TMI Tax Updates e-Newsletter
May 19,2026

Review Jurisdiction - Error apparent on the face of the record -Levy of penalty u/s 122 of the CGST Act - Fraudulent availment of Input Tax Credit - operating several non-existing and bogus firms - HELD THAT:- Review petition dismissed on the ground that no error apparent on the face of the record was found warranting review of the earlier order [2026 (1) TMI 1621 - SC ORDER].

Validity of Summary show cause notice in Form GST DRC-01, without issuance of a proper and prior notice under Section 73(1) - adjudication order passed under Section 73(9) - Conditions precedent for valid adjudication - HELD THAT: - The Court held that issuance of only a summary show cause notice does not amount to compliance with Section 73(1) read with Rule 142(1), since the summary is not a substitute for the statutory show cause notice required to set the proceedings in motion. It further observed that the show cause notice, the statement under Section 73(3), and the order under Section 73(9) are all required to be issued by the Proper Officer, and compliance with the statutory scheme of Section 73 and Rule 142 is a condition precedent for a valid order under Section 73(9). As it was undisputed that no proper and prior show cause notice had been issued to the petitioner, the impugned order was unsustainable in law. The Court therefore set aside the order and consequential actions, while leaving it open to the authorities to initiate de novo proceedings in accordance with paragraph 29(F) of the earlier common judgment in W.P.[C] no. 3912/2024 and others [2024 (10) TMI 279 - GAUHATI HIGH COURT], with exclusion of the period from issuance of the summary notice till service of the certified copy of the present order for computing limitation under Section 73(10). [Paras 10, 11, 12, 14]

The impugned order and consequential actions were quashed for want of a valid prior notice under Section 73(1), with liberty to the authorities to proceed afresh in accordance with law and with the directed exclusion of time for limitation purposes.

Final Conclusion: The writ petition was allowed to the extent that the order passed under Section 73(9) and all consequential actions were set aside for non-issuance of a proper statutory show cause notice. Liberty was reserved to the revenue authorities to initiate fresh proceedings in accordance with law, subject to the exclusion of the period directed by the Court for limitation purposes.

Entitlement to restoration of GST registration cancelled for non-response to the show cause notice - compliance with tax liabilities and procedural requirements. - HELD THAT: - The Court disposed of the writ petition on parity with earlier similar orders in SHEIKH MOHAMMAD [2024 (8) TMI 893 - JAMMU AND KASHMIR AND LADAKH HIGH COURT] and ABDUL AHAD WANI [2024 (4) TMI 762 - JAMMU AND KASHMIR AND LADAKH HIGH COURT] and in view of the respondents' stand in such matters that registration could be restored if the defaulting dealer submitted returns and deposited tax, penalty and interest in accordance with law. It expressly recorded that, having regard to the peculiar facts and circumstances and the analogy of the earlier cases, it was not examining the legal issues sought to be raised by the respondents. [Paras 3, 5, 6]

The petitioner was directed to approach the competent authority within seven days, and restoration of registration was ordered subject to completion of requisite formalities and payment compliance within the stipulated time, failing which the order would cease to operate.

Final Conclusion: The writ petition was disposed of by directing restoration of the petitioner's GST registration subject to filing returns and depositing tax, penalty and interest within the time granted. The Court did not decide the legal questions raised and confined the order to the peculiar facts of the case and parity with earlier similar orders.

Maintainability of writ petition - Availability of an alternate statutory appeal under the GST law - Binding precedent - demand notice for service tax under Section 73(1) read with Section 73(1A) of the Finance Act, 1994, which are saved by Section 174(2) of the Central Goods and Service Tax Act, 2017 - jurisdictional defect. -HELD THAT: - The Court held that the impugned orders were appealable under section 107 of the GST Act and that the petitioners had approached the writ court principally on the ground that the levy under the Madhya Pradesh Gramin Avsanrachna Tatha Sadak Vikas Adhiniyam, 2005 had already been treated in M/s Neogy & Sons as a tax on land. On examining that decision, the Court found that it dealt with the legislative competence and validity of the State enactment, whereas the adjudicating authority had independently examined the character and utilisation of the levy for purposes of service tax liability. The authority's view was held not to be contrary to the earlier High Court decision, and the correctness of that view, as also the effect of the circular dated 13.04.2016, was considered fit for re-examination by the appellate authority and thereafter the Tribunal. Since no challenge to the competence of the adjudicating authority was made out, the existence of an alternate and efficacious appellate remedy barred entertainment of the writ petitions. [Paras 18, 19, 20, 21, 22]

The writ petitions were dismissed as not maintainable, with liberty to the petitioners to file appeals before the appellate authority within the time granted by the Court.

Final Conclusion: The High Court declined to entertain the writ petitions against the orders-in-original, holding that the petitioners had an alternate and efficacious statutory remedy of appeal. Liberty was granted to pursue such appeals within the period specified by the Court.

Maintainability of Writ petition seeking habeas corpus against remand order - Non-supply of verbatim ‘reasons to believe’ recorded by the Commissioner - Substantial compliance with statutory arrest safeguards - non-compliance with a statutory mandate affecting personal liberty - breach of a mandatory statutory safeguard - lack of jurisdiction or an absolutely mechanical remand order.

Habeas corpus maintainability - Judicial remand - Non-compliance with statutory mandate - A writ petition questioning arrest and detention remained maintainable notwithstanding the remand order, where the challenge was founded on alleged non-compliance with the statutory requirements governing arrest. - HELD THAT: - The coordinate Bench in the case of V. Senthil Balaji v. State [2023 (8) TMI 410 - SUPREME COURT], held that writ petition seeking to invoke writ of Habeas Corpus to question the detention made pursuant to a judicial order will be made available.

The Court held that a remand order passed in exercise of judicial function is ordinarily not to be assailed by a writ of habeas corpus on merits; however, a distinction exists between challenging the adequacy of reasons in a remand order and alleging breach of a mandatory statutory condition that renders the detention itself illegal. Since the petition specifically asserted non-compliance with the legal requirement concerning the reasons to believe for arrest, it fell within the limited category in which habeas corpus jurisdiction can be invoked to examine whether the arrest was made in accordance with law. [Paras 16, 17]

The writ petition was held maintainable and was examined on the limited ground of alleged non-compliance with the statutory precondition for arrest.

Reasons to believe - Power to arrest - Verbatim copy - The arrest was not rendered illegal merely because the petitioner was not furnished a verbatim signed copy of the Commissioner's recorded reasons to believe. - HELD THAT: - Sub-section (1) of section 69 of the Act of 2017 provides for recording of ‘reasons to believe’ by the Commissioner, that the person has committed an offence and is punishable under the provisions of the Act of 2017 as specified therein, coupled with passing of the order authorizing any officer to arrest such person. Recording of reasons to believe is a sine qua non for satisfying the elements prescribed therein.

The Court held that recording of reasons to believe by the Commissioner is a jurisdictional precondition to arrest, and that such reasons must be furnished to the arrestee so as to enable judicial review of the arrest. On examining the e-office notings, the Court found that the Additional Director General had in fact recorded the reasons to believe, considered the material, and authorised the arrest. The reasons supplied to the petitioner substantially reflected the reasons so recorded and were not at variance with them. Neither the statute nor the decisions relied on prescribed that the arrestee must receive a verbatim copy bearing the Commissioner's signature or that any particular mode of supply was mandatory. Once the reasons to believe had been furnished in substance, the form and manner of supply became immaterial. [Paras 22, 23, 25, 26, 27]

The contention based on non-supply of a verbatim signed copy of the reasons to believe was rejected, and the challenge to the arrest and consequential custody failed.

Final Conclusion: The Court held that the petition was maintainable on the limited plea of breach of the statutory arrest safeguards, but found on the record that the reasons to believe had in fact been recorded by the competent authority and furnished to the petitioner in substance. As no legal requirement of supplying a verbatim signed copy was shown, the challenge to the arrest and consequential custody was rejected and the petition was dismissed.

Validity of the Confiscation of the seized goods and the consequential redemption fine - General penalty for unregistered additional place of business - Storage of stock in premises not registered as an additional place of business, without proof that the stock had been liquidated, did not justify confiscation of the seized goods, levy of redemption fine, or demand of tax on the seized stock itself. - HELD THAT: - The Court found from the seizure records that the petitioner had not liquidated the stock at the time of inspection and that the goods remained available. The demand of tax and redemption fine had been founded only on the fact that the goods were stored in premises not then registered as an additional place of business, though that premises was subsequently brought on record in the registration. In those circumstances, confiscation of the available stock and imposition of substantial fine and penalty were held to be unwarranted. The Court held that, at the highest, the default of not obtaining registration for the additional place in time attracted only a general penalty under Section 125 of the respective GST enactments. It was further clarified that, to the extent any of the goods had already been sold, the petitioner would remain liable to tax, interest and penalty, to be redetermined under the respective GST provisions. [Paras 11, 12, 13, 14]

The impugned order was quashed insofar as it imposed redemption fine and tax on the seized goods; only general penalty was directed for the registration default, and liability for tax, penalty and interest was confined to goods already sold, subject to redetermination.

Final Conclusion: The writ petition was partly allowed. Confiscation, redemption fine and tax demand on the seized stock were set aside, the petitioner was directed to pay general penalty for the failure to register the additional place of business in time, and tax consequences were left to be redetermined only in respect of goods already sold.

Anti-profiteering - commensurate passing of input tax credit benefit - home-buyers - claim for interest on the amount retained after cancellation of allotment - Jurisdictional limitation - re-determination of profiteering in the real estate project after the earlier inquiry - natural justice - locus standi.

Anti-profiteering - HELD THAT: - The Tribunal noted that the matter had been re-investigated on the methodology laid down in Reckitt Benckiser India Pvt. Ltd. v. Union of India [2024 (1) TMI 1248 - DELHI HIGH COURT], and that the DGAP quantified the amount still required to be passed on after taking into account the benefit already passed to a large number of home-buyers. It further recorded the Respondent's express submission that, without prejudice and in order to quietus the long-pending dispute, it was willing to accept the impugned report. On that basis, the Tribunal concluded that the Respondent had contravened Section 171 and that the DGAP report deserved acceptance. The Tribunal also directed payment of interest on the profiteered amount in terms of Rule 133(3)(b). [Paras 28, 29, 30, 31]

The DGAP report dated 09.01.2025 was accepted, the remaining profiteered amount was held payable, and interest at 18% was directed to be paid from the date of collection till return of the amount.

Grievance outside Section 171 - Jurisdictional limitation - HELD THAT: - The Tribunal found that the Applicant's subsisting grievance arose from cancellation of allotment and retention of money for a long period, for which proceedings had already been pursued before the RERA forum. It held that such claim for interest did not fall within the statutory domain of Section 171, which is confined to commensurate passing on of tax reduction or input tax credit benefit. The Applicant was therefore left to pursue the grievance before the proper forum. [Paras 23, 24, 25]

The Applicant's claim relating to interest on the retained amount was not entertained in these proceedings and was left open to be pursued before the appropriate forum.

Final Conclusion: The Tribunal accepted the DGAP's re-investigation report and held that the Respondent had contravened Section 171 of the CGST Act by indulging in profiteering, with consequential liability to return the balance amount along with interest. The Applicant's separate grievance regarding interest on money retained after cancellation of allotment was held to be outside the scope of anti-profiteering adjudication.

Receipt on account of advance sale of room nights - Allowable revenue receipt - principle business of assessee is to provide accommodation and other facilities to tourist members and assessee is debiting all the expenses relatable to these receipts

HELD THAT:- Following the order passed by this Court in Pancard Clubs Limited[2025 (11) TMI 823 - SC ORDER] we dismiss this Special Leave Petition also.

Offence u/s 276CC read with 278E - Prosecution for failure to furnish return within the time prescribed u/s 139(1) - Presumption of culpable mental state - Belated return not a defence - burden to prove absence of mens rea - as argued default was not wilful or that a belated return had been filed under Section 139(4)

As per HC [2025 (8) TMI 1807 - BOMBAY HIGH COURT] writ petitions seeking quashing of the complaint u/s 276CC were dismissed. The Court held that the principal defences raised involved either disputed questions of fact for trial or were untenable in law, and all remaining contentions were left open before the trial court.

HELD THAT:- On 17.11.2016, a show cause notice was issued to the petitioner for prosecution under Section 276CC of the IT Act. The petitioner furnished a reply on 11.01.2017 contending that since the Section 153A of the Act return has been filed within the extended period, there was no ground to initiate prosecution under Section 276CC of the IT Act.

A further show cause notice was issued on 23.12.2017 which is under Section 276CC read with 278E of the IT Act, for the delay in the regular returns.

Thereafter, after obtaining sanction on 27.03.2017, complaint(s) was filed before the Chief Metropolitan Magistrate, 38th Court, Ballard Pier, Mumbai, Maharashtra. The petitioner filed a writ petition before the High Court of Judicature at Bombay seeking quashemnt of the complaint(s). The High Court having declined, the petitioner has approached this Court.

Issue notice, returnable on 10th August, 2026. Let a set of paper book be handed over to Mr. Raghavendra P. Shankar, learned Additional Solicitor General through the office of Central Agency.

In the meantime, there shall be stay of further proceedings.

Penalty u/s 271D - Contravention of section 269SS - Absence of finding in assessment proceedings - Sustainability of penalty imposed for alleged cash receipts in the absence of a finding during assessment proceedings - HELD THAT: - Tribunal held that the assessee had furnished complete details of the cash deposits during the assessment proceedings, and that penalty could not be sustained merely on a subsequent second opinion.

As in Sahara India Financial Corporation Ltd. [2023 (8) TMI 297 - SC ORDER] categorically mentions that no penalty u/s. 271D for dealing in cash deposit as assessee is non-banking financial company dealt with depositors are dealings to rural areas where adequate bank facilities were not available

It further found that the AO had not recorded any finding regarding violation of section 269SS. On that basis, and following the principle noticed from the decisions cited before it, Tribunal concluded that the levy of penalty u/s 271D was unsustainable. [Paras 7]

The penalty u/s 271D was held to be not sustainable and liable to be deleted.

Final Conclusion: Tribunal allowed the appeal and deleted the penalty imposed u/s 271D for AY 2017-18. It held that, in the absence of a finding in the assessment proceedings of any violation of section 269SS, the penalty could not be sustained.

Corpus donation exemption - Registration under section 12AA - Capital receipt - Taxation at maximum marginal rate

Corpus donation exemption - Denial of Registration u/s 12AA - Capital receipt - HELD THAT: - The Tribunal noted that the assessee was a public charitable trust and had been granted registration under section 12A from 08-02-2018. It found that, while passing the order under section 143(1) as well as the rectification order under section 154, the Assessing Officer had not disputed the nature of the corpus donation and had not pointed out any discrepancy in the exemption claimed under section 11(1)(d). Since the registration already granted to the trust was not considered either by the Assessing Officer or by the appellate authority, the addition made in respect of the corpus donation was held to be unjustified. The Tribunal further held that the corpus donation was to be treated as a capital receipt. [Paras 7]

The disallowance relating to the corpus donation was held to be unsustainable, and the donation was accepted as a capital receipt.

Taxation at maximum marginal rate - Applicable slab rate - HELD THAT: - After holding that the registration granted to the trust had not been considered and that the addition itself was not justified, the Tribunal also found the computation of tax at the maximum marginal rate to be erroneous. It specifically held that charging tax at 30 per cent of the assessed income, instead of applying the slab rate applicable to the assessee trust, was not justified. The consequential incorrect tax computation was therefore liable to be corrected. [Paras 7]

The levy of tax at the maximum marginal rate and the consequential incorrect tax computation were held to be unjustified.

Final Conclusion: The Tribunal allowed the appeal and held that the authorities had wrongly ignored the trust's registration while denying the claim relating to corpus donation. It further held that the corpus donation was a capital receipt and that tax could not be computed at the maximum marginal rate instead of the applicable slab rate.

Premature surrender of pension policy - Taxability under income from other sources u/s 56 - Scope of section 80CCC(2) - Failure to consider submissions and documentary evidence

HELD THAT: - The Tribunal held that the receipt arose on premature surrender of a pension policy to which contributions had been made in earlier years, and that its taxability had to be examined in the light of section 80CCC(2) and the true nature of the receipt. It found that the AO had brought the amount to tax under the head "Income from Other Sources" without proper appreciation of the statutory provisions and the factual matrix. The Tribunal also recorded that the reassessment proceedings and the addition were completed without due consideration of the assessee's submissions and documentary evidence, and that the authorities below failed to examine the matter in the correct legal perspective. [Paras 5]

The addition was directed to be deleted.

Final Conclusion: The Tribunal allowed the appeal and deleted the addition made on receipt from premature surrender of the pension policy. It held that the amount could not be taxed in the manner adopted by the Assessing Officer and that the matter had not been examined with due regard to the statutory provision and the material placed by the assessee.

Deduction u/s 80P(2)(d) - Interest from co-operative banks - Dividend income from co-operative societies - Addition for reserve account discrepancy

Deduction u/s 80P(2)(d) - Interest income earned by the assessee from deposits with co-operative banks - HELD THAT: - The Tribunal held that the controversy stood concluded by the jurisdictional High Court in ASHWINKUMAR ARBAN CO OPERATIVE SOCIETY LTD. [2024 (11) TMI 971 - GUJARAT HIGH COURT], which had recognised that a co-operative bank, being a co-operative society, falls within the ambit of section 80P(2)(d) for the purpose of deduction on interest income. As there was no change either in the legal position or in the factual matrix, the assessee's claim for deduction on interest earned from co-operative banks was allowed. [Paras 6]

The disallowance of deduction on interest income from co-operative banks was deleted and the assessee's ground was allowed.

Dividend income from co-operative societies - Deduction under section 80P(2)(d) - HELD THAT: - The Tribunal found that the dividend income arose from investments with co-operative societies and therefore answered the statutory description for deduction under section 80P(2)(d). On that basis, the denial of deduction on such dividend income could not be sustained. [Paras 7]

The disallowance relating to dividend income was deleted.

Reserve account discrepancy - cogent material - HELD THAT: - The Tribunal held that the addition had been sustained without proper appreciation of the reconciliation and explanations furnished by the assessee. In the absence of any cogent material on record to substantiate the alleged discrepancy, the addition lacked support and was liable to be deleted. [Paras 8]

The addition on account of the reserve account discrepancy was directed to be deleted.

Final Conclusion: The Tribunal partly allowed both appeals. Deduction under section 80P(2)(d) was allowed on the interest income from co-operative banks and on the dividend income from co-operative institutions, and the addition made on account of the alleged reserve account discrepancy was deleted, while the grounds not pressed stood dismissed.

Disallowance u/s 14A to exempt income - Prospective operation of Explanation to section 14A - Restriction to exempt income

HELD THAT: - The Tribunal held that, for the year in question, the assessee had earned aggregate exempt income of Rs. 2,63,115/-, whereas the Assessing Officer had computed disallowance under Rule 8D at a higher figure and then restricted it to the total expenditure claimed. Accepting the assessee's contention, the Tribunal applied the binding Delhi High Court view that disallowance u/s 14A cannot exceed the exempt income earned. It further noted that the Explanation inserted in section 14A by the Finance Act, 2022 with effect from 01.04.2022 is prospective, and therefore had no application to Assessment Year: 2017-18. [Paras 6]

The disallowance under section 14A was restricted to Rs. 2,63,115/-, being the exempt income earned by the assessee.

Final Conclusion: The Tribunal partly allowed the appeal and held that, for Assessment Year: 2017-18, the disallowance under section 14A could not exceed the exempt income earned by the assessee. The disallowance was accordingly restricted to Rs. 2,63,115/-.

Search reassessment limitation - Escaped income represented in the form of asset - Special procedure for search-based assessment - Prospective operation of enhanced tax rate - Over-invoicing of purchases - Bogus purchases - CSR expenditure - Excess stock addition - Telescoping of cash found

Search reassessment limitation - Escaped income represented in the form of asset - validity of notice u/s 148 issued pursuant to the search where there was no allegation that escaped income was represented in the form of an asset - HELD THAT: - The Tribunal held that, for the eighth year preceding the year of search, reopening could be sustained only if the conditions applicable to escaped income represented in the form of an asset were satisfied. Since the Revenue had not alleged escapement in that form, AY 2016-17 fell beyond the permissible block and the assumption of jurisdiction itself was bad in law. [Paras 5, 6, 7]

The assessment for AY 2016-17 was quashed for invalid assumption of jurisdiction, and the remaining grounds were left open.

Prospective operation of enhanced tax rate - unexplained expenditure under section 69C read with section 115BBE - HELD THAT: - The Tribunal recorded that no argument was advanced on the merits of the expenditure addition itself, and the controversy was confined to the rate of tax. Accepting the legal position noticed by the lower authority precedent in SMILE Microfinance Limited[2024 (11) TMI 1444 - MADRAS HIGH COURT] it held that the enhanced rate under section 115BBE operated only from 01.04.2017 relevant to AY 2018-19 onwards and could not be applied to AY 2017-18. [Paras 13]

The assessee succeeded partly on the limited question that the enhanced rate under section 115BBE was inapplicable to AY 2017-18.

Over-invoicing of purchases - Mandi tax savings - HELD THAT: - The Tribunal accepted the finding that where purchases routed through brokers involved savings of mandi tax on procurement directly from farmers, such savings were already factored into the lower billed price to the assessee. The assessee had claimed only the amount actually billed and paid, and not any higher figure. In that factual position, treating the tax saving as inflated purchase expenditure was unsustainable. The Revenue did not dislodge these findings with any cogent material. [Paras 25, 31, 35, 39, 47]

The Revenue's challenge to the deletion of additions for alleged over-invoicing of purchases failed for all the above years.

Bogus purchases - Quantitative records - Rejection of books - HELD THAT: - The Tribunal noted that no discrepancy was found in the quantitative details of opening stock, purchases, consumption, production and sales, and the books of account were not rejected. Once production and sales of finished goods were accepted, and corresponding purchases were not disproved, an ad hoc addition merely by applying a percentage to purchases was held unjustified. The Revenue was unable to rebut the factual findings recorded by the appellate authority. [Paras 25, 31, 35, 39, 47]

The Revenue's challenge to the deletion of additions for alleged bogus purchases was rejected for all the above years.

CSR expenditure - Alternative deduction - CSR expenditure not allowable as business expenditure - alternate claim of deduction u/s 80G - HELD THAT: - The Tribunal held that expenditure on CSR activities was hit by the statutory bar and therefore could not be allowed as business expenditure. However, since the record did not contain sufficient particulars of the underlying CSR payments, and the assessee had contended that they were contributions to eligible institutions, the matter required de novo examination on the limited question whether deduction could be considered under the separate provision governing such contributions. [Paras 23, 29]

The disallowance as business expenditure was not disturbed, but the issue was restored to the Assessing Officer for fresh consideration of the alternative claim for AYs 2018-19 and 2019-20.

Special procedure for search-based assessment - Section 143(3) versus section 148 - For AY 2022-23, after a post-01.04.2021 search, the assessment could not validly be completed under section 143(3) and had to proceed through the special reassessment route. - HELD THAT: - The Tribunal held that, once the search was conducted, AY 2022-23 fell within the three immediately preceding years for which information suggesting escapement stood deemed under the statutory scheme. In that situation, the Assessing Officer was required to proceed under the special mechanism applicable to search-based reassessment and not under the general scrutiny provision. Completion of assessment under section 143(3) was therefore treated as void ab initio. [Paras 42]

The assessment for AY 2022-23 framed under section 143(3) was quashed, and the other grounds were left open.

Excess stock addition - Estimated inventory - Stock reconciliation - addition on account of alleged excess stock for AY 2023-24 - HELD THAT: - The Tribunal found that the quantity differences had been worked out on standard weights and estimation, and that the assessee had pointed out several discrepancies in the inventory exercise. It also noticed that the assessee had produced stock registers, purchase ledger and sales ledger to show reconciliation, while the Revenue had not rejected the books or stock records. In these circumstances, the alleged excess stock could not be treated as unexplained investment, and the very basis of the addition was held unreliable. [Paras 45]

The addition made on account of excess stock for AY 2023-24 was deleted, and the Revenue's corresponding ground was dismissed.

Telescoping of cash found - Double addition - additions already made for unaccounted sales and related business income - HELD THAT: - The Tribunal upheld the appellate finding that the amounts already brought to tax on account of unaccounted cash sales and the related gross profit constituted an available source for the cash found during search. Grant of telescoping was therefore proper, since it avoided taxing the same income twice under different heads. [Paras 49]

The deletion of the separate addition on account of cash found was affirmed.

Final Conclusion: The assessee succeeded on the jurisdictional challenges for AYs 2016-17 and 2022-23, obtained relief on the rate of tax for AY 2017-18, secured remand on the alternative deduction claim for CSR payments for AYs 2018-19 and 2019-20, and succeeded in deletion of the excess stock addition for AY 2023-24. The Revenue's appeals were dismissed throughout, including on the issues of alleged over-invoicing, bogus purchases, excess stock and cash found during search.

Addition u/s 68 in respect of opening balances - Unsecured loans - Source of source in non-share capital cases - Opening balance of unsecured loans -unsecured loans u/s 68 - Source of source in non-share capital cases

Whether Opening balances of unsecured loans brought forward from the preceding year could not be added as unexplained cash credits for the year under appeal? - HELD THAT: - The Tribunal held that section 68 applies to sums credited in the books during the relevant year, and where no fresh funds were received in that year, the brought forward opening balance could not be taxed as unexplained credit merely because there were mismatches or explanations had not been furnished during assessment. As the amount represented opening balances already carried forward and formed part of the closing balance wrongly added by the Assessing Officer, the deletion made by the Commissioner (Appeals) was affirmed. [Paras 14, 18]

The deletion of the addition relating to the opening balance of unsecured loans was confirmed.

Unsecured loans under section 68 - Identity, genuineness and creditworthiness - Source of source in non-share capital cases - HELD THAT: - In relation to the loan from M/s Venus India Asset Finance Pvt. Ltd., the Tribunal noted that the assessee had produced the lender's return of income, bank statement, confirmation and loan agreement, and that the lender was a registered NBFC with sufficient disclosed income and available funds. The Revenue did not dislodge these materials, and the remand report did not point out any defect in them. As to the other three lenders, the assessee had produced their returns, confirmations and bank statements showing availability of funds, and the transactions were routed through banking channels. The Tribunal also took note that loans from these parties in subsequent years had been accepted and repayments were not doubted. It held that once the assessee had established identity, genuineness and creditworthiness, the onus stood discharged; if the Assessing Officer wanted further verification, he could have exercised statutory powers to do so. The Tribunal further held that the requirement to explain the source of source in loan cases was applicable only from assessment year 2023-24 and did not govern the year under appeal; in non-share capital cases, addition could not be sustained on suspicion or on a mere presumption about the lenders' financial capacity. The decisions cited by the Revenue were treated as distinguishable on facts. [Paras 27, 28, 29, 30, 31]

The deletion of the addition relating to the loan from M/s Venus India Asset Finance Pvt. Ltd. was upheld and the sustained addition in respect of the other three lenders was also directed to be deleted.

Final Conclusion: The Tribunal upheld the admission of additional evidence, confirmed that opening balances could not be added under section 68, and held that the assessee had satisfactorily explained the fresh loan credits received during the year. The assessee's appeal was allowed in full and the Revenue's appeal was dismissed.

Pecuniary jurisdiction to issue notice - Validity of notice u/s 143(2) - Jurisdictional defect - CBDT Instruction No. 1/2011 - validity of notice u/s 143(2) had been issued by an Income-tax Officer who did not possess pecuniary jurisdiction over the assessee - HELD THAT: - The Tribunal held that, under CBDT Instruction No. 1/2011, where the returned income exceeded the prescribed monetary limit for metro cities, jurisdiction vested in the ACs/DCs and not in the ITO. Since the assessee had declared income above that limit, ITO who issued the notice u/s 143(2) lacked jurisdiction to assume scrutiny jurisdiction.

Defect was held to go to the root of the matter, and the subsequent assessment could not be sustained merely because the case was later dealt with by another officer. Following the decisions in PCIT Vs. Vimal Gupta [2017 (10) TMI 1670 - DELHI HIGH COURT], Ashok Devichand Jain Vs. Union of India [2022 (3) TMI 1466 - BOMBAY HIGH COURT], Shree Shoppers Ltd [2023 (3) TMI 1432 - CALCUTTA HIGH COURT] and Sapna Rastogi [2023 (3) TMI 1432 - CALCUTTA HIGH COURT], Tribunal treated the invalid assumption of jurisdiction as fatal. [Paras 10, 14]

The notice issued u/s 143(2) was held to be bad in law for want of jurisdiction, and the consequential assessment order was quashed.

Final Conclusion: The cross-objection was allowed and the assessment for Assessment Year 2017-18 was quashed on the ground that the notice under section 143(2) had been issued by an officer lacking pecuniary jurisdiction. Consequently, the Revenue's appeal was dismissed as infructuous.

Exemption u/s 54 - mandation to deposit money in Capital Gain Deposit Scheme - Procedural condition versus substantive compliance - Exemption u/s 54 denied where the assessee purchased a new residential house within the statutory period, merely because the capital gain had not been deposited in the Capital Gain Deposit Scheme before the due date u/s 139(1)

HELD THAT: - The Tribunal held that the decisive fact was the assessee's admitted investment in a new residential house within the two-year period prescribed in section 54. The requirement of deposit in the Capital Gain Deposit Scheme was treated as a procedural condition meant to regulate interim utilisation of unutilised capital gain, and not as one that could defeat the substantive entitlement arising from timely reinvestment. Following its earlier decision in ITO-1(2), Indore Vs. Rajendra Singh Yadav [2024 (10) TMI 1805 - ITAT INDORE] Tribunal held that denial of the exemption on this hyper-technical ground was unsustainable. [Paras 6, 8]

The disallowance of the claimed exemption u/s 54 was deleted.

Final Conclusion: The Tribunal allowed the appeal and held that exemption under section 54 was admissible for AY 2016-17, since the assessee had purchased the new residential house within the prescribed period. The exemption could not be denied solely for non-deposit of the capital gain in the Capital Gain Deposit Scheme before the due date under section 139(1).

Fixed place permanent establishment - Service permanent establishment - Virtual service permanent establishment - Income deemed to accrue or arise in India- Disposal test - India-Canada DTAA on account of remote access to customers' theatre systems and maintenance activities carried out through the Australian vendor

Fixed place permanent establishment - Disposal test - Permanence test - HELD THAT: - The Tribunal accepted the assessee's contention that the recognised tests for existence of a fixed place PE were not satisfied. It found that the remote access granted by customers for troubleshooting and maintenance did not establish a place of business at the assessee's disposal, nor did it satisfy the requirements of permanence or carrying on the assessee's own business activity through an identified place in India. On that basis, the allegation of fixed place PE was rejected. [Paras 4]

No fixed place PE was held to exist under Article 5(1) of the DTAA.

Service permanent establishment - Virtual service permanent establishment - Supervisory permanent establishment - HELD THAT: - The Tribunal recorded that the visits of the personnel to the theatre sites in India were for 67 days, which was an admitted fact and below the 90-day threshold prescribed by the DTAA. It further held, following Ernst & Young (EMEIA) Services Limited [2026 (3) TMI 1699 - ITAT DELHI] and the discussion therein on CIT vs. Clifford Chance Pte. Ltd. [2025 (12) TMI 501 - DELHI HIGH COURT] that the treaty contemplated furnishing of services in India through employees or personnel physically present in India and did not recognise any concept of a virtual service PE based only on remote rendering of services.

Tribunal also declined to treat the Linkedin profile of the individual concerned as determinative of his employment status, particularly in view of the affidavit of the Australian vendor stating that he was its employee. Accordingly, neither the remote services nor the 67 days of site visits could give rise to a service PE or supervisory PE. [Paras 4]

No service PE or supervisory PE was held to exist, as the 90-day threshold was not crossed and remote services could not create a virtual service PE under the DTAA.

Final Conclusion: The Tribunal allowed the appeal, holding that the assessee had neither a fixed place PE nor a service or supervisory PE in India under the India-Canada DTAA. As the existence of PE itself failed, the Tribunal did not examine profit attribution.

Deduction on enhanced profits - Employees' contribution to PF/ESI - eligibility for deduction u/s. 80P on the increased profits post disallowance u/s. 36(1)(va)

HELD THAT: - The Tribunal found that the AO had not disputed the assessee's status as a co-operative society or its basic eligibility for deduction under section 80P. The impugned addition arose only because delayed deposit of employees' contribution to PF/ESI attracted disallowance under section 36(1)(va).

Tribunal held that, in such a case, the disallowance merely increases the business profits of the same eligible co-operative activity, and those enhanced profits continue to retain the character of income eligible for deduction u/s 80P. Relying on CBDT Circular No. 37/2016 on Chapter VIA deduction on enhanced profits, it was held that where business-related disallowances enhance profits of the eligible business, deduction under Chapter VIA remains admissible on such enhanced profits. [Paras 5, 6]

The assessee was held entitled to deduction u/s 80P even on the increased profits resulting from disallowance u/s 36(1)(va), and the disallowance was deleted.

Final Conclusion: The Tribunal allowed the appeal and held that the disallowance of delayed employees' contribution to PF/ESI only enhanced the profits of the eligible co-operative business, on which deduction u/s 80P remained available. In view of the relief granted on merits, the challenge to reopening was treated as academic and dismissed as infructuous.

Reassessment beyond four years - Change of opinion - Failure to disclose fully and truly all material facts - allegation of hawala purchases - HELD THAT: - The Tribunal found that the recorded reasons themselves stated that they arose on perusal of the assessment records, showing that the basis for reopening was not any fresh tangible material but the material already available during the original scrutiny.

The order-sheet entries in the original assessment established that the AO had specifically examined the information regarding alleged hawala purchases, called for purchase bills, ledgers, bank statements, export details and related material, and thereafter completed the assessment without making any addition.

In these circumstances, the reopening beyond four years could not be sustained because there was no failure by the assessee to disclose fully and truly all material facts; nor could the reassessment be justified by asserting that the relevant facts were embedded in the accounts. Reopening on the same material amounted to a change of opinion, and the jurisdictional condition under the proviso to section 147 was not satisfied. [Paras 11, 12, 13, 14]

The reassessment proceedings were held to be bad in law and the reassessment order was quashed.

Final Conclusion: The Tribunal allowed the assessee's appeal and quashed the reassessment for A.Y. 2011-12. Since the reopening itself was invalid, the grounds on the merits of the purchase addition were not adjudicated.

Unexplained cash credit in respect of unsecured loan - addition was made u/s 68 r.w.s 115BBE - Creditworthiness and genuineness of NBFC lender - Consistency with coordinate Bench decision on identical lender

HELD THAT: - The Tribunal found that the Commissioner (Appeals) had confirmed the addition mainly by relying on the order in the case of the assessee's group concern, M/s ACE Infractity Developers Pvt. Ltd. [2026 (4) TMI 1188 - ITAT DELHI] concerning the same lender. Since that order had already been reversed by the coordinate Bench, which held that the lender's identity, creditworthiness on the basis of its financials, and the genuineness of the loan transaction from an NBFC stood sufficiently established, the very foundation of the impugned confirmation no longer survived. The Tribunal therefore applied the same reasoning to the present assessee on identical facts and held that the loan from M/s Sundram Consultants Pvt. Ltd. was not liable to be treated as unexplained cash credit. [Paras 8, 9]

The addition made in respect of the loan received from M/s Sundram Consultants Pvt. Ltd. was deleted.

Final Conclusion: The Tribunal held that the sole basis on which the addition had been sustained by the Commissioner (Appeals) had already been displaced by the coordinate Bench in the group concern's case on identical facts. Following that decision, the addition under section 68 in respect of the loan from M/s Sundram Consultants Pvt. Ltd. was deleted and the assessee's appeal was allowed.

Entitlement to interest on the amount collected during investigation, though such amount did not bear the character of duty or pre-deposit - no express statutory provision was shown for payment of interest - Unjust enrichment -Restitution against unlawful revenue retention - Article 265 - Whether interest is due on collection made without authority of law and retained by the Revenue in the absence of express provisions providing for interest. - HELD THAT: - The Court held that once the collection was admittedly made without authority of law and was retained by the Revenue, the absence of a specific statutory provision did not defeat the claim for interest. Relying on the principle that money received and retained without right carries with it an obligation to refund with interest, the Court found that unlawful retention by the State attracts restitutionary interest. Since there was no dispute that the collection itself was unauthorised and offended Article 265, the petitioner was entitled to interest at a reasonable rate. [Paras 10, 11]

Interest was directed to be paid at 6% per annum from the date of collection till the date of payment.

Final Conclusion: The writ petition was disposed of by directing the department to pay interest at 6% per annum on the amount collected during investigation from the date of collection till payment. The Court held that unlawful retention of money by the Revenue attracts interest even in the absence of an express statutory provision.

Transaction value - Declared value of the imported equipment - Assessable value of the imported plant and machinery - Post-importation Charges - Includibility of technical know-how and licence fees - Composite contract and segregable supplies- Whether the supply of technical know-how was the condition precedent for the supply of the plant and equipments ? - HELD THAT: - The Tribunal held that the contract itself segregated the foreign supplier's obligations into two distinct parts, namely, technical assistance, licence and related services on the one hand, and supply of key components on the other, with separate consideration reflected in separate invoices. On that basis, the supplies were not to be treated as an indivisible transaction merely because an overall contract value was also stated. Applying the principles stated in Steel Authority of India Ltd. [2020 (4) TMI 774 - SUPREME COURT], Essar Steel Ltd. [2015 (4) TMI 486 - SUPREME COURT] and Tata Iron and Steel Co. Ltd. [2000 (2) TMI 91 - SUPREME COURT], the Tribunal held that amounts paid for technical know-how, engineering and post-importation assistance are includible only if they are shown to be a condition of sale of the imported goods. The Revenue failed to establish from the contract any binding obligation requiring purchase of the services as a pre-requisite for purchase of the equipment, or any nexus showing that such payments were directly related to the imported goods as such. Since only the key equipment was imported and the remaining plant components were to be arranged separately by the buyer, the technical services agreement was not a condition precedent to the sale of the imported equipment. The separately contracted value of such services was, therefore, not liable to be added to the transaction value. [Paras 11, 12, 13]

The issue was decided in favour of the appellant, and the licence fee, engineering package and technical assistance charges were held not includible in the assessable value of the imported plant and equipment.

Final Conclusion: The Tribunal held that the separately invoiced licence, engineering and technical assistance charges were not shown to be a condition of sale of the imported equipment and therefore could not be added to its assessable value. The impugned order was set aside and the appeal was allowed.

Advance Authorisation Scheme - payment of Countervailing Duty (CVD) - Effect of Notification No. 01/2017-Cus. and Notification No. 79/2017-Cus. - Retrospective applicability of exemption notification -HELD THAT: - The Tribunal held that the controversy stood covered by the decision in M/s. Vishal Metal Industries [2024 (11) TMI 66 - CESTAT ALLAHABAD], which had treated the subsequent exemption of CVD under Notification No.79/2017-Cus. as applicable to the intervening period as well in cases of imports under advance authorisation, particularly where export obligation had been fulfilled. Finding the issue no longer res integra and seeing no reason to differ from that view, the Tribunal accepted the claim that the demand of CVD for the intervening period was unsustainable; the confiscation, interest and penalties imposed in consequence of that demand could not survive. [Paras 5]

The demand of CVD for the intervening period was set aside and all three appeals were allowed.

Final Conclusion: Following M/s.Vishal Metal Industries, the Tribunal held that CVD could not be sustained on imports made under advance authorisation for the intervening period in dispute. The impugned order was set aside in entirety and all three appeals were allowed.

Tariff classification of imported goods - goods declared as “Kingbo K Bio-Fertilizers/exodus” plant protector - reclassified as insecticides under Chapter 38 on the basis of the laboratory reports - Cross-examination and principles of natural justice - Confiscation for prohibited import and misdeclaration - Penalty for conscious and deliberate falsification - Principles of natural justice - Whether the Department has successfully established, through legally admissible and conclusive evidence, that the imported goods are “insecticides” liable for classification under Chapter Heading 3808 and consequentially liable for confiscation for want of registration under the Insecticides Act, 1968.

Denial of cross-examination of the authors of the technical reports -HELD THAT: - It is a well settled law that classification cannot be determined on assumptions or isolated chemical presence without considering composition, primary use, marketed identity and commercial understanding of the product etc. We further find that none of the reports categorically certify that the imported goods are “insecticides” within the meaning of Chapter 38 or Insecticides Act. The reports merely identify presence of certain constituents. Presence of certain constituents by itself cannot conclusively determine tariff classification unless supported by technical opinion regarding product functionality and market identity. Significantly, the Department has not produced any evidence showing that the imported product was registered, sold or recognized internationally as insecticides under any statutory regime. No trade evidence, expert evidence or market enquiry has been brought on record.

Applying the principle in Andaman Timber Industries Vs Commissioner of Central Excise [2015 (10) TMI 442 - SUPREME COURT], the Tribunal held that denial of effective cross-examination amounted to a serious violation of principles of natural justice and struck at the root of fair adjudication. The authorities relied on by the Revenue were held inapplicable because they arose in different factual contexts and did not concern a case where technical reports constituted the substantive foundation of the demand and confiscation. [Paras 13]

Reliance on the laboratory reports was held unsustainable for breach of principles of natural justice.

Tariff classification of imported goods - Confiscation for prohibited import and misdeclaration - Penalty for conscious and deliberate falsification - The Department failed to establish by cogent, reliable and legally admissible evidence that the imported goods were insecticides classifiable under Heading 3808, or that the imports were prohibited, misdeclared, or accompanied by deliberate suppression so as to sustain confiscation, duty demand and penalties. - HELD THAT: - The Tribunal found material ambiguity in the laboratory reports themselves, noting that one report specifically recorded that the analysis did not show any peaks related to pesticides, while the other did not specify quantities and yielded different results on the same basis of analysis. It held that classification cannot rest on assumptions or the isolated presence of certain constituents, but must be supported by evidence as to composition, primary use, product functionality, marketed identity and commercial understanding. Since the reports did not categorically certify that the goods were insecticides within Chapter 38 or the Insecticides Act, and no trade evidence, expert evidence, market enquiry or proof of statutory recognition as insecticides was produced, reclassification could not be sustained. The Tribunal further held that the imports were made through proper bills of entry with declared description and supporting literature, showing at best an interpretational dispute and not deliberate suppression or wilful misstatement. In the absence of clear proof that the goods were prohibited imports or that the declarations were knowingly false, confiscation under Sections 111(d) and 111(m), and penalties under Sections 112(a) and 114AA, were held unsustainable; once the basis of classification failed, the consequential duty demand, interest, fine and penalties also failed. [Paras 14, 15, 16, 17, 18]

Reclassification under Heading 3808 and all consequential confiscation, duty demand, redemption fine, interest and penalties were set aside.

Final Conclusion: The Tribunal allowed the appeals and held that the Department had failed to prove, through legally admissible and conclusive evidence, that the imported goods were insecticides or prohibited imports. The impugned reclassification, confiscation, duty demand, interest, redemption fine and penalties were therefore set aside with consequential relief.

Effect of Enhancement of assessable value and rejection of the declared transaction value - Written acceptance letter, without compliance with the statutory requirement of recording and communicating reasons for doubt and without a speaking order - Consent to reassessment - Customs valuation - Right to challenge such reassessment - Reliance on contemporaneous import data. - HELD THAT: - The Tribunal found that the appellate authority had proceeded solely on the footing that the appellant had accepted enhancement of value in writing. However, the record also contained letters by which the appellant had sought clearance on enhanced value under protest, and those letters had not been considered. In that background, the case could not be treated as one of simple and voluntary acceptance of enhancement. Following the Delhi High Court in the case of Niraj Silk Mills and Hanuman Prasad & Sons Vs. Commissioner of Customs (ICD) Patparganj [2024 (11) TMI 1361 - DELHI HIGH COURT] view on the scope of Section 17(5), the Tribunal held that any concession in writing is confined to dispensation with a speaking order only in a proper case and does not extinguish the statutory right of the importer to question the reassessment. [Paras 11, 14, 15, 16]

The rejection of the appeals on the sole ground of written acceptance of enhancement was held unsustainable.

Customs valuation - Rule 12 compliance - Communication of reasons for rejecting transaction value - Contemporaneous import data - The declared transaction value could not be rejected and redetermined without complying with the mandatory requirement of communicating reasons for doubting the declared value, and the enhancement could not be sustained merely on a consent letter unsupported by particulars of contemporaneous imports. - HELD THAT: - The Tribunal held that the mandate governing rejection of transaction value and reassessment was no longer open to doubt. Since all the bills of entry were post the date from which the requirement stood enforceable in terms of the Supreme Court ruling, the proper officer was bound to communicate in writing the reasons for rejecting the declared value. Although the acceptance letter stated that contemporaneous import details had been shown, no such details were actually mentioned. The Tribunal also noted the Delhi High Court's exposition that reassessment cannot rest on mere reliance on NIDB or similar data without cogent material and procedural compliance. On that basis, the enhancement of value and the consequential appellate orders were held to be unsustainable. [Paras 12, 13, 14, 15, 16]

The value enhancement was set aside as being contrary to the statutory valuation scheme and the mandatory procedural requirements.

Final Conclusion: The Tribunal held that the impugned orders could not be sustained merely on the basis of the appellant's written acceptance of enhancement. As the statutory requirements governing rejection of declared value and reassessment had not been satisfied, all eight appeals were allowed with consequential relief as per law.

Entitlement to bring to the notice of NCLAT the subsequent development - recall of the Recovery Certificate - HELD THAT:- In view of the subsequent setting aside of the ex-parte DRT order and closure of the recovery certificate, the interim protection granted earlier was continued, the appellant was permitted to place the subsequent developments before the NCLAT, the respondents were permitted to file affidavit and additional documents, and the NCLAT was directed to hear and dispose of the appeal in accordance with law, without any opinion being expressed on the merits.

Computation of 180-day period for retention, freezing or confirmation of provisional attachment - Covid-19 exclusion in quasi-judicial proceedings - reclassification of bank accounts and absence of foundational facts - Money laundering - Interpretation of adjudicatory power under Section 8(3) - failure to discharge the burden - Maintainability and legality of the proceedings - Attachment of jewellery and immovable properties of family members - Actus Curiae Neminem Gravabit - Reason to Believe - Proceeds of Crime - Reverse Burden of Proof - Principles of Statutory Interpretation - Harmonious Construction - Reading Down.

Computation of 180-day period - HELD THAT: - The Tribunal held that, though the orders were passed beyond 180 days if calendar computation alone were applied, the period from 15.03.2020 to 28.02.2022 stood excluded in view of the Supreme Court's directions on limitation and termination of proceedings, as applied to judicial and quasi-judicial proceedings under the Act. Relying on the later Delhi High Court view in Directorate of Enforcement and Ors. Vs. Vikas WSP Ltd and Ors. [2021 (1) TMI 1161 - DELHI HIGH COURT], and its own earlier order, the Tribunal held that proceedings before the Adjudicating Authority are quasi-judicial, and the enforcement agency cannot be prejudiced by delay attributable to the pandemic period or to the functioning of the adjudicatory forum. On exclusion of the Covid-19 period, the impugned orders were within time. [Paras 18, 19]

The challenge based on expiry of 180 days was rejected.

Predicate offence and PMLA proceedings - Foundational facts and reverse burden - Reasons to believe - HELD THAT: - The Tribunal held that the interim order of the Supreme Court operated only in relation to the pending criminal proceedings and not against the proceedings for attachment, seizure, or freezing under the Act. It further held that reclassification of the bank accounts from the category of fraud, or interference with willful defaulter classification, did not displace the allegations of diversion of funds and purchase of assets in names other than the borrowing company, which continued to support the predicate offence and the money-laundering proceedings. On the plea founded on Vijay Madanlal Choudhary Vs. Union of India [2022 (7) TMI 1316 - SUPREME COURT (LB)], the Tribunal found that the foundational facts stood established from the FIR, ECIR, money trail, statements recorded, admitted default in repayment, and absence of explanation for diversion of funds to acquire properties. As to reasons to believe, the Tribunal held that such reasons are required at the initiation stage, and the Adjudicating Authority had thereafter passed the impugned orders on consideration of the material and rival submissions; no ground for interference was made out. [Paras 22, 23, 24, 25, 26]

All common challenges to the maintainability and legality of the proceedings were rejected.

Burden under Section 24 - Nexus with proceeds of crime - Legitimate source of acquisition - appellants failed to establish that the attached jewellery and immovable properties standing in the names of women family members - legitimate sources unconnected with the alleged proceeds of crime. - HELD THAT: - The Tribunal held that the appellants' plea that the jewellery and properties represented marriage gifts, family contributions, salary, dividend income, or sale proceeds of shares remained unsupported by cogent evidence. Mere reference to documents or routing of payments through banking channels was held insufficient in the absence of material showing availability of funds, particulars of share sales, or other reliable proof of source. Applying the burden placed on the appellants under Section 24, the Tribunal held that they had not shown that the properties had no nexus with proceeds of crime. The same failure extended to the seized jewellery, for which no invoices or supporting acquisition documents were produced. [Paras 27]

The claim of independent and legitimate ownership of the attached properties and jewellery was rejected.

Retention of seized or frozen property - Interpretation of adjudicatory power under Section 8(3) - Per incuriam precedent - A prior order under Section 20(1) was not a mandatory precondition for the Adjudicating Authority to pass an order of retention or continuation of freezing on an application under Section 17(4), and the contrary interpretation in Directorate of Enforcement Vs. Rajesh Kumar Agarwal [2025 (9) TMI 875 - DELHI HIGH COURT], was not accepted. - HELD THAT: - The Tribunal interpreted the statutory scheme of Sections 8, 17 and 20 and held that Section 8(3) itself empowers the Adjudicating Authority, after adjudication under Section 8(2), to order retention of property or record seized or frozen under Sections 17 or 18. It emphasized that the text uses the expression confirming attachment under Section 5(1) or retention of property or record seized or frozen under Sections 17 or 18, thereby treating attachment and retention as distinct statutory consequences.

It is stated that when the word “confirmation” for seizure and freezing of the property has not been used either under Section 8(3) or Section 17 or18 and even under Section 20(1) and (2) of the Act, how such a power can be conferred by the High Court. The consequences are otherwise said to be serious because ultimate power of retention of the property under seizure or continuance of the property frozen has been conferred to the Adjudicating Authority. It has been diverted to the authorized officer of the ED with confirmation of such an order by the Adjudicating Authority. It is nothing but rewriting of Section 8(3) of the Act for retention of seized or frozen property to that of “confirmation”.

Relying on paragraph 84 of Vijay Madanlal Choudhary Vs. Union of India, the Tribunal held that an application under Section 17(4) is to be made within thirty days to seek retention, and the Adjudicating Authority, after hearing, passes the order of retention itself. It therefore rejected the Delhi High Court view in Directorate of Enforcement Vs. Rajesh Kumar Agarwal that Section 8(3) only confirms a prior retention order under Section 20, holding that such reading rewrites the statute, ignores the disjunctive use of the word 'or', conflicts with the binding decision of the Supreme Court, and renders part of Section 8(3) redundant. On that reasoning, the challenge based on alleged non-compliance with Section 20(1) and (2) failed. [Paras 63, 64, 65, 66, 67]

The plea of invalidity for want of a prior Section 20 order was rejected, and the Tribunal declined to follow the contrary Delhi High Court interpretation.

Final Conclusion: The Tribunal dismissed all the appeals. It upheld the orders permitting retention of seized property, continuation of freezing, and confirmation of provisional attachment, and further held that the contrary interpretation adopted in Directorate of Enforcement Vs. Rajesh Kumar Agarwal could not be followed.

Exemption for construction of road for use by general public - CENVAT credit on exempt input services - Benefit of exemption under Notification No. 25/2012-ST - Extended period of limitation - Suppression or wilful misstatement -Revenue neutrality.

Exemption for construction of road for use by general public. - HELD THAT: - The Tribunal found from the project material and brochure that the roads in the industrial park were crossed by Jaipur Master Plan roads and that most of them were connected with existing public roads. On that basis, it held that the roads were not confined to the industrial park alone and were intended to be used by the general public as well. The mere circumstance that the roads were situated inside a private industrial park was held insufficient to treat them as private roads with restricted access. Since the services related to construction of roads for use by the general public fell within the exemption notification, the corresponding input services were exempt services and CENVAT credit thereon was not admissible. The decision in M/s. Paramount Infraventures Pvt. Ltd [2024 (6) TMI 347 - CESTAT NEW DELHI] was distinguished because that case concerned a race track where public access as of right was absent. [Paras 6, 9]

On merits, the denial of CENVAT credit was upheld and the appellant was held entitled to refund of the service tax paid on the exempt service.

Extended period of limitation - Revenue neutrality - HELD THAT: - The Tribunal held that the appellant had acted on a bona fide understanding that the roads were for the specific use of the industrial park and therefore outside the exemption meant for roads used by the general public. It noted that, had the exemption been claimed, the appellant would not have paid service tax at all, and if tax was not payable the Department would have been liable to refund the amount with interest. The case was therefore treated as revenue neutral rather than one involving suppression. The Tribunal also held that the controversy was one of interpretation, particularly in the light of the converse factual situation noticed in M/s. Paramount Infra Ventures Private Ltd [2024 (6) TMI 347 - CESTAT NEW DELHI]. On that reasoning, the proviso to section 73(1) could not be invoked and the demand could survive only for the normal period. [Paras 8, 9]

The finding sustaining the extended period was set aside and the matter was remanded only for recalculation of recoverable CENVAT credit for the normal period, with consequential interest and appropriate penalty.

Final Conclusion: The Tribunal upheld the merits finding that the roads in question were for use by the general public and that CENVAT credit on the related exempt services was inadmissible. It, however, held that the extended period of limitation was not invocable, and remanded the matter only for recomputation for the normal period with consequential refund of the service tax paid.

Taxability of police security services - Sovereign functions - Security agency service. - HELD THAT: - The Tribunal held that the controversy was already covered by earlier decisions on identical facts in Senior Superintendent of Police, Gurdaspur, [2026 (2) TMI 473 - CESTAT CHANDIGARH]. Following those decisions, it accepted that the police department, being an agency of the State discharging statutory and sovereign functions, could not be treated as a person engaged in the business of providing security services, and the fees collected for such deployment did not attract levy under the taxable category of security agency service. [Paras 5, 6]

The demand confirmed in the impugned order was held unsustainable and the appeal was allowed with consequential relief.

Final Conclusion: Following earlier decisions on the same issue, the Tribunal held that deployment of police personnel for security did not attract service tax under security agency service. The impugned order was therefore set aside and the appeal was allowed with consequential relief.

Cenvat credit availed before registration under service tax - Input service nexus for exported output services - pre-condition for availment of Cenvat Credit -rebate claim on account of Export of Service -Remand for fresh examination of eligibility.

Cenvat credit prior to registration - Exported services - Registration as pre-condition - Denial of credit relating to the period when the appellant was not registered under service tax was not sustainable merely on the ground of non-registration. - HELD THAT: - The Tribunal held that section 69 of the Finance Act, 1994 required registration only from a person liable to pay service tax, and it was not disputed that during the relevant period the appellant was exporting services and was not required to pay service tax. On examining rules 3, 4 and 9 of the Cenvat Credit Rules, 2004, the Tribunal found no statutory provision making prior service tax registration a condition precedent for taking credit. It held that while availment and utilisation of credit must still satisfy the requirements relating to proper documents, nexus and other conditions under the Rules, credit could not be denied solely because the underlying input services pertained to a period prior to registration. The contrary decision cited by the Revenue was distinguished on facts, and the view taken in the line of decisions following Mportal India Wireless Solutions P Ltd.[2011 (9) TMI 450 - KARNATAKA HIGH COURT] was accepted. Since factual verification of supporting documents and other conditions was still necessary, the matter was remanded to the original authority for re-examination of such credit. [Paras 10, 11]

Credit taken in respect of the pre-registration period could not be rejected merely for want of registration, and the claim was remanded for verification of its admissibility under the Cenvat Credit Rules.

Input service nexus - Activities relating to business - Pre-2011 scope of input service - Denial of credit on the ground that the disputed input services had no nexus with exported output services required fresh examination in the light of the wider pre-amendment scope of input service and the case law cited. - HELD THAT: - The Tribunal held that for the period prior to the amendment made by the Finance Act, 2011, the expression relating to input services used in relation to business had a wider amplitude. It noted that various decisions of co-ordinate benches in the case of Sanmar Foundries Ltd [2016 (4) TMI 1069 - CESTAT CHENNAI] and M/s Xilink India Technology Services [2016 (8) TMI 40 - CESTAT HYDERABAD], had considered the eligibility of services such as maintenance or repair, air travel, catering, convention, employee insurance and entertainment-related expenses in the context of output services. Since the adjudicating authority had not considered those decisions while rejecting the claim for want of nexus, the Tribunal found that the issue required fresh examination on the appellant's factual matrix by applying the ratios laid down in the cited decisions. [Paras 12]

The question of nexus and eligibility of the disputed input services was remanded for de novo consideration in the light of the applicable precedents and the pre-2011 legal position.

Final Conclusion: The Tribunal held that Cenvat credit could not be denied merely because the underlying input services related to a period prior to service tax registration, where the appellant was exporting services and no statutory provision made registration a pre-condition for taking credit. As the factual eligibility of such credit and the nexus of the disputed input services had not been properly examined, the impugned order was set aside and the matter was remanded to the original authority for fresh determination of admissible credit and rebate.

Statutory limitation for appeal - Condonation of delay - Service of adjudication order - Sufficient cause - Gross delay - Clean hands doctrine - The appeal before the Commissioner (Appeals) was barred by limitation and could not be entertained on the appellant's plea that the adjudication order was received only later. - HELD THAT: - The Tribunal held that the record contained clear acknowledgement showing service of the Order-in-Original on the appellant on 07.02.2023. It further noted that the very original signed copy of the adjudication order had been produced by the appellant in the present appeal, which belied the stand that the order had not been duly served earlier. On that factual basis, the Tribunal found that the appeal filed before the Commissioner (Appeals) on 30.01.2025 was far beyond not only the normal period of limitation but also the further period statutorily condonable. Applying the principle stated in M/s Singh Enterprises [2007 (12) TMI 11 - SUPREME COURT], the Tribunal held that the Commissioner (Appeals), being a creature of statute, had no power to condone delay beyond the period specifically allowed by law. The Tribunal also noted that merits of the underlying demand were irrelevant once the appeal itself was hopelessly time-barred. [Paras 4]

The dismissal of the appeal as time-barred was upheld, the plea regarding delayed receipt of the adjudication order was rejected, and the appeal was dismissed without examination on merits.

Final Conclusion: The Tribunal upheld the order dismissing the assessee's appeal as barred by limitation. It found due service of the adjudication order and held that the delay was far beyond the statutory period that could be condoned by the Commissioner (Appeals).

Mandatory compliance with prescribed appellate form - Absence of statement of facts and grounds of appeal - Defective memorandum of appeal - Strict compliance with prescribed procedure - Remand for fresh consideration on properly framed pleadings. - HELD THAT: - The Tribunal held that Form ST-4 mandatorily requires the appellant to state the relief claimed and to file the statement of facts and grounds of appeal. Those pleadings are not a mere procedural formality, since they define the challenge to the order under appeal and enable meaningful appellate scrutiny. As the memorandum filed before the Commissioner (Appeals) did not contain those substantive pleadings, no fault could be found with the appellate authority's view that there were no grounds of appeal before it. At the same time, since the appellant asserted that relevant material, including documents relating to the exemption claim, had been placed before the appellate authority, the Tribunal considered that the merits should be examined by the first appellate authority on properly framed pleadings and supporting evidence. The matter was therefore restored with a direction to permit the appellant to file the statement of facts, grounds of appeal and supporting documents, and thereafter decide the appeal by a speaking order on merits. [Paras 11, 12, 13, 14, 15]

The impugned appellate order was set aside and the matter was remanded to the Commissioner (Appeals) for fresh decision after the appellant files the prescribed statement of facts, grounds of appeal and documentary evidence.

Final Conclusion: The Tribunal held that the appeal before the Commissioner (Appeals) suffered from a basic defect because the prescribed statement of facts and grounds of appeal had not been filed with Form ST-4. Nevertheless, in the interest of justice, the matter was remanded to the Commissioner (Appeals) for a fresh decision on merits after permitting the appellant to file proper pleadings and supporting documents.

Taxable value of services - liability to pay service tax on reimbursable expenses received by the service provider in the course of rendering services for the client - Demand invoking Rule 5(1) - Subordinate legislation ultra vires the Act - Extended period of limitation - Reimbursable expenses recovered by the appellant from its clients could not be included in the taxable value for the period in dispute by invoking Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006. - HELD THAT: - The Tribunal held that the show cause notice itself proceeded on Rule 5(1) and Rule 5(2) of the 2006 Rules, and that the issue stood concluded by Union of India v. Intercontinental Consultants and Technocrats Pvt. Ltd.[2012 (12) TMI 150 - DELHI HIGH COURT]. Honourable Supreme Court affirmed the decision of the Delhi High Court [2018 (3) TMI 357 - SUPREME COURT]. Applying that decision, it held that service tax is chargeable only on the value of the taxable service actually rendered and that subordinate legislation could not enlarge the measure of tax beyond Sections 66 and 67 of the Finance Act, 1994. Since Rule 5(1), to the extent it included reimbursable expenditure in the value of taxable service, had been held to travel beyond the statute, the remand ordered for verification of exclusion as a pure agent was unsustainable. [Paras 6, 7]

The impugned appellate remand order was unsustainable, and the demand founded on inclusion of reimbursable expenses could not be maintained.

Extended period of limitation - Interpretational dispute - HELD THAT: - The Tribunal accepted the appellant's plea that the controversy was interpretational in nature and, therefore, the allegation of mala fides for invoking the extended period was untenable. On that basis, it held that the Department could not invoke the extended period and that the demand was also unsustainable to that extent. [Paras 8]

Invocation of the extended period was rejected.

Final Conclusion: The Tribunal set aside the remand order and allowed the appeal, holding that reimbursable expenses were not includible in the taxable value on the basis adopted in the show cause notice and that the extended period of limitation was also not invocable in the facts of the case.

Supply of tangible goods - supply of printers and multifunctional printers under the onsite, offsite and OFE models - Transfer of right to use goods - Effective control and possession - Notification No.12/2003-ST - Activity rendered under the offsite model - Business Support Services - Extended period of limitation.

Supply of tangible goods - HELD THAT: - The Tribunal held that, under the onsite model, the printers were placed at the customers' premises and were used by the customers according to their own requirements, while the appellant only undertook maintenance and supply of consumables. Since the manner of use was determined by the customers and no role was played by the appellant in controlling such use, effective control and possession remained with the customers during the period of deployment. The Tribunal also noticed that VAT had been discharged on the transactions as deemed sale and, in view of the Board circular, a transaction attracting VAT as transfer of right to use goods would not fall within taxable service as supply of tangible goods. [Paras 3]

The demand under the category of supply of tangible goods in respect of the onsite model was unsustainable and was rejected.

Supply of tangible goods - Notification No.12/2003-ST - Activities under the offsite model and OFE model were not classifiable as supply of tangible goods, and deduction of material value was admissible under Notification No.12/2003-ST. - HELD THAT: - For the offsite model, the Tribunal found that the printing work was undertaken at the appellant's own premises and there was no supply of goods for use to the clients; service tax, if any, could arise only on the value of services after excluding the material component. Relying on the Supreme Court decision in Safety Retreading Company (P) Ltd. vs. Commissioner of C.Ex. Salem [2017 (1) TMI 1110 - SUPREME COURT], it held that where VAT had been paid on the material cost, the benefit of Notification No.12/2003-ST had to be extended. The same reasoning was applied to the OFE model, where the printers belonged to the customers and the appellant merely supplied consumables and maintenance support, making deduction of material cost from gross value available. [Paras 4, 5]

The offsite and OFE model demands could not be sustained as supply of tangible goods, and the benefit of Notification No.12/2003-ST was held available.

Business Support Services - Classification of services - Extended period of limitation - The same services could not be classified during the overlapping period both as supply of tangible goods and as business support services, and the extended period was not invocable. - HELD THAT: - The Tribunal noticed that, for the overlapping period from October 2008 to December 2010, the department had treated the same services in one appeal as supply of tangible goods and in another as business support services. It held that the department could not adopt two different classifications for the same category of services for the same period, which itself showed lack of certainty as to the correct classification and negatived suppression. On examining the statutory definition of business support services, the Tribunal further found that the appellant's activities did not fall within any of the categories covered by that definition. Consequently, neither the classification under business support services nor the invocation of the extended period could be sustained. [Paras 6]

The entire demand under business support services was set aside, and the extended period of limitation was held inapplicable.

Final Conclusion: The Tribunal held that the appellant's onsite, offsite and OFE business models were not liable to service tax as supply of tangible goods in the manner alleged, and that the material component was entitled to exclusion under Notification No.12/2003-ST where applicable. The separate demand raised under business support services was also set aside, the Tribunal finding both misclassification and absence of any ground to invoke the extended period.

Excisability of manufacturing residue - waste and residual products such as wet bhoosi, chilka, dundli and malt sprouts - Applicability of Rule 6 to non-excisable waste - reversal or payment of an amount on their clearance. - HELD THAT: - The Tribunal held that the controversy stood concluded by Union of India Vs DSCL Sugar Ltd [2015 (10) TMI 566 - SUPREME COURT], wherein bagasse was held not to be a manufactured product and, consequently, Rule 6 of the CENVAT Credit Rules, 2004 was held inapplicable. Applying that ratio, and noticing that the same position had also been accepted in the respondent's own case reported as [2018 (1) TMI 490 - PUNJAB AND HARYANA HIGH COURT], the Tribunal found no infirmity in the view of the lower authorities that the impugned waste/residual products were non-excisable and that no proportionate reversal or payment under Rule 6 could be demanded. [Paras 6]

The order dropping the demand was upheld and the Revenue's appeal was dismissed.

Final Conclusion: Following the Supreme Court decision in Union of India Vs DSCL Sugar Ltd and the High Court decision in the respondent's own case, the Tribunal upheld the finding that the residual products in question were non-excisable and that Rule 6 of the CENVAT Credit Rules, 2004 had no application. The Revenue's appeal was accordingly dismissed.

Sale of natural gas under the GSPA - nature of “inter-state sale” or “intra-state sale”-Situs of sale - Clarificatory amendment - Jurisdiction or statutory right of the State of Uttar Pradesh to levy VAT on the transaction - Common carrier pipeline - Mutual Exclusivity of Taxing Powers - Authority of Law - Territorial Nexus - Public Trust Doctrine.

Inter-State sale - Situs of sale - Common carrier pipeline - The supply of natural gas under the GSPA, with delivery at Gadimoga and onward transportation through common carrier pipelines to buyers in Uttar Pradesh, was an inter-State sale and not an intra-State sale within Uttar Pradesh. - HELD THAT: - The High Court, on a detailed examination of the GSPA and the GTA, returned clear findings on each of the contentions now urged before this Court by the State of Uttar Pradesh. It held that the delivery point of natural gas to the buyer is unambiguously at Gadimoga in the State of Andhra Pradesh, where measurement is carried out, and that the seller stands absolved of all liability immediately upon delivery at that point, the sale consideration correlating exclusively to the measured quantity at Gadimoga. It further held that the transporter carries the gas from the delivery point to the exit point without acquiring any right or title in the gas, and that the GTA is an agreement solely for carriage and not for sale. On the specific argument, now reiterated before this Court, that the co-mingling of gas in the common carrier pipeline renders the goods unascertained and relocates the point of sale to Auraiya in Uttar Pradesh, the High Court categorically rejected the same, holding that the transportation of gas in a common pipeline on an open access basis does not affect the inter-State character of the original transaction, and that any processing or change in the nature of gas during transportation does not alter the nature of the sale effected in pursuance of inter-State trade.

The Court held that under the contractual structure, the delivery point was Gadimoga in Andhra Pradesh and title as well as risk passed there on delivery to the buyer's designee. The seller's role ended at that point, while the subsequent GTA arrangements were only for transportation and did not vest any title in the transporter. Since the movement of gas from Andhra Pradesh to Uttar Pradesh was occasioned by the contract of sale itself, the transaction squarely fell within Section 3 of the CST Act. The contention founded on co-mingling, fungibility, re-metering at Auraiya, or processing during transit was rejected, as these were incidents of transportation through the statutory common carrier system and did not alter the already concluded inter-State sale. Section 4 could not be invoked to recast the transaction as intra-State because it is expressly subject to Section 3, and once the transaction answers the description of an inter-State sale, Uttar Pradesh had no authority to levy VAT under its local law. [Paras 85, 86, 87, 88, 89]

The transaction was held to be an inter-State sale taxable only within the constitutional and statutory framework of the CST Act, and the levy of VAT by Uttar Pradesh was without jurisdiction.

Clarificatory amendment - Inter-State sale - Explanation 3 inserted in Section 3 of the CST Act by the 2016 amendment was clarificatory and reflected the pre-existing legal position regarding gas transported through a common carrier pipeline. - HELD THAT: - The Court treated the 2016 insertion as a clarification made ex abundanti cautela, noting the office memorandum issued by the Ministry of Finance and holding that the amendment did not enlarge the scope of Section 3 but merely formalised the existing understanding that contractual movement of gas from one State to another through a common carrier pipeline remains inter-State movement notwithstanding co-mingling. Applying the settled principle that a truly clarificatory explanation relates back to the main provision, the Court rejected the contention that Explanation 3 operated only prospectively. [Paras 62, 63, 64, 65, 66]

Explanation 3 was held to be clarificatory and applicable as part of the original scheme of Section 3, reinforcing the inter-State character of the transaction.

Final Conclusion: The Supreme Court upheld the High Court's view that the sales of natural gas were inter-State sales concluded at Gadimoga and that Uttar Pradesh lacked authority to levy VAT on those transactions. Explanation 3 to Section 3 of the CST Act was treated as clarificatory, and all the appeals were dismissed.

Definition of "deposit" under Section 2(c) - failure to establish offences under the IPC and the civil nature of the transaction - Scope of financial establishment - Independence of remedy under the MPID Act - Whether the amounts given by the appellants to respondent Nos. 2 to 6 are covered within the ambit of concept of “deposit” as defined under Section 2(c) of the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 [“MPID Act”.] - HELD THAT: - The MPID Act is a self-contained Code, which creates an independent machinery and mechanism to provide remedial measures to the victim depositors and to check and punish Financial Establishments, which will include any person accepting deposit has fraudulently committed default duping the investors.

The Court held that the definition of deposit under Section 2(c) is of wide amplitude and covers any receipt of money to be returned after a specified period or otherwise, with or without interest or other benefit. Applying the statutory ingredients, it found that the amounts admittedly received by respondent Nos. 2 to 6 were repayable and were accompanied by a promise of quarterly interest, thereby satisfying the requirements of the definition. The Court further held that Section 2(d) uses expansive language and includes any person accepting deposit under any arrangement or in any other manner; therefore, private persons receiving such amounts are not excluded from the concept of financial establishment. It was specifically held that the label of the transaction as a loan is not determinative, since nomenclature cannot displace the substantive attributes of the transaction. [Paras 5, 6]

The amounts given by the appellants were deposits under the MPID Act, and respondent Nos. 2 to 6 answered the description of a financial establishment for the purposes of that Act.

Independent statutory remedy - Civil nature of dispute - Failure of IPC proceedings - Prior failure of proceedings alleging offences under the IPC, or the civil character of the dispute, did not bar the appellants from invoking Section 3 of the MPID Act. - HELD THAT: - The Court held that proceedings under the IPC and recourse under the MPID Act operate in distinct statutory fields. The fact that earlier criminal proceedings did not disclose offences under the IPC could not govern or foreclose the separate question whether the transaction amounted to a deposit accepted by a financial establishment under the MPID Act. For the same reason, the objection that the dispute was of a civil nature was held to be irrelevant once the statutory ingredients of Sections 2(c) and 2(d) stood satisfied. The complaint under Section 3 of the MPID Act was therefore treated as an independent and maintainable remedy. [Paras 6, 9]

The appellants were entitled to invoke Section 3 of the MPID Act notwithstanding the earlier failure of IPC-based proceedings or the availability of civil remedies.

Final Conclusion: The Supreme Court held that the amounts advanced by the appellants answered the statutory description of deposits and that respondent Nos. 2 to 6 were covered by the expression financial establishment under the MPID Act. The High Court's contrary view was set aside, and the appellants were held entitled to proceed under Section 3 of the MPID Act.