TMI Tax Updates e-Newsletter
Jun 15,2026

Revocation of cancellation of GST registration - Opportunity of hearing -Consideration of representation for non-filing of returns - Sufficient cause - Seeking revocation of cancellation of GST registration on the ground that non-filing of returns was due to the medical condition of the person handling statutory compliance. - HELD THAT: - The Court recorded a prima facie satisfaction that sufficient cause had been shown for non-filing of returns and, to balance equities, directed the competent authority to consider and dispose of the representation in accordance with law after giving the petitioner an opportunity of hearing. The petitioner was also directed to produce the relevant medical documents before the authority, and the Court clarified that revocation could be considered by the authority if the explanation was found satisfactory. The merits of revocation were not adjudicated and all questions were left open. [Paras 8, 9, 10, 11]

The representation was directed to be decided by a reasoned order after hearing the petitioner, without any adjudication on the merits of the cancellation or its revocation.

Final Conclusion: The writ petition was disposed of by directing the competent authority to consider the petitioner's representation for revocation of cancellation of GST registration in accordance with law after hearing the petitioner. The Court did not decide the merits and left all questions open for determination by the authority concerned.

Restoration of GST registration - Cancellation for non-filing of returns - Compliance under proviso to Rule 22(4) -Opportunity for restoration on subsequent compliance - Seeking restoration by approaching the proper authority and complying with the proviso to Rule 22(4) of the CGST Rules, 2017

GST registration cancellation for continuous non-filing - HELD THAT: - The Court found that the controversy was covered by the Coordinate Bench decision in Dhirghat Hardware Stores [2025 (10) TMI 1070 - GAUHATI HIGH COURT], rendered on similar facts and law. Accepting that position, the Court proceeded on the basis that where registration was cancelled under Section 29(2)(c) for non-filing of returns, and the registered person is ready to furnish all pending returns and pay the tax dues with applicable interest, penalty and late fee, the proper authority may consider dropping the proceedings in terms of the proviso to Rule 22(4). On that basis, the petitioner was held entitled to the same relief, namely an opportunity to apply for restoration and have such application considered in accordance with law. [Paras 11, 12, 13]

The petitioner was permitted to approach the concerned authority within sixty days for restoration of GST registration, and on compliance with the requirements of the proviso to Rule 22(4), the authority was directed to consider restoration expeditiously in accordance with law.

Computation of limitation under Section 73(10) - Exception for financial year 2024-25 - HELD THAT: - Following the same relief moulded in Dhirghat Hardware Stores, the Court directed that the statutory period under Section 73(10) would run from the date of the present order, while carving out an express exception for the financial year 2024-25, which was left to be governed as per Section 44 of the CGST Act/State GST Act. [Paras 13]

The limitation period under Section 73(10) was directed to be reckoned from the date of the order, except in relation to the financial year 2024-25.

Final Conclusion: The writ petition was disposed of by granting the petitioner liberty to seek restoration of GST registration within the time stipulated, with a direction to the authority to consider such request on compliance with the requirements of the proviso to Rule 22(4). The Court also directed how the period under Section 73(10) was to be computed, subject to the stated exception for the financial year 2024-25.

Cancellation of GST registration - System generated show cause notice - Jurisdictional authority in issuance of notice - Notice without name or office of issuing authority - Digital Signature - failure to identify the issuing authority - Principles of natural justice - HELD THAT: - Following M/s M Y Ent Bhatta v. State of UP & anr [2025 (5) TMI 2198 - ALLAHABAD HIGH COURT], the Court held that the statutory power to issue notice vests in the competent officer and not in the system. An advisory regarding issuance of notices or orders without digital signatures could not validate a notice which did not disclose either the name or the office of the issuing authority and merely described itself as system generated. Since the show cause notice was itself dehors the Act and the Rules, the consequential order cancelling registration could not survive.

The show cause notice and the consequential order cancelling the petitioner's GST registration were quashed.

Final Conclusion: The writ petition was allowed. Applying the earlier Division Bench view, the Court quashed the show cause notice and the consequential cancellation order on the ground that the notice was merely system generated and did not disclose the competent issuing authority.

Alternative statutory remedy - Maintainability of writ petition against refund rejection - Refund of IGST by SEZ unit - HELD THAT: - The Court held that the dispute turned on the nature of the refund claim, including whether it stood outside the scope of zero-rated supply and whether it was a simplicitor refund claim in respect of supplies made to the insurance company. Since these were matters going to the merits and required examination of the rival claims, the proper course was to pursue the statutory appellate remedy rather than invoke writ jurisdiction at that stage. [Paras 5]

The writ petition was disposed of leaving it open to the petitioner to file an appeal on all available grounds of fact and law, with a direction that delay, if any, be considered in light of the petitioner having pursued the writ remedy.

Final Conclusion: The Court declined to entertain the writ petition against the refund rejection order on the ground that the dispute involved issues on the merits of the refund claim which should be raised before the appellate authority. Liberty was granted to file an appeal, and the question of delay was directed to be considered in that background.

Seeking directection to carry out reassessment of the six bills of entry - coercive action - Time-bound compliance - Liberty to avail appropriate legal remedy - HELD THAT:- The writ petition was disposed of with a direction to the customs authorities to carry out reassessment of the six bills of entry within the stipulated period, leaving the petitioner's claim regarding waiver of interest to be considered by the authorities at the time of reassessment, and without expressing any opinion on the merits.

Writ against show cause notice - Exceptional interference under Article 226

Maintainability of writ against show cause notice - Jurisdictional challenge at threshold - Abuse of process - Exceptional circumstances - Reasoned order - Opportunity of hearing - A writ petition challenging the CGST show cause notice at the threshold was not entertained where adjudication had not commenced and the petitioner had an adequate opportunity to submit its reply before the adjudicating authority. - HELD THAT: - The Court held that a writ court ordinarily does not interfere against a mere show cause notice. Interference under Article 226 is confined to exceptional cases where the notice is without jurisdiction, violates principles of natural justice, or amounts to abuse of process. As the petitioner had only been called upon to show cause and the adjudication proceeding had yet to commence, the proper course was to permit the petitioner to place its contentions and documents before the adjudicating authority. To secure a fair adjudication, the Court directed filing of a detailed reply, consideration of the same by a reasoned order after hearing the petitioner and the supplier, and completion of the adjudication within the time fixed by the Court, while leaving all merits open. [Paras 12, 13, 14, 15]

The writ petition was disposed of without examining the merits, with directions for the petitioner to reply to the show cause notice and for the adjudicating authority to decide the matter by a reasoned order after hearing the concerned parties.

Final Conclusion: The Court declined to quash the show cause notice at the threshold and held that the petitioner must pursue the adjudicatory process. The matter was disposed of with directions for a detailed reply, hearing of the petitioner and the supplier, and a time-bound reasoned adjudication, with all merits kept open.

Extended limitation for GST demand proceedings - Invocation of Section 74 for excess input tax credit mismatch - Suppression for purposes of extended period - Judicial exclusion of the Covid-19 period - Mismatch between GSTR-2A and GSTR-3B, leading to an allegation of excess input tax credit - barred by limitation - HELD THAT: - The Court held that, for the tax period 2017-2018, the limitation for demand proceedings could not be treated as having expired under either Section 73 or Section 74, since the period affected by the Covid-19 outbreak had to be excluded in terms of the orders extending limitation, read with the statutory relaxations introduced under Section 168A. The Court further noted that the impugned order itself indicated scrutiny of returns under Section 61 and issuance of Form ASMT-10 before the intimation and show cause notice, and considered that, in the circumstances, suppression was made out for purposes of invoking Section 74. Relying on the common order rendered in the batch matters on the same day, the Court also observed that the threshold for invoking the extended period under Section 74 under the GST enactments is lower than under the earlier indirect tax laws. On that reasoning, the challenge to the jurisdictional shift from the earlier intimation to the notice under Section 74 was rejected. [Paras 21, 22, 23, 24, 25]

The writ petition was dismissed, with liberty to the petitioner to pursue the statutory appeal on merits before the Appellate Commissioner subject to compliance with Section 107.

Final Conclusion: The Court upheld the impugned order under Section 74 for the tax period 2017-2018, holding that the proceedings were within limitation after giving effect to the Covid-19 exclusion and statutory extensions, and that invocation of the extended period was justified on the facts noticed in the order. The writ petition was accordingly dismissed, with liberty to pursue the statutory appellate remedy on merits.

Maintainability of Invocation of the extended period of limitation and proceedings under Section 74 - Job work records and deemed supply - Revenue neutrality - Demand arising from dispatch of goods for job work without proper records under Section 143 - verification on the plea of revenue neutrality

Invocation of extended limitation under GST - Job work records and deemed supply - The demand proceedings under Section 74 for goods sent on job work without proper records were not without jurisdiction merely because the notice did not separately elaborate all ingredients of Section 74. - HELD THAT: - The Court held that under the GST scheme the Department proceeds on the basis of the records maintained by the taxable person under self-assessment. Where goods are claimed to have been sent on job work basis, the principal must maintain the accounts and records contemplated under Section 143 and Rule 45, and the goods must be duly accounted for. In the absence of records showing return of the goods within the prescribed period, the deeming consequence under the job work provisions is attracted. On that basis, and in view of the common order rendered in the connected batch, the Court held that Section 74 could be invoked where scrutiny discloses such shortfall, and that the threshold for invoking the extended period under GST is lower than under the earlier indirect tax enactments. The technical challenge to the notices and orders on lack of jurisdiction was therefore rejected. [Paras 16, 17, 18, 19, 20]

The challenge to the invocation of Section 74 and to the impugned orders on technical and jurisdictional grounds was rejected.

Revenue neutrality - The assessee's plea that the dispute may be revenue neutral was left open for factual verification by the assessing authority. - HELD THAT: - The Court found that the contention that the inputs sent for job work had already suffered tax, either in the hands of the assessee or in the hands of the job worker, required detailed factual examination. Since that question was disputed and depended on proof to be produced by the assessee, the Court declined to decide it in writ jurisdiction. The matter was therefore remitted to enable the assessee to file a proper reply and establish the plea of revenue neutrality, after which the authority was directed to pass fresh orders on merits after hearing the assessee. [Paras 21, 22, 23, 24, 25]

The matter was remitted for fresh consideration limited to the assessee's plea of revenue neutrality.

Final Conclusion: The Court upheld the validity of invoking Section 74 in the facts of the case and rejected the technical challenge to the impugned orders. However, as the assessee's plea of revenue neutrality required factual verification, the matters were remitted to the respondent for fresh decision on that aspect after receiving the assessee's reply.

Non-speaking order - Application of mind in delay condonation - Revocation of cancellation of registration - Rejection of the revocation application for cancellation of registration on the ground of delay, without dealing with the explanation furnished in the delay condonation application - HELD THAT: - The Court found that the impugned order merely stated that the reasons given for condonation were not correct or that the justification was insufficient, without disclosing any consideration of the explanation or supporting material placed by the petitioner. Since the revocation application had been accompanied by a delay condonation request and the authority gave no reasoned determination on that request, the order was held to be a non-speaking order suffering from lack of application of mind. On that ground, the matter required fresh consideration by the competent authority. [Paras 6, 7]

The impugned order was set aside and the matter was remitted to the competent authority to pass a fresh speaking order after considering the petitioner's explanation and supporting documents.

Final Conclusion: The writ petition was allowed on the limited ground that the rejection of the revocation application was by a non-speaking order lacking application of mind. The competent authority was directed to reconsider the matter and pass a fresh order.

Restoration of cancelled GST registration - Cancellation for non-filing of returns for continuous period of six months - Conditional revival on payment of outstanding tax, late fees and interest - Financial hardship - Covid-19 disruption - HELD THAT: - The Court found that the record did not disclose any allegation that the petitioner had indulged in unlawful activity or attempted to defraud the GST authorities. It further noted that the delay in filing returns was attributable to financial constraints and that the period of default was proximate to the disruption caused by the Covid-19 pandemic, which position was not controverted. In these circumstances, and particularly since the petitioner expressed readiness to pay the outstanding GST dues together with applicable interest and late fees or penalty, the Court held that restoration of registration would serve the interests of both the petitioner and the revenue, enabling lawful business activity while securing recovery of statutory dues. [Paras 14, 15, 16, 17, 18]

The cancelled GST registration was directed to be restored after the authorities determine and intimate the outstanding dues and the petitioner pays the same within the stipulated time; failing such payment, the petition would stand dismissed.

Final Conclusion: The petition was disposed of by directing ascertainment of the outstanding GST dues, interest, and late fees or penalty, and by ordering restoration of the petitioner's GST registration upon payment within the prescribed time. In default of such payment, the petition was directed to stand dismissed without further reference to the Court.

Revocation of cancellation of GST registration - Failure to consider material documents and applications - No Personal hearing - Rejection of the application for revocation of cancellation of GST registration without considering the documents and applications filed by the petitioner and without proper opportunity of hearing was unsustainable. - HELD THAT: - The Court held that the question whether the petitioner was carrying on business from the declared place of business or had temporarily closed the premises for personal reasons involved factual verification on the basis of the documents furnished. Such verification had to be undertaken by the competent authority after extending a personal hearing. Since the order rejecting revocation did not consider the several applications and documents filed by the petitioner, it was found wanting and could not be sustained. [Paras 4]

The order rejecting revocation was quashed and the proceedings were restored to the second respondent for fresh consideration after granting the petitioner a personal hearing.

Final Conclusion: The petition was allowed in part. The order rejecting revocation of cancellation of GST registration was set aside and the matter was remitted for fresh decision after personal hearing; no adjudication was made on the underlying factual question whether business was conducted from the declared premises.

Pre-adjudication recovery of GST dues from customers - Invalidity of recovery proceedings before determination of tax liability - Crystallisation of tax liability - Recovery from customers of the taxable person - Letters issued by the respondents to customers of the petitioners before issuance of the order-in-original determining tax liability - HELD THAT: - The Court held that, at the time when the communications were issued to the customers of the petitioners, there was only a tax proposal and no determined tax liability. In such circumstances, recovery action against persons liable to pay the petitioners for goods supplied could not be sustained. The Court therefore declared that any such letters issued prior to adjudication of liability were invalid and could not furnish the basis for further action. At the same time, the Court preserved the respondents' right to initiate recovery in accordance with law after the orders-in-original determining liability. [Paras 4, 7]

Pre-adjudication letters issued to the petitioners' customers were held invalid, without prejudice to lawful recovery proceedings after determination of tax liability under the orders-in-original.

Final Conclusion: The writ petitions were disposed of by declaring that letters issued to the petitioners' customers before determination of tax liability were invalid and could not be acted upon further. The respondents were, however, left free to pursue recovery in accordance with law after issuance of the orders-in-original.

Opportunity to reply to show cause notice - Failure of effective service through GST portal - Reasoned order after hearing - Principles of natural justice - Entitlement to an opportunity to reply to the show cause notice where he had not been able to receive the notice and therefore could not file a response. - HELD THAT: - The Court held that, on the materials placed, the petitioner had not been able to receive the show cause notice and consequently had no opportunity to submit a reply. On that procedural defect, the matter required reconsideration after permitting the petitioner to respond. The authority was therefore directed to accept the reply, consider it, grant hearing, and pass a reasoned order in accordance with law. [Paras 7, 8]

The petitioner was permitted to file a reply to the show cause notice, and the authority was directed to decide the matter afresh by a reasoned order after affording hearing.

Final Conclusion: The writ petition was disposed of by directing that the petitioner be given an opportunity to reply to the show cause notice for the financial year 2018-2019, after which the authority must pass a reasoned order upon hearing the petitioner.

Entitlement to bail in GST-related forgery and cheating prosecution - Use of co-accused police statements at bail stage - Magistrate-triable offences and documentary evidence - Prima facie case - Parity in bail - Confessional statement - Corroborative statement - Grant of bail where their implication rested only on their alleged confessional statement and the statements of co-accused, and charge-sheet had already been filed in offences triable by a Magistrate. - HELD THAT: - Apex Court in the case of Salim Khan Vs. Sanjai Singh [1999 (12) TMI 888 - SUPREME COURT] wherein the Apex Court while considering an application of the informant for cancellation of bail of the accused observed that the High Court was duty bound to consider all the statements recorded u/s 161 of Cr.P.C., examine the gravity of the offence and also examine the question of possibility of the accused tampering with the evidence and possibility of getting the attendance of the accused during the trial and then would be entitled to grant bail to an accused.

The Court examined the legal position governing reliance on police statements at the stage of bail and noted the distinction between statements of witnesses and statements of accused persons. Referring to the later decision in P. Krishna Mohan Reddy Vs. The State of Andra Pradesh [2025 (5) TMI 1900 - SUPREME COURT], it held that police statements of accused persons, particularly confessional statements implicating co-accused, do not stand on the same footing as statements of witnesses for bail purposes. On the facts before it, the Court found that the only material against the applicants consisted of their confessional statement and the statements of co-accused, while the charge-sheet had already been filed. Taking into account the nature of the accusation, the material on record, the severity of punishment, and the fact that the case was to proceed on filed material, the Court concluded that a case for bail was made out. [Paras 16, 17]

Bail was granted to both applicants subject to conditions.

Final Conclusion: The Court allowed the bail applications and directed release of the applicants on conditions. It held that, in the circumstances of the case, the material against them was insufficient to deny bail once the charge-sheet had been filed.

Alternative statutory remedy - Maintainability of writ petition- Disputed questions of fact under Article 226- absence of prior notice under Section 142(1)(a) -HELD THAT: - The Court held that though a writ petition may be maintainable notwithstanding an alternative statutory remedy if the impugned order is shown to be null and void, that principle could not be invoked here because the very foundation of the challenge, namely, absence of a notice prior to the show cause notice, was itself disputed on facts. Since adjudication of that controversy would require examination in the factual realm, the High Court, in exercise of jurisdiction under Article 226, could not undertake such enquiry. On that reasoning, the refusal to entertain the writ petition on the ground of availability of an efficacious statutory remedy was found justified. [Paras 4, 5]

The dismissal of the writ petition on the ground of alternative statutory remedy was upheld, leaving the appellant to pursue the statutory forum.

Final Conclusion: The writ appeal was dismissed, the Court holding that the challenge to the GST order raised a disputed factual issue unsuitable for examination in writ jurisdiction and was therefore required to be pursued before the statutory forum. Liberty was, however, reserved to seek exclusion of the time spent before the High Court for limitation purposes.

Revision u/s 264 - Reasoned disposal of revision application - Failure to consider material contentions

HELD THAT: - The Court noted that the assessee had invoked the revisional remedy u/s 264 on the basis of the AO's own observation that such remedial action was available. It found that, despite the assessee's request to appear and the detailed reply filed in support of the revision, the revisional authority dealt with the contentions only cursorily and rejected the application merely by stating that the AO's observation regarding Section 264 did not mean that the application could be accepted. The determinative defect was the absence of a proper and reasoned consideration of the revision application and the contentions raised by the assessee. [Paras 5, 6]

The impugned order passed u/s 264 and consequential orders were quashed, and the matter was remanded for fresh decision by a reasoned order in accordance with law after dealing with the assessee's contentions.

Final Conclusion: The High Court held that the revision application under Section 264 had been rejected without proper consideration of the assessee's contentions and without a reasoned determination. The impugned order was therefore set aside and the matter remanded for fresh decision in accordance with law.

Reassessment limitation under amended regime - Exclusion of time in Section 148A proceedings - Reopening of completed assessment

HELD THAT: - The Court held that under the amended reassessment regime, proceedings may be initiated within the period prescribed by Section 149, but a notice u/s 148A cannot be sustained if the case had already become time-barred under the old regime.

For the relevant assessment year, however, the Court found that the case was within the permissible six-year period under the old law. The Court further held that, for computing limitation, the period between issuance of the notice u/s 148A(b) and the assessee's reply is liable to be excluded, and therefore the subsequent order u/s 148A(d) and notice u/s 148 were in time.

It also recorded that the amount alleged to have escaped assessment had not formed the subject matter of the earlier scrutiny assessment, and therefore invocation of the reassessment machinery could not be faulted at this stage. All other issues were expressly left open to be raised before the respondents, except the plea of limitation. [Paras 13, 14, 16, 17, 23]

The limitation challenge failed; the writ petition was dismissed, leaving all other issues open to the petitioner before the respondents except the issue of limitation.

Final Conclusion: The Court declined to interfere with the impugned order under Section 148A(d) and the consequential notice under Section 148, holding that the reassessment proceedings for Assessment Year 2015-16 were not barred by limitation. The writ petition was dismissed, with liberty to the petitioner to raise all other issues before the respondents except the plea of limitation.

Credit for tax deducted at source on basis of Form 16A and deductor's certificate - Bar against direct demand where tax has been deducted at source - Departmental duty to verify TDS claim before denying credit

Denial of credit for tax deducted at source merely because the deduction was not reflected on the departmental portal or in Form 26AS - HELD THAT: - The Court held that under the scheme of the Act, the obligation to furnish TDS statements and to deposit the deducted amount rests on the deductor, and failure in that regard attracts consequences against the deductor. Once tax has been deducted, the statutory bar against calling upon the assessee to pay the same tax is attracted. In the present cases, the Bank had issued Form 16A and certificates containing challan details and particulars of deposit, and the Department had neither denied the correctness of those particulars by affidavit nor shown any adverse finding on verification. In such circumstances, the Department could not continue to deny credit to the deductees merely because the amount was not displayed on the portal. Its duty was to verify the particulars furnished, and only if the information was found incorrect could credit be denied. [Paras 31, 33, 34]

The Department was directed to verify the particulars furnished in Form 16A and the certificates within one month and, if no adverse material was found regarding their genuineness, to grant full TDS credit and issue consequential refund, after adjustment of any previous outstanding demand, with statutory interest from the date on which the refund became due on regular assessment.

Final Conclusion: The writ petitions were disposed of by directing the Department to verify the TDS certificates and Form 16A within the prescribed time and, if found genuine, to grant credit of the deducted tax and release any consequential refund with statutory interest, subject to adjustment of prior outstanding dues.

Disallowance u/s 14A in absence of exempt income - Prospective operation of Finance Act, 2022 amendment to section 14A - Rule 8D disallowance -

HELD THAT: - The Tribunal noted that it was undisputed that the assessee had not earned any exempt income and had claimed no exemption in the return. On that factual basis, section 14A was held inapplicable and the disallowance made under Rule 8D was unsustainable.

Tribunal further held that the amendment made by the Finance Act, 2022, providing for application of section 14A even where no exempt income has accrued, arisen or been received, is prospective and applicable only from assessment year 2022-23 onwards. Accordingly, for the year under appeal, the amendment could not be invoked to sustain the disallowance. [Paras 6, 7, 8]

The disallowance under section 14A read with Rule 8D was deleted.

Final Conclusion: The appeal was allowed. The Tribunal held that, for assessment year 2020-21, no disallowance under section 14A read with Rule 8D could be made in the absence of exempt income, and the Finance Act, 2022 amendment to section 14A was prospective.

Unexplained investment in purchase of immovable property - Discharge of burden u/s 69 through corroborative documentary evidence - Source of funds explained through spouse's direct remittance and own sale proceeds

HELD THAT: - The Tribunal held that the assessee had furnished a complete source-wise and payment-wise reconciliation of the entire property consideration, supported by interconnected documentary evidence including the seller's bank statement, the husband's identity and tax records, his affidavit, the gift deed, bank confirmation, the earlier sale deed showing availability of own funds, and the pay order for the balance amount.

Revenue did not dispute the identity of the husband, his financial capacity, the receipt of the disputed sums in the seller's account, the genuineness of the registered property transaction, or the authenticity of the documents produced. In these circumstances, the explanation could not be rejected merely because a further remittance record from the Dubai Exchange Bureau was unavailable after a long lapse of time.

Tribunal held that once the entire investment stood fully reconciled and no contrary material was brought to show that the funds represented the assessee's undisclosed income, suspicion cannot substitute evidence, and the burden under section 69 stood discharged. [Paras 9, 10, 11, 12, 13]

The entire addition u/s 69 was directed to be deleted.

Final Conclusion: The Tribunal allowed the appeal on merits and deleted the entire addition made under section 69 in respect of the property purchase, holding that the assessee had satisfactorily explained the full investment by cogent documentary evidence. The challenge to the reassessment proceedings was left open and was not adjudicated separately.

Cost of acquisition for capital gains computation - Actual consideration vis-a-vis value stated in sale deed - Scope of remand proceedings - Cost of improvement

Cost of acquisition for capital gains computation - Actual consideration vis-a-vis value stated in sale deed - HELD THAT: - The Tribunal found that the assessee had produced the certificate of the housing society and the corresponding receipts showing payment of the higher consideration for the plot. It held that once the assessee was able to demonstrate by supporting documents that the actual price paid exceeded the amount recorded in the sale deed, the figure in the sale deed could not govern the computation of cost of acquisition.

The lower authorities had failed to consider this material despite the explanation for the difference. Since the relevant documents were available before the Tribunal and were not effectively disputed, the assessee's computation based on the actual cost was accepted without further remand. [Paras 10, 11, 12]

The assessee's cost of acquisition as claimed for computing long-term capital gain was accepted.

Scope of remand proceedings - Cost of improvement - HELD THAT: - The Tribunal held that the earlier remand was confined to verification of the difference between the cost of acquisition shown in the sale deed and the actual cost reflected in the society's certificate. Since there was no discussion or remand on the question of cost of improvement in the earlier round, the Assessing Officer had no occasion in the second round to make an adverse estimation on that aspect. The restriction of the improvement claim to 30 per cent was therefore beyond the scope of the remand. [Paras 13]

The Assessing Officer was directed to allow the full cost of improvement instead of restricting it to 30 per cent.

Final Conclusion: The appeal was allowed. The Tribunal accepted the assessee's actual cost of acquisition for capital gains purposes and held that the Assessing Officer could not curtail the cost of improvement in the second round beyond the scope of the earlier remand.

Rejection of registration u/s 12AB - Renewal of charitable registration after amendment of objects - Scope of inquiry at registration stage - Consequential approval u/s 80G

Renewal of charitable registration after amendment of objects - Non-consideration of subsisting approval order - Scope of inquiry at registration stage - Renewal of registration under section 12AB rejected on the ground that approval for amended objects had not been obtained - HELD THAT: - The Tribunal held that the rejection rested entirely on a factual premise contrary to the Department's own record, since the assessee had already filed an application after amendment of its objects and had obtained approval in Form No.10AD. That approval had also been specifically placed before the authority in the renewal proceedings, yet it was ignored. Once such subsisting approval existed and had neither been withdrawn nor cancelled, the authority could not proceed as if no approval had been granted. The Tribunal further held that inquiry at the stage of registration is confined to the charitable nature of the objects, genuineness of activities, and compliance with legal requirements material to achieving the objects; it is not an assessment exercise. In the absence of any adverse finding on charitable objects, genuineness of educational activities, or violation of any law material to the objects, renewal could not be denied. The order was therefore unsustainable both on facts and in law. [Paras 13, 14, 15, 16, 17]

The rejection of renewal of registration under section 12AB was set aside, and renewal was directed to be granted with effect from 01.04.2026.

Consequential approval under section 80G - HELD THAT: - The Tribunal found that the order under section 80G contained no independent reasoning and was entirely consequential to the denial of registration under section 12AB. Once the denial of registration was set aside and the assessee was held entitled to renewal, the very basis for refusal of approval under section 80G disappeared. In the absence of any separate infirmity noted by the authority, the assessee was also entitled to renewal of approval under section 80G. [Paras 18, 19, 20]

The rejection of approval under section 80G was set aside, and approval was directed to be granted with effect from 01.04.2026.

Final Conclusion: Both appeals were allowed. The Tribunal held that renewal of registration had been wrongly denied on a factual assumption contrary to the record, and since the refusal of approval under section 80G was purely consequential, both impugned orders were set aside with directions to grant renewal in accordance with law.

Scope of legal fiction u/s 50 - Set-off of long-term capital loss against gain on transfer of depreciable long-term asset - Character of capital asset for purposes of section 74 - Transfer of depreciable long-term capital asset - Set-off of current year's and brought forward long-term capital losses against gain computed under section 50 on transfer of a depreciable asset held as a long-term capital asset

HELD THAT: - The Tribunal held that section 50 is a special provision confined to computation of capital gains on transfer of depreciable assets and the deeming fiction therein cannot be extended beyond that purpose. While the gain is deemed to be short-term capital gain for computational purposes, the provision does not convert the underlying long-term capital asset into a short-term capital asset.

For applying section 74, the relevant test is the actual character of the asset transferred. Since the asset was admittedly held for a period qualifying it as a long-term capital asset, the gain arising from its transfer retained that character for purposes of set-off, notwithstanding computation under section 50. The Assessing Officer's view enlarged the deeming fiction beyond the legislative purpose and was therefore unsustainable. [Paras 11, 12, 13, 14, 15]

The direction to allow adjustment of current year's and brought forward long-term capital losses against the gain computed under section 50 was upheld.

Final Conclusion: The Tribunal upheld the appellate order allowing set-off of current year's and brought forward long-term capital losses against the gain arising from transfer of the depreciable asset computed under section 50, and dismissed the Revenue's appeal.

Mandatory notice u/s 143(2) in reassessment - Belated return in response to notice u/s 148 - Invalidity of reassessment for non-issuance of statutory notice

Whether Reassessment could not be sustained where the assessee had filed a return in response to notice under section 148, but no notice under section 143(2) was issued before completion of the reassessment? - HELD THAT: - The Tribunal found from the assessment record itself that the assessee had filed its return on 31.01.2022 in response to notice u/s 148 and that the AO treated it as non-est only because it was filed belatedly. Tribunal accepted the assessee's explanation that the delay was attributable to the Covid period and held that, once such return was on record, the AO was bound to follow the statutory procedure of issuing notice u/s 143(2) before proceeding to frame reassessment.

Relying on ACIT v. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT] as followed in Staunch Marketing Pvt Ltd [2017 (8) TMI 249 - DELHI HIGH COURT] and Saptagiri Finance & Investments [2012 (8) TMI 523 - MADRAS HIGH COURT] the Tribunal held that the requirement of notice under section 143(2) is mandatory and its omission is not a curable procedural defect. The view of the appellate authority that no such notice was required because the belated return could be treated as non-est was held to be unjustified. [Paras 10, 12, 14, 16, 17]

The reassessment order passed under sections 147 read with 144 and 144B, without issuance of notice under section 143(2), was held bad in law and was quashed.

Final Conclusion: The Tribunal allowed the appeal and quashed the reassessment. It held that, once the assessee's return filed in response to notice under section 148 was on record, non-issuance of notice under section 143(2) rendered the reassessment invalid; the remaining grounds were left academic.

Approval u/s 80G - Relief of the poor through employment-oriented activities - Charitable character of revenue-generating activities

Whether assessee-trust was entitled to approval u/s 80G(5), notwithstanding that its publication and natural dyeing activities generated revenue? - HELD THAT: - The Tribunal held that the rejection proceeded on an unduly narrow view of the trust's activities. It found that the publication division and natural dyeing centres were not independent profit-driven ventures, but activities intrinsically connected with the trust's stated objects of providing livelihood, skill development, training and employment to disadvantaged rural sections, particularly women, artisans and marginalised communities.

The financial material, including substantial expenditure on salaries and wages and excess of expenditure over income in certain years, did not support a finding of predominant profit motive.

Tribunal further held that charitable character could not be denied merely because no separate expenditure head was shown as "charity"; where the dominant object is charitable and the activities are carried on to attain those objects, generation of receipts by itself does not render the institution non-charitable. On the record, the trust's genuineness was not doubted, it already held registration under section 12AB, and no material showed diversion of funds, personal benefit to trustees, or use of income for non-charitable purposes. The activities for employment generation, skill development, village industries and empowerment of rural women were held to fall within the broader scope of relief of the poor and charitable purpose under section 2(15). [Paras 16, 17, 18, 19, 20]

The order rejecting approval was set aside, and the Commissioner was directed to grant approval to the assessee-trust under section 80G(5) in accordance with law.

Final Conclusion: The Tribunal allowed the appeal and held that the assessee's revenue-generating activities were carried on in furtherance of its charitable objects and did not negate its charitable character. The rejection of approval under section 80G(5) was therefore unsustainable, and approval was directed to be granted.

Disallowance of purchases as non-genuine - GST registration cancellation on account of supplier's demise - Acceptance of corresponding sales

HELD THAT: - The Tribunal held that the cancellation of the supplier's GST registration could not, by itself, be treated as the sole basis for disallowing the purchases. It found that the Revenue had ignored the material fact that the supplier had died and that his proprietary business had stopped on that account. The purchase invoices and transport documents were prior to the supplier's demise, and the assessee had explained the circumstances regarding the non-response from the seller. Since the Revenue accepted the sales and did not dispute or identify any discrepancy in the purchases linked to those sales, the conclusion that the purchases were non-genuine was unjustified. [Paras 7]

The addition made by disallowing the purchases and its confirmation in appeal were held to be unjustified and were deleted.

Final Conclusion: The Tribunal allowed the appeal and deleted the addition made on account of alleged non-genuine purchases. It held that cancellation of the supplier's GST registration due to his demise, without any discrepancy in the supporting purchase records and while accepting the corresponding sales, could not justify the disallowance.

Taxability of web hosting receipts in India -Use or right to use equipment - Make available test - Royalty under India-USA DTAA - Fees for technical services - services provided by the US assessee to its Indian affiliate - Treaty override over domestic law amendments

HELD THAT: - The Tribunal found from the web hosting agreement that the assessee provided only standard hosting facilities comprising server space, internet connectivity and related infrastructure support, while possession, control and operation of the servers remained entirely with the assessee. The Indian customer had no physical access or independent right to use the equipment, and its limited right of inspection for security verification did not amount to use or right to use industrial, commercial or scientific equipment.

On that basis, the receipts were for availing a facility and not for use of equipment or intellectual property. The Tribunal further held that web hosting did not make available technical knowledge, skill, know-how or process so as to fall within the treaty definition of fees for technical services. On the Revenue's reliance on the expanded domestic definition of royalty after the Finance Act, 2012, the Tribunal held that unilateral amendments to domestic law cannot enlarge the narrower treaty definition in the absence of a corresponding amendment to the DTAA, and the more beneficial treaty provision would prevail. The same conclusion was applied to the remaining years as the facts were identical. [Paras 9, 10, 12, 13]

The deletion of the addition on account of web hosting receipts was upheld for all the assessment years in appeal.

Final Conclusion: The Tribunal held that the assessee's web hosting receipts from its Indian affiliate were not taxable in India either as royalty or as fees for technical services under the Act or the India-USA DTAA. The Revenue's appeals for all the assessment years were accordingly dismissed.

Revision u/s 263 - Plausible view after enquiry - Sham transaction allegation in mutual fund investment - Dividend stripping beyond statutory period - Exemption on mutual fund dividend - Revisional directions beyond assessment year

Revision u/s 263 - Plausible view after enquiry - Change of opinion - whether AO had examined the reassessment issue relating to the JM Financial mutual fund investment and had taken a plausible view on the material available? - HELD THAT: - The Tribunal found that the reassessment had been initiated on the very issue of the assessee's investment in the mutual fund scheme and the alleged claim of exempt dividend income coupled with capital loss. In the reassessment, the AO had called for details, examined the investment, the dividend, the holding pattern and the genuineness of the transaction, and then recorded a categorical conclusion that no short-term capital loss had been claimed in the relevant year and that the assessee was regularly investing in mutual funds. On those facts, the Assessing Officer had consciously taken a permissible view. Tribunal held that once enquiry had been made and a view taken after application of mind, revisional jurisdiction could not be invoked merely because the Principal Commissioner preferred a different conclusion. As the assessment order was neither erroneous nor prejudicial to the interests of the Revenue, assumption of jurisdiction under section 263 was invalid. [Paras 26, 27, 28, 29, 37]

The order u/s 263 was held unsustainable and the reassessment order was restored.

Sham transaction allegation in mutual fund investment - Dividend stripping beyond statutory period - Exemption on mutual fund dividend - Principal Commissioner justification in treating the mutual fund investment as a sham transaction, denying exemption on the dividend and questioning the capital loss position when there was no material showing conscious participation by the assessee and the transaction fell outside the statutory mischief of dividend stripping - HELD THAT: - The Tribunal held that the allegation of payment of dividend out of capital was essentially against the mutual fund and, by itself, did not establish that the assessee-investor had colluded in any colourable device. The assessee's investment formed part of its regular investment activity, the transactions were through banking channels, and no material showed prior knowledge of the dividend declaration or participation in any manipulation. Tribunal further held that the legislature had specifically addressed dividend stripping through section 94(7), and that provision applied only where the units were sold within nine months from the record date.

Since the units were sold beyond that period, the case fell outside that provision. In such circumstances, the Revenue could not deny the claim merely by branding the transaction as sham without cogent evidence. Tribunal also accepted that denial of exemption on the mutual fund dividend would result in double taxation, and that even under the dividend stripping provision the statute restricts loss only to the specified extent and does not deny the dividend exemption itself. [Paras 31, 32, 33, 34, 35]

The findings used by the Principal Commissioner to deny exemption and to treat the transaction as sham were rejected.

Revisional directions beyond assessment year - Scope of section 263 - Directions issued in section 263 proceedings for AY 2019-20 when the revision related only to the reassessment order for A.Y. 2018-19 - HELD THAT: - The Tribunal held that while exercising revisional power in relation to A.Y. 2018-19, the Principal Commissioner could not travel beyond that assessment year and issue directions concerning capital loss for AY 2019-20. Such a direction was outside the statutory scope of the revision proceedings under consideration. [Paras 36]

The direction concerning AY 2019-20 was held incapable of being sustained.

Final Conclusion: The Tribunal allowed the appeal and held that the reassessment order for A.Y. 2018-19 had been passed after due enquiry and on a permissible view, so the assumption of revisional jurisdiction under section 263 was invalid. The order under section 263 was set aside, the reassessment was restored, and the direction issued for AY 2019-20 was also held to be beyond jurisdiction.

TP Adjustment - Arm's length price of intra-group services - Benefit test in transfer pricing - Business expenditure on intra-group service charges - Interest on refund

Arm's length price of intra-group services - Benefit test in transfer pricing - Receipt of central corporate, GBU and IT services - TP adjustment on payment for central corporate, GBU and IT intra-group services by determining the arm's length price at nil - HELD THAT: - The Tribunal found that the assessee had produced detailed service agreements, allocation keys, cost pool workings, emails, presentations and independent audit certificates showing the nature, need, receipt and use of the services in its business. It held that once the existence and receipt of the services were demonstrated, the arm's length price could not be fixed at nil merely on a subjective perception that adequate benefit was not proved. The Tribunal also noted that the DRP had accepted that services were rendered, while upholding the adjustment without adequately dealing with the evidences placed on record, and that the Revenue had brought no cogent material to disprove rendition of services. [Paras 8]

The transfer pricing adjustment in respect of CCA, GBU and IT services was deleted for both assessment years.

Business expenditure on intra-group service charges - Consequential disallowance under section 37(1) - HELD THAT: - The Tribunal held that the disallowance under section 37(1) rested solely on the transfer pricing finding that no services had been availed. Since it had already held, on the evidences on record, that the services were actually rendered and had deleted the transfer pricing adjustment, the very basis of the business expenditure disallowance ceased to exist. [Paras 9]

The disallowance under section 37(1) was directed to be deleted.

Short grant of interest u/s 244A - HELD THAT: - The Tribunal did not undertake the computation itself, but directed the Assessing Officer to verify the computation and grant interest in accordance with law up to the date of actual refund, if any. [Paras 10]

The matter was directed to be verified and consequential interest granted in accordance with law.

Final Conclusion: The Tribunal allowed both appeals, deleted the transfer pricing adjustment on intra-group services for both years, and consequently deleted the related disallowance under section 37(1) for AY 2018-19. The claim for interest under section 244A was directed to be verified and granted in accordance with law.

Indexation benefit on capital asset received in amalgamation - Period of holding of amalgamated asset - Short-term capital loss on sale of AIF units to subsidiary - Related-party transaction and colourable device - Valuation of AIF units under NAV method

Indexation benefit on capital asset received in amalgamation - starting point for indexation -Period of holding of amalgamated asset - Tax-neutral transfer in amalgamation - HELD THAT: - The Tribunal held that the only dispute was the starting point for indexation. Since the township had been constructed by the amalgamating company and had already been let out from FY 2008-09, with rental income being offered to tax from that year, the asset was in existence and held from that period. The transfer of the asset to the assessee under the scheme of amalgamation was tax neutral, and therefore the AO was not justified in treating the effective ownership as commencing from the later date of the amalgamation order or from the occupancy certificate. On that basis, the assessee was entitled to adopt FY 2008-09 for indexation and for reckoning the holding period. [Paras 10, 12]

The deletion of the addition was upheld and the Revenue's challenge to grant of indexation from FY 2008-09 was rejected.

Short-term capital loss on sale of AIF units to subsidiary - Related-party transaction and colourable device - Valuation of AIF units under NAV method - short-term capital loss on sale of Bharath Nirman Fund units to the assessee's subsidiary disallowed merely because the transaction was between related parties - HELD THAT: - The Tribunal accepted the finding that both the acquisition and sale valuations were based on the NAV method and noted that the Revenue could not show any difference in valuation methodology. The material on record explained the fall in value through decline in the fair market value of the AIF's underlying investments, and those materials had not been properly verified or rebutted by the Assessing Officer. The Tribunal further held that a transaction with a subsidiary does not by itself become a colourable device in the absence of any other material showing tax avoidance. In the absence of contrary evidence, and particularly when the AIF was a SEBI-regulated entity, the loss could not be treated as non-genuine. [Paras 21]

The deletion of the disallowance of the claimed short-term capital loss was upheld.

Final Conclusion: Both departmental appeals were dismissed. The Tribunal upheld the grant of indexation from FY 2008-09 on the township sold by the assessee and also sustained the deletion of the disallowance of short-term capital loss on sale of AIF units to its subsidiary.

Entitlement to reduction of the bank guarantee stipulated in the provisional release order despite the show-cause notice - Smuggling - Provisional release of seized goods - The Court [2026 (4) TMI 1875 - DELHI HIGH COURT] refused to reduce the bank guarantee required under the provisional release order, having found prima facie material indicating smuggling and foreign-origin markings on the seized goods. - HELD THAT:- The Special Leave Petitions were dismissed and the pending applications, if any, were disposed of.

Extension of time for show cause notice under seizure provisions - Communication of extension order before expiry of six months - Mechanical approval and absence of recorded reasons - Illegal retention of seized cash - Costs for overreaching pending judicial proceedings - Prior approval - Application of mind - Reasons to be recorded in writing - Mandatory statutory compliance -

Extension of time for show cause notice under seizure provisions - Communication of extension order before expiry of six months - Mechanical approval and absence of recorded reasons - Illegal retention of seized cash - HELD THAT: - The Court held that the note sheet relied upon as an order extending time did not disclose a valid exercise of power under the proviso to Section 110(2) of the Customs Act, 1962. Mere signature of the higher authority, without any remark showing consideration of the proposal, recording of reasons, or approval upon application of mind, was treated as a mechanical act and not a lawful approval. The Court further held that the statute requires not only extension for recorded reasons but also that the person from whom the goods were seized must be informed before expiry of the original six months. Since no show cause notice had been issued in respect of the cash and the alleged extension had never been communicated to the petitioners within time, both mandatory conditions failed. The petitioners therefore acquired a right to return of the cash on expiry of six months, and its continued retention thereafter was wholly illegal and without jurisdiction. [Paras 14, 16, 17, 18, 19]

The petitioners were held entitled to return of the seized cash, and its retention beyond the statutory period was declared unlawful.

Costs for overreaching pending judicial proceedings - Transfer of seized cash during pendency of writ proceedings - HELD THAT: - The Court found that, despite being aware that the validity of continued retention of the cash was under active consideration in the writ proceedings, the customs authorities transferred the cash to the Income Tax authorities without leave of the Court. As their jurisdiction to retain the cash had already ceased on expiry of six months, they could not lawfully deal with the petitioners' property thereafter. The Court treated the hurried execution of the requisition during pendency of the matter as conduct intended to overreach and defeat the proceedings. Although the Court recorded that the petitioners may pursue return of the money from the Income Tax authorities in accordance with law, it held that such further proceedings had been forced upon them solely because of the illegal conduct of the respondents. On the subsequent application, in view of the affidavit tendering unconditional apology and the assurance of future compliance, the Court reduced the originally proposed exemplary costs while maintaining that loss had been caused to the petitioners by deliberate omission or commission. [Paras 25, 26, 27, 28, 36]

Costs were awarded against the respondents for overreaching the judicial process, though the amount was reduced to Rs. One Lac in view of the later assurance and apology.

Final Conclusion: The Court held that the seized cash could not lawfully be retained beyond six months because there was neither a valid, reasoned approval for extension nor communication of any extension to the petitioners within time. As the subsequent transfer of the cash to the Income Tax authorities was made after the customs authorities had lost jurisdiction and during pendency of the writ proceedings, the petition was disposed of with liberty to seek return from the Income Tax authorities in accordance with law, and with costs of Rs. One Lac against the respondents.

Penalty on supporting manufacturer and deemed export recipient under Section 112(a) - Application of coordinate Bench precedent - misuse of duty-free import authorisations - Export obligation discharge certificate - HELD THAT: - The Tribunal held that the controversy stood covered by its earlier decision in the case of Commissioner of Customs (Port), Kolkata v. M/s. Kalpena Plastiks Ltd. & ors.[2026 (5) TMI 1389 - CESTAT KOLKATA], involving broadly similar facts. Applying that ratio, it found that no case had been made out for imposing penalties under Section 112(a) on the supporting manufacturer or on the deemed export recipient. Since the impugned order had declined to impose such penalties, no infirmity was found in it to the extent challenged by the Revenue. [Paras 9]

The challenge to the non-imposition of penalties under Section 112(a) failed.

Final Conclusion: Following its earlier decision on an identical controversy, the Tribunal held that no ground existed to impose penalties on the supporting manufacturer or the deemed export recipient under Section 112(a). The Revenue's appeal was therefore rejected and the impugned order was upheld to the extent challenged.

Sampling of imported coal under IS 436 - Validity of test reports based on improper sampling - Retesting on conflicting laboratory reports - compliance with the prescribed method in accordance with IS 436 - provisional assessment under Section 18(1)(b) - claimed the benefit of Notification No.21/2002-CUS and Notification No.20/2006-Cus. - strict compliance with sampling procedure

Sampling of imported coal under IS 436 - Invalidity of test reports based on non-compliant sampling - No estoppel against law - The test report relied on to deny the customs exemption for imported coking coal could not be sustained where the samples were not drawn in accordance with IS 436. - HELD THAT: - The Tribunal held that the Commissioner (Appeals) was justified in following Tata Chemicals Ltd. [2015 (5) TMI 557 - SUPREME COURT], wherein the Supreme Court held that, when the statute or notification does not prescribe a testing method, the Indian Standard method applies, and samples drawn contrary to IS 436 cannot form the basis of a valid test report. The Revenue's contentions that the importer had earlier accepted similar testing, that the samples were drawn in the presence of its agent, and that the notification did not expressly prescribe the sampling procedure, were rejected in view of the principle that if law requires an act to be done in a particular manner, it must be done in that manner, and there can be no estoppel against law. [Paras 4]

The Revenue failed to dislodge the finding that the non-compliant sampling rendered the test report unreliable for denying the claimed notification benefit.

Retesting on conflicting laboratory reports - Delayed communication of test report - The request for retesting was rightly accepted as justified where the load port test report and the departmental laboratory report did not match and the departmental report was communicated only after substantial delay. - HELD THAT: - The Tribunal upheld the finding that, once there was variation between the load port report and the CIFMR report, the request for testing by an independent laboratory ought not to have been ignored. The Revenue's objection that the request for retest was belated was not accepted, since the departmental test report itself had been communicated to the importer only after about eight months, which explained the timing of the request. [Paras 5]

The refusal to entertain the retest request was unjustified, and this furnished an additional ground to reject the Revenue's appeal.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and sustained the order granting the notification benefit. It held that the departmental test report could not be relied upon where sampling was not in accordance with IS 436, and that the request for retesting could not be ignored in the face of conflicting reports and delayed communication of the departmental result.

Alternate statutory remedy against SEBI order - Maintainability of writ petition challenging IPO approval - HELD THAT: - The Court found that the petitioner had specifically sought to stay the operation and implementation of the approval granted for the IPO and that SEBI had already issued proceedings in that regard. On a reading of the appellate provision, the Court held that any order issued by SEBI is appealable thereunder. The objection that the petitioner had not been served with the order was overcome by the production of the SEBI proceeding before the Court and handing over of its copy to the petitioner's counsel. In that situation, the Court held that the petitioner had to work out his remedy in accordance with the statutory scheme rather than invoke writ jurisdiction. [Paras 7, 8]

The petitioner was relegated to the statutory appellate remedy against the SEBI proceeding relating to the IPO approval, and the writ petition was disposed of without examining the merits of the allegations.

Final Conclusion: The Court declined to entertain the writ challenge to the proposed IPO approval on the ground that the petitioner had an effective statutory remedy of appeal against the SEBI proceeding. The writ petition was accordingly disposed of, leaving the petitioner to pursue that remedy in accordance with law.

Civil dispute masquerading as criminal prosecution - Cheating and criminal breach of trust in flat booking transaction - Novation of contract - Forgery allegations as afterthought - Interim order not binding at final hearing -Quashing of criminal proceedings -​​​​​​​ unexplained inordinate delay in lodging the FIR - Mere breach of contract - Mens rea from inception

Cheating and criminal breach of trust in flat booking transaction - Conversion of advance into loan - Abuse of criminal process for recovery of money - HELD THAT: - The Court held that the FIR itself showed that the complainant paid the amount for allotment of flats, thereafter entered into an agreement for sale, and later, on mutual understanding, agreed to conversion of the amount into a loan carrying interest. The materials relied on by the petitioners showed that the delay in construction was connected with objections from the jail authorities and not with any demonstrated false representation existing at the inception. Mere projection of the project or statements about market demand could not, in the circumstances, be treated as criminal inducement. Once the parties mutually treated the amount as a loan, the earlier contractual arrangement stood substituted, and the grievance thereafter was essentially of non-repayment. The Court further found that the FIR, read as a whole, sought recovery of money and that criminal prosecution could not be used as a recovery mechanism.

In All Cargo Movers India Pvt. Ltd. Vs. Dhanesh Badarmal Jain and another [2007 (10) TMI 620 - SUPREME COURT],the court categorically observed, it is one thing to say that the court at this juncture would not consider the defence of the accused but it is another thing to say that for exercising the inherent jurisdiction of this court it is impermissible also to look to the admitted documents. It was further observed criminal proceeding should not be encouraged when it is found to be mala-fide or otherwise an abuse of the process of the court. The Superior courts while exercising this power should also strive the ends of justice.

The prosecution, insofar as it was founded on alleged cheating, criminal breach of trust and wrongful retention of money, was held unsustainable and liable to be quashed.

Forgery in municipal sanction documents - Absence of nexus with initial inducement - allegations of forgery under sections 467, 468 and 471 IPC were not prima facie made out. - HELD THAT: - The Court found that the alleged forged documents were said to have been shown years after the payment had already been made, and therefore they could not constitute the basis of the initial deception for the transaction in question. It also noted that despite the complainant's earlier proceedings before the NCLT, there had been no allegation there of forged or fabricated documents, which made the later accusation appear to be an afterthought. On the material before the Court, no document was produced connecting the petitioners with the making of a false document, nor was there prima facie material to establish the requisite dishonest intention for the forgery-related offences. [Paras 35, 36]

The allegations of forgery and use of forged documents were held insufficient to sustain the criminal proceeding.

Effect of refusal to interfere with interim order - Final adjudication independent of interim stage - The Supreme Court's refusal to interfere with the interim protection order did not preclude the High Court from examining the quashing prayer on merits at the final stage. - HELD THAT: - The Court held that the earlier order of the Supreme Court was confined to the interim stage and merely declined interference with the High Court's interim arrangement while investigation was to proceed. Such an order did not amount to a final determination of the validity of the FIR.

The Apex Court in the case of Amaresh Tiwari Vs. Lalta Prasad Dubey and another [2000 (4) TMI 833 - SUPREME COURT], that it is settled law that interim orders even though they may have been confirmed by the higher courts never bind and do not prevent, passing of contrary order at the stage of final hearing.

Relying on the settled principle that interim orders do not bind the court at the stage of final hearing, the Court held that the quashing application remained open for full consideration on merits. [Paras 39, 40]

The objection founded on the Supreme Court's interim order was rejected, and the quashing application was held maintainable for final decision.

Final Conclusion: The High Court allowed the revision and quashed the criminal proceeding, holding that the FIR disclosed, at best, a contractual and monetary dispute later treated by the parties as a loan transaction, and that the forgery allegations were unsupported. The amount deposited pursuant to the interim order was directed to remain available for refund to the complainant on proper application.

Sale of corporate debtor as a going concern - Business plan in liquidation auction - Liquidation estate and assets of subsidiaries - Extension of time for payment of sale consideration - Forfeiture of earnest money and deposited sale consideration - Difference of opinion between Judicial Member and Technical Member, only with regards to the issue of forfeiture of a sum

Going concern sale - Business plan - Payment schedule - No recourse basis - As is where is basis - Estoppel - Forfeiture of earnest money deposit - Principles of natural justice - Whether submission of the business plan mandated as per the e-auction notice

Business plan in liquidation auction - Sale of corporate debtor as a going concern - Terms of e-auction document - HELD THAT: - Both Members treated the controversy as turning on the auction terms and the legal status of the so-called business plan. The Judicial Member held that the auction notice and bidding document were confined to sale of the corporate debtor alone, on an as is where is, as is what is, whatever there is and no recourse basis, and that neither the order fixing the payment schedule nor the later order constituted approval of a business plan enabling inclusion of assets of subsidiaries, joint ventures or associates. The Technical Member accepted that a business plan had in fact been submitted and acknowledged in the process, but held that no final consensus was ever reached between the bidder, liquidator and stakeholders except on payment scheduling, and that the Tribunal had not approved the business plan as such. On either line of reasoning, the appellant could not claim rights over third-party assets on the basis of the alleged business plan. [Paras 50, 51, 53, 58, 59]

The appellant's case that the business plan stood approved and governed the sale was rejected.

Liquidation estate and assets of subsidiaries - Assets of third parties - HELD THAT: - The Judicial Member held that Section 36(4)(d) excludes assets of Indian or foreign subsidiaries from the liquidation estate, and therefore such assets could not be brought within the auction by reference to the appellant's business plan or by reading the earlier orders as granting such approval. He further held that the auction documents themselves did not contemplate inclusion of assets of separate legal entities. The Technical Member did not enter into the larger question sought to be raised on the interplay of Section 36(4)(d) and Regulation 21A, observing that the bid itself had never matured into a finalized arrangement on that footing; nevertheless, he upheld rejection of the appellant's claim to third-party assets because the alleged business plan terms had never crystallised into an accepted contractual basis. Thus, the appellant's prayer to treat subsidiary or third-party secured assets as covered by the auction was not accepted. [Paras 52, 56, 58, 75, 76]

The claim that subsidiary or third-party assets formed part of the auctioned estate was declined.

Restraint against alienation of third-party assets - Absence of established threat of transfer - HELD THAT: - The Judicial Member held that, apart from the statutory exclusion of subsidiary assets from the liquidation estate and the absence of any approved business plan, the appellant had not established any specific overt act warranting a restraint order against the respondents. Relief could not be granted on mere apprehension. The Technical Member also saw no basis to interfere with the order rejecting protection of assets claimed under the unapproved business plan. Since the appellant had no enforceable right to those assets under the auction, the prayer for restraint necessarily failed. [Paras 34, 35, 36, 37, 43]

The refusal to restrain alienation of such assets was upheld.

Extension of time for payment of sale consideration - Finality of payment schedule - HELD THAT: - The Judicial Member held that the order fixing the payment schedule had attained finality and merely prescribed time for remittance of the balance sale consideration; it did not approve the business plan or create any enlarged rights. Having sought extension under that order, the appellant was bound by its terms and could not use later applications to re-open the basis of the sale. The Technical Member separately held that the Tribunal had already exercised discretion by extending the statutory payment period once and that refusal to extend it again could not be faulted, especially when the extension was sought on the footing of a dispute over third-party assets that was answered against the appellant. Both Members therefore upheld rejection of the applications seeking extension and amendment. [Paras 22, 23, 43, 45, 46]

The orders refusing further extension of time and amendment of the extension prayer were sustained.

Cancellation of bid for non-payment - Forfeiture of earnest money and deposited sale consideration - Difference of opinion - There was a difference of opinion on whether, after cancellation of the bid, the amounts deposited by the appellant could be forfeited. - HELD THAT: - The Judicial Member treated the appellant as bound by the auction terms and by the payment schedule accepted and left unchallenged, and held that the relief sought against cancellation and forfeiture stood effectively denied; on that reasoning, he found no merit in the appeals and dismissed them. The Technical Member agreed that cancellation of the bid was justified, but held that forfeiture was not. According to him, the bid process had remained fundamentally incomplete because the bidder's conditional business plan was never fully accepted, and the proper course, consistent with standard tender practice, was cancellation of the bid with refund of the deposited amount rather than forfeiture for non-performance of a concluded contract. As the Members differed only on forfeiture, the question was directed to be placed before the Chairperson for appropriate nomination on that limited issue. [Paras 46, 48, 79, 80, 81]

Cancellation of the bid was upheld by both Members, but the issue of forfeiture of the deposited amount was left unresolved in view of the split opinion and was referred on that limited question.

Final Conclusion: The Members concurred that the appellant could not enlarge the auction sale of the corporate debtor by relying on an alleged approved business plan, that subsidiary or other third-party assets were not shown to form part of the auctioned estate, and that the orders refusing restraint and refusing further time for payment called for no interference. They differed, however, on the legality of forfeiture of the amounts deposited after cancellation of the bid, and that limited question was directed to be placed before the Chairperson for appropriate nomination.

Consequential orders in liquidation proceedings - Claim arising out of the landlord-tenant relationship - Rights of successful auction purchaser - Challenged to the order directing handing over of possession pursuant to earlier liquidation directions - Successful auction purchaser - entitlement to be heard in the appeal concerning possession of the auctioned assets

Consequential orders in liquidation proceedings - Maintainability of appeal against compliance directions - HELD THAT: - The Appellate Tribunal held that the order under challenge merely continued and enforced the earlier orders directing delivery of possession, including the order that had already stood affirmed in appeal. Once the earlier directions for handing over possession had been passed and the appeal against the police-assistance order had been dismissed, the later order could not be treated as giving rise to an independent cause of action. The Tribunal further noted that possession of Asset No. 1 had already been taken pursuant to the subsequent proceedings, and therefore no surviving cause remained in favour of the appellant to separately assail the consequential order. [Paras 9, 14, 15, 16]

The appeal against the order of 29.09.2025 was dismissed as not tenable, the impugned order being purely consequential to the earlier orders for handing over possession.

Tenant-landlord disputes outside liquidation adjudication - HELD THAT: - The Tribunal rejected the submission that the tenant could resist compliance with the possession directions by asserting independent rights against the appellant as landlord. It held that inter se disputes between landlord and tenant could not be made the subject matter of consideration in liquidation proceedings against the corporate debtor. Any claim such as refund of security deposit or other tenant remedies had to be pursued before the appropriate legal forum in accordance with law. [Paras 10, 11]

The tenant was left to pursue independent remedies before the appropriate forum, and could not obstruct compliance with the possession directions in liquidation.

Rights of successful auction purchaser - Locus of successful auction purchaser in possession proceedings - HELD THAT: - The Tribunal held that, once declared the successful auction purchaser, the purchaser acquired rights that would be directly affected by proceedings relating to delivery of possession of the assets. The objection that the purchaser had no say because it was not originally a party to the proceedings was therefore misconceived. The Tribunal also noticed the adjudicating authority's observation that necessary parties, including the successful auction purchaser, could be impleaded, and recorded that the purchaser had in fact been impleaded in the appeal. [Paras 12, 13]

The objection to the participation of the successful auction purchaser was rejected, and its right to be heard in relation to possession of the assets was recognised.

Final Conclusion: The Appellate Tribunal dismissed the appeal, holding that the impugned order was only a consequential compliance order flowing from earlier possession directions already affirmed. It further held that tenant-landlord disputes could not be examined in liquidation proceedings and that the successful auction purchaser had a legitimate right to participate in the proceedings affecting possession of the assets.

Seeking grant of Bail under the PMLA - Satisfaction of the twin conditions under section 45 and Article 21 - Proceeds of Crime - Unduly long incarceration without trial - serious money-laundering case arising out of a large recruitment scam - Reasonable Grounds for Believing - Pre-cognizance Hearing - HELD THAT: - The Court held that, on merits, it was not in a position to record satisfaction that there were reasonable grounds for believing that the petitioner was not guilty or that he was not likely to commit an offence while on bail, and therefore the statutory bar under Section 45 could not be crossed. It nevertheless applied the principle that, in an appropriate case, unduly long incarceration without trial may outweigh the rigour of Section 45 when tested on the anvil of Article 21. In doing so, the Court weighed the seriousness of the allegations and the possibility of influence over witnesses against the mitigating factors, namely the petitioner's age and frail health, his comparatively lesser role than the principal accused, the delay on the part of the Enforcement Directorate in taking him into custody in the PMLA case, the fact that he had already obtained bail in the predicate case involving graver punishment after prolonged custody, the limited maximum sentence in the present case, and the possibility of further delay in commencement or progress of trial. On that cumulative assessment, continued detention was not justified and bail was directed subject to stringent conditions. [Paras 8, 9, 10, 11, 12]

Bail was allowed subject to conditions, notwithstanding non-fulfilment of Section 45 on merits, because prolonged incarceration and the mitigating circumstances were held sufficient to warrant release under Article 21 considerations.

Final Conclusion: The Court granted bail in the PMLA case subject to strict conditions. While holding that the petitioner could not surmount the statutory bar under Section 45 on merits, it found that the prolonged custody and overall mitigating circumstances justified release on Article 21 considerations.

Discharge under PMLA - Proceeds of Crime -Prima facie case of money-laundering from disproportionate assets - Reverse burden at charge stage - Scope of revisional interference against refusal of discharge - Refusal to discharge the petitioner in the PMLA prosecution - materials collected by the Enforcement Directorate disclosed a prima facie case of acquisition, possession, layering and projection of disproportionate assets as untainted property - HELD THAT: - The cumulative facts and findings clearly establish that the accused misused his official position to generate proceeds of crime and subsequently invested them in movable and immovable properties. The valuation of assets and scrutiny of accounts, insurance policies, deposits, and investments confirm his direct involvement in acquisition, possession, concealment, and projection of tainted money as untainted. Accordingly, there exists sufficient material to hold prima facie that the accused has committed the offence of money laundering under Section 3 of the PMLA, 2002.

The Hon’ble Apex Court in the case of Munna Devi v. State of Rajasthan and Another [2001 (11) TMI 1021 - SUPREME COURT], has observed that the revisional power under the Code of Criminal Procedure cannot be exercised in a routine and casual manner. While exercising such powers the High Court has no authority to appreciate the evidence in the manner as the trial and the appellate courts are required to do. Revisional powers could be exercised only when it is shown that there is a legal bar against the continuance of the criminal proceedings or the framing of charge or the facts as stated in the first information report even if they are taken at the face value and accepted in their entirety do not constitute the offence for which the accused has been charged.

Thus, it is evident that the revisional power can only be exercised to correct patent error of law or procedure which would occasion unfairness, if it is not corrected. The revisional power cannot be compared with the appellate power. A Revisional Court cannot undertake meticulous examination of the material on record as it is undertaken by the trial court or the appellate court. This power can only be exercised if there is any legal bar to the continuance of the proceedings or if the facts as stated in the charge-sheet are taken to be true on their face value and accepted in their entirety do not constitute the offence for which the accused has been charged.

The Court held that at the stage of discharge the court is confined to seeing whether the prosecution material, taken at face value, discloses the ingredients of the alleged offence, and it cannot conduct a mini trial or evaluate the accused's defence documents on merits. On the complaint and investigation materials, the scheduled offence case against the petitioner was subsisting; the assets found in the names of the petitioner and his family members, the routing of funds through multiple bank accounts, deposits, insurance policies and investments, and their use in acquisition of properties were sufficient to prima facie show involvement in processes connected with proceeds of crime within Section 3 of the PMLA. The Court further held that the petitioner's reliance on the closure report concerning his wife or on claims of agricultural, dairy and rental income could not justify discharge at this stage, since those matters were part of the defence to be tested at trial. Once foundational material showing prima facie generation and routing of tainted assets was available, the statutory presumption under Section 24 operated, and the petitioner could not seek to rebut it in revision through unverified defence material. Revisional jurisdiction being limited, no patent illegality or jurisdictional error was found in the Special Judge's order rejecting discharge. [Paras 110, 112, 115, 116, 117]

Sufficient prima facie material existed to proceed with the PMLA trial, and the criminal revision against rejection of discharge was dismissed.

Final Conclusion: The High Court held that the prosecution materials disclosed a prima facie case of money-laundering against the petitioner and that the Special Judge had rightly refused discharge. Finding no patent illegality warranting revisional interference, the criminal revision was dismissed, leaving all merits to be examined at trial.

Entitlement to bail on the ground of prolonged period spent in custody as under-trials, particularly having regard to the twin restrictions on the grant of bail, provided in Section 21(4) of MCOCA and Section 45 of PMLA - Organised Crime - Prolonged pre-trial incarceration - Article 21 vis-a-vis statutory bail restrictions - benefit of Section 479 BNSS in PMLA proceedings - Parity in money-laundering bail.

Article 21 vis-a-vis statutory bail restrictions - Constitutional limitation on special-statute bail embargo - The approach to bail where prolonged incarceration is invoked despite the restrictive bail conditions under MCOCA and PMLA was determined - HELD THAT: - The Court held that the petitioners' claim of prolonged pre-trial incarceration could not be excluded merely because the proceedings arose under special statutes containing stringent bail limitations. Until the apparent divergence in later Supreme Court decisions is authoritatively resolved, the proper course was to examine, on facts, the length of custody, the likely time for completion of trial, the sentence prescribed, the attribution of delay, and the prima facie nature of the accuseds' role.

The judgments in Sheikh Mehmood [2026 (6) TMI 393 - SUPREME COURT] and Balraj Singh [2026 (6) TMI 696 - SUPREME COURT] to the extent that they provide guidance on the proper approach in bail cases, do not, in my view, require a different approach from the one I propose to adopt. The Court, in Sheikh Mehmood, held that “bail is the rule and jail is an exception” is a cardinal principle of bail jurisprudence in India, but not an absolute rule. Mr. Jain emphasised that the Court has mandated consideration inter alia of statutory restrictions, which would include Section 21(4) MCOCA. While that is true, it bears notice that the Court has also delineated several other factors, including prima facie case, gravity of offence, nature of evidence, antecedents, differentiation of roles, parity, delay in conclusion of trial, age of the accused, medical grounds, etc. Balraj Singh stands on a somewhat different footing than the present case, as the Court found that the period of custody in that case was not such as to warrant interference in view of Article 21 of the Constitution. In the present case, however, the period of custody is close to five years, and the charges have just been framed. The petitioners’ Article 21 rights are therefore, clearly implicated.

As noted, the judgments of this Court granting bail to Pinky Irani [2023 (10) TMI 1504 - DELHI HIGH COURT], Sunil Kumar [2024 (4) TMI 1410 - DELHI HIGH COURT] and Avtar [2023 (11) TMI 1448 - DELHI HIGH COURT] in the State case, were carried in appeal to the Supreme Court. As the reasoning in those judgments has been set aside by the Supreme Court, and the State’s appeal in the case of Avtar was rendered infructuous by his demise, This court does not considered the ground of parity in the State cases at all, or relied upon the judgments of this Court in those cases. This judgment proceeds on an independent analysis on the merits of each case.

The Court therefore proceeded on the basis that constitutional protection of personal liberty remains relevant even where statutory restrictions apply, and that bail adjudication must retain an individualized assessment rather than treat the statutory embargo as conclusive. [Paras 22, 23, 24, 26]

The bail applications were to be decided by balancing Article 21 concerns with the statutory restrictions, on the facts of each petitioner's role and the progress of trial.

Prolonged pre-trial incarceration - Bail under MCOCA for facilitative role - Financial and logistical facilitation - In the State case under MCOCA, prolonged incarceration coupled with the petitioners' alleged facilitative role justified grant of bail. - HELD THAT: - The Court noted that both petitioners had undergone almost five years of custody, charges had not been formally framed by the last hearing, one further supplementary chargesheet was still expected, and the case involved numerous accused and witnesses, making early conclusion of trial unlikely. Although delay was not attributed solely to the prosecution, the Court found that the role attributed to Deepak and Pradeep was, at the highest, executory and facilitative in nature. Deepak was alleged to have collected and transmitted funds, arranged their movement through intermediaries and acted on Sukesh's instructions, without prima facie material showing autonomous strategic command or conceptualization of the foundational offence. Pradeep's role was found still narrower, being confined to collection of extorted amounts on instructions. On that footing, continued detention would assume a punitive character disproportionate to the limited role prima facie ascribed to them at the post-investigation stage. [Paras 28, 35]

Deepak and Pradeep were held entitled to bail in the MCOCA case.

Section 479 BNSS in PMLA proceedings - Parity in money-laundering bail - Prolonged incarceration under PMLA - In the PMLA case against Deepak, the custody undergone, the sentence structure, and parity with co-accused warranted bail notwithstanding the rigour of Section 45 PMLA - HELD THAT: - The Court found that Deepak had remained in custody for about four years and nine months in the PMLA case, against a maximum sentence of seven years, while charges had only recently been framed and the volume of witnesses and documents made early completion of trial improbable. It held that this incarceration crossed the threshold contemplated by Section 479 BNSS, and that the benefit of that provision extended to PMLA proceedings despite the twin conditions under Section 45. The Court further noted that most co-accused in the ECIR had already been enlarged on bail and that Deepak's alleged role, namely collection, transport and delivery of the proceeds of crime on behalf of the principal accused, could not be treated as standing on a graver footing than those co-accused. On both prolonged incarceration and parity, further pre-trial detention was held unjustified. [Paras 31, 32, 33, 34, 35]

Deepak was held entitled to bail in the PMLA proceedings as well.

Final Conclusion: The Court granted bail to Deepak and Pradeep in the MCOCA case on account of their prolonged custody and the prima facie facilitative nature of the roles attributed to them. Deepak was also granted bail in the PMLA case, the Court holding that the custody already undergone, the applicability of Section 479 BNSS, and parity with co-accused rendered further pre-trial detention unwarranted.

Review jurisdiction - Error apparent on the face of the record- benefit under the Sabka Biswas Scheme categorisation of tax dues - Reappreciation of merits - Limited scope of review - Monetary limit on litigation - Scope of Clause viii of Circular No. 1074/07/2019-CX dated 12th December, 2019 and Section 121 of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - HELD THAT: - The Court held that the review petition was, in substance, an attempt to reargue the matter on merits, which falls outside the limited scope of review jurisdiction. It further found that the Department itself had understood that the proper remedy against the earlier judgment, if aggrieved, was to pursue an appeal and not invoke review in the absence of the settled parameters for such exercise. On merits also, no error apparent on the face of the record was shown: on a prima facie consideration of clause viii of the Circular dated 12th December 2019 read with the definition of "amount in arrears" under Section 121 of the Scheme, the reference to expiry of the appeal period was taken to relate to an appeal by the declarant and not by the Department. Besides, since the Order-in-Original and the declaration were both made on the same date, it could not be accepted that the process of departmental review for deciding whether to file an appeal had already commenced by then. The Court also held that the observation about the departmental appeal being time-barred was not the basis of the original judgment and, even if that observation were excluded, the result would remain unchanged. [Paras 9, 10, 11, 12, 13]

No ground for review was made out, and the challenge to the grant of Scheme benefit failed.

Final Conclusion: The review petition was dismissed. The Court held that no patent or apparent error was shown in the earlier judgment granting the benefit of the Scheme, and the Department could not use review proceedings to reopen the merits.

Extended period of limitation - Reliance on Form 26AS for service tax demand - corroborative evidence of suppression - Suppression of facts - show cause notice and the demand of service tax - barred by limitation - HELD THAT: - The Tribunal found that the Department had called for documents and the assessee had furnished the audited balance sheets, Form 26AS statements and related records by letter dated 30.09.2019. The show cause notice, however, did not even advert to that disclosure and proceeded entirely on the basis of information gathered from the Income Tax Department. The Tribunal held that mere reliance on Form 26AS or income-tax data, without corroborative evidence of taxable services and without substantiating the allegation of suppression, could not justify invocation of the extended period. Since the Revenue had not corroborated suppression by any evidence, the confirmed demand was held to be hit by time-bar. [Paras 7, 8, 9]

The impugned order was set aside on limitation and the appeal was allowed with consequential relief according to law.

Final Conclusion: The Tribunal held that the confirmed service tax demand could not survive as the show cause notice invoked the extended period solely on the basis of Form 26AS data without corroborative evidence and despite prior disclosure of records by the assessee. The impugned order was therefore set aside as time-barred and the appeal was allowed.

Taxability of irrigation-related turnkey/EPC contracts under Works Contract Service -Applicability of Larger Bench precedent - Remand for fresh adjudication - HELD THAT: - The Tribunal noted that the controversy regarding levy of service tax on irrigation-related turnkey/EPC contracts under Works Contract Service stood covered by the Larger Bench decision in M/s Lanco Infratech Ltd & Ors Vs CC, CE & ST, Hyderabad [2015 (5) TMI 37 - CESTAT BANGALORE (LB)], which had examined contracts relating to canals, irrigation and turnkey/EPC projects. Since both sides were unable to state whether any further order had been passed by the Supreme Court in the Revenue's appeal against that Larger Bench ruling, the Tribunal held that the proper course was to remit the matter to the adjudicating authority to first ascertain that position and then decide the dispute in the light of the Larger Bench order and any order of the Supreme Court. [Paras 6, 7]

The impugned orders were set aside and the matters were remanded to the adjudicating authority for fresh decision after verifying the status of the appeal against the Larger Bench ruling.

Final Conclusion: The appeals were allowed by way of remand. The adjudicating authority was directed to first ascertain the status of the appeal against the Larger Bench decision and thereafter re-decide the taxability issue in accordance with that ruling and any order of the Supreme Court.

Service tax exemption on one-time upfront amount for long-term industrial lease - Water supply capital cost as upfront amount - Departmental consistency on identical issue - The one-time amount collected as 50% of the capital cost for water supply from allottees under the 99-year industrial lease arrangement was not exigible to service tax in the present proceedings. - HELD THAT: - The Tribunal found that the amount in dispute was an upfront fee collected from the allottee-lessee for setting up water supply infrastructure relating to the leased land, distinct from annual water charges based on consumption. It further noted that, pursuant to the earlier remand, the Principal Commissioner had subsequently examined the same issue, including the earlier show cause notice, and had dropped the demand by treating the water capital cost as a one-time amount forming part of the long-term lease and therefore covered by the exemption under Section 104. Since that departmental order on the identical issue had not been shown to have been challenged, the Department was held bound by its own decision [2018 (3) TMI 551 - CESTAT CHENNAI] and precluded from sustaining a contrary view for the present period. [Paras 4, 5]

The demand on the 50% water supply capital cost was unsustainable; the impugned order was liable to be set aside, and the consequential interest and penalty did not survive.

Final Conclusion: The Tribunal set aside the impugned order. It held that the water supply capital cost, being an upfront amount already treated by the Department itself as exempt on the same issue, could not be subjected to service tax for the period in dispute, and the interest and penalty consequently failed.

Service tax exemption for handling and transportation of fertilisers - Gypsum as fertiliser for exemption purposes - Renting of immovable property service and claim of reimbursement - Benefit of notification no. 5/2012- ST as amended by 3/2013-ST

Exemption for handling and transportation of fertilisers - Gypsum as fertiliser - HELD THAT: - The Tribunal held that, after the negative list regime, tax was payable on services unless covered by exemption, and examined the appellant's claim under the notification relating to transport of chemical fertiliser. It found that gypsum is a fertiliser supplying calcium and sulphur to plants, and is used directly in some conditions and crops as well as in manufacture of other fertilisers. The absence of gypsum from the Fertiliser Control Order, 1985 was held not to be determinative, since that order was issued under the Essential Commodities Act and did not exhaustively define every substance that could answer the description of fertiliser. On that reasoning, the exemption was held available to the appellant's service to that extent. [Paras 13, 15]

The demand relating to transportation or handling of gypsum was set aside and the penalty under section 78 was directed to be reduced proportionately.

Renting of immovable property service - Reimbursement claim without supporting documents - Amounts received under renting of immovable property service could not be excluded as mere reimbursements in the absence of supporting evidence. - HELD THAT: - The Tribunal noted the appellant's plea that no premises had in fact been rented and that the receipts were only reimbursements. It upheld rejection of that plea because no documents were produced either before the Commissioner (Appeals) or before the Tribunal to establish the reimbursement nature of the amounts received. In the absence of proof, the demand on this component was sustained. [Paras 14, 15]

The service tax demand on renting of immovable property service was upheld.

Final Conclusion: The appeal was partly allowed. The Tribunal deleted the demand insofar as it related to handling or transportation of gypsum by treating gypsum as fertiliser for the exemption, but sustained the demand on renting of immovable property service for want of proof that the receipts were mere reimbursements, and remitted the matter only for recalculation and consequential relief.

Purchase and sale of goods at trade discount - Trade discount vis-a-vis commission agency - Small service provider exemption - Exemption threshold under Notification No. 33/2012-ST - Principal-to-principal Transaction -

Trade discount vis-a-vis commission agency - Taxability of margin on purchase and sale of goods - HELD THAT: - The Tribunal held that a commission agent acts on behalf of the principal, merely connects buyer and seller, and neither pays for the goods nor obtains title to them. A buyer-trader, on the other hand, purchases and sells on its own account and earns a trade discount or trading margin. On the material recorded in the impugned order itself, the appellant had purchased goods from sellers at 14% discount and sold them to buyers at 13% discount, thereby retaining 1%. The existence of registered sellers and buyers, the pre-arranged nature of dealings, or the smallness of the margin did not convert the appellant into a commission agent. The amount treated as commission was therefore not liable to service tax as commission income. [Paras 6]

The demand of service tax on the amount treated as commission income was set aside.

Small service provider exemption - Threshold exemption on aggregate taxable services - After excluding the amount wrongly treated as commission income, the remaining value of taxable services for each of the three financial years was below the exemption threshold. - HELD THAT: - The Tribunal held that once the alleged commission income was excluded, the aggregate value of the remaining services, even if otherwise taxable, remained below Rs. 10,00,000 in each year. Since services below that threshold were undisputedly exempt under notification no. 33/2012-ST, the surviving demands could not be sustained. [Paras 7]

The appellant became entitled to threshold exemption for each year, and the impugned order was set aside.

Final Conclusion: The Tribunal held that the appellant was not acting as a commission agent and that the 1% retained by it was only trading margin. On that basis, the taxable value for each of the relevant financial years fell below the small service provider exemption threshold, and the impugned order was set aside with consequential relief.

Refund of tax collected under an ultra vires levy - Limitation for refund of service tax paid under mistake of law - Mutuality and non-taxability of incorporated members' clubs - Levy of service tax on services purportedly provided by incorporated clubs to their members had already been held ultra vires - HELD THAT: - The Court recorded that the levy of service tax on services purportedly provided by an incorporated club to its members had already been declared ultra vires in Sports Club of Gujarat Limited [2013 (7) TMI 510 - GUJARAT HIGH COURT], and that view stood confirmed by the Supreme Court in State of West Bengal Vs. Calcutta Club Limited [2019 (10) TMI 160 - SUPREME COURT (LB)], which held that from 2005 onwards the Finance Act, 1994 did not purport to levy service tax on members' clubs in incorporated form. On that basis, the collection of service tax from the petitioner was treated as without authority of law. The Court held that where tax is paid under mistake of law, and particularly where the levy itself is ultra vires, the refund claim cannot be defeated by applying the limitation under section 11B, since such rejection would run contrary to Article 265 of the Constitution. The order rejecting the claim for the relevant financial years solely on limitation was therefore unsustainable, and the matter had to be reconsidered on merits, including the claim for interest. [Paras 10, 11, 12, 13]

The rejection of refund for FYs 2009-10 to 2012-13 on the ground of limitation was quashed, and the matter was remanded for decision on merits in accordance with law, including interest.

Final Conclusion: The writ petition was allowed to the extent that the refund rejection for FYs 2009-10 to 2012-13, having been founded solely on limitation, was set aside. The respondents were directed to decide the refund claim on merits, including interest, in accordance with law.

Maintainability of successive quashing petition on subsequent change in circumstances - Criminal prosecution under Central Excise law after appellate adjudication on merits in favour of assessee - Contravention of Rule 8(3A) - Earlier petitions were dismissed as withdrawn and not on merits - criminal complaint under Sections 9 and 9AA - Fresh Cause of Action - Abuse of Process of Law - Simultaneous Civil and Criminal Proceedings - Substratum of Prosecution

Fresh cause of action - Withdrawal of earlier quashing petitions - The present quashing petition was maintainable notwithstanding withdrawal of two earlier petitions seeking the same relief. - HELD THAT: - The Court held that the earlier petitions had been dismissed as withdrawn and not on merits, and no adjudication of the controversy had then taken place. Since the appellate tribunal subsequently rendered a final order on merits in favour of the petitioners, holding that there was no contravention of the relevant rule and setting aside the demand, that subsequent adjudication constituted a material change in circumstances and gave rise to a fresh cause of action. [Paras 6]

The objection to maintainability was rejected.

Quashing of prosecution after collapse of adjudicatory basis - Abuse of process - HELD THAT: - Relying upon various judgments including Joseph P. Bangera versus State of Maharashtra [2005 (11) TMI 82 - SC ORDER] Jagan Nath Nagpal & Co. versus Assistant Collector of Central Excise [1993 (11) TMI 62 - HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH] and Bihariji Manufacturing Company Pvt. Ltd. versus Commissioner of Central Excise [2007 (2) TMI 225 - HIGH COURT OF DELHI] held that though adjudication proceedings and criminal prosecution may simultaneously continue, however criminal prosecution cannot be permitted to continue once the competent appellate authority decides the matter on merits in favour of the assessee and the very basis of prosecution disappears.

In the present case, the tribunal did not grant relief on a technical ground; it recorded a categorical finding that there was no contravention of Rule 8(3A), set aside the demand forming the basis of the complaint, and also noticed that the disputed amount with interest had been deposited before issuance of the show cause notice. The Court further noted that the complaint had been instituted despite concealment of the interim stay of the adjudication order. With the very substratum of the prosecution having ceased to exist, continuation of the criminal proceedings was held to be an abuse of process. [Paras 7, 8, 9, 10]

The complaint, the summoning order, and all consequential proceedings were quashed.

Final Conclusion: The High Court held that the petition was maintainable because the earlier withdrawals were not decisions on merits and the subsequent appellate order created a fresh cause of action. Since the tribunal had on merits held that there was no contravention and had set aside the very demand forming the basis of the complaint, the criminal prosecution was quashed as an abuse of process.

Cum-duty valuation for ad valorem OID Cess - Refund of excess cess paid on incorrect assessable value - Unjust enrichment in OID Cess refund - Rebuttal of presumption of passing on of duty incidence - Cum-duty concept - Levy of cess under Section 15 - Entitlement to refund of excess Oil Industry Development Cess paid on account of incorrect valuation - Appellant failed to establish that the incidence of duty had not been passed on, thereby attracting unjust enrichment

Whether the refund of OID Cess claimed by the Appellant is admissible on merits in terms of valuation under Section 4 of the Central Excise Act, 1944 read with Section 15 of the Oil Industry (Development) Act, 1974 and Notification dated 28.03.2016, in the context of the COSA with M/s. CPCL ? - HELD THAT: - The Tribunal held that once OID Cess became an ad valorem levy, valuation had to be determined under the principles of Section 4 of the Central Excise Act. Where the transaction price did not separately recover OID Cess and the pricing under the crude oil sale agreement was fixed independently of such cess, the sale price had to be treated as a cum-duty price and the duty element had to be backed out. The verification report itself recorded that cess had been paid at 20% on the sale price and that the excess arose from adoption of ex-duty value instead of cum-duty value. The agreement and invoices showed that the price charged to the buyer comprised only the agreed price components and VAT, without inclusion of OID Cess. The subsequent correction of methodology from June 2016 onwards supported the finding that the earlier payments were made under an erroneous valuation method. The Tribunal therefore accepted that the excess payment was a direct consequence of incorrect valuation and could not be retained by the Department. Reliance was also placed on the Larger Bench decision in the appellant's own case, M/s. Oil and Natural Gas Corporation Limited Versus The Commissioner of GST & Central Excise, TiruchirappalliI [2024 (6) TMI 1417 - CESTAT CHENNAI (LB)], on the evidentiary standard for establishing refund entitlement. [Paras 12, 13, 14, 16, 17]

The appellant established that excess OID Cess had been paid due to incorrect valuation, and the refund was admissible on merits subject to unjust enrichment.

Whether the refund claim is hit by the doctrine of unjust enrichment in terms of Section 11B read with Section 12B of the Central Excise Act, 1944 ? - HELD THAT: - The Tribunal held that the presumption under Section 12B is rebuttable and must yield to cogent evidence. The crude oil sale agreement was treated as the decisive document because its pricing mechanism was exhaustive and specifically identified the levies recoverable from the buyer; while VAT and certain other levies were expressly provided for, OID Cess was not included as a recoverable component. That contractual structure showed that OID Cess was to be borne by the seller. The invoices also did not show any OID Cess element and reflected only base price and VAT. This position was independently corroborated by the Chartered Accountant's certificate certifying that the cess burden had been borne by the appellant, and by the buyer's confirmation that no amount towards OID Cess had been paid by it. In the absence of any contrary evidence from the Department, the Tribunal held that the documentary record effectively rebutted the statutory presumption. It further held that thecum-duty conceptis a valuation principle and cannot, by itself, lead to an inference that the duty burden was passed on. [Paras 30, 31, 32, 33, 34]

The appellant successfully proved that the incidence of OID Cess had not been passed on to the buyer, and the refund was therefore not hit by unjust enrichment.

Final Conclusion: The Tribunal held that the appellant had paid excess OID Cess due to adoption of an incorrect assessable value instead of cum-duty valuation and had also rebutted the presumption of unjust enrichment through the contract, invoices, Chartered Accountant certification and buyer confirmation. The refund rejection was therefore set aside and the refund claim allowed with consequential relief in accordance with law.

Directors' liability for tax dues of company in liquidation- Attachment of the bank accounts - Preconditions for recovery under Section 24(5) of the AP VAT Act - Requirement to indicate gross negligence, misfeasance or breach of duty - Recovery of tax dues from directors of private company in liquidation - Exhaustion of recovery remedies - Natural justice - Lifting of corporate veil - HELD THAT: - The Court held that Section 24(5) permits recovery from directors of a private company in liquidation only when recovery from the company itself is not possible. The expression that tax cannot be recovered covers situations where recovery has become impossible either because no assets are available or because recovery stands barred, including by operation of the insolvency process; the authorities' own negligence in pursuing the claim does not take the case outside that expression. However, the further statutory condition concerning non-recovery being attributable to gross negligence, misfeasance or breach of duty on the part of the directors cannot be invoked mechanically. Though the directors bear the burden of disproving such conduct, the tax authorities must first place the foundational allegation before them by indicating the nature of the alleged gross negligence, misfeasance or breach of duty. Since the earlier notice did not disclose any such foundation, the subsequent bank attachment was not in accordance with Section 24(5). [Paras 9, 10, 11, 13, 14]

The bank attachments were set aside, with liberty to the authorities to proceed afresh for recovery from the directors only upon complying with Section 24(5) and giving them an opportunity to file objections.

Final Conclusion: The Court allowed the writ petitions and set aside the attachment of the petitioners' bank accounts. It held that recovery from directors of a company in liquidation cannot be sustained without prior compliance with the statutory conditions under Section 24(5), particularly disclosure of the basis on which gross negligence, misfeasance or breach of duty is alleged.

Continuation of arbitration proceedings against co-guarantors - interim moratorium in respect of debt - Natural justice in arbitral proceedings - Denial of Cross-examination of arbitral witness - Non-arbitrability of mortgage enforcement - arbitral findings on proof of claim, stamp duty, membership and discharge of guarantor called for interference under Section 34 - directions enforcing mortgage-related reliefs - Fundamental Policy of Indian Law - Principles of Natural Justice - Audi Alteram Partem - Patent Illegality - Right in Rem - Waiver of Surety's Rights

Interim moratorium in respect of debt - fundamental policy of Indian law - Continuation of the arbitration proceedings against the petitioners after interim moratorium had commenced on applications filed by other guarantors - HELD THAT: - In Tata Capital Ltd. vs. Geeta Passi and Anr [2024 (6) TMI 962 - BOMBAY HIGH COURT] the Petition therein challenged the order of Learned Arbitrator which had kept in abeyance the proceedings in view of the moratorium under Section 96 of IB Code. In the facts of that case, the Arbitrator stayed the arbitration proceedings against the proprietor and one of the guarantor. The other guarantors filed an application seeking indefinite stay in view of Section 96(1)(b)(i) of IB Code, which came to be allowed. This Court considered the statutory definition of “debt” under IB Code. It held that the expression “any person” used in defining “debt” would mean that no distinction can be drawn between principal borrower or guarantor. It further held that when Section 96 speaks of moratorium in respect of “any debt”, the same would mean the entire debt irrespective from whom it is due.

The Court held that the settled legal position under Section 96 of the Insolvency and Bankruptcy Code is that the interim moratorium operates in respect of the debt and not merely the individual debtor who has applied. Once the arbitrator accepted the moratorium and stayed the proceedings qua two guarantors, the same debt could not be pursued piecemeal against the remaining guarantors. The arbitral proceedings could not be split in that manner.

The continuation of the arbitration proceedings by the Learned Arbitrator against the Petitioners despite the interim moratorium imposed qua the debt constitutes grant of relief in respect of an presently unenforceable debt. It is settled that the expression “fundamental policy of Indian law” must amount to breach of some legal principle or legislation which is so basic to Indian law that it is not susceptible of being compromised. It refers to the principles and legislative policy on which Indian statutes and laws are founded and connotes the basic and substratal rationale, values and principles which form the bedrock of laws in our country.

By continuing the arbitration against the petitioners and making an award on a debt which had become temporarily unenforceable, the arbitrator disregarded binding judicial pronouncements and acted in violation of the fundamental policy of Indian law. [Paras 43, 44, 45, 46, 67]

The awards were liable to be set aside under Section 34(2)(b)(ii) on account of continuation of proceedings despite the statutory moratorium operating on the debt.

Natural justice in arbitral proceedings - Cross-examination of arbitral witness - Patent illegality based on no evidence - HELD THAT: - The Hon’ble Apex Court in the case of M/s. Narinder Singh and Sons vs. Union of India [2021 (11) TMI 1234 - SUPREME COURT] has held that the lack of full opportunity as envisaged by Section 18 of the Act impedes a fair and just decision and had consequently set aside the Award in terms of clause (iii) to Section 34(2)(a) as well as clause (ii) to Section 34(2)(b) of Arbitration Act.

The Court held that Sections 18 and 24 of the Arbitration and Conciliation Act require equal treatment of parties and full opportunity to present the case. Once the arbitrator permitted the bank to lead evidence, fairness required the opposite party to have the opportunity to cross-examine that witness, particularly when execution of the guarantee and allied documents was specifically denied and forgery was pleaded. The arbitrator wrongly proceeded on the basis that the petitioners had to prove their defence without allowing them to test the bank's evidence. As the findings that the bank's claim stood proved were founded on the bank's affidavit and documents, denial of cross-examination rendered the decision a violation of fair hearing and also patently illegal as being based on no evidence. [Paras 54, 55, 56, 57, 67]

The awards were liable to be set aside under Section 34(2)(a)(iii) and Section 34(2A) for denial of cross-examination and the resulting patent illegality.

Non-arbitrability of mortgage enforcement - Rights in rem - Directions in the awards permitting sale of mortgaged property and restraining creation of third-party rights were beyond arbitral competence. - HELD THAT: - The Court found that the operative directions declaring subsistence of the bank's charge, permitting disposal of mortgaged property for recovery, injuncting transfer, and directing attachment till sale amounted to enforcement of mortgage by sale. Such enforcement concerns a right in rem and, in view of Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. [2012 (10) TMI 459 - SUPREME COURT], falls for decision by courts of law and not by an arbitral tribunal. These directions could not be treated as merely ancillary reliefs. [Paras 64, 65]

The mortgage-enforcement directions in the awards were unsustainable as they related to a non-arbitrable dispute.

Limited scope of interference under Section 34 - Factual appraisal in arbitral challenge - Statutory arbitration disclosure challenge - HELD THAT: - The Court held that the arbitrator's conclusion on waiver and non-discharge of surety rested on construction of the guarantee terms, and revisiting that exercise would involve factual appraisal and merits review, which is impermissible under Section 34. The finding on stamp duty similarly depended on application of Section 4 of the Maharashtra Stamp Act and on factual inquiry as to the principal instrument, which could not be undertaken for the first time in the Section 34 proceedings. The finding that the petitioners were members of the bank was based on documentary evidence and could not be reopened by re-appreciation. As regards the challenge based on defective disclosure under Section 12, the Court held that in this statutory arbitration, and in light of the decisions considered by the arbitrator, no case was made out under Section 34 on that ground. [Paras 60, 61, 62, 63, 67]

These objections were not accepted as separate grounds to set aside the awards.

Final Conclusion: The Court set aside both arbitral awards. It held that the proceedings had been continued in the teeth of the interim moratorium operating on the debt, that denial of cross-examination violated natural justice and rendered the findings patently illegal, and that the directions for enforcement of mortgage were beyond arbitral competence.

Summary suit on acknowledged loan liability - Confirmation of accounts as written contract and acknowledgement - bona fide defence or triable issue - Leave to defend - sham and moonshine defence - Pendente lite and future interest in money decree - Entitlement to future interest at the claimed contractual rate or at any rate beyond the decree

Confirmation of accounts as written contract and acknowledgement - Maintainability of summary suit on acknowledged loan - Leave to defend - sham and moonshine defence - The signed confirmation of accounts recording the bank transfers as loan with interest constituted a written contract and acknowledgement sufficient to sustain a summary suit, and the defence that the transfers were only repayment of an earlier cash arrangement did not raise any triable issue. - HELD THAT: - Admittedly, the Plaintiff Company and the Defendant had a longstanding professional and personal relationship, since 2000. The Appellant/Defendant was not only a Chartered Accountant/Auditor for the Plaintiff Company, but had longstanding personal relationship.

The simple case of the Plaintiff was that on the request of the Defendant/Appellant for urgent need of Rs. 50 lakhs Rs.30 lakhs were transferred through the bank on 24.09.2018 and Rs.20 lakhs on 28.09.2018 to the bank account of the Defendant/Appellant; a fact which is not denied by the Defendant/Appellant.

The Court found it undisputed that the amounts were transferred through bank transactions to the defendant. The confirmation of accounts letter specifically recorded both transfers as loan transactions, mentioned the agreed interest at 15% per annum with quarterly compounding, reflected the interest entries, and was signed by both sides with the endorsement confirming the statement. On a fair reading, the document embodied the terms of the loan and amounted both to a written contract and to an acknowledgement of liability. The explanation that the defendant signed it only on assurance that it would not be acted upon was rejected as untenable. The defence that he had earlier arranged cash for the plaintiff and that the bank transfers were only refund of that amount was held to be unsupported, with no disclosed source or credible explanation, and therefore a sham and moonshine defence not entitling him to leave to defend. [Paras 54, 55, 57, 59, 60]

The dismissal of the leave to defend application and the decree in the plaintiff's favour were upheld, and the defendant's appeal was dismissed.

Pendente lite interest in summary suit - Future interest under Section 34 CPC - Discretion in award of post-suit interest - HELD THAT: - In the case of Clariant International Limited and another. Vs Securities & Exchange Board of India [2004 (8) TMI 390 - SUPREME COURT], it was held that interest can be awarded in terms of an Agreement or statutory provisions. It can also be awarded by reason of usage or trade having the force of law or on equitable considerations. Interest cannot be awarded by way of damages, except in cases where money due, is wrongfully withheld and there are equitable grounds thereof, for which a written demand is mandatory. In the absence of any agreement or statutory provision or a mercantile usage, interest payable can be only at the market rate. Such interest is payable upon establishment of totality of circumstances, justifying the exercise of such equitable jurisdiction. This judgment was endorsed in Rampur Fertiliser Limited vs. Vigyan Chemicals Industries [2009 (2) TMI 694 - SUPREME COURT].

The Court held that under Order 37 Rule 2(3) CPC the plaintiff in a summary suit is entitled to the specified rate of interest up to the date of decree. Thereafter, Section 34 CPC governs the matter, under which pendente lite and future interest are discretionary and must be awarded fairly and not arbitrarily. Since the trial court had already granted pre-suit interest at the agreed rate and had reduced pendente lite interest to 9% simple interest in exercise of discretion, and there was nothing to show that such exercise was arbitrary or contrary to commercial norms, no interference was warranted on that part. However, as no reason had been given for denying future interest altogether, the plaintiff was held entitled to future interest under Section 34 CPC at 9% simple interest per annum from the date of decree till payment. [Paras 66, 67, 71, 72, 73]

The plaintiff's appeal was partly allowed by modifying the decree to grant future interest at 9% simple interest per annum from the date of decree till payment, while maintaining pendente lite interest at 9% simple interest.

Final Conclusion: The defendant's appeal against refusal of leave to defend failed, the Court holding that the signed confirmation of accounts furnished a written contractual acknowledgement of the loan and that the defence set up was sham. The plaintiff's appeal succeeded only in part, by addition of future interest at 9% simple interest per annum from the date of decree till payment, while the reduced pendente lite interest was maintained.

Dishonour of Cheque - Compounding of offence under Section 138 of the Negotiable Instruments Act - Proceedings arising from commercial transactions - Inherent jurisdiction under Section 528to quash criminal proceedings on compromise - Modification of the sentence already imposed - Principles for exercise of inherent jurisdiction - Voluntary compromise between the parties - Abuse of process of law - HELD THAT: - Section 528 BNSS confers inherent jurisdiction upon this Court to secure the ends of justice and to prevent abuse of the process of law. However, such extra-ordinary power is required to be exercised sparingly, and with circumspection, and can be invoked where continuation of criminal proceedings would serve no useful purpose and would merely result in unnecessary prolongation of litigation despite settlement between the parties.

Hon’ble Supreme Court in K. Bharthi Devi v. State of Telangana [2024 (10) TMI 212 - SUPREME COURT], has observed that the guiding principles for exercise of inherent jurisdiction are whether such exercise would secure the ends of justice or prevent abuse of the process of Court. It was further held that criminal proceedings arising out of commercial, financial, mercantile, civil or matrimonial disputes, where the wrong is essentially private or personal in nature, stand on a different footing and may appropriately be quashed where the parties have genuinely resolved their disputes. The Hon’ble Court further emphasized that in such matters, continuation of criminal proceedings despite settlement would amount to unnecessary oppression and injustice.

The Court held that offences under the Negotiable Instruments Act are compoundable by virtue of Section 147, and that proceedings under Section 138, though carrying criminal consequences, are essentially rooted in a compensatory commercial liability. On the material placed before it, the Court found that the parties had voluntarily settled the dispute, the complainant had received the entire amount in full and final satisfaction, and the execution proceedings had also been withdrawn. In those circumstances, the substratum of the dispute no longer survived, there was no indication of coercion or fraud in the settlement, and continuation of the conviction and further proceedings would serve no useful purpose. Applying the principles governing exercise of inherent jurisdiction, the Court concluded that bringing the proceedings to a close would secure the ends of justice and prevent abuse of process. Since the petitioner had also sought limited relief regarding sentence, the sentence order was modified to the period already undergone. [Paras 12, 13, 14, 15, 16]

The offence under Section 138 of the Negotiable Instruments Act was compounded, the petition was partly allowed, and the sentence was modified to the sentence already undergone.

Final Conclusion: The Court accepted the compromise between the parties in the cheque dishonour case, compounded the offence under Section 138 of the Negotiable Instruments Act, and exercised inherent jurisdiction to terminate the surviving criminal consequences. The sentence was modified to the period already undergone and release of the petitioner was directed.

Bail under MCOCA - Prolonged pre-trial incarceration - Article 21 and statutory bail restrictions - Parity with co-accused - Satisfaction of Twin conditions for bail - stringent conditions under Section 21(4) - Entitlement to bail on parity with co-accused - Prima facie satisfaction - Organised crime syndicate - Accused-specific inquiry

Prolonged pre-trial incarceration - Article 21 and statutory bail restrictions - Twin conditions for bail under MCOCA - Prolonged custody of the petitioner, despite non-framing of charges, did not by itself justify bail in a prosecution under MCOCA. - HELD THAT: - The Court held that, although custody of about four and a half years without framing of charges was substantial, the constitutional plea founded on delay had to be examined in a structured manner along with the statutory rigour of Section 21(4) of MCOCA. Adopting the approach stated in decisions under UAPA and applying it to the stricter MCOCA regime, the Court held that delay is a relevant consideration but not a stand-alone ground, and must be assessed with reference to the nature of the offence, the prima facie material, the trajectory of the proceedings, the causes contributing to delay, and the role attributed to the accused. On facts, the Court found that the delay could not be attributed solely to prosecutorial or judicial inaction, as repeated adjournments had also been taken on behalf of the accused, and the case was inherently complex owing to the number of accused, witnesses and supplementary charge-sheets. The Court further held that the petitioner could not derive assistance from a possible remission claim at this stage, as the offence under MCOCA carries a sentence extending to life imprisonment. Having regard to the prima facie findings already recorded in the earlier bail judgment that the petitioner was actively coordinating the syndicate, handling proceeds of crime, and facilitating use of the mobile phone and the so-called Silent Calling App allegedly central to the extortion, the Court concluded that her attributed role was pivotal and that the material did not satisfy the statutory requirement for bail. [Paras 38, 39, 40, 41, 42]

Bail was refused on the ground of delay, the Court holding that continued custody had not become constitutionally unjustifiable in the facts of the case.

Parity with co-accused - Distinct role in organised crime syndicate - HELD THAT: - The Court held that parity was unavailable because the co-accused who had obtained bail stood on materially different footing. Their roles were found to be limited and distinct, such as facilitation through hawala channels, salaried assistance, arranging meetings, or jail-related acts, whereas the petitioner was attributed the role of co-leader of the organised crime syndicate, coordinating its affairs during the principal accused's incarceration. In view of the prima facie material already noticed against her, the Court found her case incomparable with that of the released co-accused. As regards one co-accused, the Court also noted that the Supreme Court had directed that the order granting bail was not to be cited as a precedent. [Paras 44, 46, 47]

The plea of parity was rejected.

Final Conclusion: The Court declined regular bail to the petitioner. It held that, despite substantial custody, the statutory restrictions under MCOCA were not displaced on the facts, and neither delay in the proceedings nor parity with co-accused justified release.