TMI Tax Updates e-Newsletter
Jun 02,2026

Detention ofthe vehicle and goods in transit - Requirement of transportation documents - Detention on extraneous grounds - HELD THAT: - The Court found, on perusal of the material annexed to the writ petition, that all documents required to accompany the goods during transit were available when the vehicle was detained. Once that position stood established, the detention was held to have been made for extraneous reasons and therefore lacked legal basis. [Paras 3, 4]

The impugned notice and detention order were quashed, with consequential relief directed to follow forthwith.

Final Conclusion: The writ petition was allowed on the ground that the detention of the vehicle and goods was not legally sustainable, as the required transportation documents were available at the relevant time. The impugned notice and order were accordingly quashed.

Service of notice after cancellation of GST registration - show cause notice uploaded only on the GST portal - Violation of principles of natural justice - Validity of an order passed under Section 73 - HELD THAT: - The Court held that once the registration stood cancelled, the petitioner was not obliged to keep checking the GST portal. In such a situation, service of a show cause notice had to be effected by an alternative mode upon the petitioner. Since the impugned proceedings were founded on portal upload alone, there was a breach of natural justice. The Court also expressed agreement with the principle stated in M/s Katyal Industries v. State of U.P. and others [2024 (2) TMI 1447 - ALLAHABAD HIGH COURT]. [Paras 4, 5, 6]

The impugned order was quashed, leaving it open to the Department to issue a proper notice and proceed in accordance with law.

Final Conclusion: The writ petition was disposed of by quashing the order passed under Section 73 on the ground that notice uploaded only on the GST portal, after cancellation of registration, did not constitute adequate service and resulted in violation of natural justice. Liberty was reserved to the Department to issue a proper notice and proceed afresh in accordance with law.

Validity of Cancellation of the allotment of the mandi shop - failure to deposit 50% of the bid amount - Auction allotment- Substantial compliance - Third-party payment on behalf of allottee - HELD THAT: - The Court found that the dispute turned on payment of 50% of the bid amount for the allotted shop. On the material placed before it, the Court held that the remaining amount had been deposited on behalf of the petitioner on the stated dates by respondent no. 4, and that the receiving of those amounts was not disputed by the authority concerned. In that situation, the allotment could not be cancelled on the premise that the petitioner had failed to deposit 50% of the bid amount. [Paras 9, 10]

The impugned cancellation order and the revisional order were set aside, and the authority was directed to allot the shop to the petitioner.

Final Conclusion: The writ petition was allowed. Since the Court found that the required payment had been made on behalf of the petitioner and its receipt was undisputed, the cancellation of allotment was set aside and fresh allotment in favour of the petitioner was directed.

Imposition of general penalty under Section 125, in addition to the late fee payable for delayed filing of annual returns -General penalty vis-a-vis late fee under GST - Residual penalty only in absence of specific penaltyHELD THAT: - The Court found that the controversy stood covered by its earlier decision in Ms. Kandan Hardware Mart Vs. The Assistant Commissioner (ST)(FAC) [2026 (1) TMI 383 - MADRAS HIGH COURT] Relying on the operative portion extracted from that decision, the Court accepted the principle that general penalty cannot be imposed where the statute already contemplates levy of late fee, since the residual penalty provision operates only in the absence of any other penalty under the enactment. On that reasoning, the impugned order was interfered with only to the extent of the general penalty, while the liability to pay late fee was maintained. [Paras 4, 5]

The levy of general penalty was set aside, but the late fee was left undisturbed and directed to be paid within the time granted by the Court.

Final Conclusion: The writ petition was partly allowed. The impugned order was set aside only insofar as it imposed general penalty under the TNGST Act, 2017, while the petitioner was directed to pay the late fee, if not already paid, within the period specified by the Court.

Writ maintainability within condonable appellate period - Limitation objection to proceedings under section 74 - Remand on conditional deposit and production of supporting records.

Writ maintainability within condonable appellate period - Alternative remedy under GST appeal - HELD THAT: - The Court noted that the impugned order was appealable and that an appeal would ordinarily require pre-deposit. It nevertheless held that the writ petition, having been filed within the condonable period available under section 107, could be entertained. The conclusion was reached on the basis that the bar arising from the availability of alternate remedy did not preclude examination of the matter at that stage. [Paras 4, 5]

The objection based on alternate remedy did not bar entertainment of the writ petition.

Limitation objection to proceedings under section 74 - HELD THAT: - The Court recorded that the plea of limitation stood covered against the petitioner by the decision in M/s TATA Ply Limited Vs Union of India [2025 (7) TMI 772 - MADRAS HIGH COURT] Proceeding on that basis, it held that once the case was taken up under section 74, the petitioner was not entitled to assail the jurisdiction of the respondent on the ground of limitation. [Paras 6, 7]

The limitation challenge was rejected.

Remand on conditional deposit and production of supporting records - HELD THAT: - On the petitioner's statement that it was willing to produce all records in support of its defence and to comply with terms safeguarding the revenue, including payment of 10% of the disputed tax, the Court was inclined to remit the matter. The remand was made conditional upon deposit of 10% of the disputed tax within the stipulated time and upon filing documents and evidence in support of the earlier replies, after which the respondent was directed to pass a fresh order. In default, the respondent was given liberty to recover the tax in accordance with law. [Paras 8, 9, 10, 11, 12]

The impugned order was remitted for fresh decision subject to deposit of 10% of the disputed tax and filing of supporting material.

Final Conclusion: The writ petition was entertained, but the petitioner's limitation challenge to the section 74 proceedings was rejected. The matter was nevertheless remitted to the respondent for fresh adjudication, subject to deposit of 10% of the disputed tax and production of supporting records in respect of the replies already filed.

Classification of brake hoses used in two-wheelers and four-wheelers - classifiable under Heading 4009 as tubes, pipes and hoses of vulcanized rubber, or under Headings 8708/8714 as parts and accessories of motor vehicles - HSN explanatory notes - Specific heading based on constituent material and essential character -HELD THAT: - The Appellate Authority held that the product is composed predominantly of vulcanised rubber and that, applying GRI 3(b), the rubber component imparts the product's essential character. The presence of steel fittings and the fact that the hoses are designed for automotive braking systems do not alter their intrinsic identity as hoses of vulcanised rubber, since Heading 4009 expressly covers such hoses with or without fittings. The Authority further found that classification under Section XVII for vehicle parts is unavailable unless all prescribed conditions are satisfied, and in the present case the conditions relating to exclusion under Note 2 and goods being more specifically included elsewhere were not met. It therefore treated the specific material-based heading as prevailing over end-use classification, and also noted that Notification No. 72/93-Cus. and the Tribunal decisions in M/s Track Parts [1991 (5) TMI 260 - CEGAT, NEW DELHI] and Dunlop India Ltd. [1996 (9) TMI 672 - CEGAT CALCUTTA] support classification of brake hoses under Chapter 40. [Paras 8]

The advance ruling classifying the goods under Chapter 87 was set aside, and the product was held classifiable under Heading 4009, attracting GST at 18%.

Final Conclusion: The Appellate Authority allowed the appeal and held that brake hoses, though used exclusively in motor vehicle braking systems, retain their character as vulcanised rubber hoses with fittings and are therefore classifiable under Heading 4009. The applicable GST rate was held to be 18%.

Penalty u/s 271D and 271E - mandation of recording satisfaction to be recorded in the reassessment proceedings by the concerned AO - delay filling SLP

HC [2025 (2) TMI 238 - RAJASTHAN HIGH COURT] held notices and penalty proceedings under Section 271E (and analogous petitions under Section 271D) for Assessment Year 2012-2013, holding that in absence of satisfaction recorded by the Assessing Officer in the reassessment order the penalty proceedings cannot be sustained, in line with Jai Laxmi Rice Mills [2015 (11) TMI 1453 - SUPREME COURT]

HELD THAT:- These special leave petitions are reported to be beyond time by 369 and 356 days respectively. We do not find satisfactory explanation to condone the delay.

Consequently, the special leave petitions are dismissed on the ground of delay.

Validity of orders u/s 143(3) r/w Section 147, 92CA and 144C - instead of a Draft Assessment Order, the Final Assessment Order is passed - whether this Court could accept the respondent's case that the impugned orders are not Final Assessment Orders but Draft Assessment Orders as required u/s 144C

High Court [2025 (6) TMI 2073 - KARNATAKA HIGH COURT] held that the impugned orders for Assessment Years 2009-10 and 2010-11, which simultaneously computed tax, issued demand and initiated penalty proceedings despite a reference to Section 144C, amounted to Final Assessment Orders and were quashed.

Availability of intra-court appeal - Special leave against order of Single Judge

HELD THAT: - The Court held that the impugned order having been passed by the learned Single Judge, and an intra-court appeal being permitted under Section 4 of the Karnataka High Court Act, 1961, the petitioner had an effective appellate remedy before the High Court. On that basis, the Special Leave Petition was dismissed with liberty to file such appeal, and the High Court was directed to consider it on its own merits if filed within the time granted. The Court expressly left the merits of the controversy open. [Paras 2]

The Special Leave Petition was dismissed as the petitioner was relegated to the available intra-court appellate remedy before the High Court.

Final Conclusion: The Court declined to entertain the Special Leave Petition on the ground that an intra-court appeal lay against the order of the learned Single Judge. Liberty was reserved to the petitioner to pursue that remedy, and the merits were left open.

Limitation for reassessment notice - Exclusion of time under fifth and sixth provisos to Section 149 - Deemed date of reply u/s 148A proceedings

Validity of the order u/s 148A(d) and consequential notice u/s 148 on the ground of limitation where the assessee sought adjournments but did not file a reply - HELD THAT: - Applying the principles stated in Shailendra Nath Rai [2026 (5) TMI 1820 - DELHI HIGH COURT] the Court held that the time allowed to the assessee in the notice u/s 148A(b), including the extended time sought by adjournment, had to be excluded for computing limitation under the fifth and sixth provisos to Section 149.

Since no reply was ultimately filed and the assessee's second request for adjournment was declined, the date on which that request was rejected was treated as the deemed date of filing reply.

From that date, the AO had the statutory period available under the sixth proviso, and the order u/s 148A(d) and notice u/s 148 having been issued on the next day were within time. [Paras 6, 7, 8, 9]

The challenge based on limitation was rejected, and the reassessment proceedings were held to be within the prescribed period.

Final Conclusion: The writ petition was dismissed. The Court held that, on exclusion of the period referable to the notice under Section 148A(b) and the adjournments sought by the assessee, the impugned order under Section 148A(d) and notice under Section 148 were issued within limitation.

Rectification of mistake apparent from record - Debatable issue - Deduction under section 80P - Interest from co-operative banks

Rectification u/s 154 invoked to deny deduction claimed on interest earned from deposits with co-operative banks and banks where the taxability of such interest and the availability of deduction under section 80P were matters on which two views were possible - HELD THAT: - The Tribunal held that the foundation of section 154 is the existence of an obvious and patent mistake apparent from the record. In the present case, the controversy was whether interest earned by the assessee, a credit co-operative society, from deposits with co-operative banks was to be assessed as business income or as income from other sources, and whether deduction under section 80P was allowable on such interest. Since the issue itself was shown to be subject to divergent judicial opinion, it could not be treated as a manifest error capable of rectification. A question requiring reasoning where two conceivable views exist falls outside the scope of section 154. [Paras 11]

The appellate order holding that the matter was not amenable to rectification under section 154 was upheld and the Revenue's appeal was dismissed.

Final Conclusion: The Tribunal upheld the order deleting the rectification, holding that the assessee's claim to deduction on interest income from bank deposits involved a debatable issue on which two views were possible. The Revenue's appeal was accordingly dismissed.

Deduction for investment in residential house u/s 54F - Booking of under-construction flat as construction for Section 54F - Substantial payment within statutory period despite delayed registration - ownership of property

Whether Deduction u/s 54F could be denied where the assessee had booked a flat with the builder and made substantial payment within the statutory period, though the registered sale deed was executed after two years from transfer of the original asset? - HELD THAT: - The Tribunal held that Section 54F is a beneficial provision and that, where a flat is booked with a builder and consideration is paid in stages, the transaction can properly fall within the construction limb rather than a simple purchase. In such a case, the three-year period applies, and delayed execution of the sale deed beyond two years does not defeat the claim if the investment in the residential house is made within that period.

The Tribunal further held that, even if the matter is viewed as one of purchase, registration beyond two years is not decisive; what is material is acquisition of substantial domain over the property by making substantial payment within the prescribed time. On the admitted facts, the assessee had booked the flat and paid almost the entire consideration within time, and was therefore entitled to deduction under Section 54F. [Paras 8, 10, 11, 12, 13]

The deduction under Section 54F was held allowable and the orders of the lower authorities denying the claim were reversed.

Final Conclusion: The Tribunal allowed the appeal and held that the assessee was entitled to deduction under Section 54F for the investment in the flat. Denial of the claim solely because the sale deed was registered after two years was unsustainable in the facts found.

Profit attribution to dependent agent permanent establishment [DAPE] - Arm's length remuneration and no further attribution - Grant of refund interest on factual verification

Dependent agent permanent establishment - Arm's length remuneration - Attribution of profits under tax treaty - allowability of further profit attributed to the assessee's dependent agent permanent establishments in India once the transactions with the Indian entities were found to be at arm's length - HELD THAT: - The Tribunal recorded that the assessee did not contest the existence of dependent agent permanent establishment in India and confined the controversy to profit attribution. It found that the transactions between the assessee and the Indian entities had undergone transfer pricing examination and, after appellate relief in the transfer pricing proceedings, stood accepted at arm's length.

Applying the settled principle that where the Indian entity constituting the PE has been remunerated on an arm's length basis taking into account the relevant functions, assets and risks, no further profits remain to be separately attributed to the PE, the Tribunal held that the addition made by attributing profits to the PE was unsustainable. Tribunal also noted that the profit declared by the Indian entity in relation to its transactions with the assessee was higher than the profit attributed by the AO. [Paras 11, 12]

The addition made on account of profit attribution to the Indian PEs was directed to be deleted.

Interest on refund u/s 244A - HELD THAT: - On the claim relating to interest under section 244A, the Tribunal did not undertake a merits determination but directed factual verification of the assessee's entitlement and disposal in accordance with law. [Paras 13]

The Assessing Officer was directed to verify the claim and decide it according to law.

Final Conclusion: The Tribunal held that, the transactions between the assessee and its Indian dependent agent permanent establishments having been accepted at arm's length, no further profit attribution to the PE was permissible and the related addition was deleted. The claim for refund interest was left to factual verification by the Assessing Officer, and the appeal was partly allowed.

Treaty exemption of capital gains under India-Mauritius DTAA - Segregation of capital gains and capital losses under section 90(2) - Carry forward of capital loss against exempt treaty gains

Allowability of Long-term capital loss from sale of shares acquired prior to 01.04.2017 set off against long-term capital gains from sale of shares acquired prior to 01.04.2017, where such gains were exempt in India under Article 13(4) of the India-Mauritius DTAA - HELD THAT: - The Tribunal held that, once the Assessing Officer had accepted that the assessee was a Mauritius tax resident entitled to exemption under Article 13(4) of the treaty in respect of long-term capital gains on shares acquired prior to 01.04.2017, such gains did not enter the computation of total income in India.

Following the co-ordinate Bench decision in the assessee's group company case [2025 (2) TMI 330 - ITAT MUMBAI] it accepted the principle that under section 90(2) the assessee may adopt the treaty for exempt gains and the Act to the extent more beneficial for carry forward of loss, since the treaty cannot be forced to the taxpayer's detriment. The Tribunal further accepted that capital gains and capital losses arising from separate share transactions constitute distinct sources under the same head, and therefore exempt treaty gains could not be reduced by domestic-law set off provisions. On that reasoning, the restriction of carry forward of long-term capital loss after adjusting it against treaty-exempt gains was unsustainable. [Paras 11, 12]

The long-term capital loss was directed to be carried forward without set off against the treaty-exempt long-term capital gains, and the Assessing Officer was directed to recompute the carry forward accordingly.

Final Conclusion: The Tribunal allowed the appeal on the principal issue and held that long-term capital loss could not be adjusted against long-term capital gains exempt under Article 13(4) of the India-Mauritius DTAA. The Assessing Officer was directed to recompute the carry forward of the loss accordingly.

Cost of improvement for making residential house habitable - Exemption for capital gains investment in multiple residential houses under unamended section 54 - Capital Gains Account Scheme deposit u/s 54(2)

Cost of improvement - Habitable condition of newly acquired house - Expenditure incurred on civil and electrical work in the newly acquired residential flat allowability as cost of improvement for making the house habitable - HELD THAT: - The Tribunal found from the material on record, including the interior designer's letter and the invoices produced, that the newly acquired flat was not in a habitable condition when purchased. The expenditure claimed represented civil and electrical works undertaken to render the flat habitable. Since the record did not support the departmental view that the claim related to items not required for habitability, the ad hoc restriction of the claim was held unsustainable. [Paras 6]

The disallowance of the claimed improvement expenditure was directed to be deleted.

Deduction u/s 54(1) and Section 54(2) denied - assessee had already claimed exemption in respect of one house and subsequently invested the balance in multiple properties and the capital gains account scheme -Multiple residential houses under unamended section 54 - HELD THAT: - The Tribunal held that under the unamended provision, the expression a residential house had been judicially interpreted as not being confined to a single residential house. Relying on the jurisdictional High Court decision in Krishnagopal B. Nangpal [2025 (7) TMI 1598 - BOMBAY HIGH COURT] it held that the restriction to one residential house was introduced only prospectively from the amendment effective from 1-4-2015 and could not govern AY 2013-14. Therefore, the reasoning that deduction was exhausted once one house had been acquired was contrary to the governing legal position.

Tribunal further held that the unspent capital gain deposited in the Capital Gains Account Scheme in terms of section 54(2) was not taxable in the impugned assessment year, and any disallowance on account of non-utilisation could arise only after expiry of the stipulated three-year period. [Paras 12, 13, 14, 15]

The assessee's claim for deduction under section 54, including in relation to the Capital Gains Account Scheme deposit and investment in more than one residential property, was directed to be allowed.

Final Conclusion: The Tribunal allowed the appeal in full. It held that the expenditure incurred to make the newly acquired flat habitable was allowable, and that for AY 2013-14 deduction under section 54 could not be denied merely because the capital gains were invested in more than one residential property or kept in the Capital Gains Account Scheme.

Reference to Valuation Officer for reducing fair market value - Cost of acquisition of capital asset as on 01.04.1981 - assessment year prior to the amendment of section 55A

Whether AO could refer the property to the Valuation Officer to reduce the fair market value adopted by the assessee as on 01.04.1981 on the basis of a registered valuer's report for AY 2009-10? - HELD THAT: - The Tribunal held that the year in question being prior to AY 2013-14, the pre-amendment position governing reference to the Valuation Officer applied. On that footing, where the assessee had adopted the value as on 01.04.1981 on the basis of a registered valuer's report, the AO had no authority to invoke such reference for the purpose of reducing that value.

Relying on decision Gauranginiben S. Shodhan Indl. [2014 (2) TMI 78 - GUJARAT HIGH COURT] Tribunal held that the Valuation Officer's report had no relevance in such circumstances and, therefore, the addition made by recomputing long-term capital gains on that basis was not justified. Since this finding concluded the matter, the alternate contention concerning tolerance in sale consideration did not survive for adjudication. [Paras 8]

The addition towards long-term capital gain based on the reduced fair market value determined through the Valuation Officer's route was held unsustainable, and the alternate ground was left unadjudicated.

Final Conclusion: The Tribunal allowed the assessee's appeal and held that, for AY 2009-10, the Assessing Officer could not rely on a reference to the Valuation Officer to reduce the fair market value adopted as on 01.04.1981 on the basis of a registered valuer's report. Consequently, the long-term capital gain addition was deleted, and the alternate contention was not examined.

Validity of reassessment and notice process/procedure -Administrative approval for notice u/s 143(2) - Sanction for reopening under section 151 - Extended reassessment limitation based on entries in seized books - Attribution of seized material found at third-party premises - Unified peak credit in common cash pool - Real income from unaccounted cash ledger entries

Administrative approval for notice under section 143(2) - Validity of assessment proceedings - challenge to the assessment on the ground that notice under section 143(2) was issued before obtaining prior administrative approval - HELD THAT: - The Tribunal noted the departmental clarification that the approval had been communicated through official email prior to issuance of the notice and that the postal receipt of the physical communication was only for record maintenance. On that factual position, the Tribunal held that prior approval had in fact been obtained and the plea that the assessment was void ab initio for want of such approval had no merit. [Paras 30, 31]

The jurisdictional challenge based on alleged absence of prior approval for notice under section 143(2) failed.

Sanction for reopening u/s 151 - Extended reassessment limitation u/s 149(1)(b) based on entries in seized books - mechanical approval u/s 148B - HELD THAT: - On sanction under section 151, the Tribunal found that the specified authority had before it the AO's detailed note and recommendations of supervisory authorities, and, in the absence of contrary material, non-application of mind could not be presumed. On limitation, the Tribunal held that section 149(1)(b) stood attracted because the Assessing Officer possessed books of account or other documents revealing escaped income represented in the form of entries in the books of account of not less than the statutory amount; hence the assessee's objection founded on the meaning of asset did not survive. As regards approval under section 148B, the Tribunal held that the plea had not been raised before the Commissioner (Appeals), was fact-dependent and, even otherwise, no material had been produced to show want of application of mind; it was therefore not admitted and was also found meritless. [Paras 38, 44, 45, 51, 52]

The reopening was sustained; the objections to sanction under section 151, to the extended period under section 149(1)(b), and to approval under section 148B were dismissed.

Attribution of seized material found at third-party premises - Presumption regarding seized documents - Evidentiary value of search statements - relatability of seized handwritten cash books and digital material found at premises not owned by the assessee - HELD THAT: - The Tribunal accepted the findings that key persons of the group had stated on oath that the disputed premises were under the possession and control of the group and were used for keeping group records, and that one of the key employees held the keys and maintained the entries under instructions of the group directors. It also noted that part of the seized material matched accounted bank transactions of the group and that the assessee had itself participated in creation of the digital cash book and correlated entries with survey numbers and buyers. In that background, the objection that the material was seized from third-party premises and therefore could not be used against the assessee was rejected. The allied challenge to the evidentiary value of the statements was also rejected consequentially. [Paras 56, 61, 62]

The additions were not invalid merely because the seized material was found at premises owned by third parties.

‘V A/c’ entries and the unified peak credit doctrine - Unified peak credit in common cash pool - Real income from unaccounted cash ledger entries - Section 69A additions from common cash ledger - acceptable method of determining real income - entire handwritten and digital cash books constituted a single common cash pool of the group and that separate taxation of on-money receipts, V A/c entries and other categories on gross or estimated basis - whether the on-money receipts and V A/c entries were liable to be taxed on a gross basis or had to be recomputed on a unified peak credit basis? - HELD THAT: - The determinative reasoning adopted by the Tribunal was that the Assessing Officer had himself treated the digital cash book as a compendium of common pool cash movement and had already applied peak theory to the overwhelming majority of entries. Once the seized record was accepted as a single chronological ledger of circulating funds, the Revenue could not artificially split entries into separate silos such as on-money, V A/c, VR1 and other heads, grant peak for some entries and tax others on gross or profit-estimate basis. The Tribunal further held that the Revenue could not rely on payment-side entries as real and verifiable for reopening and at the same time disregard them at the computation stage to deny set-off. It also found that the authorities had not dealt with the statements of 24 persons denying payment of on-money, and that several instances demonstrated mismatch between the seized notings and registration records, including cases where the assessee was the buyer, was not the owner, or no corresponding registered transaction existed.

In these circumstances, the only acceptable method of determining real income was a single unified peak computed from a consolidated chronological ledger containing all entries without exclusion. The peak was directed to crystallise wholly in the hands of the present assessee, being the entity in whose hands the Revenue had chosen to assess the common pool. The Assessing Officer was directed to carry forward the closing peak of assessment year 2013-14 as opening peak for assessment year 2014-15, compute the running balance year-wise on the consolidated ledger, tax only the incremental yearly peak, and delete all separate additions made for alleged on-money, separate peaks and V A/c entries.

We find no justification for the artificial segregation of entries emanating from the singular seized cash books i.e. HCB / DCB. The only scientific method to be applied in such a situation is to apply the theory of peak credit. Therefore, the additions sustained on gross basis by the Assessing Officer which have been partially sustained on estimate basis by the Ld. CIT(A) @ 17% for plots / lands and 15% for flats and shops for different years are directed to be deleted. Similarly, the addition made by the Assessing Officer u/s. 69A which have been partly sustained by the Ld. CIT(A) is also directed to be deleted.

Assessing Officer shall compute the peak credit for every year in the manner in which he has already calculated the peak himself for about 97% of the entries. Needless to say the Assessing Officer shall give due opportunity of being heard to the assessee while computing the peak for each year. [Paras 122, 130, 131, 132, 133]

The separate additions sustained by the Commissioner (Appeals) on estimated profit from alleged on-money and on peak or gross basis for other entries were deleted, and the matter was remitted to the Assessing Officer only for recomputation of income on the unified peak credit method after giving opportunity to the assessee.

Final Conclusion: The Tribunal upheld the reassessment and the use of seized material against the assessee, but rejected the separate taxation of alleged on-money, V A/c and other entries on gross or estimated basis. It held that the seized handwritten and digital cash books represented a single common cash pool and directed recomputation only on a unified year-wise incremental peak credit basis in the hands of the assessee, with the assessee's appeals partly allowed for statistical purposes and the Revenue's appeals dismissed.

Penalty u/s 271G - failure to furnish transfer pricing documentation - Survival of penalty after deletion of underlying transfer pricing adjustment

HELD THAT: - The Tribunal noted that the transfer pricing adjustment forming the very basis of the penalty had already been deleted in the quantum proceedings and that such deletion stood affirmed by the Tribunal. Once the foundation for the penalty proceedings was wiped out, there remained no basis to sustain penalty u/s 271G on the same alleged transaction. On that reasoning, the appellate order deleting the penalty was affirmed, and the other legal and factual pleas raised by the assessee were treated as academic. [Paras 5]

The Revenue's challenge to deletion of penalty failed, and the penalty was held unsustainable.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld deletion of the penalty under section 271G, holding that the penalty could not survive once the underlying transfer pricing adjustment had been deleted. The assessee's cross-objection was dismissed as infructuous since its further grounds had become academic.

TP adjustment on intra-group services - Determination of arm's length price at Nil - Application of prescribed benchmarking method - Shareholder services and benefit test - Transfer pricing adjustment in respect of GHO non-IT services, GHO IT services and RHO services availed from associated enterprises

HELD THAT: - The Tribunal held that the controversy stood concluded in favour of the assessee by the decisions in the assessee's own case for earlier assessment years in AY 2017-18 [2022 (9) TMI 146 - ITAT AHMEDABAD] and 2018-19 [2022 (10) TMI 1288 - ITAT AHMEDABAD] which had subsequently been affirmed by the Gujarat High Court [2024 (3) TMI 1544 - GUJARAT HIGH COURT]

It noted that even the DRP had accepted that the issue was identical to the earlier years and had sustained the adjustment only to keep the matter alive in further appeal. Following the earlier view, the Tribunal accepted that once actual receipt of intra-group services and business nexus were demonstrated, the TPO could not determine the arm's length price at Nil merely on the basis of perceived lack of benefit, duplication or characterization of some functions as shareholder activities. The High Court-approved principle applied by the Tribunal was that transfer pricing adjustment for such services is not tenable without applying one of the prescribed benchmarking methods, and the ALP cannot be fixed at Nil without any comparable uncontrolled analysis. [Paras 19, 20, 21, 25, 26]

The entire transfer pricing adjustment on intra-group services was held unsustainable and was directed to be deleted.

Final Conclusion: Grounds challenging the validity of assessment were dismissed as not pressed. The transfer pricing adjustment on intra-group services for A.Y. 2021-22 was deleted in full by following the binding decisions in the assessee's own case as affirmed by the Gujarat High Court, and the appeal was partly allowed.

TDS u/s 192 - Assessee bank treated as an assessee in default for not deducting tax at source - TDS on leave travel concession payment - Binding effect of subsisting interim court directions

Whether assessee bank could be treated as an assessee in default for not deducting tax at source on leave fare concession or leave travel concession payments made to employees during assessment years 2016-17 and 2017-18 despite subsisting interim directions of the Madras High Court? - HELD THAT: - The Tribunal held that, for the period in question, there was a subsisting legal embargo created by the interim directions of the Madras High Court [2022 (7) TMI 291 - MADRAS HIGH COURT] on the bank's circular and on deduction of tax from the impugned LFC or LTC payments. It accepted that, so long as those interim directions governed the field, the bank was prevented from deducting tax, and any such deduction during the currency of the interim relief would have amounted to acting contrary to the court's order. Relying on the Kerala High Court decision in State Bank of India v. CIT [2025 (11) TMI 1773 - KERALA HIGH COURT] and the co-ordinate Bench decision [2025 (4) TMI 44 - ITAT AGRA], the Tribunal concluded that the bank could not be fastened with default liability under section 201 on account of such non-deduction. The same reasoning was expressly applied mutatis mutandis to the appeal for assessment year 2017-18. [Paras 5, 7]

The assessee bank was not liable to be treated as an assessee in default for the impugned non-deduction of tax at source, and the grounds in both appeals were allowed.

Final Conclusion: The Tribunal allowed both appeals and held that, in view of the subsisting interim directions of the Madras High Court governing the relevant period, the assessee bank could not be treated as an assessee in default for non-deduction of tax at source on the impugned LFC or LTC payments.

Prospective operation of amended section 115BBE - Surrendered income in survey conducted before amendment - Tax rate on surrendered income found in pre-amendment survey - enhanced rate under section 115BBE application to surrendered income arising from a survey conducted before the amendment took effect, even though the matter related to assessment year 2017-18 - HELD THAT: - The Tribunal held that the controversy stood covered by binding precedents of the jurisdictional High Court in Shri Krishna Kumar Verma [2024 (3) TMI 1018 - MADHYA PRADESH HIGH COURT] and Sandesh Kumar Jain [2022 (11) TMI 126 - ITAT JABALPUR],Samir Shantilal Mehta [2023 (5) TMI 1279 - ITAT SURAT] and M/s. Punjab Retail Pvt Ltd [2021 (11) TMI 405 - ITAT INDORE]. It accepted the principle that the amendment enhancing the tax rate under section 115BBE is substantive and operates prospectively, and therefore income surrendered in a survey conducted prior to the amendment could be taxed only under the then prevailing rate. Since the survey in the present case was conducted on 22.09.2016, the Revenue was not justified in applying the special enhanced rate under section 115BBE to that surrendered income. [Paras 6, 7, 8, 9]

The application of the enhanced rate under section 115BBE was held unsustainable, and the Assessing Officer was directed to delete the impugned addition.

Final Conclusion: The appeal was allowed. The Tribunal held that the enhanced rate under section 115BBE was not applicable to income surrendered in a survey conducted before the amendment and directed deletion of the impugned addition.

Validity of reassessment proceedings without issuing notice u/s 143(2) -assessee filed a return in response to notice u/s 148 - HELD THAT:- The Tribunal held that the Revenue's stand that no notice u/s 143(2) was required because the return filed in response to notice under section 148 was belated and treated as invalid could not be accepted.

Following the jurisdictional High Court decision in PCIT Vs. Staunch Marketing Pvt. Ltd.[2017 (8) TMI 249 - DELHI HIGH COURT] and Anil Aggarwal (HUF)[2025 (7) TMI 1987 - ITAT DELHI] it held that once a return is filed in response to notice under section 148, issuance of notice under section 143(2) is mandatory before completing the assessment. Since no such notice had been issued before completion of reassessment, the assessment was bad in law and void ab initio. [Paras 8, 9]

The reassessment for A.Y. 2017-18 was quashed for non-issuance of mandatory notice under section 143(2), and the remaining grounds were left open as academic.

Final Conclusion: The Tribunal quashed the reassessment for A.Y. 2017-18 on the ground that no mandatory notice under section 143(2) had been issued after the assessee filed a return in response to notice under section 148.

Maintainability of writ petition despite the availability of an alternative statutory remedy - violation of natural justice and jurisdictional objections - Penalty under Section 114AA - Non-consideration of the objections raised by the petitioner - Non-application of mind to objections -HELD THAT: - The Court held that though a statutory appeal was available, writ interference was justified where the order suffered from recognised exceptions to the rule of alternative remedy, including violation of natural justice and lack of jurisdiction. The objections filed by the petitioner specifically challenged the very invocation of the penalty provision and were therefore required to be considered by the adjudicating authority. On examining the order, the Court found that it merely recorded the petitioner's role and concluded that penalty was leviable, but did not disclose any consideration of the objections raised. Such failure to deal with material objections amounted to non-application of mind and rendered the opportunity afforded ineffective, warranting interference and remand without adjudication on the merits of the penalty controversy. [Paras 4, 6, 7, 8]

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

Final Conclusion: The Court entertained the writ petition notwithstanding the availability of an appellate remedy, since the impugned order did not consider the petitioner's material objections, including the objection bearing on jurisdiction to impose penalty. On that ground, the order was set aside and the matter was remanded for fresh adjudication.

Maintainability of appeal under Section 130of the Customs Act- seeking for exemption from payment of Special Additional Duty of Customs by relying upon Notification No.102/2007-Cus - proper appellate forum -Direct appeal to Supreme Court under Section 130E - HELD THAT: - The Court held that where the dispute turns on the applicability of an exemption notification governing levy of Special Additional Duty, the question bears a direct and proximate relation to the rate of duty applicable for purposes of assessment. Applying the test laid down in Navin Chemicals Mfg. and Trading Co. Ltd. v. Collector of Customs [1993 (9) TMI 107 - SUPREME COURT], the Court held that such questions fall outside the appellate jurisdiction of the High Court under Section 130 and are appealable only to the Supreme Court under Section 130E. Since the CESTAT order in the present case determined entitlement to exemption under Notification No.102/2007-Cus, the proper appellate forum was the Supreme Court and not the High Court. [Paras 10, 12, 13]

The appeal was closed as not maintainable before the High Court, leaving it open to the department to approach the Supreme Court.

Final Conclusion: The High Court held that the dispute concerning refund based on applicability of the exemption notification directly related to the rate of duty for assessment and, therefore, the appeal from the CESTAT order lay only to the Supreme Court under Section 130E. The departmental appeal before the High Court was accordingly closed with liberty to approach the Supreme Court.

Absence of show cause notice under customs demand proceedings - Violation of principles of natural justice - HELD THAT: - The Court confined itself to the limited question whether a show cause notice had preceded the impugned proceedings. Although the respondents asserted that a notice had been issued, they were unable to produce any acknowledgement of service or show any reference in the impugned order to such notice. The order itself referred only to the pre-notice consultative memo. In these circumstances, the Court held that the respondents had failed to establish issuance of the requisite notice and that the impugned proceedings could not stand. The impugned order was therefore treated as a show cause notice, with liberty to the petitioner to file objections, to be considered after affording reasonable opportunity of hearing. [Paras 5, 6]

The impugned order was set aside for want of proof of issuance and service of show cause notice, and the matter was directed to proceed from the stage of reply to the order treated as a show cause notice.

Final Conclusion: The writ petition was disposed of by setting aside the impugned adjudication order on the limited ground that the respondents failed to establish issuance and service of a show cause notice. The petitioner was permitted to treat the impugned order as a show cause notice and file objections for fresh consideration in accordance with law.

Classification of goods - Alkyl Ketene Dimer (AKD Wax) - classifiable under CTH 34049090 Or CTH 29141990 - differential duty demand and related confiscation - Extended period under the proviso to Section 28 - Suppression or wilful misstatement - Confiscation of goods already cleared for home consumption - Penalties imposed on the Customs House Agent and the company officer under Section 112(a).

Classification of Alkyl Ketene Dimer (AKD Wax) - Separate chemically defined organic compounds - Prepared waxes - HELD THAT: - The Tribunal found that the live consignment test report recorded waxy characteristics, dropping point and viscosity consistent with the HSN explanatory notes relating to Heading 3404. It further noted that the product, derived from fatty acids and imported in pale-yellow waxy flake form for paper sizing and finishing use, did not answer the description of a separate chemically defined organic compound falling under Chapter 29. On the technical characteristics, commercial identity and functional use disclosed in the record, the goods were more appropriately classifiable as prepared waxes under Heading 3404. [Paras 15, 16, 17, 18]

Classification under Chapter Heading 34049090 was upheld.

Extended period for differential duty in classification dispute - Departmental acceptance of classification - Suppression and wilful misstatement - HELD THAT: - The Tribunal held that the goods were consistently declared as AKD Wax and the Bills of Entry had been scrutinized by Customs over a long period, including cases of examination and testing. Since the Department had itself accepted classification under Chapter 29 over several years, including the period prior to self-assessment when classification was made by Customs officers, the allegation of suppression or wilful misstatement could not be sustained. Relying on M/s. Nexus Electro Steel Ltd. vs. CCE, Puducherry, [2018 (5) TMI 479 - CESTAT CHENNAI] and M/s. Raghav Industrial Products vs. Principal Commissioner of Customs (Import), ICD, TKD, New Delhi [2019 (5) TMI 2024 - CESTAT NEW DELHI], the Tribunal held that retrospective invocation of the extended period on the same known facts was impermissible. The earlier interim order in assessee's case [2015 (4) TMI 848 - CESTAT CHENNAI], was also noticed as showing the dispute to be one of competing tariff interpretation rather than deliberate deception. [Paras 21, 22, 23, 24, 25]

The demand was confined to the normal period under Section 28(1) with applicable interest, and the demand for the extended period was set aside.

Confiscation of goods already cleared for home consumption - Confiscation of live consignment - HELD THAT: - The Tribunal noted that, except for the live consignment detained under the specified Bill of Entry, the earlier imported goods were no longer available, having already been cleared for home consumption. Following Finesse Creations Inc. vs. Commissioner of Customs [2009 (8) TMI 115 - BOMBAY HIGH COURT], confiscation in respect of such cleared goods was held unsustainable. However, confiscation of the live consignment under Section 111(m) and the redemption fine imposed thereon were maintained. [Paras 26]

Confiscation of earlier cleared goods was set aside, while confiscation and redemption fine in respect of the live consignment were upheld.

Penalty for abetment of misclassification - Evidence of conscious knowledge or deliberate abetment - HELD THAT: - Having found that the dispute arose in the context of a classification previously accepted by the Department for several years and that the ingredients of suppression or wilful misstatement were not established, the Tribunal held that penal consequences could not follow. It found no material establishing conscious participation, collusion or deliberate abetment by the Customs House Agent or the Chief Operating Officer so as to attract penalty under Section 112(a). On the same reasoning, penalties imposed on the importer company were also not sustainable. [Paras 26]

All penalties imposed on the appellants were set aside.

Final Conclusion: The Tribunal upheld classification of Alkyl Ketene Dimer (AKD Wax) under Chapter Heading 34049090, but held that the extended period was not invocable since the earlier classification had been openly and consistently accepted by the Department. Differential duty was therefore restricted to the normal period with interest; confiscation was sustained only for the live consignment, while confiscation of earlier cleared goods and all penalties were set aside.

Rejection of the declared transaction value of imported apples - parallel invoices, overseas verification, insurance documents, e-mails and statements - Retracted statements and independent corroboration - Cross-examination and natural justice - determination of value, demand of differential duty, confiscation and penalties, including penalty on the co-appellant -Extended limitation for suppression of value

Transaction value under customs valuation - Undervaluation based on unproven parallel invoices - Retracted statements and independent corroboration - Cross-examination and natural justice - HELD THAT: - The Tribunal held that transaction value is the primary basis of valuation and can be displaced only by cogent and legally admissible evidence showing that the declared price was not the price actually paid or payable. The alleged parallel invoices were unsigned computer-generated documents whose origin and authenticity were not proved; the overseas verification reports were selective, lacked correlation with the specific consignments, and were not subjected to cross-examination; insurance values could not be equated with transaction value; and the e-mails were unauthenticated. The Department also failed to establish any financial flowback, extra remittance or other proof of additional consideration. Since the statements relied upon had been retracted at the earliest opportunity and remained uncorroborated, and cross-examination of the makers of the relied-upon material was denied, the evidentiary foundation of undervaluation failed. Following National Fruits Agency v. Commissioner of Customs (Export), Chennai [2016 (3) TMI 509 - CESTAT CHENNAI], and applying the principle that suspicion cannot replace proof, the Tribunal held that the declared value could not be rejected. [Paras 9]

The rejection of transaction value was set aside.

Consequential redetermination of assessable value - Confiscation for misdeclaration of value - Penalty on importer for alleged undervaluation - Penalty on abettor under customs law - HELD THAT: - The Tribunal held that once the rejection of transaction value failed, the very foundation for re-determination under the valuation rules also collapsed. It further found that the adjudicating authority had not followed the mandatory sequential application of the valuation rules and had not produced reliable evidence of contemporaneous imports at higher values. In the absence of a valid redetermination, the differential duty demand could not survive, and confiscation for misdeclaration of value also failed because undervaluation itself had not been established. Penalty on the importer, being consequential to proof of undervaluation and suppression, was therefore not sustainable. As regards the penalty on the alleged abettor, the Tribunal found no independent, cogent or corroborative evidence of abetment, and held that mere association or correspondence with the importer was insufficient. Relying on National Fruits Agency v. Commissioner of Customs (Export), Chennai [2016 (3) TMI 509 - CESTAT CHENNAI] and Hindustan Steel Ltd. v. State of Orissa [1969 (8) TMI 31 - SUPREME COURT], the Tribunal held that in the absence of proof of deliberate act, knowledge or mens rea, the penalties could not be sustained. [Paras 10]

The re-determination of value, demand, confiscation and penalties on both appellants were set aside.

Extended limitation for suppression of value - Suppression and wilful misstatement - HELD THAT: - The Tribunal held that the extended period is not attracted automatically and can be invoked only on cogent and reliable evidence of deliberate suppression or wilful misstatement with intent to evade duty. Since the Department had failed to prove undervaluation through admissible evidence, there was no basis for the allegation of suppression. The importer had declared the value in the Bills of Entry and there was no evidence that any material information had been withheld or that any deliberate misstatement had been made. Following National Fruits Agency v. Commissioner of Customs (Export), Chennai [2016 (3) TMI 509 - CESTAT CHENNAI], the Tribunal held that, in the absence of reliable evidence of undervaluation and suppression, the extended period under the proviso to Section 28 could not be sustained and the demand was time-barred. [Paras 11]

The invocation of extended limitation was held unjustified and the demand was also liable to fail as time-barred.

Final Conclusion: The Tribunal set aside the entire order, holding that undervaluation had not been established by legally admissible and corroborated evidence, that the consequential redetermination of value, duty demand, confiscation and penalties could not survive, and that the extended period of limitation was wrongly invoked. Both appeals were allowed with consequential relief.

Rejection of the Refund claim - Chartered Accountant's certificate not in the prescribed format and did not mention the year - Substantial compliance - HELD THAT: - The Tribunal found that the lower authority had not doubted the genuineness of the refund claim and had rejected it only for alleged non-compliance with the format requirements referred to in the Board circulars. Relying on M/s. WR Grace & Co. India Pvt. Ltd. Vs CC Chennai [2025 (12) TMI 902 - CESTAT CHENNAI], the Tribunal held that the format for the Chartered Accountant certificate was only suggested / indicative and not mandatory. Since the defect pointed out was merely formal and not one going to the substance of the claim, the rejection of refund on that basis could not be sustained. [Paras 5, 6]

The impugned common order was set aside and the appeals were allowed with consequential benefits as per law.

Final Conclusion: The Tribunal held that refund could not be denied merely because the Chartered Accountant certificate was not in the format treated by the authorities as required, when the objection was only formal and not to the genuineness of the claim. The common appellate order was therefore set aside and the appeals were allowed.

Rejection of Export Obligation Discharge Certificates and denial of EPCG benefits on the basis of alleged absence of nexus and invalidity of third-party exports - Penalties imposed on importers, directors, exporters, consultants and connected persons - Binding effect of licensing authority's determination - Procedural ambiguity - Mens rea - Harmonious construction - Confiscation under section 111(o) and redemption fine under section 125.

Third-party exports under EPCG Scheme - Validity of subsisting EODCs - Integrated operation of FTP and customs notification -HELD THAT: - The Tribunal held that the EPCG scheme under the FTDR Act, the Foreign Trade Policy, the Handbook of Procedures and Notification No.97/2004-Cus. operate as an integrated statutory framework in which determination of fulfilment of export obligation and validity of EODCs primarily lies within the domain of the DGFT authorities. The notification itself recognises discharge of export obligation through third-party exports, and the scheme is value-based, not dependent on a rigid one-to-one physical correlation between each imported machine and each export consignment. The exports in question were admitted physical exports processed through Customs channels with realised export proceeds, while the allegation of later insertion of endorsements or fraud was found unsupported by primary documentary evidence and rested substantially on uncorroborated statements. Since the DGFT appellate authority had, after considering the same DRI objections, policy ambiguity and later clarifications, restored the EODCs and those orders continued to hold the field, Customs could not effectively disregard those subsisting determinations and retrospectively apply post-2015 procedural requirements to earlier exports. On that basis, the denial of EPCG benefit and the consequential duty demand could not survive. [Paras 32, 33, 35, 42, 43]

The EODCs could not be rejected, the third-party exports could not be treated as invalid for EPCG purposes, and the denial of EPCG benefit with consequential duty demand was set aside.

Penalty for alleged misuse of third-party exports - Requirement of conscious falsity for penalty - Interpretational ambiguity and mens rea - HELD THAT: - The Tribunal found that the dispute arose from interpretation of the legal scope of third-party exports under the EPCG framework prevailing before 01.04.2015, and not from fictitious exports, non-installation or diversion of capital goods, or proved fabrication of customs documents. The shipping bills carried EPCG particulars, the exports were genuine, and there was no conclusive material to show knowing use of false documents or deliberate falsification. Mere coordination of shipping bills, certification of forms on the basis of records produced, or reliance on third-party exports under an ambiguous policy framework could not by itself establish the ingredients of abetment, guilty intent or knowing falsity required for penalty under Sections 112(a), 114A and 114AA. The later restoration of EODCs by DGFT also reinforced that the controversy was one of policy interpretation rather than fraud. [Paras 57, 58, 59, 60, 61]

The Coordinate Bench in Sree Koppammal Cotton Spinning Mills Pvt. Ltd. [2026 (4) TMI 1806 - CESTAT CHENNAI] regarding ambiguity in the legal framework governing third-party exports, the ingredients necessary for sustaining penalties under Sections 112(a), 114A and 114AA of the Customs Act, 1962 are not established against the EPCG licence holders, third-party exporters, merchant exporters, manufacturer exporters, consultants or other connected persons. Thus, penalties imposed under the impugned orders are unsustainable in law and liable to be set aside.

All penalties imposed under Sections 112(a), 114A and 114AA were held unsustainable and were set aside.

Confiscation for alleged non-fulfilment of EPCG conditions - Redemption fine consequential to denial of exemption - HELD THAT: - The Tribunal held that confiscation and redemption fine were entirely consequential to the Department's conclusion that the export obligation had not been validly fulfilled. Since the rejection of EODCs and denial of EPCG benefits were found legally unsustainable, the very foundation for invoking Section 111(o) disappeared. The consequential redemption fine therefore also could not stand. [Paras 62]

The confiscation of capital goods and the redemption fine were set aside.

Final Conclusion: The Tribunal held that subsisting EODCs restored by the competent DGFT authorities could not be disregarded to deny EPCG benefits on the basis of an unsustained allegation that third-party exports lacked the required nexus. The duty demands, confiscation, redemption fine and all penalties imposed in the impugned orders were accordingly set aside, and all sixteen appeals were allowed.

Classification of goods - imported Airspan Air Velocity 2700 - classifiable under Customs Tariff Heading 8517 6260 as a synchronous digital hierarchy system or under Customs Tariff Heading 8517 6290 as other machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus - Functional test for telecom equipment classification - HELD THAT: - The Tribunal held that the classification had to follow the actual function of the imported goods. On the material noticed by it, the Air Velocity 2700 functioned as a router: it received signals from the tower, synchronized them and routed them through the lines in the enclosed area to make the 5G network work more efficiently. Proceeding on this functional character of the equipment, the Tribunal found the classification declared by the importer under Customs Tariff Heading 8517 6260 to be sustainable and declined to interfere with the appellate order accepting that classification. [Paras 9, 10]

The Revenue's challenge to classification under Customs Tariff Heading 8517 6260 failed, and the appellate order was upheld.

Final Conclusion: The Tribunal upheld the order of the Commissioner (Appeals) and dismissed the Revenue's appeal, holding that the imported Airspan Air Velocity 2700 was rightly classified under Customs Tariff Heading 8517 6260 on the basis of its functional use.

Classification of imported goods - kitchen and household storage accessories - classifiable under Chapter 73 or Chapter 83 of the Customs Tariff, or under Heading 9403 as parts of furniture - Specific heading preferred over general heading - common parlance test - Ejusdem generis - HSN Explanatory notes - imported baskets, racks, holders, drawer systems and similar articles used in cabinets, drawers or shelves - HELD THAT: - The Tribunal held that the goods were essentially baskets, hinges and shelves having distinct identity and individual function, and were used in kitchen or household spaces below the platform or in shelves for holding articles. It found that the Principal Commissioner erred in treating them as parts of unit furniture, shelved furniture, chests or cupboards and in applying ejusdem generis to bring them under heading 9403. Relying on Commissioner of Central Excise, Surat-I vs. Crystal Interior Products [2008 (1) TMI 107 - CESTAT, AHMEDABAD], the Tribunal held that such kitchen and household articles cannot, by any stretch, be regarded as furniture items. Applying Rules 1 and 3(a) of the General Rules for Interpretation, it further held that headings 7323 and 8302 specifically cover kitchen or household articles and base metal mountings or fittings, whereas heading 9403 is only a general entry for other furniture and parts thereof. The HSN notes were also read to show that heading 9403 covers furniture and parts not covered by previous headings, and therefore the specific descriptions under Chapters 73 and 83 had to prevail. [Paras 29, 30, 31, 32, 33]

Classification under CTI 9403 90 00 was rejected, the impugned order was set aside, and the goods were held to fall under CTH 7323/8302.

Final Conclusion: The Tribunal held that the disputed imported goods were not parts of furniture classifiable under heading 9403, but kitchen or household articles and fittings classifiable under Chapters 73/83. The demand founded on classification under CTI 9403 90 00 was therefore unsustainable and the appeal was allowed.

Imposition of Penalty - failure to verify exporter antecedents - prohibited goods - Smuggling of red sanders logs concealed in export consignments declared as granite slabs -Due diligence under Customs Broker Licensing Regulations - HELD THAT: - The Tribunal held that the record did not show that the appellant had abetted the export of the prohibited goods. At the same time, it accepted that the appellant had failed to exercise due diligence in verifying the exporters' credentials and had not properly complied with the KYC obligations expected in the course of customs clearance work. Since there was no evidence that he was aware of the attempted smuggling, and the appellate authority itself had recorded that he was not involved in the nefarious activity, the Tribunal found the penalty imposed to be excessive. The omission justified only a substantially reduced penalty under Section 114. [Paras 7]

The penalty was sustained in principle for failure to exercise due diligence, but was drastically reduced on the ground that knowledge of, or involvement in, the attempted export of prohibited goods was not established.

Final Conclusion: The Tribunal found no evidence that the appellant had knowingly participated in or abetted the attempted smuggling of red sanders. While holding that his failure to verify the exporters' antecedents warranted penalty, it reduced the penalty to a nominal amount.

Classification of goods - Imported GPON OLT, SFP Module, ONU and ONT -classified under CTH 8517 6250 as Digital Loop Carrier System goods Or not -Examination of technical literature in tariff classification- Vulnerability Assessment and Penetration Test (VAPT) verification report -HELD THAT: - The Tribunal recorded that the goods were admittedly classifiable under heading 8517 and that the real controversy was whether they answered the description of the specific classification claimed by the importer or fell under the residual entry. It noticed that the appellant had produced technical material, including a letter from Compliance International Telecom Laboratories and documents of the Ministry of Communications containing technical details of the imported items, which had not been before the lower authorities as they were produced later. Since classification turned on the functional and technical characteristics of the products, the Tribunal held that a fresh examination of the classification was necessary in the light of this material rather than affirming the residual classification without such consideration. [Paras 6]

The impugned order was set aside and the matter was remanded to the original authority for fresh decision after giving the appellant an opportunity to place the technical literature and supporting documents on record.

Final Conclusion: The Tribunal did not finally determine the tariff classification of the imported products. It remanded the matter for fresh adjudication because the technical literature relevant to classification had not been examined by the lower authorities.

Fraudulent or manipulative device under the PFUTP Regulations - agency agreements with twelve entities - Principal-agent arrangements in derivatives trading- Validity of derivative contracts - Position limits and disclosure in single stock futures - Hedging through derivatives - Price manipulation and inducement - Preponderance of probabilities.

Whether the agreements entered into by and between the appellant no. 1 and the twelve entities were fraudulent and manipulative device under the PFUTP Regulations? - HELD THAT: - The appellant no. 1 attempted to capitalize on the absence of position limits for ‘persons acting in concert’ in the 2001 SEBI Circular by establishing agency relationships with 12 entities. The same may have been permissible had the appellant no. 1 disclosed the said fact. However, it failed to do so. In such view of the matter, we are of the considered view that the appellant no. 1 cannot shield its actions behind the argument that the 2001 SEBI Circular did not provide any position limits for ‘persons acting in concert’. The very stipulation of position limits in the Circular creates an implicit duty to disclose such trades that may be in breach of such limits.

Therefore, there is no gainsaying that the appellant no. 1 violated the disclosure requirement stated in the 2001 Circular and hence, is liable to be penalized for the same under the said Circular. This, so, irrespective of whether the act of the appellant amounts to fraud or manipulation as contemplated under the provisions.

The Court held that the 2001 SEBI Circular was directed to disclosure of positions exceeding prescribed limits and did not impose a per se prohibition on taking such excess positions. The appellant could not rely on the omission of an express reference to persons acting in concert to avoid disclosure, since the object of position limits was to preserve market integrity and what could not be done directly could not be done indirectly through agents. At the same time, breach of the disclosure requirement did not by itself attract the PFUTP Regulations. The Court further rejected the contention that contracts in excess of position limits became illegal or void under Section 18A of the SCRA, holding that neither the 2001 SEBI Circular nor the regulatory framework prescribed invalidation of such trades as a consequence of breach; the consequence contemplated was penal action for non-disclosure. [Paras 145, 146, 209, 210, 211]

Only the penalty for violation of the disclosure requirement under the 2001 SEBI Circular was sustainable; fraud under the PFUTP Regulations was not made out on that basis alone.

Whether the 9.92 crore open positions in the November 2007 futures segment of the RPL stock, were valid hedges?- HELD THAT: - The Court found that the futures positions were taken against the risk arising from the intended sale of 22.5 crore shares in the cash segment and therefore had a genuine hedging basis. It rejected the respondent's contention that the positions ceased to be hedges because all remaining futures positions were not proportionately reduced after part of the cash market sales had taken place. Hedging could include anticipatory hedging, and there was no legal requirement in 2007 for a perfect 1:1 correlation between the underlying exposure and futures positions. The Court also held that, in the absence of any hedging policy or regulatory requirement in 2007, the absence of a specific board resolution or formal hedging framework did not invalidate the hedge. [Paras 191, 212, 213, 214, 215]

The futures positions were valid hedges and could not be treated as speculative or manipulative merely because they were imperfect or because no separate hedging policy existed.

Whether the agreements entered into by and between the appellant no. 1 and the twelve entities were used by the appellant no. 1 to corner open positions in the November 2007 futures segment of the RPL stock for the purpose of manipulating the futures market? - HELD THAT: - The Court held that the respondent's computation of concentration only with reference to the November 2007 futures series was contrary to the 2001 SEBI Circular, which required consideration of combined positions across all derivative contracts on the underlying stock. On the correct basis, the appellant's share of open interest on the settlement date was 40.10% and not 93.60%. Though still above the prescribed limits, that concentration had to be viewed in the context of the appellant's hedging need arising from the intended sale in the cash segment. The Court held that concentration or cornering may indicate the ability to manipulate, but does not by itself establish manipulation. Since inducement remained a necessary ingredient of fraud unless manipulation itself was cogently established, and no such separate manipulative act was shown merely from concentration, the PFUTP charge could not be sustained. [Paras 217, 218, 219, 220, 221]

Excess concentration of open interest, in the facts of the case, did not amount to manipulative cornering or fraud under the PFUTP Regulations.

Whether the sale of 1.95 crore RPL shares in the cash segment during the last 10 minutes of the trading day on 29.11.2007 was an attempt to depress RPL share prices to make unlawful profits in the November 2007 futures segment? -HELD THAT: - The Court held that the respondent's case of price manipulation rested on suspicion rather than cogent material. The surrounding circumstances showed that the appellant had earlier sold at prices around its preferred threshold and had not sold during the period when the market price remained below that level. When there was an unexpected rise in price in the last minutes on the settlement date, the appellant sold to take advantage of that window. The Court found it more probable that the objective was to realize sale proceeds rather than to depress the settlement price, particularly when the appellant continued to hold a dominant shareholding in RPL and would itself be adversely affected by any fall in price. The Court also noted that other market participants had traded substantial quantities in the same period and that the respondent had not carried out proper inquiry into those trades. In a case where inducement was not separately established, the burden to prove manipulation was higher, and that burden was not discharged. [Paras 222, 223, 224, 225, 226]

Price manipulation was not proved; consequently, the finding of fraud under the PFUTP Regulations and the consequential disgorgement could not stand.

Final Conclusion: The appeals were partly allowed. The finding of fraud under Regulations 3 and 4 of the PFUTP Regulations and the disgorgement order were set aside, but the penalty for violation of the disclosure requirement under the 2001 SEBI Circular was upheld, with refund directed of the amount deposited pursuant to the disgorgement order.

Activity of providing trailers and related equipment for movement of heavy goods - classifiable as Supply of Tangible Goods Service - Transfer of Right to Use - Demand on Erection, Commissioning and Installation service - Extended period for non-filing of returns and non-payment of collected service tax - Entitlement to cum-tax benefit and reassessment of CENVAT credit - Cenvat credit denial beyond show cause notice.

Supply of tangible goods service - Trailer hire with driver and crew - Transfer of possession and effective control - Goods transport agency classification - HELD THAT: - The Apex Court in the Adani case [2020 (8) TMI 789 - SUPREME COURT], has expounded on the term “use” and held that “Thus, physical operation is not the only or invariable feature of use. As a corollary to the same, technical expertise over the goods in question is not a sine qua non for determining the ability of the consumer to use the goods. Therefore, the expression “use” also signifies the application of the goods for the purpose for which they have been supplied under the terms of a contract.” It has also been held in Adani case that “Section 65(105)(zzzzj) applies precisely in a situation where the use of the goods by a person is not accompanied by control and possession” and further that “Section 65(105)(zzzzj) does not require exclusivity of use.” Thus, for all purposes this would tantamount to a case of licence granted by the appellant to the service recipient to use the trailer. In our considered view, Section 65(105)(zzzzj) was enacted precisely to levy service tax on such “licence to use” that goes in tandem with the tangible goods supplied, where right of possession and effective control are not transferred to the service recipient.

The Tribunal held that the work orders showed only a permissive use of the trailers by the service recipients, while possession, operational control, maintenance, replacement in case of breakdown, insurance and legal responsibility remained with the appellant. Applying the statutory requirement that supply of tangible goods service covers use of tangible goods without transfer of possession and effective control, the Tribunal found that the recipient was using the trailer for its contractual purpose though physical operation remained with the appellant's personnel. In view of the contractual terms and the governing Supreme Court principles on use, right to use and effective control, the plea that the activity was goods transport agency service was rejected. For the period after 01.07.2012 also, the same factual position continued and the service remained within the taxable fold. Since the appellant had also admitted provision of erection, commissioning and installation service, the finding on that head was upheld. [Paras 26, 27, 28, 31, 32]

The classification adopted in the impugned order under supply of tangible goods service, along with liability on erection, commissioning and installation service, was upheld.

Extended period of limitation - Non-filing of ST-3 returns - Suppression of taxable receipts - Penalty for non-payment of collected service tax - HELD THAT: - The Tribunal noted that the appellant had filed ST-3 returns only for 2012-13, had not disclosed the full consideration, had admitted collection of service tax on the supply of tangible goods activity and had not retracted that statement. The show cause notice specifically alleged wilful suppression and intent to evade payment of service tax, and those allegations were not effectively controverted either in reply or in the grounds of appeal. In these circumstances, the case was not treated as resting merely on interpretation of law. The sustained defaults in registration compliance, return filing and payment justified invocation of the extended period, and the penalties were held to be in line with the statutory provisions. [Paras 34, 35, 36, 37]

The demand for the extended period and the penalties under Sections 78 and 77(2) were upheld, subject to recomputation on remand.

Cum-tax benefit - Cenvat credit entitlement - Denial beyond show cause notice - Limited remand for recomputation - HELD THAT: - The Tribunal held that cum-tax benefit had to be extended in terms of the statutory scheme and that Cenvat credit could not be denied on a basis travelling beyond the show cause notice. It further held that the bar under Rule 4(1), as invoked in adjudication, could not be used for denying the appellant's claim in the manner adopted in the impugned order. Since the appellant asserted that liability on erection, commissioning and installation service had already been discharged after availing cum-tax benefit and Cenvat credit, and also sought consideration of actual receipts for 2010-11, verification of documents and reworking of tax, interest-linked consequences and penalty under Section 78 was considered necessary. [Paras 38]

The matter was remanded for the limited purpose of granting cum-tax benefit, computing admissible Cenvat credit without invoking the bar under Rule 4(1) as done in the impugned order, examining evidence on actual receipts for 2010-11, and recomputing the consequential liability and penalty.

Final Conclusion: The Tribunal upheld the classification of the trailer-hire activity as supply of tangible goods service, sustained the taxability of the admitted erection, commissioning and installation service, and affirmed invocation of the extended period with penalties. The matter was remanded only for limited recomputation after granting cum-tax benefit, considering admissible Cenvat credit, and verifying the appellant's evidence, including on actual receipts for 2010-11.

Service tax on sponsorship service already discharged by service provider - CENVAT credit on input services used in relation to business - disputed input services -Extended period of limitation and penalty - Wilful misstatement - suppression of facts.

Reverse charge on sponsorship service - Double taxation - HELD THAT: - The Tribunal noted that the appellant did not dispute the demand to the extent already paid by it before issuance of the show cause notice, together with interest. As to the remaining demand, the record showed that the service providers had raised invoices indicating service tax and the appellant had also produced supporting documents, including a letter from one service provider confirming deposit of the tax. The appellate authority itself had accepted that, if the tax had already been paid by the service provider, recovery again from the appellant would amount to double taxation, yet rejected the claim for want of correlation. The Tribunal found this unsustainable because the show cause notice itself lacked particulars of the demand, including the period, the appellant had produced the available invoices and documents, and the lower authorities had not specified what additional evidence was required. On that basis, the Tribunal accepted the appellant's stand and held that the balance demand on sponsorship services was liable to be set aside. [Paras 9]

The balance demand of service tax on sponsorship services, beyond the amount already paid and appropriated, was set aside.

Input service credit - Activities relating to business - HELD THAT: - The Tribunal held that, for the period prior to 01.04.2011, the inclusive expression covering activities relating to business had consistently received a wide interpretation so as to include services used in relation to the assessee's business. It also found that the show cause notice did not contain particulars explaining why the specific input services were allegedly ineligible. Relying on the authorities cited for employee insurance, coffee machine charges and club fees, and following the broader interpretation of input service prevailing for that period, the Tribunal concluded that the denial of credit could not be sustained. [Paras 10]

The demand for reversal of CENVAT credit on the impugned input services was set aside.

Extended period of limitation - Section 73(3) - Penalty under Section 78 - HELD THAT: - The Tribunal found that the show cause notice did not attribute any wilful or mala fide intent to the appellant and that the demand was founded on details already available in the appellant's records. The explanation for earlier non-payment on certain sponsorship invoices, arising from differing practices of service providers and a bona fide belief regarding liability, was held to be plausible. Since the admitted tax with interest had been paid before issuance of the notice, the Tribunal observed that, under Section 73(3) as it then stood, no notice ought to have been issued for that amount. It further held that invocation of the extended period requires a positive act of fraud, collusion, wilful misstatement, suppression, or deliberate contravention with intent to evade, and mere non-payment is insufficient. As no deliberate act with intent to evade was established, the extended period was held inapplicable; and, there being no contumacious conduct, the penalty was set aside by invoking Section 80 as applicable for the relevant time. [Paras 11]

The invocation of the extended period was rejected, and the penalty imposed under Section 78 was set aside.

Final Conclusion: The Tribunal partly allowed the appeal. It upheld only the service tax amount already paid by the appellant with interest and appropriated, but set aside the remaining sponsorship service demand, the denial of CENVAT credit, the consequential interest on the set-aside demands, and the penalty.

Exclusion of rent-a-cab service from input service - Admissibility of input service under Rule 2(l) - Housekeeping service as input service for output telecommunication service - Imposition of Penalty under Rule 15 - bona fide belief.

Rent-a-cab service exclusion - Input service credit - HELD THAT: - It is pertinent to note the difference in the language employed by the legislature. With respect to output service, it is provided that the input service should be used for providing the output service. The specific reference to taxable service has been removed and it is provided that with respect to output service, the input service should be used for providing the output service.

It is settled law that the expression “in relation to”, used in the said rule, has to be given a wide connotation as has been held by the Apex Court in Collector of Central Excise v. Solaris Chemtech Limited,[2007 (7) TMI 2 - SUPREME COURT] and Doypack Systems (Pvt) Ltd v. Union of India [1988 (2) TMI 61 - SUPREME COURT].

A constitution bench of the Honourable Supreme court, in State of Karnataka v. Azad Coach Builders Pvt Ltd [2010 (9) TMI 879 - SUPREME COURT (LB)], has held thus: "The expression ‘in relation to’ are words of comprehensiveness, which might both have a direct significance as well as an indirect significance, depending on the context in which it is used and they are not words of restrictive content and ought not be so construed."

The Tribunal held that Rule 2(l) contains a specific exclusion in sub-clause (B) for services provided by way of renting of a motor vehicle, except in the situations expressly carved out in the rule. Once the legislature has specifically excluded a service from the definition of input service, such service cannot be brought back within the main or inclusive part of the definition by a broad construction. Since the appellant's claim did not fall within any stated exception, denial of credit on rent-a-cab service was sustainable. [Paras 14, 15]

The demand arising from denial of credit on rent-a-cab service, with applicable interest, was upheld.

Housekeeping service - Services used in relation to premises of output service provider - HELD THAT: - The Tribunal found that the housekeeping contract included cleaning of exchange equipment such as battery, power plant, engine alternator, computer peripherals, fire extinguishers and telecom instruments, which were used by the appellant in providing telecommunication service. It further held that the inclusive part of Rule 2(l) covers services used in relation to the premises of the provider of output service or an office relating to such premises, and the expressions 'includes' and 'in relation to' bear wide import. Housekeeping and cleanliness of the premises, including compliance-oriented upkeep, were therefore not inessential to provision of output service, and there being no specific exclusion applicable to such services, the denial of credit on this count could not be sustained. [Paras 16, 17]

The denial of Cenvat credit on housekeeping services was set aside.

Penalty for wrongful availment of credit - Bona fide belief - HELD THAT: - The Tribunal held that the period in dispute was immediately after the amendment to Rule 2(l), when uncertainty could reasonably exist and earlier rulings under the unamended provisions were still operating in the field. In those circumstances, and the appellant being a public sector undertaking, the breach was treated as flowing from a bona fide belief rather than contumacious conduct. On that basis, penalty was held to be unwarranted. [Paras 18]

The penalty imposed under Rule 15 was set aside.

Final Conclusion: The appeal was partly allowed. Credit on rent-a-cab service was held inadmissible and the related demand with interest was sustained, while denial of credit on housekeeping services and the penalty imposed were set aside.

Demand of service tax for the later period - Invocation of the extended period of limitation on the same or similar facts on which an earlier show cause notice had already been issued - intention to evade payment of due service tax -Suppression of facts - Cum Tax Valuation - HELD THAT: - The Tribunal held that the later show cause notice for 2016-17 had been issued on the same issue, on the same grounds and on the basis of similar documents as the earlier notice covering the prior period. Once the relevant facts had already come to the knowledge of the department at the time of issuance of the first notice, the same facts could not again be treated as suppression so as to invoke the extended period in a subsequent notice. Following Nizam Sugar Factory [2006 (4) TMI 127 - SUPREME COURT], the Tribunal held that the allegation of suppression could not be sustained and, consequently, the demand founded on the extended period also failed. Since the demand itself was unsustainable on limitation, the impugned appellate order could not survive. [Paras 4]

The service tax demand raised through the later notice by invoking the extended period was set aside as time-barred, and the appeal was allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the later show cause notice for 2016-17, issued on the same issue and material as the earlier notice, could not validly invoke the extended period on the ground of suppression. The impugned order was accordingly set aside.

Demand denying CENVAT credit on manpower supply services - NBFCs - Entitlement to be governed by Rule 6(3B) - Common input services and CENVAT credit- Suppression of facts for extended limitation - Bona fide belief - Rule of consistency - Interpretation against taxation by implication - Proportionate reversal of credit - Common use of input services.

Whether the demand of ineligible credit on the allegation that the appellant was availing the manpower services rendered by the aforementioned agencies exclusively for providing insurance auxiliary services to the insurance companies and for providing mutual fund distribution services to Sundaram Asset Management Company during the disputed period is tenable ? -HELD THAT: - The Tribunal found that the show cause notice proceeded entirely on the allegation of exclusive use of the manpower services for insurance auxiliary and mutual fund distribution activities, whereas the adjudicating authority's own findings and the earlier proceedings showed that the same manpower services were used on a common and rotating basis across the appellant's business verticals. Once the factual basis of exclusive use failed, wholesale denial of credit could not be sustained. The Tribunal further held that, absent any proposal in the show cause notice disputing the appellant's services as output services, the credit could not be denied on a new basis. On interpretation of Rule 6, the Tribunal held that Rule 6(3B), introduced for banks and NBFCs with a non-obstante clause, overrides sub-rules (1), (2) and (3), including the restrictions contained in Explanations II and III to Rule 6(3). The legislative scheme recognised the difficulty of apportioning common input services for such entities and therefore mandated reversal of 50% of the credit availed. Accordingly, where the appellant, being an NBFC, used the manpower services for taxable output services as well as exempt or non-output activities, the credit could not be denied in toto and its obligation had to be worked out only under Rule 6(3B). [Paras 25, 26, 27, 28, 29]

The denial of CENVAT credit was set aside, the Tribunal holding that the appellant was entitled to the benefit of Rule 6(3B) and that a blanket disallowance of credit on the manpower services was impermissible.

Extended period of limitation - Prior knowledge of facts - Wilful suppression -HELD THAT: - The Tribunal held that the department was already aware, from the earlier show cause notice and prior litigation, of the appellant's availment of credit on the same manpower services and of the dispute regarding reversal under Rule 6. Once the material facts were already within departmental knowledge, the same or similar facts could not subsequently be treated as suppression for invoking the extended period. The Tribunal also held that mere non-payment or wrong availment, in the absence of a positive act, deliberate withholding, or intent to evade, is insufficient to attract the extended period. As the dispute was interpretational and the appellant had acted on a bona fide understanding of the rules, the ingredients of wilful suppression were not established; consequently, the demand beyond the normal period and the penalty could not survive. [Paras 30, 31, 32]

The extended period was held to be wrongly invoked, with the result that the demand beyond the normal period was barred by limitation and the penalty was unsustainable.

Final Conclusion: The Tribunal set aside the impugned order and allowed the appeal. It held that the appellant, being an NBFC using the manpower services commonly across its business verticals, could not be denied credit in toto and was entitled to the Rule 6(3B) mechanism, and that the extended period of limitation had been wrongly invoked.

Entitlement to abatement and reverse charge benefit - Non-consideration of material documents - difference between ITR data and ST-3 returns - Remand for fresh adjudication after opportunity to produce evidence​​​​​​​ - HELD THAT: - The Tribunal found that the documents produced before it, including work orders and Form 26AS, went to the root of the dispute because the appellant's stand was that the services were in the nature of works contract and manpower-related services, with claims of abatement and reverse charge consequences. The record showed that no reply had been filed before the adjudicating authority and the first appellate authority had also rejected the claim for want of documents. At the same time, the show cause notice itself referred to income-tax related material as relied upon documents, yet the record did not establish proper consideration of Form 26AS and the related material while confirming the demand. In these circumstances, the Tribunal held that the impugned order lacked merit and that the matter required fresh consideration by the original authority after allowing the appellant an opportunity to produce all documents relied upon in defence.

The impugned order was not upheld on merits; the matter was remanded to the original authority for fresh decision after considering all relevant documents, including Form 26AS, with liberty to draw adverse inference if the appellant failed to appear or produce the documents.

Final Conclusion: The Tribunal set aside the impugned appellate order and remanded the matter to the original authority for fresh adjudication. The remand was directed because material documents, including Form 26AS and work orders bearing on the nature of services and tax liability, required proper consideration after giving the appellant an opportunity to produce them.

Date of communication/delivery of the Order-in-Original -Rejection of a refund claim under Rule 5 - barred by limitation -Service of adjudication order on authorised representative - Limitation for appeal before Commissioner (Appeals) - Condonable period under the statutory appeal provision - Difference of Opinion recorded by the learned Members - Majority Order.

The Points of Difference referred are as follows:-

Hon’ble Member (Judicial) - HELD THAT:- The impugned order passed by the Commissioner (Appeals) rejecting the appeal of the appellant on time-bar is held to be unsustainable. Accordingly, appeal is allowed by way of setting aside the order of the Commissioner (Appeals) and the matter is remanded to Commissioner (Appeals) to consider the appeal on merit.

Hon’ble Member (Technical) - HELD THAT:- Since, the order has been received by the authorised representative who appeared for the personal hearing before the Asst. Commissioner it is served on the appellant as per the provisions laid down under Section 37(C) of the Central Excise Act, 1944. Accordingly, there cannot be any dispute that the order was not received on 02.01.2018. As per the relevant provisions, the appeal should have been filed on 02.03.2018 before the Commissioner (Appeals) and with condonation of delay of further 30 days it should have been filed on 02.04.2018. However, we find that the appeal was filed on 09.05.2018, thus with the delay of 67 days beyond the appealable period of 60 days. Section 85 (3A) of the Finance Act, 1994 reproduced below allows the Commissioner (Appeals) to entertain the appeal within 60 days from the date of the receipt of the order and further 30 days with condonation of delay. Since, the appeal filed by the appellant is beyond the condonable period, the Commissioner (Appeals) was justified in rejecting the appeal filed by the appellant.

Whether the Commissioner (Appeals) was right in rejecting the appeal as the appeal was filed beyond the condonable limits provided by the statute, which was upheld.

President - HELD THAT:- The appeal filed by the appellant on 09.05.2018 before the learned Commissioner(Appeals) against the Order-in-Original dated 27.12.2017, which was delivered / communicated to them by tendering the same to authorized representative Shri K. Siva Prasad on 02.01.2018, is beyond the prescribed statutory period of two months and condonable period of one month; hence, rightly rejected by the learned Commissioner(Appeals) in view of the principle of law laid down by the Hon’ble Supreme Court in Singh Enterprises Vs. CCE, Jamshedpur [2007 (12) TMI 11 - SUPREME COURT] as referred by the learned Member(Technical). Therefore, concur with the view expressed by learned Member(Technical) that the appeal filed before the learned Commissioner (Appeals) against Order-in-Original dated 27.12.2017 is barred by limitation hence rightly rejected by the Commissioner (Appeals).

By majority, the order was held to have been validly served on 02.01.2018 through the authorised representative, and the appeal before the Commissioner (Appeals) was rightly rejected as time-barred.

MAJORITY ORDER - The majority upheld the order of the Commissioner (Appeals) rejecting the appeal as barred by limitation. It was held that service of the adjudication order on the authorised representative amounted to valid communication, and the appeal having been filed beyond the statutory and condonable period was not maintainable.

Taxability of corporate guarantee without consideration - Reverse charge on facilitation charges for external commercial borrowings -short reversal of CENVAT credit attributable to exempted services - Failure to consider cited precedents on CENVAT credit reversal.

Corporate guarantee without consideration - Banking and other financial services - HELD THAT: - The Tribunal held that the controversy stood settled by Commissioner of CGST and Central Excise Vs. Edelweiss Financial Services Ltd. [2023 (4) TMI 170 - SC ORDER] which recognised that for a taxable service under the post-negative list regime, the existence of consideration is indispensable. Since the appellant had admittedly issued corporate guarantees to its group companies without charging any consideration, the activity did not attract service tax. [Paras 6, 8]

The demand of service tax on corporate guarantee was set aside.

External commercial borrowings - Reverse charge liability - Facilitation charges paid to foreign bank - ELD THAT: - The Tribunal noted that the appellant's own records showed expenditure in foreign currency on bank charges and that, on departmental query, the appellant had admitted payment of facilitation fee to Syndicate Bank, London in connection with external commercial borrowings. The plea that the payment formed part of interest was rejected for want of supporting evidence. Applying Rule 2(1)(d)(g), the Tribunal held that where the service provider is located in a non-taxable territory and the recipient is in the taxable territory, the recipient bears the tax liability. The contention that liability would shift to the Indian establishment of Syndicate Bank was not accepted because the service had been received from the London branch and payment was made to it in foreign currency. [Paras 6, 8]

The demand of service tax on facilitation charges for external commercial borrowings was upheld.

CENVAT credit reversal on maintenance services for coal washery - Non-consideration of cited judgments - HELD THAT: - The Tribunal found that, although the appellant had relied on several decisions to contend that proportionate reversal was not required in respect of maintenance services used for the coal washery, the impugned order dismissed those authorities in a single sentence without giving reasons as to why they were inapplicable. Since the determinative submissions and precedents had not been considered, the issue required fresh examination by the adjudicating authority after taking note of the appellant's submissions and any further material placed during hearing. [Paras 6, 8]

The issue of short reversal of CENVAT credit was remanded for reconsideration without adjudication on merits.

Final Conclusion: The appeal was partly allowed. The demand on corporate guarantee was set aside, the demand on facilitation charges relating to external commercial borrowings was sustained, and the issue of short reversal of CENVAT credit was remanded for fresh consideration.

Service tax demand based on Trial Balance-ST-3 mismatch - Determination of taxable value from actual revenue - Reliance on sub-ledger records vis-a-vis Trial Balance - HELD THAT: - The Tribunal held that, for the period April 2011 to March 2012, the Department computed taxable value by adding opening debtors to progressive credits in the Trial Balance without considering the closing balance, even though progressive credits did not represent the actual revenue or taxable value. It accepted that actual value had to be derived from the real accounting position and that levy on the entire outstanding debtors, without considering the manner of taxability under the Point of Taxation Rules adopted by the appellant, was untenable. For the period April 2010 to March 2011, it held that the Trial Balance only reflected closing balances of ledger heads and did not by itself furnish service-wise or transaction-wise breakup; therefore, demand raised without examining the sub-ledger records and by treating Trial Balance figures as gross taxable value was legally unsustainable. The fact that a substantial part of the proposed demand was itself dropped was treated as showing the inaccuracy of the Trial Balance-based computation. [Paras 13, 14, 15]

The demand confirmed in both appeals on the sole basis of Trial Balance figures was set aside.

Final Conclusion: The Tribunal held that the impugned service tax demands, having been raised merely on the basis of differences between the Trial Balance and ST-3 returns without proper determination of actual taxable value and without adequate verification of relevant accounting records, were unsustainable. Both impugned orders were set aside and the appeals were allowed with consequential relief.

Reversal of CENVAT Credit under Rule 6(3A) - Inclusion of the value of export clearances - Credit attributable to common input services used in manufacture of exempted cotton yarn exported without payment of duty under the DEPB scheme - value of cotton yarn cleared for job work for manufacture of grey fabric or doubling of yarn -HELD THAT: - The Tribunal found that the controversy stood squarely covered by an earlier coordinate Bench decision on the same issue in the case of Sri Shanmugavel Mills (Ltd.) Vs CGST & Central Excise, Madurai [2025 (10) TMI 389 - CESTAT CHENNAI], wherein, after considering binding precedent, it was held that demand for reversal by including the value of export clearances of exempted goods was not sustainable. In the absence of any contrary judgment or distinguishing feature placed on record, judicial discipline required following that view. On that basis, the appellant's exclusion of the value of cotton yarn exported without payment of duty under DEPB from the value of exempted clearances for the purpose of reversal of credit on common input services was accepted. [Paras 4, 5]

The demand based on inclusion of export clearances of exempted cotton yarn for reversal of common input service credit was set aside.

Final Conclusion: Following its earlier coordinate Bench view on the same controversy and in the absence of any contrary authority, the Tribunal allowed the appeal. The impugned order was set aside with consequential relief in accordance with law.

Invocation of the extended period of limitation - Suppression of facts - Intention to evade duty - demand of duty on clearance of pickles without registration and without payment of duty​​​​​​​ - Scope of Penalty under Rule 26, without any proposal in the show cause notice - Non-speaking appellate order.

Extended period of limitation - Departmental knowledge of facts - Pre-show cause notice payment - HELD THAT: - The Tribunal held that the Department was aware of the relevant facts at least from the date of visit to the appellant's premises and, in any event, from the dates on which the appellant deposited the amounts later appropriated in adjudication. Despite such prior knowledge, the show cause notice was issued only after more than three years. The stated ground of suppression with intent to evade duty was found unsupported, particularly when the order itself recorded that duty was being paid under the tariff heading adopted by the appellant. In these circumstances, the conditions for invoking the extended period of limitation were not established, and the appellant was entitled to succeed on limitation itself. [Paras 7]

The demand could not be sustained beyond the normal period, and the appeal succeeded on limitation.

Penalty beyond show cause notice - Non-speaking order - Mechanical confirmation of penalty - HELD THAT: - The Tribunal found the appellate order to be cryptic and non-speaking. It specifically noted that there was no proposal in the show cause notice to levy penalty under Rule 26, yet such penalty was mechanically confirmed without reasons. The Tribunal also observed that the appellant had obtained registration and remitted the differential duty much before issuance of the show cause notice, while the notice itself substantially concerned appropriation of amounts already paid with interest. On that basis, the confirmation of penalty was held to be erroneous and unsustainable. [Paras 6, 8]

The penalty confirmation was set aside as being without proposal in the show cause notice and unsupported by reasons.

Final Conclusion: The Tribunal allowed the appeal, holding that the extended period of limitation was wrongly invoked and that the penalty had been mechanically sustained, including a penalty not proposed in the show cause notice. The impugned order was therefore set aside with consequential benefits as per law.

Quashing of criminal proceedings after bank loan compromise - Commercial transactions with predominantly civil flavour - Abuse of process of court

Quashing of criminal proceedings after bank loan compromise - Commercial transactions with predominantly civil flavour - Abuse of process of court - Criminal prosecution for cheating and use of forged documents arising out of a bank loan transaction could not be allowed to continue after the loan account had been settled under an approved compromise which was placed before and acted upon by the Debts Recovery Tribunal. - HELD THAT: - The Court held that the dispute arose out of banking transactions of a commercial nature and had an overwhelming civil flavour. The settlement was negotiated between the borrower and the Bank, approved by the Bank's competent authority, placed before the Debts Recovery Tribunal, fully performed by payment of the settlement amount, followed by issuance of a no dues certificate, and thereafter the Bank withdrew its recovery proceedings. In that setting, the later criminal complaint, lodged more than two years after closure of the DRT proceedings, was treated as an afterthought. The Court found the Bank's conduct lacking in good faith, particularly because the Bank itself had recorded in the compromise proposal that there were no lapses in documentation or irregularity as per legal audit, and had certified the settlement as consistent with RBI policy and not below the distress sale value of the securities. Applying the principles governing exercise of inherent power to quash in cases of compromise involving transactions with a predominantly civil character, and holding the case to be squarely covered by K. Bharthi Devi, the Court concluded that the possibility of conviction was remote and bleak, continuation of the prosecution would cause oppression and prejudice, and such prosecution would amount to an abuse of the process of court. The Court further held that permitting prosecution after a settlement endorsed by the DRT would undermine the sanctity of such judicially recognised settlements in commercial disputes. [Paras 24, 25, 26, 27, 28]

The criminal proceedings were quashed, including the chargesheet and the order framing charges.

Final Conclusion: The appeal was allowed. The Court held that, in the facts of the case, continuance of the prosecution after full and final settlement of the loan account under a compromise approved by the Bank and acted upon before the Debts Recovery Tribunal would be oppressive and an abuse of process, and accordingly quashed the chargesheet and the charge-framing order.

Criminal appeal in absence of appellant - Appointment of amicus curiae - Reasoned appellate scrutiny - Condonation of inordinate delay - Revisional interference to prevent failure of justice

Condonation of inordinate delay - Absconding convict - The delay of more than 2100 days in filing the revision petitions was not liable to be condoned. - HELD THAT: - The Court found that there was no explanation, much less a plausible one, for the prolonged delay. The revisionists had neither appeared before the Trial Court at the stage of sentence nor before the Appellate Court, had been declared proclaimed offenders, and had not disclosed their whereabouts during the intervening years. Mere pendency of numerous other cases was held insufficient to justify such prolonged inaction, and discretionary relief of condonation was held unavailable to litigants who had absconded after conviction and shown disregard for the process of the Court. [Paras 25, 26, 27, 28, 29]

The prayer for condonation of delay did not merit acceptance.

Criminal appeal in absence of appellant - Appointment of amicus curiae - Reasoned appellate scrutiny - Non-speaking appellate order - Revisional interference to prevent failure of justice - The appellate judgments dismissing the criminal appeals were unsustainable because the appeals were disposed of in the appellants' absence, without appointment of an amicus curiae, and without any real scrutiny of the grounds or the record. - HELD THAT: - The Court held that, although a criminal appeal is not to be dismissed for non-prosecution, disposal on merits in the absence of the appellant must still conform to the standard stated in Bani Singh, namely a proper scrutiny of the record and the trial court reasoning. Here, the Appellate Court merely noted the grounds and dismissed the appeals by a one-line conclusion that no illegality or irregularity existed, which did not reflect the comprehensive examination required in law. The Court further held, following K. Muruganandam and Others vs. State, Mohd. Sukur Ali vs. State of Assam and Jyoti Dubey vs. State & Anr., that where the accused does not appear and the appellate court nevertheless proceeds with the appeal, it should do so only after appointing an amicus curiae. Since the appellants had already been declared proclaimed offenders and the matter was governed by the Code of Criminal Procedure, the Appellate Court ought not to have hurriedly decided the appeals in their absence without such assistance. In view of this grave illegality affecting the appellants' sole statutory appeal and their liberty, the revisional court held that it could not allow the defective appellate orders to stand even though the delay in invoking revision was not condonable. [Paras 61, 62, 64, 65, 67]

The impugned appellate judgments were set aside, the appeals were revived for rehearing on merits, and such rehearing was made conditional upon deposit of 25% of the fine amount in each complaint and payment of costs to the complainants.

Final Conclusion: Though the inordinate delay in filing the revisions was held unexplained and not deserving of condonation, the Court set aside the non-speaking appellate judgments on the ground that the criminal appeals had been disposed of contrary to law. The appeals were revived for fresh hearing on merits, subject to deposit of part of the fine amount and payment of costs to the complainants.