TaxTMI Updates e-Newsletter
Jun 29,2026

Statutory appellate remedy before GST Appellate Tribunal - Bona fide prosecution before wrong forum - Continuation of interim protection pending stay application -HELD THAT: - The Court noted that the impugned Orders-in-Appeal were statutorily appealable before the Tribunal and that the Tribunal had since been constituted. In that view, without examining the merits of the rival contentions, the Court held that the petitioner should avail the appellate remedy before the Tribunal. Since the petitioner had been bona fide pursuing the writ petition, the Court directed that limitation should not obstruct consideration of the appeals if filed within the period granted by the order, continued the earlier interim protection until disposal of the stay application or for the limited period specified, and left all merits open for consideration by the Tribunal. [Paras 6]

The petitioner was relegated to the statutory appellate remedy before the Tribunal, with liberty to file appeals and stay applications within the time granted, protection against limitation to that extent, and continuation of interim relief for the limited period directed.

Final Conclusion: The writ petition was disposed of by relegating the petitioner to the GST Appellate Tribunal against the impugned Orders-in-Appeal. The Court granted time to file the appeals, protected the petitioner on limitation in view of bona fide prosecution of the writ petition, continued interim protection for a limited period, and expressly kept all merits open.

Entitlement to bail - Non-tampering with witnesses - HELD THAT:- Bail was granted to the petitioner in connection with the offences alleged under the Indian Penal Code and the Jharkhand Goods and Services Act, subject to conditions regarding cooperation with trial, disclosure of mobile number and non-interference with witnesses.

Cancellation of GST registration - Absence of opportunity of hearing - Non-speaking order - Writ maintainability despite alternative remedy - Principles of natural justice - HELD THAT: - A perusal of the order ex facie reveals that neither an opportunity of hearing was granted nor does it disclose any reason traceable to the powers exercisable under Section 28 of the GST Act. This aspect was considered by this Court in detail in the case of M/s Chandra Sain, Sarda Nagar, Lucknow Thru. Its Proprietor v. U.O.I & Ors.[2022 (9) TMI 1047 - ALLAHABAD HIGH COURT]. The facts of the said case are squarely applicable to the present case. Finding the order impugned to be without any reasoning whatsoever and without affording opportunity of hearing, the exceptions as carved out by the Hon’ble Supreme Court in the case of Whirlpool Corporation v. Registrar of Trademarks, Mumbai [1998 (10) TMI 510 - SUPREME COURT] are clearly made out for interference under Article 226 of the Constitution of India. Finding the order impugned to be violative of Article 226 of the Constitution of India, ex facie the said order is quashed.

The impugned cancellation order was quashed, leaving it open to the authorities to pass a fresh order after affording an opportunity of hearing.

Final Conclusion: The High Court quashed the GST registration cancellation order as being unsupported by reasons and passed without opportunity of hearing. It nevertheless left the authorities free to pass a fresh order in accordance with law after hearing the petitioner.

Opportunity of Hearing - Failure to submit a proper reply and produce supporting documents - Validity of order passed under Section 74 - Remand of GST assessment for reconsideration - HELD THAT: - The Court found that the impugned order had been made without the benefit of a detailed reply or supporting documents from the petitioner, and that the proposals were confirmed substantially for that reason. In those circumstances, and having regard to the explanation offered that additional relevant documents were available, the Court considered it appropriate to grant one further opportunity to place the case before the assessing authority. The indulgence was extended on equitable considerations, particularly when it was stated that the disputed tax amount had already been recovered. [Paras 6, 7]

The impugned order was set aside and the matter was remanded to the assessing authority, with liberty to the petitioner to file a detailed reply with supporting documents and to receive a fresh personal hearing.

Final Conclusion: The writ petition was allowed by setting aside the impugned assessment order and remanding the matter for fresh adjudication after permitting the petitioner to file a detailed reply with supporting documents and after affording a personal hearing.

Cancellation of GST registration for non-filing of returns - Restoration of GST registration subject to payment of statutory dues

HELD THAT: - The Court found that the controversy was similar to that considered in Rakhe Achi Vs. Union of India & Ors. [2026 (5) TMI 161 - GAUHATI HIGH COURT] and that both sides accepted such similarity. Proceeding on that basis, the Court held that the petitioner was entitled to the same relief, namely restoration of registration upon the authorities first intimating the outstanding statutory dues and the petitioner paying them within the time fixed. The restoration was thus made conditional upon complete payment of dues, penalty or fine, if found payable, followed by an order revoking the cancellation. [Paras 12, 13]

The writ petition was allowed by directing intimation of outstanding dues and revocation of cancellation upon payment within the stipulated period.

Final Conclusion: Following the earlier coordinate Bench decision in an identical matter, the Court granted the petitioner restoration of GST registration subject to prior intimation and payment of all statutory outstanding dues, penalty or fine, if any, within the prescribed time.

Estoppel against change of stand in writ proceedings - Section 74 proceedings after voluntary tax payment - Suppression of Facts - Wilful Misstatement - Writ challenge to adjudication order without contest before authority - HELD THAT: - It appears from the show cause notice (SCN) dated 25.07.2024 (Annexure ‘P/3’) that the petitioner was served with the SCN calling upon her to show cause for the alleged contravention of the provisions of Sections 9, 16, 50 and 74. The SCN alleged short payment of tax and the excess availment of the input tax credit for which the petitioner was liable to pay the amount of tax along with the interest as applicable under Section 50(1) and Section 74.

On perusal of the summary of the order in Form GST DRC-07, it would appear that the petitioner was given an opportunity of hearing as well. Paragraph ‘3’ of the order records this fact that the matter was fixed for personal hearing. Sri Anand Agrawal appeared on behalf of the noticee and said that the noticee had paid tax and partial interest and partial penalty through DRC-03 and the rest amount of interest and penalty will be deposited within two months.

The Court found that the show cause notice specifically alleged wilful suppression and invoked Section 74. Though opportunity was given, the petitioner did not file any response before the proper officer and instead deposited the demanded tax. The adjudication order also recorded that the petitioner's representative accepted partial payment of interest and penalty and stated that the balance would be paid, and that recording was never challenged. In that situation, the Court held that the petitioner, having taken that stand before the authority, was estopped from adopting a contrary stand in writ proceedings. Mere prior payment of tax after audit detection did not, by itself, invalidate recourse to Section 74, particularly when the allegation of wilful suppression was never contested before the competent authority. [Paras 19, 20]

The writ challenge was rejected and the proceedings under Section 74 were not interfered with.

Final Conclusion: The writ petition was dismissed. The Court held that, in view of the uncontroverted allegation of wilful suppression, non-filing of reply to the show cause notice, payment without protest, and the recorded admission before the adjudicating authority, no ground for interference under Article 226 was made out.

National Mental Health Programme - exemption as charitable activities - Benefits of Notification No. 12/2017-Central Tax (R) - Public awareness of preventive health - Training under government-funded programme - Exemption for training services - Incomplete factual record in advance ruling - Advancement of religion - Agricultural extension services - Vocational training exemption - Essentially factual determination - Self-defence training for women and training under the Suraksha Setu and education department programmes - exemption under Entry No. 72 - training to goldsmiths under the Gujarat Matikaam Kalakari and Rural Technology Institute and PM Vishwakarma

Charitable activities - Mental health awareness - Yoga camps - Section 12AB registration -HELD THAT: - The Authority held that Entry 1 exempts services by an entity registered under section 12AA or 12AB when rendered by way of charitable activities. The work order under the mental health programme covered public education, training and awareness activities connected with mental health, which the Authority treated as falling within charitable activities. Yoga camps were also covered because advancement of yoga is expressly included in the definition of charitable activities. Since the applicant's exemption claim under Entry 1 depended upon its registration under section 12AB, the benefit was made conditional upon the applicant possessing a valid registration from the income-tax authorities. [Paras 10]

Exemption under Entry 1 was allowed for the National Mental Health Programme and yoga camps, subject to valid section 12AB registration.

Preventive health - De-addiction awareness - Sanitation training - Blood donation camps - Road safety training - HELD THAT: - The Authority construed preventive health in the context of public awareness and accepted that seminars on de-addiction from tobacco and drugs, as well as training on cleaning and sanitation, are directed at preventing disease and therefore fall within charitable activities under Entry 1. It rejected the claim for blood donation camps on the ground that their primary purpose is collection of blood for medical use, while the screening and health checks are only ancillary safeguards for donation and cannot be extended into preventive health. Road safety training was also denied exemption because prevention of road accidents was held to be distinct from prevention of disease, and therefore outside the expression preventive health used in the notification. [Paras 10]

Exemption under Entry 1 was allowed for de-addiction seminars and sanitation training, but denied for blood donation camps and road safety training.

Government-funded training programmes - Training services to State Government - Self-defence training for women - PM Vishwakarma training - Vocational training in government-supported schools - HELD THAT: - Applying Entry 72, the Authority found that the relevant training services were provided under programmes where the expenditure was borne by the Government. In the case of self-defence training, the work orders were issued by police authorities and district education authorities, and the training was treated as directly provided to State Government agencies or Government schools with Government funding. Goldsmith training under the PM Vishwakarma Scheme was also held covered because the scheme was found to be fully funded by the Government of India and the applicant had been designated to conduct the training. Vocational training at Kasturba Gandhi Balika Vidyalaya was similarly treated as exempt because the Vidyalayas were run with Government support and the services were rendered to such institutions under that support structure. [Paras 10]

Exemption under Entry 72 was allowed for the self-defence training programmes, PM Vishwakarma goldsmith training, and vocational training provided at Kasturba Gandhi Balika Vidyalaya.

DDU-GKY exemption - Project implementation agency - Incomplete factual record in advance ruling - HELD THAT: - The Authority noted that Entry 71 applies only to services provided by training providers functioning as project implementation agencies under the Deen Dayal Upadhyaya Grameen Kaushalya Yojana. The applicant itself stated that it was not registered as such an agency. The applicant had also not produced its own work order and relied only on a sample order issued to another trust. In those circumstances, the Authority held that the applicant was not eligible for exemption under Entry 71 and did not accept the claim on the basis of speculative or incomplete facts. [Paras 10]

Exemption for training or seminars for development of women was denied.

Speculative exemption claim - Vocational training - Computer or ITI training - Advance ruling on incomplete facts -HELD THAT: - The Authority recorded the applicant's own admission that it did not fall within the categories specified in the exemption entries invoked. It further found that no work order had been produced, leaving the exact nature of the services and the identity of the recipient agencies unascertainable. Since an advance ruling could not be rendered on hypothetical or incomplete facts, the Authority declined to answer the question. [Paras 10]

The question on exemption for vocational training and computer or ITI training was left unanswered for want of a complete factual foundation.

Agricultural extension services - Training to agriculturists - Advance ruling on incomplete facts - HELD THAT: - The Authority noted that agricultural extension is defined as application of scientific research and knowledge to agricultural practices through farmer education or training. The applicant, however, did not furnish details of the training provided to farmers, the scope of work, or any supporting work order from the concerned agency. In the absence of material showing how the activity satisfied the definition, the Authority declined to answer the question. [Paras 10]

The question on exemption for training to agriculturists was left unanswered because the factual basis for treating the service as agricultural extension was not shown.

Final Conclusion: The Authority partly allowed the exemption claims. It held that specified charitable and government-funded training services were exempt, made the Entry 1 relief conditional on valid section 12AB registration, denied exemption where the activities did not fall within charitable activities, and declined to rule where the claim rested on incomplete or speculative facts.

Jurisdictional objection under faceless assessment - Failure to consider material contention - Appreciation of documentary evidence on genuineness of expenditure - validity of Tribunal's order sustaining disallowance of purchase and labour expenditure when the assessee's objection that the assessment was contrary to the procedure u/s 144B, including the complaint that physical verification was not disclosed in the show-cause notice, had not been adjudicated, and the documentary evidence on genuineness of the transactions also required fresh consideration

HELD THAT: - The Court held that the assessee's contention regarding non-compliance with the mandatory faceless assessment procedure was a jurisdictional issue going to the root of the matter and the Tribunal had failed to return any finding on it.

Revenue's objection that the point had not been raised before the Tribunal was rejected, since the Court found that the assessee had specifically raised in the rectification application the grievance that physical verification was never disclosed in the show-cause notice and that no opportunity had been given to meet that material.

Court also noted that in the earlier writ proceedings the assessee had been permitted to canvass all grounds on merits in the present appeal. Since no finding had been rendered by the Tribunal on that foundational objection, and the Tribunal was also required to consider in entirety the documentary evidence relied on by the assessee to establish the genuineness and creditworthiness of the impugned transactions, the matter required reconsideration by the Tribunal rather than a merits determination by the High Court. [Paras 7, 8, 9]

The impugned order was set aside and the matter was required to be adjudicated afresh by the Tribunal on the jurisdictional objection and the evidentiary issues.

Final Conclusion: The appeal was allowed on the re-framed question of law. The High Court held that the Tribunal had failed to adjudicate the assessee's foundational objection regarding compliance with the faceless assessment procedure and that the evidentiary aspects also required fresh consideration by the Tribunal.

Partners' remuneration on surrendered survey income treated as business income - Availability of regular business deductions on income disclosed during survey

Partners' remuneration under section 40(b) - Survey disclosure as business income - whether Income surrendered during survey, having attained finality as business income, could not be denied the deduction of partners' remuneration merely because the assessee had not explained the source of excess stock at the time of survey or because such income had earlier remained unrecorded? - HELD THAT: - The Court held that, once the appellate authorities had treated the disclosed amount as business income and that position had attained finality, the assessee became entitled to the regular deductions available under the Act in respect of such income.

Relying on the settled legal position noticed in Shilpa Dyeing & Printing Mills Ltd. [2015 (7) TMI 691 - GUJARAT HIGH COURT] Court held that taxable income, even if disclosed during survey, does not cease to be business income for the purpose of admissible deductions. The Tribunal was therefore not justified in denying partners' remuneration on the ground that the excess stock was not explained at the relevant time or that the assessee had not established that the income pertained only to the relevant year. [Paras 6, 7]

The assessee was entitled to relief of partners' remuneration under section 40(b) on the disclosed business income, and the cross-objections to that extent were required to be allowed.

Final Conclusion: The appeal was allowed. The Court answered the substantial questions in favour of the assessee and held that, once the survey disclosure stood accepted as business income, partners' remuneration under section 40(b) could not be denied on that income.

Deemed dividend u/s 2(22)(e) - Ordinary course of money-lending business - Substantial part of business - Benefit to shareholder

Addition under the deemed dividend provision on loans received by the assessee from a closely held company in which he was a shareholder substantially - HELD THAT: - The Court noted that the Tribunal had found, on the basis of the TDS certificate and the lender company's ledger account, that the assessee had paid interest on the sums borrowed and had not received any gratuitous benefit from the company. The Tribunal had also followed the assessee's own earlier case on identical facts and treated the lending of money as a substantial part of the lender company's business. Referring to its earlier decision in the assessee's own case for another assessment year, the Court held that where money-lending constituted a substantial part of the company's business, advances made in the ordinary course of such business fell outside the ambit of deemed dividend. As these were findings of fact accepted by the Tribunal, no substantial question of law arose. [Paras 8, 9, 10]

The deletion of the addition was upheld and the Revenue's appeal was dismissed.

Final Conclusion: The Court held that the Tribunal's conclusion rested on findings of fact showing that the loan was advanced in the ordinary course of the lender company's substantial money-lending business and that the assessee had paid interest thereon. No substantial question of law arose, and the appeal was dismissed.

Fresh claim before appellate authority without revised return - Appellate jurisdiction to entertain claim on material already on record - Failure to verify remanded commission expenditure claim

Whether assessee's claim for deduction of commission on performance guarantee and purchase commission could be entertained in appeal though not made through a revised return, and the Revenue could not challenge the Tribunal's order on that ground? - HELD THAT: - The Court held that the bar against entertaining a fresh claim without a revised return is confined to the Assessing Officer and does not restrict the appellate authorities where the material necessary to examine the claim is already on record. In the present case, the assessee had appended a note in the return stating that the commission expenditure was being deferred for claim at the time of payment, and later sought to press the claim during assessment.

The Assessing Officer had not rejected the claim on the ground of absence of a revised return. Further, after remand, the AO was required to verify the quantum of commission expenses and the nature of services, but did not carry out that exercise despite the details having been furnished. The Court also noted that identical expenditure had been accepted in other assessment years. On these findings, the Tribunal's view disclosed no question of law. [Paras 12, 13, 14]

The Tribunal was justified in upholding deletion of the additions, and no substantial question of law arose.

Final Conclusion: The appeal was dismissed. The Court held that the assessee's commission expenditure claim could be entertained by the appellate authorities despite absence of a revised return, and the Tribunal's decision disclosed no substantial question of law.

Estimation of profit - Bogus purchases - Addition in absence of suppression of sales - Absence of evidence of suppressed sales - Whether profit at 6% could be estimated and added on sales allegedly made to bogus parties, despite the sales being recorded in the books of account? - HELD THAT: - The Court held that the determinative consideration was not merely that the counterparties were alleged bogus entities, but that the entire sales were already reflected in the assessee's books of account. The Tribunal had sustained addition at 6% on the alleged bogus purchases by following its earlier view, and no material was shown to dislodge that factual basis. Once the sales were recorded, a further addition by estimating 6% profit on such sales was impermissible in the absence of any evidence that the assessee had suppressed sales. The Court also noted that no finding had been recorded by the Assessing Officer that the sales themselves were bogus or that any sales addition was warranted. [Paras 17, 18]

The Tribunal was right in rejecting the revenue's claim for a further 6% addition on the recorded sales.

Final Conclusion: The High Court dismissed the revenue's appeals and affirmed that no separate profit addition could be made on the impugned sales when such sales were already recorded in the books and there was no evidence of suppression. The Tribunal's view sustaining addition only on the bogus purchases was upheld.

Unexplained unsecured loan u/s 68 - Repayment through banking channels - Identity and creditworthiness of creditor -Accommodation entry allegation - HELD THAT: - The Court held that the Tribunal had proceeded on the undisputed factual position that the loan received by the assessee was repaid and that the Revenue could not dispute such repayment through banking channels.

Taking note of the jurisdictional High Court decisions relied upon by the Tribunal like Ojas Tarmake (P.) Ltd. [2023 (9) TMI 845 - GUJARAT HIGH COURT] and Ambe Tradecorp (P.) Ltd [2022 (7) TMI 902 - GUJARAT HIGH COURT] which treated repayment of the loan through banking channels and disclosure of the transaction in the books as sufficient to negate the addition in the absence of further material, the Court found no error in the Tribunal's conclusion deleting the addition. On that basis, it held that no substantial question of law arose from the Tribunal's order. [Paras 7, 8]

The Revenue's challenge to deletion of the section 68 addition failed.

Final Conclusion: The High Court held that, in view of the undisputed repayment of the unsecured loan through banking channels and the settled position relied upon by the Tribunal, no substantial question of law arose. Both tax appeals were therefore dismissed.

Penalty u/s 271(1)(c) - disallowance of deduction under Section 42 - Furnishing inaccurate particulars - Bona fide claim with full disclosure- HELD THAT: - The Court held that the Tribunal was justified in deleting the penalty because the case was covered by the principle that mere rejection of a claim does not amount to concealment or furnishing of inaccurate particulars. The determinative consideration was that there was no finding that the details furnished by the assessee in the return were incorrect, erroneous or false.

The Court also treated the earlier decision in NIKO Resources Ltd. [2010 (4) TMI 1248 - ITAT AHMEDABAD] applied by the Tribunal on similar facts, as governing the controversy and accepted that the assessee's claim could not, by itself, attract penalty. [Paras 8]

The question of law was answered in favour of the assessee, and deletion of penalty was upheld.

Final Conclusion: The High Court dismissed the Revenue's appeal and upheld the Tribunal's order deleting penalty under section 271(1)(c). It held that disallowance of the assessee's claim under Section 42, without any finding of incorrect, erroneous or false particulars in the return, could not justify penalty.

Condonation of delay in appeal against intimation u/s 143(1) -Concurrent findings of fact - Substantial question of law u/s 260A

Condonation of delay in appeal against intimation - Knowledge of demand - Concurrent findings of fact - Refusal to condone the delay in filing the appeal against the intimation under Section 143(1) - HELD THAT: - The Court held that, even though the assessee asserted that a copy of the intimation under Section 143(1) was furnished later, the record showed that he had knowledge of the outstanding demand at least when he received the communication proposing adjustment of refund and thereafter filed a revision petition seeking cancellation of the same demand. On that chronology, the appellate authorities were justified in holding that the appeal filed thereafter was belated and that the intervening delay was not satisfactorily explained. Since both authorities had concurrently recorded factual findings on the basis of the material on record, and no perversity or legal infirmity was shown, interference under Section 260A was not warranted. [Paras 13, 14, 15, 18, 19]

The delay was rightly not condoned, and the challenge to the Tribunal's affirmance of that view failed.

Exemption for long-term capital gains on sale of shares - Non-adjudication on merits consequent to refusal of condonation - HELD THAT: - The Court noted the Tribunal's observation that the long-term capital gains had been shown as exempt in the return schedule but the exemption was not reflected in the computation portion of the return. It nevertheless held that, once the appellate remedy itself was found to be barred by unexplained delay and the refusal to condone such delay was justified, the assessee could not seek adjudication of the exemption claim on merits in the appeal under Section 260A. [Paras 16]

No relief could be granted on the exemption claim in the present appeal.

Rectification application - Independent statutory remedy - HELD THAT: - The Court held that the grievance concerning the application filed for rectification was outside the scope of interference with the impugned appellate order. It left it open to the assessee to pursue such remedy as may be available in law in accordance with the statutory scheme. [Paras 17]

The rectification grievance was not a ground to disturb the impugned order, and the assessee was left to pursue any independent remedy available in law.

Final Conclusion: The High Court held that the Tribunal was justified in affirming the refusal to condone the delay in filing the appeal, and that the concurrent factual findings disclosed no substantial question of law under Section 260A. The appeal was accordingly rejected, leaving the assessee free to pursue any separate statutory remedy in respect of rectification.

Burden of proof u/s 68 for cash deposits - Deduction of interest income of co-operative credit society u/s 80P(2)(a)(i)

Unexplained Cash deposits received from members - Onus under section 68 - Addition on account of cash deposits in the bank account - HELD THAT: - The Tribunal held that, after the assessee furnished before the appellate authority the list of members who had made cash payments and whose collections were deposited in the bank account, the initial onus stood discharged. If the Assessing Officer had any doubt about the correctness of that material, further verification or enquiry was required. Since no such enquiry was conducted and no material was brought on record to show that the assessee's explanation was factually incorrect, the deletion of the addition was justified. [Paras 4]

The deletion of the addition under section 68 was upheld.

Deduction under section 80P(2)(a)(i) - Co-operative credit society providing credit facilities to members - Interest on surplus deposits - Whether Interest earned by a co-operative credit society from depositing surplus funds with a co-operative bank or bank was eligible for deduction under section 80P(2)(a)(i)? - HELD THAT: - The Tribunal held that where a co-operative credit society is engaged in providing credit facilities to its members, interest earned from depositing its surplus funds retains the character of income attributable to that business. Relying on CIT vs Karnataka State Co-operative Apex bank [2001 (8) TMI 9 - SUPREME COURT], Vavveru Co-operative Rural Bank Ltd. [2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT] and Sahyadri Co-operative Credit Society Ltd. [2024 (9) TMI 1278 - KERALA HIGH COURT] it held that such deposits do not convert the income into a separate non-business source merely because the surplus is placed with a bank in a prudent or permissible manner. On that principle, the assessee's claim for deduction could not be denied. [Paras 9, 11]

The allowance of deduction under section 80P(2)(a)(i) on the interest income was affirmed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal. It upheld the deletion of the addition under section 68 and affirmed the assessee's entitlement to deduction under section 80P(2)(a)(i) on interest earned from deposit of surplus funds.

Deemed income on receipt of immovable property for inadequate consideration - addition u/s 56(2)(x) - Registration for mortgage of pre-existing rights in under-construction flat - Pre-existing rights under allotment letter - Registration for mortgage loan - Addition u/s 56(2)(x) on the difference between the agreed purchase price of a flat and the stamp duty value adopted at the time of later registration

HELD THAT:- Tribunal found it undisputed that the assessee had acquired rights in the residential flat pursuant to the allotment letter and had substantially paid the consideration much earlier, while possession was to be delivered only later. It held that section 56(2)(x) is attracted only where there is a receipt of immovable property for inadequate consideration, and prima facie a later registration undertaken only to enable creation of a mortgage in favour of a bank over pre-existing rights would not by itself amount to a fresh acquisition or receipt of immovable property.

Since the assessment and appellate orders had not examined the mortgage documents, loan papers, terms of registration and other contemporaneous material to determine the true nature of the registration, the matter required fresh verification. [Paras 7]

The impugned order was set aside and the matter remanded to the Assessing Officer for fresh adjudication; if the registration is found to have been undertaken only for availing a mortgage loan and not to effect any fresh receipt or transfer of property, section 56(2)(x) shall not be invoked.

Final Conclusion: The Tribunal condoned the delay, admitted the appeal, and restored the addition under section 56(2)(x) to the Assessing Officer for fresh examination of the true character of the registration. The appeal was accordingly allowed for statistical purposes.

Assessment u/s 153C - Date of search for other person u/s 153C - Jurisdiction u/s 153C after 01.04.2021 - Limitation for assessment u/s 153C

Section 153C limitation - Relevant date for other person - HELD THAT: - The Tribunal held that, for an other person, the operative date under section 153C is the date on which the seized material is handed over to the Assessing Officer of such other person, or, where that date is not available, the date on which satisfaction is recorded.

Proceeding on that basis, it found that AYs 2015-16 and 2016-17 fell outside the permissible scope of section 153C and that the impugned assessments were also beyond the limitation prescribed thereunder. The assumption of jurisdiction for those years was therefore untenable. [Paras 10, 11]

The assessments for AYs 2015-16 and 2016-17 were quashed as being beyond jurisdiction and barred by limitation under section 153C.

Amended section 153C - Non-searched person assessment - Jurisdictional invalidity - whether Assessment for AY 2017-18 could be framed under section 153C when the date of handing over of seized material was not available and the satisfaction note in the case of the non-searched person was recorded on 11.10.2022? - HELD THAT: - The Tribunal held that, in the absence of any specific date showing when the seized material was handed over to the Assessing Officer of the assessee, the date of recording of satisfaction had to be treated as the relevant date for the first proviso to section 153C(1). Since satisfaction was recorded on 11.10.2022, that date governed the jurisdictional enquiry. After insertion of sub-section (3) with effect from 01.04.2021, section 153C was held to have no application where the relevant date so reckoned falls after 01.04.2021. Consequently, the notice issued under section 153C and the assessment framed thereunder were held to be unsustainable on jurisdictional grounds. [Paras 19, 20, 21, 22, 23]

The notice under section 153C and the consequential assessment for AY 2017-18 were quashed for lack of jurisdiction.

Final Conclusion: The Tribunal admitted the additional legal grounds and held that the impugned assessments were without jurisdiction. The assessments for AYs 2015-16 and 2016-17 were quashed as falling outside the permissible reach of section 153C and as barred by limitation, while the assessment for AY 2017-18 was quashed because section 153C itself was held inapplicable once the relevant date, reckoned through the satisfaction note, fell after 01.04.2021.

Unexplained cash credit on sale proceeds of shares - Taxability of share sale consideration as income from other sources - Penalty for furnishing inaccurate particulars

Unexplained cash credit on share sale proceeds - Genuineness of sale of bonus shares -Income from other sources on share transfer consideration - whether assessee's holding of the bonus shares and their transfer stood established by documentary material ? - HELD THAT: - The Tribunal found that the record contained replies filed before the Assessing Officer, share transfer deeds, valuation material, annual returns filed with the Registrar of Companies and additional evidence showing allotment of bonus shares to the assessee in earlier years and continuity of her shareholding. These documents established both the existence of the shares with the assessee and the fact that the shares sold were bonus shares. The discrepancy regarding the later purchase of stamp paper for the memorandum of understanding, the small difference in the aggregate consideration, and the reference to the purchaser's separate return were held insufficient to displace the documentary evidence of ownership and transfer. On that factual foundation, the Tribunal held that the sale proceeds could not be treated as unexplained cash credit or brought to tax under income from other sources. [Paras 8]

The addition made on account of the share sale proceeds under section 68 and section 56(2)(vii) was deleted.

Penalty u/s 271(1)(c) for furnishing inaccurate particulars - Penalty consequential to quantum addition - HELD THAT: - The Tribunal treated the penalty as consequential to the addition sustained in the quantum proceedings. Since the quantum appeal had already been allowed and the addition deleted, the very basis for the penalty ceased to exist. [Paras 10]

The penalty was deleted.

Final Conclusion: The Tribunal allowed both appeals. It deleted the addition relating to the sale proceeds of shares on finding that the assessee's ownership and transfer of the bonus shares stood proved, and consequently deleted the penalty as well.

Unexplained cash credits from cash sales during demonetisation - Rejection of books of account for unverifiable sales - Third-party non-compliance with notice - Natural justice in use of adverse inquiry material

Addition under Section 68 - Cash sales during demonetisation - Ad hoc estimation - addition made by treating part of the cash sales of jewellery recorded on the date of demonetisation as unexplained cash credits - HELD THAT: - The Tribunal accepted the appellate finding that the addition was founded only on surmises, conjectures and an arbitrary estimate of the assessee's billing capacity on an exceptional day. It noted that the purchases, stock position and other financial records stood accepted, and that mere non-compliance by customers with notices issued under section 133(6) did not by itself make the recorded sales unverifiable. Once the cash sales were recorded in the books and linked with accepted purchases, treating the corresponding cash deposits as unexplained would be unjustified. [Paras 5]

The addition under Section 68 was rightly deleted and no interference with the appellate order was warranted.

Rejection of books of account - Specific defects in books - rejection of the books of account on the footing that the sales on the date of demonetisation were not genuine - HELD THAT: - The Tribunal held that rejection of books could not be sustained where no specific defects were pointed out in the books, and the Assessing Officer had simultaneously accepted the purchases, stock and related financial records. In that situation, the conclusion that the sales were not genuine, based only on suspicion about the volume of business on a particular day, could not support rejection of the books. [Paras 5]

The rejection of books under Section 145(3) was not legally sustainable.

Adverse third-party inquiry material - Opportunity to rebut - Reliance on adverse material arising from third-party inquiries without affording the assessee an opportunity to confront - HELD THAT: - The Tribunal noted that the Assessing Officer relied on adverse information emanating from third-party inquiries and yet did not provide the assessee an opportunity to confront or respond to that material. Such use of unconfronted adverse material could not validly support the addition. [Paras 5]

The appellate finding of violation of natural justice was affirmed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the appellate order deleting the addition made out of cash sales recorded during the demonetisation period. It held that the addition and rejection of books were based on suspicion and arbitrary estimation, and that adverse third-party material had been used without proper opportunity to the assessee.

Scope of Limited scrutiny - additions made beyond the scope of the limited scrutiny notice - Revised return replacing original return - Assessment on basis of original return

Scope of Limited scrutiny - additions made beyond the scope of the limited scrutiny notice - Whether AO could not deny the claim under section 54F and treat the capital gain as business income when the notice under section 143(2) in limited scrutiny referred only to cash deposits for examination? - HELD THAT: - The Tribunal found from the notice under section 143(2) that the limited scrutiny was confined to cash deposits. The later assertion in the assessment order that transfer of properties was also part of the scrutiny could not enlarge the scope of the notice.

Since the assessment on exemption and head of income travelled beyond the subject identified in the limited scrutiny notice, that part of the assessment was held unsustainable. [Paras 4]

The disallowance and treatment adopted beyond the limited scrutiny notice were held to be invalid.

Revised return - Original return obliterated - Assessment founded on ignored revised return - whether assessment could be sustained when the revised return validly filed within time was ignored and the computation was made on the basis of the original return? - HELD THAT: - The Tribunal held that once a revised return is filed, the original return stands replaced. It found that, despite the revised return having reduced the returned income, the Assessing Officer proceeded on the income disclosed in the original return while framing the assessment. On that basis, the revised return had been completely ignored, and the additional ground challenging the assessment on the basis of the original return was sustained. [Paras 6]

The challenge based on non-consideration of the revised return was accepted and the assessment founded on the original return was not sustained.

Final Conclusion: The Tribunal allowed the appeal. It held that the assessment had travelled beyond the scope of the limited scrutiny notice and had also been framed by ignoring the revised return, with the result that the impugned addition was deleted.

Penalty u/s 271D - cash loan acceptance u/s 269SS - unsecured loan received from brother -Reasonable cause in penalty proceedings - Cash receipt vis-a-vis bank transfer

HELD THAT: - The Tribunal found that, although there was a cash deposit entry on the relevant date, the record also showed two separate bank transfers on later dates. It accepted the assessee's explanation that the loan account had been wrongly narrated as a single cash receipt due to a clerical mistake and that the cash deposit represented business cash receipts, while only a part of the loan was actually received in cash. The authorities below had not verified whether the two later credits had come from the assessee's brother through banking channels.

On that material, the Tribunal held that only Rs. 5,000/- had been accepted in cash and therefore there was no contravention attracting penalty under section 271D; it also noted that section 273B provides relief where reasonable cause is shown. [Paras 3]

The penalty was directed to be deleted, and the additional legal grounds were left unadjudicated as academic.

Final Conclusion: The Tribunal allowed the appeal and deleted the penalty. It held that the alleged cash loan of the entire amount was not established, since only a small sum was received in cash and the balance was through bank transfers.

Refund of anti-dumping duty - Applicability of Section 27 of the Customs Act to anti-dumping duty - Scope of refund under Section 9AA of the Customs Tariff Act - HELD THAT: - The Court held that Section 9AA applies only to specified refund situations where anti-dumping duty paid is in excess of the actual margin of dumping. It does not govern a case where the levy itself has been set aside and the refund arises because anti-dumping duty was not payable at all. By virtue of Section 9A(8), the provisions of the Customs Act relating to refunds apply to anti-dumping duty as far as may be; therefore, such refund claim has to be processed under Section 27 of the Customs Act. The pendency of the revenue's challenge against the earlier Tribunal order did not alter the legal position accepted by the Tribunal in the impugned order. [Paras 11, 12, 13, 14]

The Tribunal was right in holding that Section 9AA was inapplicable and that the respondent's refund claim was maintainable under Section 27 of the Customs Act.

Final Conclusion: The High Court held that the impugned refund was not a refund covered by Section 9AA of the Customs Tariff Act, but a refund consequent upon non-leviability of anti-dumping duty, to which Section 27 of the Customs Act applied through Section 9A(8). Finding no substantial question of law arising from the Tribunal's order, the appeal was dismissed.

Tariff classification of Clear Float Glass - Certificate of Origin and tariff classification - Eligibility to the benefit of Notification No. 46/2011-Cus. - Preferential exemption under trade agreement notification - Confiscation and penalty in classification dispute

Whether the tariff classification mentioned in the PTA Certificate of Origin can override or affect the classification of the imported goods determined under the Customs Tariff Act, 1975 and the appellant's eligibility to the benefit of Notification No.46/2011Cus.? - HELD THAT: - The Tribunal held that classification under Heading 7005 had to be determined under the Customs Tariff Act read with Chapter Note 2(c), which turned on the existence of a microscopically thin absorbent, reflecting or non-reflecting metal coating, and not on whether such coating was separately applied.

On the technical material on record, including the CGCRI reports and RTI clarification, the presence of a microscopic tin layer with the requisite characteristics stood established, and the Department had produced no contrary scientific evidence. The Tribunal further followed the coordinate Bench ruling in the appellant's own case [2025 (4) TMI 1695 - CESTAT CHENNAI], as well as the rulings relied on therein, and held that identical Clear Float Glass was correctly classifiable under CTH 7005 10 90 with entitlement to the notification benefit. It was therefore held that the Certificate of Origin served to establish originating status and could not override classification otherwise legally determined under Indian customs law.

The principle emerging from the statutory provisions, scientific evidence and judicial precedents is clear. Classification under Heading 7005 depends upon the existence of the absorbent, reflecting or non-reflecting layer contemplated by Chapter Note 2(c). Once such layer is established, classification under CTH 7005 10 90 follows. The Certificate of Origin serves only to establish originating status and cannot override classification legally determined under the Customs Tariff Act. Since the Department has neither disputed the originating status of the goods nor alleged that the Certificate of Origin is invalid, the mere mention of CTH 7005 29 90 therein, the benefit of Notification No.46/2011-Cus cannot be denied.[Paras 13, 14, 15, 17, 18]

The imported Clear Float Glass was held classifiable under CTH 7005 10 90, and the notification benefit could not be withheld merely because the PTA Certificate of Origin mentioned CTH 7005 29 90.

Confiscation for misdeclaration - Penalty for classification dispute - Consequential duty demand and interest - HELD THAT: - The Tribunal held that the entire duty demand was founded on the rejected premise that the goods fell under CTH 7005 29 90 and were therefore ineligible for the notification benefit; once that premise failed, the demand could not survive. It found that the goods had throughout been declared as Clear Float Glass and that the show cause notice alleged no misdescription, with the dispute arising only from an audit objection on classification. In such circumstances, confiscation under Section 111(m) was unavailable, as the basis of misdeclaration was absent, and the redemption fine, being consequential to confiscation, also fell. Penalty under Section 114A was likewise unsustainable because the openly declared classification claim was supported by scientific material, advance ruling and judicial precedent, which negatived any inference of collusion, wilful misstatement, suppression or intent to evade duty. Since interest was merely accessory to the principal duty demand, it also failed along with the demand. [Paras 23, 24, 25, 27, 28]

The differential duty demand, confiscation under Section 111(m), redemption fine, penalty under Section 114A and consequential interest were set aside.

Final Conclusion: The Tribunal held that the imported Clear Float Glass was correctly classifiable under CTH 7005 10 90 and was entitled to the benefit of Sl. No. 934(I) of Notification No. 46/2011-Cus. The mention of CTH 7005 29 90 in the PTA Certificate of Origin could not override classification under the Customs Tariff Act, and the consequential duty demand, confiscation, redemption fine, penalty and interest were therefore set aside.

Rejection of transaction value on related-party imports - Sequential application of customs valuation methods - Residual valuation under Rule 8 - Ex parte disposal on merits

Ex parte disposal on merits - Non-appearance of appellant - appeals could not be dismissed for non-prosecution merely because the appellants remained unrepresented at the hearing - HELD THAT: - Relying on Shri Balaji Steel Re-Rolling Mills [2014 (11) TMI 531 - SUPREME COURT] the Tribunal held that it was bound to decide the appeals on merits even in the absence of the appellants or their counsel. Since the matter had remained pending for long and further adjournment was declined, the Tribunal proceeded to examine the record and determine the controversy on merits. [Paras 6, 7]

The appeals were taken up and decided on merits notwithstanding the appellants' absence.

Rejection of transaction value on related-party imports - Reasonable doubt as to declared value - HELD THAT: - The Tribunal held that under section 14 and the Valuation Rules, transaction value is acceptable only subject to the statutory conditions. Where the buyer and seller are related, Rule 10A permits rejection of the declared value if there is reasonable doubt about its truth or accuracy. On the findings recorded in the impugned order that the importer and the Hong Kong supplier entities were owned or controlled by the same family and that this relationship had not been declared to Customs, the Tribunal held that such relationship by itself was sufficient to justify rejection of the transaction value, even without conclusive proof of cash payments to the suppliers. [Paras 18, 19]

Rejection of the declared transaction values under Rule 10A was upheld.

Sequential application of customs valuation methods - Residual valuation under Rule 8 - Arbitrary loading of value - re-determination of value was sustainable only where it conformed to the prescribed sequential valuation rules and had a permissible evidentiary basis - HELD THAT: - The Tribunal held that once transaction value is rejected, valuation must proceed strictly and sequentially under the Rules, and it is not open to the authority to invoke multiple rules indiscriminately or to omit identifying which rule was applied to which goods and why. Re-determination was upheld for lead brass strips/coils, PVC films, screen pronging ink and PVA abrasive wheel where the actual supplier invoices recovered from the importer's computer provided the proper basis under Rule 4, and for O-rings where the actual supplier's invoice retrieved from the computer furnished a valid basis after adding transport cost. Re-determination of dial colour, acrylic lacquer, UV glue, polishing powder, brass strip/leaded brass strips, leaded/unleaded brass strips and screen printing ink based on contemporaneous imports of similar goods was also sustained. However, the valuation of PVA Wheel-C-3000 and other specified PVA abrasive wheels under Rule 8 was set aside because the authority relied on manufacturers' invoices and earlier imports without showing that such material was permissible under the Rules. The valuation of watch dials under Rule 8 was also set aside because the very materials relied upon by the authority showed imports and sales of such goods during the relevant period, requiring recourse to Rules 5 or 6, and because domestic sale price could not be used in the manner adopted. The valuation of watch hands on the basis of a handwritten cost sheet was held impermissible under Rule 8. The enhancement of value of miscellaneous goods by simply loading the declared value on an assumed average undervaluation was also held contrary to section 14 and the Valuation Rules. [Paras 28, 29, 30, 31, 32]

Differential duty and interest were upheld only in respect of O-rings, dial colour, acrylic lacquer, UV glue, polishing powder, brass strip/leaded brass strips, leaded/unleaded brass strips and screen printing ink; the remaining re-determinations and consequential demands were set aside.

Confiscation and redemption fine - Penalty for alleged undervaluation - HELD THAT: - Having set aside most of the re-determined values and consequential demands, the Tribunal found that sufficient grounds no longer remained to sustain confiscation of the seized goods, redemption fine, or penalties on the importer and the other appellants. In that view, it considered examination of the remaining submissions unnecessary. [Paras 35, 36, 37, 38, 39]

Confiscation, redemption fine, and all personal penalties were set aside, and the importer's appeal was partly allowed.

Final Conclusion: The Tribunal held that although the declared transaction values were rightly rejected because of the related-party nature of the imports, the subsequent re-determination of value was sustainable only for specified goods where it conformed to the Valuation Rules. The importer's appeal was partly allowed, the remaining valuation-based demands were set aside, and the confiscation, redemption fine, and personal penalties were quashed with consequential relief.

Look Out Circular - Right to travel abroad under Article 21 - Bank-initiated travel restraint - Independent application of mind - Periodic review and proportionality - Relegation to trial court for LOC modification - Fair, just and reasonable procedure - Mechanical exercise of power - Independent application of mind - Whether the issuance and continuation of Look Out Circulars (“LOCs”), a coercive executive measure directly imperilling the constitutionally guaranteed right to travel, is legally sustainable in the circumstances evinced in each of these petitions ?

Look Out Circular - Bank-initiated travel restraint - Right to travel abroad under Article 21 - Economic interests of India - HELD THAT: - The Court held that an LOC is a coercive executive restraint on the fundamental right to travel and can be sustained only within the limits summarised by the Court from the governing executive instructions and precedents. Public sector banks do not presently possess valid authority to seek issuance of LOCs through their Chairman, Managing Directors or Chief Executive Officers; routine loan default, pending DRT or recovery proceedings, declaration of NPA or even allegation of fraud by the bank, without a live and legally sustainable criminal basis against the individual concerned, does not justify curtailment of travel. The expression concerning detriment to the economic interests of India must be narrowly construed and cannot be invoked for ordinary commercial defaults. The Court further found that, across this category, the LOCs had either been issued solely at the behest of banks, or continued despite the petitioners not being accused, having been discharged, being merely guarantors or former directors, or having repeatedly travelled and returned in compliance with court orders, showing absence of flight risk. The objection to territorial jurisdiction in one matter was rejected, the Court holding that the Bureau of Immigration and the bank connection in Delhi, together with the stage of the proceedings, furnished sufficient cause to entertain the petition. [Paras 88, 89, 90, 91, 92]

The bank-initiated LOCs were quashed, subject to the travel-intimation conditions and the additional case-specific safeguards imposed by the Court.

Look Out Circular- Independent application of mind - Periodic review and proportionality - Cooperation with investigation - HELD THAT: - Applying the governing principles earlier formulated, the Court held that continuation of LOCs cannot rest on pendency of assessment, search, inquiry or complaint alone. The originating agency must justify necessity, proportionality and legality with specific material, and the restraint cannot continue mechanically or indefinitely. In this category, the Court noted circumstances such as completion of investigation, filing of complaint without cognizance, absence of FIR, absence of the petitioner as an accused, no allegation of non-cooperation, prior revocation of parallel LOCs, attachment of properties securing the agency's interest, and repeated foreign travel with return in accordance with interim permissions. In such situations, the LOC either lacked a valid present basis or had served its purpose, and its continuance became an unjustified restriction on personal liberty. [Paras 137, 138, 139, 140, 141]

The LOCs in this category were set aside, with common travel-intimation conditions and the additional disclosure and travel conditions directed in the specified petitions.

Relegation to trial court for LOC modification - Pending charge-sheet proceedings - Alternative remedy within LOC framework -HELD THAT: - The Court treated this as a distinct class governed by the principle in Sumer Singh Salkan [2010 (8) TMI 1083 - DELHI HIGH COURT], that a person against whom an LOC is issued may approach the court before which the criminal proceedings are pending, and that such court is competent to modify or rescind the restraint. Since, in these petitions, charge-sheets or complaint proceedings were already pending and the trial courts were seized of the full record, those courts were considered the more appropriate forums to assess necessity and proportionality of the LOC in the first instance. The writ petitions were therefore disposed of without adjudicating the merits of the LOCs themselves. [Paras 155, 156, 157, 158, 159]

The petitioners were relegated to the competent courts where the charge-sheet or complaint is pending, with a direction that their applications for relief be considered expeditiously and without prejudice from the present order.

Final Conclusion: The Court restated the governing constitutional and legal limits on issuance and continuation of LOCs, quashed the impugned LOCs challenged in the bank and agency/Ministry categories subject to specified safeguards, and relegated the remaining petitioners, in whose cases charge-sheet or complaint proceedings were already pending before competent criminal courts, to seek relief before those forums.

Commodity derivatives - Due Date Rate and settlement price - Negative pricing in cash-settled futures - Finality and irrevocability of settlement - Annulment of trades - governing circulars and bye-laws - Judicial review of regulatory discretion - Noscitur a socii - Interpretation of the contract specifications contained in the Circular issued by Respondent No. 2 – MCX - vested rights under pre-existing contracts - locus standi - power to intervene, annul, or take emergency measures

JUDGMENT: (PER R.I. CHAGLA, J.) - HELD THAT:- It is apparent from the contract specifications that the parties to the contract agreed when they entered into the contract that the contract would be settled at the “DDR”, which would be the settlement price in Indian Rupees of NYMEX Crude Oil Front month contract on the last trading day of the MCX Crude Oil Contract. Further, the “DDR” provided for the method of conversion of the US Dollar rate to an INR Rate. The Petitioners have not disputed the applicable DDR and the settlement price on NYMEX or the currency conversion rate applied for this purpose. The only dispute appears to be that the price cannot be negative and that the DDR is the same as price.

Bye law 2.3.42 defines ‘Due Date/Contract Expiry Date/Contract Maturity Date’ as the ‘maturity date (last day) on which a specific contract in a specific commodity expires and is not available for trading thereafter’. Further, Bye-law 2.3.43 defines ‘DDR’ as ‘the settlement price fixed for squaring up (closing out) all the outstanding contracts in a contract month on the due date, which are not fulfilled by giving or taking delivery’. Thus, the DDR cannot be equated with price but is a reference rate and is applicable only after the contract expires and trading closes and is used by the clearing corporation for determining the profit or loss of traders for purposes of cash settlement. In the present case, the NYMEX settlement price became available at around 2 am (IST) when trading closed on NYMEX. This was used as the DDR as per the contract specifications. The NYMEX was at the closing in the negative and as a result the DDR was in the negative. It cannot be said that the Petitioners were sellers at this negative rate but infact the trades have been settled at the negative rate in view of crude oil price on NYMEX being in the negative.

The Petitioners being seasoned investors had invested in a sophisticated type of investment and, in its own words, had made a ‘bet’ on the price of crude oil. The settlement of the contract was carried out exactly in terms of the contract specifications. The Petitioners being traders always were at the liberty to exit the Crude Oil Futures contracts prior to the expiry by squaring of or rolling over their positions. The Petitioners had infact collected/paid all their profits and losses in relation to the April, 2020 contracts till the due date i.e. 20th April 2020 and losses, if any, related only to the last date of trading. The Petitioners having themselves chosen to hold on to their Net Long Position at the time of expiry of the contract, cannot now contend that the remaining trades which they consciously took a chance of not squaring off, cannot be settled at a negative rate.

Further, in every contract, one party makes a profit and the other makes a loss. If the Petitioners argument was to be accepted namely that the downward movement of DDR should be kept at Re. 1, this would be unfair and lead to grave injustice to the counterparty of the futures contract. Such an interpretation would run against commercial commonsense and would go against the very grain of futures market where both profits and losses for both sides are potentially unlimited.

It is pertinent to note that, the trading closed on MCX on 20th April, 2020 at 5.00 p.m. IST and it is on this date that MCX issued a Circular informing members that the final DDR was under finalization. The trading on NYMEX was yet to close and DDR had not yet become available. It was made clear by the said Circular that Rupee 1/- was only a provisional rate and differential settlement if any would be carried based on the final settlement price. The NYMEX settlement price became available at around 2.00 am IST on 21st April, 2020. Accordingly, MCX issued the impugned Circular in the early morning of 21st April, 2020 (IST) and communicated the final DDR of (-) 2884 to its members.

It would be impossible for the Court to formulate any effective relief in the Writ Petitions as submitted by the Respondent Nos. 2 and 3 / MCX and MCX-CCL as by granting such relief, the Court would have to pass directions to reverse settlement for thousands of traders, including those who had no objection to the DDR. Further, the Court would have to pass directions to recover dues from all brokers whose trades made a profit, and the Brokers in turn would have to recover the dues from all end-clients, including those who may have ceased trading with their Brokers. The Court would also be required to be called upon to determine a new DDR and to carry out fresh settlement process as per the new DDR for thousands of traders, including those who have no objection to the original DDR. Thus, it would be impossible for this Court in the present Petitions to pass an effective order to carry out such a process. This apart from it being well settled that the Court will not exercise its extraordinary discretion under Article 226 unless the relief granted does substantial justice to the entire case.

The subsequent Circular dated 21st September, 2020 issued by SEBI after the impugned Circular enabled negative pricing. This Circular has been relied upon by the Petitioners to contend that SEBI enabled negative pricing only after 21st September, 2020 as an after thought. The reliance is misplaced as the Circular only would go to show that negative pricing was always a reality and that SEBI had only put in place a revised margin framework for such commodities. The MCX had also by its Circulars dated 14th July 2020 and 28th July 2020 referred to changes in its software to enable entering of bids at negative price on MCX’s trading system. These Circulars have no bearing on the DDR to be used on settlement of contracts on their expiry. The MCX’s Circular only applies to prices quoted on MCX and does not apply to DDR that is derived from NYMEX. MCX had vide Circular dated 30th April 2020 clarified that the DDR would continue to remain at NYMEX’s prices.

The Brokers had acted upon the impugned Circular and completed settlement of trades on behalf of the Petitioners as per the DDR as well as initiated arbitration to recover dues from the Petitioners on the basis of the impugned Circulars. Thus, the Brokers/members not only accepted the negative DDR in the impugned Circular, but also acted pursuant to it. It is further pertinent to note that in the award passed against the Petitioners in the arbitration initiated by the Brokers, there is a finding at paragraph 16 viz. that the Petitioner ‘took a chance and speculated. If there was a profit, it would have been beneficiary of such profit. Therefore, the same has to be with respect to loss also. It is beneficiary of the loss as well as profits. It cannot blame anyone else. The Brokers having accepted the DDR, it would now not be open for the Petitioners to take a contrary stand and independently challenge the DDR in the impugned Circular. The Petitioners by doing so are seeking to take a second bite at the cherry and challenge the impugned Circular after suffering a ruling on the same issue in the arbitration.

Accordingly, no merit in these Petitions which seek to quash the impugned Circular and effectively undo the settlement of crude oil future contracts which is impermissible in law and which would run contrary to the very contract specifications which the Petitioners are bound under. Accordingly, the Writ Petitions are dismissed with no orders as to costs.

The Interim Applications filed therein do not survive and are disposed of accordingly.

CONCURRING JUDGMENT: (Per Advait M. Sethna, J.) :- HELD THAT:- A bare perusal of the Impugned Circular dated 21 April 2020, issued by Respondent No. 3 - Multi Commodity Exchange Clearing Corporation Limited (‘MCX-CCL’ for short), makes it evident that the same has been issued, inter alia, in pursuance of the Rules, Bye-laws and Regulations of MCX-CCL. The said Rules, Bye-laws and Regulations have not been assailed by the Petitioners in the present proceedings, as duly noted in the judgment authored by my learned brother.

It is pertinent to note that when the usufruct/source of the said circular is itself not challenged by the Petitioners, whether the Impugned Circular is bad in law becomes debatable. The Impugned Circular clarifies that the contract would be settled at the Due Date Rate (‘DDR’ for short) which would be the settlement price as per New York Mercantile Exchange’s (‘NYMEX’ for short) Crude oil front month contract, converted into Indian Rupees. The Petitioners being sophisticated traders, regularly trading in crude oil could not be oblivious to the risks of price fluctuations and volatility in that regard.

The language deployed in the MCX-CCL Circular dated 20 April 2020, which is referred to in the Impugned Circular dated 21 April 2020, does mention about the unprecedented price fluctuation in the international crude oil market. The Circular of 20 April 2020 clearly envisages that based on NYMEX price, DDR for crude oil futures as on 20 April 2020 was under finalisation. It is in such circumstances that the provisional settlement price was stated to be Re. 1 per barrel for the purpose of computation, as on 20 April 2020. Accepting the contentions of the Petitioners would mean that the price of Re. 1 per barrel is the final price for the purpose of settlement of trades on 20 April 2020. This is not what the said circular dated 20 April 2020 contemplates and/or envisages. There appears to be no ambiguity in the language, purport or intent of the Circular dated 20 April 2020, read with the Impugned Circular dated 21 April 2020, having its roots in the Rules, Regulations and Bye-laws of the MCX-CCL which are not assailed in these proceedings.

The Petitioners have consciously, knowingly and being fully aware chose to hold on to their net long position at the time of the expiry of the contract i.e. 20 April 2020. Therefore, they are estopped from now contending that the negative price on 20 April 2020 was so unprecedented so as to justify regulatory intervention by SEBI, particularly in the form of annulment of trades. It is the case of the Petitioners that annulment of the said trades is the best possible relief, in the given factual complexion. If this is to be accepted, then the decision of this Court would affect the commercial interest of several other counter-parties, who are not even before us in these proceedings.

The Petitioners seem to be aggrieved by the quantum of the negativity in the price of crude oil i.e. at Re. (-)2884 per barrel on the fateful date of 20 April 2020 which has resulted in an ‘unprecedented loss’ to them. If this is what the Petitioners justify as a ground of interference by the regulatory authority, that too under this Court’s directions, in the exercise writ jurisdiction, we are afraid whether such directions can at all be passed, moreover in the absence of counter-parties, being equally impacted by such trades.

This Court is unable to countenance a situation of granting reliefs/prayers as sought for in the Petition in-absentia of the affected counter-parties, which would be unfair, inequitable and unjust.

These are purely commercial matters and decisions taken in the interest of maximizing profits. We see no larger public interest in the present case which may have otherwise warranted interference. As a writ Court, we do not find it just, proper, and/or expedient to come to rescue of such traders or groups of traders who have approached this Court, when the market situation turned sour, to their financial detriment.

This is case where the Petitioners have failed to satisfy the Court’s conscience that justice lies on their side, being a sine qua non in the entertainability of a writ petition.

For all of the above reasons, I agree with the judgment authored by my learned brother to the effect that the Writ Petition deserves to be rejected.

Final Conclusion: The High Court dismissed the writ petitions and upheld the impugned circular fixing the negative Due Date Rate for settlement of the crude oil futures contracts. It held that the settlement was in accordance with the agreed derivative contract framework, could not be judicially undone through directions for annulment or regulatory intervention, and remained binding and irrevocable.

Clean slate principle - Extinguishment of pre-CIRP electricity dues - Late Payment Surcharge as part of pre-resolution claims - Validity of demand for pre-CIRP outstanding electricity dues and late payment surcharge as a precondition for a fresh electricity connection after approval of the resolution plan - HELD THAT: - LPSC by its very nature is statutorily payable on the failure of a consumer to pay an outstanding amount on account of electricity charges on the due date. Admittedly, this occurred in 2022 prior to the CIRP proceedings and has been running since then. If the amount on account of outstanding electricity dues is extinguished, it would be illogical to suggest that any amount could be recoverable on account of LPSC arising in respect of the same period. This would also negate the clean slate principle. (Tata Power Western Odisha Distribution Ltd. (TPWODL) and Anr. vs. Jagannath Sponge Pvt. Ltd. [2023 (9) TMI 1071 - SC ORDER] and EMC Ltd. vs. State of Rajasthan and Ors. [2023 (5) TMI 5 - RAJASTHAN HIGH COURT] In such circumstances, the entire contention of WBSEDCL that LPSC can only be levied after payment is made is without any legal basis and contrary to the records of WBSEDCL.

In Prem Cottex v. Uttar Haryana Bijli Vitran Nigam Ltd. [2021 (10) TMI 1456 - SUPREME COURT] as followed in Shree Rajasthan Syntex Ltd vs Chief Engineer Commercial Ajmer & Anr. [2025 (3) TMI 784 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI - LB] to contend that LPSC does not fall until the bill for LPSC is raised by WBSEDCL is misplaced and inapposite.

The Court found from WBSEDCL's own bill and report that the claim for LPSC had already arisen and formed part of the dues before disconnection and prior to commencement of CIRP. Once the Resolution Plan stood approved, all pre-CIRP claims not forming part of that plan stood extinguished, and the successful resolution applicant was entitled to take over the corporate debtor on a clean slate. Since the principal electricity dues for the pre-CIRP period could not be recovered, the connected LPSC for the same period could not be revived indirectly as a precondition for supply. The reliance placed by WBSEDCL on decisions under section 56(2) of the Electricity Act was held misplaced, as this was not a case of escaped billing or a later crystallisation of liability; the LPSC had already been billed before CIRP. The contention that LPSC became payable only when demand was raised after approval of the Resolution Plan was therefore contrary to the record and without legal basis. [Paras 10, 11, 12, 13, 14]

The demand for pre-CIRP LPSC as a condition for electricity supply was held arbitrary and without authority of law, and WBSEDCL was restrained from raising such demand against the petitioner.

Final Conclusion: The writ petition was allowed to the extent that WBSEDCL was held disentitled to insist on payment of pre-CIRP electricity dues or the connected Late Payment Surcharge for granting electricity supply to the successful resolution applicant. The impugned demand for LPSC was found to be contrary to the approved Resolution Plan and without authority of law.

Bar of civil court jurisdiction under FEMA - Contravention of FEMA and validity of transfer of agricultural land to Non-Resident Indian - Applicability of Section 23 of the Contract Act and Section 6(h) of the Transfer of Property Act to FEMA contraventions - Civil suit seeking declaration that a sale deed is null and void on the ground of violation of the Foreign Exchange Management Act, 1999 - sale of agricultural property in favour of a non-resident Indian - Entitlement to partition and separate possession of her share in Schedule 'A' property

Bar of civil court jurisdiction under FEMA - Declaratory suit challenging transfer for FEMA contravention -HELD THAT: - It is not in dispute and in fact, even the case of the plaintiff herself that Schedule 'B' properties were the separate properties of her father. The third defendant has purchased both Schedule 'A' and Schedule 'B' properties from Jayaraman under registered sale deed dated 24.10.2005. Jayaraman sold both Schedule 'A' and Schedule 'B' properties, executing the said document for himself and also as power agent of the first defendant, his son. Pending the suit, the third defendant settled both Schedule 'A' and Schedule 'B' properties, in favour of the 4th defendant, his mother, by registered sale deed dated 20.12.2012. In view of the above settlement, the fourth defendant was also impleaded in the suit.

The authorities have power under the provisions of FEMA to confiscate properties, apart from levying fine and also pass an order of imprisonment for a term extending upto 5 years, in addition to the fine. Section 13 deals with contravention and penalties. Section 13(2) empowers the Adjudicating Authority, in addition to imposing penalty, to also confiscate a property, in respect of which contravention has taken place. In the present case, the contravention is in respect of Schedule 'B' properties. Thus, the Adjudicating Authority has in its wisdom thought it fit to only impose penalty and has not invoked powers available under Section 13(2) of FEMA, to confiscate the Schedule 'B' properties.

The Court held that Section 34 of FEMA expressly bars the jurisdiction of the civil court in respect of matters which the Adjudicating Authority, the Appellate Tribunal or the Special Director (Appeals) is empowered to determine. The plaintiff's challenge to the sale deed was founded entirely on alleged violation of FEMA, and the plaintiff had in fact already invoked the FEMA machinery, resulting in adjudication and imposition of penalty, which was confirmed in appeal. Since the relief of partition in respect of Schedule 'B' property was only consequential upon invalidating the sale, that consequential relief could not survive independently once the declaratory relief itself was barred. FEMA was treated as a complete code on the question of contravention, penalties, confiscation and appellate remedies, and therefore the courts below erred in overlooking the width of the statutory bar. [Paras 29, 30, 36, 37, 38]

The decree declaring the Schedule 'B' sale void was unsustainable for want of civil court jurisdiction under Section 34 of FEMA.

FEMA contravention not rendering transaction void - Transfer of agricultural land to Non-Resident Indian - Section 23 of the Contract Act and Section 6(h) of the Transfer of Property Act - HELD THAT: - The Court held that FEMA does not declare such acquisition void; instead, it provides a regulatory framework of adjudication, penalty, confiscation and compounding. Where the statute itself contemplates condonation and gives the authority discretion to impose penalty or confiscate the property, the transaction cannot be treated as one forbidden by law so as to automatically attract Section 23 of the Contract Act. The adjudicating authority in the present case, despite finding contravention, consciously imposed penalty alone and did not confiscate the property. Relying on Vijay Karia [2020 (2) TMI 628 - SUPREME COURT] and applying the distinction between FERA and FEMA, the Court held that, unlike FERA, FEMA does not contain provisions making offending transactions void. The Court further noted that Regulation 3(b) permits transfer of any immovable property in India to a person resident in India, and the subsequent settlement in favour of the transferee's mother had also been noticed by the FEMA authorities while restricting the consequence to penalty. Asha John Divianathan [2021 (3) TMI 92 - SUPREME COURT] was distinguished as a decision rendered in the context of FERA and its prohibitory scheme. [Paras 36, 37, 39, 40, 41]

The sale of Schedule 'B' property could not be declared null and void merely because it contravened FEMA, and the contrary view of the courts below was set aside.

Partition of ancestral property by daughter - Concession as to ancestral character of Schedule 'A' property - HELD THAT: - The Court found that the appellants had not denied the ancestral character of Schedule 'A' property and had, even in the grounds of second appeal, accepted that the plaintiff was a coparcener in respect of those properties. In the absence of any sustainable challenge to that part of the decree, there was no reason to deny partition in respect of Schedule 'A' property. [Paras 19, 20]

The decree for partition relating to Schedule 'A' property was confirmed.

Final Conclusion: The Second Appeal was partly allowed. The decree declaring the Schedule 'B' transfer void and granting consequential relief in respect of that property was set aside, while the decree for partition in respect of Schedule 'A' ancestral property was confirmed.

Scope Of Binding nature of High Court judgments - Judicial discipline by Tribunal and statutory authorities -HELD THAT: - The Court clarified that once the law stands settled by a High Court, the Tribunal and other authorities are not at liberty to ignore that decision so long as it remains operative. The determinative principle applied was one of judicial discipline: until the High Court judgment is set aside or overruled, it holds the field, and any reliance placed on it by the Tribunal or authorities does not constitute an error of law. The Court further noticed that a similar position had also been settled by the Supreme Court in the matter of Marmugao Port Trust vs. Commissioner of Customs, Central Excise & Service Tax [2016 (11) TMI 520 - CESTAT MUMBAI]. [Paras 3, 4, 5]

The substituted paragraphs were directed to stand, affirming that the Tribunal or authorities could validly rely on the Calcutta High Court judgment so long as it remained in force.

Final Conclusion: The Court disposed of the miscellaneous application by substituting the earlier paragraphs and clarifying that a High Court decision remains binding on the Tribunal and statutory authorities until it is set aside or overruled, and reliance on such decision does not amount to an error of law.

Management, Maintenance and Repair service - Service tax liability of sub-contractor - Extended period of limitation - Burden of Proof -Waiver of penalty on the ground of reasonable cause - Suppression of taxable receipts - Revenue neutrality

Management, Maintenance and Repair service - Service tax liability of sub-contractor - HELD THAT: - Though it is contended by the appellant that the contract is only a general contract and not for Maintenance, Management and Repair Services, there is no evidence to show that the appellant did not receive remuneration for the services of line Maintenance, modem repair and cabling to the department. These receipts have come to light only during the visit of the Internal Audit Units of the Service Tax Department.

The Court accepted the Tribunal's reading of the work order and held that the appellant was engaged for managing and maintaining leased lines for consideration on a per-circuit, per-year basis. On a plain reading of the work order and the relevant tax entry, the activity squarely fell within Management, Maintenance and Repair service. The plea that the appellant was only rendering an insignificant part of the work for the system integrator, or that the main contractor had discharged service tax, was not accepted, particularly when no breakup was produced to establish that the tax paid by the main contractor covered the appellant's receipts for the disputed services. [Paras 16, 17, 20]

The demand was sustainable on merits, as the appellant's receipts for the disputed services were taxable in its own hands.

Extended period of limitation - Suppression of taxable receipts - Revenue neutrality -HELD THAT: - The Court held that the Tribunal was right in sustaining the extended period because the non-payment of service tax on the disputed services came to light only during audit and the taxable receipts had not been disclosed. Waiver of penalty under the discretionary provision was treated as resting on separate considerations and was held not to automatically displace the finding justifying the extended period. The Court also noted that revenue neutrality had been correctly explained in the appellate order, and the appellant's plea that no revenue neutrality existed was factually incorrect. [Paras 18, 19, 20]

The extended limitation was upheld in favour of the department despite waiver of penalty.

Final Conclusion: The High Court upheld the Tribunal's order and dismissed the appeal. It held that the appellant's services were taxable as management, maintenance and repair service, and that the extended period of limitation was rightly invoked notwithstanding the waiver of penalty.

Extended period of limitation for non-disclosure of taxable commission income - Penalty for suppression of taxable service in returns - Substantial question of law under Section 35G - HELD THAT: - The Court noted that the Tribunal had recorded a finding of fact that the assessee had neither disclosed the commission income in its returns nor paid service tax thereon, and that even if exemption was claimed, such income ought to have been shown as exempted income in the returns. The Tribunal had also noticed the assessee's own plea of financial hardship for non-payment, and on that basis concluded that the assessee was aware of its tax liability and had deliberately chosen neither to pay the tax nor declare the income. In view of these factual findings, the Court held that the challenge to invocation of the extended period and consequential penalty did not raise any question of law, much less a substantial question of law. [Paras 4, 5]

The appeal was held not to involve any substantial question of law and the Tribunal's order was not interfered with.

Final Conclusion: The High Court dismissed the tax appeal, holding that the Tribunal's conclusions on non-disclosure of commission income and awareness of tax liability were findings of fact and did not give rise to any substantial question of law.

Non-speaking order - Opportunity of hearing - Principles of natural justice - Wrongful availment of CENVAT credit and confirmed the penalty without any supporting reasoning - Reasoned orders by quasi-judicial authorities - HELD THAT: - The High Court found that the Tribunal had merely reproduced the relevant rule and affirmed the penalty without assigning reasons for rejecting the appellant's case. It also noted that no opportunity of hearing had been granted and that the rectification application was rejected cursorily without addressing the grievance of absence of reasons. Applying the settled principle that quasi-judicial orders must disclose reasons, howsoever brief, the Court held that the Tribunal's order could not be sustained on the issue of penalty. The Court did not examine the merits of the levy of penalty and confined interference only to the absence of reasons and hearing. [Paras 7, 9]

The Tribunal's order was quashed and set aside only insofar as it related to penalty under Rule 15, and the matter was remanded to the Tribunal to grant hearing and decide the penalty issue afresh in accordance with law.

Final Conclusion: The appeal was disposed of by holding that the Tribunal's order, to the extent it confirmed penalty under Rule 15, was a non-speaking order passed in violation of natural justice. The confirmation of wrongly availed Cenvat credit was left undisturbed, and only the penalty issue was remitted to the Tribunal for fresh decision after hearing the appellant.

Astronomy coaching - Benefits of Mega Exemption Notification No. 25/2012-ST as services by way of training or coaching in recreational activities relating to arts, culture or sports - Interpretation of the term ‘culture’ under the exemption notification - Extended period of limitation for suppression of taxable services - Entitlement to cum-tax benefit under Section 67(2) - Strict interpretation of exemption notification - Principle of noscitur a sociis -

Exemption for coaching in recreational activities relating to arts, culture or sports - Astronomy coaching as scientific training - HELD THAT: - The Tribunal held that an exemption notification must be construed strictly and its scope cannot be enlarged by implication. Reading the words used in Entry 8 in their context, the term culture had to be understood in association with arts and sports, and therefore in a narrow sense connected with recreational and cultural activities such as dance, music, theatre, literature and similar pursuits.

Applying the principle of noscitur a sociis, which contemplates that a statutory term is recognized by its associated words, we are of the firm view that the term ‘culture’ cannot be extended to include the activity of astronomy. In the case of Bangalore Water Supply & Sewerage Board versus R. Rajappa & Ors.[1978 (2) TMI 204 - SUPREME COURT] the Constitution Bench, (7J) (J. Jaswant Singh) of the Apex Court, with reference to the interpretation of the term ‘industry’ as contained in section 2(j) of the Industrial Disputes Act,1947 observed that, “bearing in mind the collocation of the terms in which the definition is couched and applying the doctrine of noscitur a sociis, which means that when two or more words which are susceptible of analogous meaning are coupled together, they are understood to be used in their cognate sense. They take as it were their colour from each other, that is, the more general is restricted to a sense analogous to a less general. Expressed differently, it means that the meaning of a doubtful word may be ascertained by reference to the meaning of the words associated with it.” Therefore, the elaborate argument made by the learned Counsel for the appellant may though appear to be attractive but is not acceptable, considering the fact that we are dealing with the application of the exemption notification and there is no scope for enlarging the same.

Following the conclusion arrived at in Rohit Pulp & Paper [1988 (10) TMI 135 - CEGAT, NEW DELHI] that the only reasonable way of interpreting the Proviso is by understanding the words ‘coated paper’ in a narrow sense consistent with the other expressions used therein, we are of the opinion that the term ‘culture’ has to be interpreted and understood in the context of the words used in the Notification which means that it would have narrow/restricted operation and cannot be stretched to include the activity of training/coaching of astronomy as sought to be interpreted by the appellant. Rejecting the contention of the appellant, we hold that the benefit of Notification cannot be extended as the activity of training in astronomy do not fall within its ambit.

The clarification given by the Board is absolutely logical and based on sound principles. Therefore, uphold the conclusion arrived at by the Adjudicating Authority that the appellant was not providing any service as mentioned above and was, therefore, not entitled to claim exemption benefit under Entry No.8 of Notification No.25/2012–ST dated June 20, 2012. [Paras 6, 7, 8, 9]

The claimed exemption was denied and the demand was sustained on merits.

Extended period of limitation for non-registration and non-filing of returns - Bona fide belief - Suppression of taxable activity - HELD THAT: - The Tribunal found that the appellant had neither taken service tax registration nor filed ST-3 returns, despite conducting the coaching activity on a commercial basis and collecting course fees over a long period. In those circumstances, the plea of bona fide belief was not accepted, as no material was shown to establish any sincere or reasonable inquiry into taxability. The failure to disclose the activity to the Department amounted to suppression of material facts, justifying invocation of the extended period. On that basis, the levy of interest and imposition of penalty were also held to have been rightly confirmed. [Paras 10, 11]

The extended period, interest and penalty were upheld.

Cum-tax benefit - Recalculation of service tax demand - HELD THAT: - The Tribunal accepted the appellant's claim for cum-tax benefit under section 67(2) and held that, on the facts of the case, the demand required recalculation on that basis. The remand was confined only to that limited computational exercise and not to the merits of taxability, limitation or penalty. [Paras 12, 13]

The matter was remanded only for recalculation after granting cum-tax benefit.

Final Conclusion: The Tribunal upheld the denial of exemption to astronomy coaching under Entry 8 of Notification No.25/2012-ST and sustained the demand by invoking the extended period, along with interest and penalty. The appeal failed on merits, but the matter was remanded for the limited purpose of recomputing the demand after granting cum-tax benefit.

Recovery under Rule 6(3) of the Cenvat Credit Rules - Proportionate CENVAT credit on common input services - Service tax classification between works contract service and erection, commissioning and installation service - Point of Taxation Rules on change in rate of service tax - Separate accounts for taxable and exempted services

Whether the demand of an amount as a percentage of the value of the exempted services could be made under rule 6(3) of CCR read with Rule 14 of CCR ? - HELD THAT: - The Tribunal held that Rule 6 gives the assessee alternative modes for complying with obligations where common inputs or input services are used for taxable and exempted services, and the choice among those options lies with the assessee. An amount under Rule 6(3) can be recovered under Rule 14 only where the assessee has opted for that method and failed to comply; the authorities cannot select that option on the assessee's behalf. The Tribunal further found that the appellant had demonstrated that it had availed only proportionate CENVAT credit on common input services and had not taken credit attributable to exempted services. In such a situation, reversal or recovery under Rule 6(3) did not arise. [Paras 12, 13, 14, 15, 16]

The demand raised under Rule 6(3) read with Rule 14 was set aside.

Service tax classification between works contract service and erection, commissioning and installation service - Alleged short payment of service tax under the head "erection, commissioning and installation service" - HELD THAT: - On examination of the Chartered Accountant's certificate and invoice-wise details, the Tribunal found that the appellant had rendered not only erection, commissioning and installation service but also works contract service and annual maintenance contract service, and had paid the appropriate service tax on those services. Since the tax liability had been discharged under the proper heads for the services actually rendered, the separate demand under erection, commissioning and installation service could not be sustained. [Paras 17]

The demand on the alleged short payment under erection, commissioning and installation service was set aside.

Point of Taxation Rules on change in rate of service tax - HELD THAT: - The Tribunal accepted the application of the Point of Taxation Rules according to the timing of invoice, rendering of service and receipt of payment. It held that where invoices were raised and services were rendered before 01.04.2012, the earlier rate applied notwithstanding later receipt of payment. Where invoices were raised before 01.04.2012 and payment was fully received in advance before that date, the higher rate also did not apply. Only in cases where payment for invoices raised earlier was received after 01.04.2012 would the higher rate of 12% apply to that extent. As the appellant stated that differential tax on such post-01.04.2012 receipts had already been paid during audit, no further demand survived. [Paras 18, 19, 20, 21]

The demand based on the rate change from 01.04.2012 was held unsustainable beyond the differential tax already paid on amounts received after that date.

Final Conclusion: The Tribunal held that none of the three demands could survive on merits. Consequently, the demands of interest and penalties were also set aside, and the appeal was allowed with consequential relief.

Voyage charter classification - classifiable as Supply of Tangible Goods for Use Service Or as transportation of goods - Extended period of limitation - Penalty for interpretational dispute - voyage charter arrangements for carriage of goods through foreign vessel owners - Suppression of Facts - Wilful Misstatement - Transfer of Possession and Effective Control

Voyage charter classification - Supply of Tangible Goods for Use Service - Transportation of goods - Possession and effective control - HELD THAT: - Section 65(105)(zzzzj) of the Finance Act, 1994 defines taxable service as supply of tangible goods for use without transferring right of possession and effective control, whereas Section 65(105)(zzzzl) deals specifically with transportation of goods, including coastal goods, which is defined as goods transported from one port in India to another. The legislative intent, as clarified by the Tax Research Unit vide D.O.F. dated 29.02.2008, is that only those transactions where goods are made available for use by the recipient fall within the scope of “Supply of Tangible Goods for Use Service”. Further, CBEC Instruction dated 09.02.2009 relating to chartering of aircraft clarifies that where the owner retains operational control, particularly when the crew is provided by the owner, effective control is not transferred. Thus, the statutory and administrative framework clearly establishes that the decisive test is whether possession and effective control, coupled with the right to use, are made available to the recipient.

The Tribunal held that the decisive test for the taxable entry was whether the vessel was made available to the recipient for use without transfer of legal possession and effective control. On examination of the voyage charter agreements, it found that the vessel owners retained command, possession, navigation, seaworthiness and operational management of the vessels, supplied the crew, and undertook carriage of specified cargo for freight linked to quantity transported. The appellant acquired no independent right to use, deploy, sub-let or commercially exploit the vessels. Bills of lading and freight-based invoicing showed that the substance of the arrangement was carriage of goods. Clauses relating to demurrage, dead freight, war risk, port charges or exclusive loading obligations were treated as standard incidents of maritime transport contracts and not as indicators of transfer of control. Applying Union of India v. Gosalia Shipping Pvt. Ltd. [1978 (5) TMI 1 - SUPREME COURT], BSNL v. Union of India [2006 (3) TMI 1 - SUPREME COURT], and the co-ordinate Bench ruling in Core Minerals v. Commissioner of Service Tax, [2023 (11) TMI 218 - CESTAT CHENNAI], the Tribunal held that the contracts were contracts of carriage and not contracts for supply of the vessel for use. It also noted that voyages from foreign ports to India were not taxable during the relevant period and that the impugned order had failed to segregate them from coastal voyages, which further vitiated the demand. [Paras 8]

The service tax demand under the category of supply of tangible goods for use service was unsustainable, the activity being correctly classifiable as transportation of goods.

Extended period of limitation - Suppression of facts - Penalty for non-payment of service tax - Interpretational dispute - HELD THAT: - It is a settled principle that mere non-payment of tax or adoption of a particular classification does not amount to suppression of facts unless there is deliberate intent to evade payment of tax. In the present case, no such evidence has been brought on record. The Department has not established that the appellant had withheld any material information or made any misstatement with intent to evade tax. On the contrary, the issue being interpretational in nature, invocation of the extended period is not justified.

The Tribunal held that the burden to establish suppression, wilful misstatement or fraud with intent to evade tax lay on the Department. Though the Revenue alleged non-disclosure in returns, the record showed that the appellant had entered into formal agreements in the ordinary course of business, maintained the transactions in its books, and had been subjected to repeated audits by CERA and departmental internal audit during the relevant years. In these circumstances, the transactions were already within departmental knowledge. Since the controversy turned on classification and interpretation of the taxing entry, mere non-payment under the classification adopted by the appellant could not amount to suppression. As the show cause notice was issued only after the normal period and the extended period was not available, the entire demand was time-barred. On the same reasoning, penalties under Sections 77 and 78 were also held to be unsustainable. [Paras 9]

The entire demand was barred by limitation and the penalties imposed were liable to be set aside.

Final Conclusion: The Tribunal held that voyage charter arrangements for carriage of cargo did not amount to supply of tangible goods for use service and were in the nature of transportation of goods. The service tax demand was therefore set aside on merits as well as on limitation, and the penalties were also deleted.

Seeking enhancement of penalty under Section 78 - short-payment of service tax- Adjustment of excess tax paid under wrong taxable category - Pre-show-cause payment of tax, interest and penalty -HELD THAT: - The Tribunal held that the Department's appeal proceeded on a technical reading of Section 78 while ignoring the factual findings recorded in the order. The short payment under Information Technology Software Services stood alongside excess payment under Management, Maintenance and Repair Services, so the dispute was substantially one of classification and adjustment of tax already paid rather than outright non-payment. The adjudicating authority had also found that no revenue loss was caused, since the tax had already reached the exchequer. Further, the respondent had paid the differential liability, interest and penalty before issuance of the show cause notice, which did not support an allegation of deliberate evasion. The Tribunal accepted the distinction drawn by the adjudicating authority between the adjustment issue and the separate violation of the Point of Taxation Rules, 2011, for which limited penalty had been retained. On that basis, the Department's contention that invocation of the extended period automatically required penalty equal to the entire tax demand under Section 78 was rejected. [Paras 7, 8]

No ground existed to enhance the penalty under Section 78, and the limited penalty as imposed in the order was rightly sustained.

Final Conclusion: The Tribunal rejected the Department's appeal and upheld the order declining to impose penalty equal to the entire service tax demand. It held that the case substantially involved adjustment of tax already paid under a different taxable category, with no revenue loss, and that the differential liability, interest and penalty had already been discharged before the show cause notice.

Limitation for appeal - Computation of period in calendar months - Condonation within statutory extended period - limitation for filing the appeal under Section 85(3A) of the Finance Act, 1994 - rejection of the appeal as time-barred​​​​​​​ - HELD THAT: - It is the case of the Appellant that earlier he was residing and operating from the address of M/s Pal Enterprises, Mehnauna, Post-Sillo, District Basti- 272001. Thereafter, the mother of the Appellant Shri Sunil Kumar Pal who was suffering from cancer was shifted to Kanpur for better medical treatment and the Appellant was shuttling between Kanpur and Basti and he could not take note of any of the notices, summon or any other order sent to him by the jurisdictional authorities. It was only when recovery proceedings for the demand as confirmed by the Order-In-Original were initiated and the Appellant was informed over phone and also a recovery letter was issued by the jurisdictional division office for depositing the dues as per the O-I-O, he came to know about the Order-In-Original dated 15.03.2018/23.03.2018. Thereafter he was served with the certified copy of the Order-In-Original only on 15.03.2021 and the appeal was filed by him on 16.06.2021.

The Tribunal held that where Section 85(3A) prescribes limitation in terms of months, the period must be reckoned as calendar months and not as an equivalent number of days. Since the adjudication order was treated as served on 15.03.2021, limitation commenced from 16.03.2021. The initial period of two months expired on 16.05.2021 and the further condonable period of one month expired on 16.06.2021. As the appeal was presented on 16.06.2021, it was not beyond the statutory outer limit. The Commissioner (Appeals), therefore, erred in rejecting it as time-barred. The Tribunal further found the explanation for delay acceptable and, in the interest of justice, condoned the delay and remanded the matter for decision on merits. [Paras 11, 12, 13, 14]

The rejection of the appeal on limitation was held unsustainable; the delay was condoned and the matter was remanded to the Commissioner (Appeals) for disposal on merits.

Final Conclusion: The Tribunal held that the appeal before the Commissioner (Appeals) had been filed within the statutory condonable period, as limitation prescribed in months had to be computed by calendar months. The impugned order rejecting the appeal as time-barred was set aside, the delay was condoned, and the matter was remanded for decision on merits.

Entitlement to interest on refund under Section 35FF - Compliance with the pre-deposit requirement under Section 35F - Characterisation of deposit for maintainability of appeal -HELD THAT: - The Tribunal held that the controversy turned not on any abstract proposition of law but on the factual position borne out from the record. The Commissioner (Appeals), while entertaining the earlier appeal, had expressly recorded compliance with the pre-deposit requirement under Section 35F as made applicable to service tax matters, and no further amount had been deposited after the order-in-original except the later deposit for the appeal before the Tribunal. In that background, the amounts paid through the two challans dated 13.05.2015, though shown under the tax head and later appropriated in adjudication, had all along been accepted by the revenue authorities as the deposit satisfying Section 35F for the first appeal. Once that factual position was accepted and had not been challenged by the revenue, the refund sanctioning authority and the Commissioner (Appeals) could not re-characterise the same amount as a mere tax payment so as to deny interest. The Tribunal therefore held that Section 35FF applied and the amount had to be refunded with interest in the same manner as any other pre-deposit. [Paras 4]

The denial of interest on the refunded amount deposited through the two challans dated 13.05.2015 was set aside, and the appellant was held entitled to interest under Section 35FF on that amount as well.

Final Conclusion: The Tribunal allowed the appeal and held that, on the facts appearing from the record, the amount deposited through the two challans dated 13.05.2015 had been accepted as pre-deposit for the first appeal. Consequently, the refund of that amount also carried interest under Section 35FF, and the impugned order denying such interest was unsustainable.

Extended period of limitation - Suppression of facts - CENVAT credit on excess service tax paid - Adjustment under Rule 6(3) of the Service Tax Rules - absence of suppression or wilful intent to evade tax

Extended period of limitation - Suppression of facts - Service tax and CENVAT credit demands raised through the show cause notice for the relevant financial years - barred by limitation - HELD THAT: - The Tribunal held that the entire basis of the notice arose from records already available to the Department, including books of account and ST-3 returns in which the CENVAT credit had been disclosed. Where the transactions were duly recorded and the dispute arose only from presentation or reconciliation of figures, the ingredients of suppression or wilful misstatement with intent to evade tax were absent. In the absence of those conditions, invocation of the extended period under the proviso to Section 73(1) was not available. [Paras 10]

The extended period was held to be wrongly invoked and the entire demand was liable to be set aside as time-barred.

CENVAT credit on excess service tax paid - Adjustment under Rule 6(3) of the Service Tax Rules - HELD THAT: - The Tribunal accepted the adjudicating authority's reasoning and found no infirmity in the order dropping the proceedings. It further held that if adjustment of the excess service tax under Rule 6(3) were not allowed, the assessee would in any event be entitled to refund, and therefore the accrued right to take credit of such excess payment had to be protected. On that basis, the disallowance of credit made in appeal was unsustainable. [Paras 9, 11, 12]

The CENVAT credit was allowed and the contrary finding in the impugned appellate order was set aside.

Penalty for alleged suppression of service tax liability - Penalty for wrongful availment of CENVAT credit - HELD THAT: - Once the Tribunal found that the extended period was not invocable for want of suppression and that the credit itself was admissible, the foundation for penalty ceased to exist. The penalties imposed under Section 78 and in relation to the alleged wrongful availment of CENVAT credit were therefore consequentially unsustainable. [Paras 10, 11]

The penalties imposed in the impugned order were set aside.

Final Conclusion: The Tribunal set aside the order of the Commissioner (Appeals) and restored the order-in-original dropping the proceedings. It held that the extended period was not invocable, the CENVAT credit was admissible, and the penalties could not survive.

Interest on refund of revenue deposit - Deposit under protest vis-a-vis duty - Inapplicability of statutory interest on delayed refund of duty - Applicability of Section 11BB - Unjust Enrichment - Principles of fairness, equity, and reasonableness

Revenue deposit- Interest from date of deposit - Amount paid under protest during provisional assessment - Interest on refund of the excess amount paid under protest during provisional assessment - Payable from the respective dates of excess deposit made under protest or only from the expiry of three months after the refund application - HELD THAT: - In M/s TT Limited [2026 (2) TMI 1077 - CESTAT ALLAHABAD], this Tribunal faced an identical controversy where the Revenue sought to apply Section 11BB of the Central Excise Act to cap the interest rate at 6% per annum and defer its commencement point to three months post-application. This Tribunal, relying upon the Hon'ble Allahabad High Court’s affirmation in the Parle Agro case [2017 (2) TMI 984 - CESTAT ALLAHABAD], held that once an amount is deposited under protest during investigation, adjudication, or provisional stages where no legal duty liability pre-exists, such payments cannot be characterized as "duty" under the Central Excise Act. Instead, they retain the character of a "revenue deposit".

After due perusal of Section 11BB of the Central Excise Act, it is very clear that the interest on delayed refunds of duty paid under Section 11B, the Central Excise Act will be applicable through this provision, only when the matter of concern is “refund of duty”.

In the present case, the excess amount was paid under protest during provisional assessment, before any quantified demand or adjudicated duty liability existed. Since the levy itself was later found unsustainable and the entire amount became refundable, the payment never acquired the character of duty and remained a revenue deposit.

The issue is no longer res integra in view of the decision of this Tribunal in Parle Agro (supra), which has been affirmed by the Hon’ble Allahabad High Court. It has been conclusively held therein that Section 11B/11BB of the Central Excise Act applies only to refunds of duty and has no application to refunds of revenue deposits. Consequently, the restriction contained in Section 11BB regarding commencement of interest after expiry of three months from the date of filing of the refund application cannot be imported into cases involving refund of revenue deposits.

The commencement of interest was held to be the respective dates of deposit till the date of refund.

Entitlement to interest at 12% per annum instead of 6% per annum - HELD THAT: - Having held that the refunded amount was not duty, the Tribunal ruled that the statutory rate prescribed for delayed refund of duty under Section 11BB and the related notification had no application. In the absence of a specific statutory provision governing interest on refund of revenue deposits, the rate had to be determined in line with the binding and consistent judicial view governing wrongful retention of money not legally due. The Tribunal therefore applied 12% per annum, also noting that retention of such money without authority of law was inconsistent with the constitutional limitation on collection and retention of tax. [Paras 36, 37, 38, 39, 40]

Interest was directed to be recalculated at 12% per annum from the respective dates of deposit till the date of actual credit, with adjustment of the interest already paid.

Final Conclusion: The Tribunal held that the excess amount paid under protest during provisional assessment was a revenue deposit and not duty, with the result that Section 11BB could not govern either the starting point or the rate of interest. The impugned order was set aside and interest was directed to be recomputed at 12% per annum from the respective dates of deposit up to the date of actual refund, after adjusting the amount already paid.

Duty paid under protest as duty deposit - Interest on delayed refund under Section 11BB - Exclusive statutory remedy for refund - Interest from the date of deposit - Entitlement to interest at 6% per annum under Section 11BB - Unjust enrichment - Strict construction of fiscal statutes

Duty paid under protest - Refund under statutory mechanism - Revenue deposit - amounts deposited under protest towards disputed central excise liability retained the character of duty - HELD THAT: - The Tribunal held that where the appellant had deposited the amounts under the head of central excise duty against disputed demands, the character of the payment remained that of duty notwithstanding that it was paid under protest. Payment under protest only removed the bar of limitation under the refund provision; it did not convert the payment into an independent revenue deposit carrying interest from the date of deposit. Following Mafatlal Industries [1996 (12) TMI 50 - SUPREME COURT] and the subsequent decisions noticed, the Tribunal held that refund of such amount had to be governed only by the statutory scheme under Section 11B and not by restitutionary principles under Article 265 or Section 72 of the Contract Act. [Paras 4]

The appellant's contention that interest was payable from the dates of deposit on the footing of a revenue deposit was rejected.

Interest on delayed refund - Commencement of interest - Refund application date - HELD THAT: - The Tribunal held that the governing provision for interest was Section 11BB, which becomes operative when refund is not made within three months from receipt of the refund application. Relying on Ranbaxy Laboratories Ltd. v. Union of India and Ors.[2011 (10) TMI 16 - SUPREME COURT], it held that the starting point for interest is linked to the refund application and not to the date of deposit. The Tribunal further found that the earlier refund claim referred to in the written submissions was not the claim involved in the present proceedings. Since the claim under adjudication was filed on 28.04.2025, interest was held payable at 6% only for the period of delay after 27.07.2025. [Paras 4]

The appellant was held entitled to interest at 6% only after expiry of three months from 28.04.2025, and not for the period from the original deposits.

Final Conclusion: The Tribunal held that the sums deposited under protest were duty deposits refundable only under the statutory scheme and not independent revenue deposits carrying interest from the dates of payment. The appeal succeeded only to the extent of holding that interest under Section 11BB was payable at 6% after expiry of three months from the refund application dated 28.04.2025.

Central excise duty on royalty and stowing excise duty - Relevant date for limitation where return is filed belatedly - Interest on duty attributable to royalty

Central excise duty on royalty and on stowing excise duty - Normal period of limitation - HELD THAT: - The Tribunal found that the controversy regarding inclusion of royalty and stowing excise duty stood covered by earlier co-ordinate Bench decisions on identical facts like M/s. Central Coal Fields Ltd. [2026 (3) TMI 1719 - CESTAT KOLKATA], M/s. Mahanadi Coalfields Ltd [2025 (3) TMI 1524 - CESTAT KOLKATA] and M/s. Eastern Coalfields Ltd [2025 (3) TMI 1522 - CESTAT KOLKATA] Following those decisions, it held that excise duty on royalty was sustainable only for the normal period of limitation, while the entire demand on stowing excise duty was unsustainable and had to be set aside. [Paras 8]

The demand on royalty was upheld only for the normal period, and the entire demand on stowing excise duty was set aside.

Interest on duty attributable to royalty - Waiver of interest - HELD THAT: - Relying on the view earlier taken by the Tribunal in M/s. South Eastern Coalfields Ltd. [2026 (2) TMI 430 - CESTAT NEW DELHI], which in turn noticed the Supreme Court's observations in Steel Authority of India [2024 (8) TMI 956 - SUPREME COURT (LB)] on balancing equities in relation to outstanding interest, the Tribunal held that interest liability on the duty payable on royalty was liable to be waived. On that basis, the interest demand connected with the royalty component was set aside. [Paras 8]

The demand of interest on duty attributable to royalty was set aside.

Relevant date for limitation where return is filed belatedly - Actual date of filing of return - Show cause notice within normal period - HELD THAT: - The Tribunal rejected the contention that, once the due date for filing the return had expired, that date alone must govern limitation. Construing the statutory definition of relevant date, it held that where a return is in fact filed, even belatedly, the actual date of such filing is the relevant date; the due date applies only where no return is filed. The Tribunal preferred the High Court view cited before it and held that the contrary Tribunal decision relied on by the appellant could not govern the issue. Since the ER-1 return for April 2015 was filed on 26.05.2015 and the show cause notice was issued on 24.05.2016, the notice was within the normal period. Consequently, the royalty demand for the period from April, 2015 to 14th June, 2015 was held to be within limitation. [Paras 9]

The show cause notice was held to be within the normal period of limitation, and the royalty demand for the period in dispute was upheld as within time.

Final Conclusion: The Tribunal modified the impugned order by sustaining the central excise duty demand only on the royalty component for the normal period from April, 2015 to 14th June, 2015, while setting aside the entire duty demand on stowing excise duty and the interest demand on royalty. The appeal was disposed of on those terms.

Exemption subject to non-availment of CENVAT credit - Deemed non-availment of credit on payment under Rule 6(3) - Extended Period of Limitation and change of opinion - Interaction between the exemption condition in Notification No. 30/2004-CE and the mechanism under Rule 6 of the CENVAT Credit Rules, 2004 - Rule of Harmonious Interpretation

Compliance with the condition in Notification No. 30/2004-CE prohibiting availment of credit on inputs -Rule 6(3) reversal as deemed non-availment of credit - HELD THAT: - It is quite evident that revenue has while initiating and determining these proceedings themselves taken the view that appellant was required to reverse the CENVAT Credit @ 6% in respect of the goods cleared by availing exemption under Notification No 30/2004-CE. In the present proceedings revenue is objecting to availment of credit and subsequent reversal in terms of Rule 6 of the CENVAT Credit Rules, 2004. Further they have invoked extended period of limitation, for making this demand which we observe is contrary to view taken by the revenue in earlier proceedings. It is settled position in law that extended period of limitation could not have been invoked for the reason of the change in opinion.

The Tribunal held that the dispute was covered by co-ordinate Bench decision in the case Mohit Industries Limited [2022 (12) TMI 134 - CESTAT AHMEDABAD], which had construed Rule 6(3D) to mean that payment of the prescribed amount under Rule 6(3) is to be treated as credit not taken for the purpose of an exemption notification conditioned on non-availment of credit. It noted that the appellant had not originally taken credit in respect of the exempted clearances, maintained separate accounts for exempted and dutiable goods, and took and reversed the credit only after the Department itself directed reversal under Rule 6. In these circumstances, the subsequent availment and reversal, made in compliance with the Department's own stand, could not be treated as breach of the condition of the notification so as to deny the exemption and demand duty on the exempted clearances. [Paras 4]

The denial of exemption and the consequential duty demand were held unsustainable on merits.

Extended limitation and departmental change of stand - HELD THAT: - The Tribunal found that the Department had earlier issued a letter and a show cause notice requiring reversal of credit at the prescribed percentage on the very exempted clearances, and that such proceedings were adjudicated accordingly. Having itself adopted that legal position, the Department could not subsequently invoke the extended period to raise a fresh demand on the contrary premise that availment of credit itself invalidated the exemption. The Tribunal therefore held that extended limitation was unavailable where the later demand rested on a mere change in opinion. [Paras 4]

The demand was also held unsustainable on limitation.

Final Conclusion: The Tribunal set aside the impugned order and allowed the appeal. It held that the exemption under Notification No. 30/2004-CE remained available notwithstanding the subsequent reversal under Rule 6(3), and that the extended period could not be invoked in view of the Department's earlier contrary stand; the demands of duty, interest and penalty were therefore quashed.

VAT refund application requirements - Non-production of additional documents -Delegated legislation and limitation on refund claims - Maintainability of writ against refund rejection - Subordinate legislation cannot curtail substantive rights - Alternative remedy of appeal under Section 69 - Refund of excess VAT, refused on the ground that Forms XXXVII and XXXVIII or original tax invoices were not furnished with the refund application when Rule 35 itself did not require such documents

VAT refund application requirements - Refund claim for excess tax paid - HELD THAT: - The Court found that the refund application contained all particulars required under Rule 35(1). Once the Rule governing refund applications specified the particulars to be furnished, the authority could not insist upon additional documents not contemplated by that Rule as a condition for entertaining the claim. The Court also noted that the documents sought by the respondents had, in any event, been filed with the monthly returns, and copies had been placed on record. The impugned rejection, being founded on requirements outside Rule 35, was therefore unsustainable. [Paras 6, 7, 11]

The rejection of the refund claim on the stated documentary grounds was held unsustainable, and the application was directed to be reconsidered in accordance with law.

Delegated legislation and limitation on refund claims - Ultra vires limitation in refund rules - The one-year limitation in Rule 35(4) bar the refund claim, since the parent statute did not prescribe any limitation for claiming refund. - HELD THAT: - Following Larsen & Toubro Ltd. v. State of Tripura [2025 (9) TMI 672 - TRIPURA HIGH COURT] which in turn followed Bharat Barrel and Drum Manufacturing Co. Ltd. v. ESI Corporation [1971 (9) TMI 183 - SUPREME COURT] the Court held that where substantive rights are liable to be affected or extinguished, the period of limitation must be prescribed by the legislature and not by rules framed under the statute. Section 43 of the Act, which created the refund entitlement, contained no limitation period. The rule-making power to prescribe the manner of refund could not be used to impose a substantive time bar. Consequently, the plea of limitation founded on Rule 35(4) was not acceptable. [Paras 8]

The defence that the refund application was barred by limitation under Rule 35(4) was rejected.

Maintainability of writ against refund rejection - Alternative remedy under tax statute -HELD THAT: - On a plain reading of Section 69, the Court held that the appellate remedy provided thereunder was confined to assessment or penalty orders. Since the impugned order was one refusing refund, no effective alternative statutory remedy was available against it. The objection to maintainability on the ground of alternative remedy therefore failed. [Paras 9, 10]

The writ petition was held maintainable notwithstanding the respondents' plea of alternative remedy.

Final Conclusion: The Court held that the refund claim had been rejected on grounds not sanctioned by Rule 35, that the limitation objection under Rule 35(4) was untenable, and that the writ petition was maintainable. The impugned order was set aside and the refund application was directed to be reconsidered by a reasoned order, with statutory interest to follow if the refund is found admissible.

Look Out Circular against borrower-guarantor for debt recovery - Preconditions for restraining foreign travel under MHA LOC guidelines - Authority of Public Sector Bank Managing Director to requisition LOC - Requisition for opening the Look Out Circular and the consequential Look Out Circular issued at the instance of the bank - absence of a cognizable offence or any criminal proceeding

Look Out Circular against borrower-guarantor for debt recovery - Requisition and the Look Out Circular issued against the petitioner - HELD THAT: - The Court held that under the Ministry of Home Affairs guidelines, detention or prevention from leaving the country through an LOC is permissible where a cognizable offence under penal law is made out, and in the absence of such offence the originating agency can at best seek information regarding arrival or departure. The exceptional power to decline departure is confined to cases affecting sovereignty, security, integrity, bilateral relations, strategic or economic interests of India, terrorism, offences against the State, or larger public interest. On the record, the petitioner had not been chargesheeted by the CBI, no cognizable offence was pending against him, and the reasons stated by the bank were only his status as guarantor, non-response to the bank, NPA classification, and declaration of the account as fraud. Those were not fresh or qualifying grounds under the guidelines, especially when recovery proceedings under DRT and SARFAESI were already being pursued and the pledged properties were already under attachment. The Court accepted that use of the LOC in these circumstances amounted to an impermissible coercive measure for debt recovery and followed the approach noticed in Rajesh Kumar Mehta v. Union of India [2024 (5) TMI 1706 - DELHI HIGH COURT] [Paras 23, 25, 31, 32, 33]

The requisition dated 30.03.2024 and the consequential LOC dated 30.03.2024 were held wholly unsustainable and were set aside.

Authority of Public Sector Bank Managing Director to requisition LOC - Challenged to the competence of the bank's originating authority to make the LOC requisition - HELD THAT: - The Court recorded the categorical stand of the respondent-bank that the requisition had been made by the Managing Director of Canara Bank and found that this factual position had not been controverted by the petitioner with any supporting material. On that basis, the Court held that the authority of the bank officer making the requisition could not be questioned in the present case. The invalidity of the LOC therefore rested not on lack of competence of the signatory, but on absence of the substantive preconditions for opening an LOC against the petitioner. [Paras 24]

The requisition was not treated as without jurisdiction on the ground of incompetence of the bank's originating authority.

Conditional permission to travel after quashing LOC - Undertakings to cooperate in debt recovery -HELD THAT: - The Court held that setting aside the LOC did not absolve the petitioner of his liabilities arising from the loan account. Having regard to the financial interests involved and the petitioner's offer to settle the matter in due course, the Court required undertakings regarding periodic visits to India, appearance before the bank when called, disclosure of arrival, annual visit, cooperation in pending proceedings, and sincere efforts toward resolution with other stakeholders. These conditions were imposed to balance the petitioner's right to travel with the bank's entitlement to pursue lawful recovery. [Paras 34, 35, 36]

The writ petition was disposed of after quashing the requisition and LOC, subject to the petitioner's undertakings to cooperate with the bank and recovery process.

Final Conclusion: The Court held that the bank could not sustain the LOC against the petitioner merely as a debt recovery measure when no chargesheet had been filed against him and no cognizable offence was pending against him. While rejecting the challenge to the competence of the bank's originating authority, it quashed the requisition and LOC and disposed of the writ petition subject to undertakings ensuring the petitioner's cooperation in recovery and settlement proceedings.

Disclosure of known encumbrances in SARFAESI auction sale - Refund to auction purchaser for non-disclosure of title defect - Entitlement to refund of the sale consideration and registration expenses where the Bank failed to disclose the pendency of the civil suit and the decree declaring the borrower's title - HELD THAT: - The Division Bench of this Court in S. Shanmuganathan vs. The Authorized Officer, Indian Overseas Bank [2017 (5) TMI 1275 - MADRAS HIGH COURT], in similar circumstances, directed refund of the sale consideration along with interest. The Division Bench held that there is a statutory obligation on the part of the Bank to disclose encumbrances in the sale notice and that failure to do so would render the contract voidable under Section 19 of the Contract Act. It was further held that when a statute prescribes that a particular act shall be done in a particular manner, it shall be done only in that manner.

The Division Bench also relied upon the judgment of the Hon’ble Supreme Court in Bharat Sanchar Nigam Ltd. vs. Telephone Cables Ltd. [2010 (1) TMI 1241 - SUPREME COURT] wherein it was held that public sector undertakings must act fairly, without arbitrariness or discrimination, and that their actions are amenable to judicial review.

The Court held that Rule 9(9) of the Security Interest (Enforcement) Rules, 2002 requires delivery of the property free from all encumbrances known to the secured creditor, and Rule 9(10) requires the sale certificate to state whether the property was sold free from such known encumbrances. In the present case, the Bank had entered appearance in the civil suit, yet did not disclose in the sale notice or otherwise that a decree had been passed declaring the borrower's sale deed null and void. The clause in the sale notice requiring bidders to conduct their own due diligence did not displace the Bank's statutory obligation to disclose encumbrances known to it. On that basis, the Court found that the Bank had acted in contravention of the statutory scheme governing the sale and that the purchaser was therefore entitled to refund with reasonable interest. [Paras 11, 12, 13, 17]

The Bank was directed to refund the entire amount deposited by the purchaser, including registration expenses, with interest at 9% per annum from the date of issuance of the sale certificate till payment, and a higher rate upon default.

Final Conclusion: The writ petition was allowed on the ground that the Bank failed to disclose a known title defect and acted contrary to the statutory requirements governing sale of secured assets. The auction purchaser was accordingly granted refund of the amount deposited with interest.

Forfeiture of 25% deposit on default in SARFAESI auction sale - Irrelevance of subsequent higher resale price to statutory forfeiture - Relief of recovery of money - Entitlement to forfeit 25% of the bid amount when the auction purchaser failed to pay the balance sale consideration within the stipulated period - HELD THAT: - The Court found that the auction terms expressly provided that, on failure to deposit the amount within the scheduled time, the sale would stand cancelled and the amount deposited would be forfeited. The plaintiff had participated in the auction on those terms and admittedly failed to pay the balance sale price within the stipulated period. Relying on Authorized officer, Central Bank of India vs. Shanmugavelu [2024 (2) TMI 291 - SUPREME COURT (LB)] the Court held that forfeiture of 25% of the deposit under Rule 9(5) is a statutory consequence of such default and is not displaced by equitable considerations. The fact that the property was subsequently sold at a higher price and that the bank did not suffer loss was held to be irrelevant to the bank's statutory power of forfeiture. The Court also held that Rule 8(6) had no relevance to the case. [Paras 12, 13, 14]

The forfeiture of 25% of the bid amount was upheld as lawful, and the claim for refund of the forfeited amount was rejected.

Final Conclusion: The suit for recovery of the forfeited amount was dismissed. The Court held that, upon the plaintiff's admitted default in paying the balance sale consideration in the SARFAESI auction, the bank was entitled in law to forfeit 25% of the bid amount notwithstanding the subsequent resale at a higher price.