TMI Tax Updates e-Newsletter
May 30,2026

Cancellation of GST registration for non-filing of returns - non-compliance with the prescribed procedure - Non- Speaking order - Violation of Natural justice - Effective Opportunity of Hearing - Procedural Fairness - Arbitrariness - HELD THAT: - The Court held that a show cause notice issued for cancellation of registration must disclose the precise default so as to afford an effective opportunity of response. In the present case, the notice merely stated failure to furnish returns for a continuous period of six months without mentioning the month from which and the period during which returns had not been filed. Further, Rule 22 read with Form GST REG-19 requires the Proper Officer to record specific reasons while cancelling registration. The impugned order only referred to the absence of reply and reproduced the statutory ground, but did not state any reason for cancellation. The Court held that cancellation of registration entails adverse civil consequences and, therefore, the obligation to pass a speaking order is implicit in fair procedure and natural justice. Non-submission of reply by the assessee did not relieve the Proper Officer of that obligation. Since the order was non-speaking and showed lack of application of mind, it could not stand in law. The Court further held that, despite delay in approaching the writ court, the statutory infirmity in the cancellation order outweighed the delayed challenge. [Paras 21, 22, 23, 24, 25]

The cancellation order was set aside and the matter was restored to the stage of the show cause notice, with liberty to the petitioner either to reply to the notice or to furnish pending returns and pay dues, interest, late fee and penalty, whereupon the Proper Officer was directed to proceed afresh in accordance with Section 29 and Rule 22.

Final Conclusion: The writ petition was allowed to the extent of quashing the cancellation of GST registration, as the impugned order was a non-speaking order passed in breach of the statutory requirement to record reasons. The matter was remitted to the stage of the show cause notice, with limited time granted to the petitioner to avail the statutory options contemplated under Rule 22.

Validity of best judgment assessment orders passed for non-filing of returns without proof of service of the statutory notice contemplated before assessment - Mandatory compliance with mode of service - HELD THAT: - The Court held that an assessment under Section 62 cannot stand unless the statutory notice preceding such assessment is shown to have been served in one of the modes recognised by Section 169. Mere recital in the assessment orders that notices had been issued was held insufficient. The dashboard material relied on by the petitioner did not indicate issuance of such notices, and the respondents also failed to produce any material showing service of notice before the assessments were completed. In the absence of proof of service of the mandatory notice, the impugned assessment orders were treated as invalid. [Paras 7, 8]

The assessment orders for the period from February, 2018 to February, 2019 were quashed, and the Assessing Officer was directed to reconsider the matter after issuing a fresh statutory notice under Section 62, if warranted.

Final Conclusion: The writ petition was allowed by quashing the best judgment assessment orders for the relevant period on the ground that there was no proof of service of the mandatory statutory notice. The matter was left open for fresh consideration by the Assessing Officer after due notice, if warranted.

Entitlement to bail in a prosecution under the GST enactments alleging fraudulent availment of input tax credit through fake invoices -Economic offences and grant of bail-Documentary evidence and pre-trial incarceration-Right to speedy trial under Article 21-HELD THAT: - The principles laid down by the Hon’ble the Supreme Court of India in the case of ‘Satender Kumar Antil v. Central Bureau of Investigation’ [2022 (8) TMI 152 - SUPREME COURT] are also relevant in this case. In the abovementioned case, it has been observed that “the rate of conviction in criminal cases in India is abysmally low. It appears to us that this factor weighs on the mind of the Court while deciding the bail applications in a negative sense. Courts tend to think that the possibility of a conviction being nearer to rarity, bail applications will have to be decided strictly, contrary to legal principles. We cannot mix up consideration of a bail application, which is not punitive in nature with that of a possible adjudication by way of trial. On the contrary, an ultimate acquittal with continued custody would be a case of grave injustice”.

In the case of ‘Tapas Kumar Palit Vs. State of Chhattisgarh’ [2025 (3) TMI 672 - SUPREME COURT] the Hon’ble Supreme Court of India has observed that “if an accused is to get a final verdict after incarceration of six to seven years in jail as an undertrial prisoner, then, definitely, it could be said that his right to have a speedy trial under Article 21 of the Constitution has been infringed”. It has also been observed by the Hon’ble Supreme Court of India in the abovementioned case that “delays are bad for the accused and extremely bad for the victims, for Indian society and for the credibility of our justice system, which is valued. Judges are the masters of their Courtrooms and the Criminal Procedure Code provides many tools for the Judges to use in order to ensure that cases proceed efficiently”.

The Court held that grant of bail could not be refused merely because the accusation concerned a serious economic offence involving alleged loss to the State exchequer. Applying the principles noticed from the decisions of the Supreme Court, the Court found that the petitioner had remained in custody for about four months, had clean antecedents, the prosecution case rested substantially on documentary and electronic material, and there was nothing on record to show that release on bail would lead to tampering with evidence, influencing of witnesses, or non-participation in trial. The Court further took note that the trial was not likely to conclude in the near future and that continued judicial custody was not likely to serve any useful purpose. On that cumulative assessment, the balance was held to favour liberty pending trial. [Paras 32, 33, 34]

The petitioner was held entitled to bail, subject to conditions restraining intimidation of witnesses, requiring disclosure of address and its change, and prohibiting departure from India without prior permission of the trial Court.

Final Conclusion: The High Court granted bail to the petitioner in the GST prosecution, holding that the seriousness of the alleged economic offence, by itself, was insufficient to deny liberty where custody had continued for about four months, the evidence was documentary, antecedents were clean, and no real apprehension of tampering or evasion of trial was shown.

Maintainability of writ petition in absence of functional appellate tribunal - Mandatory pre-deposit for appeal to GST Appellate Tribunal - HELD THAT: - The Court held that though a writ petition can be entertained against an appealable order where the appellate forum is not functional, such recourse is only to ensure that a litigant is not left remediless. Once the statutory forum has been made functional and the time for filing appeal has been specifically notified, the dispute should be adjudicated by that forum. The Court further held that non-availability of the tribunal at an earlier point did not dispense with the statutory condition attached to the appeal, and the Writ Court could not permit circumvention of the requirement of deposit under Section 112(8). In that view, instead of keeping the writ petition pending, the Court directed the petitioner to file appeal before the GSTAT within the notified timeline after making the requisite deposit, while leaving the merits of the first appellate order open. [Paras 4, 5, 6]

The writ petition was disposed of with liberty and direction to file appeal before the GSTAT within the notified period on compliance with the mandatory pre-deposit, without any opinion on the merits of the first appellate order.

Final Conclusion: The Court declined to retain the writ petition after the GST Appellate Tribunal became functional and the appeal-filing timeline was notified. The petitioner was directed to avail the statutory appellate remedy in accordance with Section 112, including compliance with the pre-deposit requirement.

Validity of Arrest - non-compliance with the mandatory requirements of furnishing the grounds of arrest in writing, serving them as an annexure to the arrest memo, and communicating them to the nominated relative with the prescribed identification details -Mechanical remand order - Maintainability of habeas corpus after remand.

Communication of grounds of arrest - Arrest memo compliance under GST - CBIC-DIN requirement - HELD THAT: - The Court found that the arrest memo did not mention any annexure containing the grounds of arrest, while the grounds of arrest were separately filed in the counter affidavit with an endorsement of receipt by the petitioner. The Court further held that, under the departmental circular referred to before it, every system-generated document was required to bear a separate CBIC-DIN, but the grounds of arrest carried no DIN and were not shown to have been annexed with the arrest memo. The arrest memo also did not mention the place of arrest and merely stated that the grounds of arrest had been explained, without recording that they had been furnished in writing as an annexure. These defects were treated as violations of the mandatory safeguards governing arrest. [Paras 16, 17, 19]

The arrest was held illegal and was quashed.

Mechanical remand order - Maintainability of habeas corpus after remand - HELD THAT: - On examining the remand order, the Court found that the Remand Magistrate had merely referred to the seriousness of the alleged economic offence and had not considered whether the grounds of arrest had in fact been served upon the petitioner. The Magistrate also proceeded on a premise regarding videography and recovery without the search memo disclosing what had actually been recovered. The Court held that the remand had been authorised in a casual manner, without application of mind to the legality of the arrest or compliance with the mandatory safeguards. On that finding, the Court held that the writ of habeas corpus was maintainable despite the passing of the remand order. [Paras 18, 19]

The remand order was held illegal and quashed, and the habeas corpus petition was held maintainable.

Final Conclusion: The Court held that the petitioner's arrest and subsequent remand were vitiated by non-compliance with mandatory arrest safeguards and by a mechanical remand order passed without application of mind. The writ petition was allowed, the arrest, detention and remand were quashed, and the petitioner was directed to be released, while leaving it open to the respondents to proceed afresh in accordance with law.

Provisional attachment of the petitioner's bank account - expiry of statutory period of one year under Section 83(2) - Cessation of attachment by operation of law -HELD THAT: - The Court held that, without entering into any other disputes between the parties, the impugned attachment had ceased to have effect by operation of law. Since the statutory period prescribed for subsistence of the provisional attachment had already expired, the attachment could no longer continue and the petitioner was entitled to operate the bank account. [Paras 3]

The impugned provisional attachment was declared to have lapsed, and the petitioner was held entitled to operate the bank account.

Final Conclusion: The petition was disposed of by declaring that the provisional attachment of the bank account had lapsed on expiry of the statutory period and, consequently, the petitioner was free to operate the account. All other contentions were expressly kept open.

Maintainability of writ petition despite alternate statutory remedy - Validity of the show cause notice and adjudication order - breach of Section 75(7) - Demand beyond show cause notice - claim of exemption under Notification No. 12/2017 and Section 11(1) - Failure to consider exemption claim -Violation of principles of natural justice.

Maintainability of writ petition despite alternate statutory remedy - Violation of principles of natural justice - HELD THAT: - The Court accepted the objection to alternate remedy only in light of the recognised exceptions stated by the Supreme Court in Godrej Sara Lee Ltd. Vs. The Excise and Taxation Officer-cum-Assessing Authority and Ors.[2023 (2) TMI 64 - SUPREME COURT], which in turn referred to Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai and Others [1998 (10) TMI 510 - SUPREME COURT]. Since the challenge disclosed breach of the statutory limitation on confirmation of demand and non-consideration of the petitioner's exemption plea, the case fell within the exceptions permitting writ jurisdiction. [Paras 9]

The petition was entertained despite the statutory appeal remedy.

Demand beyond show cause notice - Confirmation on grounds not specified in notice - HELD THAT: - The Court held that the governing provision requires that the tax, interest and penalty demanded in the order must not exceed the amount specified in the notice and that no demand can be confirmed on grounds other than those contained in the notice. Applying that principle, the Court found that the notice demanded a substantially lower amount, whereas the adjudication order imposed a much higher liability including tax, interest and penalty. The order was therefore contrary to the statutory restriction and unsustainable. [Paras 10, 11, 12]

The show cause notice and adjudication order were set aside on the ground that the final demand travelled beyond the notice.

Failure to consider exemption claim - Non-application of mind in adjudication - HELD THAT: - The Court found that the petitioner had specifically raised in reply that the services rendered to the State Government, Government undertakings and corporations were exempt under the relied-on notification and under the exemption provision invoked. That contention was not considered while passing the adjudication order. The order was therefore unsustainable on this independent ground as well, warranting remand for fresh consideration on merits after hearing the petitioner. [Paras 13, 15]

The matter was remanded to the adjudicating authority for fresh decision after giving opportunity of hearing.

Final Conclusion: The High Court held the writ petition to be maintainable, quashed the show cause notice and adjudication order for travelling beyond the notice and for failure to consider the exemption plea, and remanded the matter for fresh adjudication on merits after hearing the petitioner.

Availability of statutory appellate remedy after constitution of GST Appellate Tribunal - Transitional protection against limitation for filing appeal - Compliance with pre-deposit condition -HELD THAT: - The Court held that the writ petition had been entertained only because the GST Appellate Tribunal was not constituted. Once the Tribunal was constituted, its Members appointed, and procedural rules notified, the statutory appellate mechanism under section 112 became available and there was no useful purpose in continuing the writ proceedings. The Court, therefore, declined to examine the validity of the impugned orders on merits and permitted the petitioner to file an appeal before the Tribunal up to the specified date, directed that no objection as to limitation be raised if the appeal was filed within that period, and further ordered that any amount deposited pursuant to the interim order of the High Court would be treated as compliance with the appellate pre-deposit requirement under section 112(8), subject to production of the interim order and proof of deposit. [Paras 5, 6, 7]

The petitioner was permitted to avail the statutory appeal before the GST Appellate Tribunal within the time granted; limitation objections were barred for such filing, and the amount deposited under the High Court's interim order was directed to be treated as compliance with the statutory pre-deposit requirement.

Final Conclusion: The writ petition was disposed of without examining the merits, in view of the constitution and operationalisation of the GST Appellate Tribunal. The petitioner was relegated to the statutory appellate remedy with protection as to limitation and with adjustment of the High Court-directed deposit towards the required pre-deposit.

Levy of tax on the service element in a CIF import transaction through Notifications Nos. 8/2017 and 10/2017 - Reverse charge mechanism -Composite supply- Show cause notice founded on invalid levy - HELD THAT: - The Court noted that the challenge was to the reverse charge levy created by the impugned notifications and that the identical legal issue had already been concluded by the Supreme Court in Mohith Minerals[2022 (5) TMI 968 - SUPREME COURT]. Relying on the portions extracted from that decision, the Court held that a tax on the supply of service, when that element already stands included in the tax on the composite supply of imported goods, is impermissible, and that a separate levy on the service aspect would violate the statutory scheme governing composite supply. Since the show cause notice was founded on that very levy, it could not be sustained. [Paras 5, 6]

The show cause notice was set aside and the proceedings initiated thereunder were held to come to an end.

Final Conclusion: Following the Supreme Court decision in Mohith Minerals, the Court held that the impugned reverse charge levy on the service component of CIF imports was unsustainable. The show cause notice based on that levy was therefore set aside and the writ petition was disposed of.

Clubbing of multiple financial years - Composite show cause notice for multiple tax periods - Jurisdictional defect - HELD THAT: - The Court found from the show cause notice itself that it clubbed multiple tax periods in one proceeding. Following the law already laid down by this Court in M/s. Pramur Homes and Shelters v. The Union of India and Others [2025 (12) TMI 1188 - KARNATAKA HIGH COURT], as noticed through the subsequent order in M/s. Lakshmi Venkateshwara Traders MS Scrap v. The Deputy Commissioner of Central Tax and Another [2025 (12) TMI 1790 - KARNATAKA HIGH COURT], such consolidation of multiple tax periods or financial years in a single notice under Section 74 is impermissible. Since the foundational show cause notice was illegal, the Order-in-Original founded upon that notice could not stand. [Paras 6, 7, 8]

The show cause notice and the consequential Order-in-Original were set aside, with liberty reserved to the respondents to initiate fresh proceedings in accordance with law, and all contentions were kept open.

Final Conclusion: The petition was allowed on the ground that the impugned show cause notice impermissibly combined multiple tax periods in a single proceeding. Consequently, the Order-in-Original and the show cause notice were set aside, with liberty to the respondents to proceed afresh in accordance with law.

Res judicata in anti-profiteering proceedings- Abuse of Process - Maintainability of fresh investigation on same project and same period - Finality of prior adjudication under Section 171 - HELD THAT: - The DGAP had already conducted a detailed investigation against the Respondent for the project “Migsun Wynn” based on complaints filed by other homebuyers. The DGAP, vide its report dated 28.01.2021, quantified the profiteered amount at Rs. 6,87,58,685/- (Rupees Six Crore Eighty-Seven Lakh Fifty-Eight Thousand Six Hundred and Eighty-Five only), inclusive of GST. Further, this amount is inclusive of the profiteered amount attributable to the present Complainant, Shri Navnit Kumar, quantified at Rs. 36,488/-.

The principles of res judicata are well established. Once a matter has been fully and finally adjudicated upon by a competent authority and affirmed by a superior court, the same cannot be reopened based on a fresh complaint raising the same cause of action against the same Respondent for the same project and same period. To permit such a course would be contrary to the settled canons of jurisprudence and would lead to multiple parallel proceedings on the same subject matter, resulting in legal uncertainty and abuse of process.

The Tribunal found that profiteering in respect of the Respondent's project "Migsun Wynn" for the period from 01.07.2017 to 31.12.2019 had already been the subject of a detailed investigation by the DGAP, followed by a final adjudication by the erstwhile NAA, and that such determination had been affirmed by the Delhi High Court. The profiteered amount attributable to the present complainant was already included in the earlier quantified amount. Applying the principle of res judicata, the Tribunal held that the same cause of action against the same Respondent for the same project and period could not be reopened through a fresh complaint, as that would result in multiple proceedings on the same subject matter and amount to abuse of process. The subsequent withdrawal of the complaint and the settlement placed on record further showed that no further action was called for on that complaint. [Paras 14, 15, 16, 17, 18]

The proceedings were held to be not maintainable, no fresh investigation was required, and the DGAP was directed to take no further action on the complaint.

Final Conclusion: The Tribunal held that profiteering in respect of the project for the relevant period had already attained finality in earlier proceedings and could not be reopened on a fresh complaint by another homebuyer. The complaint having also been withdrawn, the proceedings were dropped as not maintainable.

TCS u/s 206C - compounding fees received from illegal miners/transporters of minerals - Scope of Mines and Minerals (Development and Regulation) Act, 1957/ ‘the MMDR Act’ - offenders who do illegal mining or transportation/storage without having lease or license or have not entered into the contract for transfer of right in Mines or Quarry and from whom Compounding Fine is collected as per provisions under Rule 71(5) of the Chhattisgarh Minor Mineral Rules, 2015 - HELD THAT:-

HELD THAT:- We are not inclined to interfere with the impugned judgment and order of the High Court [2025 (6) TMI 2041 - CHHATTISGARH HIGH COURT] hence, the special leave petition is dismissed.

Deduction u/s 80IB(10) - Scope and ambit of the meaning of the expression 'undertaking' - carry forwarded losses - pre-conditions and requirements of 80IB (10) - business of development of residential apartments, real estate and civil contract works - recitals of joint venture development agreement

As decided by HC [2025 (9) TMI 1510 - MADRAS HIGH COURT] although the Court held that a developer need not be the landowner to claim Section 80IB(10) relief, it set aside the Tribunal's order and restored the Assessing Officer and CIT(A) decisions because (i) the joint venture agreement dated 21.12.2005 was not valid as between the landowners and the partnership (the partnership did not exist on that date), and (ii) the assessee failed to produce required books, bills and vouchers to substantiate that it had undertaken and invested in the housing project; consequently the assessee is not eligible for deduction under Section 80IB(10) and the Revenue's appeal is allowed.

HELD THAT:- No good ground to interfere with the impugned judgment in exercise of our jurisdiction under Article 136 of the Constitution of India. Accordingly, the special leave petition stands dismissed.

Addition under section 68 - commodity transactions involving client code modification - Taxability of profit element embedded in commodity trades - Penalty under section 271(1)(c) consequential to quantum addition

Commodity transactions through broker on NSEL platform - Client code modification - Profit element embedded in transactions - Addition in respect of commodity trading transactions executed through the broker on the NSEL platform, alleged to involve client code modification - HELD THAT: - The Tribunal found that an identical controversy concerning the same assessee, the same assessment year, the same broker and the same allegation of client code modification had already been decided in the earlier reassessment round. Following that order, it held that mere client code modification by the broker did not justify treating the entire transaction value as unexplained cash credit when the assessee had produced contract notes, broker ledger accounts and bank statements showing the movement of funds through banking channels, and there was no distinguishing material brought by the Revenue. Since the factual findings of the first appellate authority regarding the purchase value, sale value and embedded profit were not controverted, only the profit component was liable to be brought to tax. The Tribunal also noticed that even that profit had already formed part of the trading profit disclosed in the return, and therefore upheld the restriction of the addition to the profit element alone. [Paras 20, 21, 22, 23, 24]

The restriction of the section 68 addition to the embedded profit element was upheld and the Revenue's challenge to deletion of the balance addition was rejected.

Penalty for concealment or furnishing inaccurate particulars - Penalty consequential to quantum relief - HELD THAT: - The Tribunal held that, since the Department's appeal against the relief granted in the quantum proceedings had already been dismissed, no infirmity survived in the order deleting the penalty. The penalty issue was thus treated as consequential to the outcome of the quantum addition. [Paras 27]

The relief granted in the penalty proceedings was affirmed and the Revenue's penalty appeal was dismissed.

Final Conclusion: Both departmental appeals were dismissed. The Tribunal upheld the first appellate order confining the section 68 addition arising from the impugned commodity transactions to the profit element alone and, that quantum relief having been sustained, also affirmed deletion of the related penalty.

Rectification of debatable issue u/s 154 - Survey disclosure as business income or unexplained money - Recharacterisation of survey disclosure - AO invoked rectification to change income disclosed during survey and accepted in scrutiny assessment as business income into unexplained income under section 69A taxable under section 115BBE - HELD THAT: - The Tribunal found that, during survey, the partner had stated that the impugned amount represented on-money receipts arising from the assessee's business activity, and the amount was thereafter credited in the regular books and offered in the return as business income. That treatment had already been accepted in the original assessment under section 143(3).

The subsequent action under section 154 sought to alter the very character of that income from business receipts to unexplained money, which required reappraisal of facts and fresh determination on the applicability of section 69A.

Following the Coordinate Bench decision in M/s. 9th Street Architects [2025 (10) TMI 1009 - ITAT AHMEDABAD] the Tribunal held that such recharacterisation involved a debatable issue and therefore lay outside the limited scope of rectification, which is confined to an obvious and patent mistake apparent from the record. [Paras 15, 16, 18, 19]

The rectification order was held to be unsustainable, since the issue was debatable and beyond the jurisdiction u/s 154.

Final Conclusion: The Tribunal allowed the appeal and held that the impugned rectification was beyond the scope of section 154. The income disclosed during survey, having been accepted in scrutiny assessment as business income, could not be recharacterised in rectification proceedings as unexplained income taxable under section 115BBE.

Rebate u/s 87A on short-term capital gains u/s 111A - Meaning of total income for rebate eligibility - Prospective operation of subsequent restrictive amendment - Total income under the new tax regime - Express statutory restriction -

HELD THAT: - The Tribunal held that section 87A, as applicable for the year under consideration, grants rebate with reference to the assessee's total income, and total income includes capital gains. Neither section 87A nor section 111A contained any express prohibition against allowing the rebate on tax payable on short-term capital gains taxable at special rates under section 111A.

Tribunal further reasoned that Parliament had specifically enacted a restriction in section 112A(6), but had not enacted a similar restriction for section 111A; such omission could not be supplied by interpretation. It concurred with the view taken in Jayshreeben Jayantibhai Palsana vs. Income-tax Officer [2025 (8) TMI 842 - ITAT AHMEDABAD]and held that the later amendment introduced by the Finance Act, 2025 was prospective and indicated that no such restriction existed earlier. On that basis, the denial of rebate while processing the return under section 143(1), and its affirmation in appeal, were held unsustainable. [Paras 10]

The assessee was held entitled to the rebate claimed under section 87A, and the Assessing Officer/CPC was directed to grant the rebate and delete the consequential demand.

Final Conclusion: The Tribunal allowed the appeal and held that, in the absence of any express statutory bar for the year under consideration, rebate under section 87A was available even against tax on short-term capital gains taxable under section 111A, where the total income remained within the prescribed limit under the new regime.

Rebate under section 87A on long-term capital gains taxable under section 112 - Meaning of total income for rebate eligibility under the new tax regime - Prospective operation of amendment restricting rebate against special rate income

Entitlement of a resident individual, opting for the new regime, to rebate under section 87A against tax on long-term capital gains taxable under section 112 where the total income does not exceed the prescribed threshold - HELD THAT: - The Tribunal held that section 87A, as applicable for the year under consideration, grants rebate with reference to the assessee's total income, and once long-term capital gains taxable under section 112 form part of that total income, they cannot be excluded for rebate purposes unless the statute expressly so provides.

It noted that Parliament had specifically denied rebate in section 112A(6), but no such exclusion existed either in section 112 or section 87A for the relevant year; hence, such a restriction could not be introduced by implication.

Tribunal also relied on the subsequent amendment made by the Finance Act, 2025 to hold that the restriction on rebate against special rate income was prospective and substantive, and therefore could not be retrospectively applied to deny the assessee's claim. [Paras 9]

The assessee was held entitled to rebate under section 87A in respect of tax payable on long-term capital gains taxable under section 112, and the consequential demand was directed to be deleted.

Final Conclusion: The Tribunal allowed the appeal and held that, in the absence of an express statutory bar for the relevant year, rebate under section 87A could not be denied merely because part of the total income consisted of long-term capital gains taxable under section 112. The order denying the rebate was set aside and the consequential demand was directed to be deleted.

Incriminating material in unabated assessment under section 153A - Scope of assessment in abated and search-year proceedings - Correct Head of income for multiplex lease receipts - Commercial exploitation of business asset

Incriminating material qua the assessee - Unabated assessment under section 153A - Recharacterization of disclosed rental receipts - For the unabated assessment years, additions based on the loose sheet showing cash and bank payments and on the sub-lease agreement sustained - HELD THAT: - The Tribunal held that, in a completed assessment, section 153A permits interference only on the basis of material unearthed in search having a live nexus with undisclosed income. The loose sheet reflecting payments to Shri K. Manju could not be treated as incriminating qua the assessee, since the same document also recorded cheque payments accepted by the Department as genuine, the recipient was not disputed, and the surrounding facts indicated that the transactions related to group concerns rather than to any unexplained personal dealing of the assessee. Likewise, the copy of the sub-lease agreement did not disclose any unaccounted receipt or concealed asset; the rental receipts were already recorded in the regular books and consistently offered to tax, though under the head business income. A mere change in legal characterization from business income to income from house property does not convert an already disclosed transaction into incriminating material. On that basis, the addition made on account of the cash payment and the additions made by changing the head of income for the unabated years were held to be unsustainable. [Paras 15, 18]

The additions for A.Ys. 2013-14 to 2016-17 founded on the seized loose sheet and on the sub-lease agreement were deleted on legal grounds.

Abated assessment - Search-year assessment - Requirement of incriminating material - For A.Y. 2017-18, being an abated year, and for A.Y. 2018-19, being the search year assessed under section 143(3), the assessee challenged the additions solely on the ground that no incriminating material was found during search - HELD THAT: - The Tribunal found that, on the date of search, no return had been filed for A.Y. 2017-18 and the assessment for that year had not attained finality; it therefore fell in the category of an abated assessment. In such a case, the Assessing Officer has jurisdiction to make a fresh assessment of total income and that power is not confined to material seized in the course of search. For A.Y. 2018-19, the Tribunal treated the year as the search year assessed under section 143(3), to which the restriction applicable to completed or unabated section 153A assessments does not apply. The legal objection founded solely on absence of incriminating material was therefore rejected for both these years. [Paras 24, 38]

The jurisdictional plea based on absence of incriminating material failed for A.Ys. 2017-18 and 2018-19.

Head of income for multiplex lease receipts - Commercial exploitation of business asset - Consistency in treatment of disclosed receipts - lease rental receipts from the multiplex were assessable as profits and gains of business or profession or income from house property - HELD THAT: - On merits, the Tribunal held that the lower authorities had not correctly appreciated the true nature of the activity. The land had been taken on long-term lease for a commercial objective, the multiplex was a specialized commercial asset, and after surrender of the earlier sub-lease the assessee continued to derive receipts by exploiting that asset through a structured arrangement. Only identified portions of the multiplex were let out, while the overall character of the property remained that of an integrated commercial facility. Fixed and periodic receipts were not decisive; what mattered was the nature of the asset and the manner of exploitation, which showed a business arrangement rather than passive enjoyment of property.

The decision in Bhoopalam Commercial Complex & Industries (P.) Ltd. [2003 (1) TMI 52 - KARNATAKA HIGH COURT] was held distinguishable because the present case involved a chain of commercial arrangements concerning a multiplex on leasehold land and not a simple case of constructed property being let out in the assessee's own right. The Tribunal also found merit in the assessee's plea of consistency, since the receipts had been consistently disclosed as business income and no new material showed that the declared nature of the activity was incorrect. [Paras 32, 40]

The lease receipts from the multiplex for A.Ys. 2017-18 and 2018-19 were directed to be assessed as business income.

Final Conclusion: The Tribunal partly allowed all six appeals. For A.Ys. 2013-14 to 2016-17, the impugned additions were deleted because the seized material was not incriminating for completed assessments, while for A.Ys. 2017-18 and 2018-19 the legal objection based on absence of incriminating material was rejected but the multiplex lease receipts were held assessable as business income.

Reassessment after scrutiny - Change of opinion - Weighted deduction for in-house research and development - Multiple deduction under research and development expenditure

Reassessment after scrutiny - Change of opinion - Incorrect factual assumption in reasons recorded - Validity of reopening of assessment on the basis of the assessee's claim of weighted deduction for research and development expenditure - HELD THAT: - The Tribunal held that the reopening was founded entirely on material already available in the original scrutiny assessment and no new information or tangible material had come into the Assessing Officer's possession thereafter. It found that the claim under section 35(2AB) had been examined in the original assessment on the basis of the forms, approvals and details furnished by the assessee, and the deduction had then been allowed after verification. The recorded reasons further proceeded on a factually incorrect premise that separate research and development accounts had not been maintained, whereas the record showed that such accounts had been maintained and audited. Reopening after expiry of four years, on the same material and on an incorrect factual basis, was therefore only a case of change of opinion and the assumption of jurisdiction under section 147 was bad in law. [Paras 5, 6]

The reassessment notice and assumption of jurisdiction were held invalid, and the challenge to reopening was allowed.

Weighted deduction for in-house research and development - Multiple deduction under research and development expenditure - Depreciation included in research and development expenditure - HELD THAT: - On merits also, the Tribunal found no basis for the disallowance. It recorded that the revenue expenditure on research and development included the depreciation figure in dispute, and that this depreciation already formed part of the total book depreciation which had been added back by the assessee in the computation of income. Consequently, there was no separate or multiple claim requiring a further disallowance. The Tribunal also noted that the Assessing Officer had only added back the depreciation amount in reassessment and had not disallowed the weighted deduction itself, while the appellate authority had travelled beyond the reassessment order in upholding denial of weighted deduction without any enhancement notice. [Paras 5, 6]

The disallowance on merits was deleted and the assessee's grounds against the addition were allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal, holding that the reassessment was invalid as it was based on the same material examined in the original scrutiny and amounted to a change of opinion on an incorrect factual premise. It further held that, even on merits, no multiple deduction had been claimed and the impugned disallowance could not survive.

Taxability of share premium on preference shares - addition made u/s 56(2)(viib) - share premium received on issuance of compulsorily convertible preference shares and redeemable preference shares - Assessee's option to adopt DCF method - DCF versus NAV method -

HELD THAT: - The Tribunal held that no equity shares had been issued by the assessee. In the case of the compulsorily convertible preference shares, each share was convertible into equity shares only after the stipulated period, and on the terms of issue no premium was in fact charged for their issuance; consequently, the provision invoked for taxing excess premium could not, by itself, be applied to those shares.

As regards the redeemable preference shares, their valuation was required to be determined under the rule governing unquoted shares other than equity shares, namely, the price they would fetch if sold in the open market, supported by a valuation report from a merchant banker or chartered accountant.

The assessee had obtained such valuation using the DCF method, and the Assessing Officer could not compel adoption of the NAV method in its place. The Tribunal further held that mere variance between projected figures and actual results could not invalidate the valuation, particularly when the valuation report, feasibility report and project details had been furnished. Since the redeemable preference shares issued at Rs. 1000 each were subsequently transferred at the same price, that price itself supported the open market value adopted by the assessee. [Paras 6, 7, 8]

The relief granted by the Commissioner (Appeals) was upheld and the addition made in respect of the share premium was rightly deleted.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the deletion of the addition made on share premium. It held that the case concerned preference shares, not equity shares, and that the assessee's valuation in accordance with the rules applicable to unquoted non-equity shares could not be rejected by forcing adoption of another method.

Unexplained cash credit - Applicability of section 68 to loan advances - Third-party statement and cross-examination - Principles of natural justice - effect of Retracted statement

HELD THAT: - The Tribunal held that section 68 can be invoked only where a sum is found credited in the books of the assessee, whereas the amount in question represented a loan advanced by the assessee and was therefore a debit in its books. It further found that the assessee had produced confirmation, bank statements, financial statements of the borrower, evidence of repayment through banking channels, and proof that interest received on the loan had been offered to tax.

Since the AO neither rebutted this material nor conducted any independent inquiry, and had relied only on investigation-wing information and a retracted third-party statement not furnished for rebuttal or cross-examination, the addition was held to be unsustainable. [Paras 11, 12, 13, 14, 15]

The deletion of the addition by the Commissioner (Appeals) was upheld and the Revenue's challenge failed.

Third-party statement and cross-examination - Off-market share sale - Addition based on suspicion - Addition under section 68 in respect of consideration received on sale of shares - HELD THAT: - The Tribunal found that the assessee had produced documentary evidence showing that the purchaser was a registered corporate entity, that payment was received through banking channels, and that delivery of shares was effected through transferred physical share certificates. The addition had been made solely on the basis of the statement of a third party, but that statement was not supplied to the assessee and no opportunity of cross-examination was granted. The Tribunal held that such reliance offended natural justice, and further noted that no material had been brought on record to show receipt of cash by the assessee or any flow-back of funds. Since the transaction was already disclosed in the books and return, the addition resting merely on suspicion could not stand. [Paras 22, 23, 24, 25, 26]

The addition was directed to be deleted and the assessee's appeal on this issue was allowed.

Final Conclusion: The Tribunal upheld the deletion of the addition relating to the loan advanced by the assessee, holding that section 68 was inapplicable to an amount debited as an advance and that the Revenue had failed to rebut the assessee's evidence. It also deleted the addition relating to the share-sale transaction, holding that a third-party statement could not be relied upon without furnishing it and granting cross-examination; accordingly, the Revenue's appeal was dismissed and the assessee's appeal was allowed.

Deduction on interest from investments with co-operative bank - Deduction for credit co-operative society u/s 80P

Deduction on interest from investments with co-operative bank - Co-operative bank as species of co-operative society - claim of Interest income earned by the credit co-operative society from fixed deposits placed with Pune District Central Co-op. Bank Ltd. eligible for deduction u/s 80P(2)(d) - HELD THAT: - The Tribunal followed the co-ordinate Bench decision in Shri Bhairavnath Multisate Cooperative Credit Society [2024 (9) TMI 342 - ITAT PUNE] which had held that where a co-operative society earns interest from investments made with a co-operative bank or co-operative society, the co-operative bank is to be treated as a species of co-operative society and the interest so earned qualifies for deduction under section 80P(2)(d).

Applying that settled position, the Tribunal held that the disallowance sustained by the appellate authority in respect of interest from deposits with Pune District Central Co-op. Bank Ltd. was not justified. [Paras 7, 8]

The disallowance of deduction on the interest income from the co-operative bank was set aside and the Assessing Officer was directed to allow the claim under section 80P(2)(d).

Deduction for credit co-operative society under section 80P - Claim of deduction in return of income - The Revenue's challenge to the allowance of deduction under section 80P(2)(a)(i) and to the appellate order passed in proceedings arising from section 154 - HELD THAT: - The Tribunal held that it has consistently been accepted in co-ordinate Bench decisions that a primary credit co-operative society is entitled to deduction under section 80P(2)(a)(i) in respect of income attributable to its business. It further found that the Revenue's premise that the assessee had not claimed deduction under section 80P in the return was factually incorrect, since the assessee had claimed deduction under section 80P(2)(a)(i) on its total income and the appellate authority had merely allowed the business profit component while separately disallowing the interest component. On that basis, both grounds raised by the Revenue were dismissed. [Paras 11, 12]

The Revenue's appeal was dismissed and the allowance of deduction under section 80P(2)(a)(i) as granted by the appellate authority was sustained.

Final Conclusion: The assessee's appeal was allowed and the Revenue's cross-appeal was dismissed. The Tribunal held that the interest earned from deposits with the co-operative bank was deductible under section 80P(2)(d), while the allowance of deduction under section 80P(2)(a)(i) in respect of the assessee's business income remained undisturbed.

Penalty u/s 271AAC(1) - unexplained money addition - Effect of deletion of quantum addition on penalty - Penalty imposed on the addition made in respect of bank deposits - quantum appeal had been decided in favour of the assessee - HELD THAT: - The Tribunal held that the penalty had been imposed and confirmed on the footing that the bank deposits were liable to be treated under section 69A. Since, in the quantum proceedings, the Tribunal had already decided the matter in favour of the assessee and held that section 69A was not applicable because the source stood explained, the very basis of the penalty ceased to exist. Once the foundational addition did not survive, the penalty under section 271AAC(1) had no independent legs to stand on. [Paras 7]

The penalty under section 271AAC(1) was deleted.

Final Conclusion: The Tribunal allowed the appeal and deleted the penalty. It held that, the quantum addition having already been decided in favour of the assessee and section 69A having been found inapplicable, the penalty founded on that addition could not be sustained.

Penalty for under-reporting of income - Misreporting of income u/s 270A - Bona fide explanation for omission to disclose capital gains

Levy of penalty for non-disclosure of capital gains in the original return, where the assessee disclosed the gain in the return filed in response to notice under section 148 and the assessment was completed on that returned income - HELD THAT: - The Tribunal held that for applying the concept of under-reporting of income in the facts of the case, the relevant comparison was between the income returned by the assessee in response to notice under section 148 and the income assessed by the Assessing Officer. Since the assessment accepted that returned income without any variation, there was no under-reporting attracting penalty.

Tribunal further held that the assessee's explanation that he was under a bona fide belief that sale of dry agricultural land coupled with purchase of another agricultural land did not attract tax was a bona fide explanation, and once such explanation was offered, the income covered by it could not be brought within the mischief of penalty under section 270A. On that reasoning, the authorities below were not justified in treating the case as one of misreporting or suppression of facts. [Paras 10]

Penalty levied under section 270A was directed to be deleted.

Final Conclusion: The Tribunal allowed the appeal and held that penalty under section 270A could not be sustained where the income disclosed in the return filed in response to notice under section 148 was accepted in assessment and the assessee's explanation for the earlier omission was bona fide.

Foreign tax credit - Delay in filing Form 67 - Form 67 as directory requirement - DTAA overriding effect - procedural requirement v/s mandatory condition -

HELD THAT: - The Tribunal followed its earlier coordinate Bench decision on the same controversy in NIRAVSINH KISHORESINH GEHLOT [2024 (2) TMI 1490 - ITAT AHMEDABAD] and held that delay in filing Form 67 is a procedural defect and not a mandatory bar to the claim of foreign tax credit. It accepted the principle that Rule 128(9) does not itself provide for disallowance of the credit for delayed filing of Form 67, and that the substantive treaty entitlement cannot be defeated by a procedural requirement. Proceeding on the same legal position, the Tribunal found no reason to take a different view in the present case and allowed the assessee's claim. [Paras 5, 6]

The denial of relief under section 90 on the ground of delayed filing of Form 67 was not sustainable, and the appeal was allowed.

Final Conclusion: Following the coordinate Bench view already holding that delayed filing of Form 67 is only a procedural lapse and does not defeat the substantive treaty claim, the Tribunal allowed the assessee's appeal and granted relief on the foreign tax credit issue.

Defective penalty notice - Non-striking off of irrelevant limb in penalty proceedings - Vagueness in notice u/s 274 read with section 271(1)(c) - Penalty for concealment of income or furnishing inaccurate particulars where the statutory notice did not specify the exact limb and the irrelevant portion was not struck off - HELD THAT: - The Tribunal found, on verification of the notice issued under section 274 read with section 271(1)(c), that it was a stereotyped notice in which the Assessing Officer had neither struck off the inapplicable limb nor indicated whether the penalty was proposed for concealment of particulars of income or for furnishing inaccurate particulars.

Applying the ratio of Mr. Mohd. Farhan A. Shaikh [2021 (3) TMI 608 - BOMBAY HIGH COURT (LB)] Tribunal held that the assessee must be informed of the ground of penalty only through a precise statutory notice and that an omnibus notice is vitiated by vagueness. Since the penalty proceedings were initiated on such defective notice, the penalty order and its affirmation in appeal were held unsustainable. [Paras 6, 8, 9, 10]

The penalty order and the appellate order confirming it were quashed, and the assessee's appeal was allowed.

Final Conclusion: The Tribunal held that penalty proceedings founded on a vague and omnibus notice under section 274 read with section 271(1)(c), without striking off the irrelevant limb, are invalid. On that basis, the penalty and the confirming appellate order were quashed and the assessee's appeal was allowed.

Maintainability of customs appeal against confiscation- Reasonable belief under reverse burden provisions - Evidentiary value of retracted statements in deemed judicial proceedings - Proof of lawful provenance of high-purity gold - High Court in [2026 (4) TMI 85 - CALCUTTA HIGH COURT] allowed the Revenue's appeals, held the Tribunal's order to be perverse, and restored the order of absolute confiscation with consequential penalties. It ruled that the seizure was supported by reasonable belief, the belated retraction did not nullify the Section 108 statements, and the respondents' documentary trail failed to establish lawful provenance of the high-purity bullion. - HELD THAT:- The Special Leave Petition was dismissed and the pending application(s), if any, stood disposed of.

Interpretation of "entertain" in appellate pre-deposit provisions - Mandatory pre-deposit under customs appeals - Writ jurisdiction to dispense with statutory pre-deposit in exceptional cases

Registration of appeal without prior pre-deposit - Defective appeal under pre-deposit condition - scope of Section 129E of the Customs Act for an appeal to be entertained - HELD THAT: - The Court held that the expression "entertain" does not mean mere filing, receipt or registration of an appeal, but the stage when the appellate authority applies its judicial mind to consider the matter.

Relying on the consistent line of decisions Haji Rahim Bux and others Vs. Haji Sanaullah and sons, Pechbagh, Kanpur [1962 (12) TMI 90 - ALLAHABAD HIGH COURT], Dhoom Chand Jain vs. Chaman Lal Gupta and another [1962 (2) TMI 120 - ALLAHABAD HIGH COURT] as affirmed by the Supreme Court in Lakshmiratan Engineering Works [1967 (9) TMI 116 - SUPREME COURT], it held that filing or registration is only a ministerial act, whereas the question whether the appeal may be entertained arises on the quasi-judicial side when the matter is taken up for consideration. Therefore, an appeal may be presented and registered even without proof of the statutory deposit, as a defective proceeding, and the objection regarding pre-deposit has to be considered thereafter by the Commissioner (Appeals) at the stage of entertainment. [Paras 20, 21, 22, 23, 24]

The petitioners' appeals were directed to be accepted, numbered and registered without insisting on pre-deposit at the filing stage, leaving the question of entertainment to be decided subsequently by the Commissioner (Appeals).

Article 226 jurisdiction - Waiver of statutory pre-deposit - HELD THAT: - The Court rejected the revenue's contention that no power exists to grant waiver of the statutory pre-deposit. Referring to the coordinate Bench decision in M/s Ganesh Yadav [2015 (7) TMI 304 - ALLAHABAD HIGH COURT], which followed Shyam Kishore [1992 (9) TMI 354 - SUPREME COURT], it held that the High Court's extraordinary jurisdiction is not excluded and may, in an appropriate case, be invoked to dispense with the requirement. However, such power was not exercised in the present matters because no appeal had yet been registered, and the stage for considering waiver had therefore not arisen. [Paras 11, 12, 13]

The High Court held that its power to waive pre-deposit in an appropriate case survives under Article 226, but declined to consider waiver at this stage.

Final Conclusion: The Court held that Section 129E bars only the entertainment of an appeal, not its filing or registration. The appeals were directed to be accepted and registered as defective proceedings without insistence on prior pre-deposit at that stage, while leaving open consideration of waiver under Article 226 in an appropriate case.

Time-limit for levy of anti-dumping duty - Infructuous challenge to final findings- HELD THAT: - The Court held that Rule 18 permits the Central Government to impose anti-dumping duty only within three months from the date of publication of the final findings under Rule 17. Since it was admitted that no notification had been issued within that period, and the three months from the final findings had already expired, the statutory window for acting on those findings had closed. On that basis, the Court concluded that the Central Government could no longer act upon the final findings, rendering the writ petition infructuous. [Paras 5, 6]

The petition was disposed of as infructuous because no notification under Rule 18 could thereafter be issued on the impugned final findings.

Final Conclusion: The Court held that, the statutory period of three months under Rule 18 having expired without issuance of any notification, the final findings could no longer be acted upon by the Central Government. The writ petition was therefore disposed of as infructuous.

Rejection of the declared transaction value of the imported second-hand machinery - Expert opinion - Enhancement on the basis of a local Chartered Engineer's certificate - Primacy of Contemporaneous Evidence - Failure to issue speaking order - HELD THAT: - The Tribunal found from the record that the importer had paid duty under protest, requested a speaking order, and had placed on record the import documents, including the load port Chartered Engineer's certificate, yet no reasoned order was issued at the assessment stage. It further held that there was no allegation of relationship between buyer and seller, no case of any circumstance disabling acceptance of the transaction value, and no evidence of any extra remittance over and above the declared price. The local Chartered Engineer's certificate merely stated a reassessed value on the basis of local market enquiries without disclosing the details of such enquiry, the technical basis for valuation, or any operational testing of the machines, whereas the load port certificate contained assessment details and stated that the machines were in working condition. In these circumstances, the customs authorities had only substituted one expert opinion for another without any independent and reasoned basis, and had not challenged the genuineness of the load port certificate. The Tribunal also noted that the prevailing Board circular treated a local Chartered Engineer's certificate as acceptable only in the absence of a proper load port certificate, thereby indicating the primacy of the latter. The rejection of the load port certificate, the consequent rejection of the declared transaction value, and the enhancement of value were therefore held untenable. [Paras 10, 11, 12, 13, 14]

The declared value based on the load port Chartered Engineer's certificate was held liable to be accepted for assessment under Section 14, there being no misdeclaration, and the impugned appellate order was set aside.

Final Conclusion: The Tribunal held that the declared transaction value of the imported used machinery, supported by the load port Chartered Engineer's certificate, could not be rejected merely by adopting a local certificate lacking disclosed basis or technical support. The enhancement of value and the appellate order upholding it were set aside, and the appeal was allowed with consequential relief.

Penalty for abetment of overvaluation of export goods - Customs Broker's knowledge of overvaluation - Non-cooperation during investigation - Penalty on the Customs Broker under section 114(iii) for alleged abetment of overvaluation of export goods sustainability in the absence of any material showing involvement in, or knowledge of, the overvaluation

HELD THAT: - The Tribunal held that penalty under section 114 can arise only from acts or omissions that render export goods liable to confiscation, and, in the present case, the relevant question was whether the Customs Broker had knowledge of the overvaluation or had abetted it. On the record, neither the investigation nor the orders of the authorities disclosed any material showing that the appellant was involved in fixing or inflating the export value, or that he knew the goods were overvalued.

Tribunal further observed that price is settled between the exporter and the overseas buyer, while any scrutiny or re-determination of value falls within the domain of customs authorities, not the Customs Broker, who has no authority to decide, question or re-determine such value, or even to open and examine export goods. The earlier order in the appellant's CBLR proceedings also recorded absence of material to show knowledge of overvaluation. Mere non-cooperation during investigation or failure to respond to summons could not justify penalty under section 114(iii), since such conduct may attract action, if at all, under other provisions. [Paras 9, 10, 11, 13]

The penalty imposed on the appellant under section 114(iii) was set aside and the appeal was allowed with consequential relief.

Final Conclusion: The Tribunal held that, absent any evidence that the Customs Broker knew of or abetted the overvaluation of the export goods, penalty under section 114(iii) could not be sustained. Non-cooperation during investigation was held insufficient to support such penalty, and the appeal was accordingly allowed.

Penalty under Section 112(a) and 112(b) of the Customs Act - improper importation- Involvement in clandestine removal and smuggling through the 5 live consignments and the earlier 26 consignments -Untested statements under Section 138B - Burden of Proof -Abetment and conscious involvement -Cogent corroborative evidence - HELD THAT: - The Tribunal held that the appellant was sought to be implicated principally on the basis of the statement of Shri Raghav Jha and the allegation that a bag belonging to a co-noticee had been recovered from the premises of M/s. Shabana Travels and had earlier been kept with the appellant. The adjudicating authority itself had recorded that Shri Raghav Jha's statement would not be relied upon, since he had evaded cross-examination despite notice, and therefore that discarded statement could not furnish the basis for penal action. The record produced by the appellant further showed that no such bag was reflected in the seizure list, and even the inspected documents disclosed absence of any Panchanama relating to the alleged search and recovery. The Tribunal found that, apart from these allegations, no independent material connected the appellant with the alleged smuggling activity, and that the Revenue had failed to comply with the statutory requirement under Section 138B for use of such statement.

It was also found that the appellant had never been posted at ACC, Kolkata and no role in import clearance or handling of the consignments was established. On the statutory requirements of Sections 112(a) and 112(b), the Tribunal held that penalty requires proof of an act or omission rendering goods liable to confiscation, or conscious dealing with such goods with knowledge or reason to believe that they were liable to confiscation.

Mere acquaintance with a co-noticee or vague reference in an untested statement was held insufficient. In the absence of recovery from the appellant, incriminating documents, financial or communication links, or any other tangible evidence of active connivance or abetment, the penalties were held unsustainable both for the 5 live consignments and for the 26 consignments cleared during 01.04.2017 to 04.08.2017. [Paras 12, 13, 14, 15, 16]

The penalties imposed on the appellant under Sections 112(a) and 112(b) in both impugned orders were set aside as legally unsustainable.

Final Conclusion: The Tribunal held that the Revenue failed to establish the appellant's involvement in the alleged smuggling activities through admissible and reliable evidence. Both penalties imposed under Sections 112(a) and 112(b) were therefore set aside and the impugned orders were modified to that extent.

Reasonable belief for seizure of gold - Burden of proof in town seizure of gold and silver - establishment of foreign origin and a reasonable belief of smuggling on cogent material - Confiscation of gold bangles and silver granules - Penalty for dealing with allegedly smuggled goods

Reasonable belief - Town seizure - Seizure of gold bangles and silver granules - whether seizure of the gold bangles and silver granules founded on the statutory requirement of reasonable belief that the goods were smuggled? - HELD THAT: - The Tribunal held that, where the goods were intercepted within India and the respondents had immediately produced manufacturing vouchers and later GST invoices indicating procurement from domestic sources, the Department could not rely on assumptions or conjecture to justify seizure. In the absence of proof that the documents were false or fabricated, of any foreign markings on the goods, or of corroborative evidence establishing foreign origin or the alleged melting activity, the material on record did not furnish the objective basis necessary for formation of a valid reasonable belief. [Paras 8]

The condition precedent for seizure under the Act was not satisfied, and the question was answered against the Revenue.

Burden of proof - Foreign origin of gold - Section 123 presumption in town seizure - burden of proving that the seized goods were not smuggled - HELD THAT: - The Tribunal held that the statutory onus under Section 123 arises only when the foundational requirement of seizure in the reasonable belief that the goods are smuggled is met, and the Department first establishes the foreign character of the goods. Since the seized gold bangles and silver granules had no foreign markings, the gold was not in standard form, the purity found was below the pure form relied upon by the Department, and the case was one of town seizure rather than seizure from a customs area or border context, the Revenue remained bound to prove smuggled and foreign origin. The authorities cited by the Department were distinguished on facts, particularly because the present case involved non-specific intelligence and supporting domestic purchase documents. [Paras 9]

The presumption under Section 123 was held inapplicable, and the burden remained on the Department.

Domestic purchase documents - Manufacturing receipt vouchers - GST invoices - documents produced by the respondents sufficiency to evidence licit domestic procurement of the gold and silver granules - HELD THAT: - The Tribunal accepted that the manufacturing receipt vouchers produced at the earliest stage and the GST invoices examined by the appellate authority prima facie established that the gold had been procured domestically and sent for job work, and that the silver granules were accounted for in the books. As the investigation did not establish that these documents were false or fabricated, their genuineness stood unrebutted and supported the respondents' explanation of lawful possession. [Paras 10]

The respondents' documentary explanation of lawful domestic source was upheld.

Confiscation under customs law - Proof of smuggled nature - Silver granules below threshold quantity - Confiscation of the seized gold bangles and silver granules was not legally sustainable - HELD THAT: - The Tribunal held that confiscation requires cogent and credible evidence of smuggled character and cannot rest on vague intelligence, purity alone, or unverified inferences. Since the Revenue failed to establish foreign origin, identify the route of illicit import, or produce corroborative evidence supporting the allegation of smuggling, the gold was not liable to confiscation. As regards the silver granules, the Tribunal further held that the statutory presumption was inapplicable where the quantity was far below the benchmark noticed by it, the goods were not in the specified form, and no foreign markings were present; consequently, the Department's failure to prove foreign and smuggled origin was fatal to confiscation. [Paras 11]

The order setting aside confiscation of both the gold bangles and the silver granules was affirmed.

Penalty for dealing with goods liable to confiscation - Mala fide intention - Simultaneous penalty under Section 112(a) and 112(b) - HELD THAT: - The Tribunal held that, once the goods were found not liable to confiscation and the respondents had valid documents evidencing lawful purchase, the foundation for penalty failed. It further held that a person could not be penalised simultaneously under both clauses for the same transaction involving the same goods, and that, in any event, mala fide intention necessary for such penal action had not been established by the Department. [Paras 12]

The appellate order setting aside all penalties was upheld.

Final Conclusion: The Tribunal upheld the appellate order and rejected the Revenue's appeal. It held that, in the absence of reasonable belief, proof of foreign origin, or rebuttal of the respondents' domestic purchase documents, the seizure, confiscation and penalties could not be sustained, and the seized goods were liable to be released.

Duty-free licence re-registration under Focus Market Scheme and liability of bona fide transferee importer - Transfer of licence rights - Extended period under section 28(4) - Absence of suppression by transferee importer - Due care in purchase of re-registered licence.

Bona fide transferee of duty-free licence - Fraudulent re-registration distinguished from forged licence - Customs duty demand on import against re-registered licence - HELD THAT: - The Tribunal held that the decisive distinction was between a licence that was never issued by the licensing authority and a licence that existed and stood re-registered in the customs system. Since the licence in question had originally been issued and its re-registration at Nhava Sheva Port was not disputed, the case did not fall in the category of fake or forged licences. Applying the principle stated in Apar Industries Ltd. v. Commissioner of Customs (Export Promotion), Mumbai [1999 (7) TMI 69 - SUPREME COURT], the Tribunal held that where a licence or scrip exists and is acted upon during its validity, a subsequent purchaser who acquired it for value cannot be denied the benefit merely because the licence was later found to have been fraudulently re-registered. The departmental reliance on GFC Weld House [2025 (12) TMI 1085 - CESTAT NEW DELHI] and Sambhav International [2025 (10) TMI 1082 - CESTAT NEW DELHI] was rejected because those decisions concerned fraudulent enhancement of scrip value and proceeded on a different footing. [Paras 18, 20, 21, 22, 23]

The confirmation of customs duty against the appellant was unsustainable.

Extended period under section 28(4) - HELD THAT: - The Tribunal found that the sole basis in the show cause notice for invoking the extended period was that the appellant ought to have verified the correctness of the licence before purchase. That basis failed because the licence had been re-registered at Nhava Sheva Port and, in those circumstances, lack of due care could not be attributed to the appellant. In the absence of any misrepresentation, collusion, or suppression on the appellant's part, the conditions necessary for invoking the extended period were not established. [Paras 24, 25]

The demand was also barred from being sustained under the extended period invoked under section 28(4).

Final Conclusion: The Tribunal set aside the impugned order and allowed the appeal. It held that customs duty could not be demanded from the appellant as a subsequent purchaser of a licence that had been re-registered by the department, and that the extended period under section 28(4) was also not available on the facts.

Entitlement to the benefit of Serial No. 530A of Notification No. 50/2017-Cus - imported auto parts - Burden of proof - Denial of exemption on omission in supporting annexures - Whether the parts imported by the appellant would be entitled to the benefit of the Exemption Notification ? - HELD THAT: - The Tribunal found that the Principal Commissioner was correct to the limited extent that Finished Goods No. 312705AA3 was not reflected in Annexure-I to the reply to the show cause notice and that the relevant Chartered Engineer certificate had also not been enclosed therewith. However, the reply filed by the appellant to the audit objections, which formed part of the reply to the show cause notice, specifically mentioned that finished goods number. The Tribunal further noted that the certificate relating to that finished goods number had been left out while all other certificates were enclosed, showing an inadvertent omission. Since the inclusion of the finished goods number in the audit-objection reply established the appellant's claim, the benefit of Serial No. 530A was held to be available. [Paras 8, 9]

The denial of exemption, and the consequential confirmation of differential duty and penalty, were set aside.

Final Conclusion: The Tribunal held that the appellant was entitled to the benefit of Serial No. 530A of the exemption notification in respect of the disputed imports. The impugned order, insofar as it confirmed the differential duty and penalty, was set aside and the appeal was allowed.

Maintainability of the Section 9 application on the ground that there is a pre-existing dispute - Transfer of winding-up proceedings to the Tribunal to be dealt with under the I&B Code - exclusion of unilateral invoice interest in absence of contractual acceptance - NCLT [2026 (3) TMI 108 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI] order admitting the Section 9 application is set aside because the converted application did not meet the Rs. 1 Crore threshold (interest claimed at 24% cannot be included without agreement); the Corporate Debtor is directed to pay the previously ordered deposit to the Operational Creditor with compound interest @12% from 04.04.2006 within 30 days; parties to bear their own costs. - HELD THAT:- The Civil Appeal was dismissed, the Court declining to interfere with the impugned judgment and order of the National Company Law Appellate Tribunal, while keeping the question of law, if any, open.

Quashing of FIR in commercial dispute - non-payment of dues under a sub-contract executed during the corporate insolvency and liquidation process -Cheating under Sections 418 and 420 IPC - Dishonest intention at inception of transaction - Abuse of criminal process for recovery of contractual dues - Contractual claims arising during insolvency proceedings - HELD THAT: - The role of the Petitioner Ashwini Mehra, acting as Resolution Professional/Liquidator under the supervision of the NCLT, also assumes considerable significance. The materials on record prima facie indicate that the affairs of Punj Lloyd Ltd. were being administered under the framework of the Insolvency and Bankruptcy Code pursuant to orders passed by the National Company Law Tribunal. Decisions relating to disbursement of funds, treatment of operational creditors, settlement of liabilities and continuation of contracts were necessarily intertwined with the statutory insolvency process. Whether the complainant's dues stood admitted, disputed, adjusted or otherwise payable are issues intrinsically connected with the liquidation proceedings and cannot be simplistically isolated from the statutory framework governing insolvency resolution.

The Court held that, while exercising inherent jurisdiction, it must examine whether the allegations taken at face value disclose the basic ingredients of the alleged offences and not undertake adjudication of disputed facts. Applying that test, it found that the dispute arose from a work order, invoices, part-payments, account reconciliation, GST-related adjustments and asserted outstanding dues under a commercial arrangement. The material did not prima facie show that the petitioners had any dishonest or fraudulent intention at the inception of the transaction, which is the foundational requirement for cheating. The continuation of business dealings, execution of work, release of payments, negotiations and settlement discussions negatived the theory that the contract was conceived as a fraudulent device from the beginning. The Court further held that allegations regarding withholding of payment and availing of GST credit, even if assumed to be correct, may give rise to civil, contractual or statutory consequences, but do not by themselves convert the dispute into cheating. The fact that the affairs of the company were being administered under the IBC through the Resolution Professional/Liquidator and under NCLT supervision reinforced that the controversy was intertwined with insolvency administration and competing financial claims. On the totality of circumstances, the FIR was found to be an attempt to give criminal colour to a fundamentally commercial dispute and to use criminal law as a coercive means for recovery of disputed monetary claims, attracting the principles in State of Haryana v. Bhajan Lal [1990 (11) TMI 386 - SUPREME COURT]. [Paras 17, 18, 19, 20, 21]

The FIR and consequential proceedings were quashed as the allegations, even if accepted in full, disclosed only a contractual and commercial dispute and not any offence of cheating.

Final Conclusion: The Court allowed the petitions and quashed the FIR and all consequential proceedings. It held that the allegations arose from a contractual payment dispute in the backdrop of insolvency proceedings and did not prima facie disclose the essential ingredients of cheating.

Maintainability of appeal by the shareholder appellants and decree-holder -Aggrieved person under Section 61 IBC - garnishee decree-holder - locus to challenge admission of the Section 7 application under Section 61 of the Insolvency and Bankruptcy Code, 2016 - Time value of money - Round tripping of funds - Fraudulent initiation of CIRP - Corporate veil - Financial debt - Sham and collusive transactions - Time value of money - Duty to examine true nature of transaction.

Whether Comp. App. (AT) (Ins.) No. 992/2023 filed by Chandrashekhar Jha – appellant No. 1 & RHC Finance Pvt. Ltd. – appellant No. 2, is maintainable under Section 61 of the IBC challenging the impugned order dated 18.07.2023 admitting Section 7 application filed by respondent No. 1? - HELD THAT: - The Tribunal held that, though a shareholder by itself could not claim locus in view of the larger Bench decision in Park Energy Pvt. Ltd.[2025 (12) TMI 229 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, CHENNAI], the objection did not conclude the matter. Appellant No. 2 was acknowledged in the corporate debtor's balance sheet as a creditor and was therefore a stakeholder in the CIRP. The Tribunal further held that where the appeal specifically assails the Section 7 proceedings on the ground that the underlying transaction was fraudulent and did not amount to a financial debt, such challenge could not be rejected merely on locus. The expression 'any person aggrieved' under Section 61 was applied broadly in the context of the Code. [Paras 14, 21, 22]

The objection to maintainability was rejected and Company Appeal (AT) (Insolvency) No. 992 of 2023 was held maintainable.

Aggrieved person under Section 61 IBC - Locus of decree-holder - Garnishee proceedings - HELD THAT: - The Tribunal held that, once garnishee orders had been issued against the corporate debtor in the award-enforcement proceedings, it could not be said that the appellant had no claim against the corporate debtor. Applying the broad meaning of 'person aggrieved' under Section 61, the Tribunal found that the appellant was entitled to question the initiation of CIRP on the pleaded ground that the proceedings were founded on tainted transactions. The objection that the appellant was only an unsecured or decree-holding creditor and therefore had no right of appeal was rejected. [Paras 23, 24, 25]

The objection to locus was rejected and Company Appeal (AT) (Insolvency) No. 1238 of 2023 was held maintainable.

Financial debt - Time value of money - Sham and collusive transactions - Round tripping of funds - Non-application of mind to material on record - HELD THAT: - The Tribunal found that the corporate debtor had specifically pleaded in reply that the alleged loan was not a legally recognised financial debt, but part of financial layering and round-tripping. The bank material showed that the principal amount received from RAIML on 31.03.2009 was transferred on the very same day to Religare Finvest Ltd., a subsidiary of the financial creditor, and similar same-day mirror transactions existed with other group entities. Applying Phoenix ARC Pvt. Ltd. v. Spade Financial Services Ltd. & Ors. [2021 (2) TMI 91 - SUPREME COURT], the Tribunal held that the real nature of the transaction had to be unearthed, since a sham or collusive arrangement may only create the illusion of disbursal for time value of money. The Adjudicating Authority rejected the defence solely by referring to the terms of the MoUs and by observing that they did not provide for onward transmission, which, according to the Tribunal, showed refusal to examine the pleadings and the bank records bearing directly on the real character of the transaction. The Tribunal also held that the balance-sheet entry could not be treated in isolation when the corporate debtor had, at the first opportunity, disputed the balance confirmation. As to FIR No. 50/2019, the Tribunal clarified that it was not substantive evidence for Section 7 adjudication, but its relevance lay in the fact that the subsidiary of the financial creditor itself had alleged that such one-page MoUs and related transactions were sham and fraudulent. On this material, the Tribunal concluded that the amount was never genuinely available with the corporate debtor as a borrowing for its use and there was no disbursal for time value of money. [Paras 37, 42, 43, 49, 50]

The Tribunal held that no financial debt existed in law, the Adjudicating Authority had erred in treating the defence as moonshine without considering the relevant material, and the Section 7 application was liable to be rejected.

Final Conclusion: Both appeals were allowed. The admission of the Section 7 application was set aside and the application itself was dismissed, the Tribunal holding that the underlying transactions did not constitute a genuine financial debt and that both appellants had locus to maintain their appeals.

Fraudulent trading under section 66 - Wrongful trading - Preferential transaction - non-payment of rentals - Master Lease Agreement - supply of machinery - Appropriation of security deposit during moratorium - Non-consideration of material documents.

Moratorium - Security deposit adjustment - HELD THAT: - The Appellate Tribunal noted the admission in the email relied on by the Adjudicating Authority that the security deposit was adjusted against outstanding lease rentals as on 31.10.2019, whereas CIRP had commenced on 23.09.2019. On that admitted position, the finding that the deposit was appropriated during moratorium did not call for interference. At the same time, the Tribunal held that restoration of that amount to the assets of the corporate debtor could not be directed in the present proceedings and would require an appropriate application before the Adjudicating Authority. [Paras 53]

The finding that the security deposit was appropriated during moratorium was upheld, but recovery or restitution was left to be pursued in appropriate proceedings.

Fraudulent trading - Master Lease Agreement - Remand for fresh consideration - HELD THAT: - The Appellate Tribunal found that documents placed at the appellate stage, including written requests or purchase orders, invoices, acknowledgements of receipt, and e-way bills, bore directly on the defence that the machinery had in fact been supplied to the corporate debtor. It also noticed that the contention regarding proceedings initiated by Orix Leasing for possession of the machinery and allied proceedings had not been discussed in the impugned order. Since the conclusion that the transaction was sham had substantially proceeded on the absence of proof of delivery and on the non-traceability of the machinery, the controversy required fresh adjudication after giving the parties an opportunity to produce supporting material. [Paras 58, 59, 60, 61, 62]

The impugned order was set aside and the application was remanded for fresh decision after permitting the parties to file documents in support of their respective case.

Third-party contribution under section 66 - HELD THAT: - The requirement of Section 66(1) is that if during the Corporate Insolvency Resolution Process or in liquidation process it is found that any business of the CD has been carried on with the intent to defraud creditors of the CD or for any fraudulent purpose the adjudicating authority, on an application by the RP may pass an order that any persons who were knowingly parties to the carrying on the business in such manner would make such contributions to the assets of the CD as it may deem fit. Sub-section 2 of this section also provides that on an application by a resolution professional during the Corporate Insolvency Resolution Process (CIRP) the adjudicating authority may direct the director or partner of the CD to make such contribution to the assets of the CD if before the Insolvency Commencement date such director or partner knew or ought to have known that there was no reasonable prospect of avoiding the insolvency process in respect of the CD and such director or partner did not exercise due diligence in minimizing the potential loss to the creditors. Thus the necessary ingredients of invoking Sub Section (1) appears to be that the business of the CD has been carried on with intent to defraud creditors of the CD or for any fraudulent purpose. and for Sub Section (2) that Before the insolvency commencement date such director or partner knew or ought to have known that there was no reasonable prospect of avoiding the commencement of CIRP and such director or partner did not exercise due diligence in minimizing the potential loss to the creditors. Thus both these Sub Sections take care of two different factual situations.

After noticing the distinction between section 66(1) and section 66(2), and the authorities cited on contribution by persons knowingly party to fraudulent trading, the Appellate Tribunal observed that whether a person or entity is to be treated as a third party for the purpose of section 66(1) depends on the facts and circumstances of the particular case and no straight-jacket formula could be laid down. In view of the remand and the liberty granted to adduce further evidence, the Tribunal expressly kept that question open for determination by the Adjudicating Authority. [Paras 52, 63]

The question whether Orix Leasing could be directed to contribute under section 66 was left open for reconsideration on remand.

Final Conclusion: The Appellate Tribunal held that the security deposit had been appropriated during moratorium, though its restoration could be sought only in appropriate proceedings. Since material documents bearing on the genuineness of the master lease transaction had not been duly considered, the impugned order was set aside and the matter remanded for fresh adjudication, with the question of contribution by an alleged third party under section 66 kept open.

Rejection of a resolution plan approved with 100% voting share - non-compliance with the statutory requirements for plan approval - Judicial review of resolution plan approval - Commercial wisdom of the Committee of Creditors - Eligibility under Section 29A of the SRA -lack of transparency in the CIRP on account of mismatch between title documents and physical possession of the corporate debtor's plots - Informational asymmetry among resolution applicants.

Judicial review of resolution plan approval - Commercial wisdom of the Committee of Creditors - Material irregularity in conduct of CIRP - HELD THAT: - The Appellate Tribunal held that the entire CIRP had been conducted under the decisions of the sole financial creditor constituting the CoC, and the Resolution Professional had acted in accordance with those decisions. The Adjudicating Authority itself had not found the successful resolution applicant ineligible, nor had it held the plan to be non-compliant with the statutory requirements governing approval. In that situation, rejection of the plan on a general perception of unfairness, material irregularity, or impact on value maximisation amounted to entering into the commercial domain of the CoC. The governing principle is that judicial review at the stage of approval is confined to statutory compliance and does not permit substitution of the Adjudicating Authority's assessment for the commercial decision of the CoC. [Paras 23, 24, 28]

The finding rejecting the plan on grounds of alleged material irregularity and fairness of the process was set aside.

Informational asymmetry among resolution applicants - Disclosure in information memorandum - Assets offered on as is where is basis - HELD THAT: - The Appellate Tribunal found that the Information Memorandum expressly disclosed the mismatch between the plot described in the title documents and the plot in actual possession, and also recorded the position regarding land, building, plant and machinery, outstanding charges and possession. Access to the virtual data room was available to all resolution applicants, and the request for resolution plan proceeded on an as is where is, as is what it is and without recourse basis. The asset in possession of the Resolution Professional, handed over by the secured creditor itself, was valued along with the existing structure, plant and machinery. In these circumstances, the observation that informational asymmetry among bidders could not be ruled out was held to be without foundation, and the non-availability of another plot for valuation did not establish any material irregularity in the process. [Paras 19, 20, 21, 23, 28]

The alleged opacity arising from the status of the plots was held insufficient to invalidate the CIRP or to refuse approval of the CoC-approved plan.

Non-responsive resolution plan - Eligibility under Section 29A - Challenge by unsuccessful resolution applicant - HELD THAT: - The Appellate Tribunal noted that the Adjudicating Authority had already answered the question of ineligibility in favour of the successful resolution applicant and had upheld the decision of the Resolution Professional and the CoC treating Claro Energy's plan as non-compliant. No appeal had been filed against those findings. With no surviving basis to reopen those questions, and since the only objection to the approved plan came from an unsuccessful resolution applicant whose own plan was found non-responsive, the applications filed by Claro Energy were directed to remain closed. [Paras 10, 11, 12, 28, 30]

The findings on eligibility and non-compliance were left undisturbed, and Claro Energy's applications were closed without revival.

Final Conclusion: The impugned order rejecting the CoC-approved resolution plan was set aside. The plan approval application was revived before the Adjudicating Authority for fresh consideration in light of the Appellate Tribunal's findings, and the applications filed by the unsuccessful resolution applicant were directed to remain closed.

Exclusion of third-party goods from liquidation estate - Jurisdiction under IBC to adjudicate title and inter se security disputes - legality of SBI's sale of the cotton bales or the partie's rights - Infructuous proceedings - Locus standi - Right to redeem hypotheca.

Third-party goods in corporate debtor's premises - Liquidation estate exclusion - HELD THAT: - The Tribunal held that the only issue raised in the appeals was whether the cotton bales should be excluded from the liquidation assets of the corporate debtor. That issue no longer survived because the liquidator had already excluded the cotton bales from the liquidation estate, and SBI also did not object to such exclusion. Once the very relief sought stood effectively granted in the liquidation process, nothing further remained for determination in the appeals. [Paras 12, 19]

The appeals were dismissed, there being no occasion for any further declaration once the cotton bales already stood excluded from the liquidation estate.

Jurisdiction over title and security disputes - Sale of disputed third-party goods - Appropriate forum - HELD THAT: - While noting that SBI had sold the cotton bales during pendency of the appeals without taking the Tribunal into confidence and that such conduct failed the broader rule of fairness, the Tribunal nevertheless held that its statutory jurisdiction was confined to examining whether the cotton bales formed part of the liquidation estate. Questions of title to the cotton, competing security interests, quality, deterioration, sale, and consequential entitlements were matters in issue before the DRAT and could not be decided in proceedings under the IBC. The Tribunal further observed that the appellants were not without remedy and should pursue the appropriate legal forum, and clarified that the appellants' creation of security interest in favour of Bank of Baroda did not extinguish their own standing altogether, since a right of redemption remained. On that basis, the interlocutory applications filed by both sides concerning the sale and delivery of the cotton were not entertained on merits. [Paras 14, 16, 17, 18, 19]

The appellants were left to work out their remedies before the appropriate forum, and SBI was also directed to approach the DRAT if so advised; the interlocutory applications were accordingly closed for want of jurisdiction.

Final Conclusion: The Tribunal dismissed the appeals on the ground that the disputed cotton bales had already been excluded from the liquidation estate by the liquidator. All disputes concerning title, security interest, sale, or consequential relief in respect of the cotton bales were held to lie outside the Tribunal's jurisdiction and were left to be pursued before the appropriate forum, particularly the DRAT.

Maintainability of the Claim - Moratorium on continuation of proceedings and creation of new liability - Recognition of allottee's investment-based claim in CIRP - Resolution professional's duty - Claim collation - Directory timeline - Concurrent remedies - Binding adjudicatory order.

Moratorium under the Insolvency Code - Proceedings continued during CIRP - Claim founded on post-moratorium adjudicatory order - HELD THAT: - The Appellate Tribunal held that once moratorium came into force, continuation of pending proceedings against the corporate debtor stood interdicted. The object of the moratorium is to freeze the corporate debtor's assets and liabilities during CIRP so that the resolution process may proceed in an orderly manner. While adjudication in certain contexts may continue, Section 14 does not permit creation of a new liability against the corporate debtor during moratorium, except as contemplated by the Code. Since the respondent's claim was founded on an order passed during moratorium which imposed liability on the corporate debtor, that order could not sustain a maintainable claim in CIRP. [Paras 6]

The claim, insofar as it was based on the order passed during moratorium, was held to be not maintainable.

Allottee's underlying debt - Verification of investment made for commercial unit - Resolution professional's duty to identify claims from records - HELD THAT: - The Appellate Tribunal found that the respondent's allotment and payment for the commercial unit were matters capable of verification from the corporate debtor's records, and were not disputed by the resolution professional in substance. It observed that a claim is essentially notice of a debt due from the corporate debtor, and where such debt can be ascertained from the records, the resolution professional ought fairly to identify and recognise it. The Code was held not to be intended as a mechanism for divesting existing rights, but to recognise debts due, even though payment would remain subject to the insolvency process. On that basis, the respondent's entitlement was directed to be considered not on the footing of the post-moratorium order, but on the basis of the original investment made for purchase of the commercial unit. [Paras 8, 9]

The resolution professional was directed to verify the payments made by the respondent to the corporate debtor and, upon such verification, include its claim.

Final Conclusion: The appeal was disposed of by holding that the respondent could not maintain a claim founded on the appellate real estate authority's order passed during moratorium. At the same time, the resolution professional was directed to verify the respondent's payments made towards the commercial unit and to include its claim on that basis.

Withdrawal of CIRP before constitution of CoC - Section 12A read with Regulation 30A - Hearing of concerned stakeholders - Withdrawal of the corporate insolvency resolution process on the basis of a settlement entered into before constitution of the Committee of Creditors

HELD THAT: - The Appellate Tribunal held that Regulation 30A expressly requires the interim resolution professional, where the Committee of Creditors has not been constituted, to submit the withdrawal application on behalf of the applicant within three days of receipt of Form FA.

In the present case, the settlement had already been entered into before the admission order; the operational creditor sent Form FA immediately after admission; no public announcement had been made; no Committee of Creditors had been constituted; and the interim resolution professional filed the application within the prescribed time.

The Tribunal held that the statutory procedure for withdrawal at this stage does not itself contemplate issuance of notice to every creditor, and the appellants had in any event filed no objection before the Adjudicating Authority.

The decisions in GLAS Trust Company LLC [2024 (10) TMI 1185 - SUPREME COURT (LB)] and Abhishek Singh [2023 (3) TMI 1285 - SUPREME COURT] were read to mean that, though the Adjudicating Authority is not a mere post office and must consider relevant objections where they are before it, a withdrawal application properly moved through the interim resolution professional before constitution of the Committee of Creditors is maintainable and can be allowed in accordance with Regulation 30A. The authorities cited by the appellants were distinguished because, in those cases, objections or claims had already been brought before the adjudicating forum. [Paras 25, 26, 27, 28, 29]

The order permitting withdrawal of the CIRP was upheld, and the appeals were dismissed.

Final Conclusion: The Appellate Tribunal held that the withdrawal application had been moved and allowed strictly in accordance with Section 12A and Regulation 30A before constitution of the Committee of Creditors, with no objection having been filed before the Adjudicating Authority. Finding no infirmity in the impugned order, both appeals were dismissed.

Seeking declaration that arrest by the Directorate of Enforcement under Section 19(1) of the Prevention of Money Laundering Act, 2002 is illegal - High Court in [2026 (3) TMI 512 - BOMBAY HIGH COURT] found no manifest arbitrariness or gross non compliance with PMLA safeguards in the arrest or remand proceedings and declined to quash the remand orders, without prejudice to parties' rights at trial or in bail proceedings. - HELD THAT:- The Special Leave Petition was dismissed, with liberty to the petitioner to apply for regular bail to be considered on its own merits without being influenced by the observations in the impugned order.

Maintainability of challenge to summons - Settlement immunity under Income-tax law - PMLA inquiry without FIR - Consideration of subsequent events in writ proceedings

Summons under Section 50 PMLA - Prematurity of writ petition - writ petition challenging summons issued for appearance, statement and production of documents under the PMLA - HELD THAT: - The Court held that a summons issued under Section 50 merely requires the person concerned to attend, state the truth and produce records, and by itself does not give rise to a cause of action. Since no adverse order affecting rights had been passed at that stage, interference in writ jurisdiction was found unwarranted. The Court therefore accepted the preliminary objection that the challenge to the summons was premature, though it proceeded to examine the other contentions as well. [Paras 12]

The challenge to the summons was rejected as premature.

Immunity from prosecution - Settlement under Income-tax Act - PMLA proceedings - Immunity claimed on the basis of an order of settlement under the Income-tax Act extendable to proceedings under the PMLA or not? - HELD THAT: - The Court held that, by reason of the second proviso to Section 245H(1), where an application for settlement is made after 01.06.2007, immunity cannot be granted from prosecution under any Central Act other than the Income-tax Act and the Wealth-tax Act. As the settlement application was made in 2020, any immunity available to the petitioner could only relate to prosecution under the Income-tax Act. The Settlement Commission or Interim Board was also held to have no authority to deal with money-laundering complaints, and the conclusiveness of the settlement order was confined to matters within that statutory scheme. [Paras 13]

The plea that settlement under the Income-tax Act barred proceedings under the PMLA was rejected.

Inquiry under PMLA - Absence of FIR - ECIR as internal document - Issuance of summons and commencement of inquiry under the PMLA invalidated merely because no FIR had been registered in respect of the scheduled offence - HELD THAT: - Relying on the law declared by the Supreme Court [2022 (7) TMI 1316 - SUPREME COURT (LB)], the Court held that non-recording of an FIR in respect of a scheduled offence does not prevent the authorities under the PMLA from commencing inquiry or investigation for collection of evidence and for initiating civil action in relation to proceeds of crime. The summons in question showed that the matter was only at the stage of investigation, and at that stage the statute did not require registration of an FIR as a condition precedent for issuing summons under Section 50. [Paras 17]

The contention that absence of an FIR deprived the respondent of jurisdiction to issue summons was rejected.

Subsequent events in writ jurisdiction - Scheduled offence under Companies Act - Independence of PMLA power - whether Court could take note of the subsequent filing of a complaint by the SFIO, and the respondent's power under the PMLA dependent upon submission of a final report by the SFIO - HELD THAT: - The Court held that, in proceedings under Article 226, facts that come into existence before pronouncement of judgment and bear directly on the controversy must be considered, and ignoring them would render the adjudication academic. Since it was brought on record that the SFIO had filed a complaint alleging offences including one constituting a scheduled offence, the foundational argument that the summons had been issued without any scheduled offence no longer survived. The Court further held that, in any event, the respondent's power to issue summons for investigation under the PMLA was not contingent on the SFIO first submitting its final report. [Paras 20]

The Court considered the subsequent SFIO complaint and rejected the contention that action under the PMLA depended on the SFIO's final report.

Final Conclusion: The writ petition was dismissed. The Court held that the challenge to summons under the PMLA was premature, that income-tax settlement immunity did not extend to money-laundering proceedings, that an FIR was not a condition precedent for inquiry under the PMLA, and that the subsequent SFIO complaint could be taken into account while deciding the writ petition.

Bank account freezing by bank on its own volition - Suspicious transaction reporting under anti-money laundering law - Absence of authority to freeze account without complaint or competent order - Principles of natural justice - Right to livelihood - Right to carry on trade and business - Trustee relationship between bank and customer - Manifest arbitrariness​​​​​​​.

Bank account freezing by bank on its own volition - Absence of complaint or competent authority order - Right to operate current account - HELD THAT: - The Court held that the respondent-bank had assumed to itself an investigative role without any legal foundation. Mere receipt of funds inconsistent with the income declared at the time of account opening did not furnish any lawful basis to brand the account as suspicious, particularly when no complaint, criminal proceeding, recovery action, or order of any competent authority existed either against the petitioner or the remitter. The alleged request of another bank, itself unsupported by any formal proceeding, could not justify freezing the petitioner's account. The Court further held that a banker holds deposits in a trustee-like capacity and can deny operation of the account only in circumstances recognised by law, such as action backed by competent authority or a lawful lien. Freezing the account without notice or communication of reasons was held arbitrary and violative of the petitioner's right to carry on business and livelihood. [Paras 26, 27, 29, 31, 33]

The freezing of the petitioner's current account by the respondent-bank was held illegal, arbitrary and unsustainable, and the account was directed to be de-frozen forthwith without imposing any withdrawal restriction.

Suspicious transaction reporting under anti-money laundering law - Scope of reporting entity's powers - Specified transaction under enhanced due diligence - HELD THAT: - The Court rejected the bank's reliance on Section 12(2) of the Prevention of Money Laundering Act, 2002, holding that Section 12 concerns maintenance and confidentiality of records and does not confer any power to freeze an account. On examining the statute, the Court observed that the bank was in substance attempting to invoke Section 12AA(2), but that provision also only enables non-permittance of a particular specified transaction upon failure of enhanced due diligence requirements and does not authorise freezing of the entire account. The Court further noted that freezing under the Act is referable to Section 17 and must be by the competent authority upon satisfaction of statutory conditions. The RBI circular on Suspicious Transaction Reports was also read to mean that even where an STR is made, banks should not impose restrictions on operation of the account. Hence, the anti-money laundering framework did not support the impugned action. [Paras 16, 17, 18, 19, 21]

The statutory scheme of the Prevention of Money Laundering Act, 2002 and the RBI instructions on suspicious transaction reporting were held not to empower the respondent-bank to freeze the petitioner's account.

Final Conclusion: The writ petition was allowed. The respondent-bank was directed to de-freeze the petitioner's current account forthwith, and costs were imposed on the bank for the unlawful and arbitrary freezing of the account.

Continuation of retention of seized property during pendency of PMLA proceedings - cash and vehicles - Seizure and retention of property held by a non-accused person - proceeds of crime - absence or non-supply of a separate retention order under Section 20(1) - Retention of seized property under Section 8 vis-a-vis Section 20 - non-application of mind or failure to discharge the burden regarding the source of the seized assets.

Continuation of retention during pendency of proceedings - Property of non-accused person - HELD THAT: - The Tribunal held that Section 8(3)(a) does not require a fresh prosecution complaint to be filed in respect of every subsequent seizure if proceedings under the Act in the same ECIR are already pending before the court. Since a prosecution complaint had already been filed and remained pending against three of the appellants, the statutory condition stood satisfied. The Tribunal further held that retention is not confined only to persons already arrayed as accused; the scheme of the Act permits seizure and retention of property of any person found to be in possession of property suspected to be proceeds of crime or records relating to money-laundering, and therefore the challenge based on absence of proceedings against one appellant was untenable. [Paras 13, 14, 15]

The challenge to continuation of retention on the ground of absence of a further prosecution complaint, including as regards the appellant not named in the complaint, was rejected.

Further seizure despite earlier attachment - Quantum of proceeds of crime under continuing investigation - HELD THAT: - The Tribunal found that the impugned order and the original application recorded material indicating that a larger amount of proceeds of crime was still under investigation and remained to be identified. It noted the allegations of bogus transactions on the NSEL platform, use of non-existent stock and forged warehouse documentation, and statements indicating that sale transactions were paper transactions and that funds were diverted. In that background, the appellants' contention that the proceeds of crime stood confined to a lower figure could not be accepted, and the possibility of a larger quantum could not be ruled out until completion of investigation. The continued retention was therefore justified to facilitate tracing of the remaining proceeds of crime. [Paras 16, 17]

The plea that no further seizure or retention could be made after the earlier attachments was rejected.

Retention under Section 8 without prior Section 20 order - Interpretation of adjudicatory power over seized property - HELD THAT: - The Tribunal followed its earlier decision holding that the adjudicating authority is empowered, on an application made after seizure or freezing, to pass an order for retention under Section 8(3), and that this power is not confined to merely confirming an earlier retention order under Section 20. It accepted the reasoning that reading Section 8(3) as requiring prior retention under Section 20 would rewrite the statutory text and conflict with the interpretation placed by the Supreme Court on the scheme of Sections 17 and 8. On that basis, the contrary view relied on by the appellants was not accepted, and the objection founded on non-issuance or non-supply of a Section 20 retention order failed. [Paras 18, 19]

The challenge based on absence of a separate order under Section 20 was rejected.

Reasons to believe - Application of mind by Adjudicating Authority - Burden to explain source of seized assets - HELD THAT: - The Tribunal found that the adjudicating authority had expressly recorded, after going through the original application and relied upon documents, that the appellants prima facie appeared to have committed the offence of money-laundering, and thereafter considered their replies before permitting retention. It held that at the notice stage the satisfaction required is only prima facie, and adequacy of the grounds is not for further scrutiny if there is rational nexus with the material. The Tribunal also found that the appellants' explanation regarding purchase of vehicles through loans and repayment from income was insufficient in the context of serious money-laundering allegations and prior confirmed proceedings concerning the same group, and that they had failed to discharge the burden under Section 24. [Paras 20, 21, 22]

The grounds of non-application of mind, absence of reasons to believe, and satisfactory explanation of the seized assets were all rejected.

Final Conclusion: The Tribunal dismissed all the appeals and upheld the order allowing retention and freezing of the seized cash and vehicles. It held that pending prosecution proceedings in the same ECIR justified continuation of retention, that absence of a separate Section 20 order was not fatal, and that the appellants failed to dislodge the prima facie nexus of the seized properties with the money-laundering investigation.

Service tax on ocean freight in CIF contracts - Benefit of Notifications No. 15/2017-ST and 16/2017-ST - Extraterritorial levy - Reverse charge on importer as third party - refund - doctrine of unjust enrichment.

Service tax on ocean freight in CIF contracts - Extraterritorial levy - Reverse charge on importer as third party - HELD THAT: - The Court accepted the legal position stated by the Gujarat High Court in Messrs Sal Steel Ltd. and one another v. Union of India [2019 (9) TMI 1315 - GUJARAT HIGH COURT] and held that, in CIF contracts, the transportation arrangement is between the foreign exporter and the foreign transporter, while the Indian importer neither contracts for nor receives the transportation service. On that basis, the levy sought to be imposed on the importer was held impermissible, both because the service in question related to an extraterritorial event beyond the scope of the Act and because service tax under the charging and reverse charge provisions could be recovered only from the service provider or the recipient of service, not from a third party such as the importer in a CIF transaction. Relying on the Gujarat High Court decision and noting the absence of any stay, the Court reiterated the same relief, clarifying that the declaration of invalidity was confined to CIF contracts. [Paras 7, 8, 9]

The notifications were declared illegal in the context of CIF contracts, and the consequential demand notice was set aside.

Refund subject to unjust enrichment - HELD THAT: - Having set aside the notifications and the consequential demand, the Court held that the petitioner would be entitled to seek refund of the amount already collected. However, the refund was not directed automatically; it was made subject to the petitioner filing a refund application to be decided in accordance with law, including on the principle of unjust enrichment. [Paras 9]

Refund was left open to be claimed by application and to be considered in accordance with law, subject to unjust enrichment.

Final Conclusion: The writ petition was disposed of by declaring the impugned notifications illegal insofar as they applied to CIF contracts and by setting aside the consequential demand notice. The petitioner was left to pursue refund in accordance with law, subject to the principle of unjust enrichment.

Remuneration paid to whole-time directors - exigible to service tax under the reverse charge mechanism - Employer-employee exclusion from service - Service tax demand on remuneration paid to the non-whole-time directors for services - Sustainability of derivative demands founded on a set-aside notice.

Whole-time director remuneration - Employer-employee relationship - Negative list exclusion - HELD THAT: - Following the Tribunal's earlier decision in the appellant's own case [2025 (8) TMI 10 - CESTAT CHENNAI], the Tribunal held that remuneration paid to whole-time directors who were employed by the company falls within the exclusion for services rendered by an employee to the employer in the course of employment. The Tribunal treated the employment agreements, the specific clause declaring employer-employee relationship, and deduction of TDS under section 192 with issuance of Form 16 as establishing that the directors were employees. It further held that the fact that part of the remuneration was linked to profits or paid as variable pay did not alter that status. On that basis, the demand on remuneration paid to such whole-time directors was held unsustainable. [Paras 10]

The service tax demand, interest and penalties relatable to remuneration paid to the whole-time directors were liable to be set aside.

Non-whole-time director remuneration - Tax discharged by another office - Absence of centralized registration - HELD THAT: - The Tribunal found that the appellant had specifically asserted that service tax on remuneration paid to the non-whole-time directors had been discharged by its Bhubaneswar office and had produced ST-3 returns in support. In the absence of any material from the Revenue disputing those returns, or any verification from the jurisdictional officers at Bhubaneswar, the adjudicating authority had no basis to reject that evidence. The Tribunal also accepted the appellant's contention that, there being no centralized registration, tax in respect of services received at Bhubaneswar could not be demanded from the Salem office, particularly when the Revenue had not shown that those directors had rendered services at Salem during the relevant period. [Paras 11, 12, 13]

The demand on remuneration paid to the non-whole-time directors was held not sustainable.

Derivative statements of demand - Foundational notice set aside - Absence of independent evidence - HELD THAT: - The Tribunal noted that the impugned statements of demand expressly adopted the grounds of the earlier show cause notice, which had culminated in an order already set aside by the Tribunal in the appellant's own case. It further found that the later demands did not rely on any separate facts or independent evidence apart from details furnished by the appellant. Once the foundational proceedings had been set aside, and no independent basis was shown for sustaining the later demands, the impugned common order could not be maintained. [Paras 11, 13]

The impugned common orders were liable to be set aside in entirety on this additional ground as well.

Final Conclusion: The Tribunal held that remuneration paid to the appellant's whole-time directors was outside the service tax net as arising from employer-employee relationship, and that the separate demand concerning non-whole-time directors was also unsustainable since the tax had been discharged by the Bhubaneswar office and no centralized registration existed. The impugned common orders were therefore set aside in entirety and the appeals were allowed with consequential relief.

Invocation of the extended period for the second show-cause notice - irregular availment of Cenvat credit in relation to trading activity from the earlier notice -Suppression of facts - Proportionate reversal of credit - Cenvat credit on input services attributable to trading activity - Proportionate reversal of credit for non-taxable activity.

Extended period of limitation - Prior show-cause notice on identical facts - HELD THAT: - The Tribunal held that once an earlier show-cause notice had already been issued on the same allegation of irregular availment of Cenvat credit in relation to trading activity, the Department could not invoke suppression again for the subsequent period. Revenue awareness arising from the first notice defeated the basis for resort to the extended period in the second notice. [Paras 5]

The demand could survive only for the normal period, and the extended period was held inapplicable.

Cenvat credit on trading activity - Non-taxable activity - Proportionate reversal of credit - HELD THAT: - The Tribunal held that credit is permissible only in relation to taxable services, and trading activity is not a taxable service. For that reason, credit attributable to the trading segment could not be retained. Relying on Lally Automobiles Pvt. Ltd. [2018 (7) TMI 1679 - DELHI HIGH COURT], as affirmed in Lally Automobiles Private Limited v. Commissioner [2019 (6) TMI 414 - SC ORDER], the Tribunal accepted that, even if the rules did not provide a specific advance segregation mechanism for such mixed activity, the correct course was proportionate attribution and reversal of credit relatable to trading activity. Since the extended period was held unavailable, quantification had to be confined to the normal period. [Paras 5]

The appellant was held liable to reverse proportionate credit attributable to trading activity, limited to the normal period, and the matter was remanded only for quantification.

Penalty for wrongful availment of Cenvat credit - HELD THAT: - After restricting the demand to the normal period and remanding the matter only for quantification of the admissible reversal, the Tribunal set aside all penalties imposed under the impugned order. [Paras 5]

All penalties were set aside.

Final Conclusion: The Tribunal held that credit attributable to trading activity was not admissible and had to be reversed proportionately, but only for the normal period because the extended period was not invocable after the earlier notice on the same issue. The matter was remanded solely for quantification of such credit for the normal period, and all penalties were set aside.

Classification of transportation service by way of transporting ‘raw coal’ from 2 incline (Pithhead) - activity of transporting coal and washery - absence of consignment notes excluded the service from service tax under the negative list - Whether the activities undertaken by the appellant are appropriately classifiable under the category of ‘Mining Service’ as claimed by the department or ‘Transportation of goods by road service’, as claimed by the appellant ? -HELD THAT: - On examination of the work order, the Tribunal found that the appellant's obligation was confined to transportation of coal and washery rejects by road, including movement through a public road over a distance of about 5 kilometres. The activity was therefore not mere shifting of goods within the mining area so as to fall under mining service. The Tribunal further held that, since no consignment note was issued, the activity could not be treated as taxable GTA service and stood covered by the Negative List entry under section 66D(P)(i)(A) during the material period. On that reasoning, the service tax demand raised by classifying the activity as mining service was held unsustainable. [Paras 13]

The demand confirmed under the category of mining service was set aside, and the consequential interest and penalties were also held not sustainable.

Final Conclusion: The Tribunal held that the appellant had only provided transportation of coal and washery rejects by road and had not rendered mining service. As no consignment note had been issued, the activity was treated as covered by the Negative List during the material period, and the service tax demand with interest and penalties was set aside.

Extended period of limitation - Service tax demand based on income-tax records - beyond the normal period on the basis of figures reflected in the income-tax records and financial statements - HELD THAT: - The Tribunal held that the show cause notice had been issued well beyond the normal period of limitation. It further found that the entire demand had been built only on the figures shown in the ITR, Profit and Loss Account and Balance Sheet, without any enquiry by the Department to ascertain the reason for the difference in the figures. Since the extended period was invoked solely on the basis of such financial records, the demand confirmed by invoking the longer period could not be sustained. On that ground itself, the impugned order was held liable to fail. [Paras 9, 10, 11]

The demand and the penalty under Section 78 were set aside, and the appeal was allowed with consequential relief.

Final Conclusion: The Tribunal set aside the impugned order on the ground that the demand for Financial Year 2016-17 was raised beyond the normal period and was founded only on income-tax records and financial statements without supporting enquiry. The demand and penalty under Section 78 were consequently quashed.

Service tax demand based on ST-3 and income-tax return mismatch - return discrepancy - without examination of books of account and without establishing that the receipts - Exemption of works contract service to Government entities - Non-taxability of trading of goods under negative list.

Exemption of works contract service to Government entities - Non-taxability of trading of goods under negative list - HELD THAT: - The Tribunal found from the financial statements and supporting invoices that the receipts for Financial Year 2016-17 were separately reflected under sales, works contract and job work. In so far as works contract receipts were concerned, the services were provided to IIT Kanpur, ITI Ltd., Raebareli and Power Grid Corporation of India, all treated by the Tribunal as Government entities; consequently, the assessee was not required to collect service tax from them. For Financial Year 2017-18 up to June 2017, the disputed amount was found to relate to sale of goods, and the invoices showed levy of VAT and SAT, leading to the conclusion that no service tax liability could be fastened in respect of those invoices. [Paras 10, 11]

The demand attributable to works contract receipts from Government entities and to sale of goods invoices was held unsustainable.

Service tax demand based on ST-3 and income-tax return mismatch - Requirement to establish taxable value as consideration for service - HELD THAT: - The Tribunal held that the entire demand was founded on a mismatch between the ST-3 return and the income-tax return, without examination of the books of account. It further held that, before invoking recovery under Section 73, the Revenue had to establish that the amount proposed in the show cause notice represented service tax not paid or short paid, and that the value was the taxable value derived from consideration received for an activity answering the definition of service. Since this foundational examination was absent and no prima facie determination that the receipts arose from provision of taxable service was found in the show cause notice, the notice itself was held unsustainable in law. [Paras 12, 14]

The show cause notice and the consequent demand were held bad in law for want of examination of records and failure to establish that the disputed receipts represented taxable services.

Final Conclusion: The Tribunal set aside the impugned order and allowed the appeal. It held that the disputed receipts were either not liable to service tax on merits or had not been shown by the Revenue, on proper examination, to constitute consideration for taxable services.

Demand of service tax, interest and consequential penalties - Reverse charge liability in goods transport agency service - Accrual basis and receipt basis in determination of taxable value - Extended period of limitation and bona fide belief - Suppression of facts - willful misstatement.

Reverse charge liability in goods transport agency service - Accrual basis and receipt basis in determination of taxable value - HELD THAT: - The Tribunal held that the authorities below erred in treating the difference between the figures in the income-tax records and Form 26AS as taxable service value payable by the appellant. The balance sheet and return showed that the entire contract income was from freight received from Bharat Petroleum Corporation Ltd. The Tribunal distinguished between entries recorded on accrual basis in the appellant's books and entries reflected on receipt basis in Form 26AS. Since Bharat Petroleum Corporation Ltd. had already discharged service tax on the receipts reflected in Form 26AS under reverse charge, the remaining amount represented services provided on accrual basis to the same recipient, for which the reverse charge liability would also rest on the service recipient and not on the appellant. The authorities were therefore found to have failed to distinguish between the accrual and receipt systems of accounting. [Paras 4]

The demand sustained on the remaining value of freight service was held unsustainable.

Extended period of limitation and bona fide belief - HELD THAT: - The Tribunal found that, on the admitted facts that the appellant was providing services only to Bharat Petroleum Corporation Ltd., the appellant's belief that service tax was payable by the recipient under reverse charge was bona fide and supported by the case record itself. Applying the principle in Uniworth Textile Ltd. [2013 (1) TMI 616 - SUPREME COURT], the Tribunal held that invocation of the extended period requires deliberate default, wilful misstatement or suppression with intent to evade tax. In the presence of a bona fide belief, that requirement was not satisfied and the extended period demand had to fail. [Paras 4]

The demand raised by invoking the extended period of limitation was held to be unsustainable.

Final Conclusion: The Tribunal held that no service tax demand could be sustained against the appellant in respect of the freight services provided to Bharat Petroleum Corporation Ltd., since the liability was under reverse charge and the authorities had wrongly proceeded without appreciating the distinction between accrual and receipt accounting. It further held that the extended period was not invocable in view of the appellant's bona fide belief, and accordingly allowed the appeal.

Jurisdiction of the High Court under Section 35G of the Central Excise Act, 1944 to decide the appeal - Excisability as a question relating to rate of duty - Clarificatory and retrospective amendment - cutting, grooving, routing and fixing of aluminium composite panels -Meaning, scope and application of “manufacture” under Section 2(f) - Marketability of transformed goods.

Excisability and appellate forum - Relation to rate of duty for assessment - Clarificatory amendment to appellate jurisdiction - HELD THAT: - The Court held that the exclusion in Section 35G covers questions having a direct and proximate relation to the rate of duty or value of goods for purposes of assessment, and that excisability is intrinsically part of that exercise.

It is trite law that an amendment could be characterized as clarificatory of existing law when the provision it seeks to amend was subject to more than one interpretation. In other words, the provision prior to the amendment was not being interpreted in harmony with the statutory intent without the amendment being read into it.

A determination whether goods are excisable is a necessary precursor to assessment and therefore falls within the expression relating to rate of duty. Reading Sections 35G and 35L together, the statutory scheme is complete and mutually exclusive: what is excluded from the High Court's jurisdiction is channelled to the Supreme Court. The later insertion of Section 35L(2) was held to be merely clarificatory, as it did not create a new right or forum but only made explicit that taxability or excisability was always included within questions relating to rate of duty; consequently, it operates retrospectively. [Paras 43, 45, 46, 47, 53]

The Revenue's remedy against the Tribunal's order lay before the Supreme Court under Section 35L and not before the High Court.

Manufacture of aluminium composite panels- Transformation test - Marketability as distinct goods - Burden to prove marketability - HELD THAT: - The test laid down in J.G. Glass [1997 (12) TMI 110 - SUPREME COURT] was laid down to decipher “manufacture” of goods. In furtherance of the ‘fundamental change’ test and ‘but for the process’ test, this Court in Servo-Med [2015 (5) TMI 292 - SUPREME COURT] tied the application of the tests to marketability of the manufactured goods. This is done so because it is marketability which reflects whether the goods are excisable goods as defined under the Act, 1944.

The dispute between the parties before us primarily lies with respect to the transformation test. It is the case of the appellant that no transformation has occurred and there is no change in the name, character, identity or use as, first, the function and end use of both the ACPs before and after cutting and grooving remains the same. Secondly, cutting and grooving of the ACPs is only for functional purposes.

It is undisputed that the cutting and grooving are undertaken at the premise of the appellant. However, the location at which a such a process is carried out is not much of significance to the question of whether it is manufacturing. The fact that these steps are carried at the appellant’s premises does not elevate them to the level of manufacture. We would also emphasize that merely because an assessee gave the specifications he could not be considered engaged in manufacturing.

There is no doubt that by cutting the ACPs into various sizes and routing them, the ACPs are undergoing a process which brings a change. However, it is only when a change or series of changes result in new and distinct goods that manufacturing is said to take place. At the same time, even if undergoing processing, if goods retain their substantial identity, they would be processed and not manufactured in terms of Section 2(f) of the Act, 1944.

The Court applied the settled two-fold requirement for excisability: emergence of distinct goods with a new identity, character or use, and marketability of the transformed goods as such. On the facts, what entered the process was an aluminium composite panel and what emerged remained the same panel, only cut, grooved and bent for site-specific fixing. These operations merely adapted the goods for installation and did not alter their fundamental identity, character or end-use as cladding or facade material. The subsequent fixing on frames with clamps and sealant was also treated as installation activity, not creation of new goods. The Court further reiterated that marketability is an independent requirement and must be affirmatively proved by the Revenue through objective material showing that the goods are recognized and dealt with in the market as a distinct product. Since no transformation into distinct goods was shown, the question of marketability lost significance in the present case. [Paras 84, 85, 86, 95, 96]

The process undertaken by the assessee did not yield a distinct excisable product, and excise duty was therefore not attracted.

Final Conclusion: The Supreme Court allowed the appeal, held that the High Court had no jurisdiction to decide the Revenue's appeal on excisability, and further held on merits that cutting and grooving aluminium composite panels for site-specific installation did not amount to manufacture. The impugned judgment was accordingly set aside.

Cess on textiles - definition of "manufacture" and its applicability - prohibition on borrowing definition from another taxing statute - limitation under Textile Committee (Cess) Rules, 1975 - High Courtin[2025 (12) TMI 1668 - PUNJAB AND HARYANA HIGH COURT] held that, demands for cess, as issued to independent processing units engaged in dyeing/processing of grey cloth, are set aside: the Central Excise definition of "manufacture" cannot be imported into the Textile Committee Act, and the notices issued in 2000 were time-barred under Rule 10; the Tribunal's nonspeaking order is set aside. - HELD THAT:- Delay was condoned, and the special leave petitions were dismissed as no good ground or reason for interference with the impugned judgment was found.

Vires of Rule 8(3A) of Central Excise Rules, 2002 - low tax effect policy - departmental litigation policy - HC in [2025 (11) TMI 1196 - PUNJAB AND HARYANA HIGH COURT]held that, the departmental appeal was disposed of on account of low tax effect and in light of the Department's litigation policy; the substantive question on the vires of Rule 8(3A) was not adjudicated and is left open for decision in appropriate proceedings. - HELD THAT:- Delay was condoned and the Special Leave Petition was dismissed as no good ground for interference with the impugned order was found.

Limitation for filing the statutory appeal against the Order-in-Original - Commencement of the computation from the date on which the order was actually communicated to the petitioner, Or from the earlier date of dispatch where the postal record showed non-delivery - Rebuttal of presumption of postal service - HELD THAT: - The Court held that the applicable requirement was to compute limitation from the date of communication of the order. Though the order bore a dispatch date and the appellate authority had presumed service in the ordinary course, that presumption could not survive once the Postal Department specifically stated that the article had been returned to the sender with the remark "No Such Person in the address". In such circumstances, dispatch by itself did not establish communication of the order. The postal communication constituted contrary evidence sufficient to displace the presumption of due service. Since the petitioner obtained a copy of the order on request on 04.04.2025, the appeal filed on 04.06.2025 was within three months from the date of communication and had to be treated as filed in time. On that finding, the order dismissing the appeal as time-barred was liable to be set aside and the matter required fresh consideration on merits. [Paras 7, 8]

The finding of limitation recorded by the appellate authority was set aside, and the appeal was directed to be treated as within time and decided on merits on remand.

Final Conclusion: The Court held that, in the peculiar facts of the case, limitation could not be reckoned from the date of dispatch because postal material showed that the order had not been served. The appeal was accordingly treated as filed within time from the date on which a copy was obtained, and the matter was remanded for decision on merits.

Scope of writ challenge- non-payment of the statutory pre-deposit as mandated under Section 35F - Effect of payments under Sabka Vishwas (Legacy Dispute Resolution) Scheme on appellate pre-deposit.

Scope of writ challenge - Relief beyond pleadings - HELD THAT: - The Court found that, though the respondent had questioned the appellate order rejecting the appeal for non-compliance with pre-deposit, there was no prayer in the writ petition challenging the order-in-original. Since the writ challenge was confined to the appellate order, the learned Single Judge exceeded the scope of the proceedings in setting aside the adjudication order itself. [Paras 8, 9]

The order of the learned Single Judge was set aside to the extent it quashed the order-in-original.

Statutory pre-deposit under Section 35F - Effect of payments under Sabka Vishwas (Legacy Dispute Resolution) Scheme on appellate pre-deposit - HELD THAT: - The Court held that the statutory requirement of pre-deposit of 7.5% under Section 35F could not be dispensed with. At the same time, the respondent had specifically contended that the issues covered by the adjudication had already stood settled under the SVLDR Scheme and that amounts paid pursuant to the discharge certificate were sufficient to satisfy the pre-deposit requirement. In the peculiar facts of the case, that contention, along with the merits of the appeal including taxability, required examination by the Appellate Commissioner in a common adjudication, with the result remaining subject to compliance with Section 35F. [Paras 10, 11, 12]

The appellate order rejecting the appeal was set aside and the matter was remitted for fresh consideration of both the pre-deposit contention and the appeal on merits.

Final Conclusion: The writ appeal was allowed in part. The High Court held that the learned Single Judge could not set aside the order-in-original beyond the scope of the writ challenge, and remitted the matter to the Appellate Commissioner to reconsider the appeal, including whether payments under the SVLDR Scheme satisfied the statutory pre-deposit requirement, while keeping compliance with Section 35F intact.

Clubbing of clearances of alleged dummy units - clearances of the alleged sister concerns - clearances without issuing show cause notices to those units - Principles of natural justice in SSI exemption denial - Clandestine manufacture and removal - retracted statements and notebook entries without corroborative evidence - Extended period of limitation based on disclosed returns - Confiscation and penalty under Rule 26.

Clubbing of clearances of alleged dummy units - Natural justice in clubbing proceedings - SSI exemption denial - Clubbing of the clearances of M/s. New Poly Packs, M/s. Veerakumar Traders and M/s. Vee Plast with those of M/s. NSPI, without issuing show cause notices to those units, was held to be legally unsustainable. - HELD THAT: - The Tribunal found that the three units were shown on record as operating from different premises, having separate registrations, bank accounts, power connections and income-tax returns, and therefore their existence could not be brushed aside. Even assuming the Revenue intended to treat them as dummy units, the value of their clearances could not be clubbed with that of the assessee without first putting those units on notice and calling upon them to answer the allegation and establish their independent status. Clubbing undertaken through a one-sided adjudication, without any statutory notice to the units whose clearances were sought to be added, was held to be contrary to principles of natural justice and unenforceable in law. [Paras 25, 26, 27]

The finding ordering clubbing of clearances for the period from March 2008 to June 2012 was set aside.

Retracted statements - Section 9D compliance - Clandestine manufacture and removal - charge of clandestine manufacture and clearance against the assessee - basis of retracted statements, seized notebooks and buyers' statements relied on in the order - HELD THAT: - The Tribunal held that statements relied upon by the Commissioner included statements later retracted, and such retracted statements could not be used against the appellants without proper justification and corroboration from independent evidence. Though the appellants raised non-compliance with section 9D, the Tribunal expressly refrained from returning a ruling on that legal aspect. On the merits of the allegation, the Tribunal found that the notebook entries did not support the case of illicit production, since the comparative figures in the statutory RG-1 and ER-3 returns were higher than the quantities noted in the seized notebooks. The buyers' statements also did not establish clandestine clearances; rather, they indicated supplies by the other units as well. Since no documentary evidence was produced regarding unaccounted raw materials, actual manufacture, transport, delivery, buyers or receipt of sale consideration, the allegation of clandestine manufacture and removal failed. [Paras 30, 31, 32, 33, 34]

The findings sustaining clandestine manufacture and clearance were disapproved and set aside.

Duty demand based on clubbing of clearances - Extended period of limitation based on disclosed returns - duty demand computed by aggregating the clearances of the other units with those of M/s. NSPI, and raised by invoking the extended period on the basis of figures already disclosed in ER-1/ER-3 returns - HELD THAT: - The Tribunal noted that the computation in the show cause notice proceeded by including the clearances of the three units treated as dummy units. Since such clubbing itself was invalid, the demand founded on that aggregation lacked legal basis. The Tribunal further found that the values adopted in the notice were drawn from the assessee's own ER-1/ER-3 returns. Where the relevant data stood disclosed in the statutory returns and remained within the Department's knowledge, there was no basis to allege wilful misstatement, suppression of facts or intention to evade duty. In such circumstances, the larger period of limitation was held to be unavailable. [Paras 35, 36]

The duty demand on the basis of clubbing was held unsustainable, and the extended period of limitation was held not invokable.

Confiscation of seized goods - Absence of proof that goods were non-duty paid - Confiscation of PP rolls seized from the premises of M/s. Thirukumaran Poly Packs - absence of admissible documentary evidence that the goods were non-duty paid. - HELD THAT: - The confiscation order rested on the proprietor's statement and on the absence of invoices, but the Tribunal noted that the statement itself had been retracted and there was no other admissible and relevant documentary evidence establishing that the seized goods were cleared without payment of duty. In the absence of proof that the goods were non-duty paid, confiscation under the rules could not stand. [Paras 37]

The confiscation order and the redemption fine were set aside.

Penalty under Rule 26 - Requirement of goods being liable to confiscation - Personal penalties imposed on the managing partner, partners and purchasers under Rule 26 - allegations of clandestine clearance failed - HELD THAT: - The Tribunal held that penalty under Rule 26 is attracted only where the person has personally dealt with excisable goods knowing or having reason to believe that such goods are liable to confiscation. Since the Tribunal had already disapproved the case of clubbing and clandestine manufacture and had also set aside the confiscation, the necessary condition for imposing penalty under Rule 26 was absent. The personal penalties could therefore not be maintained. [Paras 39, 40, 41]

All personal penalties imposed under Rule 26 were set aside.

Final Conclusion: The Tribunal set aside the impugned order in its entirety. It held that clubbing of clearances without notice to the other units violated natural justice, the allegations of clandestine manufacture and non-duty-paid clearances were not proved, the extended period was not invokable, and the confiscation and personal penalties could not survive.

Applicability of Rule 10A(ii) to works contract goods - steel structures fabricated on job-work - Penalty on co-noticee for dealing with undervalued goods - penalty under Rule 26.

Applicability of Rule 10A(ii) to works contract goods - Principal manufacturer under job-work valuation - HELD THAT: - The Tribunal held that the appellant was not a manufacturer or principal manufacturer, but a contractor executing a works contract. The goods fabricated on job-work were not sold by the appellant after clearance from the job-worker's premises, but were consumed in execution of the contract. Rule 10A(ii) applies where goods produced by a job-worker on behalf of a principal manufacturer are transferred to another place for subsequent sale. Reading the expression sale in Rule 10A with Section 2(h) of the Act, only transfer of possession in the ordinary course of trade or business for consideration would fall within its scope. Use of such goods in execution of a works contract does not amount to such sale. The duty liability, if any, was therefore rightly fastened on the job-worker, and no valuation case under Rule 10A(ii) was made out against the appellant. [Paras 10, 11, 12, 13]

The valuation basis adopted against the appellant under Rule 10A(ii) was held inapplicable.

Penalty under Rule 26 for alleged under-valuation - Absence of evidence of conspiracy - Receipt of goods under proper Central Excise invoices - HELD THAT: - The Tribunal found no evidence supporting the departmental allegation of a pre-planned conspiracy between the appellant and the job-worker. The appellant had received the goods under proper Central Excise invoices and had no reason to believe that appropriate duty had not been discharged by the job-worker. The lower authorities had remained silent on this factual defence, while the duty liability and penalty on the manufacturing side had already been placed upon the main noticee. In these circumstances, the Revenue failed to establish the factual foundation necessary for penalty on the co-noticee. [Paras 11, 13, 14]

The penalty imposed on the appellant under Rule 26 was set aside.

Final Conclusion: The Tribunal allowed the appeal and set aside the order against the appellant. It held that Rule 10A(ii) had no application to goods fabricated on job-work for consumption in execution of a works contract, and that penalty under Rule 26 was unsustainable in the absence of evidence of conspiracy or knowledge of under-valuation.

Entitlement to the concessional rate of tax - amusement rides, swings and jhoola manufactured and sold for amusement parks - Goods for indoor or outdoor games or sports - Common parlance test in taxing entries- Whether the goods manufactured for amusement park would fall within the entry 32 of the notification no. KA. NI-2-306/XI-9 (113)/99-U.P. Act-15-48- Order-(8)-2000 dated 29th January 2001 and are taxable @ 2% as classified items or @ 10% as unclassified items?- HELD THAT: - The Court followed the earlier decision of this Court in the case of Indo Italian Amusement Park Ltd.[2005 (5) TMI 685 - ALLAHABAD HIGH COURT],holding that the notification entry for goods used in indoor or outdoor games or sports has to be understood in its popular and commercial sense. In that sense, such goods connote activities involving skill, rules, competition, or development of mental or physical faculties. Apparatus meant for amusement parks provide recreation or entertainment alone and lack that element. Consequently, amusement rides could not be brought within Entry No. 32 as classified goods, and their sale was rightly treated as sale of unclassified items taxable at the higher rate. [Paras 9, 10]

The assessee's claim to taxation at the lower rate under Entry No. 32 was rejected, and the higher rate applicable to unclassified goods was held to govern the goods in question.

Final Conclusion: The revision was dismissed. The Court held that amusement rides meant for amusement parks are not covered by the notification entry relating to goods for indoor or outdoor games or sports, and are therefore taxable as unclassified goods at the higher rate.