TMI Tax Updates e-Newsletter
Jun 17,2026

Saving of service tax proceedings after repeal- Jurisdiction to issue show cause notice under repealed service tax law - Show cause notice issued under Section 73(1) of the Finance Act, 1994 after omission of the service tax provisions - HELD THAT: - Following Sahitya Mudranalaya Pvt. Ltd. [2020 (3) TMI 154 - GUJARAT HIGH COURT], the Court held that though Chapter V of the Finance Act, 1994 stood omitted by Section 173 of the CGST Act, clause (e) of Section 174(2) expressly saves investigation, inquiry, assessment, adjudication and other legal proceedings and permits their institution, continuation and enforcement as if the earlier law had not been amended or repealed. On that construction, the respondent-authorities continued to possess authority to initiate and pursue proceedings under the Finance Act, 1994, and the challenge founded on repeal was untenable. [Paras 5, 6, 7]

The writ challenge to the show cause notice was rejected and the petitioner was relegated to the adjudication proceedings, to be completed independently in accordance with law.

Final Conclusion: The writ petition challenging the service tax show cause notice on the ground of repeal of the Finance Act, 1994 provisions was dismissed. The Court held that the saving provision in Section 174(2)(e) of the CGST Act preserved the authority to institute and continue such proceedings, and directed that adjudication proceed independently in accordance with law.

GST registration cancellation for non-filing of returns - Restoration of registration on filing pending returns and payment of dues - Proviso to Rule 22(4) of the CGST Rules - Principles of natural justice - Proper application for restoration -HELD THAT: - The Court held that Rule 22, particularly sub-rule (4), contemplates dropping of cancellation proceedings where the person served with notice for non-filing under Section 29(2)(c) furnishes all pending returns and makes full payment of the tax dues along with applicable interest and late fee. Since cancellation of registration for non-filing of returns has serious civil consequences, and the proper officer is vested with authority to drop the proceedings in such circumstances, the petitioner was permitted to approach the competent authority by proper application for restoration. The authority was directed to consider the application in accordance with law if the petitioner complied with the requirements of the proviso to Rule 22(4). [Paras 10, 11, 12]

The petitioner was allowed to seek restoration of registration by filing the requisite application and, on compliance with the proviso to Rule 22(4), the CGST authorities were directed to consider restoration in accordance with law.

Final Conclusion: The writ petition was disposed of by permitting the petitioner to apply for restoration of GST registration. If all pending returns are furnished and the dues with applicable interest and late fee are paid, the competent authority must consider restoration in accordance with Rule 22(4) of the CGST Rules, 2017.

Validity of Service of GST notices after cancellation of registration - Upload on GST portal as mode of service - insufficient service - alternative modes of service -Violation of natural justice in assessment proceedings - HELD THAT: - The Court accepted the course suggested on the basis of its earlier judgment [2026 (2) TMI 995 - UTTARAKHAND HIGH COURT], wherein it had been held that after cancellation of GST registration, service has to be effected through one of the alternative modes provided under Section 169 of the Uttarakhand GST Act and mere uploading of notices on the GST portal is not sufficient. Proceeding on that basis, the writ petitions were disposed of in terms of the said judgment. The Court nevertheless preserved liberty to the competent authority to continue the matter afresh from the stage of show cause notice. [Paras 7]

The writ petitions were disposed of in terms of the earlier judgment, with liberty to the competent authority to proceed from the stage of show cause notice.

Final Conclusion: The Court disposed of the writ petitions by applying its earlier view that, after cancellation of GST registration, mere uploading of notices on the GST portal is not sufficient service. The competent authority was left free to recommence proceedings from the show cause notice stage.

Governmental Authority - Tripartite contractual arrangement - Exemption for services relating to municipal water supply functions - Article 243W municipal functions - Services by governmental authority - Maintainability of advance ruling on inter-party supply characterization - Scope of Section 97(2) - Pure agent exclusion from value of supply - Pass-through payments to contractor - Applicability of exemption under Notification No. 12/2017-Central Tax (Rate) - valuation implications under Rule 33 - implementation of an ESCO-based energy efficiency project under the Smart Cities Mission

Whether Dehradun Smart City Limited (“DSCL”) : qualifies as a “Governmental Authority” as per the Explanation to notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 32/2017-Central Tax (Rate) dated 13.10.2017 ? - HELD THAT: - The Authority held that though DSCL was not set up by an Act of Parliament or State Legislature, it was established by the Government of Uttarakhand as a special purpose vehicle under the Smart Cities Mission. Its entire equity participation was held through Mussoorie Dehradun Development Authority and Nagar Nigam Dehradun, each holding fifty per cent shareholding, thereby satisfying the requirement of ninety per cent or more Government participation by way of equity or control. Since DSCL was established for implementation of functions entrusted to urban local bodies, it fulfilled the conditions in the definition of Governmental Authority under the notification. [Paras 8]

DSCL was held to be a Governmental Authority within the meaning of the notification.

Whether the services provided by DSCL in relation to execution of smart city/ESCO projects to Uttarakhand Jal Sansthan (“UJS”) viz Service Recipient, in respect of functions entrusted to a Municipality under article 243W read with the Twelfth Schedule of The Constitution of India, qualify for exemption under Serial No. 4 of Notification No. 12/2017-Central Tax (Rate) as amended by Notification No. 14/2018-Central Tax (Rate)? - HELD THAT: - Having first found that DSCL is a Governmental Authority, the Authority examined Serial No. 4, which exempts services by a governmental authority by way of any activity in relation to any function entrusted to a municipality under Article 243W. It held that the activities undertaken by DSCL under the project relate to water supply, which is expressly one of the functions in the Twelfth Schedule. The objection raised by the State GST officer with reference to Serial No. 3 and the concept of pure services was not examined, since no ruling had been sought on that question. On the questions actually raised, the services supplied by DSCL to UJS were held to fall within Serial No. 4. [Paras 8]

The services rendered by DSCL to UJS in relation to the Smart City/ESCO project were held exempt under Serial No. 4.

Whether the arrangement under the Tripartite Agreement results in two distinct supplies of services, viz. (a) supervisory/financial-agency services by DSCL to UJS and (b) implementation-cum-O&M services by M/s GCKC Projects and Works Private Limited (the “Contractor”) to UJS ? - HELD THAT: - The Authority held that the applicant had sought ruling only with reference to the categories selected under Section 97(2), namely applicability of notification, determination of time and value of supply, and whether an activity amounts to supply. The question whether the tripartite agreement gave rise to two distinct supplies between different parties did not fall within those selected categories. It also concerned the contractual arrangement between UJS and the contractor, who were separate entities. The Authority therefore declined to examine the merits of that question. [Paras 8]

The question on two distinct supplies under the tripartite agreement was held not maintainable, and no finding on merits was recorded.

Whether DSCL, in respect of the amounts received from UJS for remittance to the Contractor without any markup, deduction or value addition, acts as a “pure agent of the recipient of supply” under Rule 33 of the CGST Rules / UKGST Rules 2017, so that such amounts do not form part of the value of the taxable supply by DSCL to UJS, under section 15 of CGST/SGST Acts 2017? - HELD THAT: - The Authority found from the tripartite agreement that DSCL was not merely a conduit for payment but an active and integral participant in execution, supervision, financial management and implementation of the project. The contractor was engaged under a contractual framework to which DSCL itself was a principal party, and DSCL also exercised monitoring, evaluation and supervisory functions over the contractor's performance. The arrangement was therefore an integrated contractual framework under which DSCL retained a specified portion of savings and administered distribution of the balance. In that setting, the payments to the contractor were linked to DSCL's own obligations and could not be treated as mere reimbursement incurred on behalf of UJS. The essential conditions of Rule 33 were accordingly held not satisfied. [Paras 8]

DSCL was held not to be a pure agent, and the amounts received and disbursed formed part of the consideration for its supply.

Final Conclusion: The Authority held that DSCL is a Governmental Authority and that its services to Uttarakhand Jal Sansthan in relation to the Smart City/ESCO water supply project are exempt under Serial No. 4 of Notification No. 12/2017-Central Tax (Rate), as amended. The question on existence of two distinct supplies under the tripartite agreement was held not maintainable, and DSCL was further held not to be a pure agent for exclusion of the contractor's share from the value of supply.

Reopening of assessment - change of opinion - Reassessment based on material disclosed in original assessment - reassessment founded on the claim of net loss on foreign currency transactions and the provision for warranty

HELD THAT: - The Court found that the financial statements, including Note 29 and paragraph 2.10 relating to foreign currency transactions and derivatives, had been enclosed with the original return, and that the assessing officer had specifically called for details of large expenses under notice u/s 142(1). Those details were furnished by the assessee before completion of the original assessment, after which no disallowance was made on the foreign currency loss claim.

As regards provision for warranty, the original assessment order had expressly dealt with that issue. The reasons recorded for reopening were thus drawn from material already available on record and from an issue earlier raised and answered in the original proceedings. Reopening in such circumstances was held to be nothing but a review of the earlier assessment on a change of opinion, which is impermissible. [Paras 7, 8, 9]

The reassessment and the preceding notices and orders were set aside as an impermissible reopening on change of opinion.

Final Conclusion: The Court allowed the writ petition and set aside the reassessment proceedings. It held that the assessment had been reopened solely on the basis of material already disclosed and considered in the original assessment, rendering the reopening invalid as a change of opinion.

Reassessment u/s 147 - Reopening on depreciation claim in eligible infrastructure business - Escapement of income under MAT regime - Change of opinion on material already scrutinised - Reopening of assessment on the ground that the assessee had claimed lower depreciation instead of a higher admissible rate, thereby affecting deduction from eligible infrastructure business profits

HELD THAT: - The Court held that the assessee's business was admittedly eligible for 100% deduction on profits from the infrastructure facility, and that if depreciation were recomputed at the higher rate, the business income under the normal provisions would only stand reduced correspondingly. Since the assessee had already been taxed on book profit u/s 115JB and it was not the Revenue's case that the depreciation claim affected the profit and loss account or the computation of book profit, the alleged error in depreciation had no bearing on tax liability.

On these undisputed facts, the foundational requirement of escapement of income chargeable to tax was absent. The Court further held that all depreciation particulars were already before the AO in the original scrutiny assessment, and the subsequent reopening on the same material amounted to a mere change of opinion.

In applying the principle in Moto Tiles (P.) Ltd. [2016 (6) TMI 381 - GUJARAT HIGH COURT] which had followed India Gelatine and Chemicals Ltd. [2015 (2) TMI 808 - GUJARAT HIGH COURT] the Court held that where even the proposed adjustment would leave the assessee assessable on the same book profit under section 115JB, there was no sufficient basis to form the belief that income chargeable to tax had escaped assessment. [Paras 10, 11, 12, 14, 15]

The notice and order initiating reassessment were quashed, the Court holding that section 147 was not attracted and that the reopening was based only on a change of opinion.

Final Conclusion: The High Court held that, on the admitted facts, no income chargeable to tax had escaped assessment since recomputation of depreciation would not alter the assessee's tax position u/s 115JB. The reassessment proceedings were therefore held to be without jurisdiction and the impugned notice and order were quashed.

Denial of approval u/s 80G(5) - some of the objects of the assessee trust are against provisions of section 80G(5)(ii) and explanation 3 to section 80G - objects of the trust are religious in nature - Religious expenditure below five per cent of total income

HELD THAT: - The Court accepted the Tribunal's view that the determinative consideration was the application of the provision treating an institution as eligible where expenditure of a religious nature does not exceed five per cent of its total income in the previous year. Since the Revenue was unable to dispute the factual figures showing that the trust's religious expenditure during the relevant financial years remained below that limit, the Tribunal was justified in granting approval on that statutory basis. [Paras 5, 6]

The proposed question of law was not entertained, and the grant of approval to the trust was allowed to stand.

Final Conclusion: The appeal was dismissed. The Court held that, on the undisputed facts showing religious expenditure below five per cent of total income, denial of approval was not justified.

Penalty u/ss 271D and 271E - Cash transactions between close family members - Meaning of loans or deposits under sections 269SS and 269T - Family transactions and loans or deposits

Whether Cash amounts received from and repaid to close family members and related family entities constitute loans or deposits so as to attract sections 269SS and 269T and the consequential penalties u/ss 271D and 271E? - HELD THAT: - The Tribunal found that the receipts and repayments in question were between the assessee and close family members or related family entities, and that this relationship was not disputed by the Revenue.

Applying the ratio of Dr. Rajaram L. Akhani [2016 (6) TMI 1051 - GUJARAT HIGH COURT] it held that such intra-family transactions could not be regarded as loans or deposits within the meaning of sections 269SS and 269T. On that basis, the very foundation for levy of penalty under sections 271D and 271E failed, and the penalties were therefore unsustainable. [Paras 7, 10, 11]

Both penalties were directed to be deleted.

Final Conclusion: The Tribunal allowed both appeals and deleted the penalties imposed for cash acceptance and cash repayment, holding that the impugned transactions between close family members were not loans or deposits within the meaning of sections 269SS and 269T.

Exemption u/s 54F - Purchase of residential property through agreement to sell - Non-registration of sale deed within stipulated period - Utilisation of capital gains - Possession and substantial payment

Assessee's claim of exemption for investment in a new residential property denied merely because the registered sale deed was executed much later - HELD THAT: - The Tribunal found that the agreement to sell showed payment of a substantial advance towards purchase of the property, and the later registered sale deed expressly acknowledged that payment, referred to the earlier agreement, and recorded that registration had been delayed because the property was mortgaged and the requisite bank NOC had not been obtained in time. It also noted that possession had been handed over under the agreement.

Following DCIT vs. Kruti Lalitkumar Jain [2025 (1) TMI 29 - ITAT PUNE] the Tribunal applied the principle that for purposes of relief u/s 54F, the decisive factor is the assessee's investment and commitment of the capital gains in purchase of the residential property within the stipulated period, and not the mere postponement of formal registration of the sale deed. [Paras 12, 13, 14]

The assessee was held entitled to exemption under section 54F, and the appellate order denying the claim was set aside.

Final Conclusion: The Tribunal held that the assessee's investment in the new residential property satisfied the requirements of section 54F notwithstanding the later execution of the registered sale deed, since substantial payment had been made and the earlier agreement stood reflected in the final conveyance. The denial of exemption was therefore set aside and the appeal was allowed.

Penalty u/s. 271(1)(c) for concealment of income - Debatable taxability of capital gains under development agreement

Validity of Penalty for non-disclosure of short-term capital gains arising from a development agreement when the year of taxability of such transfer was debatable at the relevant time - HELD THAT: - The Tribunal held that, although the quantum addition had been sustained, that by itself did not establish concealment for purposes of penalty. On the legal position prevailing when the return was filed, the question whether capital gains under a development agreement became taxable on execution of the agreement, on performance by the developer, or on completion and handing over of the constructed property, was not free from doubt and depended on the facts and terms of the agreement.

Since the issue of transfer and the corresponding year of taxability was highly debatable at the relevant time, non-offering of the gain in the return could not be treated as concealment of particulars of income. The penalty had therefore been levied without proper appreciation of the legal uncertainty surrounding the issue. [Paras 10]

The penalty under section 271(1)(c) was directed to be deleted.

Final Conclusion: The Tribunal allowed the appeal and deleted the penalty. It held that, notwithstanding confirmation of the quantum addition, penalty for concealment could not be sustained because the year of taxability of capital gains arising from the development agreement was a highly debatable issue at the relevant time.

Reassessment limitation under first proviso to section 149 - Validity of notice under section 148 - Assumption of jurisdiction for reassessment

HELD THAT: - The Tribunal found that, under the pre-amended section 149(1)(b), notice for AY 2015-16 could have been issued only up to 31/03/2022, whereas the impugned notice was issued on 08/04/2022.

Applying the first proviso to section 149 as introduced by the Finance Act, 2021, it held that where a notice could not have been issued under the old regime on account of expiry of limitation, such notice could not be issued thereafter under the new regime. It further held that the exclusion and extension contemplated by the fifth and sixth provisos could not be read into the first proviso so as to enlarge the restriction preserved for past assessment years. Following Cyberabad Citizens Health Services Private Limited [2025 (11) TMI 1967 - TELANGANA HIGH COURT] Tribunal concluded that the notice was time-barred and the consequential reassessment order lacked valid jurisdiction. [Paras 9, 10, 11, 12]

The notice under section 148 being barred by limitation, the reassessment order was quashed for want of valid assumption of jurisdiction; the remaining grounds were left open.

Final Conclusion: The Tribunal held that the notice issued under section 148 for AY 2015-16 was time-barred under the first proviso to section 149 and, therefore, the reassessment made pursuant thereto was without jurisdiction. The assessment order was accordingly quashed and the other grounds were left open.

Reassessment notice limitation under the first proviso to section 149 - Time-barred reassessment notice -Validity of notice u/s 148 for past assessment years - Jurisdiction for reassessment founded on a time-barred notice - Exclusion of time under fifth and sixth provisos

HELD THAT: - The Tribunal held that, under the unamended section 149(1)(b), a notice for AY 2015-16 could have been issued only up to 31/03/2022. Since the impugned notice under section 148 was issued on 06/04/2022, it fell beyond the time limit preserved by the first proviso to section 149 as introduced by the Finance Act, 2021.

Following Cyberabad Citizens Health Services Private Limited [2025 (11) TMI 1967 - TELANGANA HIGH COURT] the Tribunal further held that the exclusion contemplated in the fifth proviso, and the consequential extension contemplated in the sixth proviso, operate only for computing limitation under the amended substantive regime and cannot be invoked to enlarge the restrictive bar contained in the first proviso for earlier assessment years. Once the notice itself was time-barred, the reassessment proceedings lacked a valid assumption of jurisdiction. [Paras 7, 8, 9, 10]

The notice under section 148 and the consequential assessment order were quashed; all other grounds were left open.

Final Conclusion: The Tribunal allowed the appeal by holding that the notice under section 148 for AY 2015-16 was barred by limitation under the first proviso to section 149 and therefore could not sustain the reassessment. The consequential assessment order was quashed for want of valid jurisdiction, with the remaining grounds left open.

Assessee in default for non-deduction of tax on leave fare concession - Binding effect of interim judicial directions on tax deduction at source - Penalty u/s 271C for failure to deduct tax at source - Reasonable cause

Assessee in default for non-deduction of tax on leave fare concession - Binding effect of interim judicial directions on tax deduction at source - HELD THAT: - The Tribunal held that, although the legal position on exemption for leave fare concession involving a foreign leg stood concluded against the employees on merits, that was not decisive of the present controversy. The determinative question was whether, during the relevant period, the assessee had a subsisting legal obligation to deduct tax when it was acting under binding interim directions of the Madras High Court that the payments would not amount to income so as to enable deduction of tax at source. Following its co-ordinate Bench decision in State Bank of India, Bhavnagar Vs. ITO [2026 (3) TMI 1568 - ITAT AHMEDABAD] and the Kerala High Court decision in State Bank of India [2025 (11) TMI 1773 - KERALA HIGH COURT] the Tribunal held that the statutory obligation to deduct tax could not be enforced in disregard of a binding judicial order, and non-deduction in obedience to such order could not be treated as a default under section 201(1). The later Supreme Court ruling settling the substantive taxability issue could not retrospectively fasten default liability for the period during which the assessee was bound by those interim directions. [Paras 10, 11, 20, 24]

The demands raised under section 201(1) and section 201(1A) for the relevant assessment years were deleted, and the assessee was held not to be an assessee in default in respect of the impugned leave fare concession payments.

Penalty u/s 271C for failure to deduct tax from leave fare concession payments - Reasonable cause -HELD THAT: - The Tribunal held that once the very demand treating the assessee as in default for non-deduction of tax was deleted, the consequential penalty levied under section 271C read with section 201(1) could not survive. The penalty was therefore unsustainable on that basis. [Paras 15]

The penalty levied under section 271C was deleted.

Final Conclusion: The Tribunal allowed all four appeals. It held that the assessee could not be treated as an assessee in default for non-deduction of tax on the impugned leave fare concession payments made during the subsistence of binding interim judicial directions, and consequently the related penalty also stood deleted.

Penalty for under-reporting or misreporting of income - Specific charge under section 270A - Non-application of mind in penalty initiation - non specification of exact limb for under-reporting or misreporting of income - HELD THAT: - The Tribunal held that the determinative defect in the penalty proceedings was the absence of a specific finding as to whether the penalty was being imposed for under-reporting or for misreporting of income u/s 270A.

Referring to the decisions cited by the assessee and respectfully following them like Prem Brothers Infrastructure LLP [2022 (6) TMI 130 - DELHI HIGH COURT], Schneider Electric South East Asia (HQ) Pte. Ltd. [2022 (3) TMI 1295 - DELHI HIGH COURT], Manish Manohardas Asrani [2024 (11) TMI 811 - ITAT MUMBAI] and Sunil Chunilal Kumavat [2024 (3) TMI 1121 - ITAT PUNE] it held that where the precise statutory limb is not specified, the penalty becomes unsustainable. On that basis, the penalty for A.Y. 2020-21 was deleted. The same reasoning was applied, on identical facts, to A.Y. 2019-20. In the revenue's appeal for A.Y. 2018-19, the Tribunal upheld the deletion made by the CIT(A) on the same ground that both limbs had been invoked in a sweeping manner without specifying the exact charge, which showed non-application of mind. [Paras 10, 12, 13]

The penalties under section 270A were deleted for A.Y. 2020-21 and A.Y. 2019-20, and the deletion of penalty for A.Y. 2018-19 was affirmed.

Final Conclusion: The Tribunal held that, in the absence of specification of the exact limb under section 270A for under-reporting or misreporting of income, the penalty could not be sustained. Accordingly, the assessee's appeals for A.Y. 2020-21 and A.Y. 2019-20 were allowed, and the revenue's appeal for A.Y. 2018-19 was dismissed.

Unexplained cash credit in unsecured loan from accommodation entry provider - Creditworthiness and genuineness u/s 68 - Denial of cross-examination where addition is sustainable on independent material - Commission for arranging accommodation entry

Unexplained cash credit in unsecured loan from accommodation entry provider - Creditworthiness and genuineness under Section 68 - Denial of cross-examination where addition is sustainable on independent material - HELD THAT: - The Tribunal held that the assessee's onus under Section 68 was heavy in view of the Revenue's detailed investigation showing that the lender formed part of a web of non-descript entities with negligible business activity, weak financial position, non-traceability at the recorded address and non-compliance with summons. Against that material, mere production of PAN, bank statement and loan confirmation did not establish creditworthiness and genuineness.

The assessee did not place on record the lender's financial statements, any loan agreement, terms of lending, interest obligation, security, repayment schedule or produce the lender's directors, though it claimed to have repaid the loan later. The Tribunal further found that repayment made more than five years later, and only after completion of reassessment, without any evidence of interest payment or commercial terms, was an afterthought and did not validate the original credit. Since the addition stood justified even without using the recorded statements, non-supply of statements and absence of cross-examination caused no prejudice, and the right of cross-examination was not absolute in the facts of the case.

The addition under Section 68 in respect of the unsecured loan was sustained.

Commission for arranging accommodation entry - Unexplained expenditure for accommodation loan entry - addition on account of commission alleged to have been paid for obtaining the accommodation loan entry - HELD THAT: - Having upheld the finding that the impugned loan was an accommodation entry obtained from a non-genuine entity, the Tribunal accepted the consequential inference that commission had been paid for arranging that entry. No separate material was shown by the assessee to dislodge this conclusion once the underlying loan transaction itself was found to lack genuineness.

The addition towards commission expenditure was also sustained.

Final Conclusion: The Tribunal dismissed the assessee's appeal and upheld the additions made in reassessment. It held that the assessee failed to establish the creditworthiness of the lender and the genuineness of the unsecured loan, and that the consequential commission addition was also liable to be sustained.

Fees for technical services - Standard software licences and subscription receipts - Incidental support services - Refund adjustment verification

Fees for technical services - Standard software licences and subscription receipts - Incidental support services - Consideration received from sale and right to use of standard software licences or subscriptions, along with related support taxability in India as fees for technical services under the Act or the India-Ireland DTAA - HELD THAT: - The Tribunal held that the controversy stood covered by the jurisdictional High Court decision in Amazon Web Services Inc [2025 (6) TMI 84 - DELHI HIGH COURT]. Following that decision, it treated the assessee's offerings as standardised and automated facilities, with only a limited and non-transferable right of access or use, without transfer of source code, proprietary rights, or any right of commercial exploitation in the underlying intellectual property. The related support was viewed as ancillary to the software offerings and not as a separate rendering of managerial, technical, or consultancy services. On that basis, the Assessing Officer's characterisation of the receipts as fees for technical services was held to be erroneous. The same view was applied mutatis mutandis for the subsequent assessment year. [Paras 6, 8]

The addition made by treating the software offering receipts as fees for technical services was deleted for A.Y. 2020-21, and the same finding was applied to A.Y. 2021-22.

Erroneous adjustment of refund issued - HELD THAT: - The Tribunal did not decide the claim on merits and considered verification by the Assessing Officer necessary. The matter was therefore restored only for the limited purpose of examining the assessee's claim regarding the refund adjustment and granting consequential relief if found due. [Paras 7]

The issue was remanded to the Assessing Officer for limited verification of the refund adjustment claim.

Final Conclusion: The Tribunal held that receipts from standard software licences or subscriptions and related support were not taxable as fees for technical services, following the jurisdictional High Court decision in Amazon Web Services Inc, and deleted the addition for A.Y. 2020-21 with the same view applied to A.Y. 2021-22. The refund adjustment issue alone was remanded to the Assessing Officer for limited verification.

Unexplained share capital and share premium u/s 68 - Creditworthiness of share subscribers - Admission of additional evidence - Source of source

Admission of additional evidence - Rule 46A compliance - Admission of additional evidence to establish the financial capacity of the share subscribers - HELD THAT: - The Tribunal upheld the first appellate authority's admission of additional evidence, noting that the Assessing Officer had raised the objection regarding creditworthiness only shortly before completion of assessment and proceeded to pass the order without affording adequate opportunity. In those circumstances, the additional material bearing on the subscribers' financial capacity was lawfully admitted and could properly be considered in appeal. [Paras 8]

The admission of additional evidence was sustained as legally justified.

Unexplained share capital and share premium - Creditworthiness of share subscribers - Source of source - Addition under section 68 in respect of share capital and share premium sustained merely because the returned income of the subscribers appeared low - HELD THAT: - The Tribunal held that the Assessing Officer had proceeded only on the basis that the subscribers' income reflected in their returns did not match the investments, without undertaking any further examination of the material showing their financial position. On the additional evidence accepted in appeal, the assessee had sufficiently established the creditworthiness of all three subscribers, while identity and genuineness were not in dispute. The Tribunal further accepted that for the relevant assessment year there was no obligation on the assessee to prove the source of source, and that if the Revenue wished to examine that aspect it was open to do so independently. On that reasoning, the onus under section 68 stood discharged and the deletion of the addition was upheld. [Paras 8]

The deletion of the addition under section 68 was upheld and the Revenue's challenge failed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal. It held that the additional evidence had been validly admitted and that, on the material on record, the assessee had discharged the onus under section 68 in respect of the share capital and share premium received during A.Y. 2017-18.

Condonation of inordinate delay - Rectification of double taxation - Mistake apparent from record

Condonation of inordinate delay - Sufficient cause - Limitation - Delay of about 11 years in filing the appeal against the appellate order for AY 2010-11 - HELD THAT: - The Tribunal held that condonation of delay is a discretionary power to be exercised judicially on proof of sufficient cause covering the entire period of delay. A vague explanation based on lack of knowledge of tax procedure, wrong advice and later change of consultant did not constitute an acceptable or satisfactory explanation for such excessive delay. Since the assessee failed to demonstrate reasonable diligence or furnish a proper explanation for the whole period, the appeal was barred by limitation and could not be entertained on merits. [Paras 2]

The appeal was dismissed as time-barred, without examination on merits.

Rectification of double taxation - Mistake apparent from record - Double addition of same income - validity of Addition of the surrendered amount in AY 2010-11 where the same income had apparently already been brought to tax in the reopened earlier years - HELD THAT: - The Tribunal found it plausible from the record that the amount surrendered in AY 2010-11 had been subjected to tax again through additions made in the reopened earlier assessment years. Proceeding on the principle that the same item of income can be taxed only once, and drawing support from R. Natarajan Vs. ACIT and CBDT Circular No. 71, the Tribunal held that the apparent double addition warranted relief. It accordingly directed deletion of the addition in AY 2010-11, while requiring the Assessing Officer, at the stage of giving effect, to verify that the surrendered amount was the same amount considered in the earlier reopened years and to restrict relief to that surrendered amount alone. [Paras 5]

The addition in AY 2010-11 was directed to be deleted, subject to verification that it represented the same income already assessed in the earlier reopened years.

Final Conclusion: One appeal for AY 2010-11 was dismissed on limitation, the Tribunal holding that the assessee had failed to show sufficient cause for the inordinate delay. In the other appeal, relief was granted by directing deletion of the surrendered amount for AY 2010-11, subject to verification that it was the same income already assessed in the earlier reopened years.

Addition u/s 69A - cash deposits recorded in audited business books - Business cash receipts during demonetisation - VAT non-compliance as a ground to deny business character

Whether Cash deposits made during the demonetisation period, shown in the audited books as arising from customer advances, opening cash balance and recorded business receipts, could be assessed as unexplained money under section 69A merely because the assessee failed to substantiate the sales through VAT records? - HELD THAT: - The Tribunal found that the assessee had placed on record the purchase of gold from SS Bullion, payments through banking channels, audited books of account, cash book, cash memos and a cash-flow statement explaining the source of the deposits. AO had at the same time accepted the business income returned by the assessee and assessed it as such, while doubting the very cash deposits arising from the same disclosed business activity.

Once the cash movement and stock movement formed part of the recorded and audited business accounts, the source of the deposits stood explained for income-tax purposes. Any alleged breach of VAT requirements was held to be a matter for the VAT authorities and not a valid basis, by itself, to treat the recorded business cash deposits as unexplained money u/s 69A. [Paras 11, 12, 13, 14, 15]

The addition made under section 69A in respect of the demonetisation-period cash deposits was deleted.

Final Conclusion: The Tribunal held that the cash deposits during the demonetisation period were explained by recorded business receipts reflected in the assessee's audited books and could not be brought to tax as unexplained money under section 69A. The appeal was accordingly allowed and the addition was deleted.

Entitlement to regular bail - illegal smuggling of foreign vehicles into the country without payment of customs duty -Continued detention pending investigation - offence punishable under Section 135 - HELD THAT: - The Court noted that the applicant had been in judicial custody, had already been given in police custody, and his statement under Section 108 of the Customs Act had been recorded. It further recorded that the investigation was almost over, the vehicles had already been recovered, and the applicant had no criminal antecedents. On these facts, the Court held that no purpose would be served by continued detention and that release on bail was justified subject to conditions ensuring co-operation with the investigation and protection against tampering with evidence.

The applicant was held entitled to regular bail subject to conditions.

Final Conclusion: The bail application was allowed. The Court held that, in view of the near completion of investigation, prior custodial interrogation, recovery of the vehicles, and absence of criminal antecedents, continued detention was not required, and the applicant was released on conditional bail.

Immunity of corporate debtor and its property after approval of resolution plan - Continuation of the attachment - Interplay between Section 32A of the IBC and attachment under the MPID Act - Inchoate vesting of attached property under the MPID Act pending order of the Designated Court - Writ maintainability on pure question of law despite alternative statutory forum - Seeking quashing of a notification dated 19.03.2016 issued by the respondent No.1 i.e. the Competent Authority under the MPID Act in respect of a property belonging to a corporate debtor - Clean Slate Theory - Non-obstante clause - Corporate Insolvency Resolution Process - Resolution plan approval - Attachment of property - Vesting; Pure question of law

Section 32A immunity - Attachment of corporate debtor's property - Clean slate principle - Approval of the resolution plan protected the corporate debtor and the subject property from continuation of attachment under the MPID Act in relation to prior offences. - HELD THAT: - The Court held that on a plain reading of Section 32A, once a resolution plan approved under Section 31 results in a change in management or control to an eligible resolution applicant, the liability of the corporate debtor for prior offences ceases and no action can continue against its property in relation to such offences. The expression covering action against property expressly includes attachment. Relying on Manish Kumar vs. Union of India & Anr. [2021 (1) TMI 802 - SUPREME COURT], Ghanashyam Mishra and Sons Private Limited vs. Edelweiss Asset Reconstruction Company Limited & Ors.[2021 (4) TMI 613 - SUPREME COURT] and Kalyani Transco vs. Bhushan Power and Steel Ltd. & Ors. [2025 (9) TMI 1610 - SUPREME COURT] the Court held that the corporate debtor must proceed on a clean slate. As it was undisputed that the corporate debtor satisfied the requirements of Section 32A and was not even an accused in the criminal case, the attachment could not survive. [Paras 20, 21, 23, 28, 29]

The impugned attachment, insofar as it covered the subject property of the corporate debtor, could not continue after approval of the resolution plan and was liable to be quashed.

Vesting under the MPID Act - Order of attachment under Section 4 - Finality only on order of the Designated Court - HELD THAT: - Rejecting the State's reliance on National Spot Exchange Limited vs. Union of India & Ors. [2025 (5) TMI 1373 - SUPREME COURT], the Court held that a proper reading of Sections 4 to 7 of the MPID Act shows that the vesting contemplated by Section 4(2) is only pending further orders of the Designated Court. The process remains inchoate and attains finality only when the Designated Court passes an order under Section 7 making the attachment absolute. Since no such order had been passed, the State's contention that the property had already vested in the Competent Authority and was unavailable for the resolution plan was unsustainable. [Paras 24, 25, 26]

The Court held that the subject property had not attained final vesting under the MPID Act and remained available for the operation of Section 32A.

Alternative remedy - Pure question of law - Writ jurisdiction - HELD THAT: - The Court held that the effect of Section 32A on the impugned attachment raised a pure question of law and did not require adjudication of disputed facts. Therefore, the petition could be entertained in writ jurisdiction despite the NCLT having observed that the successful resolution applicant could approach the competent authority for lifting the attachment. The Court found support in Godrej Sara Lee Ltd. vs. Excise and Taxation Officer-cum-Assessing Authority & Ors. [2023 (2) TMI 64 - SUPREME COURT], which recognizes that a High Court may entertain a writ where the controversy is purely legal. [Paras 27]

The objection based on availability of an alternative forum under the MPID Act was rejected and the writ petition was held maintainable.

Final Conclusion: The Court allowed the writ petition and held that, upon approval of the resolution plan, Section 32A of the IBC barred continuation of attachment of the subject property under the MPID Act. The impugned notification was quashed to that extent, the interim relief was made absolute, and the bank guarantee was directed to be returned.

Interlocutory order - Approval of Resolution Professional - Committee of Creditors' reconsideration -No finality of rights - Entitlement to continue as Resolution Professional - commercial wisdom of the committee of creditors -HELD THAT: - The orders, which have been subjected to challenge in the instant Appeals have not been attached with any finality, but rather the Adjudicating Authority has taken a precaution that the CoC while considering its decision dated 05.03.2026, to continue the Appellant as a Resolution Professional under Section 22(2) of the Code, may take note of the observations recorded in the orders referred to in the impugned order and to record its reason on the same before pursuing the matter of appointment of the Appellant as RP with Learned NCLT. Thus, the impugned orders passed by the Ld. Tribunal is only precautionary in nature, for the reason being that, the necessity for the Ld. Adjudicating Authority to pass the said orders had chanced owing to its surmise that while passing the Resolution by 100 % voting in favour of the appointment of the Appellant as RP, the CoC was not made conscious of the orders in the matters of VNR Infrastructure Ltd [2026 (2) TMI 1433 - NATIONAL COMPANY LAW TRIBUNAL, HYDERABAD], [2025 (5) TMI 2302 - NATIONAL COMPANY LAW TRIBUNAL, HYDERABAD] and hence the Application under Section 22 was required to be reconsidered. Since, the directions contained in the impugned order only directs reconsideration of grant of an approval of the appointment of the Appellant as a Resolution Professional, which is yet to be considered by the CoC, the nature of the order is not deciding any right as such of the Appellant because the effect of the said two orders passed in the matters of VNR Infrastructure Ltd, on the approval granted by the CoC to the appointment of the Appellant as a Resolution Professional is yet to be determined by CoC.

The Appellate Tribunal held that the impugned orders did not decide the appellant's entitlement to be approved as Resolution Professional under Section 22 of the Code. The Adjudicating Authority had only required the Committee of Creditors to consider the observations made in the earlier proceedings concerning the appellant and then revert back with its view. Since the effect of those earlier orders on the Committee of Creditors' approval was still to be independently examined by the Committee of Creditors, the impugned orders were merely precautionary and facilitative in nature. As no finality had attached to the appellant's rights and the application for approval remained to be considered after such reconsideration, no interference was warranted at that stage. [Paras 11, 12, 13, 14]

The appeals were dismissed on the ground that the impugned orders were only interlocutory directions calling for reconsideration by the Committee of Creditors and did not finally adjudicate the appellant's appointment as Resolution Professional.

Final Conclusion: The Appellate Tribunal declined to interfere with the impugned orders, holding that they merely called for a fresh consideration by the Committee of Creditors before any final decision on approval of the appellant as Resolution Professional. The appeals were accordingly dismissed, with the issue of the effect of the earlier orders left open for consideration by the Committee of Creditors on its own merits.

Principles of natural justice - Effective opportunity of hearing - Audi alteram partem - Initiation of bankruptcy proceedings against the personal guarantor without granting an opportunity to file objections after first appearance - HELD THAT: - The Appellate Tribunal held that once the appellant had entered appearance for the first time, the adjudicating authority was required to afford him an opportunity to file objections to the application seeking initiation of bankruptcy proceedings. The respondent, being the applicant, could not pre-empt or presume that no effective defence was available to the appellant. The record did not show that any such opportunity had been granted before orders were reserved on the same day. Since the order proceeded to allow the prayer for bankruptcy without hearing the appellant on his objections, it stood vitiated by breach of audi alteram partem and could not be sustained. The matter was therefore directed to be reconsidered afresh after permitting the appellant to file objections. [Paras 7, 8, 9]

The impugned order was quashed for violation of natural justice and the application was remitted for fresh consideration after granting the appellant an opportunity to file objections.

Final Conclusion: The appeal was allowed on the limited ground that the appellant was denied an effective opportunity to contest the bankruptcy application. The impugned order was set aside and the matter was remitted for fresh decision on merits after permitting filing of objections.

Personal guarantor insolvency application under Section 95 - particulars of debt - Procedural objections raised for the first time in appeal - non-compliance with Section 95(4)(a) - Prima facie disclosure - Personal guarantor liability - Admission of debt and default - Mixed question of fact and law - Issue not raised at the proper stage - Best evidence rule

Personal guarantor insolvency application - particulars of debt - Admission of liability under guarantee and compromise - HELD THAT: - The Appellate Tribunal held that section 95(4)(a) requires the application to be accompanied by details and documents relating to the debt, but the provision is intended to ensure completeness of the application and to facilitate a prima facie consideration by the Adjudicating Authority. It does not create a rigid threshold that every alleged deficiency in detailing the debt would render the application itself non-maintainable.

Admission of facts is the best evidence under law. The legislative purpose of Section 95(4)(a) of the I & B Code was intended to provide with the sufficient material, details and documents to the Adjudicating Authority to justify the initiation of proceedings, about the existence of the liability. But when the fact of the existence of liability is accepted by the personal guarantors, and has been determined in the judicial proceedings before the DRT, we are of the view that the purpose of Section 95(4)(a) of the I & B Code already stood satisfied, when all the previous procedural backdrop was already explained in the application preferred under Section 95(1) of the I & B Code against the personal guarantors and there will not be any requirement to deal with the same independently, that too when Section 95 application has been preferred because of a breach of commitment under a compromise which was entered in judicial proceedings. In fact, the intention of the provision stood satisfied when the details of the previous proceedings were the basis of Section 95 of the Code, and more particularly the admission of the liability in the compromise were admitted by the personal guarantor, the Appellant. Thus, the very purpose of Section 95(4)(a) of the I & B Code was satisfied, and this plea, though even raised for the first time at an appellate stage, is no more available to the Appellant.

In the present case, the applications in Form C contained the prescribed particulars, and the liability of the personal guarantors stood independently established from the admitted guarantee deeds, the acknowledged default of the corporate debtor, the one-time settlement proposal, the compromise before the DRT, and the judicial closure of the DRT proceedings on that basis. Since the personal guarantors had themselves admitted the liability flowing from the guarantees and the compromise, the statutory purpose of section 95(4)(a) stood satisfied and no further elaborate narration of debt was necessary. [Paras 20, 21, 22, 23, 24]

The challenge founded on alleged non-compliance with section 95(4)(a) was rejected, and the admission of the section 95 applications was upheld.

Effect of Section 95(4)(a) - Procedural objections raised for the first time in appeal - Mixed question of fact and law - HELD THAT: - The Appellate Tribunal held that the objection based on section 95(4)(a) had not been urged before the Adjudicating Authority and could not be introduced at the appellate stage by taking a plea in rejoinder. Such a contention, involving examination of the adequacy of particulars in the application, entailed appreciation of facts and was therefore not a pure question of law. A new case of this nature could not be allowed to be developed for the first time in appeal, particularly when the relevant facts were already available before the NCLT and no amendment to the memorandum of appeal had been sought. [Paras 25, 26]

The new appellate plea was held not maintainable and was not entertained.

Final Conclusion: The Appellate Tribunal dismissed the appeals and sustained the admission of insolvency proceedings against the personal guarantors. It held that the applications under section 95 sufficiently disclosed the debt and that the appellants could not raise a fresh mixed factual and legal objection for the first time in appeal.

Maintainability of writ against private bank performing public law function - Authorised Dealer Bank due diligence in foreign exchange transactions - Contractual sanctions compliance in merchant trade transactions - Judicial review of refusal to process foreign exchange transaction - Suppression of material facts - Enhanced due diligence - Contractual sanctions compliance - Judicial review of administrative action - Arbitrariness - Mala fides - Procedural impropriety - Commercial transaction compliance

Maintainability of writ against private bank performing public law function - Public law element in contractual banking action - HELD THAT: - In ABL International Ltd. v. Export Credit Guarantee Corporation of India Ltd. [2003 (12) TMI 584 - SUPREME COURT], the Apex Court held that a writ petition is not rendered non-maintainable merely because the dispute arises in a contractual setting, particularly where allegations of arbitrariness and public law infirmity are raised.

In Kumari Shrilekha Vidyarthi v. State of U.P. [1990 (9) TMI 323 - SUPREME COURT], the Apex Court emphasized that contractual dealings do not create an area immune from constitutional scrutiny where public law considerations are involved.

Though a private bank does not become amenable to writ jurisdiction merely because it is regulated, the impugned action here was not treated as a purely private commercial act. The bank was acting as an Authorised Dealer Category-I Bank under the FEMA-RBI framework while processing foreign exchange transactions, and the challenge was founded on alleged arbitrariness in the exercise of that regulatory function. The existence of contractual relations did not exclude judicial review where the action carried a public law element.

The preliminary objection to maintainability was rejected.

Suppression of material facts - Clean hands in writ jurisdiction - HELD THAT: - The Court accepted the principle that a writ petitioner must make full and fair disclosure, but held that every omission or disputed factual assertion does not justify dismissal at the threshold. Since the alleged Iranian nexus itself formed part of the principal controversy and the materials relied on by the bank were already before the Court for scrutiny, the objection as to clean hands was not accepted as a preliminary bar. [Paras 53, 54, 55, 56, 57]

The plea of suppression was rejected as a ground for summary dismissal.

Authorised Dealer Bank due diligence in foreign exchange transactions - Contractual sanctions compliance in merchant trade transactions - Refusal to process transaction on sanctions-related concerns - The bank had authority under the governing statutory, regulatory and contractual framework to undertake sanctions-related scrutiny and to refuse processing of the merchant trade transactions when subsequent material cast doubt on the petitioner's declarations. - HELD THAT: - Section 10(5) of FEMA required the Authorised Dealer Bank to obtain declarations and information sufficient to satisfy itself that the transaction did not involve contravention or evasion of the applicable framework; it was therefore obliged to carry out scrutiny, verification and enhanced due diligence where circumstances so warranted. The RBI framework for merchanting trade transactions likewise required the bank to satisfy itself regarding genuineness, bona fides and compliance. Independently, the facility agreement contained continuing representations on accuracy of information and specific sanctions clauses covering origin of goods, shipment routes, vessels, countries, participating entities and correspondent banking arrangements, while expressly reserving to the bank the right to refuse processing of a transaction which violates or may violate sanctions. The petitioner had furnished declarations stating that the transactions did not involve a sanctioned jurisdiction or goods sourced from such jurisdiction. Once material later came to the bank's notice indicating an Iranian nexus and creating serious doubt as to those declarations, the bank was entitled and bound to reassess the transactions. The Court held that the legality of that action did not depend on treating OFAC sanctions as enforceable municipal law in India; the matter stood concluded on the contractual undertakings, the declarations furnished, and the bank's regulatory obligations. The plea of lack of prior knowledge on the petitioner's part did not dilute the bank's entitlement and duty to act on subsequently received information. [Paras 127, 131, 133, 134, 147]

The bank's refusal to process the transactions was held to be traceable to its statutory obligations and express contractual rights.

Judicial review of refusal to process foreign exchange transaction - Decision-making process in banking compliance review - Limits of writ court in disputed commercial facts - HELD THAT: - The Court held that the writ proceedings were not concerned with conclusively determining every disputed fact regarding origin of goods, vessels, routing or the precise extent of the Iranian nexus. The relevant question was whether material existed that reasonably triggered the bank's contractual and regulatory obligations and whether the bank acted within that framework. On the record, the bank did not reject the transactions at the threshold; it sought clarifications, exchanged communications with the petitioner, afforded opportunities to explain, and subjected the matter to internal compliance review. The considerations relied on by the bank were germane to its role under FEMA, RBI directions, KYC, AML, due diligence and the parties' sanctions-related contractual stipulations. In those circumstances, the Court declined to substitute its own assessment for that of the bank and held that the refusal could not be characterised as arbitrary or unreasonable. [Paras 164, 165, 170, 171, 172]

No ground for interference in writ jurisdiction was made out.

Final Conclusion: The writ petitions were held maintainable, but the challenge failed on merits. The Court held that the Authorised Dealer Bank acted within its statutory duties under the FEMA-RBI regime and within its express contractual rights in refusing to process the transactions after sanctions-related concerns emerged, and accordingly declined interference under Article 226.

Definition of "person resident in India" under Section 2(v) - Acquisition of immovable property in India by foreign nationals - Applicability of FEMA regulations to residents - violation of various provisions of FEMA read with the provisions of various extant Regulations - Joint Director issued a show cause notice - Substantial compliance - Perverse finding - Jurisdictional interference - Alternative remedy

Person resident in India - Business visa and residence exceeding 182 days - Purchase of immovable property in India - HELD THAT: - The Court held that, once the respondents' residence in India for more than 182 days during the preceding financial year was not disputed, the definition in Section 2(v)(i)(B) had to be applied in light of the purpose of their stay. Since they had come to India on a business visa and were carrying on business in India, they did not fall within the exclusionary part of the definition. On that basis, the Appellate Tribunal was justified in treating them as persons resident in India. Consequently, the regulations concerning investment in firm or proprietary concern in India, permissible capital account transactions, acquisition and transfer of immovable property in India, and establishment of branch or office, insofar as they apply to persons resident outside India, were held inapplicable. The Court further noted that the purchase consideration had come through legal channels, the RBI had indicated that no prior permission was required if Section 2(v) was satisfied, and no perversity or error in the Tribunal's findings had been shown. [Paras 14, 15, 16, 17, 19]

The order of the Appellate Tribunal setting aside confiscation and penalty was upheld, and the appeal was dismissed.

Infructuous writ petition - Confiscated property - HELD THAT: - The Court observed that the writ petition was founded on the confiscation order passed by the Joint Director, which had already been quashed by the Appellate Tribunal. Since the Court affirmed the appellate order, no further adjudication in the writ petition remained necessary. [Paras 22]

The writ petition was disposed of as infructuous.

Final Conclusion: The Court affirmed the Appellate Tribunal's view that the concerned respondents were persons resident in India under FEMA and that the regulations relied upon by the Directorate were inapplicable to them; the appeal was therefore dismissed. In consequence, the connected writ petition was disposed of as infructuous.

Computation of limitation - Rebate claims - Time-bar under section 11B - Applicable refund scheme under Notification No. 17/2009-ST or Notification No. 41/2012-Service Tax - Non-submission of proof of export documents with the claim when originally filed - Absence of substantial compliance - Doctrine of stare decisis - Difference of opinion between Member (Technical) and Member (Judicial)

Applicable notification for export service tax refund - Limitation for resubmitted refund claim - Substantial compliance in refund claim - The Members differed on whether the refund claims were governed by Notification No. 17/2009-ST and whether the original filings within one year, though without proof of export documents, constituted valid and sufficient compliance for limitation purposes. - HELD THAT: - The Member (Technical) held that the initial claims, filed without foundational proof of export such as ARE-1 and shipping bills, lacked substantial compliance. According to him, a refund claim had to be accompanied by the documents necessary for scrutiny, and the later filing beyond one year was the effective claim; in the absence of sufficient cause for delay, the claims were barred by limitation and the rejection was proper. The Member (Judicial), however, held that the applicable notification was Notification No. 17/2009-ST as in force at the time of export, and not Notification No. 41/2012-ST. On that footing, he held that for Airport Authority services under Sl. No. 18, the notification did not prescribe proof of export documents as mandatory enclosures with the claim, and that the original applications in Form A-1, with invoices, payment particulars, export details and Chartered Accountant certification, amounted to full compliance. He therefore treated the original filing date as the date relevant for limitation and held the claims to be within time. As the Members reached opposite conclusions, the controversy was not finally adjudicated and was referred to a Third Member. [Paras 69, 73, 74, 76, 78]

Difference of opinion recorded; the questions concerning the governing notification, sufficiency of the original filing, and computation of limitation were referred to the Third Member without final adjudication on merits.

Return of refund claim - CBEC Manual vis-a-vis statutory refund provisions - The Members differed on whether Chapter 9 of the CBEC Manual could justify treating the original refund claims as not validly filed and on the legality of returning the claims for want of export documents. - HELD THAT: - The Member (Technical) relied on Chapter 9 of the Central Excise Manual and the statutory requirement that a refund claim be accompanied by supporting evidence, and held that an incomplete claim could be treated as filed only when all relevant documents were furnished; on that basis, the returned claims could not preserve limitation. The Member (Judicial) held that neither Notification No. 17/2009-ST nor Section 11B, as applicable to service tax refunds, authorised the Department to return a refund claim instead of deciding it, and that an administrative manual could not curtail a statutory refund right or override the notification. He further held that the insistence on proof of export documents, when not required as mandatory enclosures under the applicable notification for the service in question, rendered the departmental action untenable.

Admittedly, in the instant claims, there is no dispute on the eligibility of the appellant to claim refund of service tax on the services rendered by AAI. No case has also been made out on merits that the said services are ineligible input services and the claims have been rejected on the bar of limitation. In view of the discussions and reasons stated above, Member (Judicial) is of the considered view that the impugned orders in appeal cannot be sustained and are liable to be set aside. Ordered accordingly. Inasmuch as the matter stands decided in the appellant’ s favour both on merits and on the aspect of the claims being validly filed, and since the refund claims pertain to nearly fifteen years ago, the concerned refund sanctioning authority is directed to sanction the refund alongwith appropriate interest in terms of the Apex Court decision in Ranbaxy Laboratories Ltd v. UOI [2011 (10) TMI 16 - SUPREME COURT],without raising any further objections as expeditiously as possible, and in any event within 90 days from receipt of a copy of the Final Order. Suffice to say, had the claims been examined and judiciously addressed at the appropriate juncture, the present substantial outflow of interest of fifteen years, could have very well been avoided.

Since the Members disagreed on the legal effect of the Manual and the validity of the return procedure, the issue was referred for resolution by a Third Member. [Paras 52, 53, 54, 55, 78]

Difference of opinion recorded; the issue whether the Manual could govern validity of filing and justify return of the refund claims was referred to the Third Member.

Final Conclusion: There being a difference of opinion between the Member (Technical) and the Member (Judicial) on the governing notification, validity of the original refund filings, effect of the CBEC Manual, and limitation, the appeals were not finally decided. The matter was directed to be placed before the Hon'ble President for reference to a Third Member.

Liquidated damages for delayed contractual performance - Declared service under section 66E(e) of the Finance Act - Consideration for refraining from an act, tolerating an act or situation, or doing an act -distinction between conditions to a contract and consideration for the contract - Penalties and liquidated damages recovered by the assessee from suppliers and vendors for delayed delivery under contractual terms - HELD THAT: - The Tribunal held that liquidated damages and penalty clauses are compensatory and remedial consequences of breach, and not consideration for any consensual service. For taxability under Section 66E(e), there must be a bilateral arrangement under which one party agrees, for consideration, to refrain from an act, tolerate an act or situation, or do an act. In the contracts in question, there was no independent agreement to tolerate delay for consideration; the clause merely protected the assessee against breach by imposing a financial consequence on the defaulting supplier. Relying on South Eastern Coalfields Ltd. v. Commissioner of Central Excise and Service Tax, Raipur [2020 (12) TMI 912 - CESTAT NEW DELHI], which the Tribunal treated as binding and consistently followed, the Tribunal held that recovery of liquidated damages for delayed performance cannot be equated with a taxable service of tolerating breach. [Paras 11, 12, 13, 14, 15]

The Revenue's contention was rejected, and the order setting aside the service tax demand on such recoveries was upheld.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the order holding that contractual penalties and liquidated damages recovered from suppliers for delayed delivery are not taxable as consideration for tolerating an act under the declared service provisions.

CENVAT credit on capital goods and inputs used for setting up an Air Separation Plant - Immovability of integrated plant and admissibility of CENVAT credit on constituent machinery - Leased capital goods and irrelevance of ownership for CENVAT credit - Scope of Rule 4(3) in lease arrangements - Adjudication beyond show cause notice - Prospective operation of restrictive amendment to inputs definition - Extended limitation in interpretational disputes - Ownership not a criterion - Immovability of plant - Leasing arrangement - Prospective amendment - Extended period of limitation - Beyond show-cause notice - Natural justice - Operational attachment to earth

CENVAT credit on capital goods and inputs used for setting up an Air Separation Plant - Immovability of integrated plant and admissibility of CENVAT credit on constituent machinery - HELD THAT: - Rule 2(a) of the CENVAT Credit defines “Capital goods” to include goods falling under chapter 82, 84, 85, 90 and components, spares and accessories thereof. The undisputed position is that the impugned machinery and equipment fall under chapter 84 and related chapters, were duty-paid, and where received in appellant’s factory under valid invoices.

The Tribunal held that the goods in question were duty-paid machinery, equipment, parts and components falling within the categories recognized as capital goods, received in the factory under valid invoices and used in manufacture of the final product. Following JSW Ispat Steel Ltd. [2013 (11) TMI 1389 - CESTAT MUMBAI], it held that the Rules do not require that such machinery be used as such without assembly, and that credit cannot be denied merely because individual capital goods are assembled into a larger plant. The immovability of the integrated Air Separation Plant was treated as irrelevant, since fastening to earth for stability and vibration-free functioning does not destroy the identity of the constituent machines. The post-07.07.2009 amendment to the definition of inputs was held to be prospective and incapable of being applied to the period in dispute. [Paras 21, 26, 27, 29, 32]

Credit on the goods used for setting up the Air Separation Plant was admissible, and the plea based on immovability or the later amendment to the inputs definition was rejected.

Leased capital goods and irrelevance of ownership for CENVAT credit - Scope of Rule 4(3) in lease arrangements - HELD THAT: - The Tribunal held that the CENVAT scheme emphasizes receipt and use of the goods in the factory and does not prescribe ownership as a condition for availment of credit. Relying on Pepsi Foods Ltd., JSW Ispat Steel Ltd.[2013 (11) TMI 1389 - CESTAT MUMBAI] and the view noticed from M/s Modernova Plastyles [2015 (6) TMI 154 - BOMBAY HIGH COURT] it held that lease arrangements do not, by themselves, bar credit. On Rule 4(3), the Tribunal construed the expression allowing credit "even if" capital goods are acquired on lease, hire purchase or loan agreement from a financing company as enlarging and enabling, not restrictive; consequently, the lessor need not be a financing company for the user-manufacturer to avail credit. [Paras 22, 23, 24, 25, 32]

Denial of credit on the ground that Inox retained ownership or was not a financing company was held unsustainable.

Adjudication beyond show cause notice - HELD THAT: - The Tribunal found that the show cause notice did not allege that mere retention of ownership by Inox would by itself disentitle the appellant from taking credit. Since the demand was substantially confirmed on that fresh ground, the adjudication exceeded the notice. The Tribunal held that an adjudicating authority cannot found its order on a ground not proposed in the show cause notice, and that doing so violates principles of natural justice. [Paras 28, 32]

The impugned order was vitiated to the extent it relied on a ground beyond the show cause notice.

Extended limitation in interpretational disputes - HELD THAT: - The Tribunal held that the credit had been taken on the strength of valid invoices and disclosed in monthly statutory returns, and that the relevant facts were within the Department's knowledge. As the controversy was interpretational and had been the subject of judicial debate, the ingredients of suppression, misstatement or intent to evade duty were absent. On that basis, the extended period under the proviso to Section 11A(1) was held unavailable, rendering the entire demand time-barred; consequently, interest and penalty could not survive. [Paras 30, 31, 32]

The entire demand was barred by limitation, and the consequential interest and penalty were liable to fail.

Final Conclusion: The Tribunal held that the appellant was entitled to CENVAT credit on the duty-paid goods used for setting up the Air Separation Plant, and that neither ownership with the lessor, nor the plant's attachment to earth, nor Rule 4(3) could defeat that entitlement. The impugned order was also found to travel beyond the show cause notice, the later amendment to the inputs definition was held prospective, and the entire demand was further held barred by limitation; accordingly, the order was set aside and the appeal allowed.

CENVAT credit on outward transportation - FOR destination sales - Input service under CENVAT Credit Rules - Service tax paid on outward transportation of cement from factory gate or depot to customer premises - HELD THAT: - The Tribunal held that the controversy stood covered by the decision in CC Vs. M/s. Ultra Tech Cement [2018 (2) TMI 117 - SUPREME COURT] and the issue is also covered as per the Board Circular No. 1065/4/2018-CX dated 08.06.2018. Further the Tribunal in Appellant’s own case [2024 (10) TMI 144 - CESTAT NEW DELHI] and [2024 (11) TMI 122 - CESTAT NEW DELHI], had followed the judgment of the Hon’ble Supreme Court and set aside such demand. Since the outward transportation was in relation to FOR destination transactions, the appellant was entitled to CENVAT credit of the service tax paid on such transportation. On that basis, the demand raised by disallowing the credit was held to be unsustainable. [Paras 6]

The appellant was held entitled to the credit, and the impugned demand was set aside.

Final Conclusion: Following the Supreme Court decision governing FOR destination sales, the Tribunal held that credit of service tax paid on outward transportation was admissible. The impugned order was set aside and the appeal was allowed with consequential relief.

Computation of CENVAT credit attributable to exempted clearances, particularly sale of electricity -Common input service credit under Rule 6(3A) - Formula-based reversal of credit - HELD THAT: - The Tribunal followed the view taken in M/s. JSW Steel Ltd that [2024 (1) TMI 446 - CESTAT BANGALORE], on a conjoint reading of Rule 6(1), (2) and (3), the total CENVAT credit for the purpose of the formula under Rule 6(3A) means only the credit on common input services and does not include credit exclusively used for manufacture of dutiable goods. Since the appellant had reversed credit on that basis and supported the computation by a Chartered Accountant's certificate, and there was no allegation against the correctness of the short-payment determination or the method of reversal, the Revenue's method of computing demand on total credit was held unsustainable. [Paras 7, 8]

The excess demand, interest and penalty were set aside, while the appropriation of the amount already paid by the appellant was upheld.

Final Conclusion: The Tribunal held that Rule 6(3A) reversal had to be worked out only with reference to common credit and not on total credit including credit exclusively used for dutiable goods. The excess demand, interest and penalty were therefore dropped, but the amount already paid by the appellant was allowed to be appropriated.

Mediclaim reimbursement and motor accident compensation - Double recovery under the same head of loss - Statutory and contractual entitlements - governing principle in motor accident compensation - Seeking compensation in which inter alia, loss of income, future prospects, special diet, transportation and medical expenses have been claimed for - Simultaneously, claims set out with insurance under the claim of medical insurance for the very same medical expenses - Claim before the jurisdictional Tribunal i.e., Motor Accidents Claims Tribunal - HELD THAT: - The Court held that the principle against double benefit applies where two payments are truly referable to the same loss in the same legal sphere, but that test is not satisfied where one payment arises from a private insurance contract funded by premiums paid by the claimant and the other arises as a statutory entitlement to just compensation under the Motor Vehicles Act. A Mediclaim policy is an independent contractual arrangement taken to meet medical contingencies generally, and its reimbursement cannot be eclipsed by the claimant's statutory right to compensation for injuries caused by a motor accident. Treating both as the same benefit would unjustly deprive the claimant of the fruits of premiums already paid and correspondingly confer an unwarranted advantage either on the Mediclaim insurer or on the insurer of the offending vehicle. The Court further noted that Mediclaim cover is subject to policy limits, whereas compensation under the Motor Vehicles Act is governed by the beneficial principle of just and fair compensation; the two therefore operate on different footings and cannot be equated as overlapping recoveries. [Paras 9, 10, 11, 15]

Mediclaim or medical insurance proceeds are not deductible from compensation determined by the Claims Tribunal under the Motor Vehicles Act.

Final Conclusion: The Court affirmed that reimbursement under a Mediclaim or medical insurance policy cannot be deducted from compensation payable under the Motor Vehicles Act, since the contractual insurance benefit and the statutory claim for just compensation operate in distinct spheres. The matter was remanded to the High Court for determination in conformity with that view, and the appeal stood dismissed.

Seeking Modification of Injunction -Temporary injunction in trade dress dispute - Sale of existing stock through third-party distributors and retailers - Destruction of infringing packaging material - Empty cartons found to carry the disputed trade dress - Preservation of evidence - principal-to-principal basis

Temporary injunction in trade dress dispute - Sale of existing stock through third-party distributors and retailers - HELD THAT: - The Court accepted the affidavit stating that the impugned products lying with distributors, franchisees and retailers were no longer in the custody or control of the appellant, having already been sold on a principal-to-principal basis, and that no production had taken place after the injunction was affirmed, the last manufacture being prior thereto. On that factual basis, the temporary injunction was modified to permit sale of such existing stock by those third parties to customers, while making it clear that the order was confined to the interlocutory controversy and would not affect the merits of the suit. [Paras 8, 9, 12]

The temporary injunction was modified to permit sale of the existing stock already lying with third-party distributors, franchisees and retailers.

Destruction of infringing packaging material - Existing stock with appellant - HELD THAT: - The Court held that the appellant's existing stock could be marketed only in packaging that was not red in colour and not similar to the respondent's packaging. As regards the empty cartons carrying the impugned trade dress, the Court directed their destruction and continued the temporary injunction in relation to those cartons. [Paras 6]

The appellant was permitted to market the existing stock only in dissimilar packaging, while the empty cartons bearing the impugned packaging were directed to be destroyed and remained subject to the injunction.

Final Conclusion: The appeal was allowed in part by modifying the temporary injunction to permit sale of the existing stock already with third-party distributors, franchisees and retailers, while requiring the appellant's own remaining stock to be marketed only in dissimilar packaging and directing destruction of the empty cartons bearing the impugned trade dress. The order was confined to the interlocutory stage and left the merits of the suit unaffected.