TaxTMI Updates e-Newsletter
Jul 01,2026

Scope of invocation of extended period of limitation by the Proper Officer - Jurisdictional or foundational facts for show cause notice - Meaning of the expression "where it appears" - Prior communication of grounds in GST proceedings - Conversion of proceedings from fraud-based demand to non-fraud demand - Different time limits specified in Section 73 and Section 74 -Concept of sub silentio - Expression “Due Process of Law” - Distinction between “Jurisdictional Fact or the Foundational Fact” and the “Adjudicatory Fact” - mandate of Principles of Natural Justice incorporated in Section 73 or Section 74 - Jurisdiction of the proper officer under Section 74 to issue Show Cause Notices and to pass orders - Whether the “Proper Officer” namely the contesting Respondent(s) in the respective Writ Petition was/were justified in invoking Section 74 of the respective GST Enactments against each of the Petitioners in the facts of the respective cases.

Distinction between “Jurisdictional Fact or the Foundational Fact” and the “Adjudicatory Fact” - A “Jurisdictional Fact” is a fact which must exist before an Authority can assume jurisdiction over a particular issue. The existence of such facts is a sine qua non for the Courts or the Tribunal or the Adjudicatory Authority, to assume jurisdiction over a particular dispute.

The Hon'ble Supreme Court in Arun Kumar & others Vs. Union of India & others [2006 (9) TMI 115 - SUPREME COURT], explained the distinction between the “Jurisdictional Fact” and “Adjudicatory Fact”. It held that “Adjudicatory Fact” is something that is required to be decided on merits based on evidence to be produced/adduced by both the parties. However, it reiterated that the existence of “Jurisdictional Fact” was a sine qua non for an authority to exercise Jurisdiction.

Extended limitation under GST - Foundational facts for fraud-based demand - Communication of reasons -HELD THAT: - In Oryx Fisheries Pvt Ltd.[2010 (10) TMI 660 - SUPREME COURT], the Hon’ble Supreme Court observed that the purpose of a Show Cause Notice is to give the person proceeded against a reasonable opportunity of making his objection against the proposed charges indicated in the notice.

In Municipal Corporation of Delhi Vs. Gurnam Kaur [1988 (9) TMI 314 - SUPREME COURT], the Hon’ble Supreme Court held as under:- “it was observed that “Precedents sub silentio and without argument are of no moment. This rule has ever since been followed. One of the chief reasons for the doctrine of precedent is that a matter that has once been fully argued and decided should not be allowed to be reopened. The weight accorded to dicta varies with the type of dictum. Mere casual expressions carry no weight at all. Not every passing expression of a Judge, however eminent, can be treated as an ex cathedra statement, having the weight of authority.”

In Collector of Central Excise, Hyderabad Vs. Chemphar Drugs And Liniments, Hyderabad [1989 (2) TMI 116 - SUPREME COURT], the Hon’ble Supreme Court observed whether in a particular set of facts and circumstances there was any Fraud or Collusion or Wilful Mis-statement or Suppression of Facts or contravention of any provision of any Act, is a question of fact depending upon the facts and circumstances of a particular case.

Thus, the invocation of machinery under Proviso to Section 11A of the Central Excise Act, 1944, were not justified, if an assessee entertained a bona fide belief or the tax was paid on the basis of the Approved Classification or Price List or in absence of any indication that there was deliberate attempt to evade duty. Unless there was a deliberate attempt to evade tax, no question of invoking the extended period of limitation could be countenanced.

Article 21 of the Indian Constitution, the phrase “Procedure Established by Law” was adopted Under Article 21 of the Indian Constitution, no person shall be deprived of personal liberty except in accordance with the procedure established by law. The said phrase “Procedure Established by Law” was borrowed from Article 31 of the Japanese Constitution.

A conjoint reading of the phrase “where it appears” along with the phrase “by reason of” employed in Section 74 of the respective GST Enactments and the phrase “where it appears” with the phrase “for any reason other than the reason of” in Section 73 of the respective GST Enactments, before the words “Fraud, Wilful-Mis-statement, Suppression of Facts to evade tax”would indicate that only recording a prima facie view before issuing a Notice is sufficient while exercising the power under Section 73(1) and Section 74(1) of the respective GST Enactments.

Both Section 73 and 74 of the respective GST Enactments, do not expressly mandate “recording of reasons” before issuance of Notice, as compared to Section 148(2) of the Income Tax Act, 1961 as it stood up to 01.04.2021, or thereafter, under Section 148A(b)/148A(2) of the Income Tax Act, 1961 with effect from 01.04.2021.

A separate mechanism has been provided in the case of “Nonfilers of Returns” and “Unregistered Persons”. The machinery for such provisions is under Section 62 and Section 63 of the respective GST Enactments. They start with a non-obstante clause “notwithstanding anything to the contrary contained in Section 73 or Section 74 or Section 74A”. This is a departure from the Scheme under the Central Indirect Tax Regimes, namely, Central Excise Act, 1944 and Finance Act, 1994, which have been subsumed in the respective GST Enactments.

The Court held that the expression "where it appears" in Sections 73 and 74 of the GST enactments sets a lower threshold than the older indirect tax regimes and requires only a rational prima facie view founded on available records or information. Even so, existence of jurisdictional or foundational facts remains necessary. Ordinarily, a notice under Section 74 should state the reasons for invoking the extended period and the mental elements alleged; however, such reasons need not be restated in the notice if they had already been communicated in the course of scrutiny, audit, special audit, inspection or pre-notice intimation through the prescribed forms. Mere absence of elaborate reasons in the notice is therefore not fatal where the materials and grounds were already conveyed earlier, but if neither the earlier proceedings nor the notice disclose the basis for invoking Section 74, the proceedings cannot be sustained in that form. The Court also held that a notice validly issued under Section 74 may, where the allegations of fraud, wilful misstatement or suppression are not established, be directed to be treated as proceedings under Section 73. [Paras 820, 821, 823, 824, 829]

Section 74 can be invoked on the basis of a prima facie view drawn from disclosed materials, and prior communication of grounds in the statutory process is sufficient compliance; only where such foundational facts are absent would invocation of Section 74 be arbitrary.

Show cause notice under Section 74 - Pre-determination objection - Classification of nuts - Validity of the show cause notices issued to the manufacturer for the tax periods 2021-2022 to 2024-2025 under Section 74, challenged as reflecting pre-determination and as lacking jurisdictional basis - HELD THAT: - The Court found that the impugned notices were preceded by inspection and by intimation in Form GST DRC-01A setting out the defects noticed, including non-cooperation during inspection, non-production of records and the allegation that the goods were taxed at a lower rate though treated by the department as automotive parts. In the statutory GST scheme, a detailed notice containing proposals does not by itself establish pre-meditation. The notices were held to be proposals calling for response and not concluded determinations. The Court distinguished the authorities relied on for the plea of pre-judgment and held that, under the GST enactments and rules, reasons may be communicated through the earlier stages of proceedings and need not be treated as invalid merely because the notice is detailed. Questions on the correct rate and classification were left to be urged by reply before the authority. [Paras 844, 845, 846, 847, 848]

The challenge to the show cause notices failed; the petitions were dismissed and the authority was directed to decide the matter on merits after considering the petitioner's reply.

Excess input tax credit mismatch - Fraud-based demand notice - Detailed allegations in show cause notice - The validity of the show cause notice issued to the taxpayer for 2020-2021 to 2022-2023 under Section 74 on the basis of excess input tax credit reflected by mismatch and related irregularities - HELD THAT: - The Court noted that the impugned notice specifically stated the reasons for invoking Section 74, namely excess availment of input tax credit in GSTR-3B with reference to invoices not reflected in GSTR-2A or GSTR-2B, invoices where the supplier had not discharged tax, double availment, non-reversal relating to credit notes, and availment under the wrong head. In view of these detailed allegations, the Court rejected the contention that jurisdictional or foundational facts were absent. The earlier decision relied on by the petitioner was held inapplicable because, in the present case, the notice itself contained the basis for invoking the extended period and alleging suppression. The merits of entitlement to credit were left open for adjudication on reply. [Paras 855, 856, 857, 858, 859]

The challenge to the notice was rejected, and the petitioner was directed to file a detailed reply, after which the authority was to adjudicate on merits with personal hearing.

Wrongly availed input tax credit for real estate renting activity - Inadequate particulars for invoking extended limitation - Conversion to non-fraud proceedings - Validity of the assessment orders passed under Section 74 against the real estate taxpayer for Apr 2019-Mar 2020, Apr 2021-Mar 2022 and Apr 2022-Mar 2023 on the allegation of ineligible input tax credit contrary to the notification governing real estate services - HELD THAT: - The Court held that the show cause notices and orders did not clearly particularise the basis on which the petitioner's input tax credit was treated as wrongly availed with reference to the relevant notification, nor did they adequately set out the particulars justifying invocation of the extended period under Section 74. At the same time, the Court rejected the plea that the matter was barred by limitation under Section 73, having regard to the applicable extension of time. Since the proceedings had been initiated in time, the defect did not warrant abatement. The Court therefore remitted the matters to the authority to pass fresh orders on merits under Section 73, treating the impugned orders as addenda for that purpose, and observed that if the petitioner still failed to furnish the details called for, it would remain open to the authority to pass appropriate orders under Section 74. [Paras 869, 870, 873, 874, 875]

The assessment orders under Section 74 were not sustained in their existing form; the matters were remitted for fresh consideration under Section 73, without foreclosing recourse to Section 74 if the petitioner failed to furnish the required particulars.

Final Conclusion: The Court held that invocation of Section 74 under the GST enactments depends on a prima facie appearance of non-payment, short payment, erroneous refund or wrongful availment or utilisation of input tax credit founded on available material, and that prior communication of the grounds in the statutory process is sufficient. On that basis, the challenges to the show cause notices in the Fastenex and Turbo matters were rejected, while the assessment orders in the Ispahani matters were remitted for fresh consideration under Section 73, without ruling out recourse to Section 74 if the petitioner failed to furnish the required particulars.

Maintainability and entertainability of a Writ petition - Availability of the statutory appellate remedy -Exclusion of time in bona fide rectification proceedings - Limitation for appeal under the CGST Act - Opportunity to seek condonation of delay - Due Diligence - Good Faith - Doctrine of Merger - Whether the present writ petition under Article 226 of the Constitution of India is preferred within the period of limitation prescribed by the CGST Act, which is a special enactment ?

Alternative statutory remedy - Writ entertainability - Pure question of law -HELD THAT: - The Court distinguished between maintainability and entertainability and held that availability of an alternative remedy is not an absolute bar. Since the writ petition challenged the legality of rejection of the statutory appeal on limitation, raised a narrow question of law on computation of limitation, and was itself filed within the period available for assailing the appellate order under the special enactment, the bar against entertaining a writ petition after expiry of the statutory period was not attracted.

It is a settled proposition that the doctrine of merger is not applicable to a case where an appeal is dismissed on the ground of limitation, without going into the merits. It has been held in Chandi Prasad [2004 (10) TMI 550 - SUPREME COURT], to the effect that when an appeal is dismissed on the ground that delay in filing the same is not condoned, the doctrine of merger shall not apply. The Hon’ble Supreme Court of India in Raja Mechanical Company Private Limited [2012 (5) TMI 35 - SUPREME COURT], after referring to the decision in Chandi Prasad [supra], has held that if for any reason an appeal is dismissed on the ground of limitation and not on merits, that order would not merge with the order passed by the appellate authority. The same position has been reiterated in the case of Glaxo Smith Kline Consumer Health Care Limited [2020 (5) TMI 149 - SUPREME COURT] by holding that rejection of delay application by the appellate forum does not entail in merger of the assessment order with that order. In view of such settled proposition, the issue involved in this writ petition, with the admitted facts, is in a narrow compass.

The Court therefore proceeded to examine the legality of the appellate order, while making it clear that it was not entering into the merits of the original adjudication. [Paras 32, 33, 34]

The writ petition was entertained to examine the correctness of the order dismissing the appeal on limitation.

Section 14 principles - Rectification under Section 161 - Exclusion of time - HELD THAT: - Section 14 further requires that the prior proceeding should have been prosecuted in good faith. The definition of ‘good faith’ is provided in Section 2[h] of the Limitation Act. As per the definition provided therein, ‘good faith’ – nothing shall be deemed to be done in good faith which is not done with due care and attention. Therefore, to take shelter under the provision of Section 14 of the Limitation Act about pursuing the prior proceeding in good faith an applicant has to demonstrate that there was due care and attention on his part.

The Court held that although Section 5 of the Limitation Act stands excluded where the special statute prescribes a fixed period with a limited condonable extension, the principle underlying Section 14 can still apply. A rectification application under Section 161 is a statutory remedy available to the affected person within three months, and the petitioner had invoked it within that period.

In the Assistant Commissioner, Income Tax, Rajkot vs. Saurashtra Kutch Stock Exchange Ltd.[2008 (9) TMI 11 - SUPREME COURT], the Hon’ble Supreme Court has held that non-consideration of a decision of the jurisdictional High Court or the Supreme Court is such a mistake, which can be said to be a ‘mistake apparent from the record’ and the same can be rectified under Section 254[2] of the Income Tax Act, 1961. If the point is covered by a decision of the jurisdictional Court rendered prior or even subsequent to the order passed, it can be said to be ‘mistake apparent from the record’ and can be corrected on the basis of the well settled proposition that a judicial decision operates retrospectively.

On the facts, the rectification proceeding was found to have been pursued with due diligence and in good faith. Consequently, the period from filing of the rectification application till its rejection, inclusive of both days, had to be excluded in computing limitation for the appeal. After such exclusion, the appeal was beyond the normal three-month period but still within the further one-month period available to the Appellate Authority on sufficient cause being shown. [Paras 46, 49, 50, 51, 52]

The appellate authority erred in treating the appeal as beyond the maximum permissible period without excluding the time spent in the rectification proceeding.

Condonable delay- Reasonable opportunity of hearing - Curable defect in appeal presentation - HELD THAT: - In terms of Section 2[35] r/w Section 9 of the General Clause Act, 1897, the normal period of three months prescribed for filing an appeal under Section 107[1] of the CGST Act against the Order-in-Original dated 03.01.2025 would have expired on 03.04.2025. The extended period of limitation of further one month under Section 107[4] of the CGST Act would have expired on 03.05.2025. To it, a period of forty-eight days is to be added. If such period of forty-eight days is added, the period of limitation for filing the appeal is held to be available upto 20.06.2025.

The Court held that the requirement of hearing under Section 107(8) carries with it an obligation to afford a reasonable opportunity to the appellant. If an appeal is filed within the further one-month period but without a separate condonation application or explanation in the memorandum, that deficiency is curable. Before dismissing such appeal as time-barred, the Appellate Authority must give at least one opportunity to the appellant to file an application explaining the delay and then decide whether sufficient cause is made out. Dismissal without following this course was held unsustainable. [Paras 53, 55, 56, 58, 59]

The impugned appellate order was set aside and the matter was remitted to the Appellate Authority to give the petitioner an opportunity to seek condonation and to proceed thereafter in accordance with law.

Final Conclusion: The High Court held that the time spent in pursuing the rectification application under Section 161 was liable to be excluded on application of the principles of Section 14 of the Limitation Act, with the result that the appeal had been filed within the condonable extended period under Section 107. Since the Appellate Authority dismissed the appeal without giving the petitioner an opportunity to explain the delay, the appellate order was set aside and the matter was remitted for fresh consideration on condonation and further disposal in accordance with law.

Revocation of cancellation of GST registration - Specificity of show cause notice in revocation proceedings - Reasons recorded in writing - Effective opportunity of hearing - Non-speaking order - Breach of principles of natural justice - HELD THAT: - The Court held that Section 30 of the CGST Act read with Rule 23 required the Proper Officer to consider the revocation application and to record reasons in writing while deciding it. The show cause notice issued in the revocation proceedings merely stated that Government dues had not been paid and asked for proof of payment of late fee and interest, without specifying the actual dues. The subsequent order rejected the application only on the ground that no reply had been filed within time. Such an order did not disclose reasons, did not demonstrate conscious application of mind, and failed to satisfy the statutory requirement of recording reasons, which forms part of fair procedure and operates as a check against arbitrary action. Since the notice itself lacked necessary particulars of the dues intended to be relied upon, the matter was required to go back to that stage so that the petitioner could be furnished with the relevant details and respond effectively. [Paras 15, 16, 17]

The rejection order was set aside, and the matter was restored to the stage of the show cause notice in the revocation proceedings with a direction to furnish details of tax, interest, penalty, late fee and other dues, and thereafter pass a reasoned order.

Final Conclusion: The writ petition was disposed of by quashing the order rejecting revocation of cancellation of GST registration. The Proper Officer was directed to furnish the particulars of the alleged dues, permit the petitioner to respond and prove payment, and then decide the revocation application by a reasoned order.

Cancellation of GST registration for continuous non-filing of returns - Non- Speaking order- absence of reasons -Defective show cause notice -delayed filing of the writ petition - Principles of natural justice - Application of Mind

GST registration cancellation for non-filing of returns - Speaking order requirement - HELD THAT: - The Court held that a show cause notice for cancellation of registration must make the noticee aware of the precise case set up against it so as to afford an effective opportunity of response. The notice in the present case merely referred to failure to furnish returns for a continuous period of six months without stating the month from which and the period during which returns were allegedly not filed. Further, Rule 22 read with Form GST REG-19 requires the Proper Officer to assign specific reasons while cancelling registration. The impugned order merely referred to the earlier notice and stated the effective date of cancellation, without disclosing any reason. The obligation to record reasons was held to be implicit in fair procedure and a check against arbitrary exercise of statutory power, particularly when cancellation entails adverse civil consequences. The absence of reasons therefore showed non-application of mind and rendered the order illegal. [Paras 20, 21, 22, 23, 24]

The cancellation order was set aside and the matter was restored to the stage of the show cause notice, with liberty to the petitioner either to reply to the notice or to furnish pending returns and clear dues in terms of Rule 22, after which the Proper Officer was directed to proceed afresh in accordance with law.

Delay in invoking writ jurisdiction - Statutory breach outweighing delay - HELD THAT: - The Court accepted that the writ petition had been filed after considerable delay, but held that the vulnerability of the cancellation order on account of failure to comply with the statutory requirement of recording reasons far outweighed the delayed approach. Since the defect went to the legality of an order carrying serious adverse consequences, the Court declined to refuse relief on the ground of delay alone. [Paras 25]

The objection based on delay was rejected and relief was granted notwithstanding the belated approach.

Final Conclusion: The High Court quashed the order cancelling the petitioner's GST registration as a non-speaking order passed without proper application of mind and contrary to the statutory scheme governing cancellation. The matter was remitted to the stage of show cause notice, with liberty to the petitioner to reply or regularise the defaults in accordance with Rule 22.

Service of notice on common portal - GST registration cancellation - Principles of natural justice - Ex parte cancellation of GST registration - Mandatory compliance with statutory modes of service - HELD THAT: - The Court recorded the Department's admission that the show cause notice had only been uploaded on the common portal and had not been served upon the petitioner by at least two modes. Applying the Division Bench view in M/s. Shree Shyam Trading Co. [2025 (7) TMI 916 - PATNA HIGH COURT], the Court held that mere uploading of notice on the portal in that manner is insufficient compliance and that such service violates the principles of natural justice as well as the mandatory requirement of Section 169. Since the cancellation order had been passed ex parte without a real opportunity to respond, it was vitiated. The appellate order dismissing the appeal on limitation was also found unsustainable because it failed to appreciate that the foundational cancellation order itself had been made without proper service and hearing. The matter was left open to the authorities to proceed afresh by issuing proper notice and passing a reasoned order after complying with the statutory requirements. [Paras 9, 10, 15]

The cancellation order was set aside for violation of natural justice and non-compliance with the statutory mode of service, with liberty to the authorities to proceed afresh in accordance with law.

Final Conclusion: The writ petition was allowed to the extent of setting aside the order cancelling the petitioner's GST registration, the Court holding that the notice had not been validly served and that the ex parte cancellation violated natural justice. The respondents were left free to take fresh action after due compliance with the statutory requirements.

Cancellation of GST registration for non-filing of returns - Defective show cause notice - Requirement of reasons - Audi Alteram Partem - principles of natural justice -No effective opportunity of reply -HELD THAT: - Under the GST regime a registered assessee is required to pay the statutory dues under the CGST Act or the SGST Act, as the case may be, or both. These statutory dues are required to be paid by all the assessees, who are registered under the GST regime, mandatorily. Such payments of statutory dues contribute towards the State Exchequer. If an assessee like the petitioner is not included within the GST regime, then any statutory dues that may be required to be deposited by an assessee like the petitioner would not be deposited and properly accounted for and such a situation is, albeit, not in the interest of the revenue. It is pertinent to note that in the Statement Table in the impugned Order, no Central Tax/State Tax/Union Territory Tax/Cess is shown as due.

The Court held that a show cause notice issued for cancellation of registration under the CGST framework must make the noticee aware of the precise case set up against him so as to afford an effective opportunity of reply. In the present case, the notice merely stated failure to furnish returns for a continuous period of six months without specifying the relevant period of default. The cancellation order thereafter referred to the last return having been filed for December, 2023, but that material reason was not stated in the notice itself. The Court further held that an order in Form GST REG-19 must contain specific reasons, and the statutory obligation to issue a proper notice and a reasoned order is not dispensed with merely because the assessee did not file a reply or appear.

Since cancellation of registration entails adverse civil consequences, compliance with the procedure under Section 29 and Rule 22 is implicit in the principles of natural justice and operates as a check against arbitrary exercise of power. On that reasoning, the impugned order was found unsustainable and the matter was restored to the stage of the show cause notice, leaving it open to the petitioner either to reply to the notice or to furnish pending returns and make payment of dues, interest, late fee and penalty, if any, in terms of the proviso to Rule 22(4). [Paras 23, 24, 26, 27, 28]

The cancellation order was set aside and the proceedings were remitted to the stage of the show cause notice for fresh action in accordance with Section 29 and Rule 22, with liberty to the petitioner to pursue either of the statutory courses indicated by the Court.

Final Conclusion: The High Court held that the impugned cancellation of GST registration could not be sustained because the notice did not disclose the precise default and the order was not a valid reasoned order in the prescribed statutory framework. The order was quashed and the matter was restored to the stage of show cause notice for fresh decision in accordance with law.

Interim protection against precipitate adjudication - Adjournment of GST adjudication pending writ challenge to jurisdiction of show cause notice - Undue haste in adjudication - Jurisdiction and validity of the show cause notices issued in Form GST DRG-01 - HELD THAT: - The Court noted that the writ petitions directly assailed the jurisdiction and validity of the show cause notices and raised substantial questions of law requiring adjudication. Although the adjudicating authority had rejected adjournment in the absence of any express stay and such rejection was, technically, in accordance with law, the fixing of a final personal hearing on the immediately following date with an indication that an ex parte final order would otherwise follow was found to be in undue haste. On a prima facie view, interference at that stage was necessary to preserve the subject matter of the writ petitions. [Paras 11, 12, 14]

The concerned officer was directed to grant adjournment and refix the hearing after the writ petitions were taken up, and the final hearing already fixed was directed not to proceed.

Final Conclusion: The Court granted interim protection by deferring the ongoing GST adjudication, holding that the proposed final hearing should not proceed while the writ petitions challenging the jurisdiction and validity of the show cause notices remained pending for consideration.

Invocation of statutory provision- mistaken reference to the wrong provision - Penalty rate as indicator of substantive exercise of power - Validity of order imposing 100% penalty under Section 74 -HELD THAT: - The Court held that a mere inadvertent reference to a wrong provision would not by itself invalidate proceedings. But, on examining the impugned order, it found that penalty had been imposed at 100% as if power had been exercised under Section 74, whereas proceedings under Section 74A would attract only 50% penalty. The difference in penalty showed that the defect was not merely clerical or accidental, but reflected exercise of power on the footing of the wrong provision. On that basis, the order was unsustainable. [Paras 6, 7]

The impugned order was quashed, with liberty to the respondent to initiate fresh proceedings in accordance with law under Section 74A.

Final Conclusion: The writ petition was allowed. The Court quashed the order passed under Section 74, holding that for Assessment Year 2024-2025 the matter had to proceed under Section 74A and the defect was not a mere misdescription of the provision.

Section 14A disallowance in computation of book profit - MAT computation - Book profit under section 115JB - Binding precedent

HELD THAT: - The Court held that the controversy was no longer res integra in view of the earlier decision of the co-ordinate Bench GUJARAT FLUOROCHEMICALS LTD [2019 (7) TMI 541 - GUJARAT HIGH COURT], which had already ruled that no addition to book profit can be made on the basis of the disallowance worked out under section 14A. It also noted that the same decision had been followed in the respondent's own case. Proceeding on that binding position, the Court found no error in the Tribunal's order and treated the questions proposed by the Revenue as concluded against it. [Paras 5, 6, 7, 8]

The questions raised by the Revenue were held to be covered by binding precedent, and the appeal was dismissed for absence of any substantial question of law.

Final Conclusion: Following the binding co-ordinate Bench decisions, the Court held that the controversy regarding section 14A disallowance in computation of book profit under section 115JB stood concluded against the Revenue. The tax appeal was therefore dismissed as raising no substantial question of law.

Unexplained cash credit on share capital and share premium - Non-compliance with summons and sufficiency of documentary evidence - Double addition of share application money

HELD THAT: - The Tribunal held that the assessee had produced primary documentary material establishing the identity and financial particulars of the share subscribers. Mere non-compliance with summons u/s 131 could not, by itself, justify the addition when the Assessing Officer had not disproved the documents furnished or carried out any further enquiry. It was further found that, in the case of three subscriber companies, the very investments made in the assessee had already been added in their own assessments, while in the case of the fourth investor the assessment stood completed without such addition.

On these facts, and following PCIT vs. One point Commercial Pvt. Ltd. [2025 (7) TMI 829 - CALCUTTA HIGH COURT] Tribunal held that sustaining the same amount again in the hands of the assessee would be impermissible as it would amount to double addition. [Paras 4, 6]

The section 68 addition confirmed by the appellate authority was set aside and the Assessing Officer was directed to delete the addition.

Final Conclusion: The Tribunal allowed the appeal and deleted the addition made under section 68 in respect of share capital and share premium. It held that the addition could not rest solely on non-compliance with summons when the assessee had produced supporting documents and the same investment had already been dealt with in the subscribers' assessments.

Transfer pricing under TNMM - Operating nature of foreign exchange gain - Deduction of interest against interest income

Transfer pricing under TNMM - Operating nature of foreign exchange gain - Allocation of common expenses between divisions - Selection of functionally comparable companies - Persistent loss filter - Transfer pricing adjustment on sale of finished goods by the Commodity Division to the associated enterprise - HELD THAT: - The Tribunal held that, for determining the assessee's operating margin under TNMM, foreign exchange gain arising from regular business activity had to be treated as operating income. It further held that common expenses of the Delhi and Dehradun offices could not be reallocated on turnover basis; in the facts of the case, and having regard to the accepted position in earlier years as well as the cited coordinate Bench ruling, allocation had to be made on the basis of gross profit margins instead of turnover. On comparability, the Tribunal held that under TNMM broader functional comparability, and not strict product similarity, was the relevant test, and the rejected companies were functionally comparable. As regards Gontermann Pieper, the Tribunal held that it could not be excluded as a persistent loss-making company since it had not incurred losses in three consecutive financial years including the year corresponding to the assessment year in dispute. [Paras 10, 11, 14, 15, 16]

The TPO/AO was directed to recompute the assessee's operating margin by treating foreign exchange gain as operating, allocating common expenses on gross profit margins, and benchmarking with all five comparables; the transfer pricing issue was restored for fresh computation on those terms.

Deduction of interest against interest income - Borrowed funds partly invested in subsidiary equity - HELD THAT: - The Tribunal held that the disallowance of proportionate interest was covered by the decision in CIT Vs. Rajendra Prasad Moody [1978 (10) TMI 133 - SUPREME COURT]. Following that decision, it accepted the assessee's claim that the interest expenditure was deductible against the interest income assessed under the head income from other sources, and the absence of dividend from the equity investment did not justify the disallowance sustained by the lower authorities. [Paras 19]

The disallowance of interest under section 57(iii) was deleted and the assessee's ground was allowed.

Final Conclusion: The appeal was partly allowed for statistical purposes. The transfer pricing adjustment was set aside for fresh computation in accordance with the Tribunal's findings on operating income, expense allocation and comparables, while the disallowance of interest under section 57(iii) was deleted.

Unexplained bank deposits from unaccounted business transactions - Estimation of profit on unrecorded turnover - bank deposits from raw tobacco trading -

HELD THAT: - The Tribunal noted that the controversy was identical to the assessee's own case for an earlier year [2026 (3) TMI 555 - ITAT PUNE], where similar additions based on deposits and other credits in the bank account had been examined in the second round of litigation.

Following that decision of earlier year’s, the Tribunal accepted that the entire deposits could not be treated as income when the case related to unaccounted trading transactions and the proper course was to tax only the profit element on such receipts. In that view, and there being no adverse material shown to justify a different treatment, the addition was directed to be recomputed by applying net profit at 10% on the cash deposits and other credits for the years under appeal. [Paras 11, 12, 14]

The addition of the entire bank deposits was not sustained; it was restricted by directing application of net profit at 10% on the deposits and other credits, and the same view was applied mutatis mutandis for both assessment years.

Final Conclusion: Following the earlier order in the assessee's own case on the same controversy, the Tribunal held that the entire bank deposits and credits could not be assessed as unexplained income and that only profit at 10% thereon was taxable. Both appeals for A.Ys. 2009-10 and 2010-11 were partly allowed on that basis.

Unexplained investment in co-owned immovable property - Stamp duty valuation difference in co-owned property u/s 56(2)(x) - Unexplained money in bank cash deposits

Unexplained investment in co-owned immovable property - Source verification - Ex parte appellate order - HELD THAT: - Tribunal found that the assessee had produced bank details showing that his share in the property was 16.95 per cent, but the AO had not taken cognizance of that material. It also noted that the appellate order was ex parte. In these circumstances, the correctness of the addition and the original source of investment required fresh verification by the AO after giving the assessee an opportunity of hearing in accordance with the principles of natural justice. [Paras 7]

The addition on account of unexplained investment was set aside for verification and the matter was remanded to the AO.

Stamp duty valuation difference in co-owned property u/s 56(2)(x) - Co-owner's proportionate share - Recalculation of addition - addition based on stamp duty valuation difference in respect of the co-owned property - HELD THAT: - Tribunal noted that the assessee was only a co-owner holding 16.95 per cent share, yet the basis on which the impugned addition was quantified was unclear, particularly when another co-owner holding a higher share had been subjected to a lower addition. It therefore held that the addition had to be recomputed with reference to the valuation and the assessee's actual share in the property, and that the question whether such difference was liable to be treated as income u/s 56(2)(x) also required verification. Since these aspects had not been properly examined, the matter was remanded for fresh adjudication after opportunity of hearing. [Paras 8]

The addition u/s 56(2)(x) was remanded to the AO for recalculation and fresh adjudication.

Unexplained money in bank cash deposits - Cash deposits explained from contract receipts - HELD THAT: - On examining the record, the Tribunal found that the assessee had explained the source of the bank cash deposits and that the material showed receipt of contract income as reflected in the return of income. It further found that the assessee had sufficient source and cash in hand at the relevant time. On that basis, the addition for unexplained money in respect of the cash deposits was deleted. [Paras 9]

The addition relating to cash deposits in the bank account was deleted.

Final Conclusion: The appeal was partly allowed for statistical purposes. The additions relating to unexplained investment and valuation difference in the co-owned property were remanded to the Assessing Officer for fresh verification and adjudication, while the addition on account of cash deposits in the bank account was deleted.

Approval u/s 80G - Incidental business activities and charitable purpose - Relief to the poor - Genuineness of activities - Rejection of approval u/s 80G on the ground that the trust was acting as a Business Correspondent and carrying on micro-finance activity - HELD THAT: - The Tribunal held that the trust deed itself authorised formation of self-help groups, micro-credit programmes and developmental initiatives, and therefore its facilitative interaction with the financial system could not, by itself, be treated as an independent business activity divorced from its charitable objects. On the material placed, there was no finding or evidence showing commerciality, profit-oriented conduct, distribution of surplus, or systematic business operations for earning profits.

The financial statements did not show abnormal surplus, and the annual reports showed activities falling within relief to the poor. The Tribunal also noted that the Department had already granted registration under section 12A under both the old and new regimes, recognising the charitable character of the trust. At the stage of approval under section 80G, the competent authority is required to examine the nature of the objects and the genuineness of the activities, and cannot recharacterise incidental activities as business in the absence of evidence of profit motive. The proviso to section 2(15) was held inapplicable since the activities fell within relief to the poor. [Paras 12, 13, 14, 15, 16]

The trust was held eligible for approval under section 80G, and the rejection of its application was set aside with a direction to grant approval.

Final Conclusion: The appeal was allowed. The Tribunal held that the assessee-trust's activities remained charitable in character, that its incidental financial facilitation work did not amount to profit-driven business activity, and that approval under section 80G had to be granted.

Provisional release of seized vehicle - additional security deposit -Conditions for release under customs law - Customs authority not frustrating criminal court custody order - HELD THAT: - The Court held that a plain reading of Section 110A of the Customs Act, 1962 authorises the customs authority to impose conditions for release of seized goods or things. At the same time, that power could not be exercised in a manner that rendered ineffective a lawful order of the Chief Judicial Magistrate directing release of the vehicle on execution of bond. Since the further requirement of a security deposit equivalent to not less than 30% of the value of the vehicle frustrated that judicial order, the condition was held unsustainable. [Paras 9, 10, 11]

The condition requiring security deposit equivalent to not less than 30% of the value of the vehicle was set aside, and the vehicle was directed to be released on execution of the bond already fixed by the criminal court.

Final Conclusion: The petition was disposed of by holding that, although the customs authority may impose conditions for provisional release under the Customs Act, it cannot impose a condition that nullifies or frustrates a lawful custody order of the criminal court. The additional security deposit condition was therefore set aside and release was directed on bond alone.

Anti-dumping duty on laser engraving machines - Scope of Notification No. 15/2023-Customs (ADD) - Tariff classification vis-a-vis anti-dumping levy - HELD THAT: - The Authority held that heading 84561100 is a broad tariff entry covering machine-tools operated by laser, and the applicant's laser engraving machines are classifiable thereunder because they work material by laser process. However, tariff classification and liability to anti-dumping duty were treated as distinct questions. The levy under Notification No. 15/2023-Customs (ADD) depended on whether the goods fell within the Product Under Consideration defined in the DGTR final findings and the notification, namely industrial laser machines used for cutting, marking or welding operations. On the material placed by the applicant, the imported goods were found to be compact, standardized, portable and low-powered laser engraving machines intended for artistic, decorative, personalization, jewellery, signage, educational, hobby and small commercial applications, and not customer-made industrial production systems. Relying on the DGTR findings, including the express recording that laser engraving machines were not included within the scope of the PUC, the Authority concluded that the subject goods were commercially, functionally and technologically distinct from the industrial laser machines covered by the notification. Accordingly, mere classification under CTH 84561100 did not attract anti-dumping duty. [Paras 5, 6, 7]

Anti-dumping duty under Notification No. 15/2023-Customs (ADD) was held not leviable on the subject laser engraving machines, subject to physical verification of the goods and their description at the time of import.

Final Conclusion: The application was answered in favour of the applicant. The Authority ruled that laser engraving machines, though classifiable under tariff sub-heading 84561100, are outside the scope of the industrial laser machines covered by Notification No. 15/2023-Customs (ADD), and are therefore not liable to anti-dumping duty thereunder, subject to verification at import.

Classification of rough diamonds bearing Galaxy and DiaExpert surface markings - classifiable as unworked rough diamonds or as worked and engraved diamonds - Entitlement to exemption under Sr. No. 345 of Notification No. 50/2017-Cus - Working or processing - HSN explanatory notes

Classification of Galaxy-marked rough diamonds - HELD THAT: - Rule 1 of the General Rules for Interpretation provides that the classification of goods shall be determined according to the terms of the headings of the tariff and any relative Section notes or Chapter notes and thus, gives precedence to this while classifying a product. Rules 2 to 6 provide the general guidelines for classification of goods under the appropriate sub-heading. In the event the goods cannot be classified solely on the basis of Rule 1, and if the headings and section or chapter notes do not otherwise require, the remaining Rules 2 to 6 may then be applied in sequential order.

As per the additional documents i.e. user guide by Sarin technologies Ltd. submitted by the applicant, the rough diamonds are going to be scanned and then duly mapped (line, dots & numbers) on the surface using Sarine Galaxy® system and the external surface is mapped using a separate, also non-invasive, laser technology called the DiaExpert® system, which creates a 3D model of the outer texture and grooves. In order to determine the CTH, it is pertinent to discuss that imported goods are diamonds inn their natural states or not and markings on the diamond can be considered as engraving or not.

The Authority applied Rule 1 of the General Rules for Interpretation along with the tariff entries and HSN Explanatory Notes to Heading 7102. It held that sub-heading 7102.31 covers natural diamonds in their natural state, or those simply sawn, cleaved or bruted, whereas sub-heading 7102.39 covers, inter alia, engraved diamonds. On the material placed by the applicant itself, the imported stones were to be scanned and then mapped on the surface with lines, dots and numbers for planning the cutting and polishing process. The Authority held that such planning and laser marking formed part of processing and took the stones out of the category of diamonds in their natural state. Referring to the ordinary meaning of engraving and the HSN note explaining laser machines used for engraving figures, letters and lines, it concluded that the surface markings amounted to engraving. As the goods were neither simply sawn, cleaved nor bruted, they were held classifiable under tariff item 71023990.

The subject goods were held classifiable under tariff item 71023990 and not under tariff item 71023100.

Exemption for rough diamonds - Semi-processed diamonds - HELD THAT: - The Authority held that the exemption at serial No. 345 is confined to rough diamonds, whereas the subject goods had already undergone scanning and laser plane-marking for a defined manufacturing purpose. Since those operations altered the diamonds physically or commercially and imparted a distinct commercial utility for subsequent cutting and polishing, the goods were treated as processed or semi-processed diamonds rather than rough diamonds. On that basis, the Authority ruled that the exemption meant for rough diamonds was unavailable.

The benefit of serial No. 345 of Notification No. 50/2017-Cus was denied.

Final Conclusion: The advance ruling held that diamond stones bearing Galaxy marks are not rough diamonds in their natural state, but engraved and semi-processed diamonds classifiable under tariff item 71023990. Consequently, the exemption available to rough diamonds under serial No. 345 of Notification No. 50/2017-Cus was held inapplicable.

Scope and scheme of Notification No. 45/2025-Customs dated 24.10.2025 issued under Section 25(1) - Strict construction of exemption notifications - DSIR-recognized research institution eligibility for concessional customs duty - R&D consumables under customs exemption - Prohibition on transfer of imported research goods - End-use based eligibility - Transfer prohibition - Burden of proof for exemption

Whether the applicant's DSIR-recognized R&D facilities qualify as eligible research institutions for the purposes of Notification No. 45/2025-Customs? - HELD THAT: - It is well settled that exemption notifications are required to be construed strictly. In Dilip Kumar & Company [2018 (7) TMI 1826 - SUPREME COURT (LB)], the Constitution Bench of the Hon'ble Supreme Court held that the burden lies upon the claimant to establish that its case falls squarely within the terms of the exemption notification and that any ambiguity must be resolved in favour of the Revenue.

The Authority held that the notification requires the importer to be registered with DSIR, and the material on record showed valid DSIR recognition and registration of the applicant's in-house R&D centres. No contrary material indicating suspension, withdrawal or restriction of such recognition was placed on record. At the same time, the Authority clarified that DSIR recognition is only a necessary condition and does not by itself confer exemption unless the imported goods and their use also satisfy the notification. [Paras 8]

The applicant's DSIR-recognized R&D centres satisfy the institutional eligibility requirement, subject to separate compliance with the other conditions of the notification.

Whether goods imported and utilized during the research and development stage prior to manufacture of the Exhibit Batch are eligible for the benefit of the notification? - HELD THAT: - A conjoint reading of SI. No. 70 and Condition No. 24 makes it evident that the exemption is not available merely because an importer possesses DSIR recognition. The notification envisages satisfaction of multiple substantives as well as procedural requirements, all of which are cumulative in nature.

The Authority accepted that the expression consumables in the notification is wide enough to include goods wholly or substantially consumed in experimentation, analytical evaluation, formulation development, validation, stability studies and related research activity. It found merit in the contention that items such as reference listed drugs, active pharmaceutical ingredients, impurities, chemicals, reagents, enzyme powders and similar materials directly used in such R&D processes would generally fall within that description. However, the benefit is not automatic for every import by a DSIR-recognized institution; the importer must establish that each import falls within the notified description, is essential for approved research, is supported by the prescribed certificate, and is actually used for the stated research purpose. [Paras 8]

Pre-Exhibit Batch R&D imports of goods consumed or substantially utilized in research qualify generally as consumables under the notification, subject to verification of their nature, end-use and full compliance with the prescribed conditions.

Whether goods imported for manufacture of the Exhibit Batch are eligible for the benefit of the notification?​​​​​​​ - HELD THAT: - The principle was reiterated in Hari Chand Shri Gopal [2010 (11) TMI 13 - SUPREME COURT], wherein the Hon'ble Supreme Court held that substantive conditions attached to an exemption notification are mandatory and must be strictly complied with before the benefit can be availed.

Applying the above principles, eligibility under Notification No. 45/2025-Customs must be determined strictly in accordance with the language employed therein. The Authority cannot expand the scope of the exemption by treating every activity connected with research and development as automatically qualifying for the concession.

The Authority held that the notification is institution-specific and must be construed strictly. The concession is available only for specified goods imported by a DSIR-recognized research institution, certified as essential for research, and retained in compliance with the condition prohibiting transfer or sale for five years. In the first situation, where goods are imported by the DSIR-recognized R&D unit and thereafter moved or transferred to the manufacturing facility for the Exhibit Batch, the express condition against transfer is violated, and the exemption becomes unavailable. In the second situation, where the manufacturing facility itself imports the goods for the Exhibit Batch, the exemption is unavailable from the outset because the importer is not the eligible DSIR-recognized research institution contemplated by the notification. The Authority rejected the contention that the R&D character of the Exhibit Batch by itself could enlarge the scope of the exemption beyond its express terms. [Paras 8]

Imports for the Exhibit Batch are not entitled to the benefit of Notification No. 45/2025-Customs in either situation identified by the Authority.

Final Conclusion: The Authority ruled that the applicant's DSIR-recognized R&D centres are eligible research institutions, and that goods consumed or substantially utilized in pre-Exhibit Batch research activities may obtain the concessional benefit subject to satisfaction of the notification conditions. However, imports connected with manufacture of the Exhibit Batch were held ineligible, whether the goods are first imported by the R&D unit and then moved to the manufacturing facility, or are imported directly by that facility.

Classification of Corinthian Raisin, (known as Greek Black colour Zante Currant having botanical name "Vitis Vinifera") - Eligibility for the concessional duty benefit under Notification No. 45/2025-Customs (ADD) - classifiable under CTI 08062010 as raisins or under CTI 08062090 as other dried grapes - Essential character - Commercial understanding - HSN Explanatory Notes - Natural dehydration - HELD THAT: - The Authority held that Heading 0806 covers grapes, fresh or dried, and that the imported product, being dried grapes of the species Vitis vinifera, clearly fell within that heading under Rule 1. At the sub-heading level, the determinative question was whether the goods answered the description of raisins or fell under the residual entry for others. On the material placed on record, including scientific, commercial and historical sources, the product was found to be a recognised variety of dried Black Corinth grapes, commercially known as Corinthian Raisins or Zante Currants. The expression currant was treated as a historical trade description derived from raisins of Corinth, and not as referring to fruits of the genus Ribes. The Harmonized System Explanatory Notes to Heading 0806 were also relied upon, since they specifically recognise currants as one of the principal kinds of dried grapes and do not draw a tariff distinction between currants and raisins. The production process, consisting essentially of sun-drying harvested grapes followed by cleaning, sorting and packing, was held not to alter the essential character of the grapes. On that basis, the goods were held to be raisins classifiable under 08062010, and since the notification covered dark seedless raisins of that tariff item, the claimed partial exemption was held available. [Paras 17, 18, 19, 20, 21]

The product was ruled classifiable under tariff item 08062010 as raisins, and was held eligible for the benefit under Sr. No. 28 of Notification No. 45/2025-Customs (ADD).

Final Conclusion: The application was allowed by ruling that Corinthian Raisin or Greek Black colour Zante Currant of the species Vitis vinifera is classifiable under tariff item 08062010 as raisins. The Authority further held that the goods are entitled to the exemption benefit available to dark seedless raisins under Sr. No. 28 of Notification No. 45/2025-Customs (ADD).

Seeking permission of the Chairman of the NCLAT to consider the reference arising from the difference of opinion between the Judicial Member and the Technical Member - Interim stay against admission into CIRP of an electricity distribution licensee - Primacy of IBC over the Electricity Act -Corporate guarantee executed without regulatory approval

The order [2026 (6) TMI 1426 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, CHENNAI] does not finally decide either the maintainability of the appeals or the prayer for interim stay. Owing to the divergence between the Member (Judicial), who declined interim relief, and the Member (Technical), who favoured keeping the impugned order in abeyance, the matter was directed to be placed before the Chairperson for an appropriate reference.

HELD THAT:- Special Leave Petition disposed of by reserving liberty to the petitioner to request the Chairman of the NCLAT to consider the reference arising from the difference of opinion between the Judicial Member and the Technical Member, to be considered in accordance with law.

Service tax on mining royalty - reverse charge - Assignment of right to use natural resources - Taxability of pre-01.04.2016 mining lease - Whether Service tax is leviable, under reverse charge, on the Royalty (and the contributions towards the District Mineral Foundation (DMF) and the National Mineral Exploration Trust (NMET) and User fee) paid by the Appellant to the Government of Odisha during 01.04.2016 to 30.06.2017 for the assignment of the right to use natural resources, where the mining lease in question was executed on 17.11.2009, i.e. long prior to 01.04.2016 — the date on which services rendered by the Government to a business entity first became exigible to Service tax under the Finance Act, 1994, or not ? - HELD THAT: - The Tribunal held that the determinative factor was the point of assignment of the right to use natural resources. Since the mining lease had been executed long prior to 01.04.2016, the transaction fell to be tested under the service tax law as it stood before that date, when such grant by Government was not taxable. The subsequent inclusion of Government services within the tax net from 01.04.2016 could not render taxable a service already provided or agreed to be provided earlier merely because royalty, DMF, NMET and User fee were paid thereafter. Following its earlier decisions in the case of S.R. Traders [2023 (5) TMI 766 - CESTAT NEW DELHI], affirmed by the Hon’ble Supreme Court in [2023 (9) TMI 81 - SC ORDER]; National Aluminium Company Ltd. [2024 (5) TMI 621 - CESTAT KOLKATA] and Cement Corporation of India Ltd.[2024 (6) TMI 192 - CESTAT KOLKATA], the Tribunal rejected the basis adopted in the impugned order and held that the demand could not be sustained. [Paras 6, 7, 8, 9, 10]

The demand of service tax and interest was set aside, and the penalties were held to be not imposable.

Final Conclusion: The Tribunal held that no service tax could be levied under reverse charge on royalty, DMF, NMET and User fee paid during the disputed period where the mining lease assigning the right to use natural resources had been executed prior to 01.04.2016. The impugned demand, interest and penalties were accordingly set aside and the appeal was allowed.

Taxability of electricity supplied to occupiers as sale of goods - Refundable maintenance deposit as consideration for taxable service - second Show-cause notice, in addition to reiterating the demand on electricity charges, raised a new demand on the refundable deposits collected from the occupiers towards maintenance, electricity, and common expenses.

Whether the amount recovered by the Appellant from occupiers towards redistribution/sale of electricity is exigible to service tax or not ? - HELD THAT: - The Tribunal held that the controversy stood concluded by its earlier order in the appellant's own case [2026 (5) TMI 1165 - CESTAT KOLKATA], which had followed M/s DLF Infocity Developers (Kolkata) Ltd.[2025 (8) TMI 1658 - CESTAT KOLKATA]. Proceeding on the settled position that electricity is goods, the recovery of charges for its supply to occupiers was treated as a transaction of sale of goods and not as consideration for a taxable service. On that basis, the demand on electricity charges was held unsustainable. [Paras 7, 8]

The demand of service tax on electricity charges was set aside.

Whether the maintenance deposits collected by the Appellant from tenant/unit holders could be construed as an advance payment towards provision of a taxable service when such deposits were adjustable only in the event of a default and no evidence adduced to show that these were at all adjusted during the relevant period or not? - HELD THAT: - The Tribunal found that the deposits were collected only as a financial safeguard, were strictly refundable under the maintenance agreement, and could be adjusted only in the event of default in payment of maintenance, electricity or common expenses. Unless such deposits were actually adjusted, they could not assume the character of consideration for any taxable service. Relying on M/s Maglam Build Developers Ltd.[2022 (4) TMI 255 - CESTAT NEW DELHI], the Tribunal held that the issue was squarely covered in favour of the appellant. [Paras 8, 9]

The demand of service tax on the refundable maintenance deposits was set aside.

Final Conclusion: The Tribunal held that charges recovered for supply of electricity to occupiers represented sale of goods and were not liable to service tax, and that refundable maintenance deposits, not shown to have been adjusted, could not be treated as consideration for taxable service. The impugned order confirming service tax, interest and penalty was therefore set aside and the appeal was allowed with consequential relief.

Condonation of delay - Sufficient cause for inordinate delay - Limitation and due diligence - Gross Negligence - Inaction - Lack of Bona Fides - applicant failed to establish sufficient cause for condonation of the delay of 1215 days in filing the appeal - HELD THAT: - The Tribunal held that the power to condone delay is discretionary and can be exercised only on a satisfactory explanation covering the entire period of delay. Applying the principles noticed from the Supreme Court decisions, it found that the reasons put forward were general and unsupported by convincing material. Illness of the General Manager did not explain continuous inaction for the whole period, particularly when the applicant was a company acting through multiple officers and authorised representatives. The plea of ignorance of continuing legal consequences until receipt of the recovery notice was held insufficient, since service of the appellate order required the applicant to act with diligence within limitation. Financial hardship was also rejected as no compelling material showed that filing the appeal had become practically impossible. In these circumstances, the prolonged inaction reflected lack of due diligence and the statutory law of limitation could not be displaced on sympathetic considerations. [Paras 12, 13, 14, 15, 16]

The application for condonation of delay was dismissed, and the appeal consequently stood dismissed as barred by limitation.

Final Conclusion: The Tribunal found that no sufficient cause had been shown for the extraordinary delay in filing the appeal. The condonation application was rejected and the appeal was dismissed as barred by limitation.

Nature of work for supply of materials, civil construction work, and erection and commissioning components - classifiable as a works contract Or as a pure service contract - Entitlement to abatement for the 'Installation and commissioning' service and consequential relief against the service tax demand

Composite works contract - Supply of materials with VAT payment - Incorrect classification under installation and construction service categories -HELD THAT: - The Tribunal found that the disputed contract comprised two distinct components, namely installation and commissioning of electro mechanical equipment and civil work of pump house, and also involved supply of materials. On examining the material placed on record, it found that VAT had been paid on such supply. Applying the principle in Commissioner of Central Excise & Customs, Kerala v. Larsen & Toubro Ltd.[2015 (8) TMI 749 - SUPREME COURT], the Tribunal held that the services rendered under the contract were appropriately classifiable as Works Contract Service. Since the demand in the impugned order had not been raised under that category, the service tax demand confirmed under other service classifications, along with interest and penalties, was held to be unsustainable. [Paras 7]

The demand failed because the disputed contract was a works contract and had not been taxed under that category.

Abatement on civil construction component - No CENVAT credit on construction service - Revised clarification by contractee - HELD THAT: - The Tribunal found that the demand on installation and commissioning had been founded on an initial communication from NTPC which incorrectly treated the entire value of the three contracts as service activity. NTPC later issued a revised clarification, after examining the contractual terms and supporting records, showing separate components of supply of goods, civil construction works and erection or installation services. The Tribunal held that the department had wrongly relied only on the earlier letter and had denied abatement without reason despite record evidence showing use of materials in construction. It accordingly held that the appellant had correctly paid tax on the civil construction portion after claiming 67% abatement under Notification No. 15/2004-ST, having not availed CENVAT credit on that component, while separately paying tax on installation and commissioning and availing credit only in relation to that service. On that basis also, the confirmed demand with interest and penalties was not sustainable. [Paras 7]

The appellant's service tax payment methodology was accepted and the denial of abatement was held unsustainable.

Final Conclusion: The Tribunal held that the disputed contract was a composite works contract involving supply of materials and that, in any event, the appellant had correctly discharged service tax by paying full tax on installation and commissioning and availing abatement on the civil construction component without taking CENVAT credit thereon. The impugned order confirming service tax, interest and penalties was therefore set aside and the appeal was allowed.

Extended period of limitation - Suppression of facts or wilful mis-statement with intent to evade tax - Bona fide belief on taxability of wet cleaning services - Negative List of Services prescribed under 66D of the Finance Act, 1994 - HELD THAT: - The Tribunal found that the appellant was regularly filing service tax returns and was paying tax on dry cleaning services, while excluding wet cleaning services on the basis of a Board clarification that service tax was leviable only on dry cleaning. These facts established a bona fide belief regarding non-taxability of wet cleaning services. The demand itself had been raised on verification of ST-3 returns with ITR/Form 26AS, and no independent material was produced by the Revenue to show any deliberate suppression or wilful mis-statement with intent to evade tax. In such circumstances, the conditions for invoking the extended period of limitation were held to be absent. [Paras 7]

The service tax demand, along with interest and penalties, was set aside as barred by limitation insofar as it had been raised by invoking the extended period.

Final Conclusion: The Tribunal allowed the appeal and set aside the impugned order. It held that, in the absence of evidence of suppression or wilful mis-statement, the extended period could not be invoked and the consequential demand of tax, interest and penalties could not survive.

Penalty for duty demand arising from interpretational dispute over exemption - Applicability of the penalty and interest provisions - benefit of exemption contained in Notification No. 2/95

Mandatory penalty under section 11AC - Interpretational dispute on exemption notification - HELD THAT: - After noticing the clarification in Union of India vs. Rajasthan Spinning & Weaving Mills [2009 (5) TMI 15 - SUPREME COURT] on the true scope of Union of India vs. Dharmendra Textile Processors [2008 (9) TMI 52 - SUPREME COURT], the Court held that penalty under section 11AC is attracted only when the conditions specified in the provision are established. Since the Commissioner had recorded a finding that there was ample scope for different interpretations regarding applicability of Exemption Notification No. 2/95-CE, the Tribunal was justified in concluding that no penalty was leviable. The mere fact that the Tribunal relied on its earlier order in the assessee's and co-noticees' appeals without separately restating reasons did not amount to any error of law. [Paras 13, 14]

The Revenue's challenge to non-imposition of penalty failed.

Interest under section 11AB - HELD THAT: - The Court accepted the Tribunal's view that, in light of the findings recorded in the connected appeals and the adjudicating authority's conclusion on the nature of the dispute, no interference was called for with the non-levy of interest. It therefore held that the Tribunal had committed no error of law in holding that no interest was leviable upon the assessee. [Paras 14]

The Revenue's challenge to non-levy of interest was rejected.

Final Conclusion: The High Court held that the Tribunal had committed no error in sustaining the non-levy of penalty and interest, since the duty dispute arose in a context where the adjudicating authority had found ample scope for different interpretations regarding the exemption. The Revenue's appeal was accordingly dismissed.

Dishonour of cheque -Presumption as to legally enforceable debt on admitted cheque and signature - Security cheque - Revisional interference with concurrent findings - Preponderance of Probabilities

Presumption under Sections 118 and 139 - Rebuttal of statutory presumption - Legally enforceable debt - conviction for dishonour of cheque - accused failed to rebut the statutory presumption arising from the admitted issuance and signature on the cheque - HELD THAT: - The Hon’ble Apex Court in M/s Laxmi Dyechem [2012 (12) TMI 106 - SUPREME COURT], has categorically held that if the accused is able to establish a probable defence which creates doubt about the existence of a legally enforceable debt or liability, the prosecution can fail. To raise probable defence, accused can rely on the materials submitted by the complainant. Needless to say, if the accused/drawer of the cheque in question neither raises a probable defence nor is able to contest existence of a legally enforceable debt or liability, statutory presumption under Section 139 of the Negotiable Instruments Act, regarding commission of the offence comes into play.

The Court held that, once issuance of the cheque and signature thereon stood established, the statutory presumption in favour of the holder that the cheque was issued towards discharge of a lawful liability stood attracted. That presumption, though rebuttable, could be displaced either from the complainant's own material or by defence evidence. In the present case, the accused led no evidence to probabilise his defence, while the complainant proved the cheque, its dishonour for insufficiency of funds, service of legal notice and the statement of account. The accused had also admitted the loan transaction and default in instalments. In these circumstances, the Court found that the defence had not created any doubt regarding the existence of a legally enforceable debt or liability. [Paras 6, 7, 8, 12]

The finding of guilt under Section 138 of the Negotiable Instruments Act was affirmed.

Security cheque - Cheque issued towards repayment of loan liability - HELD THAT: - I is well settled that dishonour of cheque issued as “security” can also attract offence under Section 138 of the Negotiable Instruments Act.

The expression “security cheque” is not a statutorily defined expression in the Negotiable Instruments Act, rather same is to be inferred from the pleadings as well as evidence, if any, led on record with regard to issuance of security cheque. The Negotiable Instruments Act does not per se carve out an exception in respect of a “security cheque” to say that a complaint in respect of such a cheque would not be maintainable as there is a debt existing in respect whereof the cheque in question is issued, same would attract provision of Section 138 of the Act in case of its dishonour.

Since the accused had defaulted in repayment of the loan and failed to substantiate any arrangement negating liability on the date of presentation, the defence that the cheque was only a security was held to be of no avail. [Paras 10, 11, 12]

The defence based on the cheque being a security cheque was rejected.

Scope of criminal revision - Concurrent findings of fact - HELD THAT: - This Court has a very limited jurisdiction under Section 397 of the Cr.P.C, to re-appreciate the evidence, especially, in view of the concurrent findings of fact and law recorded by the courts below.

In Krishnan and another Versus Krishnaveni [1997 (1) TMI 529 - SUPREME COURT]; has held that in case Court notices that there is a failure of justice or misuse of judicial mechanism or procedure, sentence or order is not correct, it is salutary duty of the High Court to prevent the abuse of the process or miscarriage of justice or to correct irregularities/ incorrectness committed by inferior criminal court in its judicial process or illegality of sentence or order, but learned counsel representing the accused has failed to point out any material irregularity committed by the courts below while appreciating the evidence and as such, this Court sees no reason to interfere with the well reasoned judgments passed by the courts below.

The Court held that revisional jurisdiction is supervisory and not equivalent to appellate jurisdiction or a second appeal.

No valid reason to interfere with the well reasoned judgments recorded by the Courts below, which otherwise, appear to be based upon proper appreciation of evidence available on record and as such, same are upheld.

The revision petition was not entertained on merits against the concurrent findings.

Final Conclusion: The High Court dismissed the criminal revision and upheld the conviction and sentence under Section 138 of the Negotiable Instruments Act. It held that the statutory presumption remained unrebutted, the defence of security cheque was untenable in the facts, and no ground for revisional interference with the concurrent findings was made out.

Dishonour of Cheque - Presumption as to legally enforceable debt - security cheque issued in the course of a loan transaction- Revisional interference with concurrent findings - Statutory presumptions under Sections 118 and 139 - Preponderance of Probabilities

Presumption under Sections 118 and 139 - Probable defence to rebut cheque dishonour presumption - Security cheque maturing for presentation - HELD THAT: - It is well settled that dishonour of cheque issued as security can also attract offence under Section 138 of the Negotiable Instruments Act.

Needless to say, expression “Security cheque” is not a statutorily defined expression in the Negotiable Instruments Act, rather same is to be inferred from the pleadings as well as evidence, if any, led on record with regard to issuance of security cheque. The Negotiable Instruments Act does not per se carve out an exception in respect of a “security cheque” to say that a complaint in respect of such a cheque would not be maintainable as there is a debt existing in respect whereof the cheque in question is issued, same would attract provision of Section 138 of the Act in case of its dishonour.

The Hon’ble Apex Court in M/s Laxmi Dyechem [2012 (12) TMI 106 - SUPREME COURT], has categorically held that if the accused is able to establish a probable defence which creates doubt about the existence of a legally enforceable debt or liability, the prosecution can fail. To raise probable defence, accused can rely on the materials submitted by the complainant. Needless to say, if the accused/drawer of the cheque in question neither raises a probable defence nor able to contest existence of a legally enforceable debt or liability, statutory presumption under Section 139 of the Negotiable Instruments Act, regarding commission of the offence comes into play.

The Court held that the accused had admitted the loan transaction and liability, and had not disputed either the issuance of the cheque or his signatures on it. The material on record also showed that the amount realised on sale of the vehicle had been adjusted towards the loan account, thereby negativing the defence that the bank had already recovered the dues in a manner extinguishing liability. In these circumstances, the Courts below rightly invoked the statutory presumption in favour of the holder of the cheque. The plea that the cheque was blank or given as security was not probabilised by cogent evidence; and, in law, even a cheque issued as security, if issued in the course of a financial transaction and presented on default of repayment, attracts Section 138 on dishonour. Since no probable defence was established to create doubt about a legally enforceable debt, the presumption remained unrebutted. [Paras 11, 12, 13, 14, 15]

The finding of guilt under Section 138 was upheld.

Limited scope of criminal revision - Concurrent findings of fact - HELD THAT: - The Court reiterated that revisional jurisdiction is supervisory and cannot be equated with appellate power or used as a second appeal for re-appreciation of evidence. Interference is warranted only where glaring illegality, material irregularity, abuse of process, failure of justice, or miscarriage of justice is shown.

The Hon’ble Apex Court in Krishnan and another Versus Krishnaveni and another [1997 (1) TMI 529 - SUPREME COURT], has held that in case Court notices that there is a failure of justice or misuse of judicial mechanism or procedure, sentence or order is not correct, it is salutary duty of the High Court to prevent the abuse of the process or miscarriage of justice or to correct irregularities/ incorrectness committed by inferior criminal Court in its judicial process or illegality of sentence or order, but learned counsel representing the accused has failed to point out any material irregularity committed by the Courts below while appreciating the evidence and as such, this Court sees no reason to interfere with the well reasoned judgments passed by the Courts below.

As the accused failed to point out any such defect in the appreciation of evidence by the Courts below, and the judgments were found to be well reasoned and based on proper appreciation of the record, no revisional interference was justified. [Paras 16, 17, 18]

The revision petition was dismissed and the concurrent conviction and sentence were maintained.

Final Conclusion: The High Court declined to interfere in revision and upheld the concurrent conviction and sentence under Section 138 of the Negotiable Instruments Act. It held that the statutory presumption as to liability stood unrebutted, the plea of security cheque did not defeat the prosecution, and no perversity or miscarriage of justice was shown to justify revisional interference.

Commencement of insurance coverage -Assumption of risk on receipt of premium - Motor insurance liability despite later policy commencement date - Adverse inference for non-examination of material witness - Liability of the insurer to satisfy the award when the premium was received before the accident but the policy period shown in the document commenced after the accident - HELD THAT: - The Court found that, although the policy document showed coverage from 21/04/2015 and the accident occurred on 19/04/2015, the material on record, particularly Ex.D/2, reflected payment of premium through the stated fund transfer on 16/04/2015. The insurer failed to examine the agent through whom the transaction was stated to have been effected and who was the best witness to support its case that the premium was actually paid later or that the earlier transfer represented only an advance deposit. On that failure, adverse inference was drawn against the insurer. Applying Section 64-VB(2) of the Insurance Act, 1938, the Court held that once the premium had been received, the insurer could not avoid liability merely because the policy document mentioned a later commencement date. The decisions cited by the insurer were held distinguishable on facts since, in those cases, the date of receipt of premium was not in dispute. [Paras 7, 8, 9, 11, 14]

The insurer was held liable to satisfy the award, as receipt of premium on 16/04/2015 attracted assumption of risk notwithstanding the later effective date mentioned in the policy.

Final Conclusion: The Court upheld the award against the insurer and dismissed the appeal. It held that, on the evidence, the premium had been received before the accident and, therefore, the insurer could not avoid liability by relying on a later commencement date shown in the policy.

Territorial reach of writ jurisdiction under Article 226(2) - Binding effect of High Court directions across State boundaries - Cause of Action -Ministerial duty of Sub-Registrar to implement judicial directions - Mandamus for enforcement of binding judicial orders - insolvency proceedings before the High Court of Bombay and the subsequent alienation of secured assets in Bengaluru form part of the same cause of action - HELD THAT: - The registering authorities under the Registration Act, 1908 are statutory functionaries. They are bound to act in accordance with law and are equally bound to give effect to binding judicial pronouncements. Once the High Court of Bombay has issued a categorical direction to the Sub-Registrars concerned, it is not open for the respondents to sit in judgment over the correctness of the said order or to ignore the same.

The obligation of the Sub-Registrar in such circumstances is not discretionary but mandatory. The duty cast upon them is ministerial in nature to give effect to the judicial directive and reflect the legal status of the transactions in the registration records.

The Court held that Article 226(2) expands writ jurisdiction on the basis of cause of action and is intended to ensure that judicial remedies are not defeated by territorial limitations. Once a High Court validly assumes jurisdiction and passes operative directions, the efficacy of such directions is not confined to the territorial limits of that Court where the subject matter and its consequences extend beyond one State. The insolvency proceedings before the High Court of Bombay and the subsequent alienation of the secured assets in Bengaluru formed part of the same chain of cause of action; hence the Bombay High Court was competent to issue consequential directions concerning those properties. The respondent Sub-Registrars, being statutory authorities performing a largely ministerial function in maintaining registration records, had no discretion to ignore, review or sit in appeal over those directions. Their failure to act despite communication of the order and a subsequent representation amounted to non-compliance with a binding judicial order, warranting correction through mandamus. [Paras 17, 18, 19, 20, 21]

The writ petition was allowed and mandamus was issued directing the respondents and jurisdictional Sub-Registrars to give effect to the Bombay High Court's directions, record appropriate entries declaring the concerned sale deeds and agreements null and void, consider the petitioner's representation within the stipulated period, and pay costs.

Final Conclusion: The Court held that the Bombay High Court's directions, having been validly issued in proceedings forming part of the same cause of action, were binding on the registering authorities in Karnataka. Their failure to act was held impermissible, and a writ of mandamus was issued for immediate implementation with consequential costs.