TaxTMI Updates e-Newsletter
Jun 26,2026

Binding nature of GST Council recommendations for statutory notifications - Validity of GST notifications going beyond GST Council recommendations - Absence of ratification power in GST Council -Ratification without Jurisdiction - Cooperative Federalism - Presumption of Constitutionality

Whether Notifications issued by the Central Government under Sections 9 and 11, can go beyond the recommendations made by the GST Council? -HELD THAT: - The Court held that statutory notifications issued under Sections 9 and 11 of the CGST Act are a form of subordinate legislation, on the same footing as rules for the purpose of their dependence on the GST Council's recommendation. In view of the ruling in Union of India v. Mohit Minerals Private Limited [2022 (5) TMI 968 - SUPREME COURT], the Government, though not bound in the sphere of primary legislation, is bound by the Council's recommendation while exercising delegated legislative power. On comparing the 21st GST Council recommendation with the impugned notifications, the Court found that the recommendation referred only to a mark or name in respect of which an actionable claim is available, whereas the notifications additionally introduced the expression "enforceable right in a court of law" and the related conditions. Since that expression was wider and not synonymous with actionable claim, it constituted an addition unsupported by any recommendation. To that extent, the notifications were not "on the recommendations" of the Council and were therefore ultra vires; apart from that addition, they remained valid. [Paras 8, 9, 10, 12, 14]

The impugned Central and State notifications were declared ultra vires only insofar as they incorporated the expression "enforceable right in a court of law"; excluding that expression, the notifications were held intra vires.

Power of the GST Council to ratify the notifications issued by the Central Government under Sections 9 and 11 - HELD THAT: - ‘Ratification’ is the approval by act, word, or conduct, of that which was attempted (of accomplishment), but which was improperly or unauthorisedly performed in the first instance.The principle is derived from the Latin maxim ratihabitio mandato aequiparatur, namely, “a subsequent ratification of an act is equivalent to a prior authority to perform such act”. Therefore, ratification assumes an invalid act which is retrospectively validated (vide Maharashtra State Mining Corpn. v. Sunil [2006 (4) TMI 541 - SUPREME COURT]).

The Court held that Article 279A empowers the GST Council only to make recommendations on specified GST matters and does not confer any power of ratification. Applying the principle stated in Marathwada University v. Seshrao Balwant Rao Chavan [1989 (4) TMI 323 - SUPREME COURT], the Court observed that ratification is alien to the exercise of statutory power where the original act is without authority. It further held that authorities created by the Constitution or statute possess only those powers expressly conferred or arising by necessary implication, and no such ratification power is vested in the GST Council. Consequently, the purported ratification in the 22nd meeting could not cure the absence of recommendation for the added part of the notifications and was itself without jurisdiction. [Paras 15, 16, 17, 18, 19]

The GST Council's purported ratification of the impugned notifications was held without jurisdiction and incapable of validating the unsupported additions.

Final Conclusion: The writ petitions were allowed. The impugned notifications were upheld except to the extent they introduced the expression "enforceable right in a court of law", and the GST Council's subsequent ratification was held without jurisdiction; the show cause notices founded on the impugned notifications were consequently set aside, with liberty to issue fresh notices in terms of the notifications as sustained.

Writ jurisdiction against cancellation of GST registration - Failure to challenge the substantive ground of cancellation - Alternative statutory remedy of second appeal

HELD THAT: - The Court noted that the show cause notice proposed cancellation on the ground of failure to furnish returns for a continuous period of six months and that this ground was not under challenge. The petitioner's case was confined to lack of awareness of the notice and order, personal difficulties, and subsequent entrustment of tax matters to professionals. The Court further found that the appeal before the Appellate Authority had been filed after a delay of 21 months, but no annexure explaining the delay was brought on record, and even the appellate order was not enclosed with the writ petition.

In these circumstances, no case for exercise of writ jurisdiction was made out. The Court, however, clarified that dismissal of the writ petition would not preclude the petitioner from availing the remedy of second appeal under the statute, if otherwise available in law. [Paras 5, 6, 7]

The writ petition was dismissed, with liberty to avail the statutory remedy of second appeal in accordance with law.

Final Conclusion: The High Court declined to entertain the writ petition against cancellation of registration, holding that the petitioner had not challenged the basic ground for cancellation and had also failed to place the necessary materials concerning the delayed statutory appeal. Liberty was reserved to pursue the remedy of second appeal, if available in law.

Maintainability of writ against show cause notice and adjudication order - Alternative statutory remedy - Natural justice in GST adjudication - Typographical error in relied upon documents

Challenge to the GST show cause notice and adjudication order on the ground that only part of the notice was served - HELD THAT: - The Court held that the petitioner had an efficacious statutory remedy by way of appeal, and the objections raised did not disclose any breach of natural justice or statutory provisions warranting interference under Article 226. It found that the petitioner had participated in the proceedings, filed replies, and had not raised during adjudication the plea that only three pages of the show cause notice had been received. As regards the relied upon documents and reference to the year 2021 in the notice, the Court accepted the respondent's explanation that this was an inadvertent typographical error, and that the investigation and demand in fact related to October 2018 to November 2019. The order in original had dealt with the relevant documents for the periods 2018-19 and 2019-20, showing that the petitioner was aware of the case against him and had been given sufficient opportunity of hearing. The disputed aspects were held to be matters falling within the domain of factual examination by the appellate authority. [Paras 7, 8, 9]

No case for writ interference was made out, and the petitioner was left to pursue the statutory appellate remedy.

Final Conclusion: The High Court declined to interfere with the impugned show cause notice and adjudication order in exercise of writ jurisdiction. Holding that no violation of natural justice or statutory provisions was established and that an efficacious appeal was available, it rejected the writ petition.

Validity of Order cancelling GST registration for want of reasons and non-Speaking order - Recording of reasons in FORM GST REG-19 - Natural justice in cancellation of GST registration

HELD THAT: - The Court held that the object of a show cause notice is to make the noticee aware of the precise case set up against her so as to afford an effective opportunity of response. A notice merely stating failure to furnish returns for a continuous period of six months, without indicating the month from which and the period during which returns were not filed, fell short of that requirement. The Court further held that Rule 22 read with FORM GST REG-19 obligates the Proper Officer to assign specific reasons while cancelling registration. The impugned order merely recorded absence of reply and stated "Others" with a remark that returns were not filed, without disclosing proper reasons for cancellation. Since cancellation of registration entails adverse civil consequences, the Proper Officer was bound to pass a speaking order; absence of reasons indicated non-application of mind and offended fair procedure and the statutory prescription itself. The Court also held that, despite the delayed filing of the writ petition, the statutory vulnerability of the cancellation order on account of absence of reasons outweighed the delayed approach. [Paras 21, 22, 23, 24, 25]

The impugned cancellation order was set aside and quashed, and the matter was restored to the stage of the show cause notice, leaving it open to the petitioner either to reply to the notice or to furnish pending returns and pay dues, interest, late fee and penalty, whereupon the Proper Officer was directed to proceed afresh in accordance with Section 29 and Rule 22.

Final Conclusion: The Court quashed the cancellation of GST registration on the ground that the order was non-speaking and not in conformity with the statutory requirement of recording reasons. The proceedings were restored to the show cause stage with liberty to the petitioner to respond or regularise the default, and with a direction to the Proper Officer to conclude the matter afresh in accordance with law.

Writ petition entertainable despite the availability of the statutory appeal u/s 107 of the CGST 2017 - Penalty on partners for fake invoices and e-way bills - Reasoned adjudication - violation of natural justice and lack of sustainable findings - Penalty on partners for fake invoices and e-way bills

HELD THAT: - The Court found that the adjudicating authority had recorded specific findings linking the petitioners, as partners of the firm, with the fraudulent availment and utilisation of input tax credit through fake invoices, fake e-way bills and hawala routing of funds. The order referred to the petitioners' own statements, electronic material including WhatsApp chats, and findings that the affairs of the firm were conducted with their knowledge and consent.

On that material, the Court held that the impugned order was a reasoned adjudication and that the findings brought the petitioners within the scope of liability contemplated under Section 122(1A). The contention founded on breach of natural justice was rejected, and the decision cited on the requirement of reasons, namely M/s. Kranti Associates Pvt. Ltd.and Anr. vs. Sh. Masood Ahmed Khan and Others [2010 (9) TMI 886 - SUPREME COURT] was held inapplicable.

The Bombay High Court decision in Amit Manilal Haria and Ors. v2026 (2) TMI 1409 - BOMBAY HIGH COURT] was also not treated as governing the case on the facts before the Court. [Paras 17, 18, 21, 22, 23]

The challenge to the penalty order failed, and no case for interference under Article 226 was made out.

Final Conclusion: The High Court rejected the writ petition and declined to interfere with the penalty order. It held that the adjudicating authority had passed a reasoned order based on material establishing the petitioners' complicity, and that no violation of natural justice was shown.

Alternative statutory remedy under GST - Maintanaibility of Writ petition - Non-constitution of GST Appellate Tribunal - Bypass of pre-deposit in writ jurisdiction

Whether the writ petition was maintainable against the appellate orders where the petitioner had an efficacious statutory remedy before the GST Tribunal? - HELD THAT: - The Court held that the Board Circular clarified that, where the Appellate Tribunal has not been constituted, the period for filing appeal would run from the date on which the President or the State President enters office, or from the date of communication of the order, whichever is later. On that basis, the Court found that the petitioner still had an effective statutory remedy against the appellate orders. It was therefore not permissible to invoke writ jurisdiction to bypass the appellate mechanism and avoid the statutory condition of pre-deposit. The Court consequently declined to examine the petitioner's challenges to the show-cause notices, the original orders, and the plea of jurisdictional or natural justice defects in the writ proceedings. [Paras 11, 12]

The writ petition was dismissed, leaving the petitioner at liberty to pursue the statutory appeal before the GST Tribunal in relation to the financial years 2018-19 and 2020-21.

Final Conclusion: The Court declined to entertain the writ petition on the ground of availability of a statutory appellate remedy before the GST Tribunal. It held that non-constitution of the Tribunal did not render the remedy ineffective, and dismissed the petition with liberty to pursue that appeal.

Failure to consider applicable departmental circular - Input tax credit discrepancy adjudication - validity of adjudication order under Section 73 for the tax period 2017-18 where the authority had not considered the Circular dated 27.12.2022, which was stated to govern the controversy - HELD THAT: - The Court held that a perusal of the impugned order showed that the Circular dated 27.12.2022 had not been considered by the first respondent.

Following the approach adopted in the earlier decision referred to in the order [2024 (6) TMI 889 - KARNATAKA HIGH COURT], the Court treated non-consideration of the applicable circular as a sufficient ground to interfere, without adjudicating the underlying merits, and directed fresh reconsideration in accordance with law after giving the petitioner liberty to place additional material. [Paras 6, 7]

The impugned adjudication order, summary order and consequential letter were set aside, and the matter was remitted to the first respondent for fresh consideration bearing in mind the Circular dated 27.12.2022.

Final Conclusion: The writ petition was allowed on the limited ground that the adjudicating authority had failed to consider the applicable circular. The matter was remitted for fresh decision in accordance with law, with liberty to the petitioner to file additional pleadings and documents.

Informant reward under CBDT guidelines - Ex gratia reward - Judicial review of discretionary reward determination

Petitioner, who is a Real Estate Consultant, passed on some information to the revenue relating to the escapement of income by various entities pointing out evasion of tax paid - HELD THAT: - The Court held that under paragraph 13.1 of the Guidelines for Grant of Rewards to Informants, 2007, the competent authority may grant reward not exceeding the prescribed percentage, and relaxation beyond the ceiling lies in the discretion of the Full Board.

The petitioner had also furnished an undertaking accepting that the payment was ex gratia, subject to the absolute discretion of the competent authority, and that he would not dispute the correctness of the decision in court. On facts, the Full Board had extensively re-examined the tax recovery, the information supplied, and the applicable weightage methodology, and had recalculated the reward after finding that the recommending authority had not correctly applied the relevant factors. The Court held that it could not substitute its own assessment for that of the expert body or interfere with the systematic calculation undertaken by the Board, absent manifest illegality or patent arbitrariness contrary to the policy; no such infirmity was shown. [Paras 5, 6, 7, 8, 9]

The final reward as determined by the Full Board was upheld and the claim for enhancement was rejected.

Final Conclusion: The writ petition was dismissed. The Court declined to interfere with the reward fixed by the CBDT Full Board, holding that the payment was ex gratia, governed by discretionary guidelines, and not open to reworking in writ jurisdiction in the absence of manifest illegality or patent arbitrariness.

Penalty u/s 270A - under-reporting of income - Effect of rectification on penalty proceedings - Rectification reducing assessed income to nil

HELD THAT: - The Court held that under-reporting of income is the essential pre-condition for initiation of penalty proceedings under Section 270A(1). Although the penalty order noticed the rectification order, the rectification had already recorded the assessed income as nil after giving effect to the current year and brought forward losses. In that situation, the statutory requirement of under-reporting ceased to exist, and the conclusion in the penalty order that there was under-reporting could not be sustained. [Paras 7, 8]

The impugned penalty order was set aside on the ground that, after rectification, there was no under-reporting of income to attract penalty under Section 270A.

Final Conclusion: The Court set aside the penalty order by holding that, after rectification of the assessment, the assessed income stood at nil and the foundational requirement of under-reporting under Section 270A was absent. The challenge based on liquidation under the IBC was left open without any definitive ruling.

Reassessment based on search material - Applicability of pre-amendment reassessment regime - Limitation for notice under section 148 - Reopening of assessment founded exclusively on incriminating material found in a search conducted on a third party between 01.04.2021 and 01.09.2024 - HELD THAT: - The Court held that the reassessment proceedings against the assessee were admittedly founded only on incriminating material found during the search conducted on M/s. DCW Ltd. on 18.11.2023 and on the assessee's statement recorded in the course of that search. Since the search fell within the period specified in section 152(3), the provisions of sections 147 to 151 as they stood prior to the Finance (No. 2) Act, 2024 applied.

On that basis, section 149(1)(a) governed limitation because the alleged escaped income was below the threshold contemplated in section 149(1)(b). For A.Y. 2021-22, the notice under section 148 issued on 23.05.2025 was beyond three years from the end of the relevant assessment year and was therefore contrary to the statutory limitation.

Revenue's contention that section 152(3) applied only to the searched person was rejected, the Court holding that it extends to reassessment initiated on the basis or as a consequence of such search material even against a non-searched assessee connected with that material. [Paras 8, 9, 11, 12]

The reopening order and consequential notice were quashed as barred by limitation.

Final Conclusion: The writ petition was allowed. The Court quashed the order passed in the reassessment initiation proceedings and the consequential notice under section 148 for A.Y. 2021-22, holding that the proceedings were governed by the pre-amendment regime under section 152(3) and were barred by limitation.

Recovery of tax demand pending appeal - Clerical error in Form-3CD - Expeditious disposal of statutory appeal

Recovery of tax demand pending appeal - Whether coercive steps for recovery of the tax demand arising from the assessment and demand notices should be stayed pending the assessee's appeal in view of the alleged clerical error in Form 3CD and the corrected figures? - HELD THAT: - The Court recorded that it was not disputed that the tax auditor had issued a certificate clarifying a technical or typographical error in the figures uploaded in Form-3CD and that a revised Form-3CD containing the correct figures had also been filed. Since the assessment order and consequential demand had been challenged in appeal, and having regard to the peculiar facts, the Court considered it just to protect the petitioner against coercive recovery until the appeal was decided, while leaving the merits to be considered in the appellate proceedings. [Paras 7, 8]

No coercive steps for recovery of the demand were permitted during the pendency of the appeal.

Expeditious disposal of statutory appeal - HELD THAT: - Since the dispute arose from an admitted claim of incorrect reporting in Form-3CD and the appeal against the assessment order was already pending, the Court directed early disposal of that appeal so that the matter could be examined by the appellate authority with due regard to the corrected figures presented by the petitioner. [Paras 8]

The appeal before the Commissioner of Income Tax (Appeals) was directed to be decided expeditiously, preferably within the period indicated by the Court.

Final Conclusion: The writ petition was allowed to the limited extent of protecting the petitioner from coercive recovery of the demand during pendency of the appeal and directing expeditious disposal of that appeal in light of the corrected Form-3CD figures.

Unexplained money - Cash deposits during demonetisation - Source of cash from earlier bank withdrawals - Tax rate under amended section 115BBE - Rectification of tax rate

Unexplained money - Cash deposits during demonetisation - Source of cash from earlier bank withdrawals - Cash deposits made during the demonetisation period treated as unexplained money - HELD THAT: - The Tribunal found that the assessee had shown the source of the cash deposits by linking them to cheques received on sale of the property, their deposit in the bank account, and later withdrawals from the same account. It further noted that the surrounding circumstances, including the distress sale of the property to clear bank dues, supported the explanation and indicated absence of any independent source of income for making the deposits. In the absence of any contra evidence, the explanation was required to be accepted. The decisions cited by the Revenue were held to turn on different facts and were therefore not applicable. [Paras 9, 10]

The addition made under section 69A was deleted.

Tax rate under amended section 115BBE - Rectification of tax rate - Enhancement of the tax rate through rectification on the addition made under section 69A - HELD THAT: - The Tribunal held that once the quantum addition itself had been deleted in the connected appeal, no question survived regarding levy of tax at either the earlier or the enhanced rate on that addition. It further observed that, even otherwise, the issue regarding application of the amended rate stood covered by the Madras High Court decision in S.M.I.L.E. Microfinance Ltd. [2024 (11) TMI 1444 - MADRAS HIGH COURT]. [Paras 18]

The rectification order enhancing the tax rate was set aside and the assessee's appeal was allowed.

Final Conclusion: Both appeals were allowed. The addition under section 69A in respect of demonetisation cash deposits was deleted on acceptance of the explained source, and the consequential rectification applying the higher tax rate under section 115BBE was also set aside.

Validity of revision order u/s 263 - granting only one day's time to respond to the show cause notice -shorter period to respond -violation of the principles of natural justice without affording adequate and reasonable opportunity of hearing to the assessee - difference of opinion among JM and AM - matter refered to third party

HELD THAT: - The majority held that the assessee was not afforded a reasonable and sufficient opportunity to respond to the revision notice, since the notice dated 27.03.2022 was issued on 28.03.2022, fixed compliance by 29.03.2022, and the ex parte revision order was passed on 31.03.2022.

Such truncated time did not satisfy the requirement of hearing implicit in the exercise of revisionary power and amounted to violation of audi alteram partem.

The Third Member agreed with the Judicial Member that this defect was procedural and curable, not a ground to terminate the revision proceedings altogether. Relying on the principle that breach of natural justice vacates the defective order without extinguishing the underlying proceedings, the majority directed restoration of the matter to the PCIT for fresh decision after adequate opportunity. The Accountant Member had taken a different view, holding that the reassessment order reflected adequate inquiry and that the revision order deserved to be quashed on merits; however, that view did not prevail. [Paras 6, 7, 8, 10, 11]

By majority, the revision order was set aside for breach of natural justice and the matter was remanded to the PCIT for fresh adjudication after affording sufficient opportunity of hearing, without being influenced by observations on merits.

Final Conclusion: By majority, the Tribunal held that the revision order was rendered unsustainable for breach of natural justice, as no reasonable opportunity of hearing had been afforded before action under section 263. The impugned order was accordingly set aside and the matter remanded to the PCIT for fresh decision in accordance with law, uninfluenced by observations on merits.

Exemption u/ss 11 and 12 - Retrospective benefit of registration to pending assessments - Exemption of disclosed donation income of religious trust - Prospective application of special tax rate u/s 115BBE on unexplained income

Benefit of subsequent registration to earlier pending assessment - Proviso to section 12A(2) - whether assessee was entitled to claim exemption under sections 11 and 12 for the year under appeal despite registration under section 12AA having been granted subsequently? - HELD THAT: - The Tribunal held that the proviso to section 12A(2), read harmoniously with CBDT Circular No. 1/2015, extends the benefit of registration granted in a subsequent year to earlier assessment years where assessment proceedings were pending on the date of registration, provided the objects and activities remained the same. Since the trust had obtained registration before completion of the assessment and there was no finding that its objects or activities for the year under appeal differed from those on the basis of which registration was granted, denial of exemption solely for want of registration in that year was unsustainable. [Paras 12]

Exemption under sections 11 and 12 was held allowable on the strength of the registration already granted under section 12AA.

Section 68 addition on disclosed donations - Donation receipts for religious activities - HELD THAT: - The Tribunal found that the impugned receipts were disclosed by the assessee as donation income in its return and in the income and expenditure account, and were supported by ledger accounts, donor details and sample receipts. The audited books and cash book had not been rejected, nor had the Revenue raised any doubt about the trust's religious objects or activities. In these circumstances, the donations could not be treated as unexplained cash credits merely on conjectures, and, once the benefit of sections 11 and 12 was available by virtue of the proviso to section 12A(2), exemption in respect of such donation income used for the trust's religious activities could not be denied. [Paras 14, 15, 16]

The donation addition under section 68 was deleted and the assessee was held entitled to exemption in respect of that income.

Prospective operation of section 115BBE - Special tax rate for A.Y. 2017-18 - HELD THAT: - Relying on the decision of the Hon'ble Madras High Court in S.M.I.L.E Microfinance Ltd [2024 (11) TMI 1444 - MADRAS HIGH COURT] the Tribunal held that the provision applying the higher rate operates prospectively from 01.04.2017 and therefore applies only from assessment year 2018-19 onwards. The Revenue was consequently not entitled to subject the income for the year under appeal to the special rate and could tax it only under the normal provisions of the Act. [Paras 17]

Application of section 115BBE to the income for A.Y. 2017-18 was rejected.

Final Conclusion: The Tribunal allowed the appeal, holding that the subsequent grant of registration under section 12AA enured to the benefit of the assessee for the pending assessment year, the disclosed donations for religious activities could not be added under section 68, and the special rate under section 115BBE was inapplicable to A.Y. 2017-18.

Deductibility of employee bonus expenditure - Admission and consideration of additional evidence in first appeal - Penalty for under-reported income consequent to deleted disallowance

Disallowance of Employee bonus expenditure - Additional evidence before first appellate authority - HELD THAT: - The Tribunal held that, though the assessee had not furnished the bonus details before the Assessing Officer, those details were available before the appellate authority and were expressly noticed in the appellate order. Once it stood recorded that the bonus was shown in the profit and loss account and audit report and that the entries were maintained in a separate bonus ledger, there was no justification to sustain the disallowance merely because the bonus did not appear in the salary ledger. The Tribunal further held that the appellate authority did not properly exercise the power relating to additional evidence or follow the required procedure of giving the AO an opportunity to examine it. Even otherwise, on merits, the disallowance could not be sustained. [Paras 7, 8]

The disallowance of bonus paid to employees was directed to be deleted.

Penalty for under-reported income - Consequential penalty - HELD THAT: - The Tribunal treated the penalty as purely consequential to the quantum addition based on disallowance of bonus. Since the disallowance itself had been deleted in the connected quantum appeal, the very basis of the penalty ceased to exist. [Paras 10]

The penalty was deleted.

Final Conclusion: The Tribunal allowed both appeals. The disallowance of bonus paid to employees was deleted, and the consequential penalty for under-reported income was also set aside.

Deduction u/s 80P(2)(a)(i) - Interest from cooperative banks - Business income of credit cooperative society - Interest earned by the assessee cooperative society on deposits or investments with cooperative banks - HELD THAT: - The Tribunal held that, for a cooperative society primarily engaged in accepting deposits from and providing credit facilities to its members, the determinative question was whether interest received from cooperative banks retained the character of business income attributable to that activity. It found that the issue stood covered in favour of the assessee by decisions of the Karnataka High Court like M/S. JUDICIAL EMPLOYEES HOUSE BUILDING COOPERATIVE SOCIETY LIMITED [2025 (10) TMI 770 - KARNATAKA HIGH COURT] and TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LIMITED [2015 (2) TMI 995 - KARNATAKA HIGH COURT]

On noticing that conflicting decisions of the same High Court were cited, the Tribunal adopted the view that the decision having facts closer to the case before it should be followed. Since the present facts were found closer to the decisions relied upon by the assessee, the interest income was treated as eligible for deduction under section 80P(2)(a)(i) and not excluded merely because it arose from deposits with cooperative banks. [Paras 14, 16, 17]

The assessee was entitled to deduction under section 80P(2)(a)(i) on the interest income from cooperative banks, and the Assessing Officer was directed to grant the deduction.

Final Conclusion: The Tribunal allowed the assessee's claim for deduction u/s 80P(2)(a)(i) in respect of interest earned from deposits with cooperative banks, holding such interest to be business income attributable to the activity of providing credit facilities to members. The appeal was accordingly partly allowed.

Unexplained investment u/s 69 - reliance on loose paper/Dumb document - Unexplained money - Stock shortage and presumed out-of-book sales - Natural justice in use of third-party material

Unexplained investment - Dumb document relied upon -Presumption from seized material - Addition for alleged unexplained investment based on a loose paper showing a debit balance in the name of another person - HELD THAT: - The Tribunal held that the impounded paper was an undated and unsigned group summary of sundry debtors in the name of some "PS" and, therefore, had the character of a dumb document.

The amount treated by the AO as the assessee's unexplained investment was shown therein as a debit balance in the name of "Nirmal Bhai" and not in the name of the assessee. On the face of the document itself, such entry could not be treated as the assessee's undisclosed investment, and no further inquiry had been made to link either the document or the entry to the assessee.

The addition under section 69 for alleged unexplained investment was deleted.

Unexplained money - Ownership of money or valuable article - Dumb document/figure written on a loose paper relied upon - HELD THAT: - The Tribunal held that section 69A applies only where the assessee is found to be the owner of money, bullion, jewellery or other valuable article not recorded in the books. In the present case, no such asset was found from the assessee during search, and the AO had only relied on a figure appearing in the loose paper as alleged profit. As the AO had not established either the nature of the activity or that the figure represented money owned by the assessee, the addition could not be brought to tax as unexplained money under section 69A.

The addition under section 69A in respect of the alleged profit noted on the loose paper was deleted.

Stock shortage and presumed out-of-book sales - Assessment based on presumption - Job work stock - Gross profit addition on alleged out-of-book sales based solely on shortage of stock found during search - HELD THAT: - The Tribunal held that the Assessing Officer had made the addition purely on presumption by treating the stock shortage as out-of-book sales and applying the gross profit rate. The assessee had produced evidence showing that the stock had been issued to karigars for job work, which was a plausible and normal explanation in that line of business, and the Assessing Officer did not refute that evidence. Since assessment cannot rest on suspicion or presumption alone, the gross profit addition based on alleged stock shortage could not stand.

The addition made by applying gross profit on the alleged stock shortage was deleted.

Natural justice in use of third-party material - Unexplained money - Third-party WhatsApp material and police material without supplying the material in full or permitting cross-examination - HELD THAT: - The Tribunal found that the impugned addition was founded on WhatsApp material recovered from the mobile phone of another person in a police case, while no money, bullion or other valuable article was found from the assessee during search. The Assessing Officer neither provided the underlying police material in full nor afforded the assessee the requested cross-examination of the third party. In these circumstances, the principles of natural justice barred use of such third-party material against the assessee, and section 69A was inapplicable in the absence of any asset found in the assessee's ownership.

The addition for alleged betting income treated as unexplained money under section 69A was deleted.

Final Conclusion: The Tribunal allowed the assessee's appeal and deleted all the disputed additions. It held that the loose paper relied upon by the Assessing Officer was not sufficient to sustain additions under sections 69 or 69A, that the stock-shortage addition rested on mere presumption, and that the betting-related addition based on third-party material violated natural justice.

Validity of Reassessmentfor want of notice u/s 143(2) - non issuance of Mandatory notice u/s 143(2) - Return treated as filed in response to notice u/s 148 - Jurisdictional defect

HELD THAT: - As assessee had requested the Assessing Officer to treat the return already filed as the return in response to notice under section 148. Once such return was to be acted upon, issuance of notice under section 143(2) became mandatory.

Following the coordinate Bench decision in the assessee's wife's case [2026 (1) TMI 1309 - ITAT AGRA], which had applied the principle laid down in ACIT vs. Hotel Blue Moon[2010 (2) TMI 1 - SUPREME COURT] the Tribunal held that omission to issue notice under section 143(2) is not a mere procedural irregularity but a fatal and incurable defect. The reassessment proceedings were therefore vitiated, and the grounds on merits were left open as academic. [Paras 6, 11]

The additional legal ground was accepted, the reassessment was quashed as without jurisdiction, and the remaining grounds on merits were left open.

Final Conclusion: The appeal was allowed on the legal ground that absence of notice under section 143(2), after the return was sought to be treated as filed in response to notice under section 148, rendered the reassessment void. The Tribunal did not examine the merits and left those grounds open.

Penalty u/s 271(1)(c) - disallowance of deduction u/s 36(1)(viia) towards provision for bad and doubtful debts - Bona fide claim with full disclosure - whether incorrect claim not amounting to inaccurate particulars?

HELD THAT: - The Tribunal found that the assessee had created the provision for doubtful debts in accordance with RBI prudential norms and that the excess claim arose because of the complexity of the computation. It further recorded that the assessee had made complete disclosure of the claim in the financial statements as well as in the return of income. On that factual foundation, the Tribunal held that the claim was bona fide, and applying Reliance Petroproducts P. Ltd. [2010 (3) TMI 80 - SUPREME COURT] and Vodafone Essar South Ltd. [2012 (12) TMI 70 - DELHI HIGH COURT] held that a mere incorrect or disallowed claim, when made with full disclosure, does not amount to furnishing inaccurate particulars so as to attract penalty. [Paras 13]

The penalty was held to be not leviable and was deleted.

Final Conclusion: The Tribunal allowed the appeal and deleted the penalty. It held that the excess claim of provision for doubtful debts, having been made bona fide and with full disclosure, could not be treated as furnishing inaccurate particulars of income.

Enhancement by Commissioner (Appeals) in reassessment - New source of income - Failure of recorded reason for reopening - Indexed cost of construction for residential house property - Deduction u/ss 54/54F despite non-deposit in Capital Gain Account Scheme

Enhancement by Commissioner (Appeals) in reassessment - New source of income - Failure of recorded reason for reopening - validity of Commissioner (Appeals) enhancing the reassessment by taxing long-term capital gain from sale of the Manesar property when the reassessment had been initiated only to examine the source of investment in the Panchkula property and the original addition on that issue had itself been deleted - HELD THAT: - The Tribunal found that the entire reassessment was confined to the alleged unexplained investment in the Panchkula property, and neither the recorded reasons, nor the notices issued, nor the reassessment order examined the taxability of capital gain arising from sale of the Manesar property. The enhancement therefore introduced a new source of income which had never been considered by the Assessing Officer. Relying on the decisions of the Hon'ble Supreme Court in CIT Vs. Rai Bahadur Hardutroy Motilal Chamaria [1967 (4) TMI 8 - SUPREME COURT], CIT Vs. Shapoorji Pallonji Mistry[1962 (2) TMI 12 - SUPREME COURT], and CIT Vs. Sardari Lal & Co. [2001 (9) TMI 1130 - DELHI HIGH COURT], the Tribunal held that the appellate power of enhancement, though wide, does not extend to bringing to tax an altogether new source. It further held that once no addition survived on the issue for which reopening was made, income on unrelated issues could not independently be assessed in reassessment, as explained in Ranbaxy Laboratories Ltd. Vs. CIT [2011 (6) TMI 4 - DELHI HIGH COURT] and CIT Vs. Jet Airways (I) Ltd. [2010 (4) TMI 431 - BOMBAY HIGH COURT]. The decision in CIT Vs. Smt. Aruna Luthra [2001 (8) TMI 84 - PUNJAB AND HARYANA HIGH COURT] was distinguished as dealing with rectification under section 154 and not with the scope of enhancement under section 251 in reassessment proceedings. The Tribunal also held that section 251 could not be construed so as to defeat the statutory limitations governing reassessment or to permit the appellate authority to do indirectly what the Assessing Officer could not do directly. [Paras 22, 23, 24, 25, 26]

The enhancement of long-term capital gain by the Commissioner (Appeals) was held to be beyond jurisdiction and was deleted.

Indexed cost of construction for residential house property - Residential house versus vacant plot - nature of property sold at Manesar - residential house property or vacant plot - HELD THAT: - The Tribunal held that the finding of the Commissioner (Appeals) that only a vacant plot had been sold was unsustainable. The sale deed itself described the asset as a residential house plot, and the occupation certificate issued by the competent authority evidenced completion of construction and fitness for occupation. The approved building plans, housing loan documents, valuation report and other supporting material consistently established the existence of substantial residential construction on the property before sale, and no contrary material had been produced by the Revenue. On that evidentiary basis, the Tribunal concluded that the transferred asset was a residential house property and that indexed cost of construction or improvement could not be denied on assumptions. [Paras 28, 29, 30, 31, 32]

The assessee was held entitled to indexed cost of construction or improvement while computing the capital gain.

Deduction under sections 54/54F despite non-deposit in Capital Gain Account Scheme - Liberal construction of beneficial exemption provisions - Deduction under sections 54/54F denied merely because the unutilized amount had not been deposited in the Capital Gain Account Scheme, where the sale consideration had been substantially invested in purchase and construction of a residential house within the prescribed period- HELD THAT: - The Tribunal found that after sale of the original residential property, the assessee purchased the Panchkula plot and constructed a residential house thereon within the statutory period, and documentary evidence of such investment was on record. The sole ground for denial of deduction was non-deposit of the unutilized amount in the Capital Gain Account Scheme before the due date under section 139(1). The Tribunal held that such technical non-compliance could not defeat the exemption when the substantive investment condition stood satisfied, following CIT Vs. Sambandam Udaykumar [2012 (3) TMI 80 - KARNATAKA HIGH COURT] and CIT Vs. R.L. Sood [1999 (9) TMI 27 - DELHI High Court]. Treating sections 54 and 54F as beneficial provisions requiring liberal construction, it held that substantial compliance through timely investment in the new residential property entitled the assessee to the deduction. [Paras 33, 34, 35, 36, 37]

The assessee was held entitled to deduction under sections 54/54F, and the denial thereof was set aside.

Final Conclusion: The Tribunal allowed the assessee's appeal. It held that the Commissioner (Appeals) lacked jurisdiction to enhance the reassessment by taxing a new and unrelated source of income, and further held on merits that the assessee was entitled both to indexed cost of construction and to deduction under sections 54/54F.

Ex gratia received under the BSNL Voluntary Retirement Scheme, 2019 - Exemption of BSNL Voluntary Retirement Scheme compensation as retrenchment compensation u/s 10(10B) - distinction between a "Going Concern" in revival and an undertaking in liquidation.

HELD THAT: - The Tribunal held that the controversy was already covered by the Coordinate Bench decision on identical facts involving BSNL employees, like JAYESHKUMAR TULSIDAS SUTARIA [2026 (2) TMI 930 - ITAT AHMEDABAD], MEGHMALA SUDHIR PATHAK [2026 (4) TMI 1111 - ITAT PUNE], VISHNU MOHAN T NAIR [2018 (1) TMI 324 - ITAT AHMEDABAD] and HARISH KUMAR [2025 (6) TMI 1622 - ITAT CHANDIGARH]

That decision had condoned the delay and treated the ex gratia compensation received under the BSNL Voluntary Retirement Scheme, 2019 as exempt under section 10(10B), and not as a limited exemption claim u/s 10(10C). As no contrary High Court decision was shown, and the assessee stood on the same footing in relation to the same employer and substantially similar circumstances, the Tribunal respectfully followed the earlier view and directed the Assessing Officer to grant the exemption accordingly. [Paras 14, 15]

The orders refusing relief were not sustained; the assessee was granted exemption on the ex gratia compensation in accordance with the Coordinate Bench decision.

Final Conclusion: Following the Coordinate Bench decisions on identical BSNL VRS facts, the Tribunal allowed both appeals and directed grant of exemption on the ex gratia compensation. The assessee succeeded for both assessment years.

Transfer pricing of intra-group services - Arm's length price determined at nil - Binding nature of co-ordinate Bench decision

Transfer pricing of intra-group services - Arm's length price determined at nil - Rendition of services - TP adjustment in respect of PTSE services, IT support services and centralized support services sustained by determining the arm's length price at nil - HELD THAT: - The Tribunal found that the impugned adjustment arose from determination of the arm's length price of the intra-group services at nil. It noted that, on materially identical facts in the assessee's own earlier year [2025 (9) TMI 1484 - ITAT MUMBAI], the co-ordinate Bench had examined the agreements, invoices, emails, cost allocation workings, third-party evidences and the benefit derived, and had held that the assessee had satisfactorily established the rendition of services and that determination of the arm's length price at nil had no sustainable basis. For the year under consideration also, no distinguishing feature was brought on record by the revenue. On that footing, the adjustment was held to be unsustainable. [Paras 9]

The transfer pricing adjustment in respect of PTSE services, IT support services and centralized support services was directed to be deleted.

Binding nature of co-ordinate Bench decision - Judicial discipline - Pendency of appeal - HELD THAT: - The Tribunal held that mere filing of an appeal by the revenue against the earlier co-ordinate Bench decision did not dilute its binding effect in the absence of any stay or reversal by a superior forum. Since the facts for the present year were materially identical and no distinguishing feature was shown, the earlier decision had to be respectfully followed. The approach of keeping the issue alive despite an existing binding decision was therefore not accepted. [Paras 9]

The directions sustaining the adjustment contrary to the binding earlier order were set aside.

Final Conclusion: The Tribunal allowed the appeal and deleted the entire transfer pricing adjustment relating to PTSE services, IT support services and centralized support services. It held that the earlier co-ordinate Bench decision on identical facts was binding and could not be disregarded merely because the revenue had carried the matter in appeal.

Supplementary notice under customs law - Corrigendum introducing fresh allegations after conclusion of hearing - Prospective operation of amended recovery provisions

Supplementary notice under customs law - Prospective operation of amended recovery provisions - power to issue a supplementary notice under section 28(7A) and the Customs (Supplementary Notice) Regulations, 2019 - HELD THAT: - The Court held that the department could not rely on the later-inserted provision enabling supplementary notice, since Explanation 4 to section 28 expressly preserves the pre-amendment regime for notices issued prior to 29-03-2018. As the show cause notice in question had been issued in 2014, it had to continue to be governed by section 28 as it stood before that date. The Court further held that a corrigendum introducing fresh allegations and evidence could not be treated as a supplementary notice under the 2019 Regulations. The reliance placed on Sandeep Kumar Dikshit [2024 (3) TMI 511 - CALCUTTA HIGH COURT] was not accepted, as that decision was found to turn on section 124 and not on section 28(7A). [Paras 14, 15]

The amended supplementary-notice mechanism was held unavailable to the respondents in respect of the 2014 notice.

Corrigendum introducing fresh allegations after conclusion of hearing - Adjudication under show cause notice - Time limit for determination of duty - HELD THAT: - The Court found that the adjudication proceedings had concluded on completion of the final hearing, and this factual position was not controverted by the respondents. Clause 19 of the show cause notice, reserving a right to amend, modify or supplement the notice on further evidence, was construed as operating only prior to adjudication; it could not justify introduction of a new case when the matter had already reached the stage of final order. The Court also relied on the scheme of section 28(4), (8) and the then prevailing section 28(9)(b), under which the proper officer, after hearing the noticee and considering the representation, was required to determine duty within the prescribed period where possible. Since the department offered no explanation why final determination was not made and instead sought, long thereafter, to introduce fresh material concerning another entity, the corrigendum was liable to be ignored at the stage of final adjudication. [Paras 11, 16, 17, 18, 19]

The impugned corrigendum was held unsustainable and was directed to be ignored while passing the final order on the original show cause notice.

Final Conclusion: The writ petition was allowed. The respondents were directed to pass the final order on the show cause notice dated 10.04.2014 without taking into account the corrigendum dated 22.08.2016.

Seeking permission of export of sugar consignments - scope of Notification No. 16/2026-27 dated 13.05.2026 issued by the Government of India, Ministry of Commerce & Industry, Department of Commerce (Directorate General of Foreign Trade) regulating the export policy of sugar - petitioner made a representation to the Commissioner of Customs, Kandla Customs Commissionerate, requesting for permitting the export and issuance of Let Export Order (LEO) against the shipping bills

HELD THAT:- We accede to the request made by Petitioner. Looking to the approach of monsoon and in light of the nature of the product, we direct that the Representation dated 27.05.2026 written by the petitioner to the Director General of Foreign Trade shall be decided with reasons, in accordance with law, within a period of two weeks and same shall be conveyed to the petitioner.

Reason to believe for customs seizure - Seizure of areca nuts on suspicion of foreign origin - Jurisdictional precondition for confiscation-linked seizure

Whether the seizure of the areca nuts under Section 110(1) of the Customs Act, 1962 was supported by legally sustainable "reasons to believe" that the goods were liable to confiscation under Section 111 of the Customs Act, 1962? - HELD THAT: - The Court held that Section 110(1) could be invoked only where the proper officer had reason to believe, founded on relevant material, that the goods were liable to confiscation under Section 111, which in the present context required material indicating that the goods had been brought from outside India.

Drawing from Income Tax Officer, I Ward, Dist, Vi, Calcutta & Ors Vs. Lakhmani Mewal Das, Asstt. Collector Of Customs Vs. Charan Das Malhotra [1971 (2) TMI 41 - SUPREME COURT] and Radhika Agarwal Vs. Union of India & Ors. [2025 (2) TMI 1162 - SUPREME COURT (LB)] the Court emphasised that reason to believe is distinct from mere suspicion and must rest on a live link or rational nexus between the available material and the belief formed. On the record, the seizure inventory did not disclose any basis for believing that the areca nuts were of foreign origin; nor were any contemporaneous materials produced to show that their size, features or any test report indicated foreign origin. The documents on record, including tax invoices, GST payment details and e-way bill, supported lawful intra-State movement pursuant to sale. The laboratory report only showed that the goods were fit for human consumption, and nothing on record established foreign origin.

Since the material at best gave rise to suspicion, the jurisdictional condition for seizure was absent, Section 111 was not attracted, and the exercise of power u/s 110 was without jurisdiction. [Paras 25, 26, 27, 28, 29]

The seizure of the areca nuts and the truck was held to be without jurisdiction; the seizure was quashed, release was directed forthwith, and the proceedings were to be closed unless fresh material came into possession of the authorities.

Final Conclusion: The writ petition was allowed to the extent that the impugned seizure was held to be without jurisdiction for want of material constituting reason to believe. The seized areca nuts and truck were directed to be released, and the proceedings founded on the seizure were directed to be brought to a close unless fresh material emerged.

Provisional release of seized vehicle - Conditions for release not frustrating criminal court custody order - customs authority's power to impose conditions for release of a seized vehicle - HELD THAT: - The Court held that a plain reading of Section 110A of the Customs Act, 1962 permits the customs authority to impose conditions for release of seized goods or things. However, that statutory power is not unqualified in its exercise against an existing lawful order of the criminal court. Since the Chief Judicial Magistrate had directed release of the vehicle on execution of a bond, the further condition imposed by the Superintendent requiring a security deposit equivalent to not less than 30% of the vehicle's value was found to frustrate that judicial direction and was therefore impermissible. [Paras 9, 10, 11]

The condition requiring deposit of not less than 30% of the vehicle's value was set aside, and release was directed on execution of the bond specified by the Chief Judicial Magistrate.

Final Conclusion: The petition was disposed of by holding that, although customs authorities may impose conditions for provisional release under the Customs Act, such conditions cannot nullify or frustrate a lawful custody order of the criminal court. The vehicle was directed to be released on execution of the bond already stipulated by the Chief Judicial Magistrate.

Anti-dumping duty for imports made during subsistence of notification - Manufacture under EXIM Policy - 100% EOU clearance into Domestic Tariff Area - Mandatory penalty for suppression of facts - Assessable value for CVD and SAD - Adjustment of excise duty against customs duty

Expiry of anti-dumping notification - Liability incurred during currency of notification - Recovery of non-levied duty - Demand of anti-dumping duty for imports made during the operation of the notification recoverability even though the show-cause notice was issued after the notification had expired - HELD THAT: - The Court held that the anti-dumping duty liability arose on importation of the goods during the subsistence of the notification issued under Section 9A(1). The expiry of the notification on completion of its tenure did not erase liabilities already incurred for the period when it remained in force. By virtue of Section 9A(8), the recovery provisions of the Customs Act applied to such duty, and recovery could be effected for non-levy in respect of imports made during the currency of the notification. The appellant's reliance on principles relating to repeal and saving was rejected as misconceived, since the case did not concern levy for a period after expiry of the notification, but enforcement of liability already attracted during its operation. [Paras 105, 106, 107, 108, 109]

The anti-dumping duty demand for imports covered by the notification before its expiry was upheld.

Manufacture under EXIM Policy - Mere relabelling - Distinct product test - whether appellant had not subjected the imported goods to manufacture within the meaning of the EXIM Policy and was therefore not entitled to the benefit claimed as a 100% EOU? - HELD THAT: - The Court construed the definition of 'manufacture' in the EXIM Policy as expansive, but not as treating isolated acts like labelling, refrigeration or segregation as sufficient in themselves irrespective of outcome. The inclusive processes mentioned after the words 'such as' had to be read in conjunction with the substantive part of the definition requiring a process that brings into existence a new product having a distinctive name, character or use. On the facts, the Court accepted the concurrent findings based on the departmental test report and other material that the input and output were the same and that no manufacturing or processing had taken place. The appellant's later case that mere relabelling amounted to manufacture was treated as an afterthought, particularly when no material was produced to establish even repacking or relabelling as the actual process undertaken. [Paras 144, 145, 146, 147, 148]

The finding that no manufacture had been undertaken was affirmed, and the appellant was held disentitled to the exemption benefit.

100% EOU exemption from anti-dumping duty - Section 9A(2A) - DTA clearance of imported goods as such - exclusion from anti-dumping duty under Section 9A(2A) available where a 100% EOU cleared the imported goods into the Domestic Tariff Area without undertaking the required manufacture and without fulfilling the conditions of import- HELD THAT: - The Court held that Section 9A(2A) creates an exception for imports by a 100% EOU, but that protection could not be invoked where the very conditions on which the EOU imported the goods were breached. Since the appellant had imported the goods duty-free as raw material for manufacture and export, but in fact diverted the goods into the Domestic Tariff Area without manufacturing, the statutory exclusion could not be used to defeat levy of anti-dumping duty. The Court therefore rejected the Tribunal's view that, after 11.05.2001, anti-dumping duty was not leviable in the absence of a specific notification covering 100% EOUs in the circumstances of the present case. [Paras 151, 152, 153, 154, 155]

The Tribunal's setting aside of anti-dumping duty for the period subsequent to 11.05.2001 was reversed and the duty demand was restored.

Penalty under Section 114A - Willful misstatement or suppression - Reduced penalty option - HELD THAT: - The Court found the present case to be one of willful misstatement and suppression, since the appellant had obtained duty-free import as a 100% EOU on the representation of manufacture but cleared the goods into the Domestic Tariff Area without undertaking such process. In that situation, Section 114A operated mandatorily and left no discretion with the Tribunal to reduce the penalty merely on the ground that it was excessive. However, as no option had been given by the adjudicating authority to avail the benefit of the provisos to Section 114A, the Court extended to the appellant the statutory option to pay reduced penalty at the prescribed rate along with duty and interest within thirty days from receipt of the order. [Paras 160, 161, 162, 163, 171]

The Tribunal's reduction of penalty to 10% was set aside, the penalty equal to duty was restored, and the appellant was granted the statutory option to pay reduced penalty upon timely payment.

Assessable value for CVD and SAD - Exclusion of anti-dumping duty - HELD THAT: - The Court accepted the legal position that anti-dumping duty is a separate levy and is not to be added while computing the assessable value for CVD and SAD. Relying on the law noticed by it, the Court held that even prior to the express amendments excluding anti-dumping duty, such duty was not includible in the value for additional and special additional duty. [Paras 172, 173, 174]

The Tribunal's exclusion of anti-dumping duty from the assessable value for CVD and SAD was affirmed.

Adjustment of excise duty against customs duty - DTA clearances by 100% EOU - Excise duty paid on Domestic Tariff Area clearances adjusted or abated against the customs and anti-dumping duty demand arising from removal of the imported goods as such - HELD THAT: - The Court held that the claim for adjustment was untenable because the duties were of different nature and no statutory provision permitting such adjustment was shown. It further accepted the reasoning that the concessional excise regime invoked by the appellant was available only for manufactured goods, whereas the finding in the case was that the imported raw material had been cleared without manufacture. Once anti-dumping and customs duty became payable on account of impermissible removal of the imported goods into the Domestic Tariff Area, the excise duty paid for those clearances could not be set off against that customs liability. [Paras 183, 184, 185, 186, 187]

The writ petition challenging denial of adjustment or abatement was dismissed.

Final Conclusion: The assessee's appeal failed on the core challenge to levy and on the finding that no manufacture had been undertaken. The revenue's appeal succeeded on levy of anti-dumping duty for the period subsequent to 11.05.2001 and on restoration of penalty under Section 114A, subject to the statutory option of reduced penalty on timely payment, while the Tribunal's view excluding anti-dumping duty from the assessable value for CVD and SAD was affirmed. The connected writ petition seeking adjustment of excise duty paid on DTA clearances was dismissed.

Condonation of delay - Sufficient cause - Substantial justice over technicalities - Appeal against customs penalty and confiscation proceedings - Delay in filing the appeal before CESTAT against the order-in-original arising from show cause notice relating to alleged pilferage of imported jewellery - HELD THAT: - The Court held that CESTAT was not justified in dismissing the appeal solely on the ground of delay without properly appreciating the cause shown. It found that the petitioner had explained the delay on the basis of the ongoing disinvestment and merger process, and that such explanation was believable and sufficient.

The Court reiterated that condonation of delay depends on the facts of each case, that the discretion must be exercised on the basis of sufficient cause, and that a pragmatic, justice-oriented approach should be adopted so that a meritorious matter is not defeated on technicalities where there is no negligence, mala fide, or deliberate delay. [Paras 9, 11, 12]

The delay of 324 days was condoned, the order refusing condonation was set aside, and the matter was remitted to CESTAT for consideration of the appeal on merits.

Final Conclusion: The High Court held that the explanation for the delayed appeal constituted sufficient cause and that the Tribunal had erred in rejecting the appeal on limitation alone. The impugned order was set aside, the delay was condoned, and the appeal was restored to CESTAT for decision on merits.

Classification of glucometers - Chemical analysis of blood glucose - Competing tariff entries for diagnostic devices - heading under 9027 or under 9018

Whether glucometers are classifiable under Heading 90.27 as instruments and apparatus for physical or chemical analysis, or under Heading 90.18 as instruments and appliances used in medical, surgical, dental or veterinary sciences? - HELD THAT: - The Tribunal held that a glucometer measures glucose concentration in blood by analysing the chemical or enzymatic reaction occurring on the test strip and converting that reaction into a blood glucose reading. Its essential function is therefore chemical analysis of a biological sample. The fact that the device is used in the medical field does not, by itself, bring it within the tariff entry for medical instruments when a more appropriate entry exists describing its analytical function. The Tribunal also rejected the premise that the device lacked diagnostic character, holding that measurement of blood glucose itself constitutes the diagnostic step enabling treatment.

This view was found consistent with the earlier Tribunal decision in Bayer Pharmaceuticals Pvt. Ltd. [2015 (11) TMI 943 - CESTAT MUMBAI] and its approval in M/s. Ascentia Diabetes Care India Pvt. Ltd. [2022 (11) TMI 871 - BOMBAY HIGH COURT], followed again in M/s. Abboott Healthcare Pvt. Ltd. [2026 (3) TMI 311 - SC ORDER] in that background, the Commissioner (Appeals) was held justified in accepting classification under CTH 9027. [Paras 13, 14, 15, 16, 17]

The goods in issue were held classifiable under CTH 9027, and the Revenue's contention for classification under CTH 90189099 was rejected.

Final Conclusion: The Tribunal held that glucometers are classifiable under CTH 9027 as instruments for chemical analysis and not under the tariff entry for medical instruments. The order of the Commissioner (Appeals) was upheld and the Revenue's appeal was dismissed.

Classification of imported parts and accessories for dialysis machines - parts and accessories suitable for use solely or principally with medical devices - Binding nature of departmental circulars - CTH 9018 as or CTH 9033 - HELD THAT: - Applying Chapter Note 2(b) to Chapter 90 read with GIR 1, the Tribunal held that parts and accessories suitable for use solely or principally with a particular medical apparatus are to be classified with that apparatus, while heading 9033 operates only as a residual entry for parts not specified or included elsewhere in Chapter 90. Since the imported goods were parts and accessories of kidney dialysis apparatus, they fell under heading 9018.

The Tribunal further relied on Circular No. 113/32/2019-GST, which specifically clarified that parts and accessories suitable for use solely or principally with medical devices falling under heading 9018 attract 12% IGST, and held that the circular was binding on departmental officers even if it had not been specifically cited before the adjudicating authority.

The Tribunal also found the issue covered by Aloka Trivitron Medical Technologies Private Limited [2024 (3) TMI 1000 - SC ORDER]. On that basis, the demand founded on reclassification to heading 9033 failed, and the confiscation, redemption fine and penalties, being purely consequential, also could not survive. [Paras 7, 8, 9]

The imported goods were held classifiable under heading 9018 with 12% IGST, and the entire demand along with confiscation, redemption fine and penalties was set aside.

Final Conclusion: The Tribunal held that the imported parts and accessories of the dialysis apparatus were correctly classifiable under heading 9018 and liable to IGST at 12% in terms of the statutory notes and the binding departmental circular. The contrary reclassification under heading 9033, and the consequential demand, confiscation, redemption fine and penalties, were therefore set aside and the appeal was allowed.

Classification of calcined kaolin clay or aluminium silicate -CTI 2507 0029 v/s CTI 2839 9090 - Scope of Chapter 25 for kaolin and other kaolinic clays whether or not calcined - Separate chemically defined compounds under inorganic chemicals heading

HELD THAT: - Applying GIR 1 and the relevant Chapter Notes, the Tribunal held that Heading 2507 specifically covers kaolin and other kaolinic clays whether or not calcined. The overseas supplier's product information and the chemical test report both showed that the goods were calcined clay mainly composed of aluminium silicate with only trace quantities of other elements. Those trace elements were not found to alter the character of the goods for classification purposes. The test report also did not state that the goods were separate chemical elements or separate chemically defined compounds so as to attract Chapter 28.

Relying on Commissioner of Customs & Central Excise Vs. 20 Microns Limited [2015 (9) TMI 880 - SUPREME COURT] Tribunal held that mere calcination does not take kaolin clay out of Chapter 25 where the tariff entry itself includes such goods whether or not calcined. [Paras 7, 8, 9]

The departmental reclassification under CTI 2839 9090 was rejected and the assessee's declared classification under CTI 2507 0029 was accepted.

Final Conclusion: The Tribunal held that the imported product remained calcined kaolin clay classifiable under CTI 2507 0029, since calcination did not take it outside Chapter 25 and the material was not shown to be a separate chemically defined compound under Chapter 28. The impugned order was therefore set aside and the appeal was allowed.

Disposal of appeal on merits despite non-appearance - Consequential personal penalties

Disposal of appeal on merits despite non-appearance - Ex parte adjudication of statutory appeal - HELD THAT: - Relying on the principle stated by the Supreme Court in Shri Balaji Steel Re-rolling Mills [2014 (11) TMI 531 - SUPREME COURT] the Tribunal held that a statutory appeal cannot be disposed of for default of appearance alone and must be decided on merits. Since the matter was old and further adjournment was declined, the Tribunal proceeded to hear the Revenue and decide the appeals on the available record. [Paras 6, 7]

The Tribunal proceeded to adjudicate the appeals on merits in the absence of the appellants.

Consequential personal penalties - Penalty on persons connected with importer - Effect of remand of principal demand and confiscation - HELD THAT: - The Tribunal found that these appeals contained no independent grounds and merely adopted the grounds taken by Rajasthan Watch in its own appeal. It further found that the penalties on the present appellants were wholly consequential upon the confirmation of duty demand and confiscation ordered against Rajasthan Watch. Since the appeal of Rajasthan Watch had already been remanded to the Commissioner and that remand had not been disturbed, the impugned order against Rajasthan Watch no longer survived. In the absence of any existing confirmation of demand or confiscation against Rajasthan Watch, the consequential personal penalties imposed on the appellants had no surviving foundation and therefore could not be sustained. [Paras 10, 11, 12]

All six personal penalties were set aside.

Final Conclusion: The Tribunal decided the appeals on merits despite the appellants' non-appearance and held that the impugned personal penalties were purely consequential to the order against Rajasthan Watch. Since the principal matter concerning Rajasthan Watch already stood remanded and the foundation for those penalties no longer survived, all six appeals were allowed and the penalties were set aside.

Post-export reassessment of shipping bills - Export valuation and FOB value under DEPB scheme - Confiscation of goods already exported - Penalty for alleged misdeclaration in export documents

Post-export reassessment of shipping bills - Modification of assessed export documents - Rejection of transaction value after Let Export Order - whether Commissioner could not, after assessment of the shipping bills and export of the goods, reject the declared value, re-determine the value, or alter the description of the goods in the shipping bills? - HELD THAT: - The Tribunal held that once the shipping bills were assessed and the proper officer permitted export under the Act, the assessment process stood concluded. After the goods were exported, they ceased to be export goods, and there could be no fresh assessment of such goods. Any modification of the assessment could be made only through modes recognised by law, such as appeal, finalisation of provisional assessment, amendment at the exporter's request, or correction of clerical error. As none of those situations existed, and the department had not appealed against the assessed shipping bills, the Commissioner had no power to reopen the assessment by redetermining value or changing the description of the exported goods. [Paras 8, 9, 10, 11, 12]

The rejection of declared value, redetermination of value, and change in description in the already assessed shipping bills were held to be without authority.

Export valuation and FOB value under DEPB scheme - Denial of DEPB benefit based on redetermined assessable value - Recovery of duty on imports through utilised DEPB scrips - HELD THAT: - The Tribunal held that DEPB scrips were issued by the DGFT as a percentage of the FOB value and not on the assessable value determined by customs under the valuation rules. FOB value represented the transaction value agreed between the exporter and overseas buyer, and re-determination of assessable value by customs did not alter that transaction value. The exporter's obligation to realise foreign exchange also depended on the transaction value and not on any substituted customs value. On that reasoning, the Commissioner erred in denying the DEPB benefit and in ordering recovery of duty to the extent DEPB credit had been used; customs had no authority to issue or deny DEPB scrips. [Paras 13, 14, 15]

The denial of DEPB claim and the consequential recovery of duty based on utilisation of the DEPB scrips were set aside.

Confiscation of goods already exported - Scope of confiscation of export goods - whether Goods already exported could be confiscated under the provision dealing with export goods liable to confiscation? - HELD THAT: - The Tribunal held that the statutory provision applied only to export goods, namely goods which were to be taken out of India. Once the goods had actually been exported, they were no longer export goods within the meaning of the Act. As the Customs Act extends only to India, goods already exported were beyond the scope of confiscation under that provision. The confiscation ordered by the Commissioner was therefore outside the statutory framework. [Paras 16]

The order confiscating goods which had already been exported was unsustainable.

Penalty linked to unsustainable duty demand - Penalty for alleged false declaration in export documents - HELD THAT: - The Tribunal held that penalty under the provision tied to non-payment or short-payment of duty could not survive once the duty recovery itself failed. It further held that mere rejection of declared value by the proper officer did not establish that the exporter had made a false declaration in the export documents, particularly when the declared values were stated to be the transaction values and remittances were claimed to have been realised accordingly. For that reason, the separate penalty for use of false or incorrect material in declarations or documents was also not maintainable. [Paras 17, 18]

Both penalties were set aside.

Final Conclusion: The Tribunal held that the impugned order could not be sustained on any of the grounds on which it proceeded. The order was set aside to the extent it related to the two appellants, and both appeals were allowed with consequential relief.

Restricted import of second-hand electronics and IT goods - Highly Specialised Equipment exemption under compulsory registration regime - Equipment Type Approval based on cogent evidence - Compliance with hazardous waste import conditions for used multi-function devices - Knowledge requirement for penalty for false declaration or document

Restricted import of second-hand electronics and IT goods - Confiscation for absence of DGFT authorisation - Penalty for import of restricted goods without authorisation - HELD THAT: - The Tribunal held that the imported goods were admittedly old and used multi-function devices classifiable as electronics and IT goods. Para 2.31(I)(b) specifically treats second-hand capital goods covered under electronics and IT goods as restricted, and import thereof is permissible only on obtaining DGFT authorisation.

Since no such authorisation had been obtained, confiscation under Section 111(d) was rightly attracted. At the same time, the Tribunal noted absence of clandestine importation or misdeclaration as to description, and therefore sustained confiscation only on this ground while reducing the redemption fine and the penalty on the importer u/s 112(a)(i). [Paras 11, 16, 18, 19]

Confiscation of the goods was sustained solely for import of restricted goods without DGFT authorisation; the redemption fine and penalty on the importer were, however, reduced.

Highly Specialised Equipment exemption under compulsory registration regime - Objective criteria for exemption - HELD THAT: - The Tribunal found that Paragraph 8 of the CRO, 2021 prescribes objective and quantifiable criteria for exemption and does not confine the benefit to any particular sector or specialised end-use. The adjudicating authority was held to have imported restrictions not borne out by the text of the provision. On the material before it, the Tribunal found that the imported MFDs satisfied the stated criteria and that the rejection of the HSE claim could not be sustained. Accordingly, alleged non-compliance with CRO, 2021 could not furnish a ground for confiscation. [Paras 12, 19]

The HSE exemption was allowed, and confiscation could not be sustained on the alleged non-compliance with CRO, 2021.

Equipment Type Approval based on cogent evidence - Optional wireless functionality - Disclosure of adverse material - proof of imported multi-function devices required Equipment Type Approval from WPC - HELD THAT: - The Tribunal found that the Chartered Engineer's opinion on wireless capability was based on brochures and internet sources that were not supplied to the appellant, and even that material only suggested optional wireless functionality in certain models. No independent verification or physical examination was shown to have been undertaken to establish that the imported machines were actually fitted with wireless modules. The Tribunal held that reliance on undisclosed derivative material did not satisfy fair procedure, and that optional wireless capability could not by itself establish a mandatory requirement of WPC approval. In the absence of affirmative proof, this ground could not sustain confiscation. [Paras 13, 19]

The finding regarding mandatory WPC approval was set aside, and this ground was rejected as a basis for confiscation.

Compliance with hazardous waste import conditions for used multi-function devices - Extended Producer Responsibility authorisation - Alternative proof of country-of-origin compliance - HELD THAT: - The Tribunal held that the appellant's valid EPR authorisation could not be disregarded as a mere documentary formality. It further held that, even assuming absence of an exporting country certificate, the Board circular itself recognised post-import inspection by an approved Chartered Engineer, which had been carried out in the present case. The objection regarding annual returns was found inapplicable to a first-time importer after grant of EPR authorisation, and the Department had produced no technical material to displace the appellant's assertion that the machines were capable of A3 printing. The Tribunal also noted the inconsistent reliance placed by the Department on the Chartered Engineer's report in relation to residual life. On the totality of the material, HOW Rules non-compliance was not proved and could not furnish an independent basis for confiscation. [Paras 14, 19]

The findings of violation of the HOW Rules were set aside, and confiscation was held unsustainable on that ground.

Re-determination of value of second-hand goods - Valuation difference and misdeclaration - whether Acceptance of re-determined value of used machinery establish wilful misdeclaration or justify confiscation or penalty? - HELD THAT: - The Tribunal held that valuation of second-hand and used machinery is estimation-based and may vary according to methodology and parameters adopted. A difference between declared value and value re-determined on expert opinion, even if accepted for duty payment, does not ipso facto establish deliberate misdeclaration. As no material indicating contumacious conduct was found, valuation enhancement could not constitute an independent ground for confiscation or penalty. [Paras 15, 19]

The enhanced valuation was left undisturbed, but valuation re-determination was held insufficient by itself to sustain confiscation or penalty.

Knowledge requirement for penalty for false declaration or document - Penalty on Director under Section 114AA - HELD THAT: - The Tribunal held that Section 114AA requires proof that the person knowingly or intentionally made, signed, used, or caused the use of a false or incorrect declaration, statement, or document. The mere fact that the Director's name was allegedly connected on internet sources with the overseas supplier was held insufficient, especially when the overseas supplier and the importer were distinct legal entities transacting on a principal-to-principal basis. The Tribunal further found no evidence that the Director knew of any infirmity in the BIS registrations or had consciously participated in the making or use of any false document. As the essential ingredients of the provision were not established, penalty under Section 114AA was unsustainable. [Paras 17, 19]

The penalty imposed on the Director under Section 114AA was set aside.

Final Conclusion: The Tribunal upheld confiscation of the imported old and used multi-function devices only on the ground that they were restricted second-hand electronics and IT goods imported without DGFT authorisation under Para 2.31(I)(b) of the Foreign Trade Policy, 2023. The other grounds relating to CRO, 2021, WPC approval, HOW Rules and valuation-based misdeclaration were rejected; the redemption fine and penalty on the importer were reduced, and the penalty on the Director under Section 114AA was set aside.

Countervailing duty exemption on imported fabrics - Applicability of excise exemption notification to imports - Conditions incapable of fulfilment by importer

Nil rate of additional duty of customs - Imported polyester woven fabrics - Deemed satisfaction of impossible conditions - whether importer was entitled to the benefit of nil rate of CVD on imported polyester woven fabrics under the excise exemption notification, notwithstanding the condition relating to non-availment of CENVAT credit? - HELD THAT: - The Tribunal held that the controversy stood covered by its earlier decision on similar facts in Aahana Commerce Pvt. Ltd [2025 (6) TMI 1276 - CESTAT KOLKATA] which had applied the principle that, for levy of additional duty on imports, the importer cannot be denied the benefit of an excise exemption on the ground of non-fulfilment of a condition which is inherently incapable of being satisfied in the case of imported goods. Following that ratio, the Tribunal found no infirmity in the appellate order extending the CVD exemption and sustained the same. [Paras 7, 8, 9]

The Revenue's challenge to grant of nil CVD exemption failed and the appellate order was upheld.

Final Conclusion: Following its earlier decision on identical facts, the Tribunal upheld the order granting nil CVD benefit on the imported goods and dismissed the Revenue's appeal.

Transaction value of imported Christmas lights - Enhancement of assessable value on NIDB data - Rejection of declared value under customs valuation rules - Customs valuation procedure - Enhancement of the declared value of imported Christmas lights solely on the basis of NIDB data without valid rejection of transaction value and without following the prescribed valuation procedure

HELD THAT: - The Tribunal held that the controversy stood covered by its earlier decision in M/s. Prabhu Electrical Industries [2025 (2) TMI 1174 - CESTAT KOLKATA] which in turn followed the view that transaction value cannot be discarded without valid reasons and without adherence to the procedure under the customs valuation law. It found that the Department had simply adopted NIDB data and selectively enhanced the value, without establishing any legally sustainable basis to reject the declared transaction value. Following that ratio, the Tribunal accepted that the order of the Commissioner (Appeals) directing assessment at the declared invoice value called for no interference. [Paras 5, 6]

The enhancement of value was rejected and the assessment at the declared transaction value, as directed by the Commissioner (Appeals), was upheld.

Final Conclusion: Following its earlier decision on the same valuation issue, the Tribunal held that the Department's enhancement of value based on NIDB data was not sustainable in law. The Revenue's appeal was accordingly dismissed and the order accepting assessment at the declared transaction value was upheld.

Restoration of company name struck off from register - Validity of Gazette notification for striking off - Alternative statutory remedy and writ maintainability - Limitation for restoration of struck off company

HELD THAT: - The Court held that the Gazette Notification relied upon by the respondents did not pertain to the petitioner's company, since the corporate identification number mentioned therein was different. A notification issued for a different company was treated as a fatal discrepancy, rendering the impugned action void ab initio. The objection of delay was rejected because Section 560(6) expressly permits an application for restoration within twenty years from publication in the Official Gazette, and the petition had been filed within that period. The further objection based on availability of remedy under Section 252(3) of the Companies Act, 2013 was also rejected, as in the absence of any valid Gazette Notification concerning the petitioner's company, the limitation for invoking that remedy had not commenced; the Court also held that existence of such statutory remedy did not bar exercise of writ jurisdiction in the facts of the case. [Paras 5, 6, 7, 8, 9]

The petition was allowed and the name of the petitioner's company was directed to be restored.

Final Conclusion: The Court held that the striking off action was void, since the Gazette Notification relied upon by the respondents related to a different company. The objections of delay and alternative remedy were rejected, and restoration of the company's name was directed.

Deemed conveyance under MOFA - pendency of corporate insolvency resolution proceedings and Moratorium under the Insolvency and Bankruptcy Code - Statutory obligations vis-a-vis insolvency proceedings - Harmonious construction of welfare legislation and insolvency law

Whether pendency of Corporate Insolvency Resolution Proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC) against the promoter can be a reason for the Competent Authority not to exercise jurisdiction under Section 11(3) of Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 (MOFA) and whether Section 14 of the IBC creates a bar for the Competent Authority to grant deemed conveyance in favour of organization of flat purchasers?

HELD THAT: - The Court held that the obligation to convey the land and building to the society arose originally from the promoter's contractual undertaking and statutory duty under MOFA, and that the mechanism of deemed conveyance was enacted to ensure that failure of the promoter to execute the formal conveyance does not defeat the flat purchasers' statutory entitlement. Proceedings before the Competent Authority for deemed conveyance are not in the nature of debt recovery, enforcement of a monetary claim, or transfer of an asset of the corporate debtor in the sense contemplated by Section 14 of the IBC; they constitute discharge of a statutory function to perfect title in favour of the organisation of flat purchasers.

The Court further held that Section 238 of the IBC is attracted only in case of actual inconsistency, and no such inconsistency exists between MOFA and the IBC, since the welfare object of MOFA and the insolvency framework can operate harmoniously.

The promoter or its successor is not left remediless, as grant of deemed conveyance is not a final adjudication of title and any subsisting right can still be established in appropriate civil proceedings. On that reasoning, the Competent Authority erred in refusing to decide the society's application on merits merely because CIRP was pending against Respondent No. 4. [Paras 31, 32, 33, 34, 35]

The impugned order was set aside and the application for deemed conveyance was restored to the Competent Authority for decision on merits; all merits contentions were kept open.

Final Conclusion: The Court held that pendency of CIRP and the moratorium under Section 14 of the IBC do not, by themselves, bar adjudication of a society's application for deemed conveyance under MOFA. The Competent Authority's refusal to decide the application on merits was therefore set aside and the matter was restored for fresh decision on merits.

Corporate debtor immunity for pre-CIRP offences - Clean slate under approved resolution plan - Decriminalization of environmental offences

Section 32A immunity - Pre-CIRP criminal liability - Change in management under resolution plan - Criminal prosecution against the corporate debtor for alleged environmental offences committed before commencement of the insolvency resolution process continuation after approval of the resolution plan and complete change in management - HELD THAT: - The Court held that Section 32A of the Insolvency and Bankruptcy Code, 2016 grants a statutory immunity to the corporate debtor in respect of offences committed prior to commencement of the CIRP once the resolution plan is approved and management passes to a new dispensation unconnected with the erstwhile management. The allegations in the complaint related to the period 2002 to 2009, whereas the petitioner-company had subsequently undergone CIRP and came under a new management pursuant to the approved resolution plan. In those circumstances, the alleged contraventions being attributable to the erstwhile management, continuation of the prosecution against the corporate debtor was contrary to the legislative object of giving the company a clean slate and was barred by operation of law. The Court also held that such past liability could not be fastened on the present management. [Paras 14, 16, 17, 18, 19]

The pending criminal proceeding against the petitioner-company in respect of pre-CIRP allegations was held legally unsustainable on account of the immunity under Section 32A of the Insolvency and Bankruptcy Code, 2016.

Beneficial decriminalization - Pending prosecution under Environment (Protection) Act - Subsequent legislative change -HELD THAT: - The Court took note of the Jan Vishwas (Amendment of Provisions) Act, 2023, by which offences under Section 15 of the Environment (Protection) Act, 1986 were decriminalized with effect from 01.04.2024 and the penal consequences involving imprisonment were replaced by a civil penalty framework. Relying on the principle that a beneficial change reducing penal rigor ought to be given effect, the Court held that once the legislature had removed the element of criminality from the contravention, continuance of the pending criminal prosecution would no longer serve the ends of justice and had become legally unsustainable. [Paras 20, 21, 22, 23]

The prosecution was also liable to be quashed in view of the subsequent decriminalization of the alleged offence under Section 15 of the Environment (Protection) Act, 1986.

Final Conclusion: The Court quashed the criminal proceeding against the petitioner-company. It held that prosecution for alleged pre-CIRP environmental offences could not continue against the corporate debtor after approval of the resolution plan and change in management, and that the subsequent decriminalization of the offence furnished an additional ground to terminate the proceeding.

Bail under the Prevention of Money-laundering Act - Twin conditions for bail - Proceeds of crime - Protracted pre-trial incarceration - Monetary threshold under the proviso to section 45of the PMLA

HELD THAT: - The Court held that the petitioner's admitted functional association with PFI could not, by itself, make his email identifier or saved phone contacts decisive incriminating material for refusing bail in the absence of corroborative material linking him to specific acts of money-laundering. It also treated as relevant the fact that, though the ECIR and foundational FIR were of 2022, the petitioner was named only in the 7th supplementary complaint, suggesting that he was not earlier perceived as occupying any central or commanding role.

The amount attributed to him was found to be only a small fraction of the overall alleged funds, and the Court held that this bore directly on the application of the proviso to section 45, under which involvement below the stated monetary threshold diluted the rigour of the additional twin conditions and warranted a more liberal approach to bail. The Court further noted that, at this stage, the prosecution had not prima facie demonstrated how the funds transferred to SDPI were derived from an identified scheduled offence, which is foundational to the allegation of money-laundering, and therefore that aspect could not be ignored while considering bail.

Allegations regarding protest activity and the asserted layering methodology were not treated as determinative at the pre-trial stage, especially since such matters would have to be established by admissible evidence at trial.

The petitioner's incarceration for over a year, the case remaining at the stage of arguments on charge, and the large volume of witnesses and documents cited by the prosecution showed that the trial was likely to take considerable time, making continued detention unwarranted in the circumstances. [Paras 21, 22, 23, 24, 25]

The petitioner was admitted to regular bail, the Court holding that the statutory requirements for bail stood satisfied on the facts presently disclosed.

Final Conclusion: The Court granted regular bail to the petitioner in the PMLA case, holding that his alleged involvement was limited in role and quantum, that the statutory rigour of section 45 stood sufficiently softened in the facts, and that continued pre-trial incarceration was not warranted.

Sabka Vishwas Scheme eligibility - Quantification of duty under enquiry or investigation - Designated Committee hearing requirement

Whether Admission of part of the service tax liability in a statement recorded during investigation did not by itself amount to quantification of duty on or before the cut-off date for eligibility under the Sabka Vishwas Scheme? - HELD THAT: - The Court held that the expression "quantified" has to be read with the requirement of duty payable under the Scheme. On a combined reading of the statutory provisions and the clarificatory circular, a liability admitted during enquiry, investigation or audit is only a component to be considered towards the final quantification, and not an independent or conclusive quantification of the duty payable.

The Scheme does not contemplate eligibility merely because the declarant admitted part of the liability during investigation. In cases of pending enquiry or investigation, the amount forming the subject matter of such proceedings had to stand quantified on or before 30.06.2019. Since the investigation later resulted in a higher demand and the liability had not been finally quantified by that date, the petitioners were ineligible under the Scheme. [Paras 8, 9, 10]

The rejection of Form SVLDRS-1 on the ground that service tax was not quantified on or before 30.06.2019 was upheld.

Designated Committee hearing requirement - Eligibility threshold under the Scheme - HELD THAT: - The Court held that the procedural requirement of the Designated Committee and the hearing contemplated under the Scheme arises only after the declarant is found eligible and the declaration is taken up for determination of the amount payable. Where the declarant is ex facie ineligible because the tax liability was not quantified before the statutory cut-off date, there is no obligation to constitute the Designated Committee or to afford a hearing before rejection. [Paras 9]

The challenge based on absence of hearing and non-constitution of the Designated Committee was rejected.

Final Conclusion: The High Court held that the petitioners were not entitled to the benefit of the Sabka Vishwas Scheme, since the tax liability in the pending investigation was not quantified on or before the statutory cut-off date and a partial admission during investigation could not satisfy that requirement. The writ petition was therefore dismissed.

Service tax valuation - Reimbursable expenditure - Subordinate legislation ultra vires the parent statute - Prospective operation of amendment - Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 - justification of demanding service tax on losses/excess expenditure over contract revenue for F.Y. 2012-13 to 2014-15 by invoking Rule 5(1) of the 2006 Rules

HELD THAT: - The Court held that, for the period in question, valuation under Section 67 of the Finance Act, 1994 could extend only to the consideration charged for the taxable service, and not to losses or expenditure not recovered from the service recipient. It accepted the legal position that Rule 5(1) of the 2006 Rules had already been struck down as going beyond Section 67, and that the later amendment to Section 67 bringing reimbursable expenditure within 'consideration' operated only prospectively from 14.05.2015. Since the impugned notice pertained to a period prior to that amendment, the demand founded on Rule 5(1) was not sustainable in law. [Paras 8, 10, 11]

The impugned show cause notice was quashed as untenable in law and without jurisdiction.

Final Conclusion: The petition was allowed. The High Court held that, for the pre-14.05.2015 period, service tax could not be demanded on losses or excess expenditure by invoking Rule 5(1) of the 2006 Rules, and the show cause notice was therefore quashed as without jurisdiction.

Service tax exemption for construction services - construction of a covering over the existing auction platform - exemption under Notification No. 25/2012-ST - Road construction for use by general public - Post-harvest storage infrastructure - Extended period of limitation - Penalty for non-registration and non-filing of returns

Construction of auction platform covering - Use other than commerce - Exemption for original works - Whether Construction of covering over the existing auction platform in Krishi Upaj Mandi was not exempt as a civil structure meant predominantly for use other than commerce? - HELD THAT: - The Tribunal held that the relevant exemption for construction of original works applied only where the structure was meant predominantly for use other than commerce, industry, business or profession. An auction platform in a Krishi Upaj Mandi, including its covering, has the primary function of auction of goods, which is inherently commercial in nature. On that basis, the construction service did not satisfy the condition of non-commercial predominant use. [Paras 8]

Exemption was denied for the service of construction of covering over the existing auction platform.

Construction of roads in Krishi Upaj Mandi - Use by general public - Exemption for road construction - whether Construction of roads within Krishi Upaj Mandi was exempt as road construction for use by the general public? - HELD THAT: - Rejecting the departmental view that the roads were confined to mandi users, the Tribunal found that the roads were not private roads within private property. Krishi Upaj Mandi was considered to be meant for use by members of the public such as farmers and traders, and roads constructed therein were therefore also meant for public use. The condition of use by general public stood satisfied. [Paras 10]

Exemption was allowed for the construction of roads in the Krishi Upaj Mandi.

Market infrastructure versus storage infrastructure - Post-harvest storage infrastructure - Construction of boundary wall, check posts and approach gate - HELD THAT: - The Tribunal held that auction platforms and allied market structures are not warehouses or storage facilities but form part of market infrastructure intended for trade. Mere temporary keeping of goods in the market before sale did not convert the market into post-harvest storage infrastructure. Since the exemption was confined to original works pertaining to such storage infrastructure, the constructions in question fell outside it. [Paras 12]

Exemption was denied for construction of auction platform coverings, boundary walls, check posts and approach gate.

Extended period of limitation - Suppression of facts with intent to evade - Penalty under section 78 - HELD THAT: - The Tribunal held that invocation of the extended period depended on whether non-payment was attributable to fraud, wilful misstatement, suppression, or violation with intent to evade. In the present case, the appellant had rendered taxable services but had not taken service tax registration, paid tax, or filed returns, and took no steps showing bona fide conduct until the department gathered information from third parties and commenced investigation. On these facts, the Tribunal found a clear case for invoking the extended period and upheld the penalty, subject to consequential reduction because one part of the demand on road construction was set aside. [Paras 13, 14]

The extended period and penalty were upheld, with the penalty under section 78 to stand reduced correspondingly after exclusion of the road-construction demand.

Final Conclusion: The appeal was partly allowed. The demand relating to construction of roads in the Krishi Upaj Mandi was set aside as exempt, while the remaining demand, extended limitation, and penalty were sustained, with remand limited to recalculation of service tax and corresponding penalty.

Composite works contracts - Service taxability prior to introduction of works contract service - Extended period of limitation in interpretational disputes - Penalty for non-payment arising from legal ambiguity

Composite works contracts - Service tax under Erection, Commissioning and Installation Service - Indivisible contracts involving supply of goods and services - contracts involving supply of machinery or equipment together with erection, installation and commissioning for consolidated consideration were composite indivisible works contracts OR taxable under Erection, Commissioning and Installation Service prior to 01.06.2007 - HELD THAT: - On examination of the contracts, the Tribunal found that they comprised both transfer of property in goods and rendition of installation-related services for a consolidated consideration, and therefore were not pure service contracts. Applying the law declared by the Supreme Court in relation to composite works contracts, the Tribunal held that, before the introduction of the taxable category for works contract service, such indivisible contracts could not be subjected to service tax under existing service categories like Erection, Commissioning and Installation Service. The absence of a sustainable levy on such composite contracts rendered the demand without foundation. [Paras 13, 14, 17]

The demand of service tax on the appellant's composite works contracts for the disputed period was held unsustainable.

Extended period of limitation - Suppression of facts - Interpretational dispute - HELD THAT: - The Tribunal noted that the show cause notice sought to cover a period substantially beyond the normal limitation. It held that the extended period under the proviso to Section 73(1) could be invoked only on proof of fraud, collusion, wilful misstatement, suppression of facts, or intent to evade. In the present case, the dispute concerned taxability of composite works contracts during a period of legal ambiguity; the appellant had maintained books of account and paid VAT on the goods portion, and the transactions were not clandestine. Mere non-payment arising from a bona fide interpretational dispute was therefore insufficient to justify the extended period. [Paras 15, 17]

Invocation of the extended period was held unsustainable.

Penalty under Sections 77 and 78 - Absence of deliberate suppression - Interpretational ambiguity - HELD THAT: - The Tribunal held that, once the demand itself could not survive, the connected penalties necessarily failed. It further held that even independently penalties under Sections 77 and 78 were not sustainable because the case involved an interpretational dispute and no deliberate suppression or fraud had been established. [Paras 16, 17]

The penalties imposed were set aside.

Final Conclusion: The Tribunal held that the appellant's contracts for the disputed period were composite works contracts not chargeable to service tax under Erection, Commissioning and Installation Service prior to 01.06.2007. The extended period, interest and penalties were consequently held unsustainable, and the impugned order was set aside.

Composite service classification - Cargo Handling Service versus mere transportation of goods - Essential character of transaction - Extended period and penalty for short-payment of service tax

Composite service classification - Cargo Handling Service versus mere transportation of goods - Essential character of transaction - appellant's activity of arranging containers, loading, coordinating road and rail movement, obtaining freight documents, monitoring dispatch and ensuring delivery was classifiable as Cargo Handling Service OR mere transportation or GTA service - HELD THAT: - The Tribunal held that classification had to be determined from the totality of the contract and the essential nature of the composite service, not from isolated elements or the manner of invoicing. On the record, the appellant's obligation extended beyond carriage of goods by road and covered container arrangement, loading operations, freight coordination with different agencies, movement through multiple modes and delivery assurance. These features constituted an integrated cargo handling arrangement in which transportation was only one component incidental to the principal activity. The fact that some operations were carried out through independent contractors, or that charges were shown under separate heads in invoices, did not alter the true nature of the service. The earlier order in the appellant's own case was held not decisive for the present period in view of the amended and widened definition operative from 16.05.2008. [Paras 12, 13, 14, 15, 16]

The services were rightly classifiable under Cargo Handling Service under the Finance Act, 1994, and the service tax demands were sustainable.

Extended period and penalty for short-payment of service tax - Taxable value of composite cargo handling service - HELD THAT: - The Tribunal found that the appellant had excluded several components received in relation to the taxable service, including supervisory, transportation, discount-related, higher freight and handling elements, though they formed part of the gross value of the taxable service. In those facts, the short-payment was not correctly made on the full taxable value, and the extended period as well as penalties were therefore justified. [Paras 16]

The finding on limitation and penalty was upheld.

Final Conclusion: The Tribunal held that the appellant was providing an integrated cargo handling service and not mere transportation of goods, and therefore upheld the classification adopted by the Department. The demands, as well as the invocation of the extended period and penalties, were sustained, and both appeals were dismissed.

Concept of deemed sale - Hiring of diesel generator sets with delivery at the customer's premises and customer-centric use - supply of tangible goods service Or transfer of the right to use goods as a deemed sale -effective control and possession of the goods - Pre-notice payment under Section 73(3) - Majority decision

Hiring of diesel generator sets - Deemed sale - Possession and effective control - HELD THAT: - In Bharat Sanchar Nigam Ltd.[2006 (3) TMI 1 - SUPREME COURT], Learned Justice Dr. A.R. Lakshmanan, in his concurring opinion, laid down the following attributes, in para 97 of the judgment, to constitute a transaction for the transfer of right to use the goods without transferring ownership. Such an activity is classified as a "deemed sale", attracting sales tax/VAT.

The above formulation has since been consistently followed by the Supreme Court, including in Great Eastern Shipping Co. Ltd.[2019 (12) TMI 225 - SUPREME COURT]; Adani Gas Ltd. [2020 (8) TMI 789 - SUPREME COURT] and Quick Heal Technologies Ltd.[2022 (8) TMI 283 - SUPREME COURT]. It is, therefore, clear that a transaction falls within Article 366(29-A) (d) and would be subject to Sales Tax, if the five attributes are satisfied. However, mere permission to use goods does not, by itself, amount to a transfer of the right to use; it may be no more than a licence to use.

Accordingly, following the attributes as stated in BSNL (supra), this court hold that the work orders in question evidence a transfer of the right to use the DG sets by the customer without transferring ownership of the Appellant. The supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control as stipulated under Section 65(105)(zzzzj) of the FA 1994, is not seen satisfied. Hence the demand founded on the contrary assumption is therefore unsustainable. This being so the question of evasion of duty does not arise and the issue of time-bar is settled in favour of the appellant as the department in the circumstances, has failed to establish a case of wilful evasion of duty and the impugned order merits to be set aside on this score. This being so the other issues like interest and penalty etc do not survive.

The demand on hiring of diesel generator sets as supply of tangible goods service was unsustainable and the impugned order was liable to be set aside on that issue.

Transport of goods by road service - Pre-notice payment - HELD THAT: - The amount paid by the appellant towards transportation charges and interest before issuance of the notice was found reflected in the impugned order itself. The Tribunal therefore accepted that liability on this count stood settled and held that no further action was warranted. [Paras 11]

No further proceedings survived in respect of the transportation charges.

Final Conclusion: One Member held that the statutory entry covers supply of tangible goods only where the right of possession and effective control is not transferred. On the work order terms, the diesel generator set was an identified item delivered to the customer's premises, remained stationed there for the rental period, and was to be operated according to the customer's power requirements. The appellant's obligations to attend breakdowns, provide maintenance and spares, and optionally supply an operator were treated as incidents of ownership and not as retention of effective control. The arrangement therefore satisfied the attributes of transfer of the right to useand was a deemed sale exigible to VAT, with the result that the service tax demand under the taxable category failed. The concurring Member agreed with the outcome on the basis of the facts and this reasoning, and further held that the co-ordinate Bench decisions concerning similar generator-hiring arrangements squarely applied; however, he did not adopt the broader discussion on circulars and the law of precedent contained in the other opinion.

By the majority result, the hiring of diesel generator sets was held to be a transfer of the right to use the goods and therefore outside the taxable category of supply of tangible goods service. The pre-notice payment on transportation charges was accepted as settling that component, and the impugned order was set aside with consequential relief.

Cost sharing arrangements - Business Support Service - Reimbursement of common expenses by a wholly owned subsidiary - common services being ‘provided’ or only ‘procured’ by the Appellant from the Service Providers

HELD THAT: - The Tribunal held that the controversy stood covered by its earlier decision Forum Projects Pvt. Ltd. [2025 (1) TMI 1262 - CESTAT KOLKATA], Tata Motors Limited [2024 (5) TMI 1639 - CESTAT KOLKATA] and by the Supreme Court ruling in Gujarat State Fertilizers & Chemicals Ltd. [2016 (12) TMI 103 - SUPREME COURT]

The amounts recovered by debit notes represented only sharing of common expenses incurred for facilities procured from third-party vendors, and not consideration for any service rendered by the appellant to its subsidiary. It further noted that, prior to 01.05.2011, the definition of Business Support Service did not extend to such operational or administrative cost-sharing arrangements, and therefore the impugned demand under that head was unsustainable. The further observation on revenue neutrality and service being effectively provided to self only reinforced the conclusion that no tax liability survived; penalty also could not be sustained consequentially. [Paras 7, 8, 9, 10, 11]

No service tax was payable on the impugned cost-sharing recoveries, and the penalty imposed was therefore not maintainable.

Final Conclusion: The Tribunal held that the appellant's recovery of shared common expenses from its wholly owned subsidiary did not amount to a taxable Business Support Service during the relevant period prior to 01.05.2011. The service tax demand, interest and penalty were therefore set aside and the appeal was allowed with consequential relief.

Delay in filing the appeal against the ex parte order - period of limitation - Mandatory pre-deposit for statutory appeal

Ex parte adjudication - Condonation of delay in writ jurisdiction - reckoning limitation from the date of knowledge - appeal against the ex parte adjudication rejected as time-barred when the petitioner asserted absence of knowledge of the show cause notice and the adjudication order until a later date - HELD THAT: - The Court held that, on the facts noted before it, the petitioner had no knowledge of either the show cause notice or the adjudication order and came to know of them only later, while the adjudication order had been passed ex parte. In such circumstances, limitation for filing the appeal ought to be reckoned from the date of knowledge of the order. Proceeding on that basis, the Court exercised jurisdiction under Article 226 and condoned the delay, directing that the appeal already filed be treated as within limitation. [Paras 9, 10]

The appellate order dismissing the appeal on limitation was set aside, and the appeal was restored to the file of the Commissioner (Appeals) as within time.

Statutory pre-deposit - Maintainability of appeal - HELD THAT: - The Court held that deposit of 7.5% of the disputed duty, or duty and penalty, was mandated by Section 35F of the Central Excise Act, 1944 read with the Finance Act, 1994. The appeal could therefore proceed on merits only upon compliance with that statutory requirement, though the Court granted time to make the deposit. [Paras 11, 12]

The requirement of pre-deposit was upheld, and the petitioner was granted 30 days to comply.

Final Conclusion: The High Court held that, since the adjudication order was ex parte and the petitioner lacked prior knowledge of it, limitation for appeal had to run from the date of knowledge, and the delayed appeal was therefore treated as within time. At the same time, the Court declined to waive the statutory pre-deposit and restored the appeal for decision on merits subject to deposit within the time granted.

Assessable value of the excisable goods - transaction value -Industrial Promotion Subsidy/“IPS” disbursed under the Package Scheme of Incentives 2001/2007 of the Government of Maharashtra constitutes “additional consideration” - Additional consideration flowing from buyer - appellants are engaged in manufacture of excisable goods viz. Vinyl Floorings, CCF/PVC leather cloth etc. and are paying central excise duty on the transaction value of the finished goods.

HELD THAT: - The Tribunal held that the subsidy under PSI-2001/2007 was linked to eligible fixed capital investment and regional industrial development, and became available only upon fulfilment of the conditions under the scheme and issuance of the Eligibility Certificate by the State Government. It was not part of the price paid by the buyer and did not flow directly or indirectly from the buyer. Section 4(3)(d) expressly excludes sales tax and other taxes actually paid or payable on the goods, and that exclusion operates at the time of removal when the transaction value is determined.

Since VAT/Sales Tax had been collected from customers and remitted to the State exchequer at that stage, the subsequent receipt of IPS could not retrospectively alter the transaction value. The fact that VAT/CST paid formed one component in the computation mechanism under the MOU did not convert the subsidy into an amount payable by the buyer or received in connection with any individual sale transaction.

Following Bosch Limited [2026 (2) TMI 602 - CESTAT MUMBAI] the Tribunal held that IPS fell outside the scope of transaction value under Section 4(3)(d) read with Rule 6. [Paras 11, 12, 13, 14, 15]

The duty demand based on inclusion of IPS in assessable value was held unsustainable and was set aside; the question of extended limitation was left undecided.

Final Conclusion: The Tribunal held that Industrial Promotion Subsidy received under PSI-2001/2007 is a post-sale State incentive linked to capital investment and regional development, and not additional consideration forming part of transaction value. The impugned demand was therefore set aside and the appeal was allowed with consequential relief.

Maintainability of appeal against recovery letter - Utilization of Cenvat credit for monthly duty payment - Cenvat credit on reverse charge service tax

Maintainability of appeal against recovery letter - Appealable order before Commissioner (Appeals) - HELD THAT: - The Tribunal held that the appellate provision permits an appeal only against a decision or order passed by an adjudicating authority subordinate to the Commissioner (Appeals). The communication challenged before the Commissioner (Appeals) was only a letter proposing recovery and was not an adjudication order. Since the impugned communication lacked the character of an appealable order, the Commissioner (Appeals) rightly treated the appeal as not maintainable. [Paras 6]

The finding that the appeal before the Commissioner (Appeals) was not maintainable was upheld.

Utilization of Cenvat credit for monthly duty payment - Cenvat credit on reverse charge service tax - HELD THAT: - The Tribunal held that though Cenvat credit can be used for payment of duty or service tax, such utilization is restricted to the credit available on the last day of the relevant month or quarter. On the record, including the appellant's own ST-3 returns, the credit available on 30.06.2017 was only a much smaller amount; therefore, debit of the larger amount from the Cenvat account for discharging June 2017 liability was impermissible. The plea that the credit had accrued on account of reverse charge liability was also rejected because, under the governing rule, credit of service tax payable by the recipient becomes available only after the tax is actually paid, and there was no material showing such payment before 30.06.2017. The Tribunal also found no infirmity in the appellate authority's treatment of the appellant's plea regarding carry forward through TRAN-1 and upheld the conclusion that the impugned utilization was wrongful, while leaving the appellant free to seek appropriate remedy regarding credit accumulated after the disputed period. [Paras 7]

The disallowance of utilization of the disputed Cenvat credit for June 2017 liability was upheld.

Final Conclusion: The Tribunal upheld the order under challenge and dismissed the appeal. It affirmed both the non-maintainability of the appeal against the recovery letter and the finding that the disputed Cenvat credit could not be utilized for discharge of liability for June 2017, while leaving liberty to pursue an appropriate remedy in respect of credit accumulated later.

Invocation of section 34(8A) of the Gujarat Value Added Tax Act during pending proceedings - Absence of recorded satisfaction in notice - validity of Notices issued under section 34(8A) in the absence of any pending proceedings under the Act and in the absence of recorded satisfaction in the notices - HELD THAT: - The Court held that section 34(8A) can be invoked only during the course of any proceedings under the Act, and the existence of pending proceedings is the first statutory requirement for exercise of that power. On the admitted position, no proceedings were pending against the petitioner when the impugned notices were issued. The Court further noticed that the notices themselves did not record the authority's satisfaction on the basis of material found in search that tax had been evaded, tax liability had not been correctly disclosed, or any incorrect claim had been made.

Following the interpretation earlier adopted in Dhanani Imp. Exp. Pvt. Ltd. And Ors. vs. State of Gujarat and Ors.[2016 (7) TMI 1150 - GUJARAT HIGH COURT] the Court held that the statutory preconditions for invoking section 34(8A) were not satisfied. [Paras 8, 9, 11, 12]

The impugned notices under section 34(8A), including the consequential show-cause notice proposing penalty, were quashed.

Final Conclusion: The writ petition was allowed. The High Court held that, in the absence of any pending proceedings and of recorded satisfaction as required by section 34(8A), the impugned notices and consequential penalty notice could not be sustained and were liable to be quashed.

Alternative statutory remedy under the SARFAESI Act - Writ jurisdiction against SARFAESI measures - Disputed questions of fact in writ proceedings

Challenge to SARFAESI proceedings by a non-borrower claiming rights in the secured asset - Exceptional grounds for invoking writ jurisdiction - HELD THAT: - The Court held that the statutory scheme under the SARFAESI Act provides an efficacious remedy before the Debts Recovery Tribunal to any person aggrieved by measures taken against the secured asset, and that such remedy extends beyond the borrower to persons claiming rights in the property.

It reiterated that writ jurisdiction is not ordinarily to be invoked in SARFAESI matters except in the limited exceptional situations recognised in precedent, and no such exceptional circumstance was made out.

The appellants' case further turned on factual assertions that the sale deeds were only nominal and that there was an agreement for reconveyance, which are matters not amenable to adjudication in writ proceedings. Since the appellants had already invoked the Tribunal's jurisdiction and their challenge to the mortgage was pending there, the learned Single Judge was justified in declining interference. [Paras 16, 17, 18]

The dismissal of the writ petition was upheld, leaving the appellants to pursue their statutory remedy before the Tribunal.

Final Conclusion: The writ appeal was dismissed. The Court held that the appellants must pursue their challenge to the Bank's SARFAESI measures before the Debts Recovery Tribunal, and that the factual disputes raised by them did not justify exercise of writ jurisdiction.

Maintainability of writ petition in SARFAESI proceedings - Alternative statutory remedy - Self-imposed restraint under Article 226 - Proceedings before Debts Recovery Tribunal

Writ petition challenging the recovery notice maintainability in view of the efficacious statutory remedy available under the SARFAESI and DRT framework - HELD THAT: - The Court held that the record itself showed that the bank had already instituted original application proceedings before the Tribunal against the borrower and the guarantor, and those proceedings had commenced.

Relying on the settled principle repeatedly affirmed by the Supreme Court, the Court held that where the statute provides an effective and efficacious remedy, the High Court should ordinarily decline to exercise writ jurisdiction in matters arising from recovery proceedings under the SARFAESI Act and the RDB framework. As no exceptional circumstance justifying departure from that rule was found, the petition was held to be not maintainable. [Paras 10, 11]

The challenge to the impugned notice was rejected as not maintainable, leaving the petitioner to avail the statutory remedy.

Final Conclusion: The High Court dismissed the writ petition as not maintainable, holding that once recovery proceedings had commenced before the Tribunal, the petitioner was required to pursue the statutory remedy available under the special enactments. No exceptional ground was found to justify interference under Article 226.

Disclosure of material encumbrances in SARFAESI auction sale - Auction purchaser's right to unencumbered title and possession - Writ maintainability at the instance of auction purchaser - Undivided and undemarcated land sold in auction -

HELD THAT: - The Court held that the Security Interest (Enforcement) Rules, 2002 cast an explicit duty on the secured creditor to disclose all material information, including known encumbrances and defects affecting the nature and value of the property, so that a bidder may take an informed decision.

A secured creditor is not a passive seller and cannot rely on 'as is where is' or 'as is what is' clauses to avoid that obligation. In the present case, the property auctioned to the petitioner was in fact an undivided and undemarcated part of a larger plot, yet neither the auction notice nor the sale certificate disclosed that position. The Court accepted the land records information produced by the petitioner as a public document, since its authenticity was not disputed.

On those materials, it found that the Bank had failed to exercise due diligence and could not transmit an unencumbered title or deliver lawful possession of a specific demarcated parcel. The petitioner, as auction purchaser, was therefore entitled either to unencumbered title and possession or appropriate compensation by refund of the consideration; in the facts, the auction itself was cancelled and refund directed. [Paras 11, 13, 14, 15, 18]

The auction sale was cancelled and the Bank was directed to refund the sale consideration to the petitioner.

Writ maintainability at the instance of auction purchaser - Alternative remedy under SARFAESI - HELD THAT: - The Court rejected the submission that the petitioner had suffered no breach of legal right or that the matter should be relegated to an alternative statutory remedy. Its determination on the merits established a failure by the Bank to comply with its statutory obligations in conducting the auction sale and in assuring unencumbered title and possession. Since the grievance arose from breach of those obligations owed to the auction purchaser, the objection to maintainability was held untenable. [Paras 15, 16, 17, 18]

The objection as to maintainability was not accepted and the writ petition was allowed.

Final Conclusion: The Court held that the Bank had failed to disclose a material defect in the property and could not pass or deliver the unencumbered title and possession promised in the auction sale. The writ petition was accordingly allowed, the auction was cancelled, and refund of the consideration was directed.

Compounding of cheque dishonour offence - Consent of complainant for compounding - Scope of inherent jurisdiction against refusal to compound - Delay and lack of bona fides in settlement request - Refusal to compound the offence under Section 138 of the Negotiable Instruments Act, despite the accused expressing willingness to pay at a belated stage - HELD THAT: - The Court held that though proceedings for cheque dishonour are compensatory in nature and settlement is to be encouraged, a belated offer to pay after repeated defaults and prolonged delay does not confer an indefeasible right to compounding. The record showed that the petitioner had earlier proposed a repayment schedule, failed to adhere to it, and moved the application for compounding only after the complainant's evidence had concluded and the matter had reached the stage of defence evidence and final arguments.

The complainant had specifically opposed compounding, and the petitioner's subsequent conduct supported the trial Court's view that the application was intended to prolong the proceedings rather than to achieve a genuine settlement.

The Court further held, following A.S. Pharma Pvt. Ltd. versus Nayati Medical Pvt. Ltd. and others [2024 (8) TMI 1391 - SC ORDER] that compounding under Section 147 of the Negotiable Instruments Act ordinarily requires the complainant's consent, and the High Court exercising jurisdiction under Section 482 Cr.P.C. cannot assume the wider powers available to the Supreme Court under Article 142.

The decision in Sanjibj Tari versus Kishore S. Borcar and another [2025 (9) TMI 1634 - SUPREME COURT] was distinguished as turning on its own facts and as laying down no rule that compounding must be allowed irrespective of the accused's conduct. [Paras 8, 9, 10, 11, 12]

No illegality, perversity or patent error was found in the trial Court's refusal to permit compounding, and interference under Section 482 Cr.P.C. was declined.

Final Conclusion: The petition challenging the order refusing compounding was dismissed. The High Court held that, in the absence of the complainant's consent and in view of the petitioner's repeated defaults and delaying conduct, no ground was made out for interference in inherent jurisdiction.

Auction-purchaser's vested right - Mandatory issuance of sale certificate - Physical possession of secured asset - Absence of stay order - whether bank could not withhold the sale certificate and physical possession of the auctioned property merely because the borrowers' securitisation application was pending before the Debts Recovery Tribunal when no stay restrained such steps? - HELD THAT: - The Court held that, once the bank had conducted the auction and received the entire sale consideration from the successful bidder, it was bound to issue the sale certificate and hand over physical possession.

The pendency of S.A. before the Debts Recovery Tribunal, coupled with an observation that the auction sale would remain subject to the final outcome of that proceeding, did not by itself empower the bank to refuse performance of its obligation.

Relying on Celir LLP versus Bafna Motors (Mumbai) Private Ltd. [2023 (10) TMI 48 - SUPREME COURT] Court held that in the absence of any stay order by a competent forum, the bank was duty-bound to issue the sale certificate and deliver possession. The relief, however, was made subject to the final outcome of the pending securitisation application, and the bank was further directed to take steps under Section 14 for obtaining physical possession. [Paras 5, 7]

The writ petition was allowed, and the bank was directed to issue the sale certificate and hand over physical possession, subject to the final outcome of the pending securitisation application.

Final Conclusion: The Court held that mere pendency of the borrowers' proceeding before the Debts Recovery Tribunal, without any operative stay, did not justify withholding the sale certificate or possession from the successful auction-purchaser. The bank was accordingly directed to issue the sale certificate and secure delivery of physical possession, subject to the final result of the pending securitisation application.

Execution of Section 14 possession order during pendency of securitisation proceedings - Ministerial function of authorities u/s 14 of the SARFAESI Act - Absence of interim protection from the Debts Recovery Tribunal

Whether Pendency of a securitisation application challenging the order passed under Section 14 of the SARFAESI Act does not by itself bar execution of that order when no interim stay has been granted by the Debts Recovery Tribunal? - HELD THAT: - The Court held that the learned Single Judge had only directed the Tahsildar to comply with and execute the District Magistrate's order under Section 14 in accordance with law. It found that the order under Section 14 had not been stayed by the Debts Recovery Tribunal in the pending securitisation application.

On that basis, and applying the principle that authorities acting under Section 14 discharge a ministerial function and are obliged to assist the secured creditor in taking possession, the Court held that the revenue authorities could not refuse or indefinitely delay execution merely because proceedings u/s 17 were pending. Mere pendency of the statutory challenge, in the absence of interim protection, was therefore insufficient to restrain implementation of the Section 14 order. [Paras 9, 10, 11]

The direction for execution of the Section 14 order was upheld, and the writ appeal was dismissed.

Final Conclusion: The Court held that, in the absence of any interim stay granted by the Debts Recovery Tribunal, pendency of securitisation proceedings did not prevent execution of the order passed under Section 14 of the SARFAESI Act. Finding no illegality, irregularity or jurisdictional error in the order of the learned Single Judge, the writ appeal was dismissed.

Quashing of proclamation-related prosecution after settlement of cheque dishonour complaint - Inherent jurisdiction to prevent abuse of process - Stand-alone offence of non-appearance under proclamation proceedings - Exercise of inherent powers -

HELD THAT: - The Court held that though the offence under Section 174-A IPC, now corresponding to Section 209 BNS, is an independent and substantive offence and does not automatically become liable to be quashed merely because the underlying proceedings have ended, the subsequent settlement and withdrawal of the original complaint remain a material consideration while exercising inherent jurisdiction.

Where the initial proceedings arose from a private cheque dishonour complaint, which is compoundable in nature, continuation of the proclamation-related prosecution despite compromise would defeat fairness, proportionality and the remedial character of such proceedings, and would amount to abuse of process. In exercise of its inherent power to secure the ends of justice, the Court found it appropriate to terminate both the proclamation order and the consequential FIR. [Paras 8, 9, 10]

The order declaring the petitioner a proclaimed person and the consequential FIR under Section 174-A IPC, with all further proceedings, were quashed.

Final Conclusion: The High Court allowed the petition and quashed both the proclamation order and the consequential FIR for non-appearance. It held that, in the circumstances of a settled and withdrawn complaint under Section 138 of the Negotiable Instruments Act, continuation of the prosecution would amount to abuse of process notwithstanding the stand-alone nature of the offence under Section 174-A IPC.

Patent illegality in arbitral award - Construction of contractual coverage conditions - Award based on no evidence - Reasoned award - Expert report in arbitration

Contractual preconditions for accidental damage cover - Illegal termination vis-a-vis subsisting contractual obligations - Rewriting of contract by arbitral tribunal - HELD THAT: - The Court held that clause 2(c) made coverage conditional upon receipt of both payment and product details within the stipulated time, subject only to the contractual grace period. The tribunal itself had found that the respondent was in breach of these mandatory conditions and that such finding had attained finality. Although the tribunal was justified in holding that immediate termination was contrary to clause 6 and that the agreement continued till 30.06.2014, subsistence of the agreement did not by itself extend cover to all laptops and mobile phones sold during that period. By nevertheless allowing claims and, in the case of mobile phones, granting a further thirty-day grace period not found in the contract, the tribunal rewrote the bargain between the parties and rendered its own findings contradictory. The Court held that an arbitral tribunal cannot travel beyond the contract or make the contractual conditions otiose. [Paras 14, 17, 18, 19, 20]

The award of accidental damage cover claims was held patently illegal, notwithstanding the finding that the agreement subsisted till 30.06.2014.

Expert report without adjudication of objections - No evidence to sustain claim - Unreasoned quantification of arbitral claim - HELD THAT: - The Court noted that the expert had been appointed to verify the tabulated claims and supporting documents, but the tribunal accepted the report without specifically dealing with the objections raised to it, even though allegations of bias and excess of reference had been made. The tribunal itself recorded that apart from the expert report no independent evidence had been led to prove the claims. It was also undisputed that quantification had not been done by the expert, yet the tribunal reduced the assessed amount for certain mobile phone claims by fifty percent without disclosing any basis. Such guesswork could not substitute proof. The Court further held that sale invoices and repair bills did not establish that the damage was accidental, and the respondent had failed to prove that the repairs fell under the accidental cover rather than the regular warranty. In these circumstances, the award violated the requirement of a reasoned award and was vitiated by patent illegality and perversity. [Paras 22, 23, 24, 25, 26]

The award was set aside as being based on no sufficient evidence, unsupported quantification, and absence of reasons.

Final Conclusion: The Court held that while the agreement could be treated as subsisting till 30.06.2014 because immediate termination was contrary to the contractual termination clause, that finding did not dispense with compliance with the contractual conditions for accidental damage cover. As the tribunal awarded claims by rewriting the contract, relying on an inadequately dealt with expert report, and quantifying claims without sufficient evidence or reasons, the award was set aside.

Interim compensation under the Negotiable Instruments Act - Appellate deposit u/s 148 of the Negotiable Instruments Act - Consideration of deposit in parallel civil proceedings - Right of appeal

HELD THAT: - The Court held that, in light of the principles noticed in Jamboo Bhandari and the scheme of Section 143A, read with the reference to Section 357 of the Code, the fact that money had been deposited in a parallel summary suit on the same cheque was a relevant circumstance for deciding whether insistence on deposit at the appellate stage would be justified and whether it would impair the appellant's right of appeal.

Section 357(5) of the Code did not bar the court from taking into account such payment made in civil proceedings arising from the same cause. Since the appellate court rejected the request on the ground that the relevant documents and the order of the co-ordinate Bench were not produced, it ought to have afforded an opportunity to place those documents on record and then re-examined the prayer. [Paras 7, 8, 9]

The impugned order was quashed and the appellate court was directed to grant one more opportunity to produce the necessary documents and to reconsider the prayer afresh.

Final Conclusion: The High Court held that payment deposited in a parallel summary suit founded on the same cheque was a relevant factor which the appellate court could consider, and that Section 357(5) of the Code did not preclude such consideration. As the applicant had not been given proper opportunity to place the material on record, the impugned order was set aside and the matter was directed to be reconsidered.