TMI Tax Updates e-Newsletter
Jun 10,2026

GST on actionable claims arising from betting and gambling - Games of skill played with stakes as betting and gambling - Actionable claims as goods under the GST framework - HELD THAT:- The writ petition was disposed of in terms of the judgment passed by the Court in DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE (HQS) & ORS. [2026 (5) TMI 1822 - SUPREME COURT], and the pending interlocutory applications were also disposed of.

Computation of limitation for GST appeal - Exclusion of first day in reckoning limitation - Error apparent on the face of the record -Condonable delay under statutory appellate period - Non-consideration of reply to show cause notice - Whether the petitioner had filed the appeal within the outer-limit specified in sub-Section (4) of Section 107 needs to be considered from the perspective of law enunciated by various Courts across different jurisdictions, interpreting provisions of the General Clauses Act, 1897 vis-à-vis different statutes prescribing specific period of limitation ?

Computation of limitation for GST appeal - Exclusion of first day in reckoning limitation - The appellate authority erred in treating the appeal against the adjudication order as beyond the outer condonable period under Section 107 of the GST Act. - HELD THAT: - The Court held that where the statute prescribes filing of appeal within three months from communication of the order, the date of communication has to be excluded and limitation begins from the next day. It further held that the expression month is to be construed as a calendar month and not as a fixed number of days. On that basis, the initial period expired on 15th January, 2026 and the further condonable period extended up to 15th February, 2026. Since the appeal was filed on 13th February, 2026, the delay was only 29 days within the condonable period, and the appellate authority committed an apparent error in law in rejecting it as beyond jurisdiction. [Paras 7, 9]

The finding that the appeal was beyond the statutory outer limit was set aside, and the delay was held to be 29 days within the condonable period.

Non-consideration of reply to show cause notice - Fair opportunity in condonation proceedings - The appellate authority failed to consider the reply filed by the petitioner in response to the show cause notice on limitation. - HELD THAT: - The Court found from the acknowledgment on record that the petitioner's reply had been filed electronically before the impugned order was passed. The appellate order nevertheless proceeded on the footing that there had been no compliance. Such non-consideration of the explanation already on record deprived the petitioner of fair and reasonable consideration of its request for condonation and constituted an apparent error on the face of the record. In view of this defect, the matter required reconsideration by the appellate authority. [Paras 8, 9]

The impugned order was set aside and the matter was remitted for consideration of the petitioner's reply on delay and, if the explanation is accepted, for decision of the appeal on merits in accordance with law.

Final Conclusion: The High Court held that the appeal had been filed within the statutorily condonable period and that the appellate authority had also failed to consider the reply already filed by the petitioner. The rejection order was therefore set aside and the matter remitted for fresh consideration of the explanation for delay and, if accepted, for disposal of the appeal on merits.

Export of services - Refund of accumulated input tax credit - Input tax credit on royalty expenses - Eligibility of input tax credit in refund proceedings - Place of supply -foreign recipients -Distinct persons - Input tax credit - Course or furtherance of business - Blocked credit

Export of services - Place of supply - Distinct persons - The services rendered by the petitioner to its overseas group entity and foreign customers qualified as export of services, entitling it to refund of accumulated input tax credit to that extent. - HELD THAT: - The Court held that the petitioner and the overseas contracting entity were independent legal entities under the master service agreement and could not be treated as mere establishments of a distinct person. On the material placed, the research and development and engineering deliverables were supplied to recipients located outside India, and the default rule governing location of the recipient applied. The repair and balancing services were also found to have been performed at offshore customer locations; even where goods were involved, the place of supply was not within India on the facts found. The Court further held that the services had to be viewed in their entirety and, in the case of composite supply, the principal supply was research and development. The appellate orders rejecting refund on the footing that the services were not exports were therefore unsustainable. [Paras 16, 17, 18, 19]

Refund rejection insofar as it related to export of services was quashed and the petitioner's claim on that issue was upheld.

Input tax credit on royalty expenses - Royalty in course or furtherance of business - Refund proceedings - Input tax credit on royalty paid for licensing rights, patented technology and trademark rights could not be denied in the refund proceedings. - HELD THAT: - The Court found that the royalty was paid for the right to manufacture and sell rotor blades and for use of patented technology and trademark rights, all of which were in furtherance of the petitioner's business. It held that the respondents had erred in denying refund on the basis of objections to valuation or on the ground that the transaction was between related entities, since scrutiny of the value of supply was an independent matter and could not be reopened while deciding the refund claim. The denial of refund of input tax credit relatable to royalty was therefore held to be without basis. [Paras 15, 20]

The appellate orders were quashed to the extent they denied refund of input tax credit on royalty expenses, and the petitioner's claim was upheld.

Eligibility of input tax credit in refund proceedings - Course or furtherance of business - Blocked credit - Refund could not be rejected on the ground that the petitioner had availed ineligible input tax credit where the inputs and input services were used in the course or furtherance of business and were not shown to be blocked credits. - HELD THAT: - The Court accepted that the disputed inputs and input services, including manpower supply, production-related expenses, material handling charges, uniforms, housekeeping and repair and maintenance, were used in the course or furtherance of business and that the statutory conditions for availment of credit had been satisfied. It also noted that the items were not specifically covered by the blocked credit provisions. In addition, the Court held that eligibility to claim input tax credit could not be determined in refund proceedings. On that reasoning, the appellate orders rejecting refund on the ground of ineligible credit were contrary to law. [Paras 14, 17, 21]

The rejection of refund on the ground of ineligible input tax credit was quashed and the petitioner's claim on that issue was upheld.

Duty drawback and refund eligibility - Adjusted total turnover - Credit notes in refund computation - The findings relating to duty drawback, invoices and credit notes reported in October 2019, computation of adjusted total turnover and other residual issues were not finally adjudicated and required fresh consideration by the appellate authority. - HELD THAT: - The Court held that the appellate findings on these aspects were contrary to facts, law and the material on record. In relation to computation of adjusted total turnover, the Court noted that if any value was reduced from the numerator, the corresponding value would also have to be excluded from the denominator to avoid an anomalous refund computation. Since these matters required reconsideration on the correct factual and legal basis, the Court did not finally decide their merits and directed fresh adjudication. [Paras 13, 22]

The appellate orders on these issues were set aside and the matters were remitted to the appellate authority for reconsideration afresh in accordance with law.

Final Conclusion: The petition was partly allowed. The appellate orders were quashed insofar as they denied refund on export of services, royalty-related input tax credit and alleged ineligible input tax credit, while the issues relating to duty drawback, October 2019 invoices and credit notes, adjusted total turnover and other residual matters were set aside and remitted for fresh consideration.

Refund deficiency memo in Form GST RFD-03 - Specific communication of deficiencies in refund application - Requirement of a speaking order on refund claim - A deficiency memo issued on a refund application without specifying the actual document defects could not be sustained. - HELD THAT: - The Court found that the deficiency memo merely stated that the supporting documents were incomplete and did not satisfy the requirement under the circular, without identifying the precise deficiencies. Such communication was held to be too vague for the petitioner to understand and effectively address. The Court further held that the respondent could not reject the refund claim through such a deficiency memo; and even if the memo were treated as an order rejecting refund, the stated reason of incomplete documents, without particulars, was too vague to sustain it. The proper course was to communicate the specific deficiencies and thereafter pass a speaking order on the refund claim afresh. [Paras 10, 11, 13, 14, 15]

The deficiency memo was set aside, the respondent was directed to communicate the specific deficiencies within the prescribed time, the petitioner was permitted to cure them, and the refund claim was directed to be decided afresh by a speaking order.

Final Conclusion: The petition was allowed on the ground that the deficiency memo in relation to the refund claim was vague and unsustainable. The respondent was directed to specify the deficiencies, permit rectification, and thereafter decide the refund claim afresh by a speaking order.

Alternate statutory remedy - Maintainability of writ petition - Violation of principles of natural justice - Jurisdictional error -HELD THAT: - The Court held that, though existence of an alternate remedy is not an absolute bar to writ jurisdiction, interference is confined to recognised exceptions such as lack of jurisdiction, violation of natural justice, breach of fundamental rights, or challenge to vires. On the facts, the petitioner's principal case that it rendered only limited facilitative services and not end-to-end courier services required examination of disputed facts and factual inferences, which lay within appellate scrutiny. The plea of breach of natural justice was also rejected, since the petitioner had been given notice, personal hearing and had filed its reply; mere non-acceptance of its defence, or disagreement with the reasoning of the adjudicating authority, did not amount to denial of hearing. Applying the distinction between absence of jurisdiction and an error in exercise of jurisdiction, the Court held that the impugned order, at the highest, involved an alleged error in exercise of jurisdiction, remediable in appeal and not by writ. [Paras 21, 22, 23, 24, 25]

The writ petition was disposed of as not maintainable, with liberty to the petitioner to avail the statutory appeal, and the period spent in prosecuting the writ petition was directed to be considered while reckoning limitation.

Final Conclusion: The High Court declined to entertain the writ petition against the adjudication order under the CGST Act, holding that the dispute involved factual matters and no exception to the rule of alternate remedy was made out. Liberty was granted to pursue the statutory appeal, with direction to account for the time spent in the writ proceedings while considering limitation.

Validity of reassessment notice - Specified authority for sanction - Jurisdiction of Assessing Officer - Notice issued by the Jurisdictional Assessing Officer(s) (JAO) v/s prescribed faceless mechanism or competent Faceless Assessment Officer(s) (FAO) - Effect of subsequent amending legislation on pending reassessment litigation - Insertion of new section 147A

HELD THAT:- These matters are covered by our order passed [2026 (5) TMI 54 - SC ORDER (LB)] read with order [2026 (5) TMI 855 - SC ORDER] and connected matters.

The petitions are, thus, disposed of in the same terms. The matters are remitted to the High Court to be decided accordingly.

Validity of reassessment notice - Specified authority for sanction - Jurisdiction of Assessing Officer - Notice issued by the Jurisdictional Assessing Officer(s) (JAO) v/s prescribed faceless mechanism or competent Faceless Assessment Officer(s) (FAO) - Effect of subsequent amending legislation on pending reassessment litigation - Insertion of new section 147A

HELD THAT:- These matters are covered by our order passed [2026 (5) TMI 54 - SC ORDER (LB)] read with order [2026 (5) TMI 855 - SC ORDER] and connected matters.

The petitions are, thus, disposed of in the same terms. The matters are remitted to the High Court to be decided accordingly.

Opportunity of hearing before cognizance on complaintunder the first proviso to Section 223(1) of the Bharatiya Nagarik Suraksha Sanhita, 2023 - Applicability of BNSS to post-commencement cognizance - Mandatory statutory procedure - Non-compliance as illegality vitiating proceedings -

Whether, before taking cognizance of the complaints, the Trial Court ought to have afforded an opportunity of hearing to the accused, as mandated under the first proviso to Section 223(1) of the BNSS? - HELD THAT: - The Court held that the first proviso to Section 223(1) of the BNSS is mandatory and cannot be diluted on the ground that the Income-tax Act contains safeguards such as prior sanction for prosecution. Applying the settled principle that where a statute prescribes that an act must be done in a particular manner it must be done only in that manner, the Court rejected the contention that hearing the accused before cognizance would be an empty formality or an unnecessary pre-trial exercise. On the question of temporal application, the Court read Section 531 of the BNSS with the Supreme Court decision in Parvinder Singh v. Directorate of Enforcement and held that the crucial stage is the taking of cognizance; where cognizance is taken after the BNSS came into force, the BNSS procedure applies, and prior investigation or sanction under the Income-tax Act does not preserve the old procedure. Since the complaints were filed and cognizance was taken after the commencement of the BNSS, failure to hear the accused before cognizance was not a mere irregularity but an illegality vitiating the proceedings. [Paras 20, 22, 23, 24, 25]

The orders taking cognizance without hearing the accused were set aside, and the matter was remitted to the Trial Court to hear the accused and proceed in accordance with law.

Final Conclusion: The High Court held that, since the complaints were filed and cognizance was taken after the BNSS came into force, the Trial Court was bound to comply with the first proviso to Section 223(1) and hear the accused before taking cognizance. The cognizance orders were therefore set aside and the matters were remitted for fresh consideration after hearing the accused.

Deduction of site restoration expenditure - Reassessment after four years - Failure to furnish reasons and statutory notice

Site restoration expenditure - Business deduction - Book profit adjustment - whether assessee was entitled to deduction of provision for site restoration under Section 37(1) and the Tribunal was incorrect in holding that the claim could be considered only while computing income under Section 115JA? - HELD THAT: - The Court held that the controversy stood concluded by its decision in the connected appeals filed by the assessee against the same common order of the Tribunal, where the assessee's claim for deduction u/s 37(1) had already been upheld. Once that position was accepted, the basis of the Revenue's challenge to the Tribunal's view on treatment of the provision under the book profit provisions did not survive, and the substantial questions raised by the Revenue had to be answered against it as a corollary. [Paras 12, 13]

The Revenue's challenge to the allowance of site restoration expenditure failed.

Validity of reassessment - Reopening beyond limitation - Non-service of reasons and notice u/s 143(2) - HELD THAT: - For Assessment Year 1999-2000, the Court noted that the reassessment had been initiated after four years, yet the assessee was not furnished a copy of the reasons recorded and no notice under Section 143(2) was served. The Court further found that neither before the appellate authority nor before the Tribunal had the Department provided a valid reason for reopening the assessment after the period of limitation. On that basis, the Tribunal's interference with the reassessment was upheld. [Paras 15, 16]

The Revenue's appeal relating to the reassessment for Assessment Year 1999-2000 was dismissed.

Final Conclusion: The Revenue's appeals were dismissed. The Court held that the assessee's claim for deduction of site restoration expenditure under Section 37(1) had already been upheld in the connected appeals, and further sustained the Tribunal's view that the reassessment for Assessment Year 1999-2000 was invalid.

Validity of reassessment notices and reassessment orders - scope of subsequent retrospective amendment - Liberty to challenge validity of section 147A - Reassessment notices under sections 148 and 148A

HELD THAT: - The Court declined to examine the merits of the controversy because the Supreme Court [2026 (5) TMI 855 - SC ORDER], in an identical situation, had set aside High Court judgments which had quashed reassessment notices on the ground of lack of competence and had directed fresh consideration after taking note of the newly inserted section 147A. Following that course, the Court held that all contentions should remain open before the learned Single Judge, and that the assessees must be given liberty to amend their writ petitions to challenge section 147A and any connected or consequential provision. The Court also directed that the timeline indicated by the Supreme Court, including the consideration of the question relating to AY 2015-16 wherever applicable, be kept in view on remand. [Paras 6, 7]

The writ appeals were allowed; the Single Judge's orders were set aside and the matters were remitted to the learned Single Judge for fresh consideration with liberty to the assessees to challenge section 147A and with all rival contentions kept open.

Final Conclusion: Following the course indicated by the Supreme Court after insertion of section 147A, the Court set aside the orders of the learned Single Judge and remitted the batch of matters for fresh consideration. The assessees were granted liberty to challenge section 147A and connected provisions, while all contentions were kept open.

TDS u/s 195 on decretal interest - Judgment debt - Execution of decree as it stands - Judgment debtor liability to deduct TDS from the interest amount payable by them to a decree holder - HELD THAT: - The Court held that the controversy was not about the general taxability of interest payable to a non-resident, but about deduction by the judgment debtor when the interest had merged in a decree and was being paid as part of the decretal amount.

Relying on All India Reporter Ltd. v. Ramachandra D. Datar [1960 (11) TMI 142 - SC ORDER] Court held that under the scheme of the Civil Procedure Code a decree must be executed as it stands, subject only to deductions or adjustments permissible under that Code, and that as between the judgment debtor and decree holder the amount payable is a judgment debt. Since the decree did not provide for deduction of income tax, and Section 195 as noticed by the Court did not speak of a decretal debt, the petitioner could not deduct TDS from the interest component payable under the decree. [Paras 4, 5, 6]

The direction to pay the amount deducted towards TDS to the decree holders was upheld and the challenge failed.

Final Conclusion: The High Court held that interest payable as part of a decree in execution retains the character of a judgment debt and cannot be subjected to deduction of tax at source by the judgment debtor in the absence of such provision in the decree. The original petition was accordingly dismissed.

Compensation for wrongful retention of seized Kisan Vikas Patras and Indira Vikas Patras - Effect of final order directing release of seized assets on deposit of settlement amount - Non-statutory compensatory interest for loss of opportunity cost - Simple interest on delayed payment of compensatory interest

Wrongful retention of seized Kisan Vikas Patras and Indira Vikas Patras - Release of seized assets after deposit of settlement amount - Compensatory interest for loss of opportunity cost - HELD THAT: - The Court held that, although the Assessing Officer ought to have considered the request for release, renewal or conversion of the seized instruments earlier, the petitioners' entitlement had to be tested in the light of the final order of the Settlement Commission, which directed release only after deposit of the settlement amount. Since that order had attained finality, the claim for interest could not be granted for any prior period. Once the settlement amount was deposited, the Assessing Officer was bound to release the instruments forthwith, and continued retention thereafter was without justification and contrary to the direction governing release.

The resulting loss was treated not as statutory interest but as compensation for the loss of opportunity cost caused by unjustified retention. The Court therefore limited relief to interest on the maturity value of the seized KVPs and IVPs for the period from deposit of the settlement amount until their actual release, with recourse to corresponding NSC rates if the relevant KVP or IVP rates were unavailable. [Paras 21, 24, 25, 26, 27]

Interest was directed to be paid at the prevailing KVP or IVP rate, or the corresponding NSC rate if unavailable, on the maturity value of the seized instruments for the period from 23.12.2003 to 10.01.2005, and not from the respective dates of maturity.

Interest on compensatory interest - Distinction between statutory interest and compensatory restitution - whether interest could be awarded on the compensatory amount because the claim arose from wrongful retention of the seized instruments and not from a statutory claim for refund interest? - HELD THAT: - The Court distinguished Commissioner Income Tax v. Gujarat Floral Chemicals [2013 (10) TMI 117 - SUPREME COURT (LB)] on the ground that the bar against interest on interest in that case arose in the context of statutory interest under Section 244A. In the present matter, the amount awarded represented compensation for wrongful deprivation of the benefit of the seized instruments and not statutory refund interest. Having found that there was no legal authority justifying continued retention of such instruments until satisfaction of the demand, and relying on the compensatory principle recognised in Sandvik Asia Ltd. [2006 (1) TMI 55 - SUPREME COURT] Court held that further simple interest could be granted on the compensatory amount in the peculiar facts of the case. [Paras 31, 32, 33, 34, 35]

The petitioners were held entitled to further simple interest at 4% per annum on the compensatory interest amount from 10.01.2005 until payment.

Final Conclusion: The writ petitions were partly allowed. The Court directed payment of compensatory interest for the period during which the seized KVPs and IVPs were wrongfully retained after deposit of the settlement amount, together with further simple interest at 4% per annum on that compensatory amount until payment.

Validity of reassessment notice - challenge to Section 147A of the IT Act - Effect of subsequent amending legislation on pending reassessment litigation - Insertion of new section 147A - scope of legislative changes introduced to the reassessment framework u/ss 147 to 151 of the IT Act, by the Finance Act, 2021 enacted on 28.03.2021

HELD THAT:- The Court permitted amendment of the writ petitions in terms of the liberty granted by the Supreme Court [2026 (5) TMI 54 - SC ORDER (LB)] and dispensed with re-verification, while directing service on the Revenue to enable filing of reply affidavits.

Tax deduction at source on interest paid by co-operative societies - proviso inserted in Section 194A(3) creating thresholds for co-operative societies -Effect of CBDT Explanatory Note on liability of co-operative banks - Constitutional validity of restricted exemption u/s 194A(3) proviso - Protection for acts done under subsisting interim orders

Liability of co-operative banks to deduct tax at source from interest paid to co-operative society members - Binding effect of CBDT Explanatory Note - effect of proviso inserted by the Finance Act, 2020 whether governing the exemption claimed by the State Co-operative Bank and Urban Banks in respect of interest paid on time deposits to their co-operative society members - HELD THAT: - The Court held that, on a plain reading of section 194A(3)(v), a co-operative bank did not fall within the statutory exemption otherwise available to co-operative societies. However, clause 42.7 of the CBDT Explanatory Note to the Finance Act, 2015 expressly stated that the exemption under section 194A(3)(v) would continue to apply to a co-operative bank in relation to payment of interest on time deposits to a depositor which is a co-operative society, and the Department admitted that this note was binding on it. The Court therefore held that the exemption of the Kerala Bank and Urban Banks, qua their co-operative society members, flowed from the Explanatory Note and not from the impugned proviso, which was intended only to curtail the earlier blanket exemption available to other classes of co-operative societies. [Paras 25, 26, 35, 36, 48]

Demands inconsistent with the binding Explanatory Note were left open to be challenged through appropriate remedies, the Court clarifying that the impugned proviso had no bearing on the exemption so claimed by the Kerala Bank and Urban Banks in relation to their co-operative society members.

Constitutional validity of proviso restricting exemption from tax deduction at source - Section 80P deduction and tax deduction at source - HELD THAT: - The Court held that exemption from deduction of tax at source was a matter within the legislative policy domain, subject only to constitutional limitations. The appellants did not challenge legislative competence; their contention was essentially that, since interest income could be deducted from total income under section 80P, deduction at source was unnecessary. That contention was rejected because section 80P did not grant complete exemption from tax, but only enabled the qualifying interest component to be deducted from total income upon filing returns.

The decision in Nathpa Jhakri Joint Venture v State of Himachal Pradesh and others [2000 (3) TMI 949 - SUPREME COURT] was found inapplicable, since that case dealt with full exemption from tax. The Court also accepted the learned Single Judge's view that nothing in the proviso warranted invalidation on constitutional grounds. [Paras 43, 44, 45, 46, 47]

The challenge to the constitutional vires of the proviso failed, and deduction at source was held not to be barred merely because the recipient societies may claim deduction under section 80P.

Challenge by deductor societies to restricted exemption from tax deduction at source - Administrative inconvenience and constitutional challenge - Deductor societies invalidated the proviso on the ground that the obligation to deduct tax at source from interest payable to their members was unfair or administratively burdensome - HELD THAT: - The Court held that the amounts required to be deducted at source did not belong to the deductor societies, but were amounts to be remitted on behalf of their members towards tax credit. Consequently, the deductor societies could not assert legal prejudice merely because they were required to comply with the statutory deduction mechanism; at the highest, the proviso caused administrative inconvenience, which was insufficient to sustain a constitutional challenge. The Court further noted that the threshold built into the proviso limited the operation of deduction at source to larger interest payments, and that any person ultimately not liable to such tax could claim refund through return proceedings. [Paras 53, 54, 55, 56, 57]

The objections of the deductor societies to the proviso were rejected and their challenge to the statutory obligation to deduct tax at source failed.

Confirmation of interim protection against consequences of non-deduction under court orders - Obedience to subsisting interim orders - Single Judge justification in protecting deductor societies from adverse consequences for non-deduction of tax at source during the period when subsisting interim orders had restrained such deduction - HELD THAT: - The Court held that the interim orders restraining deduction of tax at source were affirmative judicial directions which the deductor societies were bound to obey. Since the Revenue had not sought variation or modification of those orders while the writ petitions were pending, it could not later insist on penal consequences for conduct that was in compliance with the Court's orders. The Court also noted the practical impossibility of effecting deduction after the relevant assessment years and financial years had passed, particularly when returns would already have been filed and statutory reliefs, if any, pursued by the assessees. [Paras 63, 64, 65, 66, 67]

The clarification confirming the interim orders and insulating the deductor societies from adverse consequences for the period covered by those orders was upheld.

Final Conclusion: All the appeals were dismissed. The Court upheld the validity of the impugned proviso, clarified that the exemption claimed by the Kerala Bank and Urban Banks flowed from the binding CBDT Explanatory Note and not from the proviso, and sustained the protection granted against adverse consequences for acts done in obedience to subsisting interim orders.

Limitation for assessment under the Black Money Act - Applicability of TOLA extensions to Black Money Act proceedings

HELD THAT: - The Tribunal held that section 11 of the Black Money Act required completion of assessment within two years from the end of the financial year in which notice u/s 10(1) was issued. Since the notice was issued on 10-04-2018, the assessment had to be completed by 31-03-2021 unless a valid statutory exclusion applied.

The exclusion relating to exchange-of-information references was found inapplicable because the relevant FT & TR references had been made and the information had been received before initiation of proceedings under section 10(1). The Tribunal further held that, although TOLA covered specified Acts and the initial extension operated generally, Notification No. 113/2021 extended time only for the Income-tax Act and the Prohibition of Benami Property Transactions Act, 1988, and not for assessment proceedings under the Black Money Act. Consequently, the order passed on 17-02-2022 was beyond limitation. [Paras 10]

The assessment proceedings were quashed as time-barred.

Final Conclusion: The appeal was allowed. The assessment under the Black Money Act for A.Y.2018-19 was quashed on the ground that it was completed beyond the limitation prescribed under section 11 and was not saved by the TOLA notifications relied upon by the Revenue.

Royalty on market data recharge receipts- India-USA DTAA - Fees for Included Services on seconded employee cost reimbursements

Royalty on market data recharge receipts - Reimbursement of database access costs - Article 12 of the India-USA DTAA - Receipts recovered from Indian associated enterprises towards market data charges taxability - HELD THAT: - The Tribunal found that the facts for the year under appeal were identical to those considered in the assessee's own earlier years, where recovery of costs for usage of third-party databases had been held not to constitute royalty. It noted that the Revenue itself had not disputed identity of facts and that the only reason for sustaining the addition was pendency of further appeals against the earlier Tribunal orders. The Tribunal held that such pendency was not a valid ground to disregard binding coordinate bench decisions. Following the earlier orders, it held that recovery of market data charges could not be taxed as royalty under Article 12 of the India-USA DTAA. [Paras 7]

The addition on account of market data recharge receipts was directed to be deleted.

Taxability of an amount as Fees for Included Services (‘FIS’), Fees for Technical Services (‘FTS’) -Reimbursement of employee-related expenses - India-USA DTAA - Amounts received from Indian associated enterprises towards seconded employee expenses treatment as Fees for Included Services or Fees for Technical Services - HELD THAT: - The Tribunal recorded that the disputed amount represented recovery of employee-related expenses incurred by the assessee on behalf of its Indian associated enterprises. It referred to earlier coordinate bench decisions in proceedings concerning the Indian payers, where such payments had been held not to be in the nature of FIS/FTS, and further noted that the Revenue's appeal against one such decision had been dismissed by the High Court. It also noted a similar view taken in the case of another group entity. Since no factual distinction was shown and the Assessing Officer had declined relief only because further appeal had been preferred, the Tribunal held that this was not a valid reason to ignore higher appellate precedent. The receipts were therefore held not taxable as FIS/FTS under the India-USA DTAA. [Paras 9]

The addition made by treating the secondment-related reimbursements as FIS/FTS was directed to be deleted.

Final Conclusion: The Tribunal deleted both substantive additions, holding that market data recharge receipts were not taxable as royalty and that reimbursements of seconded employee expenses were not taxable as FIS/FTS under the India-USA DTAA. The appeal was partly allowed, with only the consequential grounds left unadjudicated and the premature ground dismissed.

Taxability of receipts/income from transportation of cargo through feeder vessels by - covered under Article 8 of India- Germany DTAA OR taxable u/s. 44B of the Act -Shipping profits from feeder vessels - Slot hire arrangements

HELD THAT: - The Tribunal found that the dispute was identical to the one decided in the assessee's own case for earlier years and that the Department itself had accepted that the basic facts remained unchanged. Following the consistent view taken by the Tribunal from earlier assessment years [2016 (7) TMI 1377 - ITAT MUMBAI], which had also been upheld by the jurisdictional High Court [2016 (9) TMI 1519 - BOMBAY HIGH COURT], [2020 (1) TMI 1554 - BOMBAY HIGH COURT], [2020 (1) TMI 1747 - BOMBAY HIGH COURT] it held that receipts from feeder vessels and slot arrangements had a direct and integral nexus with the assessee's business of operating ships in international traffic. On that basis, such receipts were held to fall within Article 8 of the India-Germany DTAA and could not be separately brought to tax under section 44B. [Paras 12]

The disputed addition on account of feeder vessel receipts was directed to be deleted.

TDS credit verification - Factual verification of tax credit - The assessee's claim of short credit of TDS required factual verification with reference to the income offered and corresponding tax deducted. - HELD THAT: - The Tribunal did not adjudicate the TDS credit claim on merits. It directed the Assessing Officer to verify the claim factually with reference to the income offered and the corresponding TDS credit, and thereafter decide the issue in accordance with law after giving the assessee a reasonable opportunity of being heard. [Paras 13]

The TDS credit issue was restored to the Assessing Officer for factual verification and fresh decision.

Final Conclusion: The appeal was partly allowed. The Tribunal held that feeder vessel receipts were exempt under Article 8 of the India-Germany DTAA and not taxable under section 44B, while the claim of short TDS credit was remitted to the Assessing Officer for factual verification.

Amortisation of preliminary expenses u/s 35D - Consistency in allowance of deferred deduction - ESOP recharge as employee compensation expenditure - Share issue expenditure as capital expenditure

Amortisation of preliminary expenses - disallowance u/s. 35D - Consistency in allowance of deferred deduction - Deduction of pre-operative expenditure claimed on amortised basis under section 35D disallowed in the fifth year when the same claim had been accepted in the earlier years of the amortisation period - HELD THAT: - The Tribunal held that the assessee had incurred the preliminary expenditure and had been allowed the pro-rata deduction for the earlier four years. Once the claim was accepted in the initial years and the same deduction was to run year after year over the statutory period, disallowance in the fifth year, without disturbing or showing why the allowance in the earlier years was erroneous, was unjustified. On that basis, the Tribunal followed the principle applied in Subex Ltd. [2021 (10) TMI 1209 - KARNATAKA HIGH COURT] and held the claim allowable u/s 35D. The alternative claim under section 37 was not required to be examined after allowing the deduction under section 35D, and in any case was not allowable for the year as the expenditure had not been incurred during the relevant year. [Paras 9, 10]

The disallowance of the amortised preliminary expenditure was directed to be deleted, and the claim was allowed only under section 35D and not under section 37.

ESOP recharge as employee compensation expenditure - Business expenditure for employees of subsidiary - whether Recharge of ESOP cost by the parent company in respect of employees of the assessee was allowable as business expenditure? - HELD THAT: - The Tribunal found that the ESOPs were issued by the holding company under the group scheme, but the cost relatable to employees employed by the assessee was charged to and reimbursed by the assessee. Since the expenditure pertained to the assessee's own employees and was incurred wholly and exclusively for their benefit, it could not be treated as notional merely because the shares were issued by the holding company and the amount was paid by way of recharge. The fact that the employees were taxed on the benefit also supported the character of the outlay as employee-related expenditure. The disallowance was therefore unsustainable. [Paras 16]

The disallowance of the ESOP recharge was reversed and the expenditure was allowed as deductible business expenditure.

Nature of expenses - Share issue expenditure - revenue or capital expenditure - Increase of capital base - capital was raised for working capital requirements or solvency requirements - HELD THAT: - The Tribunal held that the governing principle laid down in Brooke Bond India Ltd. [1997 (2) TMI 11 - SUPREME COURT] squarely applied. It noted that even if the share capital was raised for working capital needs or to meet capital adequacy and solvency requirements, the expenditure was directly connected with expansion of the capital base and therefore retained the character of capital expenditure. The decisions of the coordinate Benches relied upon by the assessee were held inapplicable in the face of the binding Supreme Court ruling. [Paras 21, 22, 23]

The disallowance of share issue expenditure was upheld and the ground was dismissed.

Final Conclusion: The appeal was partly allowed. The Tribunal deleted the disallowances relating to amortised preliminary expenditure under section 35D and ESOP recharge, but upheld the disallowance of share issue expenditure as capital in nature; the challenge to penalty initiation was treated as premature.

Relief u/s 89 on superannuation fund arrears - Perquisite included in salary - Rule 21A applicability to salary received in arrears - employer's contribution to the approved superannuation fund - HELD THAT: - The Tribunal held that the controversy stood covered by Rajesh Kumar [2018 (8) TMI 746 - ITAT AGRA] with whose reasoning it agreed. It accepted that though the contribution in question was taxable as a perquisite under section 17(2)(vii), section 17(1)(iv) includes perquisites within salary.

Since section 89 grants relief where salary is received in arrears or in advance, such relief extends to arrears of perquisites forming part of salary. The Tribunal further accepted that Rule 21A and Form 10E do apply to such arrears, and that the case falls under Rule 21A(1)(a) read with Rule 21A(2), not under the residuary provision. The internal circular of GAIL treating the amount as a perquisite could not override the Act and did not disentitle the assessee from the statutory relief. [Paras 9, 10]

The assessee was held entitled to relief under section 89(1), and the Assessing Officer was directed to allow the claim.

Final Conclusion: The Tribunal allowed the appeal and held that arrears received on account of the employer's contribution to the approved superannuation fund, though assessed as perquisites, formed part of salary for the purpose of section 89(1). The claim for relief was accordingly directed to be allowed.

Penalties u/ss 271D and 271E - cash loans and repayment recorded in seized materials belonging to third parties - Burden of proof in penal proceedings - Third-party seized material - Penalty for alleged cash loans and repayments - Cross-examination in penalty proceedings

HELD THAT: - The Tribunal held that penalty proceedings being penal in nature are independent of assessment proceedings, and the initial burden lay on the Revenue to conclusively establish that the assessee had in fact accepted or repaid loans in cash in contravention of the statutory prohibition. The penalties had been levied solely on the assumption that entries in papers seized from third parties represented actual cash loans and repayments by the assessee.

Co-ordinate Bench, while deleting the corresponding additions of alleged interest expenditure in the quantum appeals [2025 (5) TMI 2292 - ITAT JAIPUR] had already found that the Revenue failed to prove the existence of the underlying loan transactions, that the documents were not found from the assessee, and that there was no evidence of utilisation or repayment by the assessee.

Tribunal further held that, during penalty proceedings, the assessee had specifically denied the transactions and sought copies of the seized material and opportunity to cross-examine the persons from whom the documents were recovered, but neither was granted. In the absence of proof of the primary fact of receipt or repayment of loan, and with third-party material left untested, the penalties under sections 271D and 271E were held unsustainable. [Paras 7]

The penalties under sections 271D and 271E were deleted.

Final Conclusion: The Tribunal allowed all the appeals and deleted the penalties for both years. It held that the Revenue failed to prove, on the basis of legally sustainable material, that the assessee had accepted or repaid any cash loans so as to attract penal consequences.

Customs valuation of imported High Pressure Laminate Sheets - Reliance on retracted statement - Comparable contemporaneous imports

Redetermination of import value - Retracted statement - Non-comparable contemporaneous imports - Redetermination of the declared value of imported High Pressure Laminate Sheets could not be sustained where it was founded substantially on a retracted statement and on invoices/import values not shown to be comparable goods. - HELD THAT: - The Tribunal held that the proceedings rested entirely on the retracted statement, and apart from that statement no acceptable supporting evidence was available on record. It further found that there was no discussion or substantiating material regarding the alleged contemporaneous imports relied upon for enhancement of value. On examining the invoice of M/s. Chanzong Yaming Wood Industries Co. Ltd., the Tribunal found that the product description differed from the goods imported by the appellant and therefore it was not comparable. In the absence of reliable evidence to reject the declared value and support the redetermined value, the enhancement was not maintainable. [Paras 5]

The enhancement of value was set aside and the appeal was allowed.

Final Conclusion: The Tribunal held that the impugned valuation could not be upheld as the record disclosed no reliable evidence beyond a retracted statement and non-comparable material. The impugned order was therefore set aside and the appeal was allowed.

Entitlement to challenge enhancement of value in the Bills of Entry despite having paid duty on the enhanced value - absence of a speaking order - declared value in the Bills of Entry - HELD THAT: - The Tribunal held that the Commissioner (Appeals) was not justified in rejecting the appeals solely on the ground that the appellant had accepted the enhanced value. Relying on the Delhi High Court decision in M/s Hanuman Prasad & Sons [2024 (11) TMI 1361 - DELHI HIGH COURT], the Tribunal [2020 (12) TMI 1092 - CESTAT NEW DELHI] held that an importer retains the right to challenge assessment of Bills of Entry where value is enhanced without issuance of a speaking order. Since no speaking order under Section 17(5) was available on record, the enhancement could not be sustained, and the declared value in the Bills of Entry was required to be accepted. [Paras 6]

The enhanced value was held unsustainable, and the declared price in the Bills of Entry was accepted.

Final Conclusion: The Tribunal set aside the orders rejecting the challenge to enhanced valuation and held that, in the absence of a speaking order for value enhancement, the importer's declared value in the Bills of Entry had to be accepted.

Insider trading - Proviso to Regulation 4(1) of the PIT Regulations - Bona fide trades while in possession of unpublished price sensitive information - Disclosure of trades by insider - Securities Appellant Tribunal [2022 (7) TMI 1629 - SECURITIES APPELLATE TRIBUNAL MUMBAI], held that, the finding of insider trading, the consequent market-access and association restraints, and the related part of the impugned order were quashed, while the penalty for delayed disclosure of two trades under Regulation 7(2)(a) was sustained. - HELD THAT:- The appeal was disposed of with refusal to interfere with the impugned order, while clarifying that the impugned order shall not be treated as a binding precedent and leaving the question of law open.

Taxability of amount collected towards transportation and insurance charges - Business Support Service or remained outside service tax as transportation of goods by road other than through a goods transport agency - reverse charge on services - Imported services received by foreign branch as separate permanent establishment - Extended period of limitation based on disclosures in balance sheet

Transportation of goods by road - Goods transport agency - Business Support Service - Bundled insurance with transportation - Charges recovered under the contract towards transportation and insurance of equipment and material from vendors' location or the appellant's location to the customer's site were not taxable as Business Support Service and did not attract service tax where the transportation by road was not provided by the appellant as a goods transport agency issuing consignment notes. - HELD THAT: - The Tribunal held that service tax on transportation by road, both before and after the negative list regime, was attracted only in the case of a goods transport agency, and transportation by road by a person other than a GTA was outside the levy. On reading the contract as a whole, the amount recovered under the transportation and insurance head represented transportation of goods by road, irrespective of whether the appellant undertook the movement itself or arranged it through others. Where transport was from the appellant's premises or from vendors' premises, the GTA service and reverse charge liability had already been discharged by the appellant or the vendor, and the adjudicating authority could not re-characterise the same contractual charge as Business Support Service merely because that category was taxable. The insurance component was held to be bundled with transportation and incapable of separate taxation on the facts found. [Paras 15, 16, 17, 20, 21]

The demand on transportation and insurance charges was unsustainable on merits.

Reverse charge on imported services - Separate permanent establishment - Services received by foreign branch - Service tax under reverse charge was not payable in India on accounting services rendered by an Ethiopian firm to the appellant's branch office in Ethiopia for use in that country alone. - HELD THAT: - The Tribunal accepted that the accounting services were rendered to, and received by, the branch office in Ethiopia and were never received in India. It held that, for the relevant period, the Ethiopian branch and the Indian office had to be treated as separate permanent establishments, with the consequence that services availed by the foreign branch could not be regarded as services received by the appellant in India. The adjudicating authority's approach in confirming the post-July 2012 demand by referring to import of services and place of provision principles was also found to disclose non-application of mind. [Paras 24, 25, 26, 27, 32]

The reverse charge demand on services received by the foreign branch was set aside.

Extended period of limitation - Suppression of facts - Penalty under Section 78 - Consequential interest and penalties - The extended period of limitation was not invocable where the demand was founded on figures available in financial records and balance sheets, and the related penalty and interest could not survive. - HELD THAT: - The Tribunal found that the show cause allegations were unsupported by investigation or statements and that the demand itself was based on entries available in the appellant's financial records. Since the balance sheet of the appellant, a public listed company, was a public document and the facts were drawn from disclosed records, suppression could not be alleged. On that reasoning, invocation of the extended period under the proviso to Section 73(1) was held untenable. As the ingredients for extended limitation and penalty under Section 78 were identical, the penalty under that provision also failed; and once the tax demand itself did not survive, the consequential interest and remaining penalties also fell. [Paras 29, 30, 31, 32]

The extended period, penalty under Section 78, and consequential interest and penalties were unsustainable.

Final Conclusion: The Tribunal allowed the appeal and set aside the impugned order. It held that the transportation-related charges were not taxable in the manner alleged, services received by the Ethiopian branch were not liable to service tax in India, and the extended period of limitation, consequential interest, and penalties were unsustainable.

Benefit of exemption under Notification No. 25/2012-ST, S. No. 14(a) -construction services pertaining to railways - Interpretation of exemption notification - No addition of words to tax exemption entry - Construction service for the Jagdalpur-Rwaghat Railway Line Project was entitled to exemption under the entry covering original works pertaining to railways, and the exemption could not be denied on the ground that the railway was for exclusive use of NMDC and SAIL and was not a government railway. - HELD THAT: - The Tribunal held that the exemption entry covered services by way of construction of original works pertaining to railways and expressly excluded only monorail and metro. Since the notification did not confine the benefit to government railways, no such limitation could be read into it by the departmental authorities. The principle of strict interpretation of exemption notifications applies only where ambiguity exists; in the present entry there was no ambiguity requiring a restrictive construction. Taxing and exempting entries had to be read as issued, and neither the adjudicating authority nor the appellate authority nor the Tribunal could add the word "government" to the notification. [Paras 8, 9, 10, 11, 12]

The denial of exemption was held unsustainable and the appeal was allowed with consequential relief.

Final Conclusion: The Tribunal held that the exemption for construction services pertaining to railways could not be restricted to government railways when the notification itself contained no such limitation. The impugned order was set aside and the appeal was allowed with consequential relief.

Taxability of liquidated damages - compensation received for shortfall in the guaranteed number of coolers for testing - Inclusion of reimbursable amounts in taxable value - Demand of service tax on renting of premises under Renting of Immovable Property Service.

Classification of renting and storage service - Renting of Immovable Property Service - The demand of service tax on amounts received for renting of premises was rightly sustained under Renting of Immovable Property Service and the appellant could not reopen the classification dispute at the appellate stage after having not contested the demand before the adjudicating authority and having obtained waiver of penalty under section 80(2). - HELD THAT: - The Tribunal found that the appellant had not disputed the service tax demand on renting before the adjudicating authority. Since the adjudicating authority had already granted the statutory benefit of waiver of penalty upon payment of the outstanding tax and interest under the category of Renting of Immovable Property Service, the Tribunal held that the appellant could not thereafter reopen the question that the receipts were classifiable as storage and warehousing service. On that basis, no infirmity was found in the order upholding the tax and interest on the renting receipts. [Paras 8, 9]

The demand on renting of premises under Renting of Immovable Property Service was upheld.

Taxability of liquidated damages - Inclusion of reimbursable amounts in taxable value - Rule 5(1) of Service Tax (Determination of Value) Rules, 2006 - Compensation received from Coca-Cola India for failure to send the guaranteed number of coolers for testing was not liable to service tax as part of testing service. - HELD THAT: - The Tribunal held that the payment described as adjustment in testing fee was, in substance, compensation for Coca-Cola India's inability to honour its commitment to send the agreed quantity of equipment for testing, intended to compensate the appellant for fixed operating costs of the test lab. Such amount was therefore in the nature of liquidated damages or compensation, and not consideration for testing service. The adjudicating authority had treated it as a reimbursable amount and included it in taxable value by invoking Rule 5(1) of the 2006 Valuation Rules. That basis was held untenable, since Rule 5(1), on which the demand rested, had been held ultra vires in Intercontinental Consultants & Technocrats Pvt Ltd Vs UOI [2012 (12) TMI 150 - DELHI HIGH COURT]. The confirmation of demand on the compensation charges was therefore unsustainable. [Paras 10, 11]

The demand of service tax on compensation charges under testing service was set aside.

Final Conclusion: The appeal was partly allowed. The demand of service tax on renting of premises under Renting of Immovable Property Service was sustained, while the demand on compensation received for shortfall in the guaranteed number of coolers for testing was set aside.

Refund of unutilized CENVAT credit on export of services - No one-to-one correlation between input services and exported services - Past-period CENVAT credit availed during relevant quarter - Refund under Rule 5 of the CENVAT Credit Rules could not be denied merely because the credit was availed during January 2013 to March 2013 in respect of input services received in earlier years, or because there was no one-to-one correlation between those input services and the exported services of that quarter. - HELD THAT: - The Tribunal held that, during the period when the credit was availed, there was no statutory bar requiring immediate availment of CENVAT credit, and the later limitation for availment came into force only subsequently. The availment of credit by the appellant during October 2012 to March 2013 was therefore not open to dispute. It further found that the appellant was engaged only in export of services and was consequently entitled to refund of unutilized credit relatable to input services used for providing exported output services. Interpreting Rule 5, the Tribunal held that the provision did not require one-to-one correlation between the input services and the exported services during the relevant period, and that denial of refund on that basis was unsustainable. The objection that credit pertaining to earlier periods could not be refunded in the quarter of claim was also rejected. [Paras 7, 8, 9]

The appellant was held entitled to refund of the unutilized CENVAT credit, and the refund claim was directed to be sanctioned with consequential relief, if any.

Final Conclusion: The appeal was allowed. The Tribunal held that refund of unutilized CENVAT credit on export of services could not be denied on the ground that the credit pertained to earlier periods or for want of one-to-one correlation between input services and exported services, and directed sanction of the refund with consequential relief, if any.

Service tax on transport and handling of food grains - Goods transport operator and consignment note - negative list or exempt from service tax - Extended period of limitation

Goods transport operator and consignment note - Service tax on transport and handling of food grains - Negative list services - Exemption for transportation and handling of agricultural produce - The appellant's activity of handling and transportation of food grains under the agreements could not be taxed as Goods Transport Agency service or as cargo handling service on the entire consideration received. - HELD THAT: - The Tribunal held that absence of consignment notes was decisive against treating the activity as Goods Transport Agency service, since issuance of consignment note is an essential requirement for that taxable category. The finding in the appellate order that the appellant had used vehicles not belonging to him was found contrary to the agreement terms, which required production of registration details and prohibited subletting of the contract; even if some vehicles were not registered in the appellant's name, they remained under his effective possession and control for execution of the contract. The Tribunal further found no basis for the alternative attempt to sustain the demand as cargo handling service, because the orders of the lower authorities had taken the entire consideration without any tenable bifurcation between transportation and handling charges, and mere transportation of goods is outside cargo handling as explained in Sushil & Company [2016 (4) TMI 987 - SUPREME COURT]. The activity, being transportation of food grains by road without consignment notes, and in any event involving loading and unloading of agricultural produce, was held covered by the negative list and also exempt under the notification relied upon. [Paras 4]

The demand of service tax, with consequential interest and penalties, was unsustainable on merits.

Extended period of limitation - Suppression of facts - HELD THAT: - Having found that the services rendered were not taxable in the manner alleged, the Tribunal also held that the demand raised by invoking the extended period had no merit. The basis of suppression adopted in the notice did not survive once the activity itself was found covered by the negative list or exemption. [Paras 4]

The demand could not be sustained by resort to the extended period of limitation.

Final Conclusion: The Tribunal held that the appellant's services in relation to transport and incidental handling of food grains could not be taxed in the manner adopted by the department, and that the extended period was also not invocable. The impugned order was set aside and the appeal was allowed with consequential relief from interest and penalties.

Maintainability - dismissal of the appeal as time-barred - Service of adjudication order - Limitation in appeal - Jurisdiction to issue show cause notice - Mismatch between the address used in the order-in-original and the postal particulars relied upon by the department - Service tax demand on GST turnover - demand initiated without basic verification of the appellant's records, including the ST-3 return and reconciliation materials

Service of adjudication order - Limitation in appeal - Maintainability of first appeal - The dismissal of the first appeal as time-barred and non-maintainable could not be sustained when the adjudication order had not been shown to have been properly served on the appellant. - HELD THAT: - The Tribunal found that the address mentioned in the Order-in-Original did not match the address shown in the postal receipt, and neither address established valid service on the appellant. Since the departmental record itself showed discrepancy in the address and no satisfactory proof of dispatch and delivery to the appellant was produced, the presumption of service drawn by the Commissioner (Appeals) was held to be unsustainable. On that basis, the Tribunal accepted the appellant's case that the order was received only through e-mail and that the appeal had been filed within two months thereafter. The order rejecting the appeal on limitation, and consequently on maintainability, was therefore held not to be in accordance with law. [Paras 4]

The finding that the appeal was time-barred and not maintainable was set aside.

Service tax demand on GST turnover - Jurisdiction to issue show cause notice - Basic verification of records - The service tax demand was unsustainable because no service tax remained outstanding for April to June, 2017 and the turnover on which demand was raised pertained to the GST period. - HELD THAT: - On examining the material placed by the appellant, including the ST-3 return and reconciliation of turnover with returns and Form 26AS, the Tribunal held that there was no outstanding service tax liability for April to June, 2017. It further found that the turnover taken for demand related to the period 01.07.2017 to 31.03.2018, which was the GST period, and such liability could not be raised in the present service tax proceedings. The Tribunal also recorded that the show cause notice and the Order-in-Original had been issued without even basic verification of the relevant records and without jurisdiction, particularly when the appellant was registered and paying service tax in the proper jurisdiction. Though the Commissioner (Appeals) had not examined the merits, the Tribunal set aside the demand itself on the ground that the show cause notice was issued without jurisdiction and the demand lacked merit. [Paras 4]

The service tax demand and consequential findings were set aside as without merit and without jurisdiction.

Final Conclusion: The Tribunal held that the first appeal had been wrongly dismissed as time-barred, since proper service of the adjudication order was not established. On merits also, it found that no service tax was outstanding for the service tax period and that the demand had been raised on GST-period turnover without jurisdiction; accordingly, the impugned order was set aside and the appeal was allowed.

Demand of service tax on membership of clubs or association service - Principle of Mutuality - Service tax on charges collected from members - ​​​​​​​Short-payment demand ignoring excess tax paid in the same period

Mutuality in club or association service - Service tax on charges collected from members - Charges collected by the association from its members for upkeep and maintenance of the industrial area were not leviable to service tax under Membership of Clubs or Association Service. - HELD THAT: - The Tribunal found that the appellant was a society formed for upkeep and maintenance of the area in and around Electronic City and that the amounts collected from members were used exclusively for their benefit. It held that the levy of service tax on such collections was concluded by the decision in State of West Bengal and Ors. Vs. Calcutta Club Ltd.[2019 (10) TMI 160 - SUPREME COURT (LB)], which settled that service tax was not leviable on services by an association to its own members under club or association service. Applying that ratio, the demand confirmed on this count could not be sustained. [Paras 6, 7]

The demand under Membership of Clubs or Association Service for 2006-2007, with consequential interest and penalty, was set aside.

Short-payment demand ignoring excess tax paid in the same period - Adjustment of excess service tax payment within the relevant period - The demand for alleged short payment of service tax on renting of immovable property service for the financial year 2009-10 was unsustainable because excess payments made in the relevant months had been ignored. - HELD THAT: - The Tribunal accepted the appellant's written computation showing excess payments during the months of April, June and July of the relevant period. It held that, once those excess payments were taken into account, no short payment survived. Since the adjudicating authority had ignored those excess payments despite their having been brought on record, the confirmed demand on that account was held to be without basis. [Paras 8]

The confirmed demand for alleged short payment for 2009-10, with consequential interest and penalty, was set aside.

Final Conclusion: The Tribunal allowed the appeal. The service tax demand on collections from members under Membership of Clubs or Association Service and the demand for alleged short payment on renting of immovable property service were both held unsustainable, and the related interest and penalties were set aside.

Entitlement to succeed in the appeal in view of the original notification and the clarificatory notification- Pre-condition of specified processes - eligibility for Compound Levy Scheme - Valuation of investment in plant and machinery - HELD THAT:- The civil appeal was dismissed after the Court, on considering the original and clarificatory notifications and the concurrent findings of the authorities and the High Court in [2010 (5) TMI 344 - RAJASTHAN HIGH COURT], found no merit in the appeal.

Maintainability of writ petition against CESTAT order - Statutory appellate remedy under Section 35G - Challenged to the CESTAT orders -HELD THAT: - learned Senior Standing Counsel, accepts notice for all the respondents. He raises the preliminary objection that only a statutory appeal, by way of a Civil Miscellaneous Appeal, is maintainable and not a writ petition. He relies inter alia on the judgment of this Court in M/s.Thiruchitrambalam Projects Ltd. vs. Customs, Excise and Service Tax Appellate Tribunal [2016 (7) TMI 472 - MADRAS HIGH COURT].

The Court accepted the preliminary objection that the proper remedy against the impugned CESTAT orders was a statutory appeal and not a writ petition. On consideration of Section 35G of the Central Excise Act and the objection raised on behalf of the respondents, the Court held that the petitioner should pursue the appellate remedy provided by statute. [Paras 4, 5]

The writ petitions were disposed of by permitting the petitioner to take back the papers and re-file them as Civil Miscellaneous Appeals.

Final Conclusion: The Court upheld the objection as to maintainability and declined to entertain the writ petitions against the CESTAT orders. The petitioner was permitted to withdraw the papers and re-file the matter in the form of statutory Civil Miscellaneous Appeals.

Cenvat credit on inputs cleared as such - Reversal of credit on capital goods used for exempted goods - exemption from payment of Central Excise duty vide Notification No.12/2012-CE - Extended period of limitation - Suppression of facts

Cenvat credit on inputs cleared as such - Reversal of credit on capital goods used for exempted goods - Credit demand on capital goods used for manufacture of exempt tractors and on spare parts removed on payment of duty was not sustainable. - HELD THAT: - The Tribunal found from the record that the credit taken on capital goods had been reversed by the appellant even before issuance of the show cause notice, and such reversal amounted to sufficient compliance with the requirement that credit should not be retained on capital goods used in manufacture of exempt products. As regards the spare parts, the Tribunal held that they had been cleared as such, without any further manufacturing activity, on payment of appropriate Central Excise duty. Payment of duty at the time of such clearance was treated as amounting to reversal of the credit availed on those inputs. In these circumstances, the demand for reversal again was unsustainable and would, as noticed by the Tribunal, result in double taxation. [Paras 10, 12]

The substantive demand of Cenvat credit on the capital goods already reversed and on spare parts cleared as such on payment of duty was set aside.

Extended period of limitation - Suppression of facts - Invocation of the extended period for recovery of alleged inadmissible credit was not justified. - HELD THAT: - It is noted that the period impugned in the matter is January, 2015- June, 2017, whereas the show cause notice has been issued to the appellant on 18.11.2019 that is after nearly two and a half years. In view of the fact that the appellant had on their own volition reversed the credit on the capital goods and cleared the spare parts on payment of appropriate Central Excise duty, I find no justification in the Revenue’s charge of invocation of suppression of facts, mis-statement etc. The coordinate Bench of this Tribunal in the case of Lakshmi Engineering Works vs. CCE [1985 (1) TMI 219 - CEGAT, NEW DELHI] as upheld by the Hon’ble Apex Court [1991 (5) TMI 266 - SC ORDER], had categorically held that the concept of suppression amounts to that where one is legally bound to state, but one intentionally or deliberately or consciously does not state so.

The term ‘suppression’ includes a mental fixation to deliberately omit to state certain things. In view of the facts on record, it is quite evident, that there is no intention to evade payment of excise duty nor there is any willful suppression of facts to evade payment of duty. Also other ingredients of section 11A proviso are not attracted in the matter. Under the circumstances, the larger period of limitation is not available to the department to proceed with the matter.

The impugned notice, therefore, is clearly barred by limitation. No malafide intention can, therefore, be attributed to the appellant. It is a settled principle that when the demand is itself unsustainable no penalty would be imposable upon the appellant. There is also sufficient force in the appellant’s plea that the demand of tax by revenue, would amount to double taxation.

The show cause notice was held barred by limitation, with the result that the demand, interest and penalty were not maintainable.

Final Conclusion: The Tribunal held that reversal of credit on capital goods before issuance of notice and payment of duty on spare parts cleared as such were sufficient compliance, leaving no sustainable demand for further reversal. The notice was also held barred by limitation for absence of suppression or intent to evade duty, and the order confirming demand, interest and penalty was set aside.

Approved resolution plan under insolvency law - Extinguishment of statutory dues not forming part of resolution plan - Abatement of pending indirect tax appeal - Functus officio - Wrongly utilized CENVAT credit of Education Cess and Secondary & Higher Education Cess - HELD THAT: - The Tribunal held that, once the resolution plan approved by the adjudicating authority was placed on record, the controversy was governed by the principle stated in Ghanashyam Mishra & Sons Pvt Ltd vs. Edelweiss Asset Reconstruction Company Ltd & Ors [2021 (4) TMI 613 - SUPREME COURT], as followed in the coordinate bench decisions in M/s Jet Airways (India) Limited vs. Commr of Service Tax-V, Mumbai [2023 (5) TMI 767 - CESTAT MUMBAI] and Icomm Tele Ltd. vs. Commr of Central Tax, Puducherry [2023 (10) TMI 1344 - CESTAT HYDERABAD]. The legal effect of such approval is that claims not forming part of the resolution plan stand extinguished and no proceeding in respect of those dues can be continued. On that basis, the Tribunal found that it had become functus officio in relation to the present appeal. [Paras 5, 6]

The appeal was treated as abated upon approval of the resolution plan.

Final Conclusion: Following the approved resolution plan placed on record and the law declared by the Supreme Court, the Tribunal held that the excise dues in question could not survive outside the resolution plan and that the pending appeal itself stood abated.

Clandestine removal of scrap cleared under non-returnable gate passes - Duty demand based on assumptions and presumptions - Failure to consider documentary evidence in de novo adjudication - The demand of duty and penalty on alleged clandestine removal of scrap cleared under non-returnable gate passes could not be sustained when the authorities proceeded without proper investigation and without examining the assessee's documents and explanation regarding weighment and subsequent duty-paid clearance.

HELD THAT: - The Tribunal held that a serious allegation of clandestine removal required proper investigation and objective examination of the material on record. The appellant had explained that scrap sent out for weighment under non-returnable gate passes was brought back and thereafter cleared on payment of duty under proper invoices. The record also showed that, in the earlier round, the Tribunal had specifically directed the original authority to grant opportunity to produce invoices and other relevant documents and to examine them. In the de novo proceedings, however, the adjudicating authority merely proceeded on the footing that evidence of re-receipt after weighment was not produced, without examining the appellant's explanation, ledger accounts, returns, books of account and balance sheet, and without correlating the quantity of raw material, finished goods and scrap generated during the relevant period. The finding of clandestine removal was thus founded on presumption that the entire quantity moved under non-returnable gate passes had been clandestinely removed. Such adjudication was held to be improper and the resulting demand and penalty unsustainable. [Paras 9, 10]

The impugned order confirming duty and penalty was set aside and the appeal was allowed with consequential relief.

Final Conclusion: The Tribunal held that the charge of clandestine removal of scrap was not established, since the authorities had proceeded on presumption without proper investigation and without considering the documentary material produced by the appellant. The demand of duty and the penalty were therefore set aside and the appeal was allowed.

Extended period of limitation - Successive show cause notices on same facts - Suppression of facts -HELD THAT: - The Tribunal found that an earlier show cause notice had already been issued on a similar allegation by invoking the extended period of limitation. Once the department was aware of the material facts and had already proceeded on that basis, issuance of another notice again invoking the extended period on the same factual foundation could not be sustained. Applying the ratio of M/s. Nizam Sugar Factory [2006 (4) TMI 127 - SUPREME COURT], the Tribunal held that the entire demand was barred by limitation. [Paras 10]

The demand was held time-barred and the appeal was allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeal solely on limitation, holding that a second show cause notice invoking the extended period on the same facts was unsustainable. Consequently, the entire demand was held barred by limitation and consequential relief was granted.

Substantial compliance with exemption notification conditions - Entitlement to Benefit of the Mega Power Project exemption under Notification No. 6/2006-CE and Notification No. 12/2012-CE - Procedural lapse in project authority certificate and undertaking -HELD THAT: - The Tribunal found that there was no dispute that the goods were supplied for and used in setting up the Mega Power Project, and that the project stood recognized and certified as a Mega Power Project. It held that the purpose of the prescribed undertaking was only to ensure that the exemption was not misused. Since there was no allegation of diversion of the goods for any use other than the eligible projects, the substantive conditions of the notifications stood fulfilled. Applying KEC International Ltd, Shri DP Shrivastava and Shri Tarun Santra Vs. CCE & ST, Silvassa [2024 (6) TMI 300 - CESTAT AHMEDABAD], the Tribunal treated the deficiency in the undertaking or certificate compliance as a mere procedural lapse not affecting the essence of the exemption claim. [Paras 13, 14, 15]

The appellant was held entitled to exemption under Notification No. 6/2006-CE for the period December 2011 to Feburary 2012 and under Notification No. 12/2012-CE for the period April 2012 to December 2012, and the impugned orders were set aside.

Final Conclusion: The Tribunal held that the exemption could not be denied for procedural defects in the undertaking or supporting certification when the substantive conditions for Mega Power Project supplies were satisfied and there was no allegation of misuse. The appeals were accordingly allowed and the impugned orders were set aside.

Claim for benefit of exemption by the learned National Company Law Appellate Tribunal (NCLAT) - failed to appreciate issue regarding exercise of power under Section 10 -Interlocutory deferral of appellate adjudication - Jurisdictional issue left open for tribunal consideration - HELD THAT: - The Court found that the very proceeding before NCLAT, on account of which the Tribunal had deferred adjudication, had already been disposed of. In that situation, the proper course was to direct the Tribunal, being the final fact-finding authority competent to decide questions of fact and law, to take up the second appeal and consider all grounds raised by the petitioner, including the jurisdictional objection to the assessment. The Court expressly refrained from examining the merits of the jurisdictional issue or the exemption claim and left those questions open for adjudication before the Tribunal. [Paras 7, 8]

The writ petition was disposed of with a direction to the Tribunal to expedite hearing of the second appeal and decide it on all grounds, including the jurisdictional issue, without any expression by the Court on the merits.

Final Conclusion: Since the proceedings before NCLAT had already been disposed of, the basis on which the Tribunal had deferred consideration no longer survived. The Tribunal was accordingly directed to hear and decide the pending second appeal on all grounds, including the jurisdictional objection, and all questions on merits were left open.

Challenged the Bail orders - Prejudicial observations affecting pending trial - HELD THAT: - The Court held that, while granting bail, the High Court had made unnecessary and avoidable observations which could affect the pending trial. Since the respondents had already remained on bail for a sufficiently long period, the Court preserved the operative part granting bail, but set aside all other observations and declared them irrelevant for the purposes of the ongoing trial. [Paras 2, 4, 5]

All observations in the impugned orders, except the operative direction granting bail, were set aside and rendered irrelevant to the pending trial.

Final Conclusion: The appeals were allowed in part. The grant of bail to the respondents was left undisturbed, but the observations made in the impugned bail orders were set aside as irrelevant to the ongoing trial.

Claim for reimbursement of service tax and GST implication cost under the contract - Scope of arbitration clause- seeking appointment of a sole arbitrator for adjudication of the disputes - Prima facie examination of non-arbitrability in Section 11 proceedings - HELD THAT: - The Court construed the dispute resolution clause in the agreement and held that it was confined to disputes concerning specifications, design, drawings, instructions, quality of workmanship, materials used, and matters arising out of or relating to execution of the work in the manner contemplated by that clause. The claim raised in the petition, however, pertained to payment of tax under the separate contractual provision dealing with taxes and duties. The Court held that the expression in the arbitration clause could not be read as bringing within its fold every claim arising between the parties under the contract. While reiterating that scrutiny under Section 11 is only prima facie and that issues of jurisdiction ordinarily fall for the arbitral tribunal, the Court held that where it is manifest that the parties did not agree to refer a particular category of dispute to arbitration, the referral court can refuse reference. On that construction, the tax payment dispute covered by the taxes-and-duties clause was found to be non-arbitrable under the agreed arbitration clause. [Paras 9, 10, 11, 12]

Appointment of an arbitrator was refused as the tax reimbursement dispute was not referable to arbitration under the agreement.

Scope of Referral Court - Prima Facie Review - Section 11 of the Arbitration Act - HELD THAT:- Scope of the Court under Section 11 is limited; the Arbitral Tribunal primarily decides its own jurisdiction and validity of the arbitration agreement. The referral court's scrutiny regarding non-arbitrability is confined to a prima facie, first-look review without entering into contested facts. - Exception: Where non-arbitrability is conclusive, or parties have manifestly agreed to exclude a specific issue from arbitration, the referral court may refuse reference to save parties from unnecessary arbitration costs.

Final Conclusion: The petition under Section 11(6) was dismissed. The Court held that the dispute concerning service tax and GST payment arose under the contractual taxation clause and did not fall within the arbitration clause agreed between the parties.