TMI Tax Updates e-Newsletter
Jun 01,2026

GST on actionable claims arising from betting and gambling - Games of skill played with stakes as betting and gambling - Actionable claims as goods under the GST framework - Supply of actionable claims in online gaming and fantasy sports - Valuation of betting and gambling transactions - Validity of Rule 31A, Rule 31B and Rule 31C - Clarificatory and retrospective operation of the 2023 GST amendments - Constitutional limits of legislative and delegated fiscal powers, the scope and operation of the GST framework, and the manner in which traditional legal doctrines are to be applied to technology-driven commercial activities.

Whether activities conducted on online gaming platforms, casinos, betting platforms and allied establishments constitute taxable supplies of actionable claims arising from betting and gambling arrangements ? - HELD THAT: - In Junglee Games [2026 (5) TMI 1821 - SUPREME COURT] this Court, after undertaking an exhaustive examination of the expressions "betting” and "gambling”, the constitutional framework governing Entry 34 of List II and the relevant judicial precedents including RMDC-I, RMDC-II, K.R. Lakshmanan [1996 (1) TMI 336 - SUPREME COURT] and Satyanarayana [1967 (11) TMI 109 - SUPREME COURT], held that "betting” and "gambling” constitute a composite and interchangeable expression referring to the act of staking money or money’s worth upon uncertain outcomes. This Court expressly rejected the interpretation that Entry 34 ought to be read as "betting on gambling”, holding that such construction would be contrary to the constitutional scheme as revealed by the substantive constitutional provisions as well as the legislative heads specified in the entries in the Seventh Schedule thereto. Most significantly, this Court clarified that the determinative factor in betting and gambling is the staking of money upon uncertain outcomes irrespective of whether the underlying activity involves skill, chance or a combination of both. The distinction between games of skill and games of chance becomes relevant only where a statute expressly protects games of skill irrespective of the involvement of stakes. In the absence of such statutory protection, staking upon uncertain outcomes retains the character of betting and gambling. The Court further clarified that the medium, through which the activity is conducted, whether online or offline, is immaterial, since the essential character of the transaction lies in the staking arrangement itself and not in the technological medium through which it is facilitated. Notably, the Court also distinguished between an ‘entry fee’ paid merely to secure participation in a genuine skill-based competition and a ‘stake’ placed upon an uncertain outcome. It was held that in a genuine skill-based competition, the entry fee merely confers a right to participate and is not linked to the uncertain outcome or prize pool. Conversely, in gambling adventures or chance-based competitions, the so-called entry fee itself constitutes the stake amount, since it is paid upon an uncertain outcome and the prize money is intrinsically linked to the pooled stake amounts.

Applying the principles stated in the connected judgment on betting and gambling, the Court held that the determinative element is the staking of money or money's worth on an uncertain outcome, and not whether the underlying activity is one of skill or chance. Once participation in the game is conditioned on stakes and the participant stands to gain more depending on an uncertain result, the transaction acquires the character of betting and gambling. The same principle applies to online gaming and fantasy sports, notwithstanding the technological medium or the presence of elements of skill. [Paras 49, 84]

Online gaming, including fantasy sports, when played for stakes, is betting and gambling under the GST framework.

Actionable claims as goods under the GST framework - Legislative competence under Article 246A - Constitutional validity of levy on actionable claims - HELD THAT: - Before the advent of GST, the exclusive power to levy tax on betting and gambling vested with the States. Such activities were kept outside the ambit of service tax imposed by the Union under the Finance Act, 1994. Section 66D(i) of the Finance Act, 1994 expressly placed "betting, gambling or lottery” within the negative list of services, thereby excluding such activities from the levy of service tax under Section 66B.

It is no doubt true that actionable claims were historically treated as distinct from conventional goods under legislations such as the Sale of Goods Act, 1930. However, such treatment arose within entirely different statutory and juristic contexts governing contracts of sale and transfer of property. The constitutional validity of the GST framework cannot be determined solely by importing rigid classifications evolved under pre-GST commercial legislations enacted for altogether different purposes.

The decision of the Constitution Bench in Sunrise Associates [2006 (4) TMI 118 - SUPREME COURT], assumes significance. The Constitution Bench expressly recognised that actionable claims constitute movable property and "goods” in the wider sense of the term, though historically excluded from the ambit of sales tax legislations by specific statutory exclusion. The Court observed that were actionable claims not otherwise comprehended within the wider conception of goods, there would have been no necessity for their express exclusion under sales tax statutes.

The Court held that Article 246A confers wide legislative power to enact GST laws and that the taxable event under GST is supply. Article 366(12) is inclusive and does not freeze the meaning of goods to pre-GST commercial classifications. In light of the statutory framework and the decisions recognising actionable claims as movable property capable of being treated as goods, Sections 2(52) and 9(1) validly include and tax actionable claims arising from betting and gambling. The levy is on supply of such actionable claims and not a direct tax on betting and gambling as an activity simpliciter. The challenge under Articles 14, 19(1)(g), 21 and 265 was rejected, the Court holding that mere commercial hardship or higher tax incidence does not invalidate fiscal legislation otherwise within competence. [Paras 50, 84]

Once the legislative competence underlying the levy, taxable event and valuation framework is sustained, the Rules framed thereunder, including Rules 31A, 31B and 31C of the CGST Rules, cannot independently be invalidated merely by reiterating the same constitutional challenge directed against the parent levy itself. The validity of such delegated legislation thereafter falls to be examined within the settled parameters governing subordinate legislation, including manifest arbitrariness, inconsistency with the parent enactment, excessive delegation or lack of statutory authority. Those aspects shall be dealt with separately in the subsequent part of this judgment. No constitutional infirmity is otherwise made out so as to warrant interference in exercise of judicial review. The impugned Rules are therefore not liable to be struck down on the constitutional grounds urged against the parent levy and statutory framework.

Sections 2(52) and 9(1), read with the GST scheme taxing actionable claims arising from betting and gambling, were upheld as constitutionally valid.

Supply of actionable claims beyond transfer of pre-existing claims - Organised betting and gambling arrangements as taxable supply - HELD THAT: - The GST regime therefore taxes supplies and not merely traditional transfers of title or conventional sale transactions. Consequently, once actionable claims are expressly included within the definition of "goods”, the expression "supply” under Section 7 must necessarily receive a purposive and expansive interpretation consistent with the constitutional and statutory architecture of GST. Any other restrictive construction would defeat the very architecture of GST and render the levy incapable of addressing modern commercial transactions which do not conform to traditional forms of transfer.

The Court held that GST is a supply-centric regime and Section 7 uses broad and inclusive language. Therefore, taxability is not limited to assignment or transfer of an already existing actionable claim. Once the organised gaming or betting structure gives rise to contingent beneficial interests in movable property upon participation, those interests fall within actionable claims and their supply is taxable under Section 7 read with Entry 6 of Schedule III. The procedural requirements governing transfer of actionable claims under the Transfer of Property Act are not bodily imported into the GST framework. [Paras 51, 52, 84]

Supply of actionable claims under GST includes organised betting and gambling structures in which such claims arise, even without transfer of a pre-existing claim.

Consideration for betting and gambling supplies - Stake amount as transaction value - Valuation of betting and gambling transactions - HELD THAT: - In betting and gambling transactions, the stake amount is paid for the very purpose of participation in the organised betting and gambling framework and for acquisition of the corresponding actionable-claim interest arising therein. Even if, at a particular stage prior to participation crystallising, the amount may retain certain attributes of a refundable deposit, the character of such payment fundamentally changes once the participant is admitted into the betting or gaming arrangement and the amount stands appropriated towards participation in the underlying supply. Upon such appropriation, the payment ceases to retain the character of a mere deposit and forms part of the consideration for the supply involving actionable claims.

The Court held that the definition of consideration in Section 2(31) is of wide import and covers payment made in respect of, in response to, or for the inducement of supply. Participation in betting and gambling is impossible without payment of the stake amount; hence the stake is neither collateral nor incidental but integral to the supply. Once appropriated towards participation, the amount ceases to be a mere deposit and becomes consideration for the supply. There is no statutory basis for deducting winnings, prize pools or payouts from the taxable value, and the statutory measure may validly adopt the full amount entering the betting and gambling framework. [Paras 53, 84]

The full stake amount appropriated towards participation constitutes consideration and enters the valuation mechanism under Section 15.

Validity of Rule 31A - Delegated valuation machinery for betting and gambling - HELD THAT: - The Court held that Rule 31A does not create a new levy or enlarge the charging section but only operationalises the valuation framework inhering in Sections 9 and 15 read with Entry 6 of Schedule III. The rule is traceable to Sections 15(4), 15(5) and 164, and the materials on record showed that it was backed by GST Council recommendations. The prescription of 100% of the face value of the bet as the measure of valuation bears a direct nexus with the taxable supply and is not manifestly arbitrary merely because another valuation method may also be conceivable. Rule 31A is not confined to horse racing; the use of the disjunctive expression covers betting and gambling generally, and the expression "chance to win" refers to the actionable-claim interest supplied, not only to games of chance. [Paras 58, 59, 64, 65, 84]

Rule 31A was upheld as a valid valuation and machinery provision applicable to actionable claims arising from betting and gambling.

Clarificatory and retrospective operation of the 2023 GST amendments - Validity of Rule 31B and Rule 31C - HELD THAT: - The Court found that the pre-amendment regime already taxed actionable claims arising from betting and gambling and that the 2023 amendments did not create a fresh levy or a new taxable event. They were introduced to provide greater statutory specificity and operational clarity for online gaming, online money gaming and casino transactions, and to refine and standardise valuation in those ecosystems. Rules 31B and 31C were held to be valid machinery provisions with a rational nexus to the taxable supply and not violative of Article 14. Since the amendments merely clarify and systematise the existing law, they were held to be retrospective in operation in the manner indicated in the judgment. [Paras 66, 67, 84]

The 2023 amendments and Rules 31B and 31C were upheld as clarificatory, valid and retrospectively applicable.

Supply of actionable claims in online gaming and fantasy sports - Online gaming operators as suppliers - Rule 31B valuation - HELD THAT: - The Court held that when players place stakes, an identifiable pooled fund of movable property comes into existence and each participant acquires a contingent beneficial interest therein. The players do not retain actual or constructive possession over the staked amounts once those amounts are committed to gameplay, and the platform controls deposits, gameplay, outcome determination and disbursal. There is no independent inter se supply between players; the platform creates, structures and administers the entire ecosystem and therefore itself supplies the actionable-claim interest. Fantasy sports were placed on the same footing because the amounts paid are not mere access fees but pooled stakes appropriated towards contingent prize structures dependent on uncertain future outcomes. Consequently, valuation of such transactions is governed by Rule 31B, including in pending proceedings. [Paras 72, 73, 74, 79, 84]

Online gaming and fantasy sports operators were held to be suppliers of actionable claims, and valuation is to be governed by Rule 31B.

Casino transactions under the GST framework - Best judgment valuation - Rule 31C valuation - HELD THAT: - The Court rejected the contention that GST in casino operations is leviable only on gross gaming revenue or net retained earnings, holding that GST is a tax on taxable supply and not on profits. The amount paid for participation in casino gaming enters the taxable framework irrespective of the ultimate profitability or loss of the casino, and chips or tokens are merely the medium through which bets are placed. The Court upheld the Department's authority to resort to Rule 31 and reconstruction or best judgment methodologies where complete contemporaneous records were absent. At the same time, because Rule 31C was held to be clarificatory and retrospective, the actual determination and computation of taxable value in casino cases must be reconsidered by the adjudicating authority in accordance with Rule 31C, leaving factual and computational objections open. [Paras 82, 83, 84]

The challenge to taxability and to the use of best judgment methods failed, but casino valuation and computation were directed to be redetermined in accordance with Rule 31C.

Final Conclusion: The Court upheld the GST levy on actionable claims arising from betting and gambling transactions, including online gaming and fantasy sports played with stakes, and sustained the constitutional and statutory validity of the relevant provisions and rules. The 2023 amendments and Rules 31B and 31C were held clarificatory and retrospective; pending show cause notices and proceedings were directed to be decided accordingly, with casino valuation to be recomputed under Rule 31C. The Karnataka High Court judgment quashing the show cause notices was set aside, the writ petitions and transferred cases were dismissed, and the criminal appeal was allowed to the limited extent indicated.

Efficacious statutory appeal under Section 107 - Maintainability of writ against show cause notice - Principles of natural justice - Excess of jurisdiction -HELD THAT: - The Court held that where a statutory appeal is available, writ jurisdiction is to be invoked only in exceptional situations such as breach of fundamental rights, violation of natural justice, excess of jurisdiction or challenge to vires. In the present case, the petitioner had been served with the show cause notice, chose not to challenge it at that stage, participated in the adjudication proceedings, and a speaking order was thereafter passed upon hearing. On these facts, the Court found no violation of natural justice. The objections raised to the consolidated notice and the adjudicating authority's competence were treated as matters that could be urged before the appellate authority. The Court also relied on the principle that ordinarily no writ lies against a show cause notice and, after the adjudication order, the petitioner had an efficacious remedy of appeal. [Paras 5, 7, 8, 9]

The petitioner was relegated to the statutory appellate remedy, and the writ petition was dismissed as not maintainable.

Final Conclusion: The High Court declined to entertain the writ petition and held that the petitioner must pursue the statutory appeal against the Order-in-Original. As no exceptional ground such as violation of natural justice was made out, the writ petition was dismissed.

Entitlement to restoration of registration - No automatic stay on filing of departmental appeal - Mandatory compliance with unstayed appellate directions -HELD THAT: - The Court held that it was undisputed that the appellate authority had set aside the order refusing revocation of cancellation and had positively directed restoration of the petitioner's registration. Mere filing of a further appeal by the revenue did not operate as a stay of that order, since the statute contained no provision for automatic stay. The revenue's reliance on a subsequent survey to avoid compliance was found arbitrary and unreasonable, because once the registration stood cancelled, it was to be expected that business activity may not continue from the premises until revival. The refusal to restore registration despite the unstayed appellate direction therefore lacked legal sanction. [Paras 10, 11, 12, 13, 14]

The writ petition was allowed and the authorities were directed to revive the petitioner's registration forthwith, subject to the result of the revenue's pending appeal.

Final Conclusion: The Court held that an appellate order directing restoration of GST registration must be implemented unless stayed, and that pendency of the department's appeal does not by itself suspend its operation. The registration was accordingly directed to be restored forthwith, subject to the outcome of the pending departmental appeal.

Entitlement to refunds for earlier periods on the same factual basis as refunds granted and appellate orders accepted for other periods - Discriminatory tax assessment - Consistency in treatment of export services - HELD THAT: - The Court found it undisputed that, on the same set of facts, the revenue had earlier treated the petitioner as an exporter and granted refunds for other tax periods, and that assessment orders for later periods founded on the same factual position had also been set aside in appeal and those appellate orders had been complied with. In the absence of any reason from the respondents to distinguish the impugned period either on facts or in law from the periods for which refund had been granted or adverse assessments had been reversed, the contrary assessment for July 2017-March 2023 was held to be discriminatory and therefore unsustainable. [Paras 4]

The impugned assessment order was quashed with consequential reliefs.

Final Conclusion: The writ petition was allowed. The assessment order for July 2017-March 2023 was set aside as discriminatory because the revenue had taken a contrary and favourable view on the same factual basis for other periods.

Validity of assessment order - Non-service of notice and denial of opportunity of hearing - Violation of natural justice - Valid Service of Notice -Service of notice through registered e-mail and mobile number - HELD THAT: - The Court held that communication of the show cause notice and hearing dates on the common portal and through the registered e-mail address and mobile number satisfied the statutory mode of service. Where the assessee had himself furnished the accountant's contact details at the time of registration, the department could not be faulted for sending notices to those registered particulars, and it remained the assessee's duty to update any change in such details. The Court further held that breach of natural justice is not to be assumed in the abstract; the person complaining must also show resulting prejudice. Since the petitioner had not appeared on either of the two dates fixed for reply and personal hearing, he could not claim prejudice merely because the assessment order was ultimately passed on a date which had not itself been fixed for hearing. [Paras 7, 8, 9, 10, 11]

The challenge to the assessment on the ground of want of opportunity was rejected.

Final Conclusion: The writ petition was dismissed. The Court found no ground for interference with the assessment, holding that service was duly effected on the registered contact details and that no actionable prejudice from the alleged procedural defect had been established.

Composite GST assessment order for multiple tax periods - Separate assessment for each financial year - order violative of the provisions of Section 73 and Section 74 of the G.S.T. Act, 2017

HELD THAT: - Following the earlier Division Bench view of this Court in [2025 (9) TMI 1215 - ANDHRA PRADESH HIGH COURT] the Court held that a single show-cause notice or a single composite assessment order cannot be issued for more than one tax period, and where the due date for filing annual return has been reached, not for more than one year.

As the impugned assessment order covered two financial years, it was set aside on that ground alone, with the other grounds of challenge left open. Fresh proceedings were permitted separately for each assessment year, subject to deposit of 20% of the disputed tax, and the intervening period was directed to be excluded for limitation. [Paras 4, 5, 6, 7, 8]

The composite assessment order covering 2020-2021 and 2022-2023 was set aside, with liberty to initiate fresh proceedings separately for each assessment year.

Final Conclusion: The writ petition was disposed of by setting aside the composite GST assessment order as impermissible for more than one financial year. Liberty was reserved to the respondents to commence fresh proceedings separately for each assessment year, subject to the conditions imposed by the Court.

Denial of effective opportunity of hearing - proceedings initiated under Section 74 - Violation of principles of natural justice - Validity of the adjudication order, where no personal hearing was afforded to the petitioner despite replies having been filed on specified dates - HELD THAT: - The Court found that notices had been issued by the department and did not attribute fault to the respondents for non-participation by the petitioners. Even so, following the principle noticed in Ms Sri Ganesh Sales and the extracted reasoning in Mahaveer Trading Company [2024 (3) TMI 334 - ALLAHABAD HIGH COURT], the Court held that before an adverse order is passed in adjudication proceedings, an opportunity of personal hearing must be afforded. In the circumstances, without entering into the merits of the assessment, the Court considered it appropriate that the petitioners be permitted to file a fresh reply and that the adjudicating authority conclude the proceedings afresh after granting hearing. [Paras 7, 8, 9, 10]

The impugned assessment order was set aside and the matter was remitted for fresh adjudication after receipt of a fresh reply and grant of personal hearing.

Final Conclusion: The writ petition was disposed of by setting aside the impugned assessment order and remitting the matter for fresh adjudication. The petitioners were permitted to file a fresh reply, and the assessing authority was directed to grant personal hearing and pass a fresh order in accordance with law.

Quantification of interest in show cause notice - Demand beyond grounds and amount specified in notice - Scope of statutory interest liability vis-a-vis adjudication notice - HELD THAT: - The Court held that where the authorities were aware of the period in question at the time of issuing the show cause notice, omission to quantify interest in that notice was contrary to the statutory limitation that the amount of tax, interest and penalty demanded in the order cannot exceed what is specified in the notice. The provision making interest payable even if not specified in the order was held inapplicable, since it addresses omission of interest in the adjudication order and not omission in the show cause notice itself. On that construction, the demand of interest in the impugned order could not be sustained. [Paras 8, 9, 10, 11]

The impugned show cause notice and the consequential order were quashed, with liberty to the authorities to issue a fresh show cause notice in accordance with law.

Final Conclusion: The writ petition was disposed of by quashing the show cause notice and the adjudication order, since interest for the period 2020-21 had not been quantified in the notice and could not thereafter be imposed in the order. Liberty was reserved to the authorities to proceed afresh in accordance with law.

Entitlement to a hearing - summons issued under Section 74 - Opportunity of hearing - Principles of Natural justice - HELD THAT:- The petition challenging the search authorisation was disposed of with a direction that the petitioner be granted proper hearing in the proceedings under Section 74 of the U.P. GST Act, and that the departmental report dated 18.02.2026 be taken into account while hearing the petitioner.

Writ jurisdiction against GST adjudication order,passed under Section 73 - Alternative statutory remedy - non-compliance of rules of natural justice - HELD THAT: - The Court held that the petitioner's plea that tax liability stood to be discharged on reverse charge basis, and the supporting documents relied upon for that purpose, were matters requiring examination in appellate proceedings, particularly when those documents had admittedly not been produced before the adjudicating authority. On the objection of breach of natural justice, the Court found that, apart from the show-cause notice, three reminder notices had also been issued. In that view, the challenge did not warrant writ interference, and the petitioner's submissions as to liability and service or posting of notices were left to be tested in the statutory appeal. [Paras 4, 5, 6]

The writ petition was disposed of by relegating the petitioner to the statutory appeal, with protection that an appeal filed within the time granted be entertained on merits without objection as to limitation.

Final Conclusion: The Court declined to entertain the writ petition on merits against the GST adjudication order and directed the petitioner to pursue the statutory appellate remedy. An appeal filed within the period granted was directed to be considered on merits without objection on limitation.

Blocking input tax creditunder Rule 86A(1) - absence of a recorded reason to believe based on relevant material and independent application of mind by the competent authority - HELD THAT: - The Court held that exercise of power to block ITC under Rule 86A requires the competent authority itself to record reasons to believe in writing on the basis of relevant material. A mere recital that action was taken "as per recommendation" of the Superintendent did not satisfy that mandatory jurisdictional requirement and, on the contrary, showed that the authority had acted on dictate without forming its own belief. The material referred to in the counter affidavit and the alert circular could not cure the defect because the impugned order itself disclosed no objective reason or application of mind by the authority passing it. In the absence of such recorded reasons, the statutory remedy of seeking recall would also remain ineffective, since the affected person would be left without any disclosed basis to test the existence or relevance of the belief. [Paras 9, 10]

The impugned order was set aside, with liberty to the competent authority to pass a fresh order in accordance with law and the observations made by the Court.

Final Conclusion: The writ petition was allowed to the extent that the order blocking ITC was held unsustainable for failure of the competent authority to record its own reasons to believe in writing. Liberty was reserved to pass a fresh order strictly in accordance with law.

Cancellation of GST registration - claimed in exercise of extraordinary jurisdiction under Article 226 of the Constitution of India - Bogus or paper transactions - Pendency of return scrutiny and simultaneous cancellation proceedings - HELD THAT: - The Court held that the allegations forming the basis of the show cause notice for cancellation involved disputed questions of fact which could not be examined in writ proceedings and had to be tested on evidence before the statutory forum. It further held that the same allegation of fake supplies could give rise both to proceedings for cancellation of registration and to proceedings relating to tax demand, and mere pendency of scrutiny of returns did not create any legal bar against initiation or continuation of cancellation proceedings. On reading the impugned order, the Court found that registration had not been cancelled merely because proceedings under Section 61 were pending; the order only noticed that those proceedings had not concluded, and no further adverse meaning could be attached to that observation. The Court also held that, unlike A.M. Enterprises vs. State of Himachal Pradesh and Others [2024 (9) TMI 1485 - HIMACHAL PRADESH HIGH COURT], the allegation here was of bogus or paper transactions in the entire supply chain, which was serious enough to justify cancellation proceedings if ultimately proved. For these reasons, the Court declined to pre-judge the merits and refused interference under Article 226, leaving the petitioners to pursue the statutory appeal. [Paras 11, 12, 13, 14, 15]

The writ petitions were not entertained; the petitioners were left to avail the statutory appellate remedy, to be decided uninfluenced by the observations in the order or by pendency of the scrutiny proceedings.

Final Conclusion: The Court declined to interfere with the cancellation of registration in writ jurisdiction, holding that the controversy turned on disputed facts and that pendency of scrutiny proceedings did not bar separate cancellation proceedings founded on allegations of bogus transactions. Liberty was reserved to the petitioners to file a statutory appeal, to be decided expeditiously and without prejudice from the observations made in the order.

Imposition of the tax liability as well as penalty under Section 130 read with Section 122 - Excess stock found during survey - Scope of confiscation proceedings under GST - Jurisdiction to impose tax and penalty on excess stock - HELD THAT: - The Court held that the legal position was no longer in dispute that proceedings for confiscatory action under the GST enactment cannot be invoked where the foundation is only excess stock found at the time of survey. Since the impugned orders determined tax liability and imposed penalty on that very basis, they were beyond the jurisdiction conferred by law and contrary to the binding law already declared.

The impugned orders were set aside and the writ petition was allowed.

Final Conclusion: The High Court held that proceedings leading to tax liability and penalty could not be sustained where they were founded solely on excess stock found during survey. Treating the impugned orders as having been passed in excess of jurisdiction and contrary to the settled legal position, the Court set them aside and allowed the writ petition.

Claim for unpaid bills arising from pre-GST works - sanction and disbursement of payment - interest on delayed payment - HELD THAT:- The writ petition was disposed of with a direction to the petitioner to make a fresh representation on the unpaid bills, including its position regarding GST liability on work executed prior to the GST regime, and to the Executive Engineer to either sanction and disburse payment or communicate the revenue dispute within the time granted.

Availability of statutory appellate remedy before GST Appellate Tribunal - Compliance with pre-deposit condition - HELD THAT: - The Court noted that the writ petition had earlier been entertained because the GST Appellate Tribunal under section 112 was not constituted. After constitution of the Tribunal, appointment of its Members, and notification of the procedural rules, the statutory appellate mechanism had become operational. On that basis, the Court held that no useful purpose would be served in continuing the writ proceedings. Since an appeal under section 112 requires the deposit contemplated by sub-section (8), the Court further directed that any amount already deposited by the petitioner pursuant to the interim order in the writ petition should be treated as compliance with that statutory requirement on production of the interim order and proof of deposit. The appeal, if filed within the time granted by the Court, was directed to be entertained without objection on limitation and to be decided on merits in accordance with law. [Paras 5, 6, 7]

The petitioner was permitted to file an appeal before the GST Appellate Tribunal within the time granted; such appeal was directed to be entertained without limitation objection, and the amount already deposited under the writ order was directed to be treated as compliance with the statutory pre-deposit requirement.

Final Conclusion: The writ petition was disposed of in view of the constitution and operationalisation of the GST Appellate Tribunal, leaving the petitioner to pursue the statutory appeal. The Court protected the petitioner on limitation and directed that the amount already deposited under the writ proceedings be treated as compliance with the required pre-deposit for the appeal.

Reassessment limitation - Exclusion of time for reply u/s 148A(b) - Extension of residual limitation to seven days - scope of fifth and sixth proviso to Section 149

Limitation for issuance of notice u/s 148 where the notice u/s 148A(b) issued near the end of the limitation period and the assessee was granted time, including extended time, to file a reply - HELD THAT: - The Court held that proceedings do not become invalid merely because, on the date of issuance of notice under section 148A(b), seven clear days were not available before the normal limitation date. The statutory scheme permits a minimum of seven days and up to thirty days to file a reply, and the fifth proviso to section 149 expressly requires exclusion of the time or extended time allowed to the assessee under the show-cause notice issued under section 148A(b). The sixth proviso further provides that where, after such exclusion, the remaining period available to the AO does not exceed seven days, that period stands extended to seven days.

Applying this construction, the period from the date of notice u/s 148A(b) till the date of filing of reply had to be excluded; thereafter only seven days were available to the Assessing Officer to pass the order u/s 148A(d) and issue notice under section 148. Since the reply was filed on 21.04.2024, the outer limit was 28.04.2024, and issuance of the order under section 148A(d) and notice under section 148 on 30.04.2024 was beyond limitation. [Paras 20, 21, 22, 23, 24]

The impugned order u/s 148A(d) and the notice u/s 148 were barred by limitation and were quashed.

Final Conclusion: The Court allowed the writ petition and held that although the time allowed to the assessee for replying to the notice under section 148A(b) had to be excluded while computing limitation, the consequential order under section 148A(d) and notice under section 148 were nevertheless issued beyond the extended seven-day period available to the Assessing Officer. Both were accordingly quashed as time-barred.

Validity of penalty u/s 271D - mandation of recording of satisfaction for initiation of such penalty proceedings - Penalty for acceptance of cash loan -Jurisdiction of Joint Commissioner to levy penalty - delay filling SLP

High Court [2024 (10) TMI 1800 - ANDHRA PRADESH HIGH COURT] set aside the penalty imposed under Section 271D on the ground that the assessment order contained neither a finding of violation of Section 269SS nor the Assessing Officer's recorded satisfaction necessary for initiation of such penalty.

HELD THAT:- There is a gross delay of 388 days in filing the Special Leave Petition which has not been satisfactorily explained by the petitioners.

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

Reopening of assessment -Reasons to believe - Survey u/s 133A - Permanent Establishment - Dependent Agent Permanent Establishment - Fixed Place Permanent Establishment - tangible material to form belief - chargeability of business income attributable to PE - reliance on precedent

HELD THAT:- Having heard the learned counsel appearing for the petitioners and having gone through the materials available on record, we do not find any good ground to interfere with the impugned order passed by the High Court [2025 (5) TMI 2058 - DELHI HIGH COURT]

Validity of reassessment proceedings - Time-barred reassessment notices under the pre 2021 and post 2021 regimes - Section 3(1) of TOLA - executive extension of limitation - repeal and substitution of reassessment provisions by the Finance Act, 2021 without savings - proviso to the substituted Section 149(1) not operating as a savings clause - ultra vires notifications issued under TOLA (Notification No. 20/2021 and No. 38/2021) - treatment/conversion of old Section 148 notices as notices under newly inserted Section 148A(b) - Delay filling SLP

HELD THAT:- There is a gross delay of 715 days in filing the Special Leave Petition which has not been satisfactorily explained by the petitioners.

Even otherwise, we see no good ground to interfere with the impugned order passed by the High Court. 2024 (2) TMI 704 - CALCUTTA HIGH COURT]

Special Leave Petition is, accordingly, dismissed on the ground of delay as well as on merits.

TP adjustment for Advertising, Marketing and Promotional (AMP) expenditure - Allocability of brand building expenditure between taxpayer and overseas IPR proprietor - Disallowance u/s 14A of the Incometax Act in absence of exempt income - Use of seized material from noncoincident assessment years for making disallowances - delay in filing the Special Leave Petition

HC confirmed [2024 (12) TMI 772 - DELHI HIGH COURT] Tribunal's findings rejecting transfer pricing/brandbuilding adjustments, declining Section 14A disallowance (in the absence of exempt income), and refusing disallowances based on seized material from prior years are affirmed; the appeals are dismissed.

HELD THAT:- Delay of 384 days in filing the Special Leave Petition which has not been satisfactorily explained by the petitioner.

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

Violation of natural justice in reassessment proceedings - Maintainability of writ against assessment order despite appellate remedy - assessment order challenged in writ jurisdiction passed in breach of natural justice so as to justify bypassing the statutory appellate remedy - HELD THAT: - The Court found that a show cause notice under section 148 had been issued, the petitioner had submitted replies raising legal objections as well as a reply on merits, and the Department's explanation that the relevant documents had been supplied along with the notice was satisfactory. The Court further accepted that the reply sent by the petitioner was considered by the Assessing Authority while finalising the assessment. On that basis, the case was held not to involve any abject denial of natural justice warranting interference under Article 226. In tax matters, where no such procedural violation is made out, the assessee must pursue the statutory appeal against the assessment order. [Paras 13, 14, 15]

The writ petition was held not maintainable in view of the absence of any violation of natural justice and the availability of an efficacious appeal under the Act.

Final Conclusion: The Court dismissed the writ petition, holding that the petitioner had been afforded due opportunity and that the assessment proceedings did not suffer from violation of natural justice. The challenge to the merits of the assessment was left to be pursued before the statutory appellate forum.

Effect of approved resolution plan on pending tax proceedings - Extinguishment of statutory dues under the Insolvency and Bankruptcy Code - Revenue's appeal concerning the assessee for the relevant assessment year to be continued after approval by the NCLT of the sale of the corporate debtor as a going concern under the insolvency proceedings - HELD THAT: - The Tribunal recorded that the assessee had been ordered into liquidation and that thereafter the NCLT approved sale of the corporate debtor as a going concern under the insolvency proceedings.

Applying the principle stated in Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. [2021 (4) TMI 613 - SUPREME COURT] Tribunal held that once the adjudicating authority approves the resolution plan, claims not forming part of that plan stand frozen and extinguished, including statutory dues, and proceedings in respect of such dues for the prior period cannot continue. As the Revenue did not rebut the fact of such approval, the appeal was not maintainable for further continuation in its present form. [Paras 4]

The Revenue's appeal was dismissed, with liberty to file afresh if so considered appealable.

Final Conclusion: Applying the principle that statutory and other claims not forming part of an approved insolvency resolution framework cannot be continued thereafter, the Tribunal dismissed the Revenue's appeal for the relevant assessment year. Liberty was reserved to the Revenue to file afresh if the matter was otherwise appealable.

Addition on account commission @ 1.0% on the gross value of transactions appearing in the bank account -Principle of consistency - Commission agent income estimation - Bank deposits representing consignment sale proceeds -

HELD THAT: - The Tribunal found that, in the immediately preceding assessment year, the Assessing Officer himself had treated the assessee as engaged in consignment sales of Khal Binola and had taxed only commission income at 1% of the gross bank transactions.

For the year under appeal, the Tribunal noted that the facts were identical and that deduction of tax u/s 194H further supported the claim that the assessee had earned commission and that the bank deposits represented consignment sale proceeds on behalf of principals.

On that basis, the Tribunal held that the Commissioner (Appeals) had rightly adopted the same approach and that the principle of consistency, as recognised in Radhasoami Satsang [1991 (11) TMI 2 - SUPREME COURT] and M/S Excel Industries Ltd. [2013 (10) TMI 324 - SUPREME COURT (LB)] supported the view taken. [Paras 6, 7]

The addition was correctly sustained only at 1% of the gross bank transactions and the balance addition was rightly deleted.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the order restricting the addition to 1% of the gross bank transactions. It held that, on identical facts, the consistent treatment adopted in the preceding year as commission income was rightly followed.

Ad hoc disallowance of business expenditure - Allowability of business promotion, petrol and travel expenses - Section 37(1) business purpose test - Disallowance of business promotion, petrol and tour and travel expenses on an estimated basis, on the ground that personal use could not be ruled out - HELD THAT: - The Tribunal held that the assessee had discharged its primary onus by producing ledger accounts, invoices and supporting details for the disputed expenses and by explaining that the expenditure was incurred wholly and exclusively for business purposes. The authorities below neither rejected the books of account nor pointed out any specific defect in the expenditure, and no incriminating material was brought on record to establish personal use, inflation, or that the expenses were bogus or not incurred. In these circumstances, an estimated disallowance merely because complete minutest particulars were not available could not be sustained u/s 37(1). [Paras 5]

The estimated disallowance sustained by the first appellate authority was deleted.

Final Conclusion: The appeal was allowed. The Tribunal deleted the disallowance of business promotion, petrol and tour and travel expenses, holding that the estimate was unsupported by any specific defect or material showing personal or non-business use.

Bogus purchases - Unexplained expenditure u/s 69C - Purchase of steel supported by invoices and e-way bills - HELD THAT: - The Tribunal found that the sole basis for treating the purchases as bogus was the alleged failure of the assessee to prove genuineness and physical delivery. However, the assessee had produced tax invoices, e-way bills, declarations before the Excise and Taxation Department, and bank statements evidencing payment to the supplier.

Tribunal held that these documents discharged the assessee's onus regarding the purchases and movement of goods. It further observed that, when the sales and closing stock were not doubted, no addition for the alleged bogus purchases was warranted; even if the purchases were assumed to be from the grey market, addition as unexplained expenditure was not justified on the facts recorded. [Paras 5]

The addition made on account of alleged bogus purchases was deleted.

Final Conclusion: For Assessment Year 2018-19, the Tribunal held that the addition made in respect of alleged bogus purchases was unsustainable in view of the documentary evidence produced by the assessee and deleted the addition. The impugned order was set aside and the appeal was allowed.

Rectification after grant of immunity u/s 270AA - Statutory finality of assessment on acceptance of immunity - Estimated disallowance of recorded expenditure vis-a-vis unexplained expenditure - Inapplicability of section 115BBE to ad hoc disallowance of booked expenditure

Rectification after grant of immunity under section 270AA - Statutory finality of assessment on acceptance of immunity - Limited scope of rectification jurisdiction - AO power to invoke rectification jurisdiction to alter the tax consequence of the original assessment after having granted immunity under section 270AA on the assessee accepting the assessment without appeal - HELD THAT: - The Tribunal held that section 270AA embodies a statutory arrangement intended to bring certainty and quietus where the assessee accepts the assessment order and foregoes appellate remedy in return for immunity from penalty and prosecution. In the present case, the assessee did not file appeal, the Assessing Officer recorded satisfaction that the statutory conditions were fulfilled, and immunity was granted. Once such order was passed, finality attached to the assessment proceedings. The subsequent action u/s154 was not a mere correction of a patent mistake but an attempt to substantially rewrite the assessment by converting the assessed loss into taxable positive income. Such exercise travelled beyond the narrow scope of rectification and defeated the legislative object of section 270AA. [Paras 15, 16, 17, 19, 20]

The rectification order was without jurisdiction and unsustainable after grant of immunity under section 270AA.

Estimated disallowance of recorded expenditure vis-a-vis unexplained expenditure - Inapplicability of section 115BBE to ad hoc disallowance of booked expenditure - An ad hoc disallowance of expenditure already recorded in the books of account treated as unexplained expenditure under section 69C so as to attract separate taxation and denial of set off under section 115BBE. - HELD THAT: - The Tribunal found that the addition in the original assessment was made purely on estimate at a percentage of expenditure already debited in the profit and loss account. Where expenditure is duly recorded in the books and reflected in the financial statements, it cannot be characterised as unexplained expenditure within the meaning of section 69C, which operates in a different field and applies where the source of expenditure is not satisfactorily explained. At best, the case involved a normal estimated disallowance for want of verification. Since the very basis for invoking section 69C was legally erroneous, the consequential application of section 115BBE in rectification proceedings was also misconceived. [Paras 12, 13, 18, 19, 20]

The addition could not be treated as deemed income under section 69C, and section 115BBE had no application to such estimated disallowance.

Final Conclusion: The Tribunal quashed the rectification order and the appellate order affirming it. It held that, after grant of immunity under section 270AA, the assessment could not be fundamentally altered through section 154, and in any event the ad hoc disallowance of expenditure recorded in the books could not be brought within section 69C read with section 115BBE.

Annual letting value of commercial property - Interest on borrowed capital for acquisition of let-out property - Disallowance u/s 14A in absence of exempt income

Annual letting value of commercial property - Actual rent under genuine lease and amenities agreements - Separate amenity charges in commercial real estate transactions - Enhanced annual letting value determined by discarding the actual rent received under genuine leave and license agreements and by merging separate amenity receipts with rent - HELD THAT: - The Tribunal held that the AO had no cogent material to show suppression of rent, receipt of unaccounted consideration, sham arrangements or artificial deflation of rental income. The assessee had executed registered agreements with independent tenants, separately providing for bare-shell premises and for substantial commercial amenities having independent utility. In such circumstances, the actual contractual rent constituted the best evidence of the amount for which the property might reasonably be expected to let, and hypothetical market perceptions or unspecified local enquiries could not justify substitution of fair market rent. The Tribunal further held that separate receipts for genuine commercial facilities could not automatically be treated as part of house property income merely because they arose in connection with occupation of the premises. [Paras 10, 11, 12]

The deletion of the addition made by enhancing the annual letting value under section 23(1)(a) was upheld.

Interest on borrowed capital for acquisition of let-out property - Deduction u/s 24(b) - Correct statutory provision for lawful deduction - Whether Interest on borrowings used for acquisition of the properties is allowable once the rental income from those properties was itself assessed under the head income from house property? - HELD THAT: - The Tribunal found the assessment approach self-contradictory, since the Revenue taxed income from the very properties u/s 22 and sought to enhance their annual value, yet denied deduction of the borrowing cost incurred for acquiring them. It held that section 24(b) requires utilization of borrowed capital for acquisition, construction or reconstruction of the property whose annual value is assessed, and does not depend on business use of the property. As the assessee had furnished material showing nexus between the borrowings and acquisition of the commercial properties, and there was no finding of diversion for non-income-generating purposes, the disallowance was unsustainable. Tribunal also held that an incorrect claim under another provision could not deprive the assessee of relief otherwise lawfully available on the facts already on record. [Paras 13, 14]

The deletion of the disallowance of interest expenditure was upheld as allowable under section 24(b).

Disallowance u/s 14A in absence of exempt income - Prospective operation of Explanation inserted by Finance Act, 2022 - Rule 8D disallowance - HELD THAT: - The Tribunal held that the absence of exempt income removed the very foundation for invoking section 14A, because expenditure can be disallowed only if incurred in relation to income not forming part of the total income. Where no such income accrued or arose during the year, there could be no corresponding disallowance. It further held that CBDT Circular No. 5 of 2014 could not override the statutory language or binding judicial precedent. On the amendment relied on by the Revenue, the Tribunal accepted that the Explanation inserted by the Finance Act, 2022 operates prospectively and, as stated in the memorandum to the Finance Bill, applies from Assessment Year 2022-23 onwards. [Paras 15, 16]

The deletion of the disallowance u/s 14A read with Rule 8D was upheld.

Final Conclusion: The Tribunal upheld the appellate orders for Assessment Years 2013-14, 2014-15, 2015-16 and 2017-18, holding that the additions towards enhanced annual letting value, the disallowance of interest on borrowed capital, and the disallowance under section 14A were unsustainable. The Revenue's appeals were dismissed.

TDS u/s 194H on trade margins/discounts earned by stockists and distributors on resale of pharmaceutical products - Principal-to-principal sale and trade discount - ESOP perquisite taxation on exercise of option - MSME delayed payment interest and TDS - Assessee in default under section 201

Principal-to-principal sale and trade discount - Section 194H on stockists' margins - Trade margins retained by stockists and distributors on purchase and resale of pharmaceutical products - HELD THAT: - The Tribunal followed the earlier orders in the assessee's own case on identical facts and held that the relationship between the assessee and its stockists was one of principal-to-principal sale and not of principal and agent. The controls regarding quality, regulatory compliance and supply chain in pharmaceutical trade were treated as normal incidents of that business and not as indicators of an agency arrangement. On that basis, the margin retained by stockists was held to be ordinary trading margin arising from resale of goods and not commission within the meaning of section 194H. [Paras 16, 19, 20]

Section 194H was held inapplicable to stockists' trade margins, and the assessee could not be treated as an assessee in default on that count.

ESOP perquisite taxation on exercise of option - Section 192 withholding on ESOPs - Tax deduction at source on ESOPs/ESBPs arises at the stage of grant or accounting recognition or only when the employee exercised the option and the shares were allotted or transferred - HELD THAT: - The Tribunal held that the taxable event under section 17(2)(vi) arises only upon exercise of the option and consequent allotment or transfer of shares. It distinguished between book recognition of employee compensation during the vesting period and accrual of taxable perquisite under the charging provisions. Since the statute fixes taxation at the stage of exercise, the withholding obligation under section 192 could not be fastened at the earlier stage of grant merely because expenditure had been recognized in the accounts. [Paras 17, 19, 20]

No tax was deductible u/s 192 at the stage of grant or accounting recognition of ESOPs/ESBPs.

MSME delayed payment interest and TDS - Section 194A and section 2(28A) - Voluntary disallowance and assessee in default - whether Interest liability on delayed payments to MSMEs did not attract tax deduction at source under section 194A, and voluntary disallowance of such expenditure also precluded treatment of the assessee as in default? - HELD THAT: - The Tribunal held that the liability arising on delayed payment to MSMEs was not interest in respect of moneys borrowed or debt incurred within the meaning of section 2(28A), but arose from delay in payment of sale consideration. It therefore fell outside section 194A. The Tribunal further accepted that, once the assessee had itself voluntarily disallowed the expenditure under section 37(1), there was no basis to invoke section 201 and again treat it as an assessee in default in respect of the same amount. [Paras 18, 19, 20]

Section 194A was held inapplicable to delayed payment interest payable to MSMEs, and the consequential liability under sections 201(1) and 201(1A) was held unsustainable.

Final Conclusion: Following the coordinate bench decisions in the assessee's own case on identical facts, the Tribunal upheld the appellate orders and held that no liability under sections 201(1) and 201(1A) arose in respect of stockists' trade margins, ESOPs/ESBPs at the stage of grant, or delayed payment interest to MSMEs. The Revenue's appeals were dismissed and the assessee's cross-objections were allowed.

Reassessment beyond three years - Sanction u/s 151 - Escaped income threshold u/s 149(1)(b) - Reassessment for the assessment year 2017-18, initiated after three years where the alleged escaped income was only Rs. 5,00,000 - HELD THAT: - The Tribunal held that, on the admitted facts, the order under section 148A(d) was issued after expiry of three years from the end of the relevant assessment year and the alleged escaped income forming the basis of reopening was only Rs. 5,00,000. In such a case, section 149(1)(b) could apply only where the income escaping assessment, represented in the prescribed form, amounted to or was likely to amount to Rs. 50,00,000 or more.

Since that statutory threshold was not met, and nothing on record showed otherwise, the approval u/s 151 was held to have been granted in violation of section 149(1)(b).

Tribunal applied the principle that where notice under section 148 is founded on an invalid sanction, the entire reassessment proceeding is bad in law; accordingly, the assessment under section 147 was liable to be quashed. In view of that legal finding, the addition on merits and the remaining grounds were treated as academic and left unadjudicated. [Paras 7, 8, 9, 10]

The reassessment was quashed as time-barred and founded on invalid sanction, and the consequential addition and other grounds were left unadjudicated as academic.

Final Conclusion: The Tribunal allowed the appeal and quashed the reassessment for AY 2017-18 on the ground that reopening beyond three years, where the alleged escaped income was below the statutory threshold, was contrary to section 149(1)(b) and based on invalid sanction under section 151. The merits of the addition and the remaining grounds were left unadjudicated as academic.

Penalty u/s 272A(1)(d) - non-compliance with notice u/s 142(1) - Reasonable cause u/s 273B - Medical incapacity as defence to penalty

HELD THAT: - Tribunal held that, though the fact of non-compliance with the notices was not disputed, section 273B protects an assessee from penalty where a reasonable cause for such failure is proved. Applying that principle, the Tribunal accepted the assessee's explanation that the failure to respond was attributable to the stated medical condition and was not deliberate or intentional. On that basis, it found that the case was not fit for levy of penalty u/s 272A(1)(d). [Paras 8]

The penalty levied for non-compliance with the two notices was deleted.

Final Conclusion: The Tribunal condoned the short delay in filing the appeal and, on merits, held that the assessee had shown reasonable cause for non-compliance with the statutory notices on account of medical condition. The penalty under section 272A(1)(d) was therefore deleted and the appeal was allowed.

Limitation for show cause notice under Customs Brokers Licensing Regulations - time limit under Regulation 17(1) for issuance of Show cause notice-non-adherence to the prescribed period of ninety days from receipt of the offence report -Whether the timeline prescribed in Regulation 17(1) of CBLR, is mandatory ? - HELD THAT: - The Court held that the question was concluded by binding decisions of the same High Court inA.M. Ahamed & Co. [2014 (9) TMI 237 - MADRAS HIGH COURT] and SHRI. SYED KHALID AHMED [2025 (4) TMI 529 - MADRAS HIGH COURT], which had consistently treated the timeline under Regulation 17(1) of CBLR, 2018 as mandatory, and had held that failure to adhere to that period vitiates the proceedings. In view of that settled position, the respondent's attempt to contend that the provision was only directory, including by relying on a Kerala High Court in M/s.Cargo Care International vs Commissioner of Customs [2024 (12) TMI 753 - KERALA HIGH COURT] decision taking a different view, could not prevail. Since the impugned show cause notice had been issued beyond the prescribed period from receipt of the offence report, it was liable to be set aside, and the inquiry report founded on it also could not survive. [Paras 5, 6, 8]

The impugned show cause notice and the consequential inquiry report were set aside on the limited ground of breach of the mandatory timeline under Regulation 17(1) of CBLR, 2018.

Final Conclusion: Following the binding precedents of the High Court, the Court held that the ninety-day period prescribed in Regulation 17(1) of CBLR, 2018 is mandatory. As the impugned show cause notice had been issued beyond that period, both the notice and the consequential inquiry report were set aside.

Denial of provisional release - misclassification of the imported gloves - non-compliance with labelling requirements and absence of NOC from CDSCO - detention of the goods -Import through notified port under Rule 43A -Requirement of CDSCO NOC for release of goods.

Provisional release of imported Class-A medical examination gloves - Labelling compliance for bulk-packed medical devices - Requirement of CDSCO NOC for release of goods - HELD THAT: - The Tribunal held that the dispute before it was confined to provisional release and not to final classification, particularly when the classification issue was stated to be pending in adjudication and no differential duty or restriction had been shown to arise from that controversy. The goods were undisputedly Class-A devices and the respondent was duly registered. On labelling, the Tribunal accepted the finding that labels were affixed on the bulk packing, noted that re-examination conducted by the department itself showed such labelling, and found that there was no requirement to affix labels on individual gloves imported in bulk. The department's reliance on the test report mentioning absence of labelling on the drawn sample was therefore not accepted. The Tribunal further held that goods could not be withheld merely because CDSCO had not issued NOC once the statutory requirements stood fulfilled, especially when the test report raised no objection except labelling, which had already been answered, and when no evidence was produced to show any real risk to public health from release of these low-risk Class-A goods. [Paras 16, 17, 18, 21, 22]

Denial of provisional release on labelling, CDSCO NOC, or public health grounds was held unsustainable.

Import through notified port under Rule 43A - Port of discharge and inland clearance - HELD THAT: - Affirming the appellate authority, the Tribunal held that where the goods entered India through Nhava Sheva, which was a notified port, and thereafter came to ICD Dadri only for clearance, the restriction under Rule 43A was not violated. The Tribunal followed M/s CC., ICD, TKD, New Delhi versus Roshanlal Aggarwal and Sons Pvt. Ltd. [2009 (2) TMI 577 - CESTAT, NEW DELHI], in which goods imported by sea and entering India through Nhava Sheva were treated as imported through that port. It further observed that, in any event, the alleged port violation could not by itself justify refusal of provisional release or NOC when the other statutory requirements were satisfied. [Paras 19, 20]

The objection based on import through a non-notified port was rejected.

Final Conclusion: The Tribunal upheld the order directing provisional release of the imported goods and rejected all objections founded on labelling, port restriction, and absence of CDSCO NOC. The department's appeal and stay application were dismissed, and release of the goods was directed forthwith.

Classification of goods -Fair opportunity to raise alternative classification - imported solar cells - levy of Safeguard Duty under Notification No.01/2018-Customs (SG) - User test in classification of goods - HELD THAT: - The Tribunal noted that safeguard duty under the notification attached to solar cells falling under heading 8541 or tariff item 85414011. It also noticed the appellant's end-use certificates and the certificate of the scientist showing that the imported solar cells were exclusively meant for satellites, and that there was no contrary material on record rebutting such principal use. Since the question of classification under Chapter Heading 8803 as parts of satellites had not been argued before the adjudicating authority, the Tribunal held that, in the interest of justice, the appellant should be given a fair opportunity to advance that plea and the correct classification should be determined afresh on the basis of the user test indicated in the authorities referred to by it. The Tribunal therefore did not decide the classification on merits and kept all issues open. [Paras 8, 9]

The impugned order was set aside and the matter was remanded for de novo consideration after granting reasonable opportunity of hearing.

Final Conclusion: The Tribunal held that the appellant should be allowed to urge its alternative plea of classification of the imported solar cells as parts of satellites on the basis of their exclusive use, and that the matter required fresh adjudication. The demand order was therefore set aside and the case remanded, with all issues left open.

Application seeking request for conversion of free shipping bills to advance authorisation scheme - Documentary evidence for post-export conversion - Reasonable opportunity -Physical examination at export as condition for conversion -HELD THAT: - The Tribunal held that, after the earlier remand, the only surviving question was whether the claim for conversion was supportable on the documents placed on record. Since the earlier rejection had been on limitation and not on merits, and the remand direction was to verify the documents for deciding entitlement to conversion, the Commissioner could not again reject the request by placing decisive emphasis on absence of physical examination or endorsement at the time of export. The certificates issued by the Central Excise authorities referred specifically to the advance authorisation numbers in question, and the Chartered Accountant's certificate tabulated the import and export details shipping bill-wise. In the absence of any contrary material rebutting those certificates, the Tribunal found no justification to treat lack of physical verification as a disqualifying criterion and accepted documentary verification as sufficient for allowing conversion. [Paras 6, 7, 8]

The rejection of conversion on the sole ground of non-examination of the export goods was not sustainable, and conversion was allowed on the strength of the documentary evidence on record.

Final Conclusion: The Tribunal held that the claim for conversion had to be examined on the documentary material produced and could not be rejected merely because the exports had passed through RMS without physical examination. On the certificates of the Central Excise authorities and the Chartered Accountant, and in the absence of contrary evidence, conversion of the free and drawback shipping bills to the advance authorisation scheme was allowed.

Entitlement to the benefit of Sl. No. 226 of Notification No. 1/2017-Integrated Tax (Rate) - Benefit of concessional rate for LED lights or fixtures including LED lamps - Strict construction of exemption notification on plain meaning of words used -HELD THAT: - The Tribunal held that the dispute turned on the meaning of the word including in the description "LED lights or fixtures including LED lamps". Relying on the Supreme Court in the case of Tamil Nadu Kalyana Mandapam Assn. vs. Union of India [2004 (4) TMI 1 - SUPREME COURT], exposition that "including" is ordinarily a word of enlargement, the Tribunal found no justification for reading the entry restrictively in the manner adopted in the impugned order. On a plain reading, the notification extends to lights and light fixtures, and also to light fixtures including lamps; it does not warrant importing additional words so as to limit the benefit only to fixtures fitted with or containing LED lamps. Applying that interpretation, the imported lighting fixtures were held entitled to the benefit of the notification. [Paras 5, 6, 7]

The benefit of Notification No. 1/2017 at Sl. No. 226 was held admissible and the demand, interest and penalty founded on its denial were set aside.

Final Conclusion: The Tribunal held that the expression used in the notification could not be read restrictively to confine the benefit only to fixtures fitted with or containing LED lamps. The imported lighting fixtures were therefore held eligible for the notification benefit, and the impugned demand, interest and penalty were set aside.

Seeking removal of independent directors and one whole time director on the basis of an alleged irregularity in exercise of voting rights -Requisitioned extraordinary general meeting - Corporate shareholder voting authority - Corporate democracy - challenged the proposed amendment to the Articles of Association of JMNIPL particularly the proposed deletion/dilution of Article 4.1 which vests irrevocable authority in Respondent No.1 to exercise voting rights on behalf of JMNIPL at the general meeting of JPL - HELD THAT: - The Tribunal held that the questions sought to be urged in appeal, including the effect of Article 4.1, the validity of the board resolution changing the authorised representative, and the impact of earlier authorisations, had not been adjudicated by the NCLT and therefore could not be decided for the first time in appeal. At the same time, since the company had itself already initiated the process for convening the EOGM, and having regard to the principle of corporate democracy noticed in LIC of India Vs Escorts Ltd and Others [1985 (12) TMI 289 - SUPREME COURT], the meeting itself was not stayed. However, because the determinative issue concerning the corporate shareholder's voting authority remained sub judice in the pending company petition, the Tribunal directed that implementation of any resolution passed at the EOGM should remain in abeyance till the NCLT decides that petition. [Paras 30, 31]

The EOGM was permitted to be held, but the implementation of any resolution passed therein was ordered to remain in abeyance until disposal of the pending company petition by the NCLT.

Final Conclusion: The appeal was disposed of without staying the requisitioned EOGM. The Tribunal, however, directed that any resolution passed at that meeting would not be implemented until the NCLT determines the pending dispute concerning the holding company's voting authority and related articles.

Binding nature of CoC-approved resolution plan - forfeiture of earnest money deposit for non-acceptance of the letter of intent and failure to submit the performance guarantee - Conditional Letter of Intent - Commercial wisdom of Committee of Creditors - Approbate and reprobate -Estoppel by election - Liquidation before confirmation of resolution plan.

Conditional Letter of Intent - Binding nature of CoC-approved resolution plan - Acquiescence - Approbate and reprobate - HELD THAT: - The Court held that making the letter of intent subject to the outcome of pending judicial proceedings did not introduce any impermissible conditionality, since the final order of the adjudicating forum would in any event govern the process. The minutes of the committee meetings showed that the appellant was fully aware of the pending litigation and of the risk allocation concerning employee and worker claims, and had participated in the discussions without objection. On the record, the appellant had not merely acquiesced but had expressly agreed to those stipulations. Once the resolution plan stood approved by the Committee of Creditors, the successful resolution applicant could not indirectly withdraw from or seek to renegotiate the plan by describing known and accepted stipulations as conditional. The Court therefore treated the objection as an impermissible attempt to renege from a binding plan. [Paras 22, 26, 30, 31, 32]

The objection that the letters of intent were conditional was rejected, and the appellant was held bound by the CoC-approved resolution plan.

Forfeiture of earnest money deposit - Performance bank guarantee - Non-compliance with resolution plan process - HELD THAT: - The Court found that the request for forty-five days to furnish the performance guarantee had been accepted only as a relaxation in the circumstances then prevailing, whereas the governing request for resolution plan prescribed seven days. By the time the third letter of intent was issued, the earlier relaxed period had already run out, and the appellant had still not conveyed acceptance. The minutes further showed that the appellant had agreed to furnish the performance bank guarantee within seven days as prescribed in the request for resolution plan. Clause 1.9.4 expressly permitted forfeiture where the successful applicant failed to submit the performance guarantee within time or committed any other non-compliance with the resolution plan process, and the Court held that the present case fell within that stipulation. The exceptions against forfeiture were held inapplicable because the impugned terms were not additional terms outside the approved plan process. [Paras 24, 25, 33, 34, 35]

The forfeiture of the earnest money deposit was upheld as a consequence of the appellant's failure to comply with the accepted resolution process requirements.

Liquidation before confirmation of resolution plan - Commercial wisdom of Committee of Creditors - Judicial review of CoC decision - HELD THAT: - The Court held that Section 33 expressly permits the Committee of Creditors, before confirmation of a resolution plan, to resolve to liquidate the corporate debtor, and once such decision is duly taken, the adjudicating authority is to act upon it. In the present case, the appellant, after becoming the successful resolution applicant, failed to carry out the obligations necessary to take the plan forward, with the result that the process ran out of time and the Committee of Creditors resolved to liquidate the corporate debtor. The decision was treated as an exercise of commercial wisdom, and no statutory aberration in the process was shown. Since the Code accords primacy to the informed business decision of the Committee of Creditors, the fora below were right in refusing to interfere with the decision to liquidate. [Paras 37, 39, 40, 41, 42]

The approval of liquidation under Section 33 and the rejection of the appellant's challenge were affirmed.

Final Conclusion: The appeals were dismissed. The Court upheld the view that the appellant, having accepted and participated in the CoC-approved process, could not treat the letters of intent as conditional, could validly suffer forfeiture of the earnest money deposit for non-compliance, and could not assail the CoC's decision to liquidate the corporate debtor.

Maintainability of writ petition in presence of statutory appellate remedy - locus standi - Statutory appeal against order of appellate tribunal - HELD THAT: - The Court held that under the Insolvency and Bankruptcy Code, 2016, an order passed by the appellate tribunal is subject to a statutory appeal before the Supreme Court. Since that remedy was available, the Court declined to examine the challenge in writ jurisdiction and left it open to the petitioner to pursue the statutory appellate remedy. [Paras 9, 10]

The writ petition was disposed of with liberty to the petitioner to approach the Supreme Court by way of appeal.

Final Conclusion: The High Court did not adjudicate the merits of the challenge to the appellate tribunal's order. It disposed of the writ petition on the ground of availability of a statutory appeal to the Supreme Court, reserving liberty to the petitioner to avail that remedy.

Scope of the notification and disclosure obligations in merger control under the Act and the Competition Commission of India - statutory limits of the CCI's powers after an approval under Section 31(1) of the Act - Composite notification of inter-connected steps - Penalty for non-notification under merger control - Material omission and false statement in combination notice - Limitation on post-approval combination inquiry - Limitation under the proviso to Section 20(1) - Scope of appellate interference under Section 53T of the Act - Statutory power to suspend merger approval - Natural justice in penal regulatory proceedings.

Whether, on a proper construction of Section 6(2) of the Act read with Regulation 9(4) and Regulation 9(5) of the Combination Regulations, the appellant was required to notify all inter-connected steps and agreements forming the composite transaction in a single notice; and whether its Form I filing met that requirement in substance ? - HELD THAT: - A notice “covering” inter-connected steps for the purposes of Regulation 9(4) of the Combination Regulations ordinarily entails two elements: first, placing the relevant instruments on the CCI’s record; and second, explaining, either in the notice itself or in responses furnished during review, the linkages by which those instruments operate within the composite structure to achieve the ultimate intended effect. Where these elements are satisfied, the CCI is enabled to apply Regulation 9(5) of the Combination Regulations and examine the substance of the transaction, irrespective of the notifying party’s descriptive label.

The Court held that Regulation 9(4) requires a single notice covering inter-connected steps by which the ultimate intended effect is achieved, and Regulation 9(5) requires the transaction to be examined in substance. On the contemporaneous regulatory record, the notice did not present an isolated acquisition step: the FRL SHA, the BCAs, the rights arising from them, and their commercial linkages were placed before the Commission, were queried through RFIs, and were reflected in the approval process itself. Once the relevant agreements and linkages were on record and were operationally intelligible for ex ante assessment, the sufficiency of notice could not be made to depend on the notifying party adopting the regulator's later characterisation of every disclosed arrangement. At most, the dispute was about under-characterisation of disclosed material, not absence of a composite notice. [Paras 157, 158, 159, 160, 161]

The contrary conclusion of the CCI and the NCLAT on the comprehensiveness of notification was unsustainable.

Whether the CCI and the NCLAT were correct in holding that the appellant’s manner of notification and disclosure, including the treatment of the FRL SHA and the BCAs, amounted to a failure to notify the complete combination as required by law, thereby attracting action under Section 43A of the Act ? - HELD THAT: - Section 43A of the Act is a penal provision and must therefore be applied only upon strict satisfaction of its jurisdictional ingredients. Where a notice under Section 6(2) of the Act was filed and the CCI exercised its statutory review culminating in an approval under Section 31(1) of the Act prior to implementation, Section 43A of the Act cannot be expanded to punish a later disagreement on how disclosed material ought to have been framed or emphasised. The Act separately provides for consequences for false statements and material omissions through Sections 44 and 45 of the Act. Section 43A of the Act cannot be converted into an omnibus penalty for every alleged defect in narration.

The Court held that Section 43A is a penal provision whose jurisdictional trigger is failure to give notice under Section 6(2). That provision cannot be expanded into a general penalty for every alleged deficiency in presentation, emphasis, or drafting in a notice that was actually filed and adjudicated. Since the FRL SHA and the BCAs were on the Commission's record, were examined in the same review, and approval was granted before implementation, the matter could not be recast as non-notification in substance. The respondents' case, at its highest, was one of under-emphasis or incomplete characterisation, and such a complaint, if otherwise maintainable, belonged to the field of false statement or omission provisions, not Section 43A. The precedents on substance over form prevent avoidance of prior scrutiny by fragmentation; they do not justify treating a filed and approved notice as no notice merely because the regulator later takes a different analytical view of the same record. [Paras 176, 177, 178, 179, 180]

Action and penalty under Section 43A were held not maintainable on the facts of the case.

Whether the findings of suppression, omission, and misrepresentation recorded against the appellant, including in relation to Item 5.3 and Item 8.8 of Form I and the responses furnished during review, attract the requirements of Section 44 of the Act and Section 45 of the Act ? - HELD THAT: - Since the impugned findings under Section 44 and Section 45 rest in substantial measure upon internal communications of the appellant, it is appropriate to notice the relevant contents of those communications in some detail. The Commission relied upon them to contend that the transaction, though outwardly presented as an investment in FCPL, was internally conceived as a strategic arrangement directed at FRL and its retail business. The appellant, in contrast, argued that the earlier communications related to alternative or exploratory structures, and that the finally executed transaction documents and the notice filed before the Commission constituted the legally relevant record.

Under Section 45(1)(b), the statute requires omission of a material fact, knowing it to be material. Under Section 45(1)(c), the statute requires wilful alteration, suppression or destruction of a document which is required to be furnished. A penal conclusion cannot be sustained on insinuation or on a broad inference of “lack of candour” without a specific finding, supported by reasons, meeting these statutory ingredients. Penalty is not an automatic consequence. It is quasi-criminal in nature and is not ordinarily imposed unless the party acted deliberately in defiance of law or was guilty of dishonest conduct; it must also be noted that a bona fide belief negates penal consequences as held by this Court in Hindustan Steel Ltd. v. State of Orissa [1969 (8) TMI 31 - SUPREME COURT]. A broad inference of “lack of candour”, unaccompanied by a precise finding on falsity, materiality, requirement of disclosure, and the relevant state of mind, is insufficient to sustain penalty under these provisions.

The Court held that Sections 44 and 45 are penal provisions requiring precise identification of the false statement or omitted material, demonstration of materiality to the statutory review, and clear findings on the prescribed mental element. Internal communications relied upon by the Commission were relevant as surrounding material but could not, by themselves, displace the legal significance of the executed agreements, the actual filing, the review responses, and the approval record. Item 8.8 did not oblige production of every internal email or exploratory paper; it had first to be shown that the omitted materials were required to be furnished in the circumstances and that their non-furnishing rendered the filing materially false or incomplete. The approval order itself reflected examination of FRL-related overlaps and retail-market aspects, which undermined the premise that the Commission had been disabled from assessing the FRL-facing dimensions of the transaction. The Commission and the NCLAT conflated internal deliberations and differences in descriptive characterisation with statutory falsity and suppression, without adequately establishing materiality, required disclosure, or the distinct ingredients of Sections 44 and 45. [Paras 213, 214, 215, 216, 217]

The penalties and adverse findings under Sections 44 and 45 were set aside.

Whether, and to what extent, the proviso to Section 20(1) of the Act bears upon the CCI’s authority to initiate and conclude proceedings of the present nature, having regard to the basis on which the show cause notice dated 04.06.2021 was issued and the character of the proceedings which culminated in the order dated 17.12.2021 ? - HELD THAT: - Once it is found that the combination had taken effect by December 2019, and that the show cause notice dated 04.06.2021 was issued after the expiry of one year, the CCI could not, consistently with the proviso to Section 20(1) of the Act, take steps which in substance reopened the combination for a fresh competition review under the guise of proceedings framed under other provisions.

The difficulty in the present case is that, although the proceedings were styled as proceedings relating to the notification and disclosure process, the final directions issued in the order dated 17.12.2021 had the practical effect of reopening the combination for a fresh substantive review. A direction to keep an approval order in abeyance, coupled with a direction to file a fresh notice in Form II, is not a mere ancillary consequence of penal action. It is, in substance, a step towards recommencing the combination review process after the expiry of the statutory period. That is precisely what the proviso to Section 20(1) of the Act forbids.

The Court held that the proviso to Section 20(1) is a jurisdictional limitation ensuring finality after implementation of a combination. On the chronology recorded by the appellant itself, the combination had taken effect by December 2019, whereas the show cause notice was issued in June 2021, beyond one year. Although distinct penal provisions may operate in their own field, they cannot be used to achieve indirectly what Section 20(1) prohibits directly. Directions keeping the approval in abeyance and requiring a fresh Form II notice necessarily contemplate a fresh substantive review of the combination and therefore amount, in substance, to reopening the combination inquiry after expiry of the statutory period. The Act does not create any fraud-based exception to this bar. [Paras 230, 231, 232, 233, 234]

The post-one-year directions seeking to reopen the approved combination were held beyond jurisdiction.

Whether the CCI possessed the statutory power to keep the approval order dated 28.11.2019 in abeyance and to direct the filing of a fresh notice in Form II, and whether such power can be traced to the Act and the Combination Regulations, including Section 45(2) of the Act, Regulation 5(5) of the Combination Regulations, and the condition recorded in the approval order ? - HELD THAT: - It is settled that a power of review is not inherent and must be conferred by statute, either expressly or by necessary implication. In the absence of such conferment, an authority cannot revisit a concluded decision on merits merely because it later prefers a different view. The respondent side relies on broad “fraud vitiates” formulations and on reference to Section 21A of the Act to imply a recall or rescission power. Even assuming that a narrow recall power may exist in some statutory settings, it cannot be exercised to (i) bypass the time-bound finality embedded in the combination regime, or (ii) collapse the Act’s careful separation between penal consequences (Sections 44/45) and merits re-examination of a consummated combination. In the present record, the Approval Order itself demonstrates retail-market assessment and FRL-linked findings, undermining the factual premise that the Commission was disabled from reviewing the retail dimension at the ex ante stage. Even if a narrow recall power exists in cases of proved fraud, it cannot be exercised to override the Act’s time-bound finality and to compel a fresh merger review after the bar contained in the proviso to Section 20(1) has come into operation. And, in any event, it cannot be used when the statutory ingredients of Sections 44/45 are not established on a reasoned finding.

The Court held that the combination control framework is ex ante and that Section 31(1) contemplates approval as the terminal decision on the notified combination, not a provisional approval capable of being placed in suspended animation. No express or necessarily implied statutory power authorises suspension or reopening of an approval after it has been granted and acted upon. Section 45(2), being part of a penal provision concerning furnishing of information, could not be converted into an independent source of substantive review power over approvals under Section 31. Regulation 5(5), as subordinate legislation, could not enlarge the Commission's jurisdiction beyond the Act and was confined to the machinery of ex ante review before approval. Nor could a condition in the approval order create a jurisdiction that the statute itself did not confer. Acceptance of the Commission's position would undermine statutory finality and permit indirect evasion of the bar in the proviso to Section 20(1). [Paras 253, 254, 255, 256, 257]

The directions keeping the approval in abeyance and requiring a fresh Form II filing were held without statutory authority.

Whether the impugned proceedings are vitiated for breach of principles of natural justice, including whether the final findings and directions travelled beyond the show cause notice dated 04.06.2021 and whether the appellant was denied a fair opportunity to meet the case against it ? - HELD THAT: - The show cause notice put in issue the asserted non-notification or defective disclosure in respect of FRL-linked arrangements, including why the FRL SHA was not notified, and framed that case through alleged contradictions and disclosure defaults. The final order, however, went further in both evidentiary reliance and consequence. It kept the approval order in abeyance, compelled a fresh Form II filing, and rested decisive conclusions on internal documents that assumed a sharper and more central role in the final reasoning than was clearly foreshadowed at the notice stage. The latter course, especially the directions concerning approval abeyance and Form II re-filing, required explicit notice because they raised distinct questions of power, limitation, and prejudice.

The Court held that in proceedings entailing serious civil and penal consequences, the show cause notice is the foundation and must clearly convey both the allegations and the action proposed, so that the noticee has a real opportunity to respond. The show cause notice had proceeded on a defined case regarding asserted non-notification or defective disclosure of FRL-linked arrangements. The final order, however, gave central significance to internal communications and also imposed substantive directions of approval abeyance and compelled Form II refiling, which raised distinct issues of power, limitation and prejudice and were not clearly put to the appellant for focused response. Mere filing of replies and grant of hearing did not cure this defect, because the relevant test was whether the appellant had a meaningful opportunity to meet the case that ultimately formed the basis of the adverse findings and directions. [Paras 275, 276, 277, 278, 280]

The proceedings were held procedurally unfair and stood vitiated on that ground as well.

Final Conclusion: The appeal was allowed. The Supreme Court set aside the NCLAT judgment and the CCI order, holding that the statutory conditions for action under Sections 43A, 44 and 45 were not established, that the CCI lacked power to keep the approval in abeyance or compel a fresh Form II filing, and that the proceedings were in any event vitiated by limitation and breach of natural justice.

Proceeds of crime - Provisional attachment of property - Equivalent value property - property acquired prior to the commission of the scheduled offence - Whether Attached flats, parking spaces and agricultural lands could not be excluded from provisional attachment on the plea that they had been acquired prior to the commission of the scheduled offence? - HELD THAT: - The Tribunal found, on the material noticed by the Adjudicating Authority, that the subject properties were purchased during the period of criminal activity and after receipt of funds treated as proceeds of crime; hence the factual foundation of the appellants' sole contention was itself incorrect. It further held that the date of registration of the criminal case was not decisive for this purpose, and the appellants were unable to specify any legitimate source for acquisition of the properties.

Tribunal also declined to follow Seema Garg [2020 (3) TMI 460 - PUNJAB & HARYANA HIGH COURT] holding that in view of the later interpretation in Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT (LB)] as noticed in Dilbag Singh @ Dilbag Sandhu [2024 (11) TMI 833 - PUNJAB AND HARYANA HIGH COURT] the expression proceeds of crime is wide enough to cover property of equivalent value, with the result that even the premise that property purchased prior to the crime period is always immune from attachment could not be accepted. [Paras 20, 21, 22, 23]

The challenge to confirmation of the provisional attachment failed, and the attached properties were held liable to continue under attachment.

Final Conclusion: The Tribunal upheld the confirmation of the Provisional Attachment Order and dismissed both appeals. It held that the appellants' sole plea, that the properties were acquired prior to the crime and therefore lay outside the ambit of proceeds of crime, was contrary to the record and in any event untenable in law.

CENVAT credit on defective input service documents - Burden of proof for admissibility of credit - invoices lacking prescribed particulars and unsupported documents - Doctrine of substantial compliance - Input service nexus after amendment to Rule 2(l) - Adjudication beyond show cause notice.

CENVAT credit on invoices lacking mandatory particulars - Burden of proof under Rule 9 - Fresh verification and disclosure of verification report - HELD THAT: - The Tribunal held that under Rule 9 of the CENVAT Credit Rules, 2004, the burden to establish admissibility of credit and the correctness of the supporting documents rests on the claimant, and defects in the core particulars of the document cannot be treated as inconsequential merely by describing them as procedural. At the same time, on the record of the impugned order there was an apparent inconsistency regarding the extent of invoices produced by the appellant for verification, and the verification report relied on in adjudication had not been furnished to the appellant. In those circumstances, the controversy under Annexures I and II could not be finally sustained on the existing record and the matter required a fresh opportunity to produce all documents, a fresh verification in terms of Rule 9, and furnishing of the verification report so that objections or reconciliation could be made before a reasoned order was passed. [Paras 6, 7, 11]

The demand relating to Annexures I and II was set aside and remanded to the original authority for fresh verification and decision after giving the appellant a final opportunity and supplying the verification report.

Eligibility of input services for output taxable services - Functional and commercial nexus - Exclusions under amended Rule 2(l) - HELD THAT: - The Tribunal held that, even after the amendment to Rule 2(l) with effect from 01.04.2011, credit remained available if the service satisfied the main part of the definition by having a real and sufficient nexus with the provision of output service, so long as it did not fall within the specific exclusions, including services used primarily for personal use or consumption of employees. On the facts recorded, the disputed services, including renovation-related civil works, vehicle hire and repair, sales promotion and customer engagement, membership fees, water and food testing, public performance licence, and insurance of company-owned vehicles, were used in relation to the appellant's taxable output services and were not shown to be for employees' personal consumption. The Tribunal therefore treated them as eligible input services and held that credit thereon could not be denied. [Paras 8, 9, 11]

The demand under Annexures III and IV was set aside and the credit on the disputed input services was allowed.

Adjudication confined to show cause notice - HELD THAT: - The Tribunal held that the adjudicating authority could not confirm demand in respect of courier charges, bank charges, telecommunication charges and consultancy services when there was no averment regarding those services in the show cause notice. The adjudication could not travel beyond the notice, and demands founded outside its allegations were liable to be set aside. [Paras 10, 11]

The demands confirmed beyond the scope of the show cause notice were set aside.

Final Conclusion: The appeal was partly allowed. The demand relating to defective or unverified documents under Annexures I and II was set aside and remanded for fresh verification and reasoned adjudication, while the demand under Annexures III and IV and the demands confirmed beyond the show cause notice were set aside with consequential relief according to law.

Inclusion of reimbursable expenses in taxable value of services - Goods Transport Agency service - demand under reverse charge - absence of evidence of consignment notes - Section 66D of the Finance Act, 1944 - Negative List​​​​​​​ -levy of Service Tax - demand relating to services provided to SEZ units.

Reimbursable expenses - Taxable value of services - HELD THAT: - The Tribunal held that the controversy was no longer open in view of Intercontinental Consultants and Technocrats Pvt. Ltd. [2012 (12) TMI 150 - DELHI HIGH COURT] and Union of India Vs. Intercontinental Consultants & Technocrats (P.) Ltd.[2015 (2) TMI 593 - SC ORDER]. It accepted that, prior to the amendment of Section 67 with effect from 14.05.2015, Rule 5 could not enlarge the taxable value by including reimbursable expenditure as part of the gross amount charged for the service. Since the demand related to December 2008 to December 2009, the tax demand on reimbursable expenses was held to be unsustainable. [Paras 6]

The demand on reimbursable expenses was set aside.

Goods Transport Agency service - Consignment note - Reverse charge liability - HELD THAT: - The Tribunal treated issuance of a consignment note as an essential requirement for classification of the provider as a goods transport agency. As the department had produced no material to establish issuance of consignment notes, and the appellant's case was that the payments were for vehicle hire and not freight, the foundation for the GTA demand failed. Relying on M/s Bothra Shipping Services Vs Commissioner of Central Excise & Service Tax, Visakhapatnam [2025 (9) TMI 1715 - CESTAT HYDERABAD], the Tribunal held that where no consignment note is issued, no GTA service can be said to exist and no demand can be raised on that basis. [Paras 7]

The reverse charge demand on alleged GTA service was set aside.

Services provided to SEZ units - Prior discharge of service tax - Double taxation -HELD THAT: - The Tribunal noted that the appellant did not dispute the exigibility of the service and confined its case to prior payment of tax. Accepting the appellant's consistent stand that the liability had already been discharged, partly when pointed out by the department and partly through regular payment reflected in returns, it held that the same amount could not be demanded again. On that basis, the demand relating to services provided to SEZ units was not sustained. [Paras 8]

The demand concerning services provided to SEZ units was set aside on the ground that the tax had already been paid.

Final Conclusion: The Tribunal set aside the impugned order and allowed the appeal. It held that reimbursable expenses for the pre-14.05.2015 period were not includible in taxable value, the GTA demand failed for want of consignment notes, and the demand relating to services provided to SEZ units could not be repeated after tax had already been discharged.

Limitation for refund of unutilised CENVAT credit under Rule 5 read with Section 11B - Quarterly refund claims relating to export of services - Relevant date as end of quarter of receipt of foreign remittance - Judicial discipline in following Larger Bench decisions - HELD THAT: - After carefully considering the appeal memorandum and bestowing our consideration to the facts and the submissions made by the parties, it is clear that the dispute pertains to the relevant date from which the one-year limitation under Section 11B be computed.

The Tribunal held that the controversy stood covered by the Larger Bench decision in CCE & CST, Bengaluru Vs Span Infotech (India) Pvt. Ltd. [2018 (2) TMI 946 - CESTAT BANGALORE - LB], which had considered the applicability of Section 11B to refund claims under Rule 5 and also noticed the Madras High Court decision in GTN Engineering [2011 (8) TMI 960 - MADRAS HIGH COURT]. Following that reasoning, the Tribunal accepted that, although Section 11B applies, the statutory definition of relevant date does not specifically cover export of services; therefore, in the case of quarterly refund claims, a constructive interpretation consistent with the scheme of export of services requires the limitation to run from the end of the quarter in which the FIRC is received. The Tribunal further held that judicial discipline required a Division Bench to follow the Larger Bench ruling, there being no material to show that it had been modified or set aside. On that basis, the rejection of refund on limitation, insofar as it was founded on the date of export invoice, could not be sustained. [Paras 5, 6, 7]

Refund rejection on limitation based on the export invoice date was set aside, except to the extent of the claim relating to credit notes which was not pressed.

Final Conclusion: The Tribunal held that, for quarterly refund claims of unutilized CENVAT credit on export of services, limitation is to be computed from the end of the quarter in which foreign remittance is received. Accordingly, the impugned order was modified and the refund rejection on limitation was set aside, save for the portion relating to credit notes which was not pressed.

Adjustment of excess service tax payment- benefit of threshold exemption under Notification No. 33/2012-ST - Limitation for service tax demand - CENVAT credit of service tax paid by the MSO - Suppression of Facts -denial for non-compliance with the credit conditions and time limit - penalties and the tax demand for the short-paid period - HELD THAT: - In this case the appellant was registered with the service tax authorities and was also paying the service tax and filing service tax returns also. Undisputedly for the period 2016-17 they have paid service tax and also filed the ST-3 return. However for the period April 2017 to June 2017, appellant did not paid the service tax and did not filed any ST-3 return. Appellant was vide letters dated 27.11.2017, 19.01.2018, 24.05.2018 and 10.08.20-18 was asked to furnish the requisite information which they failed to provide. Thereafter the information was collected from the Commercial Tax officer and the show cause notice was issued to the appellant on 15.04.2019. Since the show cause notice has been issued within the normal period of limitation i.e. within thirty months from the relevant date i.e. date of filing the ST-3 return, the demand is not barred by limitation.

From the record, it is evident that during the period 2016-17 appellant as per the adjudicating authority has paid excess service tax amounting to Rs 2,534 (Rs 252331/- - Rs 249797/-). This excess payment of service tax during the period needs to be adjusted against the tax liability for the subsequent period.

Admissibility of Cenvat credit - No reason to disagree with the findings recorded in the impugned order. The credit have to be allowed strictly as per the provisions of the Cenvat Credit Rules and appellant should have taken the credit within one year from the date of issuance of document against which credit is claimed. In the case of Kusum Ingots & Alloys Ltd.[2000 (7) TMI 108 - CEGAT, NEW DELHI] referred by Authorized Representative appearing for revenue, Tribunal have upheld the denial of credit taken beyond the period prescribed by Central Excise Rules, 1944.

The above view taken by the Tribunal have approved by Hon’ble Supreme Court in the case of Osram Surya Pvt. Ltd. [2002 (5) TMI 49 - SUPREME COURT].

Thus, the benefit of Cenvat credit sought in respect of the documents which are beyond one year from the date of when the claim to CENVAT Credit is made as this goes contrary to Rule 4 of Cenvat Credit Rules.

Final Conclusion: The Tribunal substantially upheld the impugned order, including rejection of the limitation plea and denial of CENVAT credit claimed beyond the prescribed period. However, it held that the excess service tax paid for 2016-17 had to be adjusted against the liability for April 2017 to June 2017.

Taxability of grants-in-aid as consideration - Scientific or Technical Consultancy Service - Extended period of limitation - Whether the grants-in-aid received by Appellant from various Department/Ministries of State Government and Central Government are taxable under the category of ‘Scientific or Technical Consultancy Services’?

Grants-in-aid from Government Departments/Ministries - HELD THAT: - The Tribunal held that the entire demand in this appeal was time-barred. It further found, on the evidence on record and by following the ratio of the decisions noticed by it as well as the order in the appellant's own case for a subsequent period, that the amounts received as grants-in-aid could not be sustained as taxable value for the service in question. On that basis, the demand and consequential penalty were set aside. [Paras 11, 13]

The demand for 2002-2003 to 2005-2006 and the penalties were set aside and the appeal was allowed.

Grants-in-aid from Government Departments/Ministries - Consideration for taxable service - Remand for verification of documentary evidence - HELD THAT: - The Tribunal held that amounts received as grants-in-aid from Government Departments and Ministries cannot be subjected to service tax because they cannot be treated as consideration. It also recorded that documentary proof of the grants-in-aid had been produced with supporting documents. Since the impugned order had nevertheless confirmed the demand, it was found unsustainable; however, the adjudicating authority was directed to verify the evidence, exclude the grant-in-aid component from the taxable value, and then finalize any surviving demand in accordance with law. [Paras 12, 13]

The impugned demand was set aside to the extent it included grants-in-aid, and the matter was remanded for verification and re-quantification, if any.

Final Conclusion: The Tribunal held that grants-in-aid received from Government Departments and Ministries are not taxable as consideration for the service in question. The earlier-period demand and penalties were set aside as unsustainable and time-barred, while the later-period matter was remanded for verification and exclusion of grant-in-aid amounts before reworking any surviving demand.

Statutory limitation for service tax appeal - barred by limitation -Condonation of delay beyond prescribed period - HELD THAT: - The Tribunal held that Section 85(3A) prescribes a period of two months from receipt of the adjudication order for filing appeal, with power to condone delay only within a further period of one month on sufficient cause being shown. Once that statutory outer limit is crossed, the limitation cannot be extended further. The recital in the preamble of the original order indicating a longer period could not enlarge the period of limitation fixed by statute. Applying Singh Enterprises Vs. Commissioner of Central Excise, [2007 (12) TMI 11 - SUPREME COURT], the appeal filed beyond the total permissible period was rightly rejected as barred by limitation. [Paras 5]

The rejection of the appeal as time-barred was upheld.

Final Conclusion: The Tribunal held that the appellate authority had no power to condone delay beyond the additional one month permitted by Section 85(3A). Since the appeal had been filed beyond the total statutory period, dismissal on limitation was sustained.

Condonation of delay - HELD THAT:- Delay in filing the appeal before the Tribunal was condoned, with a direction to the Registry to allot an appeal number and list the appeal in due course.

Refund claims for unutilised Cenvat credit - barred by limitation under Rule 5 - Benefit of Notification No. 27/2012-CE (N.T.) - delayed refund of accumulated Cenvat credit under Section 11BB.

Relevant date for refund limitation - Quarter-wise refund claim under Rule 5 - HELD THAT: - Applying Suretex Prophylactics India Pvt. Ltd.[2020 (5) TMI 225 - KARNATAKA HIGH COURT], the Tribunal held that for refund under Rule 5 read with Notification No. 27/2012-CE (N.T.), the limitation of one year is to be computed from the last date of the quarter for which the claim is filed. Since the claims for October 2012 to December 2012 and April 2016 to June 2016 were filed within one year from the end of those respective quarters, rejection of the balance refund on the ground of time bar was unsustainable. [Paras 7, 8]

The rejected refund amounts for the said two quarters were held to be within time and became admissible, subject to the appellant's accepted recalculation in one appeal.

Interest on delayed refund - Section 11BB on refund of unutilised CENVAT credit - HELD THAT: - Following CCE, Bengaluru Vs. Netapp India Pvt. Ltd. [2019 (3) TMI 1096 - KARNATAKA HIGH COURT], which in turn applied Ranbaxy Laboratories Vs. UOI [2011 (10) TMI 16 - SUPREME COURT], the Tribunal held that delayed refund of unutilised CENVAT credit under Rule 5 attracts interest under Section 11BB after expiry of three months from receipt of the refund application. The Revenue's objection that, in the remanded matters, interest should run only after the Tribunal's remand order was rejected, because the record showed that the claims had originally been filed and the Tribunal had already noted the appellant's assertion that the required original documents had been made available for verification; the later remand was only because the authorities had not verified them and had rejected the entire claim. In those circumstances, interest could not be denied from the original statutory point of accrual. [Paras 9, 10]

Interest was held payable after expiry of three months from the dates of filing of the respective refund claims, including for the refunds sanctioned after remand.

Final Conclusion: The Tribunal held that the refund claims rejected as time-barred were in fact filed within the permissible period reckoned from the end of the relevant quarter, and that interest under Section 11BB was payable on the delayed refunds from expiry of three months from the original dates of filing of the claims. The impugned appellate orders were modified and the appeals were allowed to that extent.

Inter-State sale - Movement of goods outside the State - Validity of registration - Failure to consider material evidence on validity of purchasing dealer's registration - rejection of the claim relating to sales made to outside-State dealers -Concessional rate on inter-State sales against Form-C - HELD THAT: - The Court noted that in the earlier round the matter had already been remanded with a direction to the Tribunal to consider all documents brought on record. The revisionist had placed material, including verification showing that the registrations of the three disputed purchasing dealers remained valid up to 20.6.2017, while the transactions were earlier in point of time. Since the Tribunal, being the final forum on facts and law, did not record any finding on whether those registrations were in existence when the transactions took place, or whether the Form-C declarations had been validly issued, the determination against the assessee on those three transactions could not be sustained without fresh consideration. The matter was therefore required to be reconsidered only to that limited extent. [Paras 13, 14, 15]

The impugned order was modified only in respect of the three dealers, and the matter was remitted to the Tribunal for fresh consideration on the existence of their registration and validity of Form-C at the time of transaction.

Final Conclusion: The revision was partly allowed. The Court modified the Tribunal's order only insofar as it concerned the three disputed outside-State dealers and remitted that limited question for fresh decision after considering the material relating to subsistence of registration and validity of Form-C.

Legislative competence over betting on games of skill - Interpretation of betting and gambling - Res extra commercium - Manifest arbitrariness - Public order - Nomen juris

Interpretation of betting and gambling - Legislative competence over betting on games of skill - Games of skill played with stakes - Entry 34 of List II is not confined to betting on games of chance, and betting on the uncertain outcome of games of skill also falls within the State Legislature's competence. - HELD THAT: - The Court held that the High Courts erred in reading the expression "betting and gambling" as "betting on gambling". Entries in the Seventh Schedule must receive a broad and liberal construction, and the Constitution does not warrant rewriting the text by confining "betting" to gambling alone. The Constituent Assembly Debates showed that the framers intended the States to have power to regulate and even prohibit betting and gambling, including play of rummy for money. The decisions in State of Bombay v. R.M.D. Chamarbaugwala, R.M.D. Chamarbaugwala v. Union of India and Dr. K.R. Lakshmanan v. State of Tamil Nadu & Anr. were held not to have decided the scope of the word "betting" in Entry 34. Those cases distinguished skill-based competitions from gambling in their own statutory settings, but did not lay down that betting on games of skill is outside Entry 34. The Court held that once money is staked on an uncertain outcome with the hope of gain, the activity answers the description of betting and gambling irrespective of whether the underlying game is one of skill or chance. The protection available to games of skill cannot be extended to betting on such games unless the statute itself creates such an exception. [Paras 288, 289, 290, 376, 377]

The State legislatures were competent under Entry 34 of List II to regulate and prohibit betting and wagering on online games even where the underlying game involves skill.

Manifest arbitrariness - Res extra commercium - Proportionality - The impugned Tamil Nadu and Karnataka enactments are neither manifestly arbitrary nor disproportionate. - HELD THAT: - The Court held that, once staking on uncertain outcomes is treated as betting and gambling, the distinction between games of skill and games of chance ceases to be constitutionally decisive for testing the legislation under Article 14. The classification adopted by the States had a rational nexus with the object of curbing addiction, monetary loss and the social consequences of online money gaming. The Court further held that activities falling within betting and gambling are res extra commercium; therefore, no fundamental right can be claimed to carry on such activity, and the occasion for a proportionality inquiry does not arise. The legislations were held to have merely brought all forms of betting and gambling within their scope and not to suffer from any so-called sweeping or artificial definition. The Court also accepted that the Tamil Nadu legislation was supported by material including the Justice Chandru Committee report, surveys and other empirical inputs regarding addiction, mental harm, financial distress and suicides linked to online gaming. [Paras 322, 323, 324, 376, 377]

The challenge based on arbitrariness, Article 19 protection and proportionality failed.

Nomen juris - Statutory definition of gaming - The expression "gaming" has not acquired the status of a nomen juris confined to games of chance, and the Legislature may define it for the statutory purpose. - HELD THAT: - Rejecting the view accepted by the High Courts, the Court held that the Constitution uses the expression "betting and gambling" in Entry 34 and not "gaming". The term "gaming" is a statutory expression whose content varies across enactments and States, and its meaning is therefore fluid rather than fixed. It cannot be treated as a settled legal term restricted to games of chance alone. For the same reason, the inclusion of betting on games of skill within the statutory definition of gaming was held not to be the creation of an impermissible legal fiction or a mere Midas touch. The Legislature was entitled to frame the definition in a manner suited to the object of curbing online betting and gambling. [Paras 328, 329, 331, 376, 377]

The plea that gaming is a nomen juris excluding games of skill was rejected.

Public order - Legislative competence - Online money gaming - Apart from Entry 34, the impugned enactments were also supportable on the State's power over public order. - HELD THAT: - The Court held that "public order" in Entry 1 of List II has wide connotation and includes preservation of public tranquility, public safety, public health-related harm, and social or economic disorder having community-wide impact. Applying those principles, the Court found that online money gaming, through its normalization of betting, large-scale public participation, addiction, financial losses, depression and suicides, affects the community at large and disturbs the even tempo of life. The Statements of Objects and Reasons and the material relied upon by the States showed a proximate nexus between the legislation and the mischief sought to be remedied. The online medium had converted mobile phones into virtual gaming spaces, making the problem pervasive and accessible to the public at large. The Court therefore held that the States could invoke public order, in addition to Entry 34, to sustain the challenged enactments. [Paras 373, 374, 375, 376, 377]

The impugned legislations were also within the States' competence under Entry 1 of List II on the ground of public order.

Final Conclusion: The Supreme Court allowed the appeals, set aside the Madras and Karnataka High Court judgments, and upheld Part II of the 2021 Tamil Nadu Amendment Act, the challenged provisions and Schedule of the Tamil Nadu Online Gambling Act 2022/23, and the challenged provisions of the 2021 Karnataka Amendment Act as intra vires. It held that betting on games of skill is within State competence and that the impugned enactments are not arbitrary or disproportionate.

Negotiable Instruments Act - Dishonour of cheque - existence of a legally enforceable debt or other liability - criminal prosecution or recovery proceedings - Reference to larger Bench - Moratorium under Part III of the IBC - liability of directors under Section 141 - vicarious liability - benefit of moratorium in respect of compensatory liability - effect of personal insolvency or bankruptcy on recovery of compensation - meaning of the term “any debt” appearing in Sections 96 and 101 of the IBC.

Whether the proceedings under Section 138 of the NI Act are in the nature of legal action for recovery of money? - HELD THAT:- The discussion on the predominantly criminal nature and objective of Section 138 of the NI Act was not brought to the attention of the three-Judge Bench of this Court in P. Mohanraj [2021 (3) TMI 94 - SUPREME COURT]. We have held that though proceedings under Section 138 of the NI Act are quasi-criminal, yet the predominant nature of such proceedings is criminal. We have said so after a perusal of the reasons on the strength of which the judgment in P. Mohanraj (supra) described Section 138 as a “civil sheep in criminal wolf’s clothing”. In our considered opinion the three-Judge Bench described Section 138 proceeding inherently civil in nature primarily on the basis of the procedure stipulated under Chapter XVII of the NI Act.

On a plain reading of Section 138 of the NI Act, it is limpid that the offence is the act of cheque dishonour which has been saddled with criminal consequences. The non-payment of the debt to the extent of the cheque amount is the injury caused due to commission of the offence. The principal object of Section 138 is to deter persons from using cheques when they have insufficient balance. The provision of punishment is a measure of deterrence. Therefore, the provision was not intended to be used as a recovery of debt mechanism.

Upon examination of the nature and dual objectives of Section 138, we found it prudent to treat the legal action taken under Section 138 as tiered proceedings. Tier I of the proceeding under Section 138 is without any doubt, criminal and culminates into punishment of either imprisonment, fine or both, if the drawer of the cheque is convicted. Tier I is mandatory in nature unlike Tier II which is dependent upon the discretion of the courts to order compensation. Tier II is the compensatory aspect of Section 138 which causes an inevitable overlap between criminal and civil actions.

Whether the proceedings under Section 138 of the NI Act are protected during the moratorium period provided under Part-III of the IBC? - HELD THAT:- It is imperative to balance between the objectives sought to be achieved by both the legislations. We have attempted to balance the provisions of both the NI Act and the IBC by bifurcating the offence of cheque dishonour into (i) criminal aspect of the offence (Tier I), and (ii) compensatory aspect of the Section 138 proceedings (Tier II).

The criminal aspect of Section 138 proceedings results in punishment including imprisonment, fine or both. This makes it sufficiently clear that moratorium provisions under Part III of the IBC cannot be made applicable on the criminal impact of Section 138 of the NI Act. We have said so because Section 79(15) of the IBC which defines “excluded debts” has excluded the ‘liability to pay fine’ from debts in respect of which legal actions and proceedings are stayed by the operation of moratorium under Part III of the IBC. We are of the view that allowing Section 138 proceedings to enjoy the benefit of moratorium, especially in light of such express exclusion of criminal liability, is not a good law.

The compensatory aspect of Section 138 proceedings and have taken the view that the same is in the nature of a civil remedy that would result in the depletion of the assets of the individual debtor if not stayed. Therefore, we are of the view that the moratorium provisions under Part III of the IBC must be made applicable in respect of recovery of compensation in Section 138 proceedings.

Therefore, operation of moratorium depends upon the stage of the Section 138 proceeding.

Whether director(s) liable under Section 141 of the NI Act would enjoy the benefit of moratorium in respect of Section 138 proceedings, while undergoing personal insolvency? - HELD THAT:- The pecuniary liability of payment of compensation is assumed by the director(s) of the company in the absence of the latter due to a legal impediment. In such a scenario, if the director himself is undergoing insolvency or bankruptcy, depriving him of the benefit of moratorium on the sole ground that the compensatory liability was not his personal obligation, would be detrimental to his interests as well as the interests of the creditors who would benefit from minimal depletion of the debtor’s assets.

The term “any debt” appearing in Sections 96 and 101 of the IBC respectively and made a comparison with the expression “any of his debts” appearing in Section 124 of the IBC. The contra-distinction between the scope and subject matter of the moratorium under different provisions in Part III is necessary as different stages require differential protection standards.

The extension of the benefit of moratorium under Sections 96 and 101 of the IBC respectively to “any debt” irrespective of whether it is the debtor’s personal debt or not is because, at the stage of insolvency proceedings, the objective of staying legal actions and proceedings in respect of any debt is to protect the individual debtor from the enforcement of existing debts.

Thus, the moratorium under Sections 96 and 101 of the IBC respectively is applicable on the director(s) who are saddled with the liability to discharge the compensatory obligation of the company by virtue of the use of the words “any debt” therein. Further, the moratorium under Sections 124 and 128 of the IBC respectively would also stay any suit or legal proceedings against the properties of the debtor, instituted with the purpose of enforcement of the bankruptcy debt.

The matters were referred for consideration by a three-Judge Bench on the questions framed by the Court.

Final Conclusion: The Bench did not finally settle the controversy. Holding that the questions concerning the nature of Section 138 proceedings and the extent to which the moratorium under Part III of the IBC operates upon them required an authoritative pronouncement after considering all aspects, it directed the matters to be placed before the Chief Justice of India for constitution of an appropriate three-Judge Bench.

Enforcement of arbitral award against non-signatories - Persons claiming under the parties - Special purpose vehicle and constituent shareholders - Separate Legal Personality - Lifting of Corporate Veil - Alter Ego Doctrine - Group of Companies Doctrine - HELD THAT: - Once Section 35 and the phrase “any person claiming through or under him” has been interpreted by the Supreme Court to hold that the arbitral award binds every person whose capacity or possession is derived from and is the same as party to the proceedings, leaves no room for interpretation that the petitioners would be persons falling within the phrase “any person claiming through or under”.

The Court held that, unlike an ordinary decree against a company which ordinarily remains executable only against the judgment-debtor company unless grounds for lifting the corporate veil are established, an arbitral award under the Arbitration and Conciliation Act is governed by Section 35, which expressly binds not only the parties but also persons claiming under them. Relying on Cheran Properties Ltd. v. Kasturi & Sons [2018 (4) TMI 1412 - SUPREME COURT] and Cox and Kings Ltd. v. SAP India Private Limited and Anr. [2023 (12) TMI 427 - SUPREME COURT (LB)], the Court held that the expression extends to persons whose capacity or position is derived from and is the same as that of the party to the proceedings. On the material before it, the Court found that the special purpose vehicle had been created by the petitioners for the sole purpose of exploiting the allotted coal blocks for their benefit; its management, finances and operations were entirely sourced from and controlled by them; their officers acted for and on behalf of the special purpose vehicle; and even part of the interim award had been satisfied through funds infused by them. In that factual setting, the special purpose vehicle was held to be inseparable from the petitioners for purposes of execution, and the executing court was justified in proceeding against them under Section 35 read with Section 36 and Order XXI Rule 11 CPC. [Paras 61, 62, 63, 64, 65]

The objections to execution were rightly rejected, and the arbitral awards were held executable against the petitioners as persons claiming under the award-debtor special purpose vehicle.

Final Conclusion: The Court held that the petitioners, though not parties to the arbitral proceedings, were so completely identified with and derived through the special purpose vehicle that the awards were enforceable against them under Section 35 of the Arbitration and Conciliation Act. The challenge to the execution orders failed, and both petitions were dismissed with a direction for expeditious execution.