TMI Tax Updates e-Newsletter
May 23,2026

Effective communication of adjudication order - Limitation for first appeal under GST - Delay and laches - Writ maintainability despite the availability of statutory appellate remedy.

Writ maintainability despite alternate remedy- Loss of effective first appeal - HELD THAT: - The Court entertained the writ petitions because the impugned appellate orders had rejected the assessees' first appeals solely on delay, without considering the binding law governing the starting point of limitation. It held that, once a binding Division Bench precedent of this Court in M/S Bambino Agro Industries Limited [2025 (12) TMI 1598 - ALLAHABAD HIGH COURT] the appellate authority were bound to give its own independent finding while passing the impugned orders, but the appellate authority has utterly failed to follow the directions in the above-noted judgements and therefore, the impugned orders cannot be sustained in the eyes of law. required the appellate authority to examine the assessee's declared date of actual communication and cast the burden on the Revenue to rebut it, the failure of the appellate authority to apply that principle rendered the impugned orders unsustainable. The Court also noted that the appellate authorities were bound to return their own findings in light of that precedent, and their failure to do so justified interference in writ jurisdiction rather than relegating the petitioners to the further appellate remedy. [Paras 19, 20, 21, 22, 23]

The preliminary objection based on alternate remedy did not prevent the Court from quashing the appellate orders and remitting the matters to the appellate authorities for fresh decision.

Effective communication of adjudication order - Burden to rebut declared date of communication - HELD THAT: - Following the binding Division Bench ruling M/S Bambino Agro Industries Limited [2025 (12) TMI 1598 - ALLAHABAD HIGH COURT], the Court held that for the purpose of limitation under the appeal provision, the effective date of communication is the actual communication of the order to the assessee. Where the assessee discloses the date of actual communication, a presumption arises in the assessee's favour, and the burden shifts to the Revenue to establish an earlier communication by cogent material. Since the Revenue had failed in the impugned orders to rebut the dealers' stand regarding the actual date of communication, the dismissal of the appeals on the ground of delay could not be sustained in law. [Paras 15, 20, 21, 22, 23]

The appellate orders dismissing the appeals as barred by limitation were quashed, and the matters were remitted for fresh orders in accordance with the governing precedent.

Final Conclusion: The Court quashed the appellate orders which had dismissed the assessees' first appeals as time-barred and remitted the matters to the respective appellate authorities for fresh decision in accordance with the binding law on actual communication and limitation. The authorities were directed to pass fresh orders after due consideration of that principle.

Seeking Restoration of GST registration - Cancellation for non-filing of returns - Compliance with the prescribed procedure under proviso to Rule 22(4) - HELD THAT: - The Court noted that this Court in the case of Dug Rade [2026 (3) TMI 1308 - GAUHATI HIGH COURT] and other similar writ petitions, had already been dealt with by coordinate Benches and accepted that the present case stood on the same footing. Proceeding on the basis that the petitioner had already furnished the pending returns and was ready and willing to make full payment of the outstanding statutory dues, the Court adopted the course followed in those earlier decisions and directed the petitioner to approach the competent authority for restoration. The matter was thus not finally adjudicated on the validity of the cancellation order on merits; instead, the competent authority was required to verify the application and proceed in accordance with law for restoration. [Paras 12, 13, 14]

The petitioner was directed to file an application for restoration within the stipulated time, and the respondent authorities were directed to verify, consider and thereafter restore the GST registration in accordance with law.

Final Conclusion: The writ petition was disposed of by granting the petitioner liberty to apply for restoration of the cancelled GST registration, with a direction to the respondent authorities to verify the application and restore the registration in accordance with law within the time fixed by the Court.

Challenged the cancellation of GST registration for non-filing of returns and non-payment of taxes - HELD THAT:- Following an earlier order in a similar matter in M/S RAMAKRISHNA HOUSING PRIVATE LIMITED [2024 (10) TMI 1387 - ANDHRA PRADESH HIGH COURT], the writ petition was disposed of by permitting the petitioner to apply for revocation of cancellation of GST registration, to file draft returns, and to deposit the tax dues within the time stipulated, with a direction to the registering authority to consider the revocation application and to accept manual filing if online filing is not possible.

Effect of the absence of the signature, on an assessment order - Validity of service of GST order - HELD THAT: - The Court held, following its earlier decisions in A.V. Bhanoji Row Vs. The Assistant Commissioner (ST) [2023 (2) TMI 1224 - ANDHRA PRADESH HIGH COURT], M/s. SRK Enterprises Vs. Assistant Commissioner [2023 (12) TMI 156 - ANDHRA PRADESH] and M/s. SRS Traders Vs The. Assistant Commissioner ST & ors [2024 (4) TMI 894 - ANDHRA PRADESH HIGH COURT], that the signature of the assessing officer on the assessment order cannot be dispensed with and such defect is not cured by Sections 160 and 169 of the Central Goods and Service Tax Act, 2017. It further held that, in view of Rule 26(3) of the CGST Rules, 2017, service of an order without signature does not amount to service at all; consequently, the delay in approaching the Court was immaterial. On that basis, the impugned summary of assessment was set aside, with liberty to the authority to make a fresh assessment after due notice and by issuing a duly signed summary. [Paras 4, 5, 6, 7, 8]

The unsigned summary of assessment was set aside, and fresh assessment was permitted in accordance with law after proper notice and signature.

Final Conclusion: The writ petition was disposed of by setting aside the unsigned Form GST DRC-07 for the financial year 2022-23, holding that an unsigned assessment order is invalid and its service is no service in law. Liberty was granted to undertake fresh assessment, and the intervening period was directed to be excluded for limitation.

Forum of appeal - Alternative statutory remedy - Calculation of limitation -Exclusion of pendency period for limitation - Taxability of freight on exempt goods -HELD THAT: - The Court held that the contention founded on exemption and the alleged non-taxability of freight charges did not require adjudication in writ proceedings, since the petitioner had an effective appellate remedy and could place the relied-on judgment before the appellate authority. Having relegated the petitioner to that remedy, the Court directed that the period during which the writ petition remained pending be excluded for computing limitation and granted an additional two weeks to file the appeal. [Paras 3, 5]

The petitioner was relegated to the appellate remedy, with exclusion of the writ-pendency period for limitation and two weeks' further time to file the appeal.

Final Conclusion: The writ petition was disposed of without examining the merits of the assessment, on the ground that the petitioner had an effective appellate remedy. The petitioner was permitted to approach the appellate authority within two weeks, with exclusion of the period of pendency of the writ petition for limitation purposes.

Validity of an assessment order issued without a Document Identification Number - inherent defect - Delay in invoking writ jurisdiction - Service through GST portal

Document Identification Number - Validity of assessment order - HELD THAT: - The Court followed its earlier in the case of M/s. Cluster Enterprises Vs. The Deputy Assistant Commissioner (ST)-2, Kadapa [2024 (7) TMI 1512 - ANDHRA PRADESH HIGH COURT] and in the case of Sai Manikanta Electrical Contractors Vs. The Deputy Commissioner, Special Circle, Visakhapatnam [2024 (6) TMI 1158 - ANDHRA PRADESH HIGH COURT] held that absence of a DIN is sufficient to invalidate the assessment order. Since the impugned order admittedly did not contain a DIN, the defect went to the validity of the order itself and warranted interference. [Paras 3, 12]

The impugned assessment order was set aside on account of absence of a DIN.

Delay in invoking writ jurisdiction - HELD THAT: - The Court noted the respondents' objection of delay and the contention that service had been effected by uploading the order on the GST portal. It also recorded the recurring practical difficulty faced by registered persons in accessing such orders under the GST online regime. Holding that delayed writ petitions can be considered where the impugned order suffers from a patent irregularity, the Court balanced the interests of taxpayers and tax administration by directing that such challenge be entertained on condition of deposit of 20% of the disputed tax. [Paras 10, 11, 12, 13]

The matter was remanded to the Assessing Officer for fresh orders after hearing the petitioner, subject to deposit of 20% of the disputed tax, with prior payments or recoveries to be adjusted and the intervening period excluded for limitation.

Final Conclusion: The Court set aside the assessment order for want of a DIN and remanded the matter for fresh adjudication after hearing the petitioner. The delayed writ petition was nevertheless entertained in view of the patent defect in the order, subject to deposit of 20% of the disputed tax.

Deemed withdrawal of best judgment assessment - Filing of returns under Section 62(2) - Bar on recovery pursuant to withdrawn assessment - Cure by belated return filing -HELD THAT: - The Court held that the impugned assessment orders had been passed under Section 62 on the ground of non-filing of returns for the relevant periods. Since the petitioners subsequently filed the returns for those periods and the filing was accompanied by payment of tax, interest and late fee, the statutory consequence under Section 62(2) followed. On that basis, the earlier assessment orders were to be treated as deemed withdrawn, and recovery could not continue on the strength of those orders. The Court further directed that any amount already recovered under the impugned orders should be adjusted against the petitioners' tax dues. [Paras 6, 7, 8, 9]

The assessment orders were declared deemed withdrawn, recovery under those orders was held impermissible, and any amount already recovered was directed to be adjusted against the petitioners' tax dues.

Final Conclusion: The writ petitions were allowed. The assessment orders for the relevant tax periods were held to stand deemed withdrawn under Section 62(2), recovery under those orders was barred, and any amount already recovered was directed to be adjusted against the petitioners' tax dues.

Validity of Consolidated show cause notice - Multiple financial years - Section 74 of the CGST Act - Clubbing of notices - Year-wise limitation -HELD THAT: - This Court in M/s Milroc Good Earth Developers [2025 (10) TMI 867 - BOMBAY HIGH COURT] has held that a single consolidated show cause notice covering multiple financial years cannot be issued under Section 74 of CGST Act. The said view has been consistently followed in subsequent judgments of this Court, including ICAD School of Learning Pvt. Ltd. v. Union of India 2026 (2) TMI 1420 - BOMBAY HIGH COURT and Rite Water Solutions (India) Ltd. v. Joint Commissioner, CGST and Central Excise, Nagpur [2025 (11) TMI 1939 - BOMBAY HIGH COURT]. It is not brought to our notice that the judgment in Milroc Good Earth Developers (Supra) has been stayed by the Hon’ble Supreme Court.

The Court followed its earlier view that the statutory scheme under Section 74 links determination and limitation to the annual return of the respective financial year, so that limitation runs independently for each year. Clubbing multiple financial years in one notice aggregates distinct tax periods governed by separate limitation timelines and prejudices year-specific defences. The Court accepted that a consolidated notice may be permissible only in exceptional circumstances where a composite and interlinked fraudulent mechanism spanning several years forms an indivisible basis of the proceedings, as noticed while distinguishing Ambika Traders, but found that the impugned notices contained no such allegation of a continuous fraudulent design requiring consolidation. [Paras 19, 20, 21, 22, 23]

The impugned consolidated show cause notices were set aside, the consequential adjudication orders founded on such notices were also quashed, and liberty was reserved to issue fresh year-wise notices in accordance with law.

Final Conclusion: The writ petitions were allowed to the extent that the consolidated notices issued under Section 74 for multiple financial years were held invalid on the facts of the case. Consequential final orders passed in two petitions were also quashed, with liberty to the respondents to issue fresh notices separately for the respective financial years, if otherwise permissible in law.

Rectification of judgment - operative portion - inadvertent error - substitution of operative words

As decided by HC [2018 (2) TMI 1788 - DELHI HIGH COURT] the words and expressions “answered in the negative, i.e., in favour of the Revenue and against the Assessee” occurring in para-3(iii) of the judgment dated 7th December, 2017 is substituted by the words and expressions “answered in the affirmative, i.e., in favour of the Assessee and against the Revenue”

HELD THAT:- We have heard learned counsel for the petitioner and learned Additional Solicitor General for the respondent.

We do not find any reason to interfere with the impugned order

Special Leave Petition is hence dismissed

Validity of assessment order passed - Alternative remedy - no notice was served upon the petitioner - Service of notice on PAN or passport address - violation of principles of natural justice -Audi alteram partem in reassessment proceedings

Alternative remedy - Breach of natural justice - Writ maintainability - HELD THAT: - The Court adopted its earlier interim reasoning that an order passed in violation of audi alteram partem can be interfered with in writ jurisdiction. It held that, in the peculiar facts, the petitioner could not be treated as negligent merely because she did not file an appeal within the statutory period from the date of knowledge, and that the plea of alternative remedy did not bar examination of an order assailed for breach of natural justice. [Paras 12]

The objection based on availability of an appellate remedy was not accepted.

Non Service of notice - denial of Natural justice - validity of Reassessment - Service of notice on the address available in the PAN or passport of an NRI - HELD THAT: - The Court held that no illegality could be attributed to the Assessing Officer for attempting service at the address reflected in the PAN or passport, and that the officer was not bound to ascertain the address from the bank when bank particulars were not available with the Department. At the same time, it found that the assessment order had been passed without actual service upon the petitioner and without affording her an opportunity of hearing. Since the petitioner had not been heard, the reassessment made ex parte was held unsustainable for violation of natural justice. The Court therefore directed the AO to issue notice afresh in accordance with law and clarified that the petitioner would not be entitled to contend that such notice was time-barred, as the proceedings themselves were held valid so far as the attempt at service was concerned. [Paras 14, 15, 16, 17, 18]

The assessment order, consequential demand notices, penalty orders and further recovery proceedings were quashed, with liberty to the AO to proceed afresh after proper service and opportunity of hearing.

Final Conclusion: The Court entertained the writ petition on the ground of breach of natural justice, set aside the reassessment and all consequential proceedings, and directed fresh proceedings after due service of notice and opportunity of hearing. It nevertheless held that the original proceedings were not invalid on the ground that notice had been attempted at the PAN or passport address, and the petitioner could not raise a plea of limitation against the fresh notice.

Writ petition against net amount refundable - HELD THAT:- In view of the instructions as the refundable amount has been re-computed by the DCIT, Circle 1(1), Cuttack in order to give effect to the order passed in appeal under Section 250 of the IT Act, and the process has been activated for refund the amount recomputed, there remains nothing for adjudication in the matter. Accordingly, the writ petition stands disposed of.

Personal expenditure disallowance in case of company - Consistency in tax treatment - Telephone and car expenses - Ad hoc disallowance of one-sixth of telephone and car expenses on the footing of personal use

HELD THAT: - The Court held that, when similar disallowances for earlier years had been deleted and there was no striking change in facts, the Tribunal ought to have maintained consistency. It further held that, although a company is a separate legal person, that by itself does not mean that its expenditure can be treated as personal expenditure.

In the case of a company, use of car or telephone by employees or directors, if authorized by the company, forms part of the business arrangement or employment package, and cannot be disallowed merely on a presumed element of personal use. Disallowance could be made only on a finding that the expenditure was of a personal nature having no nexus with the company's business. The Court also found the AO's reasoning cursory and held that the company was not required to maintain a log book for such purpose or permit a dissection of journeys into personal and official components. [Paras 14, 15, 16, 17, 18]

The Tribunal was held to have erred in upholding the disallowance, and the disallowance of one-sixth of the telephone and car expenses was set aside.

Final Conclusion: The appeal was allowed. The Court held that the Tribunal had erred in sustaining the disallowance of part of the telephone and car expenses, since no material change in facts was shown and such expenditure could not be treated as personal expenditure of a company in the absence of a finding of lack of business nexus.

Non-adjudication of all grounds by Tribunal - sale of software as “royalty” - remaining two issues i.e., Maintenance support and other services related to software license and Education and training services, despite being involved in the appeal before the Tribunal but have not been dilated upon or decided

HELD THAT: - The Court held that the Tribunal's reasoning was erroneous to the extent it relied on Engineering Analysis Center of Excellence (P) Ltd. [2021 (3) TMI 138 - SUPREME COURT] which dealt with sale of software as royalty, for setting aside the entire demand though the appeal also involved maintenance support and other services related to software licences and education and training services. Even so, remand was found unnecessary because the Revenue could not dispute that the remaining two issues already stood covered in favour of the assessee by this Court's decision in TSYS Card Tech Ltd. [2024 (7) TMI 1779 - DELHI HIGH COURT] - In that situation, sending the matter back to the Tribunal would serve no fruitful purpose. [Paras 10, 11, 12]

The appeal was dismissed, as no remand was warranted once the surviving issues were already covered against the Revenue.

Final Conclusion: The Court found that the Tribunal had not correctly addressed all components of the additions while relying on Engineering Analysis. However, since the remaining issues were already covered by this Court's decision in TSYS Card Tech Ltd., the appeal was dismissed and no remand was ordered.

Minimum response time in show-cause notice - Violation of principles of natural justice - Non-compliance with faceless assessment standard operating procedure - assessment made after granting less than the minimum response time prescribed in the Standard Operating Procedure

HELD THAT: - The Court found that the applicable Standard Operating Procedure required a minimum period of seven days for responding to the show-cause notice, and reduction of that period was permissible only where the limitation for completing assessment so required. In the present case, the response time granted was only five days, though the limitation for completing the assessment would expire later. The show-cause notice and the consequential assessment order were therefore held to be contrary to the prescribed procedure. The Court further held that failure to grant the reasonable time contemplated by the procedure also resulted in violation of the principles of natural justice. [Paras 6, 7, 8, 9]

The show-cause notice and the assessment order were set aside, and the matter was remanded for fresh assessment after giving due opportunity of hearing to the petitioner.

Final Conclusion: The writ petition was allowed. The impugned show-cause notice and assessment order for the assessment year 2021-2022 were set aside for breach of the prescribed minimum response period and consequent violation of natural justice, with a direction for fresh assessment after due hearing.

Absence of a signature on the sanction issued u/s 151 - validity of notice issued u/s 148 and order passed u/s 147 as well as the show cause notice issued u/s 271 (1) (c) - as submitted non-affixing of a signature is a curable defect and would not vitiate the proceedings - scope of subsequent insertion of Section 292BC

HELD THAT: - The Court held that, although the dispute arose from the validity of approval u/s 151, the subsequent insertion of Section 292BC with retrospective effect introduced a new legal dimension requiring reconsideration.

Since the assessee could not be permitted, in the Revenue's appeal, to raise fresh pleadings on the retrospective applicability of that provision without an opportunity to address it in the writ proceedings, the matter had to be restored for fresh consideration. The determinative basis of interference was thus the need to afford both sides an opportunity to address the effect of the retrospective provision before the issue is decided. [Paras 6]

The order of the learned Single Judge was set aside and the writ petition was restored, with liberty to the assessee to raise the plea regarding applicability of Section 292BC; all contentions were left open.

Final Conclusion: The appeal was allowed only to the extent of restoring the writ petition for fresh consideration in light of the retrospective insertion of Section 292BC. No opinion was expressed on the merits of the challenge to the reassessment proceedings, and all contentions were kept open.

Penalty u/s 271(1)(c) - Penalty for concealment - Estimated quantum addition - Penalty levied on the addition made on bank credits - HELD THAT: - The Tribunal noted that, in the quantum appeal, the co-ordinate Bench had accepted in substance the assessee's explanation that the cash deposits represented cash sales turnover and cash in hand which could not be fully reconciled in the lower proceedings, and had consequently restricted the addition to a small amount on an estimated basis. On that footing, the foundation for alleging concealment did not remain intact. Since the surviving addition was only an estimate after substantial acceptance of the explanation, the penalty u/s 271(1)(c) was held to be unsustainable. [Paras 4]

The penalty was deleted and the assessee's appeal was allowed on this issue.

Final Conclusion: The Tribunal held that, after the quantum addition had been drastically reduced and sustained only on an estimated basis with substantial acceptance of the assessee's explanation, the concealment penalty could not be maintained. The penalty order was therefore deleted and the appeal was allowed.

Deemed dividend - Applicability of section 2(22)(e) to withdrawals - Withdrawal from proprietary concern vis-a-vis company - difference in cash book and physical cash found during search in case of a company where assessee is a substantial shareholder holding more than 10 % of share capital chargeable to tax in the hands of the assessee - HELD THAT: - The Tribunal held that the charge of deemed dividend depended on establishing that the amount had been withdrawn from the books of the company in which the assessee held the requisite shareholding. It found from the statement referred to by the AO's report, particularly the question put to the assessee regarding the tally extract, that the cash balance and shortage were traced to Lakshmi Gold Palace, the assessee's proprietary concern, and not to Lakshmi Gold Khazaana Pvt. Ltd.

Since the Revenue produced no material to show any shortage in the books of the company or any withdrawal by the assessee therefrom, the basic factual foundation for invoking section 2(22)(e) was absent. [Paras 10, 11]

The addition made under section 2(22)(e) was directed to be deleted.

Final Conclusion: The appeal was partly allowed. The addition treating the cash shortage as deemed dividend was deleted, as the shortage was not shown to be from the company's books but from the assessee's proprietary concern.

Deduction u/s 80P(2)(a)(i) - Interest on bank deposits attributable to business of providing credit facilities - Transactions with nominal members

Whether Interest earned by the credit co-operative society on mandatory reserve fund deposits and deposits with the district central co-operative bank formed part of income attributable to its business of providing credit facilities to members and was eligible for deduction? - HELD THAT: - The Tribunal found that the assessee was a credit co-operative society engaged in accepting deposits and providing credit facilities to its members, and that the interest in question arose from deposits made out of members' funds in bank accounts. It held that there was no basis to assess such interest as income from other sources, since the deposits were connected with the assessee's business activity and the funds, if not immediately required for lending, could validly be kept in bank deposits.

Applying the principle accepted in Tumkur Merchants Souharda Credit Cooperative Ltd. [2015 (2) TMI 995 - KARNATAKA HIGH COURT] the interest retained its character as business income attributable to the activity of providing credit facilities to members and qualified for deduction u/s 80P(2)(a)(i). [Paras 8, 9, 11]

The assessee was held entitled to deduction u/s 80P(2)(a)(i) on the interest income as part of its business income.

Eligibility for deduction u/s 80P - Transactions with nominal members - HELD THAT: - The Tribunal rejected the disallowance founded on the presence of nominal members. Referring to the principle stated in Mavilayi Service Co-operative Bank Ltd. [2021 (1) TMI 488 - SUPREME COURT] it held that income derived from transactions with nominal members is also eligible for deduction u/s 80P. Since the Tribunal recorded that there were no transactions with non-members, the assessee could not be denied the deduction on that ground. [Paras 10, 11]

The objection based on nominal members was rejected, and the assessee's eligibility for deduction u/s 80P(2)(a)(i) was upheld.

Final Conclusion: The Tribunal allowed the appeal and directed grant of deduction under Section 80P(2)(a)(i) on the whole of the income attributable to the assessee's business. It held that the interest income from the relevant deposits was business income and that the presence of nominal members, in the absence of dealings with non-members, did not defeat the claim.

Penalty u/s 270A - Computation of under-reported income - Set-off of income determined u/s 143(1)(a) - Penalty for misreporting of income

HELD THAT: - The Tribunal held that, on the statutory scheme of section 270A(2)(a) and section 270A(3)(i)(a), under-reported income in a case of first assessment after return processing is the difference between the income assessed and the income determined under section 143(1)(a).

Since the intimation u/s 143(1)(a) had already determined the income but AO was not justified in treating such figure as nil while computing under-reported income in the assessment as well as the penalty order. The computation mechanism required adjustment of the income determined u/s 143(1)(a) against the assessed income, and the penalty had therefore to be recomputed on that basis. [Paras 8]

The levy of penalty on merits was not disturbed, but the Assessing Officer was directed to recompute the under-reported or misreported income and the consequential penalty after giving credit for the income determined under section 143(1)(a).

Final Conclusion: The appeal was partly allowed for statistical purposes. The Tribunal upheld the applicability of penalty proceedings, but directed recomputation of the penalty by correctly taking into account the income already determined under section 143(1)(a).

Accommodation entries - Burden of proof - Natural justice - Addition based on investigation information - Natural justice

HELD THAT: - The Tribunal held that, when the Revenue alleged that the assessee had received accommodation entries through bogus billing, the onus lay on the Revenue to factually establish the impugned transaction. The assessee had consistently stated that there was no purchase or sale transaction with Falguni Enterprises during the year and that the receipts represented payment of earlier outstanding dues, which was supported by its ledger account.

Revenue did not controvert this factual explanation, did not establish how the alleged accommodation entry of the specific amount was received, and rested entirely on information from the Investigation Wing without proving its truth or existence in the assessee's case. The addition was therefore based on assumptions and presumptions. The Tribunal further noted that the statement relied upon was neither supplied to the assessee nor was cross-examination afforded, which was contrary to the principles of natural justice. [Paras 6, 7, 8, 9]

The addition on account of alleged accommodation entry was directed to be deleted.

Final Conclusion: The Tribunal allowed the appeal and deleted the entire addition for A.Y. 2012-13, holding that the Revenue had failed to prove the alleged accommodation entry and that reliance on an undisclosed statement without cross-examination also vitiated the addition.

Indexed cost of improvement - Section 54 exemption on joint ownership - Eligible cost of acquisition u/s 54

Disallowance of Indexed cost of improvement - Estimation of construction cost - Capital gains computation - old bills and vouchers for construction and improvements were not produced - HELD THAT: - The Tribunal held that once the registered sale deed itself established the existence of a substantial residential superstructure and the stamp valuation authority had also recognised the constructed portion while valuing the property, the claim of construction and improvement could not be wholly discarded only for want of old supporting vouchers. In cases of old construction and improvements carried out over several years, complete preservation of bills may not always be possible. Since the material on record showed that the property was a developed residential house and not a vacant plot, the proper course was to recompute the cost of construction and improvement on a reasonable basis by taking the covered area mentioned in the sale deed and applying the applicable PWD rates for the relevant financial years, with consequential indexation. [Paras 11, 12, 13]

The matter was restored to the AO to recompute the cost of construction and indexed cost of improvement on the stated basis and grant consequential indexation.

Section 54 exemption - new residential property stood in joint names - Cost of acquisition - HELD THAT: - The Tribunal found that the entire investment in the new residential property had been made from the assessee's own funds and the Revenue had not shown any contribution by the husband. Mere inclusion of the husband's name as a joint holder in the agreement to lease did not justify restricting the deduction to the assessee's ostensible share. The Tribunal further held that the one-time premium, GST thereon, stamp duty, registration charges, utility charges, cluster fund, infrastructure charges and environment fund were directly connected with acquisition of the leasehold residential property and therefore formed part of the eligible cost for section 54. Club membership charges, however, were optional and not intrinsically linked to acquisition of the residential unit, and therefore could not be included. [Paras 17, 18, 19, 20, 21]

The restriction of deduction u/s 54 to 50% was deleted, and the assessee was held entitled to deduction on the full eligible investment excluding club charges and allied taxes thereon.

Final Conclusion: The appeal was partly allowed for statistical purposes. The disallowance of indexed cost of improvement was set aside for fresh recomputation on a reasonable basis, and the section 54 deduction was directed to be allowed on the entire eligible investment made by the assessee, excluding only optional club charges and related taxes.

Faceless reassessment jurisdiction - Notification-based enforceability of faceless scheme - Section 68 addition on sale of investments - Addition based on presumption and third-party material - Cross-examination and natural justice

Faceless reassessment jurisdiction - Notification-based enforceability of faceless scheme - faceless reassessment proceedings initiated and completed by the NFAC before the notification bringing the scheme into operation - HELD THAT: - The Tribunal held that though section 151A had been introduced with effect from 01.11.2020, the faceless scheme for assessment of income escaping assessment became operative only upon its notification on 29.03.2022. Since notice under section 142(1) had been issued by the NFAC before that date and the reassessment proceedings were undertaken by the faceless authority prior to the scheme becoming effective, the assumption of jurisdiction by the NFAC lacked legal authority. On that legal basis, the reassessment could not be sustained. [Paras 6]

The reassessment framed by the NFAC was held to be without jurisdiction and was quashed.

Addition u/s 68 on sale of investments - Accepted source of investment - addition in respect of sale proceeds of unlisted investments - HELD THAT: - The Tribunal found that the shares sold during the year were investments purchased in an earlier year and had been consistently reflected in the audited balance sheets. It further noted that the purchase of those investments had already been examined and accepted by the Department in scrutiny proceedings for the earlier year. In those circumstances, the sale proceeds could not be treated as unexplained cash credits merely because the Assessing Officer considered the sale price unrealistic, particularly when no defect was pointed out in the assessee's evidence and no comparable material or valuation report was brought on record. [Paras 9]

The addition on account of sale of investments was deleted.

Addition based on presumption and third-party material - Cross-examination and natural justice - addition towards alleged undisclosed receipts rested on receipt through some other bank account and on undisclosed third-party statements and reports - dis allowing cross-examination - HELD THAT: - The Tribunal held that the AO proceeded only on presumption in treating the amounts as received by the assessee, even though the bank account produced by the assessee had itself been opened on 17.09.2012 and no material was brought on record to show that the assessee maintained any other bank account. The information relied on by the Department itself showed entries in accounts of other entities and did not establish receipt by the assessee. The Tribunal further held that reliance on investigation reports and statements of third parties, without furnishing those materials to the assessee and without granting opportunity of cross-examination despite specific request, amounted to a fatal breach of natural justice. The Revenue having failed to discharge its onus, the addition could not stand. [Paras 10, 11, 12, 13]

The addition towards alleged undisclosed receipts was deleted.

Final Conclusion: The Tribunal allowed the appeal. It held that the faceless reassessment undertaken by the NFAC prior to the notification making the section 151A scheme operative was without jurisdiction, and it also found that both additions on merits were unsustainable.

TDS u/s 194C on composite contracts - Disallowance u/s 40(a)(ia) - service charges incurred on the installation

TDS on composite contracts - Material component in works contract - Disallowance under section 40(a)(ia) - HELD THAT: - The Tribunal found from the books and details produced that the assessee had separately purchased materials for installation and had also incurred labour expenditure. On that factual footing, the material purchases for installation were not payments on which the assessee was required to deduct tax under section 194C. The Tribunal held that, in so far as the material component was concerned, the assessee was not liable to deduct tax at source and, consequently, section 40(a)(ia) had no application to that part of the claim. [Paras 5]

The disallowance could not be sustained on the material component of the installation contracts.

Threshold exemption under section 194C - Partial disallowance under section 40(a)(ia) - service charges incurred on the installation - HELD THAT: - The Tribunal held that the service-charge component had to be examined with reference to actual deduction of tax and the monetary limits under section 194C. It recorded that tax had already been deducted on a substantial part of the labour payments, that some individual payments did not cross the prescribed limit, and that certain aggregate payments to sub-contractors also remained within the statutory threshold. After excluding those sums, the Tribunal determined the balance on which tax was deductible but had not been deducted. Following Dipak Parui [2018 (7) TMI 2066 - ITAT KOLKATA] the Tribunal applied the principle that the disallowance under section 40(a)(ia) was to be restricted to 30 per cent of such balance amount. [Paras 6, 7, 8]

The Assessing Officer was directed to restrict the disallowance to 30 per cent of the balance service charges on which tax was deductible but not deducted.

Final Conclusion: The Tribunal partly allowed the appeal. It held that no disallowance under section 40(a)(ia) could be made on the material component of the installation contracts, and that on the service component the disallowance was liable to be confined to 30 per cent of the amount on which tax was deductible but had not been deducted.

False declaration under customs law - Validity of Order of acquittal for offences under Section 132 and Section 135(1)(a) - Attempt distinguished from preparation - Fraudulent evasion of customs duty - Burden of proof beyond reasonable doubt - Presumption of culpable mental state -concealment of gold in the waist belt - Preparatory act.

False declaration under customs law -Customs clearance stage - HELD THAT: - The Court held that, on the prosecution evidence itself, the respondent was stopped after immigration clearance but before he could proceed through the red or green channel for customs clearance. Since he was apprehended before any declaration could be made, there was no false declaration, statement or document in relation to customs business. Mere recovery of concealed gold could create suspicion, but suspicion could not substitute proof of the statutory ingredients of the offence. [Paras 45, 46, 48, 52]

The acquittal on the charge under Section 132 was upheld.

Attempt distinguished from preparation-Fraudulent evasion of customs duty -HELD THAT: - The Court held that concealment of gold in the waist belt might raise suspicion and indicate preparation, but criminal liability required proof beyond reasonable doubt of fraudulent evasion or an attempt at evasion. As the respondent was intercepted before availing the opportunity of customs clearance, the case had not travelled beyond preparation. The Court also noted the observation in Vigneswaran Sethuraman vs. Union of India [2014 (12) TMI 268 - KERALA HIGH COURT] that apprehension before any attempt at fraudulent evasion would not attract the penal provision. In the absence of proof that the respondent had actually attempted to evade duty, the prosecution failed to establish the offence. [Paras 47, 48, 53, 54, 55]

The acquittal on the charge under Section 135 was upheld.

Final Conclusion: The High Court found no error in the order of acquittal. Since the respondent had been intercepted before the stage of customs clearance, the essential ingredients of false declaration and fraudulent evasion or attempt to evade duty were not proved, and the appeal was dismissed.

Rejection of the request to treat the two export shipments under the Advance Authorisation Scheme - Denial of personal hearing despite specific requests - breach of the principles of natural justice - absence of a meaningful reasoned decision - Non-application of mind - HELD THAT: - The Court held that Paras 2.59 and 2.60 of the FTP contemplate grant of relaxation or relief in cases of genuine hardship and also recognise the importance of personal hearing in grievance redressal. The impugned orders did not address the petitioner's specific case that the benefit of the Advance Authorization Scheme could not be availed because of non-transmission of authorization data to Customs/ICEGATE due to technical glitches beyond its control, nor did they meaningfully consider the plea that export obligations had been fulfilled and repeated approaches had been made to the authorities. Applying the principle in the case of Automotive Tyre Manufacturers Association v. Designated Authority and Others [2011 (1) TMI 7 - SUPREME COURT], that administrative and quasi-judicial orders affecting rights must disclose cogent reasons and cannot rest on mechanical or rubber-stamp reasoning, the Court found complete non-application of mind. The denial of personal hearing despite specific requests further rendered the decision-making process contrary to natural justice. On that basis, the orders were set aside and the matter was remanded for fresh consideration with an effective opportunity of hearing and a fresh reasoned order. [Paras 37, 39, 41, 42, 43]

The impugned orders were set aside and the matter was remanded to the competent authority for de novo consideration after granting an effective personal hearing and passing a fresh reasoned order.

Final Conclusion: The Court set aside the PRC orders on the ground that they were mechanical, unreasoned, and passed in breach of natural justice, particularly despite repeated requests for personal hearing. The matter was remanded to the competent authority for fresh consideration in accordance with the FTP, without any opinion on the merits of the petitioner's substantive claim.

Re-export the goods - The High Court [2026 (5) TMI 1044 - BOMBAY HIGH COURT] permitted to re-export the goods and the authorities were directed to grant the necessary permissions, but the matter was only adjourned and not finally concluded. - HELD THAT:- The petition was rejected as no material was placed on record to show that the petitioner had taken steps to re-export the goods, and the Court was therefore not inclined to entertain the petition.

Classification of Roasted Arecanuts - classifiable under CTH 20081920 as roasted arecanut, Or liable to reclassification under CTH 08028020 as raw arecanut - Binding nature of advance ruling - Evidentiary value of court-directed test report - Confiscation and penalty for alleged misclassification.

Classification of roasted arecanut - HELD THAT: - In the matter of Neena Enterprises Vs Commissioner of Customs Chennai [2024 (11) TMI 1088 - MADRAS HIGH COURT], the Hon’ble Single Member bench of the Madras High Court has held that if moisture content is below 10%, the same should be treated as ‘Roasted Arecanut’. The Department challenged the above order before the Division bench of Hon’ble Madras High Court and the Division Bench passed the order [2025 (3) TMI 396 - MADRAS HIGH COURT], upholding the order of the Single Member bench.

The Test Report received from NFL, Ghaziabad dated 24.07.2025 indicates that the moisture content is 2.09%, which is much less than 10% prescribed in the order of the Hon’ble Madras High Court for ‘Roasted Arecanut’. Thus, there is no doubt that the impugned goods imported by the Respondents conforms to the standards prescribed for classifying the goods as ‘Roasted Arecanut’.

The Tribunal held that the advance ruling obtained by the respondent in its own case [2023 (11) TMI 1366 - CUSTOMS AUTHORITY FOR ADVANCE RULINGS, NEW DELHI] classifying roasted arecanut under CTH 20081920, continued to bind the Department since no stay had been granted against its operation. It further found that the fresh test report obtained from the FSSAI accredited laboratory pursuant to the Calcutta High Court's specific direction identified the goods as roasted arecanut conforming to the prescribed standard, and therefore that report had to prevail for classification.

Thus, by relying on the ratio of the decision in the case of Neena enterprises Vs commissioner of Customs Chennai, cited supra, and the Test Report dated 24.07.2025 received from NFL, Ghaziabad, Court held that the Ld. Commissioner (Appeals) has rightly decided the classification of goods under CTH 20081920 as ‘Roasted Arecanut’ vide the impugned order.

Confiscation for misclassification - Penalty for alleged evasion - HELD THAT: - The Tribunal held that, since the goods were rightly declared and classified as roasted arecanut, the foundation for alleging misdeclaration or misclassification disappeared. On that basis, confiscation under Sections 111(d) and 111(m) was held to be unsustainable. For the same reason, the allegation of intentional misclassification to evade customs duty also failed, and the penalty imposed on the respondent was liable to be set aside. [Paras 9, 10]

The setting aside of confiscation and penalty by the Commissioner (Appeals) was affirmed.

Final Conclusion: The Tribunal upheld the order of the Commissioner (Appeals), holding that the imported goods were roasted arecanut classifiable under CTH 20081920 on the strength of the binding advance ruling and the later court-directed laboratory report. Consequently, the confiscation and penalty founded on alleged misclassification were also held unsustainable, and the Revenue's appeal was rejected.

Imposition of Penalty against a director of a foreign company for acts allegedly originating outside India but culminating in import undervaluation and customs clearance in India - Abetment -conscious participation in undervaluation and use of false invoices - Extra-territorial applicability of customs penal provisions - Personal liability for use of false customs documents.

Extra-territorial applicability of customs penal provisions - Personal liability of director of foreign company - Independent penal liability of abettor - HELD THAT: - The Tribunal held that the proceedings were not directed against acts committed abroad in isolation. The acts attributed to the appellant culminated in undervaluation of goods imported into India, and the manipulated invoices were knowingly prepared for use before Indian Customs authorities and were actually used for clearance in India. On that basis, the offence had a direct territorial nexus with India and stood completed within India. The absence of notice to, or penalty upon, the foreign company did not extinguish the appellant's own liability, since his liability depended on his personal role in the offending acts and not upon prior or parallel action against the company. [Paras 17, 18, 19, 20]

The objection based on lack of extra-territorial jurisdiction and non-impleadment of the foreign company was rejected.

Abetment of undervaluation - Penalty under section 112(a) - Territorial nexus with improper importation - HELD THAT: - The Tribunal found that the show cause notice specifically set out the appellant's role in coordinating imports, supervising manufacture and export, and issuing dual invoices. The documentary material recovered in investigation was held to establish that one set of invoices reflected the true value and another suppressed value was intended for Indian Customs purposes. Since the appellant failed to satisfactorily rebut this evidence, the Tribunal concluded that he had consciously and deliberately participated in the undervaluation mechanism. Section 112(a) was applied on the footing that the expression any person is wide enough to cover a person who knowingly participates in fraudulent importation or undervaluation, and the appellant's acts had a direct nexus with importation and clearance in India. The decisions cited by the appellant, namely C.K. Kunhammed [1992 (3) TMI 199 - CEGAT, MADRAS], Guru Electronics Singapore Pvt Ltd.[2008 (9) TMI 808 - CESTAT, BANGALORE], Shafeek P.K. [2015 (9) TMI 1257 - CESTAT BANGALORE], M/s Seville Products Ltd. [2021 (3) TMI 775 - CESTAT NEW DELHI], M/s Seville Products Ltd. [2021 (4) TMI 525 - CESTAT CHANDIGARH] and Ashok Kharey & Others [2025 (6) TMI 1441 - CESTAT BANGALORE], were distinguished on facts because those matters did not involve comparable evidence of active and intentional participation in customs fraud completed in India. The Tribunal also relied on Amritlakshmi Machine Works Vs Commissioner of Customs (Import) Mumbai [2016 (2) TMI 57 - BOMBAY HIGH COURT] to hold that penalty under section 112 is not confined to the importer who files the bill of entry. [Paras 14, 15, 16, 21, 24]

Penalty under section 112(a) was held to be legally sustainable.

Penalty under section 114AA - False or incorrect customs documents - Suppressed invoices - HELD THAT: - The Tribunal held that the evidence on record established that suppressed invoices were intentionally prepared for use in customs transactions in India. Since section 114AA applies where a person knowingly or intentionally makes, signs, uses or causes to be used false or incorrect declarations or documents in customs business, the deliberate use of false invoices squarely satisfied its ingredients. The conduct was treated as a designed revenue fraud and not a mere technical or procedural lapse. [Paras 22, 23, 24]

Penalty under section 114AA was upheld.

Final Conclusion: The Tribunal held that the appellant's acts had a direct territorial nexus with undervaluation and customs clearance in India, and that his liability was independent of any action against the foreign company. The penalties imposed under sections 112(a) and 114AA were accordingly sustained and the appeal was dismissed.

Moratorium under insolvency law - seeks recovery of the “property occupied by the Corporate debtor” - Termination of lease during CIRP - Going concern - breach of lease conditions or non-payment of dues - Overriding effect of insolvency law - Whether any clash between the MHADA Act and Insolvency Code ? - HELD THAT: - The Court held that the scheme of Section 14 is to preserve the status quo of the Corporate debtor's assets during CIRP and to prevent depletion of those assets so that the debtor may continue as a going concern. The land in question, held under a subsisting lease and in the possession of the Corporate debtor, fell within the protection of Section 14(1)(d), which prohibits recovery by the owner or lessor during moratorium. The expression in Section 14(1)(a) covering proceedings against the Corporate debtor was also construed broadly, in line with the object of the Code, so as to include statutory eviction proceedings before an authority and not merely civil suits. The Court rejected the contention that the explanation to Section 14(1) operated as an exception enabling termination for breaches other than insolvency; relying on the legislative background and the law explained in Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta [2021 (3) TMI 340 - SUPREME COURT], it held that the explanation is clarificatory, inserted to make explicit the protective scope of the moratorium, and cannot be read to dilute the main provision or permit action that would render Section 14 nugatory. On the facts, re-entry and eviction under the lease and the Public Premises Act directly amounted to recovery of property from the Corporate debtor during moratorium and were therefore impermissible. Since Section 238 gives the Code overriding effect, any inconsistency between the Public Premises Act and the insolvency regime stood resolved in favour of the Code. The termination and eviction orders were accordingly rightly quashed. [Paras 74, 76, 86, 87, 88]

The appeal was dismissed and the quashing of the lease termination and eviction orders was affirmed.

Final Conclusion: The Court upheld the judgment of the learned Single Judge and held that, during the subsistence of the moratorium, GIDC could neither terminate the lease nor pursue eviction of the Corporate debtor from the leased premises. The appeal was dismissed as devoid of merit.

Rejection of the resolution plan - Delay in refiling plan approval application - Liquidation on failure of timely resolution - Adverse remarks against resolution professional - request to expunge the remarks - commercial wisdom of the committee of creditors - outer limit of 330 days.

CIRP timelines - Delay in refiling plan approval application - HELD THAT: - Hon’ble Supreme Court as well as this Appellate Tribunal in various decisions have highlighted the importance of speedy resolution process under the IBC and a pre-dominant consideration behind minimising the delay in resolution of the CD is, as stated earlier, to minimise the devaluation of the assets and it is in this background the delay which has been caused in the instant case by the CoC as well as by the RP is to be visualised. It is also pertinent to mention here that one of the member of the CoC namely State Bank of India having majority voting share is supporting the impugned order before this Appellate Tribunal.

In State Bank of India vs. Consortium of Murari Lal Jalan[2024 (11) TMI 410 - SUPREME COURT (LB)] in paragraph no. 168 Hon’ble Supreme Court has highlighted as to how the power to extend time may be exercised by the Adjudicating Authority and by this Appellate Tribunal and it is emphasised that this power must not be exercised mechanically without application of mind.

In celebrated case of Committee of Creditors of Essar Steel India Ltd. vs. Satish Kumar Gupta and Ors.[2019 (11) TMI 731 - SUPREME COURT] the Hon’ble Supreme Court has highlighted the manner in which the delay which has occurred after the outer limit of 330 days must be dealt with and it is stated that it would be in the interest of all stakeholders that the CD be put back on its feet instead of being sent into liquidation and the delay which has occurred due to the pendency of the legal proceedings for which the fault cannot be attributed to the litigants and could only be due to the tardy process of adjudication, it may be open in such cases to the Adjudicating Authority or this Appellate Tribunal to extend time beyond 330 days. However, a note of caution has been given in paragraph no. 127 of the report that it is only in exceptional cases the time can be extended and the general rule being that 330 days is the outer limit within which resolution of the stressed assets of the CD must take place beyond which the CD is to be driven into liquidation.

The Appellate Tribunal held that the order remanding the plan for reconsideration specifically required refiling by 30.11.2023, yet the first post-remand meeting of the CoC was convened only on 04.12.2023 and no application for extension of time or condonation of delay was moved. Even after the CoC again approved the plan on 25.01.2024, the approval application was not pursued with diligence and, on the resolution professional's own showing, remained under defects for months. The Tribunal held that extension beyond the prescribed outer limit is permissible only in exceptional cases where delay is substantially due to legal proceedings or factors not attributable to the parties; that principle could not assist the appellants because the delay here was not caused by the adjudicatory process but by the conduct of the RP and the CoC. In that background, and having regard to Sections 12 and 33 of the Code, the Adjudicating Authority committed no error in treating timely liquidation as preferable to an endlessly delayed resolution process that would further erode asset value. [Paras 73, 74, 75, 76, 77]

The challenge to rejection of the resolution plan and initiation of liquidation failed.

Adverse remarks against resolution professional - Conduct of resolution professional - HELD THAT: - The Appellate Tribunal found material on record to support the Adjudicating Authority's criticism of the resolution professional's conduct, including the delayed convening of the post-remand CoC meeting, failure to seek extension despite expiry of the stipulated timeline, and prolonged non-removal of defects in the approval application. In those circumstances, the remarks were held to be fact-based and not unsupported or gratuitous. [Paras 66, 67, 77]

The request to expunge the observations against the resolution professional was rejected.

Final Conclusion: Both appeals were dismissed. The Appellate Tribunal upheld rejection of the plan and liquidation of the corporate debtor on account of substantial, unexplained post-remand delay attributable to the RP and the CoC, and declined to interfere with the adverse observations made against the RP.

Fraudulent trading/wrongful trading and diversion of sale proceeds - Contribution to assets of corporate debtor - Power to direct SFIO investigation - Preponderance of probabilities - sham transaction - siphoning of assets - knowing participation - misrepresentation to creditors - sale of the corporate debtor's shareholding in its subsidiary and the unsubstantiated sale transaction reflected in the books.

Fraudulent trading- Burden of proof - Concealment of asset transfer - Diversion of sale proceeds -HELD THAT: - From the material which is available on record it is reflected that the CD was having investment in Rio Resource Singapore (its subsidiary) of 51% shareholding (19,00,000 shares) and this investment was shown in the audited balance sheet of the CD up to financial year 2021-2022 however this investment is shown to have been sold by the Suspended Directors of the CD on 31.12.2018 and significantly the investment of Rs. 8.85 Crore in the Rio Resource was continuously shown by the CD in its financials.

It is crystal clear that despite the sale of the shareholding in Rio Resource the Suspended Directors continuously showing their investment in Rio Resource of Rs. 8.85 Crores in their balance sheets and it was only when the information was revealed by the IRP the Suspended Directors informed to have sold their shareholding way back in 2018 to Bellwether. Thus we concur with the findings recorded by the Ld. Adjudicating Authority in terms that showing the investment of Rs. 8.85 crores in the financials of the CD till 2022 despite the same was sold way back in 2018 was nothing but an act of misguiding the creditors of the CD so that the consideration of the sale of the shareholding be kept away from the reach of the creditors of the CD.

The Appellate Tribunal held that section 66(1) and section 66(2) operate independently, and that though the initial burden lies on the resolution professional, once sufficient material is produced the onus shifts to the suspended directors to explain the impugned transactions. It found that the investment in the subsidiary continued to be shown in the corporate debtor's financial statements up to the financial year 2021-2022 despite the appellants' case that the shares had been sold much earlier; the alleged sale and the alleged diversion of the consideration were disclosed only belatedly during CIRP; no satisfactory material was produced to substantiate the alleged payment of penalty to Aero Steel or to justify direct transfer of the sale consideration outside the corporate debtor; and the appellants failed to give a satisfactory explanation regarding any prior transaction with Aero Steel. The Tribunal treated these circumstances, read with the financial statements and the conduct of the suspended directors, as establishing that the consideration of the share sale was kept away from the corporate debtor and beyond the reach of its creditors. It further held that the explanation regarding the sale shown to SR Minerals was unsupported by documentary evidence and also appeared to be a fraudulent device. The finding was therefore not based on the forensic report alone, but on corroborative material and the surrounding circumstances proving fraudulent purpose. [Paras 42, 43, 44, 45, 46]

The direction requiring the appellants to contribute to the assets of the corporate debtor was upheld.

SFIO investigation - Statutory competence - Investigation by inspector - The Adjudicating Authority could not straightaway direct investigation by the Serious Fraud Investigation Office. - HELD THAT: - The Appellate Tribunal accepted the objection to the direction for SFIO investigation and held that, under the scheme of sections 212 and 213 of the Companies Act, the discretion to order investigation by SFIO vests with the Central Government. The Tribunal observed that the Adjudicating Authority could not directly command an SFIO investigation, though the matter could be referred for investigation through Inspector or Inspectors in accordance with law, leaving it to the Central Government to take any further step warranted by the investigation. [Paras 47, 48]

The direction for SFIO investigation was modified, and the matter was referred to the Central Government for investigation through Inspector or Inspectors.

Final Conclusion: The appeal was partly allowed. The finding of fraudulent conduct and the direction requiring contribution to the assets of the corporate debtor were sustained, but the direction for SFIO investigation was set aside and the matter was instead referred to the Central Government for investigation through Inspector or Inspectors in accordance with law.

Interim Resolution Professional fees-Restricted CIRP period - Entitlement to Resolution Professional (“RP”) for full fees - Adjudicating Authority failed to grant him fees in accordance with the agreed remuneration as well as the minimum fee structure prescribed under Regulation 34B read with Schedule II - Minimum fee under CIRP Regulations - Commercial wisdom in fee ratification - equitable remuneration - fees payable to the Appellant during the period when the constitution of the CoC stood stayed by order dated 28.02.2023 passed by this Appellate Tribunal. - HELD THAT: - It is on record that the Appellant did perform limited function relating to receipt and collation of claims during the aforesaid period. The Ld. Adjudicating Authority has also recorded that the Appellant had received claims from creditors, prepared a list of four Financial Creditors involving claims exceeding Rs. 250 Crores and also processed claims of Operational Creditors.

From the Section 20 of the Code, the main role of the IRP during the CIRP process is to keep the Corporate Debtor running as a going concern. Whereas in this case we note that the CD was being run by the existing management during the period of the stay. Clearly the role performed by the Appellant was extremely limited in comparison to the role of an IRP in normal CIRP proceedings.

The Appellate Tribunal held that the interim order had not left the CIRP fully operational, but had confined the Appellant's role only to collation and verification of claims while all further CIRP steps stood barred. In a normal CIRP, the IRP is required to perform several statutory and managerial functions, including constitution of the CoC, conduct of the process, and management of the corporate debtor as a going concern; during the relevant period, those functions could not be undertaken and the corporate debtor continued under the existing management. The Court therefore held that remuneration had to depend on the nature and extent of functions actually discharged, and Regulation 34-B with Schedule II could not be read in isolation so as to mandate full minimum fees despite substantial judicial restrictions on the process. The Adjudicating Authority had rightly balanced the competing positions by rejecting both the CoC's stand of no fee and the Appellant's claim for full fee, and by granting a reasonable amount with reimbursement of verified expenses. The contention that an earlier understanding on fees permanently bound the CoC was also rejected, the Court holding that ratification of CIRP costs remains within the CoC's commercial domain subject to scrutiny for arbitrariness, which was not established here. The Tribunal further held that the principle in IndusInd Bank Ltd. v. Mr. Rajendra K. Bhuta [2022 (4) TMI 1657 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI] applied, since apart from claim processing there was a complete halt to all other material CIRP activities. [Paras 54, 55, 56, 57, 58]

The reduced fee fixed for the restricted period was upheld, and no interference with the impugned order was warranted.

Final Conclusion: The appeal was dismissed. The Appellate Tribunal upheld the order granting the Appellant remuneration at a reduced rate for the restricted period, together with reimbursement of verified expenses, holding that full fees were not payable when only limited functions could be performed.

Validity of auction process for sale of the aircraft - As is where is sale - lack of transparency - Adequacy of inspection opportunity - Finality of auction - Post-auction higher bid - Accrual of rights to the highest bidder - Absence of fraud.

As is where is sale - Adequacy of inspection opportunity - Transparency in auction process -HELD THAT: - The Appellate Tribunal held that the asset sale process memorandum itself provided that the aircraft were being sold on an as is where is, as is what is and as is how is basis. The appellant had sought inspection and was in fact permitted inspection for two days before the auction. In those circumstances, and having thereafter participated in several bidding rounds, the appellant could not assail the process on the footing that it was unable to undertake a further borescope inspection. The Tribunal accepted that the Adjudicating Authority had considered the communications, the process terms and the applicable regulations, and found no lack of transparency or non-disclosure of material particulars. [Paras 12, 13]

No infirmity was found in the conduct of the auction or in the rejection of the appellant's challenge founded on alleged inadequate inspection and non-transparency.

Finality of auction - Post-auction higher bid - Liquidator's discretion - entitlement to reopen the concluded auction or compel acceptance of its post-auction enhanced offer. - HELD THAT: - The Appellate Tribunal held that, after the appellant had participated in the inter se bidding and its bid remained lower than that of the successful bidder, the subsequent offer to pay a higher amount for each aircraft did not oblige the liquidator to reopen the process. The liquidator had placed the request before the Stakeholders Consultation Committee, which decided that no further step for re-auction be taken and that the auction be given finality. The Tribunal agreed that value maximisation could not be read so as to render the process endless, and that no error arose from refusal to entertain the revised offer after conclusion of the auction. The appellant's objection founded on the successful resolution applicant's separate application was also rejected, since that application did not confer any right on the appellant to question the concluded process. The Tribunal concurred with the Adjudicating Authority's reliance on Valji Khimji [2008 (8) TMI 562 - SUPREME COURT] that, absent fraud, rights accruing upon confirmation of sale in favour of the successful bidders could not be displaced. [Paras 10, 12, 13]

The concluded auction was treated as final, and the prayer to set it aside or to act on the appellant's higher post-auction offer was rightly refused.

Final Conclusion: The Appellate Tribunal upheld the dismissal of the appellant's application and found no error in the liquidation sale process. The appeal was dismissed, the auction in favour of the successful bidders being left undisturbed.

Application of the procedure pertaining to a complaint under the CrPC (now BNSS) to proceedings under the PMLA - Right of hearing before cognizance - Scope and applicability of the first proviso to Section 223(1) of the BNSS- Meaning of inquiry under the savings clause.

Applicability of complaint procedure to PMLA proceedings - Special Court deemed to be Court of Session - Inconsistency test under PMLA - HELD THAT: - The Court held that the question was no longer open in view of the decisions in Tarsem Lal [2024 (5) TMI 837 - SUPREME COURT], Yash Tuteja [2024 (5) TMI 468 - SUPREME COURT] and Kushal Kumar Agarwal [2025 (5) TMI 2001 - SUPREME COURT] Under Sections 46 and 65 of the PMLA, the procedural provisions of the CrPC, now replaced by the BNSS, apply to proceedings before the Special Court save where the PMLA provides otherwise or where there is inconsistency. No provision in the PMLA excludes the complaint procedure or is inconsistent with the provisions governing examination of complaint, dismissal, issuance of process and related stages. The Court rejected the contention that the PMLA, being a stand-alone enactment, excludes these provisions, observing that such a construction would denude the Special Court of essential powers available in complaint cases. [Paras 30, 31, 32, 33]

Sections 223 to 228 of the BNSS were held applicable to a complaint under Section 44(1)(b) of the PMLA.

Right of hearing before cognizance - Mandatory nature of first proviso to Section 223(1) - Meaning of inquiry under the savings clause - HELD THAT: - The Court held that an inquiry under Section 2(1)(k) of the BNSS requires a judicial act involving application of mind and is not satisfied by a merely ministerial step such as directing the complaint to be numbered and posting it for hearing on cognizance. Hence, the savings provision in Section 531(2)(a) was not attracted merely because the complaint had been filed before the BNSS came into force. The Court further held that the first proviso to Section 223(1) confers a substantive right upon the accused to be heard before cognizance, forms part of fair trial protection under Article 21, and is mandatory. Since cognizance was taken on 02.07.2024, after the BNSS had come into force, without affording such hearing, the defect was not a curable irregularity requiring proof of prejudice but an illegality vitiating the cognizance order itself. [Paras 34, 35, 36, 37, 38]

The High Court's view based on the savings clause was set aside, and the cognizance order was held void for non-compliance with the first proviso to Section 223(1) of the BNSS.

Final Conclusion: The Supreme Court held that the BNSS complaint procedure, including the accused's right of hearing under the first proviso to Section 223(1), applies to PMLA complaints where cognizance was taken after commencement of the BNSS. As the pre-BNSS filing and numbering of the complaint did not amount to a pending inquiry, the savings clause did not apply; the impugned judgment and cognizance order were set aside and the Special Court was directed to proceed afresh from the stage of cognizance after hearing the appellant.

Maintainability of Enforcement Case Information Report and the connected proceedings - Parallel Investigation -institution of Second FIR and consequent proceeding arising out of this FIR on the ground that the communications made by respondent-ED under Section 66(2) of the PMLA have raised overlapping allegation viz-a-viz the FIR - Statements under Section 50 PMLA - Right against self-incrimination - Summons under Section 50 PMLA - Violation of Article 20(3), Article 21, Section 164 CrPC or alleged non-observance of Miranda-type safeguards -Private person liability under the Prevention of Corruption Act.

ECIR maintainability - Internal departmental document - Prematurity of challenge -HELD THAT: - The Court held that an ECIR has no statutory status under the PMLA and functions only as an internal departmental document for initiation of inquiry or investigation. Relying on Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT (LB)], it held that no person can claim, as of right, quashing of such an internal document, except in a case where the predicate offence itself has been quashed. The challenge to ECIR-13 was also found premature because the petitioner's assertion that it merely repeated ECIR-4 rested on conjecture, the document having not entered the public domain or taken the shape of a prosecution complaint. [Paras 38, 39]

The prayer for quashing ECIR-13 was rejected as not maintainable and premature.

Second FIR - Test of sameness - Distinct scheduled offences - HELD THAT: - Applying the principle in Babubhai [2010 (8) TMI 892 - SUPREME COURT], the Court held that permissibility of a subsequent FIR depends on the facts and on whether the later case concerns the same occurrence or a different incident or crime. It accepted the ED's stand that ECIR-13 arose from FIR No. 05 of 2025, concerned a larger conspiracy, involved additional offences and accused, and was therefore not a mere repetition of the earlier matter. Relying also on Ram Lal Narang [1979 (1) TMI 241 - SUPREME COURT], the Court held that investigation to unearth the conspiracy angle was legally permissible and that institution of ECIR-13 could not be treated as impermissible evergreening of jurisdiction. [Paras 40, 41, 42]

The challenge founded on the bar against a second FIR or parallel investigation failed.

Statements under Section 50 PMLA - Right against self-incrimination - Section 164 CrPC safeguards - Miranda rights - HELD THAT: - The Court held that the protection against self-incrimination and the safeguards of Section 164(4) CrPC attach to an accused person and not to a person who, at the time of recording of the statement, had not yet been arraigned as an accused. Following Vijay Madanlal Choudhary (supra), it held that authorities under the PMLA are not police officers, and statements recorded by them under Section 50 are not hit by Article 20(3) or Article 21 unless recorded after formal arrest. It further held that Section 164(4) CrPC applies to confessions of an accused and cannot be imported into Section 50 proceedings, and that Miranda rights have no independent legal force in the Indian legal system so as to be grafted into the PMLA. As the petitioner became an accused only later, he could not claim those protections for the earlier statements. The Court also declined to examine the effect of retraction at this stage, leaving that issue open for trial. [Paras 44, 45, 46, 47]

The prayer to quash the petitioner's statements recorded on the specified dates was refused.

Summons under Section 50 PMLA - Investigative powers - Prematurity of writ challenge - HELD THAT: - The Court held that the power to summon any person whose attendance is considered necessary is expressly conferred by Section 50 and forms part of the statutory process of investigation. Issuance of summons by itself does not infringe any right so as to warrant interference in writ jurisdiction, and courts ordinarily do not interdict statutory investigation at that stage. In view of Vijay Madanlal Choudhary and the principle in Kunisetty Satyanarayana [2006 (11) TMI 543 - SUPREME COURT], the challenge to the summons was held to be premature and devoid of merit. [Paras 48, 49]

The prayer to quash the summons dated 09.09.2025 and 15.09.2025 was rejected.

Information sharing under Section 66(2) PMLA - Further investigation - HELD THAT: - The Court held that Section 66(2) casts a mandatory obligation on the ED to share information and material with other law-enforcement agencies where necessary for discharge of their statutory functions, and that if the information disclosed cognizable offences, registration of an FIR could follow. It further held that the objection that further investigation required prior permission of the court did not assist the petitioner, since, on the authorities relied on by the Court, such a requirement would arise only in the circumstances discussed there and not at the present stage of the matter. The decisions cited by the petitioner on further investigation were held inapplicable on the facts. [Paras 50, 51]

The challenge to the ED's communications under Section 66(2) and to the continuation of investigation on that ground was rejected.

Private person liability under the Prevention of Corruption Act - Aiding and abetting corruption offences - HELD THAT: - The Court held that the petitioner's contention that, being a contractor and not a public servant, he could not be proceeded against in relation to offences under the Prevention of Corruption Act was contrary to settled law. Relying on Jitender Kumar Singh [2014 (2) TMI 1401 - SUPREME COURT], it held that even in the absence of a public servant being tried, a private person can be tried for offences under the Prevention of Corruption Act as well as allied non-PC Act offences. [Paras 52]

The objection to the proceedings on the ground that the petitioner was not a public servant was rejected.

Final Conclusion: The writ petition was dismissed in entirety. The Court held that the challenge to ECIR-13 was not maintainable at that stage, the attack on the petitioner's statements and summons under Section 50 of the PMLA was untenable, and no ground was made out to restrain the ED from continuing investigation in accordance with law.

Claim for release of the excess amount recovered after reduction in the quantified proceeds of crime -Entitlement to the consequential relief - Failure to consider prima facie merits.

Whether the appeal filed by the respondent challenging the reduction in the quantification of proceeds of crime by the Adjudicating Authority was prima facie meritorious or not has to be determined in the appeal filed by the respondent qua the reduced amount ? -HELD THAT: - The Court held that the Tribunal's refusal rested only on the pendency of the respondent's separate appeal and on the assumption that grant of relief would render that appeal infructuous. That approach was unsustainable because the prima facie merits of the respondent's appeal had not been considered at all, and that appeal or any application therein was not before the Tribunal while deciding the appellant's request. Since the appellant had partly succeeded before the Adjudicating Authority by securing reduction in the quantified proceeds of crime, it became entitled to the consequential relief of release of the excess recovered amount, subject to any contrary order passed in the respondent's own proceedings. In view of the appellant's offer to secure the differential amount, the Court directed release of that amount against an equivalent bank guarantee, to abide by the outcome of the respondent's pending application or appeal. [Paras 6, 7, 8, 9, 10]

The impugned order was set aside, and the respondent was directed to release the excess recovered amount to the appellant on furnishing an equivalent bank guarantee.

Interim protection of adjudicated amount - HELD THAT: - The Court kept intact the amount adjudicated by the Adjudicating Authority as proceeds of crime and directed that it be placed in fixed deposit, subject to the result of the pending appeals. The Court expressly refrained from expressing any opinion on the merits of either party's appeal or on the interim stay application. [Paras 11, 12]

The adjudicated amount was ordered to remain in fixed deposit and to abide by the outcome of the pending appeals.

Final Conclusion: The Court held that the Tribunal was not justified in refusing release of the excess recovered amount solely because the respondent's separate appeal was pending without examining its prima facie merits. The excess amount was directed to be released against bank guarantee, while the balance adjudicated amount was directed to remain in fixed deposit subject to the outcome of the pending appeals.

Services under the Information and Communication Technology (ICT) skills scheme - Scheme run by State Governments with funding support from the Ministry of HRD -Naturally bundled services - negative list exemption - educational institution exemption - Predominant nature test - Composite supply - Education services - Auxiliary educational services - Exemption by notification - Curriculum-based education - Limitation - Valuation of composite contracts - abatement - maintainability of revenue appeal.

Whether M/s SNIL are liable to pay Service Tax on the services rendered by them in connection with ICT programme in schools in different states as per the agreements with different states ? - HELD THAT: - Hon’ble Gujarat High Court in Sahitya Mudranalaya Pvt. Ltd. v. Additional Director General [2020 (3) TMI 154 - GUJARAT HIGH COURT] considered the scope of clause (l) of Section 66D, placed express reliance on CBEC Circular No. 172/7/2013-S.T. which confirmed that "all services relating to education are exempt from service. The Special Leave Petition filed by the Revenue against the Gujarat High Court decision was dismissed by the Supreme Court [2021 (7) TMI 1259 - SC ORDER]. The decision has attained finality.

The Tribunal held that the contracts executed under the BOOT model could not be vivisected merely because certain payment components were separately indicated. On a reading of the agreements, the infrastructure, software, maintenance, teacher training, student instruction and related support formed one integrated supply intended to impart computer education as part of the school curriculum. Applying Section 66F(3)(a), the predominant nature of the bundle was education service, while the ICT infrastructure was only the medium through which such education was delivered. Since the services were provided in secondary and higher secondary schools and formed part of the prescribed curriculum leading to qualifications recognised by law, they fell within Section 66D(l)(i) and (ii) up to 13.05.2016. After omission of Section 66D(l), the Tribunal held that no new tax liability was created, as the same exemption continued under amended Entry 9 of Notification No. 25/2012-S.T.; the appellant satisfied the definition of an educational institution and its services remained exempt. [Paras 31, 32, 33, 35, 36]

The confirmed service tax demand on the appellant was unsustainable, as the services were outside the levy up to 13.05.2016 and exempt thereafter.

Whether the deduction allowed by the Commissioner are correct as per the Service Tax Valuation Rules ? - HELD THAT: - The Tribunal observed that the question of deduction and valuation had relevance only if the services were exigible to service tax. Having held that the appellant's activities under the ICT Scheme were not taxable during the disputed period, the controversy raised by the Revenue regarding vivisection of the contracts and reworking of value under the valuation rules became academic. The Revenue appeal was therefore held to be not maintainable. [Paras 13, 37]

The Revenue appeal questioning bundling and abatement was dismissed as not maintainable.

Final Conclusion: The Tribunal held that the appellant's ICT@ Schools activities constituted naturally bundled education services and were not liable to service tax during the disputed period, being covered first by the negative list and thereafter by the continuing exemption under the Mega Exemption Notification. The assessee's appeal was allowed and the Revenue's appeal was dismissed.

Power of remand in service tax appeals -Scope of appellate powers under section 85(4) of the Finance Act, 1994 - activity of “Advertising Services” - HELD THAT: - The Tribunal followed its earlier decision in Commissioner of Central Excise and Service Tax, Goa versus M/s Fab Well Engineers [2017 (5) TMI 1024 - CESTAT MUMBAI], which had accepted the distinction between the language of section 85(4) of the Finance Act, 1994 and section 35A of the Central Excise Act, 1944. On that reasoning, the appellate power in service tax matters to pass such orders as the Commissioner (Appeals) thinks fit includes the power to remand the matter to the original authority in an appropriate case. Since the remand in the present case was for verification purposes, no infirmity was found in the impugned order. [Paras 4, 5]

The Revenue's objection to the remand power of the Commissioner (Appeals) was rejected, and the remand ordered for verification was upheld.

Final Conclusion: The Tribunal held that in service tax matters the Commissioner (Appeals) possesses the power to remand the matter to the adjudicating authority for verification. The Revenue's appeal was therefore dismissed.

CENVAT credit on input services - service tax paid on group medical insurance obtained for members - demand barred by limitation - Extended period of limitation - Suppression of facts or wilful misstatement.

Denial of CENVAT credit on service tax paid on group medical insurance policies obtained for members - HELD THAT: - The Tribunal held that the appellant had admittedly paid service tax to the Government and Rule 3 permitted credit of service tax paid on an input service used by a provider of output service. It further found that the insurance policies were taken for members of the co-operative society and not for employees; hence the exclusion in Rule 2(l) relating to personal consumption was wrongly invoked. The arrangement with HBPL was only for collection of premium from members and did not alter the character of the transaction. The Tribunal also held that, even if the appellant was not legally required to pay service tax because it was not registered with IRDA and was not an insurance agent, once such tax had already been paid through utilisation of credit, the credit stood effectively reversed and could not again be demanded to be reversed. [Paras 7]

The finding disallowing the credit was set aside.

Extended period of limitation - Suppression of facts - Knowledge of department - HELD THAT: - The Tribunal found that the appellant had been regularly filing ST-3 returns and was also subject to audit, and that the demand itself was founded on information periodically furnished to the department. In those circumstances, the allegation of suppression merely because the issue surfaced in audit was held to be untenable. As no evidence of any positive act of misstatement or suppression with intent to evade tax was brought on record, the precondition for invoking the extended period was absent. Since the show cause notice proposed demand for a period wholly beyond the normal limitation, the demand was liable to fail on limitation alone. [Paras 8, 9, 10]

The demand was held time-barred and the impugned order was liable to be set aside on this ground alone.

Final Conclusion: The Tribunal set aside the impugned order and allowed the appeal. It held both that the credit denial was unsustainable on merits and that, in any event, the demand was barred by limitation for want of any established suppression.

Statutory limitation for appeal - barred by limitation - Exclusion of Section 5 of the Limitation Act - Sufficient cause - Power to condone delay - Appellate authority's limited jurisdiction -HELD THAT: - The Tribunal held that the statute prescribes a fixed period of two months for filing the appeal and confers only a further limited power to condone delay of one month on sufficient cause being shown. Once the appeal is presented beyond the aggregate period permitted by the provision, the appellate authority has no jurisdiction to condone the excess delay. Applying that statutory bar, the Tribunal found no infirmity in the dismissal of the appeal as time-barred and followed Singh Enterprises . [Paras 3, 4]

The dismissal of the appeal as barred by limitation was upheld.

Final Conclusion: The Tribunal upheld the order dismissing the appeal as time-barred, holding that the Commissioner (Appeals) had no statutory power to condone delay beyond the period expressly permitted under section 85(3A) of the Finance Act, 1994. The appeal was accordingly dismissed.

Clandestine removal - Suppression of production - Assumptions, presumptions, private records, and uncorroborated material - Admissibility of electronic evidence - Burden of Proof - printouts taken from pen drives and other electronic equipment - Mandatory Procedural Compliance of Section 36B - Evidentiary value of statements - procedural requirements under Section 9D - violation of the principles of natural justice - Demand of duty, interest, and penalties.

Whether the allegation of clandestine removal of goods can be based on assumptions and presumptions without providing any corroborative evidence, or not ? - HELD THAT: - The Tribunal held that a charge of clandestine removal is a serious allegation and must be established by tangible and corroborative evidence. In the present case, there was no evidence of excess procurement of raw materials, unaccounted finished goods, excess electricity consumption, engagement of additional labour, transportation of alleged clandestine clearances, receipt of sale proceeds, or unexplained cash or bank deposits. The case of the Revenue rested essentially on printouts from a pen drive and certain private records, which by themselves could not establish clandestine manufacture and removal. [Paras 16, 17, 21, 22]

The charge of clandestine removal failed for want of corroborative evidence, and the duty demands founded on such allegation were unsustainable.

Whether the allegation of clandestine removal can be established on the basis of private records / documents in the absence of any corroborative evidence, or not. - Print-outs taken from pen drives and other electronic equipment can be treated as admissible evidence without complying with the conditions prescribed under Section 36B ? -HELD THAT: - The Tribunal held that electronic records in the form of computer printouts are admissible only if the conditions prescribed in Section 36B are satisfied, including proof of regular use, ordinary-course input, proper functioning of the computer, and a certificate under Section 36B(4). The Revenue neither established exclusive ownership or authenticity of the pen drives nor produced the statutory certificate. The adjudicating authority therefore could not rely on those printouts. The Tribunal also noted that the appellants had explained the pen drive entries as inflated figures prepared for banking purposes, and in the absence of corroborative evidence, such unverified electronic material could not support the charge. [Paras 18, 21, 22]

The electronic printouts were held inadmissible and incapable of supporting the allegations against the appellants.

Whether the said statements have any evidentiary value without complying with the procedure laid down under Section 9D of the Central Excise Act, 1944, or not ? - HELD THAT: - The Tribunal held that statements recorded under Section 14 cannot be relied upon for proving their contents unless the procedure under Section 9D is followed. The makers of the statements were required to be examined before the adjudicating authority, the authority had to form the requisite opinion for admitting the statements in evidence, and only thereafter could cross-examination arise. Since the Revenue had not followed this mandatory procedure, and the buyers relied upon in the impugned order were not subjected to the statutory process, those statements could not be treated as relevant evidence for alleging clandestine removal. [Paras 19, 21, 22]

The statements recorded during investigation were excluded from evidentiary consideration and could not sustain the demands.

Whether, in the facts and circumstances of the case, penalties can be imposed on the appellants, or not ? - HELD THAT: - The Tribunal held that the very basis for imposition of penalty was the alleged clandestine manufacture and removal of excisable goods. As that allegation was not established, the foundation for penalty did not survive. The penalties imposed on the appellants were therefore liable to be set aside. [Paras 20, 22, 23]

All penalties were set aside as a consequence of the failure of the duty demands.

Final Conclusion: The Tribunal held that the demands were founded on inadmissible electronic material, private records and statements lacking statutory evidentiary compliance, and were unsupported by independent corroboration required to prove clandestine removal. Consequently, the duty demands, interest and penalties in both sets of appeals were set aside and the appeals were allowed with consequential relief.

Admissibility of third party evidence - Cross-examination under Section 9D - Cenvat credit on invoices issued by non-existent dealers - Corroborative evidence - Clandestine removal - Reasonable diligence - Bogus invoices.

Third party statements - Cross-examination - Section 9D compliance - HELD THAT: - The Tribunal held that the department had heavily relied on statements of third parties and data recovered from their premises, which constituted third party evidence. The appellant had sought cross-examination of those witnesses, but the request was rejected only on the ground that the statements were voluntary and had not been retracted. That reason was held unjustified, since cross-examination is a relevant safeguard in adjudication and the use of statements recorded under Section 14 is governed by Section 9D. In the absence of examination of the makers of the statements in the manner contemplated by law and in the absence of an effective opportunity of cross-examination, such statements could not form the basis of the demand. The Tribunal also noted that the rejection of the cross-examination request was not properly communicated to the appellant. [Paras 5]

Reliance on third party statements and documents, without compliance with Section 9D and without cross-examination, was held impermissible.

Cenvat credit - Non-existent dealers - Reasonable diligence - HELD THAT: - The Tribunal held that the mere fact that the invoice-issuing entities were later found non-existent did not by itself justify denial of credit to the appellant. There was no evidence, apart from the inadmissible third party material, to establish the appellant's involvement, knowledge of the alleged bogus nature of the invoices, or non-receipt of the goods. The Tribunal further noted that the appellant had cleared its final products on payment of duty and that the invoices contained the particulars required under Rule 9 of the Cenvat Credit Rules, with corresponding records being maintained by the appellant. In these circumstances, requiring the appellant to go behind the records maintained by registered dealers would cast an impractical burden upon it. As the department failed to produce independent corroborative evidence proving wrongful availment of credit, the demand, appropriation and penalties could not be sustained. [Paras 5, 6]

The denial and recovery of Cenvat credit, and the connected penalties, were held unsustainable and were set aside.

Final Conclusion: The Tribunal held that the demand was founded only on inadmissible third party material and lacked independent corroboration against the appellant. The denial and recovery of Cenvat credit, along with the penalties, were therefore set aside and the appeals were allowed.

Transaction value - Preventive maintenance charges -additional consideration received in respect of the vehicles cleared - Related person valuation - Valuation of excisable goods for purposes of charging of duty of excise.

Whether the charges collected by the Respondent towards Preventive Maintenance Programme of the Volvo manufactured vehicles prior to 01.04.2009 and post-01.04.2009 collected by VECVL is part of the transaction value of the vehicles manufactured? - HELD THAT: - The Tribunal accepted the finding that the preventive maintenance programme was an optional post-sale arrangement and not a compulsory part of the sale transaction. The Revenue failed to produce material, including the warranty documents called for by the Bench, to establish that enrolment in that programme was a condition of sale or a prerequisite inseparably linked with the warranty attached to the vehicle sale. The recorded position that a substantial majority of purchasers had not opted for the scheme further showed that the programme had no proximate connection with the sale of the vehicles. On that basis, the charges for such preventive maintenance could not be treated as amounts payable by reason of, or in connection with, the sale so as to form part of the transaction value. [Paras 11, 12]

The preventive maintenance charges were held to be outside the assessable value, and the demand based on their inclusion was rightly dropped.

Whether the post 01.4.2009 such charges collected by VECVL be added to the transaction value being additional consideration under Rule 6 of Central Excise Valuation Rules, 2000 ? -HELD THAT: - The Tribunal agreed with the Commissioner that, once the Department's case proceeded on the footing that the manufacturer and VECVL were related by reason of being inter-connected undertakings, valuation had to be worked out under the provisions governing sales to related persons and not by invoking Rule 6 to load the assessable value with the preventive maintenance charges collected by the distributor. Rule 6 deals with additional consideration flowing from the buyer to the assessee, whereas, on the Department's own premise of related-person transactions, the proper course was valuation under Rule 9 or Rule 10. Therefore, the attempt to treat the distributor's collections towards the optional maintenance scheme as additional consideration under Rule 6 was contrary to the valuation scheme under Section 4 read with the Valuation Rules. [Paras 11]

The invocation of Rule 6 for the post-01.04.2009 period was rejected, and the demand on that basis was unsustainable.

Final Conclusion: The Tribunal upheld the order dropping all the show cause notices. It held that the optional preventive maintenance programme had no nexus with the sale of the vehicles so as to enter the transaction value, and that, in any event, for the post-01.04.2009 period Rule 6 could not be invoked to add the distributor's collections as additional consideration.

Application for modification -Entitlement to a decree of permanent injunction restraining the defendants from using the plaintiff's trademarks, logos and deceptively similar marks, and from representing any association with the plaintiff. - HELD THAT:- The application for modification was disposed of as not pressed, and the suit was decreed on the basis of the defendants' undertaking and statement that the school had been shut down, with a permanent injunction restraining use of the plaintiff's marks and any representation of association with the plaintiff.