition relating to work-in-progress based on survey surrender.

DTAA vis-a-vis Act beneficial option - exemption under the India-Singapore DTAA for capital gains arising from shares acquired before 01.04.2017 - separate source of income in capital gains transactions - distinction between source of income and head of income - Treaty-exempt capital gains outside total income computation

Whether assessee was entitled to claim treaty exemption on long-term capital gains arising from transfer of shares acquired prior to 01.04.2017 and, at the same time, to be governed by the Act in respect of long-term capital loss arising from another transaction, without compulsory aggregation of all capital gains and losses for the assessment year? - HELD THAT: - The Tribunal, following the coordinate bench decision in Prashant Kothari [2025 (6) TMI 393 - ITAT MUMBAI] held that each investment or transaction giving rise to capital gain or capital loss constitutes a separate source of income. On that footing, section 90(2) permits the assessee to avail, qua each such source, the provisions of the Act or the applicable DTAA, whichever is more beneficial. The view of the Assessing Officer and the DRP that all transactions under the head capital gains had to be aggregated and subjected uniformly either to the Act or to the DTAA was rejected as contrary to the settled distinction betweensource of income and head of income.

The Tribunal further held that gains from transfer of shares acquired prior to 01.04.2017, being governed by Article 13(4A) of the India-Singapore DTAA, do not form part of taxable income in India and therefore cannot be drawn into the computation provisions of the Act for set-off of losses from other transactions. The Revenue's approach would indirectly tax gains not taxable in India under the treaty, which is impermissible under section 90(2). [Paras 6]

The addition made by denying treaty benefit and by aggregating the transactions was deleted, and the AO was directed to grant the treaty benefit and allow the assessee's claim accordingly.

Final Conclusion: The Tribunal allowed the appeal and held that the assessee could claim the benefit of the India-Singapore DTAA in respect of one capital gains transaction and, simultaneously, the benefit of the Act in respect of another transaction where that course was more beneficial under section 90(2). The addition made by compelling aggregation of all transactions under the Act was deleted.

Unexplained money u/s 69A - Cash deposits during demonetisation - Presumptive taxation under section 44AD - Deduction under Chapter VI-A

Unexplained money u/s 69A - Cash deposits during demonetisation - Business receipts - HELD THAT: - The Tribunal found that the assessee had produced VAT returns showing turnover, and that such turnover was not disputed by the Revenue. In remand proceedings, no adverse material was brought on record to disprove the explanation that the deposits arose from regular business receipts, and there was no material to show that the deposits were over and above the declared turnover. Applying the principle emerging from ACIT vs. Hirapanna Jewellers [2021 (5) TMI 447 - ITAT VISAKHAPATNAM], R.S. Diamonds India (P) Ltd. [2022 (10) TMI 389 - ITAT MUMBAI] and Eagle Fleet Services [2023 (7) TMI 926 - ITAT CHENNAI] the Tribunal held that where the source of cash deposits is traceable to disclosed business receipts, section 69A cannot be invoked merely on suspicion or on the timing of deposit. The appellate authority was therefore not justified in disregarding the evidence and remand report without cogent reasons. [Paras 12, 14, 15, 16]

The addition made under section 69A in respect of demonetisation cash deposits was deleted.

Presumptive taxation under section 44AD - Estimation of income - Double addition - Income of an eligible assessee under the presumptive scheme had to be computed on the total turnover OR selective bank deposits or credits - HELD THAT: - The Tribunal held that once it stood accepted that the assessee was carrying on business, that the turnover had been determined, and that he was eligible for computation under section 44AD, profit could not be estimated on only a portion of bank deposits. Estimating profit at 8% on isolated deposits, without rejecting the overall turnover and without showing that such deposits were independent of business receipts, was arbitrary and contrary to the scheme of presumptive taxation. Such an approach also resulted in impermissible duplication by subjecting the same receipts to multiple additions in different forms. [Paras 17, 18]

The Assessing Officer was directed to compute income under section 44AD by applying 8% to the total turnover declared by the assessee.

Consequential applicability of section 115BBE - HELD THAT: - The Tribunal held that the applicability of section 115BBE was only consequential to the addition under section 69A. Once the addition under section 69A was deleted, invocation of section 115BBE did not survive and the issue became academic. [Paras 19]

The question of applying section 115BBE did not arise.

Deduction u/s. 80C - Deduction under Chapter VI-A - LIC premium paid during the relevant financial year - HELD THAT: - Having directed computation of income under section 44AD, the Tribunal held that the assessee would be entitled to claim deduction under Chapter VI-A from the gross total income, subject to verification of the claim for LIC premium. The matter required factual verification of the supporting evidence and was therefore left to the Assessing Officer for allowing the deduction in accordance with law. [Paras 20]

The Assessing Officer was directed to verify the evidence and allow the deduction under section 80C in accordance with law.

Final Conclusion: The Tribunal held that the demonetisation cash deposits formed part of the assessee's disclosed business receipts and could not be separately taxed under section 69A. Income was directed to be computed under section 44AD on the total turnover, section 115BBE was held inapplicable as a consequence, and the claim under section 80C was restored for verification.

TP Adjustment - Operating and non-operating items under TNMM - Selection of comparables and search matrix - Turnover filter in transfer pricing comparability - Working capital adjustment under TNMM - Delayed receivables as international transaction - Aggregation of closely linked transactions - Intra-group services and nil arm's-length price - Disallowance u/s 40(a)(ia)

Operating expenses - Provision for doubtful debts - Rates and taxes - whether Provision for doubtful debts and routine rates and taxes were to be treated as operating items while computing the operating margins of the assessee and the comparables? - HELD THAT: - The Tribunal held that provision for doubtful debts has a direct nexus with sales and realization of trade receivables and, therefore, bears the character of an operating expense. It also accepted the assessee's plea of consistency, noting that the Revenue had not disputed such treatment in earlier years. As regards rates and taxes, the Tribunal found that statutory levies such as customs duty, road tax and similar charges incurred in the ordinary course of business are directly relatable to business operations. Rule 10TA was held not to justify exclusion of such items, since the rule excludes only income-tax and not routine business levies falling under rates and taxes. [Paras 13]

The AO/TPO was directed to recompute the operating margins by treating both provision for doubtful debts and rates and taxes as operating in nature.

Search matrix - Functional comparability - Turnover filter - Software development services - HELD THAT: - The Tribunal held that the search matrix is only a guiding tool and not a statutory condition for inclusion or exclusion of comparables. A comparable outside the TPO's search matrix cannot be rejected solely for that reason if it is otherwise functionally comparable and satisfies the relevant filters; equally, unexplained inclusion of new comparables without showing satisfaction of filters would amount to cherry picking. Applying this principle, the Tribunal included Infomile Technologies Ltd., KALS Information Systems Ltd., Rheal Software Ltd. and Yudiz Solutions Pvt. Ltd. after examining their functional profile and, where applicable, consistency with the assessee's own earlier years. It excluded Aptus Software Labs Pvt. Ltd., Consilient Technologies Pvt. Ltd., Cybage Software Pvt. Ltd., Great Software Laboratory Pvt. Ltd., Indianic Infotech Ltd., Net4nuts Ltd., Nihilent Ltd., Orion India Systems Ltd. and Tata Elxsi Ltd. on functional dissimilarity and, in some cases, failure of export filter or absence of segmental comparability. On turnover, the Tribunal held that scale materially affects profitability and comparability under TNMM; companies with substantially higher turnover than the assessee, including Infosys Ltd., Larsen and Toubro Infotech Ltd., Mindtree Ltd., Tata Consultancy Services Ltd. and Wipro Ltd., were therefore excluded, and an upper turnover filter of 10 times was directed to be applied as a reasonable measure. [Paras 27]

The software and engineering design comparables were revised in the manner directed by the Tribunal, and the adjustment was ordered to be recomputed on that basis.

ITeS comparables - Functional dissimilarity - Turnover filter - Search matrix - HELD THAT: - The Tribunal excluded Anderson Business Solutions Pvt. Ltd., Savitriya Technologies Pvt. Ltd., Vitae International Accounting Services Pvt. Ltd. and Inteq BPO Services Pvt. Ltd. after finding that their activities in accounting services, software development, staffing for accounting and pension firms, and core BPO functions respectively were materially different from the assessee's ITeS functions. Datamatics Business Solutions Pvt. Ltd., Tech Mahindra Business Services Ltd., CES Ltd. - ITeS Segment and TTEC India Customer Solutions Pvt. Ltd. were excluded by applying the turnover principle already discussed in the software segment. As regards Microland Ltd., the Tribunal held that it could not be rejected merely because of the search matrix objection, and on examining the material found it functionally comparable and part of the assessee's own search matrix. [Paras 36]

The AO/TPO was directed to exclude the identified dissimilar and high-turnover comparables and to include Microland Ltd. in the ITeS segment.

Distribution segment comparables - Functional comparability - Gross margin method - Consistency - HELD THAT: - The Tribunal included Biomedicon Services (India) Pvt. Ltd., Hicks Thermometers (India) Pvt. Ltd. and Pika Medical Pvt. Ltd. after finding them engaged in trading of medical and surgical equipment and, in the case of Hicks, also supported by acceptance in the assessee's own earlier year. It excluded Dental Avenue India Pvt. Ltd., IDS Denmed Pvt. Ltd., MDD Medical Systems (India) Pvt. Ltd., Narang Medical Ltd. and Stryker India Pvt. Ltd. because their activities in dental services, dental cements and fillings, support-service offerings, manufacturing or consumable-oriented products, and wholesale trade services with failure of RPT filter were not comparable with the assessee's distribution of specified medical products for resale without modification. The objection regarding Schiller Healthcare India Pvt. Ltd. was dismissed as not pressed. The Tribunal further held that, as in the assessee's own earlier years, gross margin was the proper basis for benchmarking the trading/distribution segment, and in the absence of any change in facts, consistency required the same method to be followed. [Paras 45]

The distribution segment comparables were modified as directed, and the TPO was directed to benchmark the segment by comparing gross margins with the final set of comparables.

Manufacturing comparables - Functional comparability - Research and development intensity - HELD THAT: - The Tribunal included Allied Medical Ltd., Centenial Surgical Suture Ltd., Hemant Surgicals Industries Ltd., Iscon Surgicals Ltd., Mediplus (India) Ltd. and Poly Medicure Ltd. after finding them engaged in manufacturing of medical equipment, devices or allied surgical products and, in some cases, also part of the search matrix. Agappe Diagnostics Ltd. was excluded because its significant research and development expenditure indicated innovation-driven functions, higher-end assets and a different risk profile from that of the assessee, which carried on routine activities without comparable R&D. Sahajanand Medical Technologies Ltd. was excluded because its manufacture of balloon catheter cardiac stents, valves and occludes, together with significant R&D and clinical trial expenditure, rendered it functionally distinct from the assessee's contract manufacturing profile. [Paras 55]

The AO/TPO was directed to revise the manufacturing segment comparable set by including the specified manufacturing companies and excluding Agappe Diagnostics Ltd. and Sahajanand Medical Technologies Ltd.

Working capital adjustment - TNMM comparability adjustment - HELD THAT: - The Tribunal held that under TNMM, differences in working capital levels between the tested party and comparables materially affect net margins and therefore require adjustment. It found that the rejection of the claim by the lower authorities on the ground of absence of details was unjustified, since the assessee had placed sufficient material on record and the authorities had not undertaken a proper analysis based on average balances and comparable data. Consistency with the assessee's own earlier year also supported grant of the adjustment. Since the actual quantification still required examination of receivables, payables and inventory levels, the matter was restored for proper computation. [Paras 63]

The issue was restored to the AO/TPO with a direction to grant working capital adjustment in accordance with law after examining the necessary details.

Delayed receivables - International transaction - Debt-free company - notional interest adjustment - HELD THAT: - The Tribunal accepted that, after the Explanation to section 92B, deferred payments or receivables arising in the course of business can constitute a separate international transaction. However, it held that such inclusion does not automatically justify an adjustment. On the facts, the assessee was undisputedly debt-free, and the Revenue had not shown that it had incurred any interest cost or passed any financing benefit to the associated enterprise. Mere delay in realization of receivables, without proof of impact on profitability or a real financing arrangement, was therefore held insufficient to sustain a transfer pricing adjustment. [Paras 71]

The addition on account of notional interest on delayed receivables was deleted.

Royalty - Closely linked transactions - TNMM aggregation - Nil arm's-length price - Royalty paid for manufacturing technology and technical know-how - HELD THAT: - The Tribunal found that the royalty was paid for use of manufacturing technology and technical know-how that enabled the assessee to carry on its manufacturing operations. Since the payment was intrinsically connected with the manufacturing function, Rule 10A(d) permitted aggregation with the manufacturing segment and benchmarking under TNMM. The TPO was held to have erred in segregating the royalty transaction, invoking CUP without identifying any comparable uncontrolled transaction, without conducting the mandatory comparability analysis, and in determining the arm's-length price at nil. The Tribunal further held that the TPO could not disallow the payment by questioning its commercial necessity or by proceeding on a general assumption that a contract manufacturer would not bear royalty, in the absence of a cogent benchmarking analysis. [Paras 79]

The transfer pricing adjustment made by determining the arm's-length price of royalty at nil was deleted.

Intra-group services - Shareholder activities - Nil arm's-length price - proper benchmarking - HELD THAT: - The Tribunal noted that the assessee had furnished party-wise details, agreements, invoices and supporting material showing receipt of accounting and finance support, legal and regulatory assistance, technical documentation, marketing support, enterprise-wide operational services and re-work charges. These were held to be operational and business support services, not liable to be disregarded merely by describing them as shareholder activities. The Tribunal held that the TPO could not substitute his judgment for that of the businessman on the question whether the services were needed, once actual receipt and use in business were demonstrated. It also found that the arm's-length price had been fixed at nil without any proper CUP benchmarking, comparable uncontrolled transaction or method analysis, and that no specific service had been individually examined to establish that it was truly a shareholder activity. [Paras 87]

The transfer pricing adjustment in respect of intra-group service charges was deleted.

Disallowance of tax not deducted u/s. 40(a)(ia) - Chargeability to tax - as per DR Assessee failed to conclusively prove that the impugned payments were not in the nature of rent liable for TDS - HELD THAT: - The Tribunal found that the assessee had furnished a detailed breakup of the disputed payments, including vendor names, transaction descriptions, invoice dates and amounts, and had also produced sample purchase invoices demonstrating that part of the expenditure was not in the nature of rent. It further held that, in respect of payments made outside India, the Revenue had brought no material on record to show chargeability to tax in India, which was a necessary condition for any obligation to deduct tax at source. Since the AO had made the disallowance without controverting the evidence or establishing TDS liability on the impugned sums, invocation of section 40(a)(ia) could not be sustained. [Paras 95]

The disallowance made u/s 40(a)(ia) was deleted.

Final Conclusion: The appeal was partly allowed for statistical purposes. The Tribunal granted substantive relief to the assessee on multiple transfer-pricing and corporate tax issues, revised the comparable sets across segments, deleted the adjustments on delayed receivables, royalty, intra-group services and disallowance under section 40(a)(ia), and remitted only the issue of working capital adjustment for fresh computation.

Deduction for provision for bad and doubtful debts - Provision on standard assets - RBI prudential norms - Books of account requirement - whether the assessee-bank would be entitled to lay claim deduction under Sec.36(1)(viia) of the Act towards provision made for ‘standard assets’ or not?

HELD THAT: - The Bench held that section 36(1)(viia) requires, for the present assessment years, that the eligible bank should make a provision for bad and doubtful debts in its books and that the deduction should remain within the prescribed overall limit. The provision does not prescribe any separate methodology under the Income-tax Act for quantifying such provision, and the bank is bound to follow RBI norms for provisioning.

Those norms mandate even a general provision on standard assets, since such assets, though performing, still carry inherent credit risk and may subsequently turn bad. The statutory ceiling is linked to total income and aggregate average rural advances, and the provision does not carve out a distinction excluding standard assets from the scope of such claim for the years in question.

The first proviso dealing with assets classified by RBI as doubtful or loss assets was held to be confined to the specified earlier relevant assessment years and therefore not controlling for the present years.

Bench treated the Karnataka High Court decision in Bellad Bagewadi Urban Souhard Sahakari Bank Niramit [2018 (3) TMI 737 - KARNATAKA HIGH COURT] as supporting the view that a bank cannot be denied deduction merely for following RBI-mandated provisioning, and distinguished Southern Technologies Ltd. [2010 (1) TMI 5 - SUPREME COURT] and New India Industries Ltd. [2007 (10) TMI 325 - ITAT DELHI-F] as decisions concerning section 36(1)(vii) in the case of NBFCs. It also relied on State Bank of Patiala v. CIT [2004 (5) TMI 12 - PUNJAB AND HARYANA HIGH COURT] only to the extent that deduction under section 36(1)(viia) is allowable only against provision actually made in the books, subject to the statutory ceiling. [Paras 10, 11, 12, 13, 14]

The reference was answered in favour of the assessee, holding that provision made on standard assets in accordance with RBI guidelines was eligible for deduction under section 36(1)(viia), subject to the provision having been made in the books and remaining within the prescribed limit.

Final Conclusion: The Special Bench answered the reference in the affirmative and held that the assessee-bank was entitled to deduction under section 36(1)(viia) on provision made for standard assets as per RBI norms, subject to the provision being made in the books and remaining within the statutory ceiling. The appeals were directed to be placed before the regular Division Bench for disposal in accordance with law.

Leave encashment exemption - Beneficial notification - Retrospective application of curative amendment - whether assessee was entitled to exemption u/s 10(10AA)(ii) up to the enhanced limit of Rs. 25 lakhs for the assessment year 2020-21?

HELD THAT: - The Tribunal held that the enhancement of the monetary ceiling under CBDT Notification No. 31/2023 from Rs. 3 lakhs to Rs. 25 lakhs did not introduce a new exemption but rationalised an existing benefit so as to remove disparity between government and non-government employees. Treating the enhancement as beneficial, remedial and intended to mitigate hardship, the Tribunal held that the absence of an express retrospective clause was not decisive where the amendment merely enlarged an existing benefit and did not adversely affect any vested right of the Revenue.

Tribunal also found that restricting the benefit only to retirees after the notification would create an artificial and unjust distinction, defeating the object of the amendment. Following the consistent view taken in coordinate bench decisions RAM DEV DAIYA [2026 (2) TMI 1353 - ITAT JAIPUR], Chandra Prakash Vashista [2025 (10) TMI 1368 - ITAT JAIPUR], Govardhan Deepchand Bhambhani [2025 (7) TMI 1812 - ITAT AHMEDABAD], Vijay Kumar Jain [2025 (7) TMI 1028 - ITAT AGRA] the enhanced limit was applied to the assessee's pending matter. [Paras 26, 27, 28, 29, 30]

The restriction of exemption to Rs. 3 lakhs was held unsustainable, and the entire leave encashment received by the assessee, being within Rs. 25 lakhs, was directed to be allowed as exempt.

Final Conclusion: The Tribunal condoned the delay and allowed the appeal on merits. It held that the enhanced exemption limit of Rs. 25 lakhs for leave encashment u/s 10(10AA)(ii), introduced by Notification No. 31/2023, being beneficial and remedial in nature, applied to the assessee's case for assessment year 2020-21.

Validity of satisfaction note u/s 153C- common satisfaction note recorded by the AO for all the seven years without correlating the seized materials to a particular assessment year

HELD THAT: - The Tribunal found that the satisfaction note was common for A.Ys. 2014-15 to 2020-21 and merely referred to jewellery found in various lockers, without recording how the seized jewellery had a bearing on the determination of total income for any particular assessment year.

Applying the principle stated in CIT Vs. Sinhgad Technical Education Society [2015 (4) TMI 190 - BOMBAY HIGH COURT] the Tribunal held that, for section 153C, the seized incriminating material must pertain to the assessment year in question and document-wise correlation with that year is a jurisdictional fact. Since that requirement was not met, the assumption of jurisdiction under section 153C failed. [Paras 7, 9, 10, 11]

The notice issued under section 153C and the consequential assessment under section 153C read with section 143(3) for A.Y.2020-21 were held bad in law and void ab initio, and the assessment was quashed.

Final Conclusion: The assessee's cross objection was partly allowed by quashing the assessment for A.Y.2020-21 on the ground that the common satisfaction note under section 153C did not correlate the seized jewellery with the relevant assessment year. As a result, the Revenue's appeal against deletion of the addition became infructuous and was dismissed.

Provisional Attachment Order (PAO) - Unexplained cash - failed to explain the source of the cash - statutory definition of benami transaction under Section 2(9)(D) - ownership of cash - basic requirement for the issue of notice is the “reason to believe” - Tangible Movable Property - Benami transaction where provider of consideration is not traceable - Additional operation of PBPT Act vis-a-vis Income-tax Act.

Whether cash is not property? - Benami property - Cash recovered from possession of the appellant falls within the definition of property and can constitute benami property under the PBPT Act. - HELD THAT: - The Tribunal held that property under the PBPT Act includes movable as well as immovable assets, and cash, being physical currency, is tangible movable property. Referring to the statutory definition of property and the object of the enactment to curb black money, it held that unaccounted cash or cash without established ownership cannot be excluded from the Act. Since benami property includes any property which is the subject matter of a benami transaction, the seized cash was capable of being treated as benami property. [Paras 6]

Cash was held to be covered within the definition of tangible movable property and amenable to proceedings under the PBPT Act.

Benamidar and beneficial owner - Constituents of benami transaction - A benami transaction does not require three parties and can exist with the benamidar and the beneficial owner alone. - HELD THAT: - On a reading of the definitions of benami property, benamidar and beneficial owner, the Tribunal held that the statutory scheme contemplates property held by a benamidar for the benefit of a beneficial owner. It rejected the contention that a third party is necessary to complete a benami transaction and held that two parties are sufficient for such a transaction within the meaning of the Act. [Paras 7]

The contention that three parties are necessary for a benami transaction was rejected.

Untraceable provider of consideration - Section 2(9)(D) - Section 2(9)(D) was attracted where the appellant failed to disclose or substantiate the persons from whom the cash was allegedly received. - HELD THAT: - The Tribunal relied on the admitted seizure of cash from the appellant's possession, his statement claiming ownership of the cash, and his assertion that it had been collected from friends and relatives for investment in immovable property. As he neither challenged that statement nor disclosed the identity of the persons who allegedly provided the money, and produced no valid supporting material, the source of the consideration remained untraceable. On that basis, the Tribunal held that the case fell within the statutory description of a benami transaction where the person providing the consideration is not traceable. [Paras 8]

The Tribunal held that the inability to trace the providers of the cash attracted Section 2(9)(D), and decided the issue against the appellant.

PBPT Act and Income-tax Act - Filing of return not a bar - The appellant's willingness to offer the seized amount to tax did not exclude the applicability of the PBPT Act. - HELD THAT: - The Tribunal held that the PBPT Act operates in addition to other laws and that its object is distinct from that of the Income-tax Act. While the Income-tax Act is concerned with taxation of unexplained money, the PBPT Act is aimed at prohibiting benami holdings and confiscating benami property. It therefore rejected the plea that filing, or expressing readiness to file, an income-tax return for the seized amount could bar or neutralise proceedings under the PBPT Act, particularly when the source of the money remained unexplained. [Paras 9]

Mere filing or intended filing of an income-tax return was held not to exonerate the appellant from action under the PBPT Act.

Final Conclusion: The Tribunal upheld the order confirming the provisional attachment and dismissed the appeal. It held that the seized cash was property within the PBPT Act, that Section 2(9)(D) stood attracted because the providers of the money were not traceable, and that the appellant's offer to disclose the amount in his income-tax return did not defeat proceedings under the PBPT Act.

Re-export of goods -Earlier opportunity granted but not been availed of -Entitlement to grant a final opportunity to re-export the goods and complete the process within a further period - Exercise of equitable discretion - Procedural indulgence - HELD THAT:- The Special Leave Petition was disposed of by granting the petitioner a final opportunity of four weeks to complete re-export of the goods, the Court observing that the High Court had rejected the writ petition after the earlier opportunity granted for re-export was not availed of.

Contempt application - Non-compliance with the earlier order concerning cessation of anti-dumping duty levy and refund of amounts collected after the judgment - Wilful disobedience in contempt - Bona fide misinterpretation of court order - Subsequent compliance and refund of levy. - HELD THAT: - The Court found that after the earlier order, no further levy ought to have been collected because the basis for collection had ceased to exist. It nevertheless accepted the explanation in the compliance affidavit that the continued collection occurred due to an inadvertent misinterpretation of the earlier direction and not by way of wilful or deliberate non-compliance. The Court further noted that collection of the duty had been stopped, a decision had been taken to refund the amount collected, the petitioner had already applied for refund, and the respondents stated that the refund applications would be processed immediately. In those circumstances, the Court held that no useful purpose would be served by retaining the contempt application. [Paras 6, 7]

No case for proceeding further in contempt was made out, and the application was disposed of on the basis of the explanation offered and the steps taken for compliance and refund.

Final Conclusion: The Court declined to continue the contempt proceedings, accepting that the post-judgment collection of anti-dumping duty resulted from inadvertent misinterpretation rather than wilful disobedience, and recording that the levy had been stopped and refund applications would be processed immediately.

Admissibility of Electronic evidence - enhancement of value on the basis of the computer print-outs, documents - Undervaluation of imported goods - Retracted statements - Cross-examination of witnesses - Whether the demand of differential duty on the imported goods, confiscation of goods and consequently imposition of penalty, is legally sustainable or not? - HELD THAT: - The Tribunal found that the present appeals arose out of the very same investigation and rested on the same electronic printouts, recovered emails and retracted statements which had already been considered in the connected matter. Following the decision of Co-ordinate Bench of this Tribunal in the case of Junaid Kudia Vs. Commissioner of Customs, Mumbai Import-II [2023 (9) TMI 22 - CESTAT MUMBAI], and noting that the Supreme Court [2024 (3) TMI 570 - SC ORDER] had dismissed the department's appeal therefrom, the Tribunal held that computer printouts and other electronic material could not be relied upon without compliance with the statutory requirements governing admissibility of such evidence; statements not supported by the prescribed procedure and cross-examination could not sustain the case; and retracted statements, in the absence of corroborative evidence of undervaluation, were insufficient to uphold enhancement of value, demand of duty, confiscation and penalties. [Paras 7, 8, 9]

The impugned order affirming enhancement of value, differential duty with interest, confiscation and penalties was held unsustainable and was set aside.

Final Conclusion: Following the earlier decision rendered on the same investigation, and the Supreme Court's affirmance of that view, the Tribunal held that the case of undervaluation could not be sustained. The impugned appellate order was set aside and the appeals were allowed with consequential relief.

Invocation of the extended period under section 28(4) - Intent to evade duty - Wilful misstatement or suppression - misdeclaration of the imported CD containing software as an integral part of the LRSAM System and thereby sought exemption under the notification -Penalty under section 114A - HELD THAT: - The Tribunal held that mere allegation of misdeclaration in the show cause notice was insufficient to sustain the extended period. The bill of entry itself disclosed the tariff item and described the imported goods as software relatable to the purchase order for the LRSAM system. In these circumstances, it could not be said that the appellant had misrepresented or concealed material facts. The Tribunal further held that, for invoking the extended period, it must be established not only that there was a deliberate misstatement or misrepresentation, but also that it was with an intention to evade payment of duty. Having regard to the appellant's status as a Public Sector Undertaking engaged in defence supplies and the stated purpose of the software CD as support to the LRSAM system, the necessary intent to evade duty was not made out. Since the entire demand pertained to the extended period, the demand could not survive. [Paras 21, 22, 23]

The demand was set aside as the extended period of limitation could not be invoked.

Penalty under section 114A - Consequential penalty - HELD THAT: - The Tribunal found that the basis for imposition of penalty was identical to the basis on which the department had invoked the extended period. Once the extended period was held to be unavailable, the foundation for penalty also failed. [Paras 24]

The penalty under section 114A was held to be unsustainable.

Final Conclusion: The Tribunal allowed the appeal and set aside the impugned order on the ground that the extended period under section 28(4) of the Customs Act had been wrongly invoked. In view of that finding, the connected penalty also could not be sustained, and the Tribunal did not examine the dispute on merits.

Misdeclaration of goods in terms of classification and the consequent short payment of customs duty - imported goods declared as “Polyethylene Fiber Product Name HB26 A” by classifying those under CTH 39201099 which covers 'other plates, sheets, film, foil and strip, of plastics, non-cellular and not reinforced, laminated, supported or similarly combined with other materials - classifiable under CTH 540730 instead of CTH 39201099 - HSN explanatory notes - Confiscation for misdeclaration - Consequential penalty.

Tariff classification - HELD THAT: - The Tribunal held that the competing headings covered materially different classes of goods, Chapter 39 dealing with plastic articles and Chapter 54 dealing with textile material. On the admitted nature of the product as a cross-ply unidirectional laminate composed of ultra-high molecular weight polyethylene fibers, used for ballistic protection, and on a reading of the relevant chapter notes, the product was found to be distinct from plates, sheets, films, foil and strip of plastics covered by Chapter 39.

The title of both the chapters, sub-chapters and chapter notes are relevant for determining classification as general Rules for the interpretation of harmonized system. Hon'ble Apex Court also in the case of Wood Craft Ltd.[1995 (3) TMI 93 - SUPREME COURT] observed that it is internationally accepted norm that the nomenclature and HSN being the safe guide, the tariff classification should totally be based on HSN explanatory notes.

Here, we have a machine which performs the alternative functions of Automatic Data Processing Machine as well as cellular telephone; which function is considered as a principal function will be depending upon the use.

Applying the interpretative relevance of chapter titles, notes and HSN explanatory notes, the Tribunal sustained the department's classification of the goods as woven fabrics of synthetic filament yarn under CTH 540730. The resulting differential duty demand was therefore upheld. [Paras 5, 6]

Classification under CTH 540730 was upheld, and the consequential demand of differential duty with interest was sustained.

Confiscation for misdeclaration - Self-assessment - Consequential penalty - A mere difference in tariff classification did not render the goods liable to confiscation under section 111(m), and the penalty under section 112 could not survive. - HELD THAT: - The Tribunal found no dispute regarding the identity or description of the imported goods as declared in the Bills of Entry; the dispute was confined to their classification. It held that classification under the Customs Tariff is part of assessment and is a matter on which different views may legitimately be taken by the importer, the assessing officer, the adjudicating authority and appellate forums. Section 111(m) did not require the importer to anticipate and declare the classification that the officer might ultimately consider correct. In those circumstances, the goods could not be treated as improperly imported merely because the importer's classification was rejected. Since liability to confiscation itself failed, the penalty under section 112, being consequential, was also liable to be set aside. [Paras 8, 9]

The finding of confiscability under section 111(m) and the consequential penalty under section 112 were set aside.

Final Conclusion: The appeal was partly allowed. The classification of the imported goods under CTH 540730 and the consequential differential duty demand with interest were upheld, but the confiscation and penalty were set aside as the dispute was only one of classification.

Limitation in oppression and mismanagement proceedings- illegal removal from the directorship of the Company, without any intimation - Knowledge of impugned acts and accrual of cause of action - illegal dilution of shareholding - New grounds in appeal - Share valuation by independent registered valuer.

Limitation in oppression and mismanagement proceedings - The challenge to the appellant's cessation from directorship in 2012 and dilution of shareholding in 2013 was barred by limitation. - HELD THAT: - The Tribunal held that the appellant's own notice showed she was aware, by January 2013, of the cessation of her directorship, and the record further supported the finding that she was aware of the 2013 allotment as well. Once the material facts necessary to pursue the remedy were within her knowledge, limitation began to run from that point, and the plea that the acts constituted a continuing cause of action was not accepted on the facts. The decisions relied on for continuing wrong were distinguished because, unlike those cases, the appellant here was found to have prior knowledge of the impugned acts. [Paras 21, 22, 23, 25, 26]

The findings of the Tribunal below that the claims relating to removal from directorship and the 2013 dilution could not be reopened in the 2018 petition were affirmed.

New grounds in appeal - The contention that the Articles of Association and the Companies Act did not require the appellant to offer herself for reappointment could not be entertained for the first time in appeal. - HELD THAT: - The Tribunal found that the argument based on absence of any requirement for a director to offer herself for reappointment had not been urged before the adjudicating authority. In appellate jurisdiction, it would not act as a court of first instance to decide a fresh ground not forming part of the impugned order. [Paras 27, 28]

The fresh challenge founded on the Articles and the statutory scheme was declined at the appellate stage.

Share valuation by independent registered valuer - HELD THAT: - The order under challenge required valuation by an independent registered valuer as on the specified date and expressly excluded the acquisition of another concern because that acquisition had not been implemented by then. The Tribunal noted that the appellant had been given opportunities to place submissions before the valuer and before the adjudicating authority but did not avail them, and later raised only general objections in appeal. It further found that the accepted valuation methods had been adopted and properly applied, leaving no basis for revaluation at the appellate stage. [Paras 29, 30, 31]

The valuation mechanism and the consequential directions were upheld, and the appellant was held not entitled to reopen them in appeal.

Final Conclusion: The appeal was dismissed. The Tribunal affirmed that the appellant's challenge to her cessation from directorship and earlier dilution of shareholding was time-barred, declined to entertain a new ground raised for the first time in appeal, and found no reason to interfere with the valuation directions or the valuation exercise already undertaken.

Declared service - cashback or reward incentive received on use of a commercial credit card - Consideration for taxable service - Scope of show cause notice.

Declared service - Cash back incentive - Cash incentives received by the assessee from banks for use of commercial credit cards in booking airline tickets did not constitute consideration for any taxable service rendered by the assessee to the banks. - HELD THAT: - The Tribunal held that mere use of the credit card for making payment to airlines did not involve any activity rendered by the assessee to the issuing banks. The show cause notice itself contained no evidentiary basis to treat such usage as promotion or marketing of the banks' name or business, and the agreements did not impose any contractual obligation on the assessee to perform any act other than using the card for payment. The assessee remained a recipient of credit card services, not a provider of service to the bank. The cash back was found to be only an incentive devised by the banks to increase card usage and thereby augment their own revenue; it lacked the necessary nexus of consideration for a service. The Tribunal also noted the CBIC circular clarifying that section 66E(e) applies only where the agreement specifically contemplates the activity and there is a flow of consideration for that activity. [Paras 6, 7, 9]

No service tax was leviable on the cash incentives received on credit card usage.

Scope of show cause notice - New ground in appeal - The Revenue could not invoke section 66E(e) for the first time in the grounds of appeal when that basis was not part of the show cause notice. - HELD THAT: - The Tribunal found that the show cause notice proceeded on the allegation that the assessee was promoting the business of the banks by using the credit card, whereas the reliance on section 66E(e) as a distinct basis of taxability was raised only in the appeal. Reaffirming the principle that the show cause notice is the foundation of the demand, the Tribunal held that the Department cannot travel beyond the case set up in the notice at the appellate stage. [Paras 8]

The new basis of taxability urged in appeal was not permissible.

Final Conclusion: The Tribunal upheld the order dropping the demand and dismissed the Revenue's appeal. It held that cash back received on use of the commercial credit card was only an incentive and not consideration for any service rendered by the assessee, and that the Revenue could not set up a new basis of taxability beyond the show cause notice.

Bundled services- Meal-plan charges for food and beverages supplied to hotel guests - Naturally bundled with accommodation services, Or constituted independent restaurant services - Separate Invoicing - availing the benefit of abatement of 40% on the value of room rent so collected in terms of Entry at S. No. 6 of Notification No. 26/2012-S.T. -claiming rebate at the rate of 60% of the value of food and beverage supplied by them in terms of rule 2C of Service Tax. - HELD THAT: - The Tribunal examined the invoice produced by the appellant and found that room charges and meal charges were reflected separately, with separate tax treatment for each. On that factual basis, it held that the two services were separately provided and the consideration for them stood segregated in the invoice itself. The determinative principle applied was that where accommodation service and restaurant service are separately supplied and separately billed, the transaction is not to be treated as a bundled service of hotel accommodation. Consequently, the appellant was entitled to 40% abatement on room charges under the notification governing accommodation service and 60% abatement on restaurant service under Rule 2C, the appellant having paid VAT on food and beverages. [Paras 16, 17, 18]

The service tax had been correctly discharged by claiming 60% abatement on restaurant charges, and the demand as well as penalty were therefore unsustainable.

Final Conclusion: The Tribunal held that separately billed room charges and meal-plan charges were independent supplies and not a bundled accommodation service. The demand of service tax and the consequential penalty were therefore set aside, and the appeal was allowed with consequential relief.

Maintainability of application seeking recalling of the order rejecting condonation of delay - Service of notice - Sufficient cause. - HELD THAT: - The Tribunal found from the record that notices of the earlier proceedings had been served both on the appellant and on its counsel. It further held that the statement in the recall application that notice of listing of the delay condonation application had not been served on the appellant was contrary to the track consignment report, which showed service on the appellant. In the absence of any plea disputing the correctness of that report, and as no other good reason for recall was disclosed, the Tribunal held that no ground existed to recall the earlier order. [Paras 3, 4, 5]

The recall application was rejected for want of any sufficient ground.

Final Conclusion: The Tribunal rejected the application for recall, holding that service of notice was established on record and that the applicant had failed to disclose any valid reason for recalling the earlier order rejecting condonation of delay.

Condonation of delay - delay of 782 days in filing the appeal - Sufficient cause - Inordinate delay - Due diligence in litigation - health issues of the Director of the appellant, the operational disruptions and sudden resignation of the concerned person responsible for handling tax compliance and the legal matters of the appellant’s company all mentioned to be the reasons for delay of 782. - HELD THAT: - The Tribunal held that while a liberal and justice-oriented approach governs applications for condonation of delay, such approach remains subject to reasonableness, bona fides and due diligence. In cases of inordinate delay, stricter scrutiny is required and the explanation must be supported by objective material. The reasons put forward, namely the Director's health issues, resignation of personnel and operational disruptions, were found to be vague and unsupported by cogent evidence; nor did they explain why the company, despite timely receipt of the impugned order, failed to act for more than two years.

The hon’ble Apex Court in the case of Maniben Devraj Shah vs. Municipal Corporation of Brihan Mumbai [2015 (3) TMI 64 - SUPREME COURT], has held that a discretion must be made between a case whereby the delay is inordinate and the case where the case is delay of few days. It was held that in the former case the consideration of prejudice to the other side will be the relevant factor.

On that basis, the Tribunal concluded that the explanation reflected negligence rather than sufficient cause, and that the decisions emphasising a liberal approach did not assist the appellant on the facts. [Paras 7, 8, 9, 10, 11]

Condonation of delay was refused, and as a consequence the appeal was rejected as defective.

Final Conclusion: The Tribunal found that no sufficient cause had been shown for the inordinate delay in filing the appeal. The application for condonation of delay was dismissed and, consequently, the appeal was rejected.

Works contract service - low side work and HVAC contracts - Transfer of property in goods - Composite contracts - Entitlement to the abatement - Separate work orders for low side works and HVAC works relating to installation and commissioning of air-conditioning systems were classifiable as works contract service and not as pure service contracts, and were entitled to abatement. - HELD THAT: - The Tribunal held that the decisive test was whether the execution of the installation and commissioning work involved transfer of property in goods liable to VAT. On the Commissioner's factual finding, the low side works included supply and use of materials such as piping, wiring and ducting, and VAT had also been paid treating the transaction as deemed sale. Once such materials formed part of the execution of the contract, the activity could not be reduced to a mere service of installation and commissioning. The Department's contention that the prior separate sale of the AC system converted the second contract into a pure service contract was rejected, since use of materials in the second contract was not shown to be only minor or incidental. In that view, the contracts answered the description of works contract service and the abatement allowed by the adjudicating authority was rightly sustained. [Paras 8, 9]

The Department's challenge failed; the low side works and HVAC works were held to be works contract service involving labour and material, and the appeal was dismissed.

Final Conclusion: The Tribunal upheld the Commissioner's order dropping the demand. It held that the installation and commissioning contracts involved transfer of property in goods on which VAT had been paid and therefore constituted works contract service eligible for abatement, not pure service contracts.

Composite import contract - Non-payment of service tax under the category of ‘Erection, Commissioning & Installation Service’ (ECIS) on Reverse Charge Mechanism (RCM) - Extended period of limitation.

Whether the foreign supplier of machinery has also provided ECIS to the appellant and therefore, the appellant is required to pay service tax under RCM or otherwise ? - HELD THAT: - The Tribunal found from the invoices that the foreign suppliers raised a single consolidated CIF value covering supply of machinery, export packing, shipment, installation, supervision and commissioning, and the demand itself had been computed on the basis of such gross invoice values after allowing abatement. There was no direct evidence of any separately agreed or separately paid consideration for installation or commissioning. In those circumstances, the foreign supplier, acting under the composite supply contract, could not be treated as a distinct commissioning and installation agency for the pre-01.07.2012 period, and even for the period thereafter, in the absence of a clear nexus between a specific consideration and the alleged service element, the contract could not be vivisected for levy of service tax. The Tribunal also noted that the same consolidated invoice value, including installation and commissioning, had been considered for customs assessment under EPCG, and therefore the department could not again carve out an artificial service component from that value for separate taxation. Applying the ratio of Rahil Air Bubbles Pvt Ltd Vs CCE & ST, Rajkot [2019 (11) TMI 565 - CESTAT AHMEDABAD], Bhavik Terryab [2017 (1) TMI 1691 - CESTAT NEW DELHI] and the other decisions noticed, the demand on merits was held unsustainable. [Paras 8, 9, 10, 11, 12]

The levy of service tax under reverse charge on the alleged erection, commissioning and installation component was set aside on merits.

Extended period of limitation - Bona fide belief - HELD THAT: - The Tribunal held that the department had not established any deliberate or intentional suppression or evasion. The appellant's conduct was found consistent with a bona fide belief arising from the composite nature of the transaction and the fact that customs assessment had been made on the entire invoice value. The department's assumption that the appellant was aware of liability was not supported by contrary evidence clearly showing intent to evade. In such circumstances, the ingredients necessary for invoking the extended period were absent, and the authorities cited on limitation by the appellant were held relevant. [Paras 13]

The demand was held time-barred and the impugned order was unsustainable on limitation as well.

Final Conclusion: The Tribunal held that the consolidated import contracts for machinery, which included installation and commissioning obligations of the foreign supplier, could not be artificially split for levy of service tax under reverse charge. The demand and equal penalty were therefore set aside, both on merits and on limitation, and the appeal was allowed.

Liability to pay 50% of service tax liability - Works contract service - Services rendered to the client - Benefit of Notification No. 30/2012-Service Tax - Reverse Charge Mechanism - Form 26-AS - Invocation of the extended period of limitation - Suppression of Facts - Imposition of penalty.

Works contract service - Reverse charge mechanism - The appellant's warranty repair activity as authorised service centre for LGEIL did not qualify as service portion in execution of a works contract so as to attract the 50:50 reverse charge mechanism under Notification No. 30/2012-Service Tax. - HELD THAT: - The Tribunal held that for a service to fall within works contract, there must be transfer of property in goods in execution of the contract and such transfer must be liable to VAT/WCT. The appellant produced no evidence of payment of VAT, no invoices, and no material showing transfer of property in goods by it. On the terms of the agreement, the spare parts and components used in warranty services were supplied by LGEIL and not by the appellant. The basic requirement of a works contract was therefore absent, and the appellant could not claim discharge of service tax only on 50% of the taxable value under the reverse charge notification. [Paras 4, 5]

The appellant was liable to service tax on the full taxable value and was not entitled to the benefit claimed under Notification No. 30/2012-Service Tax.

Form 26-AS - Best judgment based on third-party data - Reliance on Form 26-AS for quantifying the taxable receipts was valid in the absence of any rebuttal or reconciliation by the appellant. - HELD THAT: - It is apparent that the appellant was required to produce the details and documents, which prove that they were liable to pay service tax only to the extent to 50% of the taxable value, but the appellant failed to respond. As the appellant did not produce any contrary evidence or reconciled statements to disprove the transactions as reflected in Form 26-AS, no error can be found in relying on Form 26-AS. In this regard, Shri Rakesh Kumar has relied on the decision of this Tribunal in M/s. National Refrigeration [2023 (4) TMI 611 - CESTAT NEW DELHI], where action of the Department in obtaining details of the amounts received by the appellant from the Income Tax Office and making the assessment was upheld.

The demand founded on the receipts reflected in Form 26-AS was upheld.

Extended period of limitation - Suppression of taxable value - Penalty under Section 78 - HELD THAT: - The Tribunal found that the terms of the agreement clearly showed the nature of the appellant's obligations and that the service tax liability had to be discharged in accordance with those terms, which were fully within the appellant's knowledge. It further noted the non-declaration of the receipts in question and held that failure to report taxable services, particularly where TDS had already been deducted by clients, reflected deliberate suppression with intent to evade payment of service tax. On that basis, the extended period and penalty under Section 78 were sustained. [Paras 7]

The extended limitation and consequential penalty were rightly invoked.

Final Conclusion: The Tribunal affirmed the impugned order and dismissed the appeal. It held that the appellant's services were not works contract services eligible for partial reverse charge, that reliance on Form 26-AS was proper in the absence of rebuttal, and that the extended period with penalty was validly invoked.

Limitation for departmental appeals - delay of 195 day - Sufficient Cause -Statutory cap on condonation of delay - Whether Commissioner (Appeals) has rightly rejected the appeal on the grounds of limitation. - HELD THAT: - The Tribunal held that, for filing an appeal before the Commissioner (Appeals), the relevant date is the date of receipt of the order sought to be challenged. On the material before the appellate authority, the Order-in-Original was received by the appellant on 05.03.2013, and the plea that the order was not provided till 2021 was found unreasonable, particularly when the order was not ex parte and no explanation was offered for the long inaction. Proceeding on the date of receipt so recorded, the appeal had been filed with a delay of 195 days. Under Section 85(3A), the Commissioner (Appeals) could condone delay only to the limited extent statutorily permitted beyond the normal period, and had no power to entertain an appeal filed beyond that outer limit. Following Singh Enterprises Vs. Commissioner of C.Ex., Jamshedpur [2007 (12) TMI 11 - SUPREME COURT], the Tribunal held that Section 5 of the Limitation Act stood excluded and the delay could not be condoned. [Paras 6]

The rejection of the appeal on limitation was upheld and the appeal before the Tribunal was dismissed.

Final Conclusion: The Tribunal upheld the order rejecting the appeal as barred by limitation, holding that the Commissioner (Appeals) had no power to condone a delay beyond the statutorily prescribed extended period. The appeal was accordingly dismissed.

Imposition of Penalty under Rule 26, on a body corporate - expression "any person" - essential ingredient for invoking Rule 26 -Confiscable goods - Knowledge or reason to believe - Deemed confiscation - undervaluation of the goods resulting in non-payment of duty - Pari materia​​​​​​​.

Whether the expression ‘person’ used in Rule 26 covers a body corporate or it only covers individuals and non-juristic persons​​​​​​​ ? - The expression "person" in Rule 26 of the Central Excise Rules, 2002 includes a body corporate and is not confined to natural persons. - HELD THAT: - The Tribunal held that, since the Central Excise Act and the Rules do not define the expression "person", recourse could be taken to the General Clauses Act, under which the term includes a company or body corporate. It found that the earlier Larger Bench in the case of Steel Tubes of India Ltd Vs CCE [2006 (10) TMI 146 - CESTAT, NEW DELHI [LB]], rendered in the context of Rule 209A could not prevail against the Supreme Court's interpretation that "person" is wide enough to include non-natural entities. The use of the expression in section 4(3)(b) of the Act was also noticed as indicating that the term is capable of covering both natural persons and body corporates depending on context. On that reasoning, the plea that a company could not be penalised under Rule 26 was rejected. [Paras 14, 15]

Penalty under Rule 26 was held legally imposable on a body corporate.

Knowledge of confiscable goods - Confiscability as condition for penalty - Penalty under Rule 26 was sustainable because the goods were liable to confiscation and the appellant had knowledge or reason to believe that duty was being discharged on an incorrect assessable value. - HELD THAT: - The Tribunal confined itself to the appellant's challenge to the penalty, since the findings in the common adjudication order against the manufacturer and its Managing Director had attained finality after disposal of their separate appeals. Proceeding on that basis, it held that undervaluation and consequential short-payment of duty stood concluded, and goods cleared in such contravention were confiscable under Rule 25. It further held that actual confiscation was not necessary for invoking Rule 26; it was enough that the goods were otherwise liable to confiscation. On the facts recorded in the adjudication order, including the appellant's awareness of the valuation arrangement, the contractual stipulations, and the conduct noted by the adjudicating authority, the Tribunal found sufficient material to infer that the appellant knew or had reason to believe that the goods were liable to confiscation. [Paras 10, 16, 17, 18]

The challenge to penalty failed and the penalty imposed on the appellant under Rule 26 was upheld.

Final Conclusion: The Tribunal held that a body corporate falls within the expression "person" for the purpose of Rule 26 and that the requirement of dealing with goods liable to confiscation stood satisfied on the facts already concluded in the common adjudication order. The appeal against imposition of penalty under Rule 26 was therefore dismissed.

Clandestine manufacture and clearance - Assumptions and presumptions -Burden of proof - absence of tangible evidence - Demand of central excise duty, interest and penalty. - HELD THAT: - The Tribunal held that, while remanding the matter earlier, it had specifically directed examination of the insurance documents relating to sample Nos. 2H to 2S and application of the principles laid down in Flevel International v. Commissioner of Central Excise [2015 (9) TMI 1151 - DELHI HIGH COURT]. In the de novo order, however, the adjudicating authority confirmed the demand on the allegation of clandestine removal without adhering to that standard. The Tribunal reiterated that clandestine manufacture and clearance is a serious charge requiring strict proof through tangible evidence, and that the mere presence of goods in a godown cannot by itself establish clandestine manufacture or removal. No evidence was brought on record regarding procurement or use of raw materials, actual manufacture, transportation, sale to identified parties, receipt of sale proceeds, or any other material linking the seized goods to clandestine activity. The adjudicating authority's presumption that the presence of seized goods itself justified an inference of use of unaccounted raw materials was found to be contrary to the principle noticed in Flevel International v. Commissioner of Central Excise [2015 (9) TMI 1151 - DELHI HIGH COURT], relying on Arya Fibres Pvt. Ltd. v. CCE, Ahmedabad-II [2013 (11) TMI 626 - CESTAT AHMEDABAD], that clandestine removal cannot rest on assumptions or presumptions. On that basis, the duty demand was held legally unsustainable. [Paras 6, 7]

The allegation of clandestine removal was held not established; consequently, the duty demand was set aside, and the associated interest and penalty were held not leviable.

Final Conclusion: The Tribunal allowed the appeal and held that the impugned de novo order could not be sustained, since the charge of clandestine manufacture and removal had not been proved by tangible evidence and the earlier remand directions were not properly followed. The demand of duty, and the consequential interest and penalty, were therefore set aside.

Export clearances -​​​​​​​ Simultaneous availment of the nil-rate exemption notification and the concessional-duty notification - claim for the rebate of the accumulated Cenvat credit after the export - CENVAT credit on common inputs and capital goods -Extended period of limitation - Suppression of facts.

Simultaneous availment of exemption notifications - Cenvat credit on inputs and capital goods was admissible where the appellant simultaneously cleared some goods under Notification No. 30/2004-CE at nil rate and some goods under Notification No. 29/2004-CE on concessional duty, including export clearances. - HELD THAT: - The Tribunal held that where both notifications were available, the assessee could not be compelled by the Department to choose only the full exemption. The choice of a beneficial notification remained with the assessee. On the facts found, the inputs and capital goods were used in the manufacture of both dutiable and exempted goods and therefore could not be treated as used exclusively for exempted goods. The Tribunal also relied on the Board circular permitting simultaneous availment of Notification Nos. 29/2004-CE and 30/2004-CE subject to the prescribed procedure, and found that the appellant had followed that procedure. The decisions in S. T. Cottex Export (P) Ltd. [2010 (1) TMI 1048 - CESTAT NEW DELHI], upheld by the [2011 (1) TMI 491 - PUNJAB & HARYANA HIGH COURT] and Winsome Yarns Ltd. [2015 (2) TMI 304 - CESTAT NEW DELHI] were applied to hold that credit could not be denied in such circumstances. [Paras 6]

The disallowance of Cenvat credit on inputs and capital goods was held unsustainable on merits.

Extended period of limitation - Interpretational dispute - Suppression of facts - HELD THAT: - The Tribunal found that the show cause notice itself proceeded on the footing that the dispute arose from an interpretation of Notification No. 30/2004. In such an interpretational dispute, suppression with intent to evade duty could not be alleged. It was further found that the appellant had regularly filed ER-1 returns disclosing the availment of credit, and that rebate claims based on the same credit had been scrutinized by the departmental authorities without objection and the sanction orders had attained finality. On these facts, non-disclosure or suppression was not established. [Paras 7, 8]

The demand was also barred insofar as it had been raised by invoking the extended period of limitation.

Final Conclusion: The Tribunal allowed the appeal, holding that the appellant was entitled to Cenvat credit on the inputs and capital goods and that the extended period had been wrongly invoked. Consequently, the demands of credit, interest and penalty were set aside.

Demand on central excise duty - Products cleared in the Domestic Tariff Area - classifiable as software or not - Reliance on expert opinion in classification dispute- Benefit of Notification - Whether the products cleared by the appellant M/s. Toonz Animation India (P) Ltd. in the Domestic Tariff Area (DTA) are to be considered as ‘Software’ as claimed by the appellant. - HELD THAT: - The Tribunal held that the very basis of the demand failed because the departmental experts, on whose original opinion the show cause notice had proceeded, later stated with reference to the statutory definition that the products were software, and that earlier opinion had been given without considering that definition. It further found that the appellant, operating under the Software Technology Park Scheme, had been permitted to develop and export software, and there was no dispute that the goods exported as software were not different from those cleared in DTA. The inconsistent classification of the same goods in two show cause notices also showed lack of clarity on the Revenue's part as to the nature of the product. On the material noted in the notice itself, the products were capable of functioning only with the relevant software tools and therefore answered the definition of Information Technology Software. The Tribunal also held that the expert opinion favourable to the appellant could not be discarded without obtaining any contrary expert opinion. [Paras 9, 10, 11, 12, 13]

The impugned DTA clearances were classifiable as software, were eligible for the benefit of the notification, and the duty demand with consequential liabilities could not be sustained.

Final Conclusion: The Tribunal set aside the impugned order and allowed the appeal, holding that the goods cleared by the appellant into DTA were software and not liable to be reclassified as proposed by the Revenue.