TMI Tax Updates e-Newsletter
Jun 08,2026

Illusory opportunity of hearing - Validity of the assessment order passed under section 73 - breach ofPrinciples of natural justice - Fixing the date of personal hearing before the expiry of the time granted for filing reply to the show cause notice rendered the opportunity of hearing illusory and contrary to the prescribed procedure -HELD THAT: - The Court accepted that where the date fixed for personal hearing was 18 days prior to the last date for filing reply to the show cause notice, the hearing offered could not be treated as a real or effective opportunity. Such a course was held to be not in conformity with the prescribed procedure and violative of the principles of natural justice. On that finding, the assessment order was quashed and the matter was remitted to the Adjudicating Officer to proceed from the stage of show cause notice after fixing a fresh date for personal hearing. [Paras 3, 4]

The assessment order was set aside for breach of natural justice, and the matter was remitted for fresh adjudication from the stage of the show cause notice after granting proper personal hearing.

Final Conclusion: The writ petition was disposed of by quashing the assessment order on the ground that the personal hearing fixed before the last date for filing reply was illusory and procedurally invalid. The matter was remitted to the Adjudicating Officer for fresh proceedings from the show cause notice stage after granting proper hearing.

Writ jurisdiction to condone delay beyond the statutory appellate period under GST - prescribed period under Section 107 - Condonation of delay in GST appeal beyond the extendable period - HELD THAT: - The Court held that while the Appellate Authority has no jurisdiction under the GST Act to condone delay beyond the additional one month contemplated by Section 107(4), that statutory prohibition does not curtail the High Court's extraordinary jurisdiction. Applying the principle stated in M/s Multi Trading Agencies, Drangbal Vs. UT of Jammu and Kashmir & Ors [2024 (10) TMI 1046 - JAMMU AND KASHMIR AND LADAKH HIGH COURT] and noticing the similar view in M/s Parshotam Electronics vs. State Taxes Officer, Circle-Q, Jammu [2025 (10) TMI 325 - JAMMU AND KASHMIR AND LADAKH HIGH COURT], the Court found that the appeal had been presented with only a one-day delay beyond the extendable period and that the explanation based on the death of the petitioner's sister warranted indulgence. In those circumstances, denial of a hearing on merits was held likely to operate harshly against the petitioner, and intervention was considered necessary to secure the ends of justice. [Paras 5, 6, 8, 9]

The delay in filing the appeal was condoned in writ jurisdiction, the rejection order was set aside, and the matter was remanded to the Appellate Authority for decision on merits.

Final Conclusion: The writ petition was allowed. The High Court condoned the one-day delay beyond the statutory extendable period, set aside the appellate rejection order, and remanded the appeal for decision on merits.

Entitlement to bail in a GST prosecution - illegal availing of input tax credit through invoices issued and used without actual supply of goods- Economic offences and bail - Presumption of innocence -Documentary and electronic evidence - Right to speedy trial - HELD THAT: - The Hon’ble Supreme Court of India in the case of Radhika Aggarwal [2025 (2) TMI 1162 - SUPREME COURT (LB)] has propounded that ‘the arrest must proceed on the belief supported by reasons relying on material that the conditions specified in Section 132(5) are satisfied, and not on suspicion alone. An arrest cannot be made to merely investigate whether the conditions are being met. The arrest is to be made on the formulation of the opinion by the Commissioner, which is to be duly recorded in the reasons to believe. The reasons to believe must be based on the evidence establishing to the satisfaction of the Commissioner that the requirements of sub-section (5) to Section 132 of the GST Act are met’.

Hon’ble Supreme Court of India in the abovementioned case that ‘the figures with regard to the tax demand and the tax collected would, in fact, indicate some force in the petitioners' submission that the assessees are compelled to pay tax as a condition for not being arrested. Sub-section (5) to Section 74 of the GST Acts gives an option to the assessee and does not confer any right on the tax authorities to compel or extract tax by threatening arrest. This would be unacceptable and violative of the rule of law’.

The principles of law laid down by the Hon’ble Supreme Court of India in the case of Dataram V/s State of Uttar Pradesh and another [2018 (2) TMI 410 - SUPREME COURT], are also relevant, wherein it has been observed that “a fundamental postulate of criminal jurisprudence is the presumption of innocence, meaning thereby that a person is believed to be innocent until found guilty. However, there are instances in our criminal law where a reverse onus has been placed on an accused with regard to some specific offences but that is another matter and does not detract from the fundamental postulate in respect of other offences.

The Court held that, notwithstanding the seriousness of the allegation, bail was justified because the petitioner had remained in custody for more than three and a half months, the evidence to be relied upon by the prosecution was essentially documentary in nature, the trial was not likely to conclude in the near future, and there was nothing on record to show either a likelihood of tampering with evidence or influencing witnesses or non-cooperation in trial. Applying the settled principles governing bail in economic offences, the Court treated continued incarceration as unnecessary in the facts of the case. [Paras 28, 29, 30]

The petitioner was directed to be released on bail on furnishing bonds, subject to conditions restraining inducement or threat to witnesses, requiring disclosure of address and its change, and prohibiting travel outside India without prior permission of the trial Court.

Final Conclusion: The petition for bail was allowed. Having regard to the period of custody, the documentary nature of the prosecution case, the likely time for conclusion of trial, and absence of material indicating risk of tampering or non-cooperation, the Court directed release on bail subject to conditions.

Entitlement to restoration of GST registration after cancellation for non-filing of returns - furnishing pending returns and making payment of tax dues, interest and late fee - Restoration of GST registration on compliance with proviso to Rule 22(4) - HELD THAT: - The Court held that the case was squarely covered by the earlier coordinate Bench decision in the case of Dhirghat Hardware Stores[2025 (10) TMI 1070 - GAUHATI HIGH COURT] on similar facts and law. Proceeding on the basis of the proviso to Rule 22(4), as extracted in the earlier decision, the Court accepted that where cancellation had been made under Section 29(2)(c) for non-filing of returns, and the registered person was ready to furnish all pending returns and make payment of the tax dues with applicable interest, penalty and late fee, the proper officer could consider dropping the proceedings and restoring the registration in accordance with law. On that basis, the petitioner was granted the same liberty to approach the concerned authority, and the authority was directed to consider restoration expeditiously upon due compliance. The Court further directed that the period stipulated under Section 73(10) of the CGST Act/State GST Act would be computed from the date of the present order, except for the financial year 2024-25, for which computation would be governed by Section 44. [Paras 11, 12, 13]

The petitioner was permitted to apply within the time granted for restoration of GST registration, and the proper officer was directed to consider such application in accordance with law on compliance with the proviso to Rule 22(4), with the consequential direction regarding computation of the period under Section 73(10).

Final Conclusion: Following the earlier coordinate Bench decision on the same legal position, the writ petition was disposed of by permitting the petitioner to seek restoration of GST registration on furnishing pending returns and complying with the proviso to Rule 22(4) of the CGST Rules, 2017. The authority was directed to consider such request expeditiously, with the period under Section 73(10) to run from the date of the order except for the financial year 2024-25.

Seeking Modification of order - Typographical error -Exercise of writ jurisdiction where appellate authority lacks power to condone delay - Earlier order [2026 (6) TMI 313 - RAJASTHAN HIGH COURT], held that delay in filing the appeal was condoned, the impugned orders were set aside, and the appellate authority was directed to hear and decide the appeal on merits. - HELD THAT:- The miscellaneous application was allowed and the earlier order (supra) was modified to clarify that only the appellate authority's order was quashed and set aside, while the delay in filing the appeal before the appellate authority stood condoned.

Service of notice after cancellation of GST registration - Show cause notice uploaded on the GST portal - Alternative mode of service - Violation of principles of natural justice -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 the show cause notice had to be effected through alternative means. Since the impugned order was passed without proper service of notice, there was a violation of the principles of natural justice. [Paras 4, 6]

The impugned order was quashed, with liberty 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 assessment order on the ground of breach of natural justice, as notice uploaded on the GST portal after cancellation of registration was not valid service. Liberty was reserved to the department to issue a proper notice and proceed afresh in accordance with law.

Seeking permission to pre-deposit - Challenged an adjudication order passed after the petitioner did not respond to the show cause notice or attend the personal hearings - HELD THAT:- The writ petition was disposed of by recording the petitioner's consent to deposit 25% of the disputed tax, whereupon the matter was remitted for fresh adjudication on merits and the bank attachment was directed to be lifted subject to compliance with the stipulated conditions.

Levy of GST on sale of immovable property - Failure to consider sale deeds - FORM 26AS-based demand - Failure to consider sale deeds - GST demand founded on FORM 26AS entries could not be sustained without examining the sale deeds showing that the underlying transaction was sale of immovable property. - HELD THAT: - The Court found that the assessment order proceeded on the footing that the petitioner had failed to produce the sale deeds. On examining the sale deed copies and the corresponding FORM 26AS placed before it, the Court observed prima facie that the transaction was one of sale of immovable property. Since sale of immovable property is outside the purview of levy under the GST enactments, a demand merely because the amount was reflected in FORM 26AS could not stand without proper examination of those documents. The impugned orders were therefore quashed and the matter was remitted for fresh consideration on merits after notice. [Paras 5, 6, 7, 8]

The impugned orders for the tax period 2021-22 were quashed and the matter was remitted for fresh order after due notice to the petitioner.

Final Conclusion: The High Court held that the transaction disclosed by the sale deeds was prima facie sale of immovable property, which is outside GST, and that the demand based on FORM 26AS could not be sustained without considering those documents. The impugned orders were quashed and the matter was remitted for fresh adjudication after notice.

Legality of arrest and remand under GST law - Grounds of arrest in writing - Non- Supply of grounds of arrest - HELD THAT: - The arrest of the petitioner is in violation of the law laid down by the Apex Court in the case of Radhika Agarwal Vs. Union of India [2025 (2) TMI 1162 - SUPREME COURT (LB)]; Mihir Rajesh Shah Vs. State of Maharashtra [2025 (11) TMI 367 - SUPREME COURT] and in the cases of Vihaan Kumar Vs. State of Harayana [2025 (2) TMI 1104 - SUPREME COURT]; Prabir Purkayastha Vs. State (NCT of Delhi) [2024 (5) TMI 1104 - SUPREME COURT]. He has submitted that remand order has been passed by the Remand Magistrate without application of mind and without taking into account the law settled by the Apex Court and also this Court in the case of Jai Kumar Agarwal Vs. DGGI and Others [2026 (2) TMI 893 - ALLAHABAD HIGH COURT].

The Apex Court in the case of Pradeep Goyal Vs Union of India [2022 (8) TMI 216 - SUPREME COURT], directed the GST Council to implement the system of electronic DIN generation on every communication sent by State Tax Officers to tax payers and other concerned persons as to bring in transparency and accountability in tax administration.

The Court found that the respondent's stand that the grounds of arrest were supplied together with the arrest memo was not borne out by the record. It accepted the contention that the arrest memo did not show the grounds of arrest as any annexure, and noted the discrepancy regarding the CBIC-DIN despite the plea that both were generated simultaneously as one document. On that basis, the Court concluded that the grounds of arrest had not in fact been furnished along with the arrest memo and had been subsequently formulated and filed with the counter-affidavit. Applying the law noticed from the decisions cited before it, the Court held that the arrest was illegal, and that the remand founded on such arrest was likewise unsustainable. [Paras 8]

The arrest and remand were declared illegal; the remand order was set aside and the petitioner was directed to be released forthwith, while leaving it open to the respondents to proceed afresh in accordance with law.

Final Conclusion: The Court allowed the habeas corpus petition and held the petitioner's arrest and consequent remand to be illegal because the grounds of arrest were not shown to have been supplied along with the arrest memo. The petitioner was directed to be released forthwith, with liberty to the respondents to proceed afresh in accordance with law.

Legality of the arrest and remand - Non- supply of grounds of arrest - Transit remand - Judicial remand without application of mind -Non-supply of the reasons to believe - Availment of fraudulent I.T.C as well as fake invoices being generated without supply of goods - illegal custody, non-compliance with mandatory procedural safeguards, and failure to produce him before the competent Magistrate within the prescribed time - habeas corpus.

Legality of the arrest and remand - Arrest memo compliance - Transit remand - HELD THAT: - The Apex Court in the case of D.K. Basu [1996 (12) TMI 350 - SUPREME COURT]clearly directed that the place of arrest of an accused should be clearly mentioned in the arrest memo, but in this case we find that the place of arrest and venue of the custody of the petitioner have also not been disclosed. The information to his son was also not given at the time of the arrest of the petitioner. Since in the arrest memo of the petitioner, petitioner has mentioned that let his son be informed about his arrest, hence his son was not clearly informed about his arrest, when his arrest was effected.

The Court held that, in substance, arrest commences when personal liberty is restrained and continues until release or lawful remand. On the record, the petitioner had been kept under the control of the authorities from 29.01.2026, and there was nothing to show that he had been permitted to leave and return later when the formal arrest memo was prepared on 30.01.2026. The arrest memo itself did not disclose the place of arrest, did not properly reflect service of the grounds of arrest as an annexure acknowledged by the petitioner, and did not establish due communication of the arrest to his son. The Court also found that the grounds of arrest were not shown to have formed part of the arrest memo in the manner required by the departmental instructions, and the omission of a separate D.I.N. on that document was contrary to the respondent authority's own procedure. Further, whether the petitioner had been picked up from Delhi or had come in response to summons, he was kept at Noida and then taken onward without any lawful transit remand. These defects rendered the detention and arrest contrary to law. [Paras 32, 33, 34, 35, 37]

The Court held the petitioner's detention and arrest to be illegal.

Judicial remand without application of mind - HELD THAT: - Having found serious defects in the arrest and production of the petitioner, the Court further held that the remand order did not reflect a judicial examination of those defects. The remand was therefore treated as having been passed without application of mind and in violation of the governing legal requirements. [Paras 35, 37, 38]

The remand order was quashed.

Supply of reasons to believe - HELD THAT: - The powers of arrest under Section 69 of the CGST Act, 2017 have been validly exercised in the present case, strictly in accordance with law, after due formation of "reason to believe" based on credible material including documentary evidence, electronic records, and Shri Nitin Aggarwal's own voluntary statement. The constitutional validity and procedural safeguards relating to arrest under fiscal statutes have been upheld by the Hon'ble Supreme Court in Radhika Agarwal v. Union of India [2025 (2) TMI 1162 - SUPREME COURT (LB)], wherein it has been held that arrest is permissible where supported by material evidence and recorded reasons, subject to compliance with procedural safeguards.

The Court declined to accept the contention that the reasons to believe had to be supplied to the arrested person. It held that those reasons are meant for the Court to examine in order to verify whether the arrest was justified, and non-service of that material on the arrestee did not vitiate the arrest on that ground. [Paras 36]

The challenge founded on non-supply of reasons to believe was rejected.

Final Conclusion: The Court held that the petitioner's detention, arrest and consequential remand were vitiated by fundamental legal defects, including unlawful custodial restraint, defective arrest documentation and absence of lawful transit remand. The habeas corpus petition was allowed, the remand order was quashed, and the petitioner was directed to be released forthwith, while leaving it open to the respondents to proceed afresh in accordance with law.

Validity of the detention, arrest, remand and custody - Clubbing of clandestine removal with undervaluation for GST arrest - Statutory safeguards in arrest - Violations in the manner of arrest, including non-compliance with the requirement of supplying grounds of arrest in the manner prescribed.

Clubbing of clandestine removal with undervaluation for GST arrest - Penal prosecution for undervaluation - HELD THAT: - The Court found that the respondents gave no answer to the objection that the first remand application had treated alleged clandestine removal and alleged undervaluation as separate categories, but the later remand application mixed them together. No explanation was furnished as to how alleged undervaluation, stated to be covered by section 122(1)(i), could be treated as the same offence as clandestine removal under section 132(1)(a), nor was there any reply to the contention that determination of the quantum of undervaluation required the procedure under section 74. In the absence of any legal justification for this clubbing, the very basis of the arrest and remand was held to be unsustainable. [Paras 12, 14]

The arrest and remand could not be supported on the basis of a combined allegation of clandestine removal and undervaluation.

Statutory safeguards in arrest - Mechanical remand - HELD THAT: - The Court held that the respondents failed to explain why the mandate requiring notice in offences punishable up to seven years would not apply. Their stand that no separate DIN was required because the grounds of arrest formed part of the arrest memo was found inconsistent with the applicable circular and instructions. The Court further recorded that the grounds of arrest were not supplied to any relative or friend, proper intimation of arrest was not given, and the place of arrest was not mentioned. It also found that the remand Magistrate had mechanically passed the remand order without considering the accused's objections, the conduct of the department, or the law governing remand. These defects rendered the detention, arrest, remand and custody illegal. [Paras 12, 13, 14]

The remand order and consequential proceedings were quashed, though liberty was reserved to proceed afresh in accordance with law.

Final Conclusion: The petition was allowed. The remand order, detention, arrest, subsequent remand and custody were held illegal and quashed, with liberty to the respondents to proceed afresh in accordance with law.

Availability of statutory appellate remedy under GST - Defect removal - Appeal before GST Appellate Tribunal after its constitution - Limitation for filing appeal - Compliance with the statutory pre-deposit requirement - HELD THAT: - The Court noted that the earlier basis for invoking writ jurisdiction was the non-constitution of the Tribunal under the statute. Since the Central Government had thereafter constituted the GST Appellate Tribunal, appointed its Members, notified the procedural rules, and also notified the date up to which appeals could be filed in cases where the impugned orders had been communicated before the specified cut-off, the statutory appellate mechanism had become operational. In that situation, the Court held that no useful purpose would be served by keeping the writ petition pending and, without examining the validity or legality of the impugned orders, relegated the petitioner to the appellate remedy. The Court further directed that an appeal filed within the notified period up to 30th June, 2026 be entertained without objection as to limitation, and that any amount deposited under the interim order be treated as compliance with the statutory pre-deposit requirement.

The writ petition was disposed of by permitting the petitioner to file an appeal before the GST Appellate Tribunal within the notified period, with protection against limitation objections and with the interim deposit to be treated as statutory pre-deposit.

Final Conclusion: The Court declined to examine the challenge to the impugned orders on merits in view of the now-operational GST Appellate Tribunal and relegated the petitioner to the statutory appeal. An appeal filed within the notified period up to 30th June, 2026 was directed to be entertained without objection on limitation.

Writ petitions challenged the assessment orders passed under Section 74 - Short payment of tax and non-payment of tax on seigniorage fees under reverse charge mechanism - Taxability of seigniorage fees under reverse charge mechanism.

Remand of GST assessment - Short reported turnover in mineral excavation - HELD THAT: - The Court noted that the impugned assessment orders under Section 74 were preceded by show cause notices in Form GST DRC-01 and that the petitioner had not filed replies. Following the consistent view adopted by the Court in similar circumstances, it directed that the matter be remitted to the respondent on condition that the petitioner deposit 25% of the disputed tax referable to Defect No.1 and file separate replies with supporting documents, treating the impugned orders as an addendum to the show cause notices. The respondent was then directed to pass fresh orders on merits and in accordance with law. [Paras 6, 7, 8]

Fresh adjudication on Defect No.1 was directed upon compliance with the stipulated pre-deposit and reply requirements.

Seigniorage fee under reverse charge mechanism - Deferred adjudication pending Supreme Court decision - HELD THAT: - In respect of Defect No.2 concerning non-payment of tax on seigniorage fees under reverse charge mechanism, the Court did not pronounce upon the substantive taxability issue. It ordered remand subject to deposit of 10% of the disputed tax and filing of replies, and specifically directed the respondent to pass separate orders only after the Supreme Court's decision on the issue of taxability of seigniorage fees under RCM becomes available. The merits of that controversy were thus left open. [Paras 6, 7, 8]

Adjudication on Defect No.2 was deferred, and separate orders were directed to be passed after the Supreme Court decides the RCM taxability issue concerning seigniorage fees.

Final Conclusion: The writ petitions were disposed of by setting aside the operative effect of the impugned assessments and remitting the matters for fresh consideration subject to specified pre-deposits and replies. The issue relating to seigniorage fees under reverse charge mechanism was left open for decision after the Supreme Court settles that question.

Assumption of jurisdiction under Section 74 - Wilful defects and omissions in returns - Scope of Show cause notice - issued only three months before the assessment order - Writ jurisdiction where factual dispute on wilfulness - Alternate appellate remedy.

Section 74 invocation for wilful defects and omissions in annual returns - Factual dispute on wilfulness - HELD THAT: - The Court found from the impugned orders that, after considering the petitioner's reply, the assessing authority had categorically concluded that the defects and omissions in the annual returns were wilful in nature. On that finding, the ingredients for invoking Section 74 stood attracted. The petitioner's contention that the defects and omissions were not wilful raised a factual dispute, which the Court held could be examined only by the appellate authority and not in writ jurisdiction. [Paras 11, 12]

The challenge to the assumption of jurisdiction under Section 74 was rejected, leaving the factual question on wilfulness to the appellate remedy.

Show cause notice period under Section 74 - Absence of prejudice from shorter notice period - HELD THAT: - The Court accepted the respondent's contention that the object of the prescribed period in Section 74 is to afford sufficient time to the assessee to submit a reply, and treated the requirement as suggestive rather than mandatory. Since the petitioner had, in fact, submitted a detailed reply along with supporting documents and the same was considered before the impugned orders were passed, no prejudice was shown. In that situation, the objection founded on limitation in issuance of the show cause notice was held untenable. [Paras 14]

The plea that the proceedings were barred or invalid because the show cause notice was issued only three months prior to the assessment order was rejected.

Final Conclusion: The writ petitions were dismissed on the ground that the invocation of Section 74 was supported by the finding of wilful defects and omissions in the returns, and that the objection based on the timing of the show cause notice failed for want of prejudice. Liberty was reserved to the petitioner to pursue the statutory appellate remedy within the time granted by the Court.

Validity of assessment order confirming the proposed GST demand - Non- Reasoned adjudication - failure to follow a proper adjudicatory procedure -HELD THAT: - The Court found from the impugned order itself that, although the assessee's reply had been received and acknowledged, there was no clear discussion of that reply in the order. The order merely recorded that the reply was not in order and that records were not produced, without disclosing a reasoned consideration of the objections before confirming the demand. The Court also observed that the procedure of first calling the assessee for personal hearing and only thereafter calling upon the assessee to file a reply was procedurally improper and required correction so that due process is followed before adjudication. [Paras 5, 6, 7, 8]

The impugned order was quashed and the matter was remitted for fresh decision on merits in accordance with law, after due notice to the assessee; the Department was also directed to frame and circulate proper guidelines to ensure compliance with due process.

Final Conclusion: The writ petition was disposed of by setting aside the impugned assessment order and remanding the matter for fresh adjudication. The Court further directed adherence to proper procedure, including issuance of due notice before any final order.

Tax on dividends paid/distributed by the Appellant (Non-Resident) - governed by Double Tax Avoidance Agreement between (DTAA) between India and United Kingdom or in accordance with Section 115O of the Income Tax Act, 1961 -tax credit are envisaged in the hands of shareholders in respect of dividend distribution tax payable to company in which shares are held - bilateral treaty between India and UK - Appeal against Advanced Rulings

Correctness of the decision impugned in this special leave petition has been doubted in Foseco India Ltd. Company [2026 (4) TMI 1795 - BOMBAY HIGH COURT]

HELD THAT:- The Court noticed that substantial questions concerning tax under Section 115-O of the Income-tax Act, 1961, and the treaty treatment of Dividend Distribution Tax were already under consideration in connected proceedings before a High Court larger Bench. In view of the ramifications of the issues and the need to hear parties further, the Court allowed the intervention applications, directed circulation of the order to all High Courts, permitted further intervention applications by a specified date, and indicated that High Courts may consider staying similar proceedings in the meantime.

If any intervention application needs to be made before us, the same may be made by 15.07.2026.

List on 12.08.2026.

In the meantime, the High Courts may consider staying the further proceedings of any matter involving similar issues.

Reimbursement of expenses to non-resident - Tax deduction at source on sums chargeable u/s 195 - amounts paid by the assessee to a non-resident parent company and third parties under the Production Sharing Contract - Section 44BB and Production Sharing Contract - Double taxation relief under DTAA

TDS u/s 195 - Payments made by the assessee to its non-resident parent company under the Production Sharing Contract, claimed as reimbursement of expenses - HELD THAT: - The Court held that, in cases governed by the special provisions relating to mineral oil operations, a cost-to-cost reimbursement under the Production Sharing Contract may stand outside the sweep of deemed profits only where the contractual restriction against profit is supported by proper particulars of the expenditure.

The arm's length clause in the contract was not treated as creating any presumption that every payment described as reimbursement was non-taxable. Since the assessee had claimed a consolidated amount under the head reimbursement of expenses, without furnishing item-wise details before the Assessing Officer or seeking determination of the chargeable proportion under section 195(2), it could not avoid deduction of tax at source. On those facts, the Tribunal was justified in treating the claim as unsustainable and in upholding the liability under sections 201(1) and 201(1A). [Paras 31, 32, 33]

The claim that the remittances were mere reimbursements not liable to deduction of tax at source was rejected.

Double taxation relief under DTAA - Applicability of section 90 during relevant assessment years - HELD THAT: - The Court held that the alternate reliance on double taxation relief was misconceived. For the assessment years in question, the benefit of such relief was confined to agreements with foreign Governments and did not extend, in the manner claimed by the assessee, to the private consortium arrangement underlying the payments in question. The DTAA plea was therefore unavailable to defeat the Revenue's claim. [Paras 33]

The plea based on the DTAA was rejected.

Final Conclusion: The Court upheld the Tribunal's order and answered the substantial questions of law against the assessee. It held that the assessee could not treat the remittances as non-taxable reimbursements in the absence of supporting particulars and section 195(2) determination, and that the DTAA plea was unavailable for the years in question.

Maintainability of writ petition - Alternative appellate remedy for non-party intervenor

Maintainability of writ petition - Alternative appellate remedy for non-party intervenor - intervention application was rejected by the Tribunal - HELD THAT: - The Court noted that the petitioner invoked Article 226 on the footing that the statutory appellate remedy would be available only to a party to the proceedings and that the Tribunal had refused intervention. Even in those circumstances, the Court held that the proper course was to approach the appellate court, being a forum of higher strength, with an application seeking leave to file an appeal. Writ jurisdiction was therefore not to be invoked at the first instance, and recourse to the High Court was kept open only depending on the appellate court's decision on such leave application.

The writ petition was disposed of with liberty to the petitioner to file an appeal along with an application for leave, while reserving liberty to approach the Court thereafter depending on the appellate court's conclusion.

Final Conclusion: The Court declined to entertain the writ petition at the threshold and directed the petitioner to first pursue the appellate remedy by seeking leave to appeal against the Tribunal's order. Liberty was reserved to seek writ relief later if the appellate court rejects such leave.

Scope of amendment to section 115BBE enhancing the rate of tax on unexplained income from 30% to 60% - Prospective or retrospective operation of taxing statutes - Enhanced tax on unexplained income u/s 115BBE - Dependent penalty u/s 271AAC

Amendment enhancing the tax rate u/s 115BBE from 30% to 60%, and the consequential penalty provision u/s 271AAC to be applied to income relating to Financial Year 2016-17 either from 01.04.2016 or from 15.12.2016 - HELD THAT: - The Court held that, in the absence of express retrospective language, an onerous fiscal amendment must operate prospectively.

Section 4 of the Act read with the binding rule in Karimtharuvi Tea Estate Ltd. v. State of Kerala [1965 (12) TMI 35 - SUPREME COURT] requires the law as in force on the first day of the relevant year to govern the assessment, and a later amendment cannot alter the tax consequences of completed transactions unless the statute clearly so provides. The Taxation Laws (Second Amendment) Act, 2016, though stated to come into force "at once", expressly provided that the substitution of Section 115BBE(1) would take effect from 01.04.2017; the Court treated this as decisive of legislative intent.

The Court further held that Section 271AAC is not a free-standing penal provision and can operate only if Section 115BBE validly applies. While agreeing with Maruthi Babu Rao [2021 (1) TMI 481 - KERALA HIGH COURT] to the limited extent that surcharge is derivative, the Court respectfully differed from its view that enhancement of the principal tax rate creates no new liability, holding instead, in light of CIT vs. Vatika Township. [2014 (9) TMI 576 - SUPREME COURT (LB)] that doubling the principal rate is a substantive and onerous burden which cannot be given retrospective operation by implication. [Paras 14, 15, 16, 17, 18]

The enhanced rate under Section 115BBE and the linked penalty provision under Section 271AAC were held prospective, with Section 115BBE applicable only from 01.04.2017, and not to Financial Year 2016-17.

Final Conclusion: The Court held that the Taxation Laws (Second Amendment) Act, 2016 operates prospectively in the manner expressly stated therein, and that the enhanced tax under Section 115BBE, with the dependent penalty under Section 271AAC, could not be applied to Financial Year 2016-17. The pending statutory appeal was directed to be decided in accordance with this declaration of law.

Addition u/s 56(2)(viib) - issuance of Compulsory Convertible Preference Shares ('CCPS') to its holding company - issue of CCPS to holding and existing shareholders - Rule 11UA valuation - Assessing Officer power to substitute the chosen method - Real income - reversal of management fee accrual - Revenue versus capital expenditure - transformation service charges - addition u/s 40A(2) - payment for services mislabeled as interest

Addition u/s 56(2)(viib) - CCPS valuation - intra-group capital infusion - Rule 11UA - Addition u/s 56(2)(viib) on share premium received on issue of CCPS to the parent and existing shareholders, and on conversion of CCPS issued in earlier years into equity shares during the year - HELD THAT: - The Tribunal held that the impugned shares were issued after reorganisation to the parent and existing shareholders, and the change in shareholding had arisen because proportionate shares were issued pursuant to the approved scheme. On these facts, the transaction could not be regarded as one intended to introduce unaccounted money, which was the mischief sought to be addressed by section 56(2)(viib). It further held that once valuation had been obtained from registered valuers or a merchant banker in terms of Rule 11UA, the tax authorities could not re-evaluate the shares by substituting another valuation basis. The Tribunal also noted that the investment had come through a foreign owned and controlled company in compliance with FEMA regulations, and therefore could not be characterised as unaccounted money. As regards the separate addition on conversion of CCPS issued in earlier years into equity shares during the relevant year, the Tribunal held that section 56(2)(viib) had no relevance for that purpose in the impugned assessment year. [Paras 13, 14, 15, 16]

Both additions made under section 56(2)(viib) were deleted.

Management fee accrual - year-end reversal entry - verification of real income - Disallowance relating to the negative management fee entry recorded at year end - HELD THAT: - The Tribunal found that the assessee had explained the impugned entry as a reversal of excess accruals made during the year, but had not supported that explanation with proper documents and evidence. It held that the assessee was required to explain the basis on which management fees had been claimed from group entities through the year and to justify the year-end reversal with appropriate material. Since the explanation had remained vague and unsupported, the matter required verification by the Assessing Officer after granting a further opportunity of hearing. [Paras 23]

The issue was remanded to the AO for fresh verification; the ground was allowed for statistical purposes.

Revenue expenditure - transformation services - capital asset not acquired - addition u/s 40A(2) - Payments made to MTH for hotel transformation and related services allowability as revenue expenditure v/s disallowance by treating them as excessive interest u/s 40A(2) - HELD THAT: - The Tribunal examined the business model and the Master Framework Agreement and found that MTH rendered transformation, refurbishment and related services in relation to hotel properties operated within the OYO framework. The capital work on refurbishment and improvement was borne in relation to the hotel properties under the contractual arrangement, but no capital asset or enduring benefit in the capital field was acquired by the assessee. The compensation paid to MTH formed part of the standard cost of running the hotel business and was therefore revenue in nature. The Tribunal also accepted that the accounting classification of the payment as interest was not decisive, since the payment was not for servicing any debt or repayment of any loan, but for services rendered by MTH. On that basis, the approach of benchmarking the payment as interest under section 40A(2) was held inapplicable. [Paras 33, 34, 35]

The deletion of the disallowance by the CIT(A) was upheld and the Revenue's grounds were dismissed.

Final Conclusion: The assessee's appeal was partly allowed. The additions under section 56(2)(viib) were deleted, the management fee issue was restored to the Assessing Officer for fresh verification, and the Revenue's appeal against deletion of the disallowance relating to payments to MTH was dismissed.

Disallowance u/s 14A on investments yielding exempt income - Presumption of investment out of interest-free funds - Unapproved research and development expenditure under weighted deduction scheme - Business expenditure on rent paid to related parties

Disallowance u/s 14A - Rule 8D computation - Interest-free funds presumption - HELD THAT: - The Tribunal held that for the purpose of disallowance under Rule 8D(2)(iii), only those investments which actually yielded exempt income could be taken into account. On the interest component, it found from the financial statements that the assessee's interest-free funds were far in excess of the investments, attracting the presumption that the investments were made out of such own funds and not from borrowed funds. On that basis, the interest disallowance under Rule 8D(2)(ii) was directed to be deleted and the remaining disallowance was to be recomputed accordingly. The same directions were applied for AY 2017-18. [Paras 6, 18]

The disallowance under section 14A was partly sustained only for recomputation on the basis of investments yielding exempt income, and the interest disallowance was deleted.

Rent expenditure for business purpose - Related party rent - Business expediency - Rent paid for a farmhouse taken from related parties - HELD THAT: - The Tribunal noted that the rent was paid to related parties and that the assessee had claimed the expenditure for a continuous six-month period on the footing that the premises were used for foreign customers. It found, however, that the supporting particulars furnished showed stay of only two foreign visitors for one or two days during the entire period, and therefore the assessee had not fully established the claimed business expediency. Since personal use also could not be ruled out, particularly when the property stood in the names of the directors, the disallowance was restricted instead of being wholly confirmed. [Paras 10, 11]

The disallowance of rent was restricted to 50% of the rental expenditure and the ground was partly allowed.

Disallowance u/s 37(1)/35(1)(i) - Weighted deduction for research and development - DSIR approval - Alternative allowance u/s 37(1) - Whether Research and development expenditure not approved for weighted deduction under section 35(2AB) remained allowable as business expenditure under section 37(1), to the extent actually incurred for the business? - HELD THAT: - The Tribunal accepted that weighted deduction u/s 35(2AB) was confined to the expenditure approved by the prescribed authority. It nevertheless held that the balance revenue expenditure on research and development, though not qualifying for weighted deduction, did not lose its character as business expenditure merely because it was not certified for that purpose. Following the cited coordinate bench decisions like Auto Ignition Ltd [2022 (1) TMI 327 - ITAT DELHI] and BEML Ltd. [2023 (11) TMI 385 - ITAT BANGALORE] it directed allowance of the unapproved portion under section 37(1). The same directions were extended to AY 2017-18 while dealing with the similar grounds relating to research and development expenditure. [Paras 14, 15, 19]

The unapproved research and development expenditure was directed to be allowed under section 37(1), and the corresponding grounds were allowed.

Final Conclusion: Both appeals were partly allowed. For both years, the section 14A disallowance was directed to be recomputed by considering only investments yielding exempt income and by deleting the interest component; the rent disallowance for AY 2016-17 was restricted to 50%; and the unapproved research and development expenditure was directed to be allowed under section 37(1).

Unexplained money for alleged on-money payment in flat purchase - Statement of builder group as sole basis of addition - Third-party statement without corroborative incriminating material - Cross-examination and admissibility of electronic evidence

HELD THAT: - The Tribunal found that the Assessing Officer had made the addition solely on the basis of statements of key persons of the Cosmos Group and on an Excel sheet stated to have been prepared by the investigation team. The alleged incriminating material contained in Gmail or Yahoo mail was neither brought on record nor supplied to the assessee, and no cognizance was taken of the builder's confirmation regarding receipt of the stated sale consideration.

Tribunal held that a statement by itself cannot be treated as evidence against a third party unless tested by cross-examination. It further noted that on similar facts, coordinate Benches had deleted like additions arising from the same search material. Following those decisions, the Tribunal held that the addition lacked evidentiary foundation and was liable to be deleted. Since relief was granted on merits, the challenge to reopening was treated as academic and left undecided. [Paras 8, 9]

The addition under section 69A for alleged on-money payment was deleted, and the ground challenging reopening was not adjudicated as academic.

Final Conclusion: The Tribunal allowed the appeal and deleted the addition made for alleged on-money payment in purchase of the flat, holding that the Revenue had not produced corroborative incriminating material and had relied only on untested third-party statements and electronic material not furnished to the assessee. The challenge to reopening was left open as academic after relief on merits.

Exemption of long-term capital gains on sale of listed shares - Unexplained cash credit based on alleged penny stock transactions - Burden of proof in share transaction genuineness - Consequential addition for alleged commission expenditure u/s 69C - Cross-examination and absence of independent inquiry

HELD THAT: - The Tribunal held that the assessee had discharged the initial onus by producing documentary evidence covering purchase, holding and sale of the shares, including contract notes, demat account details and bank records. The additions were founded only on general information from the investigation wing regarding alleged penny stock modus operandi, without any independent investigation connecting the assessee or his broker with manipulation of the scrip price.

The request for cross-examination of the persons whose statements formed the basis of the adverse inference was also not granted. In the absence of any adverse material against the documents produced, any finding against the broker, or any cogent evidence showing that the assessee's transaction was an accommodation entry, the sale consideration could not be treated as unexplained cash credit.

Once the addition under section 68 failed, the alleged commission addition under section 69C, being purely consequential, also had to be deleted. [Paras 6, 7]

The addition under section 68 on the sale proceeds of the shares and the consequential addition under section 69C for alleged commission were deleted.

Final Conclusion: The Tribunal allowed the appeal and held that the assessee's documented share transactions could not be disregarded merely on the basis of general investigation material relating to alleged penny stocks, in the absence of any specific evidence against the assessee or his broker. The additions under sections 68 and 69C were accordingly deleted.

Transfer pricing adjustment on interest paid on compulsorily convertible debentures - Recharacterisation of compulsorily convertible debentures as equity - Allowability of interest on compulsorily convertible debentures

HELD THAT: - The Tribunal found that the assessee had issued CCDs carrying stipulated interest and that the Transfer Pricing Officer disregarded the assessee's benchmarking and treated the CCDs as equity-like instruments, fixing the arm's length price of interest at nil. It held that the controversy stood covered by a consistent line of Tribunal and High Court decisions holding that CCDs cannot be treated as equity for this purpose and that interest in respect of such CCDs cannot be disallowed by recharacterising the instrument.

Indorama Ventures Oxides Ankleshwar (P.) Ltd [2024 (10) TMI 1625 - ITAT MUMBAI] where assessee issued CCDs to its AE to finance acquisition of business undertaking of an unrelated party and revenue made transfer pricing adjustment on account of alleged option premium arising on alleged sale of embedded call option to AE, it was held that in absence of any income (notional or otherwise) in nature of options premium, transfer pricing adjustment could not be made. We also find that in HDFC Bank Ltd [2024 (11) TMI 1386 - BOMBAY HIGH COURT] also held that where assessee-bank had made a 'rights issue' of Fully Convertible Debentures (FCDs), expenditure incurred by assessee on issue of said FCDs was to be allowed as deduction. We further find that Hon’ble Bombay High Court followed the decision of Delhi High Court in CIT Vs Havells India [2012 (5) TMI 449 - DELHI HIGH COURT] wherein it was held that expenditure incurred on issue of debentures is to be allowed as revenue expenditure despite indications to effect that debentures are to be converted in near future into equity shares.

Thus, expenditure on issue of convertible debentures remains allowable notwithstanding future conversion into equity. Applying those decisions, it held that the adjustment on account of interest on CCDs could not be sustained. [Paras 8]

The addition and transfer pricing adjustment on account of interest on CCDs were directed to be deleted.

Final Conclusion: The Tribunal held that the transfer pricing adjustment made by determining the arm's length price of interest on CCDs at nil after recharacterising the CCDs as equity was contrary to the settled position reflected in earlier decisions. The assessee's appeal was accordingly allowed and the entire adjustment on account of interest expense was directed to be deleted.

Unexplained cash deposits during demonetisation - Taxability of section 69A addition under normal rates as against section 115BBE - Penalty for under-reporting or misreporting on estimated addition - Penalty linked to tax payable u/s 115BBE - Penalty for non-compliance of notice and natural justice

Unexplained cash deposits during demonetisation - Cash sales recorded in books - Lump-sum estimation of addition - Cash deposits during the demonetisation period, claimed to be out of recorded sales - HELD THAT: - The Tribunal found that the assessee had made an attempt to explain the cash deposits as arising from sales recorded in the books and had, prima facie, discharged the initial onus. At the same time, the explanation could not be wholly accepted because no satisfactory explanation was given for the disproportionate rise in cash sales immediately preceding demonetisation. Since the Revenue also could not fully dislodge the assessee's material such as stock register and purchase records, the matter did not justify sustaining the entire addition. In that factual position, the Tribunal adopted a lump-sum estimation and held that only a partial addition should survive to cover the unexplained element. [Paras 8]

The addition was restricted to a lump-sum amount of Rs. 10 lakhs, and the ground was partly allowed.

Taxability of section 69A addition under normal rates as against section 115BBE - Prospective operation of amended rate provision - HELD THAT: - Relying on the view of the Madras High Court [2024 (11) TMI 1444 - MADRAS HIGH COURT] the Tribunal held that the impugned amended statutory provision would operate only for transactions undertaken on or after 01.04.2017. Since the dispute related to the year under consideration prior to such operation, the higher rate under section 115BBE could not be applied to the addition sustained in appeal. [Paras 9]

The Assessing Officer was directed to tax the sustained addition under the normal provisions and not under section 115BBE.

Penalty u/s 270A for under-reporting or misreporting on estimated addition - HELD THAT: - The Tribunal held that when income is brought to tax solely on estimation, penalty for misreporting or under-reporting cannot rest merely on such ad hoc determination. Penalty under section 270A requires concrete material showing misreporting, and not merely an estimated addition to income. [Paras 12]

The penalty levied under section 270A was deleted.

Penalty u/s 271AAClinked to tax payable under section 115BBE - HELD THAT: - The Tribunal noted that penalty under section 271AAC is computed with reference to the tax payable under section 115BBE(1)(i). Since the invocation of section 115BBE was deleted in quantum proceedings, the statutory foundation for the penalty ceased to exist. [Paras 13]

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

Penalty u/s 272A(1)(d) for non-compliance of notice and natural justice - HELD THAT: - The Tribunal found that the dismissal of the appeal by the first appellate authority on the ground of delay was unwarranted because adequate opportunity had not been given to explain the delay, contrary to the principles of natural justice. Taking the overall facts into account, the Tribunal held that the penalty for non-compliance of notices was liable to be deleted. [Paras 14]

The penalty levied under section 272A(1)(d) was deleted.

Final Conclusion: The quantum appeal was partly allowed by restricting the addition on account of cash deposits to a lump-sum amount and by directing that the addition be taxed under the normal provisions instead of section 115BBE. The penalties under sections 270A, 271AAC(1) and 272A(1)(d) were deleted, and the remaining three appeals were allowed.

TP Adjustment - Additional evidence in transfer pricing proceedings - Reasonable cause for non-production before lower authority

Validity of Admission of additional evidence relating to intra-group legal and professional services and remand of the transfer pricing adjustment for fresh adjudication -HELD THAT: - The Tribunal found that the documents relating to expenses incurred by the associated enterprise for rendering legal and professional services to the assessee had not been produced before the Transfer Pricing Officer during the transfer pricing proceedings because the associated enterprise in Canada was not operating due to Covid-19.

This explanation was accepted as a reasonable and sufficient cause for the earlier non-production. On that basis, the additional evidence was admitted, and since those documents bore directly on the determination of the arm's length price of the impugned services, the transfer pricing issue was restored to the file of the Transfer Pricing Officer for fresh consideration after granting reasonable opportunity to the assessee. [Paras 7]

The additional evidence was admitted, and the transfer pricing adjustment on account of legal and professional services was set aside to the file of the Transfer Pricing Officer for fresh adjudication.

Final Conclusion: The Tribunal accepted the assessee's explanation for not filing the relevant documents earlier, admitted the additional evidence, and remanded the transfer pricing adjustment relating to legal and professional services for fresh adjudication. The appeal was accordingly allowed for statistical purposes.

Penalty u/s 270A for under-reporting and misreporting of income - Return filed in response to reassessment notice accepted without variation - Withdrawal of deduction claim before completion of reassessment

Whether Penalty could not be sustained where the assessee, in the return filed in response to notice u/s 148, withdrew the deduction earlier claimed u/s 80GGC and the reassessment was completed by accepting that returned income without any further addition or variation? - HELD THAT: - The Tribunal held that the material fact was that, in the return filed in response to the reassessment notice, the assessee had categorically withdrawn the deduction claim and disclosed the corresponding income.

Since the Assessing Officer accepted that return and made no addition on that count, there was no basis to characterise the case as one of under-reporting or misreporting of income. The Tribunal also noted that the decision in Schneider Electric South East Asia (Hq) Pte Ltd [2022 (3) TMI 1295 - DELHI HIGH COURT] supported the same position. [Paras 7]

The penalty levied under section 270A was held unsustainable and was deleted.

Final Conclusion: The Tribunal allowed the appeal and held that, once the assessee had withdrawn the deduction claim in the return filed in response to notice under section 148 and that return was accepted without variation, penalty for under-reporting or misreporting could not survive.

Penalty levied u/s 271D or u/s 271DA - Defective notice - Penalty for cash receipt of sale consideration - Reasonable cause for cash transaction - mismatch between the notice referring to section 271DA read with section 269ST and the penalty ultimately imposed u/s 271D for alleged contravention of section 269SS - HELD THAT: - The Tribunal held that the penalty notice was itself not in accordance with the statute, since it mentioned contravention of section 269ST, whereas the penalty had been levied for alleged violation of section 269SS under section 271D. It further found on merits that the transaction was a genuine sale transaction, the Revenue had never disputed that the property transaction had actually materialised, part of the consideration had been received through cheques and banking channels, and the tax consequences of the transaction had been offered by the assessee. In these circumstances, coupled with the practical difficulty connected with the purchaser's non-resident status, the levy of penalty under section 271D was held unsustainable. [Paras 7]

The penalty levied under section 271D was deleted.

Final Conclusion: The Tribunal allowed the appeal and held that the penalty under section 271D could not stand, both because the penalty notice referred to a different statutory contravention and because the cash receipt formed part of a genuine, disclosed sale transaction.

Reassessment beyond recorded reasons - Addition on issue not forming part of reasons recorded

Validity of reassessment where the recorded reasons referred to unexplained time deposits and interest income, but the assessment ultimately made no sustainable addition on that basis and instead brought to tax long-term capital gain on sale of land - HELD THAT: - The Tribunal held that the recorded reasons disclosed escapement only in respect of the assessee's alleged investment in time deposits and related interest income.

Assessing Officer ultimately made the principal addition on account of long-term capital gain, which did not form part of the reasons recorded for reopening. The Tribunal further noted that even on the stated basis of time deposits, no valid addition survived. Once no addition was made on the ground for which jurisdiction under section 147 had been assumed, the Assessing Officer could not sustain the reassessment by making an independent addition on a different issue without recording fresh reasons and obtaining the necessary sanction in accordance with law. [Paras 16, 17, 18]

The reassessment was quashed as void ab initio, and the additions on merits were treated as academic and infructuous.

Final Conclusion: The Tribunal allowed the appeal and quashed the reassessment on the ground that the addition ultimately made was on a matter different from the reasons recorded for reopening. Consequently, the grounds on the merits of the additions were left undecided as infructuous.

Jurisdictional objection to assessment- Long term capital gain computation -Cost of acquisition of converted land - Adoption of fair market value under stamp valuation provisions - Levy of interest where seized cash is available for tax adjustment

Jurisdictional objection to assessment - Waiver of objection by participation - Bar u/s 124(3) - challenge to the Income Tax Officer's jurisdiction to frame the assessment - HELD THAT: - The Tribunal admitted the legal grounds as they arose from the record and did not require fresh investigation of facts. On merits, however, it held that the assessee had not filed the original return, the AO having territorial jurisdiction initiated proceedings by notice under section 142(1), and the assessee thereafter filed the return and participated in the proceedings without objection. In such circumstances, the objection to jurisdiction was held to be both meritless and barred by the statutory time limit under section 124(3), participation in the proceedings amounting to acceptance of jurisdiction. [Paras 8]

The legal grounds challenging the AO's jurisdiction were dismissed.

LTCG - Cost of acquisition of converted land - Area foregone for roads and drainage - Recomputation of long-term capital gains - HELD THAT: - The Tribunal found no basis for reducing the original cost of acquisition merely because a part of the land was left for roads and drainage upon conversion. The cost incurred for acquiring the capital asset was attributable not only to the area sold but also to the area necessarily foregone in the conversion process under the applicable rules. In the absence of any finding that the claimed cost was excessive, or that the differential area had been separately sold, the restriction of cost with reference only to the converted area was held to be unsustainable. [Paras 9]

The impugned finding on cost of acquisition was set aside, and the Assessing Officer was directed to recompute the long-term capital gains by taking the full cost of acquisition as claimed, with applicable indexation.

Adoption of fair market value under stamp valuation provisions - On-money in sale of immovable property - Claim of exemption not substantiated - The adoption of the fair market value determined after reference to the Departmental Valuation Officer, in place of the declared sale consideration, was upheld. - HELD THAT: - The Tribunal noted that the seized cash, the assessee's statement regarding its source, and the sale deeds together established receipt of on-money on transfer of the immovable properties. It held that the first appellate authority had correctly required expert valuation and, on receipt of the valuation report, rightly substituted the stamp valuation with the determined fair market value for computation of long-term capital gains. As no material was placed to dislodge that determination, and the claim for exemption was also not supported, no interference was warranted. [Paras 10]

The challenge to the adoption of fair market value and the related claim for further relief were rejected.

Levy of interest where seized cash is available for tax adjustment - Interest under sections 234A and 234B - Interest under section 234C - HELD THAT: - The Tribunal held that interest under sections 234A and 234B, though mandatory in principle, is compensatory in character. Since the seized cash had remained with the Revenue from a date earlier than the due date for filing the return and before the period relevant for advance tax default, and was sufficient for adjustment against the tax liability on the returned as well as assessed income, failure to appropriate that amount could not be attributed to the assessee. Consequently, belated filing by itself did not justify interest under section 234A, and no compensatory interest under section 234B could be charged when the Revenue already held more than sufficient cash. As regards section 234C, the Tribunal distinguished between instalments that fell due before seizure and those that fell due thereafter, holding that only the pre-seizure default, if any, could attract such interest. [Paras 11]

Interest under sections 234A and 234B was directed to be deleted in entirety, and interest under section 234C was directed to be recomputed only in accordance with the period of default prior to seizure.

Final Conclusion: The appeal was partly allowed for statistical purposes. The jurisdictional challenge and the adoption of fair market value for computing long-term capital gains were upheld, but the Assessing Officer was directed to recompute capital gains by allowing the full cost of acquisition, to delete interest under sections 234A and 234B, and to recompute interest under section 234C only to the extent permissible prior to seizure of cash.

Seeking grant to recall application and the prayers for fresh investigation, prosecution and ancillary coercive directions in respect of transfers and acquisitions already examined by the Court-approved SIT - Zoo-to-zoo transfer under valid CITES permits - Admissibility of digital evidence - Commercial acquisition by zoo under statutory permission - Prospective strengthening of CITES import-permit due diligence - Res judicata - Constructive res judicata - Double jeopardy - Allegations regarding husbandry, mortality, overcrowding, climatic conditions, forged rescue documentation, improper record-keeping, money laundering and shell entities.

Finality of court-accepted SIT findings - Fresh investigation on later foreign material - Media and digital material as basis for reopening - HELD THAT: - The Court held that the transfers relied upon in the miscellaneous application were the very matters already examined by the SIT, whose report had been accepted by this Court and later reaffirmed. Later inquiries, prosecutions or regulatory actions in foreign jurisdictions, as well as SC79 Document 6.3.4 and the Standing Committee decision, did not displace that closure so far as respondent Nos. 5 and 6 were concerned. The governing principle applied was a bar of finality: where the entire field had been remitted to a high-powered body, examined, reported upon and judicially closed, the matter could not be reopened at the instance of the applicant or any other body. The Court further held that the material now relied upon, consisting largely of media reports, social-media posts, screenshots, chats, emails and similar digital fragments, was not cogent legally cognizable material for directing a fresh investigation, especially after the SIT had already examined and rejected such material. [Paras 11, 14, 15, 16, 18]

All prayers seeking fresh investigation, cooperation with foreign or global agencies, seizure of specimens, takeover of the facility, or other coercive action in relation to transfers up to September 2025 were rejected.

Commercial acquisition by zoo under statutory permission - Section 38I compliance - CITES purpose code and zoological transfer - HELD THAT: - The Court held that the controlling requirement under the governing statute is previous permission of the Central Zoo Authority and, in the case of imports, compliance with the legal process under CITES. Recognition as a zoo in the Indian statutory sense is inapplicable to foreign establishments so long as their purpose is that of a zoo, rescue centre or breeding centre. Consequently, once the import is supported by valid export and import permits and the requisite domestic permissions, the commercial intent of the foreign exporter is largely immaterial. Even a transfer described as commercial would principally be treated as a zoological transfer if made for or to a zoo, rescue centre or conservation breeding centre; use of purpose code 'T' rather than 'Z' would not by itself bar the import for purposes of Section 38I, except in the case of Appendix I specimens. [Paras 10]

The Court accepted the legality of such acquisitions where statutory permission and CITES compliance existed, and declined to treat the foreign commercial character of the source as a basis for reopening or invalidating the imports.

Confidentiality obligations of employees and consultants - Refusal of judicial immunity for breach of confidence - HELD THAT: - The Court held that such a prayer would effectively nullify confidentiality and non-disclosure obligations owed by persons standing in a relationship of trust to respondent Nos. 5 and 6 and would insulate them from the consequences of breach. It refused to employ its process for that purpose, observing that the fact that an employee or consultant had left service or harboured a grievance did not dilute those obligations. The Court also noted that disclosure in breach of confidence could attract civil consequences and, in appropriate cases, criminal liability under the Bharatiya Nyaya Sanhita. [Paras 17]

The prayer for compelled examination of insiders coupled with immunity from legal consequences was rejected.

Prospective strengthening of CITES import-permit due diligence - Systemic directions to CITES Management Authority of India - HELD THAT: - The Court distinguished between past allegations against the respondents, which stood closed, and the forward-looking systemic observations contained in SC79 Document 6.3.4 regarding due diligence, scrutiny of source and purpose codes, the breeding-in-captivity test, and regulatory capacity. Treating those observations as directed to the Indian regulatory architecture rather than to respondent Nos. 5 and 6, the Court considered it appropriate to issue prospective directions to the CITES Management Authority of India. It accordingly required direct liaison with the CITES Secretariat, formulation of a Standard Operating Procedure for import permits concerning Appendix I live specimens in consultation with the Secretariat, and interim guidance by the Secretariat for proposed private imports of Appendix I species until the SOP is finalized and placed before the Court. [Paras 12, 19, 20]

Prospective regulatory directions were issued to CMA India for formulation and implementation of an SOP governing Appendix I imports, without disturbing the finality attaching to past transfers.

Final Conclusion: The miscellaneous application was rejected insofar as it sought any further inquiry, investigation, prosecution or coercive action against respondent Nos. 5 and 6 in relation to transfers and related matters already examined up to September 2025. At the same time, the Court issued prospective directions to CMA India to strengthen future CITES compliance for Appendix I imports.

Commencement of delegated legislation on publication in Official Gazette - Effect of Prospective operation of import restriction notification - Applicability of restricted import policy to goods imported before e-Gazette publication - Benefit under Notification No. 02/2026-27, which changed the import policy for goods under CTH 7113 from "Free" to "Restricted" to consignments that had already been dispatched and had arrived in India before the notification was published in the e-Official Gazette - Whether the notification published in the e-official Gazette on 2nd April, 2026 with a time stamp of 20:52:28 hrs can be made applicable to the goods that were already booked vide Airway Bills before the notification came to be published ? - HELD THAT: - In Viraj Impex Pvt. Ltd. [2026 (1) TMI 1102 - SUPREME COURT] wherein the Apex Court held that the legal position has been crystallised that a notification or any other form of subordinate legislation becomes enforceable only when the same is published in the manner reasonably calculated to bring it to the notice of all the persons who may be effected by it. It was observed that the requirement of publication in the gazette is not an empty formality.

As regards the point of time at which a notification takes effect after its publication, this issue was examined by the Apex Court in Union of India v. G.S. Chatha Rice Mills [2020 (9) TMI 903 - SUPREME COURT], wherein the Court emphasized that the exact date and time of publication assume significance, especially having regard to the manner in which the gazettes are being published, has shifted from analog to digital.

The Court held that it was unnecessary to decide the validity of the notification itself, since the petitioner's case was that the notification had no application to consignments which had already landed before its publication. Applying the principles governing delegated legislation, the Court held that a notification acquires force of law only upon publication in the Official Gazette, and in the case of electronic publication, the exact time of such publication is legally material. It further held that subordinate legislation under the foreign trade regime operates prospectively and cannot burden imports completed before the notification came into force. Since the consignments had arrived on 1st April, 2026 and 2nd April, 2026, and the last consignment reached the port at 01:39 AM on 2nd April, 2026, prior to the notification being published at 20:52:28 hrs on that date, the subsequent change of policy from "Free" to "Restricted" was inapplicable to those goods. [Paras 24, 25, 26, 27, 28]

The goods were held liable to be cleared under the legal position prevailing before the notification came into force, and the authorities were directed to process their release immediately.

Final Conclusion: The petition was allowed. The Court held that the notification changing the import policy from free to restricted became operative only upon its publication in the e-Official Gazette and could not be applied to consignments that had already arrived before that time; the respondents were accordingly directed to process release of the goods.

Seeking interim release of the imported goods - provisional release - Enhanced Duty - Bank Guarantee - HELD THAT:- The writ petition was allowed by directing consideration of the petitioner's application for provisional release of the seized imported goods on the same conditions as imposed in similar earlier matters in [2025 (4) TMI 1705 - TELANGANA HIGH COURT] said order of releasing of the goods was subjected to challenge before the Hon’ble Supreme Court [2025 (1) TMI 800 - SC ORDER], has refused to interfere with the order passed by this Bench, while leaving adjudication to proceed independently in accordance with law.

Scope of adjudication vis-a-vis show cause notice - denial for the benefit of exemption No. 24/2005-Cus [S. No. 13S]- Non-fulfilment of the procedural requirements under the exemption entry and the IGCR Rules - Conditional customs exemption - failure to follow the Customs Rules, 2017 and furnish the prescribed undertaking - Substantive compliance with exemption condition.

Scope of adjudication vis-a-vis show cause notice - Exemption denial on conditions of notification - HELD THAT: - The Tribunal held that the show cause notice alleged that the goods were not covered by entry 13S and therefore the exemption was unavailable. Once the importer, in defence, asserted that the goods were in fact covered by that entry, the adjudicating authority was required to examine that defence in its entirety, including compliance with the condition attached to the exemption. Since the condition itself was reproduced in the notice and the importer neither claimed nor demonstrated compliance with it, consideration of that aspect was within the permissible scope of adjudication. The explanation that a private publication had omitted the condition was also rejected, as any such error could not alter the contents or legal effect of the notification, particularly when the condition stood reflected in the notice itself. [Paras 13, 14, 15, 16]

The objection that the impugned order travelled beyond the show cause notice was rejected.

Conditional customs exemption - Substantive compliance with exemption condition - IGCR Rules - HELD THAT: - The Tribunal examined the structure of entry 13S and the IGCR Rules and found that the condition was designed to ensure that the imported goods were not used in manufacture of the excluded products specified in clauses (b) to (i). The prescribed bond, undertaking and procedural compliances were meant to secure that object. In the present case, although the importer had not followed the IGCR Rules and had not furnished the required undertaking, the record showed that it was only a trader and not a manufacturer, and that the imported goods had merely been sold and not used in manufacture of any excluded goods. The Tribunal therefore held that, in the peculiar facts, the substantive purpose of the condition stood satisfied though the procedural mechanism meant to ensure such compliance had not been followed. On that basis, denial of the exemption could not be sustained. [Paras 22, 23, 24, 25, 26]

The benefit of Notification No. 24/2005-Cus, S. No. 13S, was held admissible; the duty demand, interest and penalty were therefore unsustainable.

Final Conclusion: The appeal was allowed. While the Tribunal upheld the view that the adjudicating authority had not gone beyond the show cause notice, it held on merits that the exemption could not be denied in the peculiar facts since the imported goods were not used for manufacture of the excluded products, and consequently the demand, interest and penalty were set aside.

Smuggling - Fraudulent export of ketamine under the guise of Alpha Olefin Sulphonate - Penalty for misdeclared export of controlled psychotropic substance - Evidentiary value of foreign seizure report and corroborative circumstantial evidence - Redemption fine where exported goods are not available for confiscation.

Penalty for misdeclared export of Ketamine as Alpha Olefin Sulphonate - Foreign seizure report - Circumstantial evidence in smuggling cases - HELD THAT: - The Tribunal held that the matter was not a mere misdeclaration but a deliberate and organised scheme to export Ketamine under the guise of AOS, using fabricated documents, misused IEC credentials and a fraudulently operated bank account. The report of seizure by the Chinese customs, communicated through the Indian Consulate, was treated as carrying intrinsic evidentiary value in the context of international cooperation concerning psychotropic substances. The appellant's plea that he was only a commission agent was rejected in view of the un-retracted and corroborated statements of the freight forwarder and other witnesses, the appellant's own inculpatory statement, and the surrounding circumstances showing his active role in procurement, storage, documentation, coordination with CHA and freight forwarders, and receipt of export remittances. Applying the principle recognised in Collector of Customs, Madras and Ors. v. D. Bhoormal [1974 (4) TMI 33 - SUPREME COURT] the Tribunal held that in smuggling matters direct evidence is rarely available and the charge can be established by corroborative statements, conduct and circumstantial evidence. On that basis, mens rea and active complicity were found established and penalty under the Customs law was justified. [Paras 10, 11, 13, 14]

The penalty was sustained on merits, but in the facts of the case and considering the long lapse of time, it was reduced to Rs. 5 lakh.

Redemption fine on exported goods - Goods not available for confiscation - HELD THAT: - The Tribunal found that the goods had in fact been exported and had reached the importing country, and therefore the case was one of actual export and not merely attempted export. Although the goods were liable to seizure and confiscation for breach of the applicable legal regime, they were no longer available for confiscation and had not been cleared on bond. In those circumstances, the imposition of redemption fine was held to be not borne out in law. [Paras 12]

The redemption fine imposed qua the appellant was set aside.

Final Conclusion: The order was modified qua the appellant. The Tribunal set aside the redemption fine as unsustainable for want of availability of the goods for confiscation, but upheld the appellant's penal liability for the misdeclared export of Ketamine and reduced the penalty to Rs. 5 lakh.

Smuggling - seizure of gold bars and jewellery in a town seizure case - Reason to believe for invoking statutory presumption - Evidentiary value of hearsay statements - Cross-examination - Relevancy of statements recorded under Section 108, without compliance with Section 138B - Call detail records as corroborative evidence.

Town seizure of gold - Reason to believe for invoking statutory presumption - Foreign origin and smuggling of seized gold - In a town seizure of gold bars and gold ornaments without foreign markings, the statutory presumption could not be invoked unless the Department first established reasonable belief, on definite and cogent material, that the goods were smuggled. - HELD THAT: - The Hon'ble Delhi High Court in the case of Shanti Lal Mehta vs. Union of India & Ors. [1982 (11) TMI 56 - HIGH COURT OF DELHI], has elaborately dealt with town seizures and the evidences required to have the 'reasonable belief' that the goods are smuggled in nature, in such cases.

The Tribunal held that the seizure was a town seizure, since the goods were recovered while the carrier was travelling within the country and not from a border area or notified customs area. In such cases, a greater degree of proof of smuggling is required. The recovered gold had no foreign markings, and there was no evidence showing who brought it into India, by what route, or at what time. The alleged basis of seizure was only general information and statements which did not themselves establish foreign origin or illicit import. Since the initial requirement of a reasonable belief that the goods were smuggled was not made out on cogent material, the burden under the statutory presumption could not shift to the noticees. In the absence of independent evidence proving smuggling or foreign origin, confiscation and consequential penalties could not be sustained. [Paras 10, 12, 13]

The Commissioner (Appeals) was right in treating the case as one of town seizure and in holding that the Department failed to establish the foundation necessary to invoke the presumption against the respondents.

Evidentiary value of hearsay statements - Cross-examination under Section 138B - Call detail records as corroborative evidence - The statements relied upon by the Department, unsupported by independent corroboration and taken without complying with the requirement of cross-examination under Section 138B, could not be relied upon; nor could call records, by themselves, prove smuggling. - HELD THAT: - A bench of this Tribunal in Shafeek P.K. vs. Commissioner of Customs, Cochin [2015 (9) TMI 1257 - CESTAT BANGALORE] has held that it is the subject matter of conversation and not the call records itself, which is material to prove the charge

The Tribunal found that the statement of the carrier, insofar as it attributed smuggling from Nepal, was only hearsay because it was based on what others had allegedly told him. The statements of the other noticees were inconsistent, and without corroborative evidence it was not possible to determine which version was voluntary or truthful. The call detail records merely showed contact between the respondents; they did not disclose the subject matter of the conversations and therefore did not corroborate the allegation that the gold was of foreign origin or had been smuggled. The adjudicating authority had also denied cross-examination on the ground that the case was otherwise supported by call records. The Tribunal held that this was not a valid ground to bypass the mandatory procedure under Section 138B. Since that procedure was not followed, the statements had to be excluded from consideration. Once those statements were eschewed and the call records were found insufficient, the Department's case lacked the evidence necessary to prove smuggling or justify penalty. [Paras 11, 14, 15, 16]

The statements and call records were insufficient in law to establish smuggling, and the penalties imposed on that basis were therefore rightly set aside.

Final Conclusion: The Tribunal found no ground to interfere with the order of the Commissioner (Appeals). Holding that smuggling and foreign origin of the seized gold were not proved and that the relied-upon statements were unusable for non-compliance with the statutory procedure, all six appeals filed by the Revenue were dismissed.

Scope of show cause notice issued by the Customs - Offence report under Customs Broker disciplinary proceedings - Limitation for notice under Customs Broker Licensing Regulations - barred by limitation - Procedural compliance in penalty proceedings against Customs Broker - Imposition of penalty under Regulation 18.

Whether the show cause notice issued by the Tuticorin Customs can be considered as an offence report by the Cochin Customs to initiate the proceedings against the Appellant-CB under the provisions of Customs Broker Licensing Regulations, 2018 ? - HELD THAT: - The Tribunal held that Regulation 17(1) requires issuance of notice within ninety days of receipt of an offence report. In the present case, the show cause notice issued by Tuticorin Customs had been issued after investigation and contained the particulars of the alleged violations committed by the appellant Customs Broker. Since that notice had been forwarded to Cochin Customs for initiating action under the Customs Broker Licensing Regulations, initiation of disciplinary action on that basis was held to be sustainable. [Paras 8]

Proceedings could validly be initiated on the basis of the show cause notice forwarded by Tuticorin Customs, treating it as the relevant offence report for action under the Regulations.

Limitation for notice under Customs Broker Licensing Regulations - Procedural compliance in penalty proceedings against Customs Broker - HELD THAT: - The Tribunal found that even if the Tuticorin show cause notice dated 09.03.2022 were treated as the offence report, the notice under Regulation 17(1) was issued by Cochin Customs only on 17.10.2022, which was beyond ninety days. The Tribunal further held that Regulation 17 prescribes the procedure for revocation of licence or imposition of penalty and that non-adherence to that procedure vitiates the adjudication. As the respondent had not strictly followed the procedure and timelines prescribed under Regulation 17, the impugned order imposing penalty under Regulation 18 was rendered unsustainable. [Paras 8]

The notice being time-barred and the prescribed procedure having not been followed, the penalty order against the Customs Broker was liable to be set aside.

Final Conclusion: The Tribunal held that while disciplinary action could be initiated on the basis of the show cause notice forwarded by Tuticorin Customs, the notice issued by Cochin Customs under the Customs Broker Licensing Regulations was beyond limitation and the prescribed procedure had not been strictly followed. The impugned penalty order was therefore set aside and the appeal was allowed.

Penalty on the Customs Broker - Violation of the Customs Broker Licensing Regulations in relation to attempted export of sugar in the guise of raw rice - Exporter's misdeclaration of export goods - Clerical/ typographical error in the name -Due diligence and KYC compliance under Customs Broker Licensing Regulations - HELD THAT: - The Tribunal found that the statement of the appellant's branch-in-charge showed that the appellant had no knowledge of the presence of sugar in bags declared as raw rice and would not have filed the shipping bill had such mixing been known. On the record, the appellant had obtained KYC documents of the exporter before undertaking clearance. The mere existence of illegal export by the exporter did not, by itself, establish breach by the Customs Broker. The Tribunal further held that there was no admissible evidence in the impugned order to show that the appellant failed to advise the client regarding legal compliance, failed to exercise due diligence as to the correctness of information, or committed any actionable lapse under the cited regulations. The incorrect affidavit was accepted as a clerical or typographical error and not as proof of collusion or conscious default. On that reasoning, the findings of violation of Regulations 10(d), 10(e) and 10(n) were held to be unsustainable. [Paras 9, 10]

The penalty imposed on the appellant Customs Broker was set aside.

Final Conclusion: The Tribunal held that, despite the exporter's attempted illegal export, the material on record did not establish knowledge, collusion, or failure of due diligence on the part of the Customs Broker. The finding of violation under the Customs Broker Licensing Regulations and the consequent penalty were therefore set aside.

Resolution applicant ineligibility under Section 29A(c) - past NPA and shortfall relating to another corporate debtor - Relevant date for reckoning NPA-based disqualification - Effect of approved resolution plan and clean slate principle - Connected person disqualification under Section 29A(j).

Whether the NCLAT erred in holding the appellant to be ineligible under Section 29A(c) and 29A(j) of the IBC? - HELD THAT: - The Court held that disqualification under Section 29A(c) has to be tested at the time of submission of the resolution plan. On that date, there were no dues in praesenti in respect of Cosmic Ferro Alloys Ltd., since its CIRP had already concluded with approval of a resolution plan and change of management. Once such plan stands approved, all stakeholders are bound by it and the remaining dues stand extinguished; they cannot be revived to assess a later applicant's eligibility. The Court further found that the appellant was incorporated after the earlier CIRP had concluded, that its managing director was neither promoter nor in management or control of Cosmic Ferro Alloys Ltd. on the relevant date, and that the NCLAT's reliance on the first proviso to Section 29A(c) was misconceived because no overdue NPA amounts subsisted on the date of submission of the appellant's plan. The additional reasons relied on by the NCLAT, namely prior engagement as marketing executive and subsequent purchase of a unit on slump sale basis, were held insufficient to attract Section 29A(c). [Paras 57, 58, 59, 60, 61]

The finding of ineligibility under Section 29A(c) was unsustainable, and the appellant was held eligible on that count.

Connected person disqualification under Section 29A(j) - Derivative ineligibility based on connected person - HELD THAT: - The Court held that Section 29A(j) is not an independent disqualification in itself, but operates only where a connected person is in fact ineligible under clauses (a) to (i). Since the NCLAT's conclusion that the appellant's connected person was ineligible under Section 29A(c) was erroneous, the derivative disqualification under Section 29A(j) necessarily failed. The Court therefore held that neither the appellant nor its connected persons suffered any ineligibility under Section 29A. [Paras 62, 63, 64, 65, 66]

The finding of ineligibility under Section 29A(j) was set aside, and the appellant was held eligible to participate in the CIRP.

Final Conclusion: The Supreme Court allowed the appeals and set aside both impugned orders of the NCLAT. It held that the appellant was not ineligible under Sections 29A(c) or 29A(j), quashed the consequential fresh Form-G process, and directed that the appellant's resolution plan be processed further in accordance with law.

Substantial question of law - Rejection of section 9 - existence of a pre-existing dispute - Acknowledgment of debt - Operational debt - Moonshine defence - barred by Section 10A - NCLAT in [2026 (5) TMI 1309 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI], held that the existence of a pre-existing dispute was not established, and the rejection of the Section 9 application was set aside. The operational creditor was held entitled to admission of the application if the debt was not discharged within the time granted. - HELD THAT:- The appeal was dismissed on the ground that no substantial question of law was involved, and the Court declined to interfere with the impugned judgment (supra).

Levy of service tax - Transfer of development rights under the collaboration agreement - Benefit arising from land - Immovable property - Exclusion from service tax -HELD THAT: - The Tribunal held that the controversy stood covered by its earlier decision in M/s Genius Propbuild Private Limited [2025 (9) TMI 1607 - CESTAT NEW DELHI], which had followed decisions treating development rights as a benefit arising from land and therefore as immovable property. Once the transaction is in the nature of land or benefits arising out of land, it falls outside the definition of service under the exclusion clause in section 65B(44). Examining the collaboration agreement, the Tribunal found that the ultimate aim of the transfer of development rights was transfer of land, and therefore the demand of service tax on that transaction was unsustainable. [Paras 5, 6]

The impugned order confirming service tax, interest and penalty on transfer of development rights was set aside and the appeal was allowed.

Final Conclusion: Following the earlier Tribunal view that transfer of development rights is a transaction in immovable property and outside the scope of taxable service, the Tribunal set aside the demand, interest and penalty. The appeal was accordingly allowed.

CENVAT credit on goods returned to the factory under Rule 16 - Returned machinery cleared to different buyer - Manufacture of new machine - Claim of using parts of the old machine to manufacture a new machine - Adjudication beyond show cause notice.

CENVAT credit on returned machinery - Remanufacture of returned goods - Clearance to different buyer -HELD THAT: - The Tribunal held that Rule 16 permits credit when duty-paid goods are returned to the factory for being re-made, re-conditioned or for any other reason, and where the subsequent process amounts to manufacture, sub-rule (2) requires payment of duty on the goods at the time of their removal. The provision does not require that the goods, after such process, must be returned to the same buyer from whom they were received back, nor does it insist that the resultant machine must be of identical shape and size. The departmental reliance on the Board circular was rejected insofar as it was used to read into Rule 16(2) a condition of return to the same customer; the Tribunal held that under sub-rule (2), the determinative factor is removal of the manufactured goods on payment of duty. The fact that some components were not used in the new machine but were cleared as scrap on payment of duty did not justify total denial of credit, particularly when the notice itself proceeded only on the footing that the machine was not returned to the previous buyer. [Paras 5, 6, 7, 8]

The credit was held to be rightly admissible and the demand, interest and penalty founded on its denial were unsustainable.

Show cause notice limitation on adjudication - Appellate authority travelling beyond notice -HELD THAT: - The Tribunal found that the show cause notice was founded on the allegation that the same machine was not re-made or re-manufactured and returned, whereas the Commissioner (Appeals) proceeded to reject the appellant's case on a different basis by doubting the practical use of parts of the old machine in manufacture of the new machine. This amounted to travelling beyond the notice, changing the departmental case and adopting a legal approach not open in adjudication. Such a finding was therefore held to be impermissible. [Paras 7]

The additional ground adopted by the Commissioner (Appeals) was held legally unacceptable and could not support denial of credit.

Final Conclusion: The Tribunal allowed the appeal, holding that credit on the returned machine was admissible under Rule 16 where a new machine was manufactured and cleared on payment of duty, and that the contrary view taken by the Commissioner (Appeals) was unsustainable. The order confirming recovery was set aside with consequential refund and interest as per law.

Entitlement to regular bail in a prosecution alleging a large-scale financial fraud - Economic offences - Right to speedy trial - Documentary evidence and absence of apprehension of tampering -HELD THAT: - The principles of law laid down by the Hon’ble Supreme Court of India in the case of Sanjay Chandra [2011 (11) TMI 537 - SUPREME COURT] are relevant. In the abovementioned case, the accused was arrested in a serious economic offences relating loss to the State Exchequer. However, the Hon’ble Supreme Court of India accorded the benefit of bail to the abovenamed accused by observing that the investigation in the case was already complete and charge-sheet by the police had been filed. It has also been observed by the Hon’ble Supreme Court of India that when the under-trial prisons were detained in jail to an indefinite period, Article 21 of the Constitution of India stands violated.

In the abovementioned case, the Hon’ble Supreme Court of India has further observed that it is not in the interest of justice that accused should be in jail for any indefinite period. According to Hon’ble Court, even if the offence is serious in terms of huge loss to the State exchequer, that, by itself, should not deter the Court from enlarging the appellant on bail, when there is no serious contention of the respondent that the accused, if released on bail, would interfere with the trial or tamper with the evidence.

Similarly in the case of Dipak Shubhashchandra Mehta [2013 (6) TMI 105 - SUPREME COURT],the benefit of bail was accorded to accused against whom there were allegations of economic offences of huge magnitude involving crores of rupees.

This Court is conscious of the basic and fundamental principle of law that right to speedy trial is a part of reasonable, fair and just procedure enshrined under Article 21 of the Constitution of India. This constitutional right cannot be denied to the accused as mandated by Hon’ble Apex court in Balwinder Singh versus State of Punjab and Anothe [2024 (9) TMI 1744 - SC ORDER].

The Court held that, notwithstanding the gravity of the financial allegations, bail was justified because the offences were triable by the Judicial Magistrate, the petitioner had remained in custody for about four months, investigation stood completed, and nothing remained to be recovered from him. The Court also treated it as significant that the petitioner had no criminal antecedents, the evidence was essentially documentary, and there was nothing on record to show any real likelihood of tampering with evidence, influencing witnesses, or evading trial. Relying on decisions dealing with bail in economic offences and the constitutional dimension of speedy trial, the Court further observed that prolonged pre-trial detention should not continue where trial was not likely to conclude in the near future. It additionally noticed that the dispute appeared to relate to payment of money, that remedies under Section 138 of the Negotiable Instruments Act had already been invoked, and that a serious question of territorial jurisdiction also arose, all of which weighed in favour of grant of bail. [Paras 34, 35, 36, 37, 38]

Bail was granted subject to conditions restraining inducement or threat to witnesses, requiring disclosure of address changes, and prohibiting travel outside India without prior permission of the trial Court.

Final Conclusion: The petition was allowed and the petitioner was ordered to be released on bail. The Court held that completion of investigation, absence of criminal antecedents, documentary nature of evidence, and the constitutional concern against unnecessary pre-trial incarceration outweighed the seriousness of the economic allegations, subject to appropriate conditions.