TaxTMI Updates e-Newsletter
Jul 08,2026

Statutory appellate remedy - Liberty to file appeal with delay condonation - statutory pre-deposit - rectification of error - Challenge to the order-in-original imposing tax, interest and penalty was left to be pursued before the appellate authority after the discrepancy in the summary order stood rectified during the writ proceedings. - HELD THAT: - The Court noted that the original grievance regarding discrepancy between the order-in-original and the summary in Form GST DRC-07 had already been rectified during pendency of the writ petition. Since the order-in-original contained findings on tax, interest and penalty, including rejection of the petitioner's plea against invocation of Section 74, the proper course was to permit the petitioner to avail the statutory appellate remedy. The Court therefore did not examine the merits and left all grounds of fact and law open to be urged before the appellate authority, subject to filing the appeal with the statutory pre-deposit and an application for condonation of delay. [Paras 6, 7]

The petitioner was granted liberty to file an appeal within the time allowed by the Court, along with delay condonation application and statutory pre-deposit, and the appellate authority was left free to consider delay and decide the appeal on merits in accordance with law.

Final Conclusion: The writ petition was disposed of after noting that the discrepancy in Form GST DRC-07 had been rectified, and the petitioner was relegated to the statutory appellate remedy against the order-in-original. No opinion was expressed on the merits.

Opportunity of personal hearing - Violation of statutory adjudicatory procedure - Absence of a specified date for personal hearing in the show-cause notice and the consequent non-grant of hearing required by section 75(4) - Audi alteram partem - Principles of natural justice - HELD THAT: - The Court found from the show cause notice that no date had been indicated for affording the petitioner an opportunity of hearing. Since the notice itself contemplated an adverse decision and the subsequent order was also adverse, Section 75(4) of the Act required that an opportunity of hearing be given. In view of the specific statutory requirement and its breach, the adjudication order was held to be unsustainable. The matter was therefore remanded to the proper officer for re-adjudication on merits after issuing a fresh notice on the common portal intimating the date of personal hearing and completing the proceedings within the time fixed by the Court. [Paras 4, 5, 6]

The impugned order was set aside for breach of the statutory requirement of hearing, and the matter was remanded for fresh adjudication after granting personal hearing.

Final Conclusion: The writ petition was disposed of by setting aside the adjudication order on the ground that no opportunity of personal hearing had been afforded though an adverse decision was contemplated. Fresh adjudication was directed within the time stipulated by the Court, with exclusion of the period during which the writ petition remained pending.

Garnishee recovery for partnership tax dues - Personal liability of partners for dues of partnership firm - Bank account of partner for firm dues - Misconceived reliance on provisional attachment - HELD THAT: - The Court held that the challenge proceeded on a misconception that the impugned communication was a provisional attachment under Section 83. On the face of the communication, it had been issued under Section 79(1)(c)(i) after the tax liability of the partnership firm had crystallised, and that provision authorises action against a garnishee. The writ petition had been filed by the firm, not by the partner, and the recovery related to the period during which the concerned person was admittedly a partner. Since the demand against the firm had not been challenged and partners are personally liable for the dues of the firm, no infirmity was found in issuing the notice in relation to the partner's bank account. [Paras 4]

The notice to the bank was upheld, and no interference was warranted in writ jurisdiction.

Final Conclusion: The writ petition was dismissed. The Court upheld the impugned communication as a recovery notice under Section 79(1)(c)(i) for crystallised dues of the partnership firm and rejected the contention that it was an invalid provisional attachment.

Provisional attachment under GST - Lapse of provisional attachment after one year - Statutory expiry of attachment - HELD THAT: - The Court held that, in view of the Supreme Court decision in Kesari Nandan Mobile [2025 (8) TMI 992 - SUPREME COURT], two propositions stood concluded: a provisional attachment under Section 83 lapses on expiry of one year by operation of law, and the affected person ought not to be compelled to approach the High Court merely for lifting an attachment that has already lapsed. The Court further accepted that, once the statutory period is over, another attachment order cannot be issued so as to defeat the protection contained in the provision. On that basis, the impugned provisional attachment order was liable to be interfered with.

The challenge to the provisional attachment order succeeded, and the petitioner was held entitled to operate the bank account unless restrained under any other proceedings.

Final Conclusion: The petition was allowed. The Court held that the impugned provisional attachment could not subsist beyond one year and that, after such statutory lapse, the petitioner was entitled to operate the bank account unless any other independent proceedings existed.

Alternative statutory remedy against confiscation order - Jurisdictional objections before appellate authority -HELD THAT: - The Court held that since an appeal lies against an order passed under Section 130 of the CGST Act, the learned Single Judge was justified in relegating the petitioner to the statutory appellate remedy. Taking note that specific jurisdictional objections had been raised in the writ proceedings, the Court clarified that all such contentions, including jurisdiction, could be urged before the appellate authority. In the peculiar facts that the matter had remained under consideration before the Court, it was further observed that an appeal filed within the time granted should be entertained without objection as to delay, and any request for interim release of goods, if made, should be considered by the appellate authority. [Paras 5, 6, 7]

The order relegating the petitioner to the statutory appeal was not interfered with; the petitioner was permitted to raise all grounds before the appellate authority, which was directed to entertain the appeal if filed within the time granted and to consider any interim request for release of goods.

Final Conclusion: The writ appeal was disposed of without interfering with the order declining writ relief on the ground of availability of an appellate remedy. The petitioner was left to pursue the statutory appeal, with liberty to raise all contentions including jurisdiction and to seek interim relief before the appellate authority.

Input tax credit set-off under wrong tax head - Utilisation of IGST credit against CGST and SGST liability - Binding precedent of Division Bench - challenged to the assessment order arising from set-off of eligible input tax credit under the IGST head and its claim under the CGST and SGST heads for discharge of output tax liability - HELD THAT: - The Court recorded that the controversy raised in the writ petition stood covered in favour of the petitioner by the earlier Division Bench judgment in Rejimon Padikapparambil Alex [2024 (12) TMI 399 - KERALA HIGH COURT]. On that basis, without undertaking any separate merits determination, the Court accepted the petitioner's challenge and observed that any inter-departmental settlement issue could be taken up by the State before the GST Council in the light of the principles laid down in that decision. [Paras 2, 3]

The assessment order was quashed, leaving it open to the State to seek resolution of the settlement issue before the GST Council.

Final Conclusion: The writ petition was allowed on the ground that the issue was already concluded in favour of the petitioner by the binding Division Bench decision. The impugned assessment order was quashed, with liberty to the State to place the inter-departmental settlement issue before the GST Council.

Taxability of Consideration for statutory permission - Supply of service by Government - Government service in diversion of forest land - Exemption for such deposits​​​​​​​ under Notification No. 12/2017-Central Tax (Rate) - functions entrusted to municipalities and panchayats - GST payable under forward charge or reverse charge - Nexus between payment and supply - Whether the compulsory payment of Net Present Value (NPV), Compensatory Afforestation charges, and other associated environmental levies into the State Compensatory Afforestation Fund Management and Planning Authority (“CAMPA Fund”) acts as a “consideration” for a “supply of service” rendered by the Government, thereby attracting liability to pay GST under forward charge or under the Reverse Charge Mechanism (RCM)

Statutory deposits - ​​​​​​​Grant of permission to divert forest land for non-forest use - ​​​​​​​HELD THAT: - Granting clearance or permission to use forest land is an activity performed in the furtherance of business. As such, the grant of permission is not a passive sovereign act but a specific activity undertaken in favour of an identified applicant. Moreover, the taxability of the transaction is required to be examined on the touchstone of Section 7(1) read with the definition of “consideration” under Section 2(31) and “service” under Section 2(102) of the CGST/OGST Act, 2017.

The Authority held that diversion of forest land for non-forest purposes is prohibited unless prior approval is granted under the statutory framework, and the applicant cannot execute its transmission project without such approval. The Government examines the proposal, evaluates the environmental impact, imposes conditions and grants a legally enforceable permission to use forest land for non-forest purposes, thereby conferring a specific benefit on an identified business entity. Since the CAMPA deposits are mandatory pre-conditions for obtaining that permission and approval would not be granted without such payment, the nexus between the payment and the permission is direct. On that reasoning, the deposits answer the definition of consideration and the grant of permission answers the definition of service under the CGST/OGST Acts. [Paras 5, 6]

The CAMPA-related statutory deposits were held to be consideration for a taxable supply of service by Government.

Exemption for municipal and panchayat functions - Strict construction of exemption notification - service of granting permission for diversion of forest land for a commercial transmission project - HELD THAT: - The Authority held that exemption entries must be construed strictly and the burden lies on the claimant to show that the transaction squarely falls within the notification. Entry Nos. 4 and 5 apply to specified services by governmental authorities in relation to functions entrusted to Municipalities under Article 243W and Panchayats under Article 243G. The impugned service was found to be a statutory regulatory function exercised under the Forest (Conservation) Act and the Compensatory Afforestation Fund Act in connection with diversion of forest land for a commercial project, and not an activity relatable to municipal or panchayat functions. The claimed exemption was therefore unavailable. [Paras 5, 6]

Exemption under Entry Nos. 4 and 5 of Notification No. 12/2017-Central Tax (Rate) was denied.

Reverse charge on Government services - Business entity as recipient - HELD THAT: - Having held that the grant of forest diversion approval is a taxable supply of service by Government for consideration, the Authority applied Entry No. 5 of Notification No. 13/2017-Central Tax (Rate). It found that the supplier is the Government, the recipient is a business entity located in the taxable territory, and the service does not fall within any excluded category specified in the notification. The Authority further held that deposit of the amounts into the CAMPA Fund, instead of direct retention by a department, does not alter the character of the transaction, since taxability depends on the existence of a supply and the consideration paid in relation to it. GST was therefore held payable under reverse charge on the amount of NPV and other CAMPA-related charges deposited for obtaining the permission. [Paras 5, 6]

The applicant was held liable to discharge GST under the Reverse Charge Mechanism on the CAMPA-related deposits.

Final Conclusion: The Authority ruled that mandatory CAMPA deposits made for obtaining forest clearance are consideration for a supply of service by Government, are not covered by the claimed exemption, and attract GST in the hands of the applicant under the Reverse Charge Mechanism.

Cash deposit addition under wrong charging provision - Change from unexplained money to unexplained cash credit in appeal - Non-application of mind in first appellate order - Violation of natural justice in changing statutory basis of addition - HELD THAT: - The Tribunal held that the assessment order proceeded on addition for unexplained money, whereas the CIT(A) altered the statutory basis to unexplained cash credit without showing how that provision applied to the facts. The appellate authority changed the charging section without issuing notice or affording opportunity of hearing, and the enquiry trail on record was only with respect to the source and nature of cash deposits, not any unexplained cash credit. The Tribunal, following its earlier decision in the case of Suman Poptani [2026 (5) TMI 1830 - ITAT RAIPUR] on the same reasoning, held that the change of provision and sustenance of the addition disclosed complete non-application of mind and rendered the impugned order arbitrary and bad in law, without requiring examination of the merits of the addition itself. [Paras 2, 3]

The impugned appellate order was held vitiated for invocation of a wrong provision and lack of application of mind, and the addition could not be sustained.

Final Conclusion: The Tribunal allowed the appeal and quashed the impugned order. It held that the addition relating to cash deposits could not be sustained when the appellate authority changed the charging provision without notice and the record disclosed complete non-application of mind.

Reassessment on unexplained investment in immovable property - Disclosure in wealth-tax return vis-a-vis disclosure in return of income - Sanction for reopening after four years - Reason to believe under Section 147

Validity of Reopening of assessment for undisclosed investment in purchase of land and unexplained cash source notwithstanding disclosure of the property transaction in the wealth-tax return - HELD THAT: - The Court held that the return for the relevant year had only been processed under Section 143(1) and no scrutiny assessment had been made. On examination of the return vis-a-vis the value of the immovable property purchased, the Assessing Officer found a substantial mismatch between the disclosed income and the investment, including a large cash component, and therefore had material to form a belief that income chargeable to tax had escaped assessment.

The Court applied Explanation 2(b) to Section 147 and held that, at this stage, reassessment could not be defeated on the plea that the transaction had been shown in the wealth-tax return, since disclosure in the wealth-tax proceedings did not dispense with the assessee's obligation to disclose material facts, including the source of funds and the true nature of the transaction, in the return of income. [Paras 12, 14]

The notice under Section 148 was sustained and the challenge to reopening on the merits of disclosure was rejected.

Sanction for reopening after four years - Satisfaction under Section 151 - prior approval under Section 151 obtained or not? - HELD THAT: - The Court examined the form recording reasons and the approval placed on record and found that the Principal CIT had recorded satisfaction on the reasons stated by the Assessing Officer and had opined that the case was fit for issue of notice under Section 148. On that basis, the Court held that the statutory requirement of sanction had been complied with and the reopening could not be invalidated for want of proper approval. [Paras 14]

The objection to the reopening on the ground of absence of valid sanction under Section 151 was rejected.

Final Conclusion: The High Court upheld the notice issued under Section 148 and the rejection of objections, holding that the material regarding the immovable property investment and cash payment furnished a valid basis for reopening under Section 147 and that disclosure in the wealth-tax return was not sufficient disclosure for income-tax purposes. The Court also held that the approval recorded by the Principal Commissioner constituted sufficient compliance with Section 151, and the writ petition was rejected.

Reassessment proceedings initiated u/s 148 based on cessation of liability after sale of the company as a going concern in liquidation - Clean slate principle in insolvency sale - Reassessment based on surmises and conjectures - Extinguishment of past liabilities in liquidation sale -

Clean slate acquisition as going concern - Extinguishment of past liabilities in liquidation sale - HELD THAT: - The Court treated as undisputed that the petitioner had undergone CIRP, was ordered into liquidation, and was thereafter sold as a going concern under the liquidation process. Reading the sale agreement with the insolvency framework, the Court held that the acquisition was on a clean slate basis, with past liabilities and investigations standing extinguished.

Relying on KRBL Limited vs. State of Gujarat [2023 (9) TMI 1293 - GUJARAT HIGH COURT] which had applied the principle stated in Ghanshyam Mishra & Sons (Private) Limited vs. Edelweiss Asset Reconstruction Company Limited [2021 (4) TMI 613 - SUPREME COURT] the Court held that the same settled legal position governed the case. [Paras 11, 12]

The reopening could not be sustained in the face of the clean slate consequence of the liquidation sale.

Reopening on unverified assumption of interest deduction - Failure to examine available accounts before reassessment - reassessment notice founded on the assumption that the petitioner might have claimed deduction of unpaid interest was held to be invalid - HELD THAT: - The Court found that the very basis of reopening was a presumption that the petitioner might have claimed deduction of interest on loans that were never paid and whose liability had ceased. It noted that the petitioner had specifically explained that such interest had never been claimed in the profit and loss account since the loan had become NPA, and that this was a matter open to verification from the accounts. AO nevertheless ignored that explanation and proceeded on surmises and conjectures. Since the reopening was not founded on a properly examined factual basis, the action called for interference. [Paras 13, 14]

The notice under Section 148 and the order under Section 148A(d) were quashed as the reopening was premised on conjectural assumption rather than verified material.

Final Conclusion: The High Court allowed the writ petitions and quashed the reassessment notice and the order passed under Section 148A(d) for A.Y. 2019-20. It held that the petitioner, having been sold as a going concern on a clean slate basis in liquidation, could not be reopened on the basis of a mere unverified assumption that interest deduction might have been claimed.

Liberty to challenge Section 147A - Fresh consideration of reassessment notices after retrospective clarification of Assessing Officer - Single Judge's order quashing the reassessment notices on the ground earlier accepted could not be sustained in view of the subsequent orders of the Supreme Court taking note of the retrospective insertion of Section 147A - HELD THAT: - The Court recorded that the Supreme Court, in an identical factual situation in Tej Partap Singh [2026 (5) TMI 54 - SC ORDER (LB)] had set aside judgments quashing reassessment notices because the legislative insertion of Section 147A had altered the foundation on which such orders were made. Since the Supreme Court had expressly left open all questions touching the validity, scope, effect, retrospectivity and applicability of the amended provision, the High Court declined to examine the merits and considered it appropriate to set aside the impugned order and remit the matter for fresh consideration, while preserving all contentions of both sides. [Paras 5]

The order of the learned Single Judge was set aside and the matter was remitted for fresh consideration with all contentions kept open.

Challenge to Section 147A - Liberty to amend challenge - HELD THAT: - Following the course indicated by the Supreme Court in Sri Sai Kumar Mateti [2026 (5) TMI 855 - SC ORDER], the Court granted liberty to the assessee to lay a challenge to Section 147A as introduced by the amending Act, as well as to connected or consequential provisions. The grant of such liberty was part of the remand arrangement because the merits of the controversy were not being adjudicated in the appeal. [Paras 5, 6]

Liberty was granted to the assessee to challenge Section 147A and connected or consequential provisions within the time permitted.

Final Conclusion: The writ appeal was allowed, the order of the learned Single Judge quashing the reassessment notices was set aside, and the matter was remitted for fresh consideration in the light of the subsequent Supreme Court orders and the retrospective insertion of Section 147A. The assessee was granted liberty to challenge the amended provision, with all contentions left open.

Reassessment on recorded reasons - Escapement of income - Impermissible substitution of reasons - Validity of reopening for alleged inflation of closing work in progress, where the recorded reasons treated the reduction in closing work in progress as escapement of income and the objection disposal order introduced suppression of sales or other income as a new basis - HELD THAT: - The Court held that, on the reasons recorded, the alleged excess valuation of closing work in progress could not lead to escapement of income, because reduction in closing work in progress would reduce the profit and not increase taxable income. As further held that, after the assessee pointed out this defect, the AO could not sustain the reopening by shifting to a new case of suppression of sales or other income, since reassessment must stand or fall on the recorded reasons and such reasons cannot be substituted at the stage of disposing of objections.

The Court also noted that the method of valuing closing work in progress had been consistently followed and had not been disturbed earlier, and the later challenge to that method had already been found unsustainable. [Paras 8, 10, 11]

The notice under Section 148 and the order rejecting objections were quashed as the recorded reasons did not disclose escapement of income and the Assessing Officer could not support reopening on a new ground outside those reasons.

Final Conclusion: The High Court held that the reassessment notice was without lawful foundation, since the recorded reasons themselves did not indicate escapement of income and the Assessing Officer later sought to justify reopening on a fresh ground. The notice under Section 148 and the order disposing of objections were accordingly quashed.

Criminal prosecution during pendency of substantive tax proceedings - Exercise of liberty reserved by earlier writ order - petitioner's applications before the Magistrate seeking consideration of the effect of pending substantive tax proceedings on the criminal complaints

HELD THAT: - The Court proceeded on the basis of the earlier Division Bench order in the petitioner's own case, which had recorded that, if criminal prosecution was initiated, all defences would remain open before the competent criminal court, including a request that the court await the outcome of the substantive proceedings, and that reliance on Bhupen Champak Lal Dalal and Another [2001 (2) TMI 12 - SUPREME COURT] could be placed at that stage. Since the appeal against the assessment order, whose early disposal had been recorded in the earlier order, had thereafter been disposed of, the Court held that, in the facts and circumstances, the impugned order rejecting the petitioner's applications could not stand and the applications were required to be considered afresh in accordance with law. The Court expressly kept all contentions of both sides open and did not adjudicate upon the merits of the rival submissions on Section 223 of the Bharatiya Nagarik Suraksha Sanhita, 2023 or the underlying criminal complaints. [Paras 5, 6, 7]

The impugned order was quashed, the petitioner's applications were restored to the Magistrate's file for expeditious decision in accordance with law, and all contentions were left open.

Final Conclusion: The High Court quashed the Magistrate's order and restored the petitioner's applications for fresh consideration, holding that the earlier writ order had reserved liberty to raise all defences before the criminal court after initiation of prosecution and that, in the changed factual position following disposal of the substantive appeal, the applications required reconsideration. All rival contentions were kept open.

Reassessment without participation of assessee - Opportunity to respond to reassessment notice - Deduction under Section 80P for primary agricultural co-operative society - validity of the reassessment order and consequential recovery measures against a primary agricultural co-operative society, where the assessee sought an opportunity to place material showing that it functioned only as an intermediary institution extending credit to its members and could claim deduction u/s 80P

HELD THAT: - The Court found that it was not disputed that, if the petitioner could establish the essential circumstances that it functioned only as an intermediary institution lending credit facilities to its members, it would be open to it to claim deduction u/s 80P. The Court further noted that the order u/s 148A(d) and the assessment order had been made without the petitioner's participation, and the petitioner had pleaded bona fides for such non-participation.

In these circumstances, the Court considered interference justified and restored the matter to the stage of notice u/s 148A(b) so that the petitioner could file its response and appear before the authority. [Paras 5]

The assessment order, demand notice and bank attachment were quashed, and the proceedings were restored to the stage of notice under Section 148A(b) with liberty to the petitioner to submit its response and participate in the reassessment proceedings.

Final Conclusion: The writ petition was allowed in part. The reassessment order and consequential demand and attachment were set aside, and the matter was remitted to the stage of notice under Section 148A(b) to enable the petitioner to place its case and seek the claimed deduction in accordance with law.

Reassessment notice limitation - Assessment Year 2015-16 - Time-barred notice under Section 148 - validity of notice issued under Section 148 for Assessment Year 2015-16 on or after 1st April 2021 - HELD THAT: - We note that in the aforesaid batch of Appeals disposed of by the Supreme Court [2026 (5) TMI 855 - SC ORDER], the Supreme Court, inter alia recorded a concession on the part of the learned Additional Solicitor General that in Assessment cases pertaining to A.Y.2015-16, the Notice issued, proposed to be issued, for re-assessment would stand barred by time in light of the view taken by the Supreme Court in Union of India and Ors. v. Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)]

In the facts of the present case, it is an admitted fact that the impugned Notice under Section 148 is issued on or after 1st April 2021 and pertains to A.Y.2015-16. In these circumstances, the impugned Notice issued under Section 148 is clearly time barred [Paras 4 and 5]

The impugned notice under Section 148, and all action taken pursuant to it, were quashed as time-barred.

Final Conclusion: Since the case admittedly related to Assessment Year 2015-16 and the impugned reassessment notice had been issued on or after 1st April 2021, the Court held the notice to be time-barred and set it aside along with all consequential action.

Exemption of educational institution substantially financed by Government - Character of interest accrued on unspent grant funds - Consequential penalty u/s 270A on deleted quantum addition

Exemption of educational institution substantially financed by Government - Character of interest accrued on unspent grant funds - Deduction u/s 10(23C)(iiiab) for the assessee-society running an engineering college denied by treating interest earned on unspent grants kept in FDRs as an independent source of income for applying Rule 2BBB - HELD THAT: - The Tribunal found that the assessee-society was set up solely to run an engineering college, that the land was allotted by the State Government, and that its funding came only from Government grants and contributions from NTPC and NHPC for setting up the college. During the year the college was still under construction and no operational income had arisen.

The only receipts apart from the grant were interest earned on unspent grant amounts temporarily parked in bank accounts and FDRs. On these facts, the Tribunal held that such interest was merely incidental to the grants and bore the same colour and character as the source grants, and therefore did not constitute an independent source of income. The legal principle applied was that where the institution has no independent income and the interest arises only from temporary parking of grant funds meant for the educational project, that interest cannot be separated from the grant for determining whether the institution is wholly or substantially financed by Government. The assessee was therefore held to be fully financed by Government and entitled to exemption. [Paras 5]

The assessee was held entitled to exemption under section 10(23C)(iiiab), and the Assessing Officer was directed to accept the returned income.

Consequential penalty on deleted quantum addition - Validity of Penalty u/s 270A - HELD THAT: - The Tribunal treated the penalty as purely consequential. Since the quantum appeal was allowed in full and the underlying addition was set aside, the very basis for levy of penalty ceased to exist. [Paras 6]

The penalty was held unsustainable and stood deleted.

Final Conclusion: The Tribunal allowed both appeals. It held that the assessee, being an educational institution funded through Government grants and allied contributions for establishment of the college, could not be denied exemption merely because interest accrued on temporarily parked unspent grants, and the consequential penalty therefore also failed.

Extent of denial of exemption on violation of section 13 - Specified concern under section 13(3)(e) - Application of income on accrual basis prior to Explanation 7 to section 11

Partial denial of exemption - Benefit to specified persons - Deemed application under section 11 - Denial of exemption under sections 11 and 12, where section 13 is invoked - HELD THAT: - The Tribunal held that the settled position is that a violation consisting of benefit extended to persons referred to in section 13(3) does not result in forfeiture of the whole exemption under sections 11 and 12. The denial operates only to the extent of the income so diverted or applied in violation. Relying on CIT vs. IILM Foundation [2025 (4) TMI 1272 - DELHI HIGH COURT], and noticing that DIT v. Bharat Diamond Bourse [2002 (12) TMI 8 - SUPREME COURT] had been distinguished in later decisions, the Tribunal held that the disallowance of the 15 per cent amount treated as deemed application under section 11 was unsustainable. [Paras 11, 12]

The disallowance of the 15 per cent amount under section 11 was directed to be deleted.

Specified concern threshold - Revenue expenditure to related concern - Procedural defect in Form 10B - Revenue expenditure paid to M/s Educomp Infrastructure and School Management Ltd. disallowed under section 13(3)(e) when the trustee's voting power in that concern was below the statutory threshold and the adverse Form 10B disclosure was only procedural - HELD THAT: - The Tribunal found that the concern to which payment was made was not a specified concern within the meaning of section 13(3)(e), since the trustee held only 11.71 per cent voting power, which was below the 20 per cent threshold prescribed in Explanation 3 to section 13. It also noted that other payments to the same concern had already been accepted by the authorities. The Tribunal further held that an error in Form 10B could not by itself defeat the exemption claim where the return position was otherwise contrary to such reporting and the form was procedural in nature. [Paras 13]

The Assessing Officer was directed to allow the revenue expenditure claim.

Capital expenditure as application of income - Accrual basis application - Substantiation of charitable expenditure - whether the disallowance of capital expenditure was justified on the grounds of specified concern status, lack of substantiation, non-reporting in Form 10B, absence of open tender, and alleged non-compliance with notice under section 133(6)? - HELD THAT: - The Tribunal held that the disallowance was not justified because the assessee had produced supporting documents including invoices and related records in support of the expenditure. It accepted the assessee's contention that, prior to insertion of Explanation 7 to section 11 with effect from 01.04.2022, actual payment was not necessary and accrual of expenditure was sufficient for treating it as application of income. The Tribunal also held that non-reporting in Form 10B was not fatal where the purchase stood disclosed in the balance sheet, that absence of an open tender was not by itself decisive, that replies to notices under section 133(6) had been furnished, and that no depreciation had been claimed on the same asset. [Paras 14]

The capital expenditure disallowance was deleted and the corresponding ground was allowed.

Final Conclusion: The Tribunal allowed the appeal in full. It held that any denial of exemption on account of section 13 could extend only to the amount of the alleged violation, and on the facts both the revenue and capital expenditure disallowances were also unsustainable.

Deposits reflected in the bank accounts of the two foreign companies - unexplained money belonging to the assessee on basis of his earlier shareholding, directorship, and authority to operate the bank accounts -Separate corporate personality - Section 69A beneficial ownership - Lifting of corporate veil -Penalty consequential to quantum deletion

HELD THAT: - The Tribunal held that the two foreign companies were separate legal entities and their corporate personality could not be disregarded unless the Revenue established by cogent evidence that they were a mere fac ade or that the funds actually belonged to the assessee. Mere shareholding, directorship, or authority to operate the bank accounts was insufficient to attribute the companies' assets or income to him. The Assessing Officer had not brought any material to show flow of funds from the assessee in India to the foreign companies or any receipt by the assessee in India from those accounts. The assessee's explanation that the transactions pertained to dealings of his non-resident son and son-in-law stood supported by confirmations, and it was also noted that before the relevant period he had resigned from directorship and transferred his shareholding. In the absence of proof of beneficial ownership or of the companies being vehicles for parking the assessee's undisclosed income, section 69A was held inapplicable. [Paras 6]

The deletion of the additions made under section 69A for the years under consideration was upheld and the Revenue's quantum appeals were dismissed.

Penalty under section 271(1)(c) could not survive once the underlying quantum additions were deleted. [Paras 7]

Final Conclusion: The Tribunal upheld the orders deleting the additions made under section 69A in respect of the foreign companies' bank accounts, holding that the Revenue had failed to prove that the funds belonged to the assessee. The consequential deletion of penalty under section 271(1)(c) was also sustained, and the assessee's cross-objections were dismissed as infructuous.

Unexplained money u/s 69A - Cash deposits explained by prior bank withdrawals - Nexus between cash withdrawal and subsequent redeposit - Time gap between withdrawal and redeposit

HELD THAT: - The Tribunal held that the addition had been made only on the basis of the time gap between withdrawal and redeposit and on disbelief of the assessee's explanation regarding the purpose of withdrawal. It found that the earlier withdrawals from the bank accounts were evidenced and were not disputed.

Once the source of the cash deposits was shown to be prior cash withdrawals from the same or other bank accounts, the addition u/s 69A could not be sustained merely because of the lapse of time, particularly when the AO had not established that the withdrawn cash had been spent for any other purpose or invested elsewhere. On that basis, the explanation of the assessee ought to have been accepted. [Paras 7]

The addition made under section 69A on account of cash deposits was deleted.

Final Conclusion: The Tribunal allowed the appeal and held that the cash deposits stood explained by prior bank withdrawals. The addition treated as unexplained money under section 69A was therefore directed to be deleted.

Unsecured loan u/s 68 - Additional evidence in appellate proceedings - Head of income for interest from money-lending - Set-off of brought forward business losses

Unsecured loan u/s 68 - Additional evidence in appellate proceedings - Identity genuineness and creditworthiness - addition made in respect of the unsecured loan received from a corporate lender notwithstanding the Revenue's objection that the appellate authority had admitted further material in violation of Rule 46A - HELD THAT: - The Tribunal found that the assessee had already disclosed before the Assessing Officer the name and address of the lender and the claim that the loan was received through banking channel. Before the appellate authority, the assessee furnished further material such as confirmation, return particulars and financial statements of the lender, and the appellate authority examined the matter under section 250(4). On those materials, the lender's identity, the genuineness of the transaction and the creditworthiness stood proved. The Tribunal held that this was not a case where relief had been granted solely on wholly new evidence produced for the first time in appeal, but a case where further evidence was furnished to strengthen an existing claim. The decision cited by the Revenue concerning entry-provider loans was held distinguishable on facts, since in the present case the transaction was supported by banking records and confirmation from the lender. [Paras 8]

The deletion of the addition under section 68 in respect of the unsecured loan was upheld and the Revenue's objection based on Rule 46A was rejected.

Head of income for interest from money-lending - Systematic money-lending activity - Set-off of brought forward business losses - Interest earned from advances made in the course of systematic money-lending activity connected with the assessee's film-related business assessable as business income or income from other sources - HELD THAT: - The Tribunal accepted that, although in earlier years the assessee had offered such interest under the head income from other sources, for the year under consideration she was engaged not only in finance activity but also in production of motion pictures, and both activities were inter-linked, inter-connected and under one management. On that factual basis, the money-lending activity was treated as a systematic business activity, and the interest derived therefrom was held to partake the character of business income. The absence of a regulatory licence for money-lending was held not to alter the factual position that the assessee was actually engaged in that activity. Since the receipts were assessable under the head profits and gains of business or profession, the consequential set-off of brought forward business losses was also held allowable. [Paras 9]

The direction to assess the interest under the head income from business and profession and to allow set-off of brought forward business losses was upheld.

Final Conclusion: The Tribunal dismissed the Revenue's appeal. It upheld the deletion of the section 68 addition on the unsecured loan and affirmed the treatment of the interest receipts as business income with consequential set-off of brought forward business losses.

Reassessment beyond four years - Failure to disclose fully and truly material facts - First proviso to section 147 - Change of opinion

HELD THAT: - Tribunal found that the notice u/s 148 had been issued after four years from the end of the relevant assessment year and that the original assessment had been completed u/s 143(3). As noted from the recorded reasons that the AO himself acknowledged that the information regarding alleged accommodation entries was available at the time of the original scrutiny assessment. In that situation, reopening could be sustained only if the recorded reasons disclosed, in terms of the first proviso to section 147, that income had escaped assessment by reason of the assessee's failure to disclose fully and truly all material facts necessary for assessment.

Since the reasons recorded contained no such allegation or satisfaction, the essential jurisdictional condition was absent. The reopening was therefore held invalid and unsustainable in law, and the notice u/s 148 together with the consequential reassessment order was quashed. [Paras 10, 11]

The reassessment was quashed for want of the jurisdictional requirement under the first proviso to section 147, and the merits were left unexamined.

Final Conclusion: The Tribunal held that the reopening, made after four years from the end of A.Y. 2012-13 despite an earlier assessment under section 143(3), was invalid because the recorded reasons did not disclose failure by the assessee to make a full and true disclosure of material facts. The notice under section 148 and the consequential reassessment order were quashed, and the merits of the additions were not examined.

Protective addition of cash deposits in joint bank account - Attribution of unexplained bank deposits to joint holder - Source of cash deposits from sale proceeds of agricultural land

Protective addition of cash deposits in the hands of the assessee as a joint holder of the bank account - HELD THAT:- The Tribunal found that the later material placed on record showed that the assessee's wife had disclosed her share in the sale consideration of the agricultural land, and in her appellate proceedings the explanation regarding the actual consideration, the receipt of cash on execution of the sale deed, and the immediate deposit of the cash by the assessee's father in the impugned bank account had been accepted. It was also noticed that in the case of another joint owner of the land, the returned income had been accepted. On the totality of these facts, the deposits were held not to pertain to the assessee merely because he was a joint holder of the bank account, but to have been sourced by his father out of sale proceeds of agricultural land owned by the female family members. [Paras 4]

The protective addition was deleted and the assessee's appeal was allowed.

Final Conclusion: The Tribunal held that the impugned cash deposits could not be protectively added in the hands of the assessee merely on account of his status as a joint bank account holder, since the record established that the deposits were made by his father out of explained sale proceeds belonging to other family members. The appeal was accordingly allowed.

Refund limitation - Scope of appellate order in refund proceedings - statutory requirement of unjust enrichment under Section 27 - Claim rejected solely based on time bar without getting into other aspects of the claim.

Whether the refund application was filed on 02.06.2011 or on 25.05.2012 ? - HELD THAT: - In this case the RSA has not commented anything about the refund application dated 02.06.2011, which is clearly within the time limit. Ld. Advocate submitted that on the strength of the same application, they were already granted refund of SAD which would support the view that application was received by the Department.

This aspect of date of first application is crucial because there is no evidence on record as to whether the said application was received in the department or by RSA or otherwise. Moreover, the appellant has also not produced any evidence in support of it’s being received by Department. So if the said application has been received in the department, but it was either not acknowledged or not processed by the department, in that event the date of said application has to reckoned as the relevant date for the purpose of limitation and in that event, the refund will be within the time limit and not hit by time bar. [Paras 6]

The question of limitation was remanded to the refund sanctioning authority for verification of the earlier application and its receipt by the Department.

Scope of appellate order in refund proceedings - Refund rejection on new ground - Unjust enrichment in customs refund -HELD THAT: - The Tribunal held that the appellate authority had gone beyond the scope of the original order by introducing a new ground that proof of payment had not been established or verified. That issue had not been specifically discussed or disputed by the refund sanctioning authority while rejecting the claim on limitation. The appellate order was therefore unsustainable on that reasoning. The Tribunal also clarified that, upon remand, the refund sanctioning authority would be entitled to examine whether the appellant had in fact paid the amount twice and whether the statutory bar of unjust enrichment under Section 27 of the Customs Act was satisfied. [Paras 7, 8]

The appellate order was set aside, and the matter was remanded for fresh decision on proof of double payment and the statutory requirement of unjust enrichment.

Final Conclusion: The Tribunal set aside the appellate order and remanded the refund claim to the original refund sanctioning authority. Fresh consideration was directed on the question of receipt of the earlier refund application, proof of double payment, and compliance with the statutory bar of unjust enrichment.

Misdeclaration - Wrongly claiming exemption from payment of basic customs duty in terms of s.no. 303 of Notification No. 50/2017-CUS - Closure of proceedings on payment under section 28(5) and 28(6) - Penalty in excess of 15% after pre-adjudication payment - Redemption fine - Appellant filed the Bills of Entry Nos. 8818045 and 8818053 while mis-classifying those goods under tariff item 49060000 instead of classifying those goods under CTH 419119920 - HELD THAT: - The Tribunal held that, on the admitted facts, the appellant had fully complied with the requirement of section 28(5) by paying the differential duty, interest and 15% penalty and informing the department accordingly. It also noticed that the adjudicating authority itself recorded that the appellant had opted for the benefit under that provision and had paid the 15% penalty. Once such compliance stood accepted, the proceedings attained the statutory finality contemplated by section 28(6), and the adjudicating authority, by still imposing penalty beyond 15% and ordering redemption fine, travelled beyond the legislative intent of section 28. At the same time, since no submissions were advanced on the merits of classification or exemption and the payment of differential duty was accepted as acknowledgment that the exemption benefit was not available, the finding denying the notification benefit and confirming the differential duty was left undisturbed. [Paras 6, 7, 8, 9]

The denial of exemption benefit and confirmation of differential customs duty were upheld, but the penalty imposed in excess of 15% of the duty and the redemption fine were set aside.

Final Conclusion: The appeal was partly allowed by modifying the order. The demand of differential duty and denial of exemption were sustained, but the further penalty beyond 15% and the redemption fine were held unsustainable in view of the appellant's compliance with section 28(5) and 28(6) of the Customs Act.

Classification of integrated drive generator and starter generator - Customs Broker penalty for alleged misclassification - classifiable under CTH 8501 or CTH 8511 - HSN Explanatory Notes - Customs House Agent liability - Overt act - Connivance - Burden of classification - Gas turbine engines

Whether the Integrated Drive Generator and Starter Generator are classifiable under CTH 8501 as declared by the appellant or they are classifiable under CTH 8511 as alleged by the department ? - HELD THAT: - The Tribunal held that CTH 8501 covers electric motors and generators generally, whereas CTH 8511 is confined to generators used in conjunction with spark-ignition or compression-ignition internal combustion engines. On the description of the imported goods, the Integrated Drive Generator was an AC generator supplying electrical power to aircraft systems and the Starter Generator was a DC generator which, after starting the aircraft engine, functioned as a generator. Since these goods were used with gas turbine aircraft engines and not with spark-ignition or compression-ignition internal combustion engines, they could not be brought under CTH 8511. Following Interglobe Aviation Ltd. [2026 (5) TMI 779 - CESTAT NEW DELHI], and finding no contrary material from the department, the Tribunal held that the classification declared by the importer under CTH 8501 was correct and the customs duty demand founded on reclassification was unsustainable. [Paras 10, 12, 14, 15, 16]

The demand of customs duty, interest and consequential liability based on classification under CTH 8511 was set aside.

Customs Broker penalty for alleged misclassification - Absence of connivance or overt act by Customs Broker - HELD THAT: - The Tribunal held that a Customs Broker is not responsible for deciding the classification of imported goods and functions only as a processing agent for clearance documentation. Once the classification declared by the importer was itself found to be correct, the allegation of intentional misclassification by the Customs Broker lost all basis. Even otherwise, in the absence of any evidence showing an overt act, involvement or connivance on the part of the Customs Broker, penalty could not be sustained. The Tribunal therefore applied the settled principle noticed in Chakiat Agencies [2023 (2) TMI 490 - CESTAT CHENNAI] and Kunal Travellers (Cargo) [2017 (3) TMI 1494 - DELHI HIGH COURT] and held that penalty under section 117 was unwarranted. [Paras 17, 18]

The penalty imposed on the Customs Broker was set aside.

Final Conclusion: The Tribunal set aside the impugned order in full. It held that the imported Integrated Drive Generator and Starter Generator were correctly classifiable under CTH 8501, and that no penalty could be imposed on the Customs Broker in the absence of any proved involvement in misclassification.

Penalty on Customs Broker for movement of imported goods before out-of-charge - Availability of imported goods within customs station - vehicles remained available within the Land Customs Station for drawal of samples and had not been taken away - HELD THAT: - The Tribunal found that the vehicles carrying the imported goods were available for drawal of samples by the DRI and had not been removed from the Land Customs Station. On that factual finding, the alleged breach of permitting movement without out-of-charge did not justify penalty. The Tribunal also noted that, in the proceedings under the CBLR, the appellant had already been discharged, and therefore the impugned penalty was unwarranted. [Paras 6, 7]

The penalties imposed on the appellants were set aside.

Final Conclusion: The Tribunal held that no penalty was imposable on the Customs Broker on the allegation of movement of goods before out-of-charge, since the vehicles had remained within the Land Customs Station and were available for examination. The appeals were accordingly allowed and the penalties were set aside.

Imposition of penalties under Sections 112(a) and 112(b) - beyond the scope of show-cause notice- Penalty for false declaration or document in import transaction

Penalty beyond show-cause notice - Penalty under Sections 112(a) and 112(b) - HELD THAT: - The Tribunal found from the record that the show-cause notice did not propose imposition of penalty under Sections 112(a) and 112(b) of the Customs Act, 1962. In the absence of such proposal in the notice, the adjudicating authority could not impose those penalties. [Paras 5]

The penalties imposed under Sections 112(a) and 112(b) were set aside.

Penalty for false declaration or document in import transaction - Penalty under Section 114AA - HELD THAT: - On reading Section 114AA, the Tribunal held that the provision applies where a person knowingly or intentionally makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document that is false or incorrect in any material particular in the transaction of any business for the purposes of the Act. The Tribunal therefore rejected the observation of the Revisionary Authority in Kanchal Bansal that the provision pertains only to export, and held that the penalty was rightly imposable in the present import matter. [Paras 7, 8]

The penalties imposed under Section 114AA were confirmed.

Final Conclusion: The Tribunal partly allowed the appeals by setting aside the penalties imposed under Sections 112(a) and 112(b) for want of proposal in the show-cause notice, but upheld the penalties under Section 114AA on the ground that the provision covers use of false or incorrect documents in transactions under the Act, including the import transaction in question.

Advance ruling obtained by fraud or misrepresentation of material facts - Independence of void ab initio jurisdiction from appellate remedy - advance ruling on imported goods used with front cover, back cover and middle cover of mobile phones was obtained on a materially inaccurate factual premise - HELD THAT: - The Authority found that the original application had projected the imported antenna modules, conductive foams, heat dissipating films, silicon pads and similar items as inputs indispensable for manufacture of the covers. On the materials later placed on record, including investigation inputs, statements recorded under Section 108, and the Chartered Engineer's opinion, the Authority held that the covers acquired their own identity and essential character upon moulding and machining, while the imported items were complete and functionally distinct parts of mobile phones retaining independent identity even after affixation. The subsequent activity was only assembly of ready-to-use components on already manufactured covers and did not amount to manufacture of the covers. The Authority therefore held that the factual basis on which the earlier ruling proceeded had not reflected the true nature, identity and role of the imported goods. It further held that Section 28KA concerns c-97 allenge to the correctness or legality of an advance ruling, whereas Section 28K operates independently where the ruling has been obtained by fraud or misrepresentation of facts; hence, the existence of an appellate remedy did not denude the Authority of jurisdiction under Section 28K. [Paras 2]

The earlier advance ruling was held to have been obtained by misrepresentation of material facts and was accordingly declared void ab initio under Section 28K.

Final Conclusion: The Authority held that the applicant had misrepresented the true nature and role of the imported goods while seeking the earlier advance ruling. On that finding, it invoked Section 28K and declared the advance ruling void ab initio, rejecting the objection that the Department was confined to the appellate remedy.

Classification of joint replacement implants - Imported knee, hip and shoulder implant systems and component parts - Eligibility for exemption under Sr. No. 385 of Notification No. 45/2025-Cus dated 24.10.2025, particularly under Entry B(1) or Entry E(9) of List 21 -Implants for severely physically handicapped patients - Strict construction of exemption notifications - HSN Explanatory Notes as a safe guide - Classifiable under tariff item 90211000 as orthopaedic appliances, tariff item 90213100 as artificial joints, tariff item 90213900 as other artificial parts of the body, or any other tariff item

Whether the products proposed to be imported, namely knee implants, hip implants and shoulder implants, are classifiable under Heading 9021 as "Artificial Joints", "Orthopaedic Appliances" or under any other tariff item ? - HELD THAT: - It is evident that the HSN draws a clear distinction between orthopaedic appliances and artificial parts of the body. The orthopaedic appliances enumerated in Part (I), such as splints, braces, trusses, corsets, orthopaedic footwear, crutches and appliances for treating deformities or supporting body parts, are all intended to prevent or correct bodily deformities or to support or hold parts of the body following an illness, operation or injury. These appliances assist, stabilise or correct the functioning of an existing body part but do not replace it.

The products marketed as GMK, Sphere and SpheriKA (knee replacement systems), Mpact System (hip replacement system), Medacta Shoulder System (shoulder replacement system) and Moto Partial Knee System (partial knee replacement system), are presented as complete prosthetic joint assemblies intended to replace the articulating function of natural joints, are classifiable under tariff item 90213100 as "Artificial joints";

The products marketed as P Family Stems, SMS Stem, M-Vizion Monobloc Stem and Masterloc, being implantable femoral stem components, and Mpact 3D Acetabular System, including acetabular shells, cups, liners and similar acetabular components, which do not constitute complete artificial joints at the time of importation, are classifiable under tariff item 90213900 as "Other artificial parts of the body";

The alternative claim for classification of the aforesaid goods under tariff item 90211000 as "Orthopaedic appliances" is not sustainable in view of the specific provisions of Heading 9021, Chapter Note 6 to Chapter 90 and the HSN Explanatory Notes, which distinguish orthopaedic appliances from artificial joints and other artificial parts of the body.

The reliance on Smith & Nephew Healthcare Pvt. Ltd. [2025 (7) TMI 1346 - CESTAT MUMBAI] was not accepted as determinative on classification since that decision principally concerned exemption.

The applicant has not produced any evidence demonstrating that the subject goods are specially designed, exclusively intended or principally used for a class of patients recognized as severely physically handicapped. On the contrary, the literature on record indicates that the goods are general-purpose joint replacement implants used in routine orthopaedic and arthroplasty procedures for a broad range of patients suffering from degenerative or traumatic joint conditions. [Paras 10, 11]

Complete prosthetic joint replacement systems were held classifiable under tariff item 90213100, and separately imported prosthetic components under tariff item 90213900; none of the subject goods were held classifiable under tariff item 90211000.

Exemption under Sr. No. 385 of Notification No. 45/2025-Cus - Orthopaedic appliances falling under Heading 9021 - Implants for severely physically handicapped patients - Legislative omission in exemption entry -HELD THAT: - It is a settled principle that exemption notifications are required to be construed strictly, and the burden lies upon the claimant to establish that the goods fall squarely within the terms of the exemption.

The Authority held that Entry B(1) of List 21 is confined to orthopaedic appliances falling under Heading 9021 and does not extend to all goods of that heading. Since the subject goods had already been found classifiable as artificial joints or other artificial parts of the body, they could not satisfy Entry B(1). As to Entry E(9), the Authority emphasized that the present notification uses the narrower expression "implants for severely physically handicapped patients including bone cement" and omits the earlier language expressly covering joint replacement and spinal implants. That omission was treated as deliberate and incapable of being neutralised by interpretation. The earlier decisions in Smith & Nephew Healthcare Pvt. Ltd.(supra) and Centerpulse India [2011 (7) TMI 379 - CESTAT, CHENNAI] were distinguished because they turned on differently worded exemption entries that expressly covered joint replacement implants. The Authority further held that general-use knee, hip and shoulder replacement implants used in routine orthopaedic and arthroplasty procedures for patients with degenerative, traumatic or similar conditions could not, without specific material, be regarded as implants specially intended for the narrower class of severely physically handicapped patients. Applying the principle in Dilip Kumar & Co. [2018 (7) TMI 1826 - SUPREME COURT (LB)], the exemption notification had to be strictly construed, and the applicant failed to establish that the goods fell squarely within either Entry B(1) or Entry E(9). [Paras 10, 11]

Exemption under Sr. No. 385 of Notification No. 45/2025-Cus was denied, as the goods were neither orthopaedic appliances under Entry B(1) nor implants for severely physically handicapped patients under Entry E(9).

Final Conclusion: The Authority ruled that complete knee, hip and shoulder joint replacement systems are classifiable as artificial joints under tariff item 90213100, while separately imported prosthetic components are classifiable as other artificial parts of the body under tariff item 90213900. It further held that such goods are not orthopaedic appliances under Entry B(1) of List 21, are not covered by Entry E(9) as implants for severely physically handicapped patients, and are therefore not entitled to exemption under Sr. No. 385 of Notification No. 45/2025-Cus.

Jurisdiction over offence of wrongful withholding of company property - Decriminalisation under the Companies Act - Penal offence under Section 452 -Adjudication of penalties and criminal offences - HELD THAT: - In view of the provisions contained in Sub Section (2) of Section 452 which stipulates imprisonment for a term which may extend to two years to those defaulters who failed to deliver back the property or refund the cash within a fixed time as ordered by the Court trying the offence. By no stretch of imagination could it be said that an Adjudicating Officer appointed under Section 454 of the Companies Act, has to be considered as the Court trying the offence under Sub Section (1) of Section 452, and capable of imposing the imprisonment extending to two years for the failure to abide by the direction to deliver back the property to the complainant.

The Court held that the amendment made to Section 452 by Act 29 of 2020 only inserted a proviso restricting imprisonment in specified circumstances relating to unpaid employee dues, and did not alter the character of the offence or transfer its adjudication to the Adjudicating Officer. Section 454, as amended, deals with imposition of penalties for non-compliance or default under the Act in an administrative or civil sense, and does not encompass criminal offences carrying punitive consequences. Section 452 itself contemplates that the court trying the offence may direct delivery or refund of the property and, on default, impose imprisonment; such power cannot be attributed to an Adjudicating Officer under Section 454. The Court also relied on the statutory scheme of Sections 435 and 436 to note that the offence under Section 452 stands excluded from the jurisdiction of Special Courts, thereby indicating that it is to be tried by the competent Judicial Magistrate. The Magistrate's view that no criminal court had jurisdiction after the 2020 amendment, and that Section 452 stood decriminalised, was therefore held to be erroneous. [Paras 6, 7]

The order returning the complaint was set aside, and the Magistrate was directed to receive the complaint and proceed in accordance with law.

Final Conclusion: The High Court held that Section 452 of the Companies Act, 2013 continues to create a criminal offence triable by the competent Magistrate, and that the 2020 amendment did not decriminalise the provision or shift jurisdiction to the Adjudicating Officer under Section 454. The complaint was accordingly directed to be taken on file and proceeded with in accordance with law.

Oppression and mismanagement jurisdiction - Scope of power to unwind fraudulent or void transactions - Consent requirement for modification of third-party agreements - Election, estoppel and approbate-reprobate in cases of alleged illegality - mandatory pre-condition for unwinding/collapsing the transaction - consent of the counterparty - condition precedent for relief under Sections 241 and 242 - approbate and reprobate - incorrect interpretation of the order passed by this Tribunal

Whether NCLT in the impugned order has correctly construed the order dated 16.01.2025 of this Tribunal by holding that consent is mandatory for collapsing the transaction? - HELD THAT: - The earlier order had permitted collapse of transactions in respect of which consent-based modalities were before the Appellate Tribunal, but, for the disputed third-party transactions, it had expressly held that deeper examination was required and that the issue could be examined by the NCLT in the pending proceedings. That liberty necessarily meant that the NCLT was required to adjudicate the controversy on its own merits. The NCLT therefore erred in reading the earlier order as declaring mutual agreement to be an inflexible precondition for considering collapse of every transaction. [Paras 12]

The NCLT misconstrued the earlier appellate order in treating prior consent as a mandatory condition for examining the disputed transactions.

Whether for exercise of jurisdiction under Sections 241 & 242 by the Tribunal to terminate an agreement, obtaining consent of the parties concerned is condition precedent? -HELD THAT: - The judgment of the Delhi High Court in ‘Pearson Education INC (formerly Prentice Hall Inc.)’ [2005 (9) TMI 621 - HIGH COURT DELHI] holds that the power under Section 242(1) to make such order as the Tribunal thinks fit is wide, and the matters enumerated in Section 242(2) are illustrative and do not cut down that general power. The proviso to clause (f) applies where the Tribunal terminates, sets aside or modifies a subsisting agreement with a third party under that clause. Here, the application alleged that the transactions were sham, circuitous, fraudulent and void, and sought declaratory reliefs for unwinding their true effect rather than mere termination of valid contracts. On that footing, the proviso to Section 242(2)(f) did not fetter the Tribunal's power to examine and grant appropriate relief under Sections 241 and 242. [Paras 22, 23, 33]

The NCLT erred in holding that absence of consent under Section 242(2)(f) barred examination of the prayer to unwind allegedly fraudulent and void transactions.

Whether the appellant in CA, has made sufficient pleadings and brought materials which necessitated the NCLT to examine the allegations of fraudulent and void transactions as alleged in the collapsing application? - HELD THAT: - The application set out the structure of the six transactions, the corresponding lending legs, the role of letters of awareness and assurance, and the consequence claimed in the creditors' claims process. It was accompanied by extensive annexures and relied on the RBI inspection report, the SFIO report, the forensic audit report and the SEBI order. The RBI and SFIO materials, as noticed by the Appellate Tribunal, indicated that funds were routed through SREI group entities to bypass regulatory restrictions on group exposure and to reach IL&FS group entities. In view of these pleadings and materials, the NCLT was required to examine the allegations on merits rather than decline adjudication on threshold grounds. [Paras 42]

The allegations of circuitous and fraudulent transactions were sufficiently pleaded and supported to warrant substantive examination by the NCLT.

Whether application filed by the IL&FS was barred on the principle of election, estoppel, approbation, and reprobation on account of initiating independent proceeding under Section 7 against SIFL entities? - HELD THAT: - The present is the case where we have noticed that initially application under Section 7 was filed by the IL&FS against the third parties including Attivo, Sahaj, Giridhan, BRNL and Vistar. CIRP of Attivo and Sahaj were admitted and were adjourned on account of pendency of collapsing I.A. With regard to Vistar, Section 7 application was rejected which is pending consideration in this appeal. The present is not a case where IFIN has obtained any benefit out of the aforesaid proceedings.

It is settled law that directions issued by RBI are statutory directions and are binding of NBFC.

Hon’ble Supreme Court had occasion to consider the doctrine of approbate and reprobate in MR. P. Firm Muar [1964 (10) TMI 13 - SUPREME COURT] held that doctrine of approbate and reprobate is only a species of estoppel it applies only to the conduct of the parties and it cannot operate against the provisions of statute.

Hon’ble Supreme Court has again occasion to consider the case in Immai Appa Rao & Ors. [1961 (9) TMI 87 - SUPREME COURT], where plea of fraud was raised with respect to transaction relating to immovable property. Court clearly held that there is no question of estoppel in such a case for the obvious reason that fraud in question was agreed by both the parties and both parties have assisted each other in carrying out the fraud.

The Appellate Tribunal held that the new board was entitled to reassess earlier litigation strategy and take remedial action against transactions alleged to have been devised by the previous management to defeat statutory RBI directions. It found that earlier Section 7 proceedings had not yielded any such benefit as would preclude a contrary legal stand, and, in any event, doctrines of election or estoppel cannot be used to foreclose examination of transactions alleged to be illegal, fraudulent or void, particularly where statutory directions are said to have been bypassed. The judgment also rejects the NCLT's view that the RBI directions were merely advisory, holding that RBI directions to NBFCs are statutory and binding. On that basis, the NCLT was wrong in refusing to examine the allegations by invoking approbate-reprobate, estoppel or election. [Paras 48, 49, 50, 51, 52]

The threshold rejection of the application on election, estoppel, waiver, or approbate and reprobate was unsustainable.

Final Conclusion: The Appellate Tribunal set aside the common order rejecting the application for unwinding the six disputed transactions and the consequential orders passed in the connected applications. It held that the NCLT had misread the earlier appellate order, wrongly treated consent as mandatory, and improperly refused to examine the allegations of fraudulent and void transactions; all three applications were therefore revived for fresh consideration, with the amount in question to continue in escrow till decision.

Subsequent application by personal guarantor under Section 94 - barred by limitation - Principle of Res-judicata​​​​​​​ - Maintainability of subsequent petition - Limitation for insolvency application - Abuse of interim moratorium

Section 94 application by personal guarantor - Res judicata - Abuse of interim moratorium - A subsequent application under Section 94 filed by the personal guarantor after an earlier fresh application had already been dismissed on merits as barred by limitation - HELD THAT: - The Appellate Tribunal found that, after the first defective petition had been dismissed with liberty to file afresh, the appellant had in fact filed another fresh petition which was dismissed on merits as barred by limitation. The present petition was therefore not the petition filed pursuant to the earlier liberty, but another identical attempt. The Tribunal held that suppression of this intervening dismissal and repeated filing of petitions by personal guarantors of the same corporate debtor showed a design to obtain interim moratorium and obstruct recovery proceedings rather than seek genuine insolvency resolution. On that basis, the subsequent petition was held to be hit by res judicata and to amount to abuse of process. [Paras 29, 31, 32, 33, 36]

The subsequent Section 94 petition was rightly treated as not maintainable and the dismissal was upheld.

Limitation for insolvency application - Invocation of personal guarantee - HELD THAT: - The Tribunal rejected the appellant's case that the personal guarantee had not been invoked until issuance of the possession notice and that limitation should therefore run from that later date. It recorded that, apart from the notice issued to the corporate debtor, a separate demand notice under Section 13(2) had also been issued to the personal guarantor on 20.03.2017. The earlier order dismissing the appellant's fresh Section 94 petition as time-barred had proceeded on that basis, and the Tribunal accepted that reasoning. It further held that the decision relied on by the appellant was factually inapplicable. [Paras 27, 30, 34]

The plea that limitation commenced only from the later possession notice was rejected, and the finding of limitation against the appellant stood affirmed.

Costs for abuse of process - HELD THAT: - The Tribunal found the conduct of the appellant serious, noting that material facts were not fully disclosed and that the process under Section 94 was being used for a purpose other than insolvency resolution. Having concluded that the repeated filings were intended to stall the secured creditor's recovery process, it held that the matter warranted imposition of substantial costs. [Paras 31, 37]

Costs were imposed on the appellant in addition to dismissal of the appeal.

Final Conclusion: The Appellate Tribunal upheld the dismissal of the appellant's Section 94 application, holding that the subsequent filing was barred by res judicata and that the plea to compute limitation from the later possession notice was untenable in view of the earlier demand notice issued to the personal guarantor. Finding repeated filings to be an abuse of the insolvency process intended to stall recovery, it dismissed the appeal and imposed costs.

Mutual dealings and set-off in liquidation - Separate juristic identity of group companies in insolvency- Applicability of the "Group of Companies Doctrine" - Whether the Appellant/ Operational Creditor is liable to pay the alleged outstanding dues to the Respondent despite the applicability of the "Group of Companies Doctrine" read with Regulation 29 of the Liquidation Process Regulation, 2016 ? - HELD THAT: - It is evident and established in the eye of law that the Corporate Debtor is a separate juristic person, distinct from other group entities, and each of the BISCON entities namely Brahmaputra Galvochem Pvt Ltd, Brahmaputra Iron & Steel Pvt Ltd, Brahmaputra TMT Bars Pvt Ltd and Brahmaputra Tubulars Pvt Ltd have undergone separate CIRP or liquidation proceedings.

The Appellate Tribunal held that the corporate debtor retained its distinct juristic identity notwithstanding its association with other BISCON group entities. Each entity had undergone separate CIRP and liquidation proceedings, with separate electricity connections, separate load security deposits, separate billing, and separate treatment under the insolvency process. Regulation 29 contemplates set-off only where there are mutual dealings between the corporate debtor and the same counterparty; it cannot be invoked by aggregating claims involving third-party group entities. The appellant had itself filed separate claims in the respective proceedings and had not disclosed any mutual set-off in its claim form against the present corporate debtor. The plea founded on the group of companies doctrine and on common administrative handling by the same resolution professional or liquidator was therefore rejected. The Tribunal also held that the liquidator was entitled to recover the refundable balance forming part of the corporate debtor's liquidation estate, and any reliance on other laws could not defeat the scheme of the Code in view of its overriding effect. [Paras 37, 38, 39, 40, 41]

The direction requiring payment of the admitted amount to the liquidator was upheld, and the defence of cross-entity set-off was rejected.

Final Conclusion: The appeal was dismissed. The Appellate Tribunal affirmed that dues recoverable by the liquidator from the appellant could not be set off against claims allegedly arising from other group companies, since Regulation 29 applies only to mutual dealings between the corporate debtor and the same party.

Dissenting secured financial creditor - Homebuyer's rights in allotted units - Security interest limited to actual secured asset value - First charge under sub-lease deed - valuation defects, and non-compliance with Section 30(2) - Entitlement of NOIDA, to be treated as a secured creditor on the basis of the registered sub-lease deed and the statutory framework - Approbate and Reprobate - Harmonious Construction - Waterfall Mechanism - alleged illegalities in approval of the Resolution Plan - wrongful classification of appellant - wrongful rejection of interest, time extension charges and farmer's compensation and subsequent relating to its claims and concessions allowed to SRA in the Resolution Plan

Whether the disbursement proposed for ACRE in the resolution plan is in accordance with Section 30(2)(b) & 53(1) of the Code ? - HELD THAT: - Section 11(4)(h) of RERA prohibits the creation of a mortgage or charge over units already allotted to homebuyers, and even if such a charge is created, it shall not affect the Rights and interests of the allottee.

The Appellate Tribunal held that ACRE, being an assignee of the original lender, could claim no higher security than what was available to the assignor. The SARFAESI demand notice issued by the original lender itself treated the security as confined to unsold units and excluded the sold units. On the date of creation of the mortgage, most units had already been allotted to homebuyers, and by virtue of Section 11(4)(h) of RERA, any mortgage or charge over units already allotted could not affect the rights and interests of the allottees. Applying the principle recognized in Bikram Chatterji [2019 (7) TMI 1233 - SUPREME COURT] and Kotak Mahindra Bank Limited [2023 (4) TMI 414 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI], the Tribunal held that the lender's security could extend only to the unsold inventory. It further held that the value of a secured creditor's entitlement under Section 30(2)(b) read with Section 53 could not exceed the value of the underlying security, and any unpaid balance would rank lower under Section 53(1)(e)(ii). The claim that project receivables should be separately added was rejected, since liquidation value proceeds on the assumption of liquidation on the insolvency commencement date, in which situation future receivables from an incomplete real estate project would not arise as independently realizable assets. As the plan payment to ACRE exceeded the assessed value of its security interest and also preserved its rights against co-borrowers and other securities, no violation of Section 30(2)(b) or Section 53 was made out. [Paras 121, 124, 126, 127, 128]

The challenge by ACRE failed, and the approved plan was held compliant insofar as the distribution to the dissenting secured financial creditor was concerned.

Commercial wisdom of CoC - Resolution plan compliance - Dissenting unsecured financial creditor - Restoration application and prejudice - HELD THAT: - The Appellate Tribunal found that the process was not conducted in haste and that the resolution plan emerged after multiple meetings, consideration of several applicants, issuance of a fresh Form-G, invitation of revised plans, and deliberation by the Committee of Creditors. The objections raised by Dhankalash related substantially to valuation, comparative merits of plans, CIRP costs and other commercial aspects already considered during CIRP. The Tribunal held that the assessment of feasibility, viability and comparative benefit of competing plans falls within the commercial wisdom of the CoC, and that a creditor with a marginal voting share could not seek appellate re-evaluation of those matters in the absence of breach of a mandatory provision. On distribution, it was held that Dhankalash, being an unsecured financial creditor without security interest, stood on a lower footing in the waterfall than ACRE, and therefore its claim for parity as a dissenting creditor had no merit. As to the non-disposal of the restoration application, the Tribunal found no real prejudice established, since no material was shown that the CIRP outcome would have been different had that application been separately decided. Allegations of collusion and manipulation were also held unsupported by cogent evidence. [Paras 133, 134, 135, 136, 137]

The appeal of Dhankalash was dismissed, and the approval of the resolution plan was upheld as free from material irregularity and compliant with Section 30(2).

Whether the Appellant/NOIDA is entitled to a treatment different from that of an ordinary Operational Creditor in view of the rights arising from the registered Sub-Lease Deed dated 19.10.2012 and the statutory framework governing the project land ? - HELD THAT: - It is to be noted that the RP in its submission has stated that two elements are essential to constitute a security interest under Section 3(31) of the Code: (i) the right, title, interest or claim must be created by a transaction; and (ii) such transaction must secure payment or performance of an obligation.

The Appellate Tribunal held that the dispute concerning NOIDA could not be treated as a routine claim for recovery of dues, because the corporate debtor's rights over the project land flowed from the registered sub-lease deed itself. The deed expressly provided that the lessor would have the first charge on the plot towards payment of all its dues. Interpreting Sections 3(31) and 3(33) of the Code, the Tribunal held that a security interest exists where a right or charge is created by a transaction securing payment or performance of an obligation, and that the registered sub-lease satisfied those requirements. The Tribunal distinguished a mere statutory charge created by operation of law from the present case, where the rights asserted were founded on a contractual instrument to which the corporate debtor was a party, with the statutory provisions only reinforcing those rights. It therefore held that the later explanation excluding security interests created merely by operation of law did not defeat NOIDA's claim under the registered deed. The Tribunal further found that the Adjudicating Authority had not meaningfully examined the consequences of the resolution plan upon NOIDA's rights as owner-lessor and as holder of the first charge under the deed. Since the plan incorrectly classified NOIDA as an operational creditor, the distribution under the plan required reconsideration, though the rest of the plan was left undisturbed. [Paras 186, 188, 189, 190, 191]

The impugned order was set aside to the limited extent of distribution, and the Resolution Professional was directed to place an addendum treating NOIDA as a secured creditor and revising the proposed distribution for consideration by the CoC and the Adjudicating Authority.

Final Conclusion: The appeals of ACRE and Dhankalash were dismissed, the Appellate Tribunal holding that the approved resolution plan did not violate Section 30(2)(b) or Section 53 and that no material irregularity was made out in the CIRP process. NOIDA's appeal was allowed in part by holding that its rights under the registered sub-lease deed constituted a security interest, and the matter was remitted only to the extent of revising distribution under the plan after treating NOIDA as a secured creditor.

Demand based on differences between receipts reflected in the balance sheet and ST-3 returns - Verification of Cenvat credit on input services under abatement notification - claiming benefit under Notification No. 26/2012-ST - Principles of natural justice - Point of taxation

Balance sheet and ST-3 reconciliation - Point of Taxation Rules - HELD THAT: - The Tribunal noted that the assessee's case was that the balance sheets were prepared under AS-7, whereas the ST-3 returns were filed in accordance with the Point of Taxation Rules, and that this difference in accounting basis explained the variation in figures. Since the Commissioner himself did not dispute that the returns and the balance sheets could be prepared on different legal bases, the determinative question was whether the figures could be reconciled on the basis of supporting documents. The Tribunal held that the assessee ought to be given an opportunity to produce evidence for such reconciliation and that the service tax liability, if any, could be determined only after such verification. [Paras 13]

The demand on this count was set aside and remanded to the Commissioner for fresh examination after giving the assessee an opportunity to produce documents and reconcile the figures.

Cenvat credit on input services - Abatement under Notification No. 26/2012-ST - HELD THAT: - The Tribunal recorded that the undisputed legal position was that where the assessee availed the abatement under Notification No. 26/2012-ST, Cenvat credit on inputs was not admissible. The assessee's specific stand, however, was that the disputed credit pertained to input services, for which the notification imposed no such restriction. Since the Commissioner rejected the claim on the ground that nexus between the input services and the output service had not been established, the Tribunal treated the controversy as a factual dispute requiring verification of the relevant documents rather than adjudicating the claim on merits. [Paras 14, 15, 16]

The denial of Cenvat credit was set aside and remanded to the Commissioner for fresh decision after giving the appellants an opportunity to place the relevant material on record.

Final Conclusion: The Tribunal set aside the impugned order and remanded both the service tax demand based on balance sheet-ST-3 differences and the denial of Cenvat credit for fresh adjudication. All questions on merits were left open, with a direction to afford the appellants a reasonable opportunity of hearing and to produce supporting documents.

Consideration as an essential element of taxable service - Corporate guarantee without consideration - negative list regime - Service tax on notional consideration - Furnishing corporate guarantee by the assessee to its group companies without charging any commission, fee or other consideration - HELD THAT: - The Tribunal held that the determinative requirement for levy of service tax under the post-negative list regime is the existence of an activity rendered for consideration. In the present case, the absence of consideration stood admitted in the show cause notice as well as in the order-in-original. Once no consideration was charged or received for issuance of the corporate guarantee, the activity did not fall within the ambit of taxable service, and the demand raised on a notional or assumed commission could not be sustained. The Tribunal followed the decisions rendered in the appellant's own case in DLF Home Developers Ltd.[2023 (10) TMI 1089 - CESTAT CHANDIGARH] and in the cases of its group companies, as also the view in Edelweiss matter [2022 (2) TMI 1359 - CESTAT MUMBAI] affirmed by the Supreme Court in the [2023 (4) TMI 170 - SC ORDER], and therefore rejected the levy itself. [Paras 6, 7, 8, 9]

The service tax demand on corporate guarantees issued without consideration was held unsustainable, and both appeals were allowed with consequential relief.

Final Conclusion: The Tribunal held that corporate guarantees furnished to group companies without any consideration do not constitute taxable service, and a demand founded on notional commission cannot be sustained. The impugned order was therefore set aside and both appeals were allowed with consequential relief.

Refund of unutilized Cenvat credit on export of services - Interpretation of Notification No. 5/2006-CX (NT) -quarterly refund condition under beneficial notification - Timing of availment of admissible input service credit within the claim quarter - Beneficial construction of refund notification - HELD THAT: - The Tribunal held that Condition No. 4 of Notification No. 5/2006-CX (NT) had to be read in a manner that advanced the object of Rule 5 and the refund scheme, namely, grant of cash refund of accumulated credit that could not be utilized and prevention of export of tax. Since the admissibility and bona fides of the credit availment were not disputed, a narrow construction excluding credit availed after the last export invoice of the quarter would defeat the purpose of the notification, create avoidable anomalies, and render the quarterly refund mechanism unworkable. The relevant test was the quantum of admissible unutilized credit available for the quarter at the time of filing the claim, not the precise timing of availment of such credit within that quarter. The Tribunal further noted that refund under the notification is considered on a quarterly basis and not export-invoice wise, and that rejection on this ground would be futile because such credit would in any event become refundable in a subsequent quarter.

The learned consultant for the appellant has sought to seek support in the matter from the Tribunal’s decision in the case of Chamundi Textile [2010 (4) TMI 450 - CESTAT, BANGALORE], to support their stance. All that is required to be considered is whether the appellants had accumulated Cenvat Credit or not. Therefore in agreement with the pleadings rendered by the appellant and hold the admissibility of the refund claim allowed in the first instance.

The appellate order denying proportionate refund on the ground that the credit was availed after the last export invoice of the quarter was set aside, and the refund as originally allowed was held admissible.

Final Conclusion: The Tribunal allowed all four appeals and held that admissible unutilized Cenvat credit could not be excluded from quarterly refund merely because it was availed after the last export invoice of the quarter. The restrictive interpretation adopted by the appellate authority was rejected as contrary to the object of the refund scheme for exports.

Extended period of limitation against a government body - Suppression of facts and audit-based detection - Penalty for statutory non-compliance without mens rea

Extended period of limitation against a government body - Suppression of facts and audit-based detection - HELD THAT: - The Tribunal held that, the appellant being a government body constituted under statute, intent to evade payment of tax could not be alleged in the absence of material showing deliberate suppression. Since the information regarding the transactions was available in the balance sheets, which were public documents, non-disclosure in the returns could not by itself be treated as suppression of facts. The discrepancy surfaced through audit scrutiny and not through any search or intelligence-based detection; further, the documents examined in audit could have been called for by the Department during scrutiny of ST-3 returns. On that basis, the condition necessary for invoking the extended period was held absent. [Paras 5, 6]

The service tax demand raised by invoking the extended period was set aside.

Penalty for statutory non-compliance without mens rea - HELD THAT: - Following the case of G.D Goenka Private Limited [2023 (8) TMI 995 - CESTAT NEW DELHI] decided by the Principal Bench of the Tribunal. The Tribunal accepted the Department's contention that penalty under Section 77 did not depend upon proof of mens rea. Consequently, even though the tax demand founded on the extended period was unsustainable, the statutory penalty under Section 77 was liable to be retained. [Paras 5, 6]

Penalty under Section 77 was upheld, while the other demand and penalties were set aside.

Final Conclusion: The appeal was partly allowed. The Tribunal held that the extended period was not invocable against the appellant government body in the facts of the case, set aside the service tax demand and consequential penalties, but sustained the penalty under Section 77.

SEZ service tax exemption - Overriding effect of the SEZ Act - Refund limitation under exemption notification - refund of service tax paid on input services used for authorized operations in a Special Economic Zone - denied on the ground that the claim was filed beyond the one-year period prescribed in the exemption notification issued under the Finance Act - HELD THAT: - In the case of GMR Aerospace Engineering Limited [2019 (8) TMI 748 - TELANGANA AND ANDHRA PRADESH HIGH COURT], High Court analysing the scheme of SEZ Act and Rules along with the provisions of the Finance Act and the notifications issued thereunder held that SEZ Act was a complete code in itself and its provisions were having overriding effect on other taxation laws, including the Finance Act with regard to exemption from taxes or duties and therefore exemption from service tax could not be denied to services provided by co-developer cum SEZ unit to SEZ Developer on the ground of violation of the conditions prescribed under the service tax exemption notifications. It was therefore concluded that notification issued under section 93 of the Finance Act cannot be pressed into service for finding out whether a unit in SEZ qualifies for exemption or not. The said decision has been affirmed by the Hon’ble Apex Court [2019 (7) TMI 1975 - SC ORDER] as the special leave petition filed by the department was dismissed.

Once services received by an SEZ unit or co-developer for authorized operations are exempt under section 26 of the SEZ Act, the condition in the notification prescribing filing of refund claim within one year cannot control or defeat that statutory exemption. The amount paid as service tax in such circumstances is refundable, and denial of refund solely on the basis of limitation under the notification was therefore unsustainable. [Paras 7, 8, 9]

The appellant was held entitled to the refund, and rejection of the claim as time-barred under the notification was set aside.

Final Conclusion: The Tribunal allowed the appeal and held that refund of service tax paid on input services used for authorized SEZ operations could not be denied merely for breach of the one-year limitation in the notification. The impugned order rejecting the refund claim as time-barred was set aside with consequential relief.

Service of adjudication orders under section 37C - Deemed service by speed post -Proof of Delivery - Limitation for appeal from date of communication - Principles of natural justice

Whether sending of order by speed-post complies with the provision of section 37C(1)(a) of the Central Excise Act ? - HELD THAT: - In Saral Wire Craft Pvt. Ltd. [2015 (7) TMI 894 - SUPREME COURT], were adjudication order was served on kitchen boy of the assessee, it was held to be not a proper service. As per section 37C of the Central Excise Act, 1944, notice must be served to the person for whom it is intended or his authorized agent under proof of acknowledgement. It is the basic principle of law long settled that if the manner of doing a particular act is prescribed under any statute, the act must be done in that manner or not at all. The judgment lays down the pre-requisite for issuance of notice. Any notice issued in violation of section 37C is not valid. It is worth mentioning that section 37C has been made applicable to service tax also by virtue of section 83 of the Finance Act, 1994. Hence, the principle laid down in the judgment shall mutatis mutandis apply to notice served in service tax cases also.

In Jay Balaji Jyoti Steels Ltd.[2015 (1) TMI 859 - ORISSA HIGH COURT], where order was sent by speed post, it was held that post office issues receipt for both by registered post and by speed post. Hence, both have to be treated as registered post in view of section 28 of Indian Post Office Act, 1898. Only difference between the two is that charges payable are normally higher for ‘speed post’ for delivery at any early date. Further, insertion of ‘or by speed post with proof of delivery’ after the words ‘sending it by registered post with acknowledgement due’ in section 37C(1)(a) of Central Excise Act 1944 we.f. 10.05.2013 is clarificatory and procedural amendment. It is curative since various courts had held that communication of notices through speed post was in consonance with law.

The Commissioner (Appeals) had also proceeded on the basis of the unamended provision and wrongly invoked deemed service, although neither the show cause notice nor the order-in-original had been shown to have been served by registered post with acknowledgment due, nor had the department complied with the further modes of service under clauses (b) and (c). In these circumstances, the date of dispatch could not be treated as the relevant date for limitation, and denial of appellate consideration at the threshold amounted to violation of natural justice. [Paras 5, 6]

The finding of limitation was set aside, and the matter was remanded to the Commissioner (Appeals) for decision on merits after giving proper opportunity of hearing to the appellant.

Final Conclusion: The Tribunal held that limitation for the appeal could not be computed from the date of dispatch of the order-in-original in the absence of valid service under section 37C. The order dismissing the appeal as time-barred was set aside, and the matter was remanded to the Commissioner (Appeals) for decision on merits after affording proper opportunity of hearing.

Prospective operation of statutory provisions - Recovery of duty collected and retained prior to introduction of Section 11D - Demand under Section 11D, for the period prior to its introduction. - HELD THAT: - The Tribunal held that the dispute related entirely to a period prior to September 20, 1991, whereas Section 11D was inserted only with effect from that date. A statutory provision, unless expressly made retrospective, cannot be applied to an earlier period. As nothing on record showed that Section 11D was intended to operate retrospectively, the Revenue could not invoke it to recover the amount allegedly collected and retained by the appellant before its introduction. Though limitation was also argued, no finding was rendered on that aspect since the matter stood concluded on merits. [Paras 5, 6, 7]

The demand was held unsustainable on merits and the appeal was allowed.

Final Conclusion: The Tribunal held that Section 11D could not be invoked for a period prior to its introduction, there being no indication of retrospective operation. On that ground, the impugned order was found unsustainable and the appeal was allowed.

Relevancy of statements without Section 9D compliance - Penalty under Rule 26 based on uncorroborated confessional statements - Requirement to specify the applicable clause for penalty

Section 9D compliance - Penalty under Rule 26 on the Director and the Authorised Signatory, founded only on statements, without sufficient corroborative evidence and without compliance with the requirement governing reliance on such statements. - HELD THAT: - The provisions of Section 9D(1)(b) of the Central Excise Act, 1944 provides that a person whose statement has been recorded is required to be examined as witness before his statement is relied upon.

The Tribunal held that Rule 26 could be invoked only where the material on record established the concerned person's knowing involvement with excisable goods liable to confiscation or other conduct covered by that rule. In the present case, the adjudicating authority had relied essentially on the statements of the appellants and other witnesses, but no substantial corroborative evidence was discussed in support of those statements. The Tribunal further noted the requirement under Section 9D that a recorded statement must be tested in the manner contemplated therein before it is relied upon, and applied the principle that, in the absence of such examination and opportunity of cross-examination, statements by themselves could not furnish a sufficient foundation for penalty. On that basis, the findings fastening penalty on both appellants were held unsustainable. [Paras 6]

The penalties imposed on the appellants under Rule 26 were set aside as they were based only on statements unsupported by substantial corroborative evidence.

Specificity in penalty notice and order - Applicable clause under Rule 26 - HELD THAT: - The Tribunal held that the adjudicating authority was bound to state the precise provision of Rule 26 under which penalty was sought to be imposed. Since the impugned order did not identify the relevant sub-section or clause, the appellants were not visited with penalty under a specifically identified statutory basis. Applying the principle stated in Amrit Foods [2005 (10) TMI 96 - SUPREME COURT], the Tribunal held that such lack of specification rendered the penalty order legally defective. [Paras 6]

The penalty order was held invalid for failure to specify the exact clause of Rule 26 invoked against the appellants.

Final Conclusion: The Tribunal held that the penalties imposed on the Director and the Authorised Signatory under Rule 26 could not be sustained, as the impugned order rested only on uncorroborated statements and also failed to specify the precise clause of Rule 26 invoked. The appeals were accordingly allowed and the penalty portion of the order was set aside.

Transaction value - Royalty recovered on coal clearances - Deductibility of Stowing Excise Duty - Extended period of limitation - Penalty in interpretational dispute - Interest liability

Royalty as part of assessable value - Transaction value - Other taxes exclusion - Royalty recovered in the sale-cum-excise invoice - includible in the transaction value under the exclusion for "other taxes" and liable to central excise duty - HELD THAT: - The Tribunal held, following its earlier decisions and after noting the Supreme Court ruling in Mineral Area Development Authority vs. Steel Authority of India [2024 (8) TMI 956 - SUPREME COURT (LB)], that royalty is not in the nature of a tax. Since the exclusion in Section 4(3)(d) applies only to other taxes, royalty could not be deducted while computing transaction value. Excise duty was therefore payable on royalty, subject to limitation. [Paras 6, 7, 9]

Duty on royalty was held payable only for the period falling within limitation, while the demand for the extended period was set aside.

Deductibility of Stowing Excise Duty - Duty of excise - Assessable value exclusion - HELD THAT: - The Tribunal held that SED is itself a duty of excise and therefore falls within the exclusion from transaction value. On that basis, the amount of SED had been rightly deducted from the assessable value and could not again be subjected to excise duty. [Paras 6, 8, 9]

No duty was payable on the amount collected towards SED.

Extended period of limitation - Interpretational dispute - Penalty in interpretational dispute - Interest liability - HELD THAT: - The Tribunal found that most show cause notices had been issued beyond the normal period of one year and that the dispute was one of legal interpretation, the matter having been litigated up to the Supreme Court. In those circumstances, suppression with intent to evade duty was not made out, and the extended period could not be invoked. Penalties were therefore set aside. The Tribunal further held, by relying on South Eastern Coalfields Ltd. [2026 (2) TMI 430 - CESTAT NEW DELHI] which had taken note of Mineral Area Development Authority vs. Steel Authority of India, that the demand of interest also deserved to be set aside. [Paras 6, 7, 9]

Demand beyond the normal period was set aside, no penalty was imposable, and no interest was payable.

Final Conclusion: The Tribunal held that royalty formed part of the transaction value and was dutiable only within the normal period of limitation, whereas SED was deductible and not dutiable. The extended period, penalties and interest were set aside, and the appeals were disposed of in those terms.

Entitlement to refund of excess excise duty under Section 11B - Unjust enrichment under Section 12B- Proof of non-passing of duty incidence - Evidentiary value of Chartered Accountant's certificate and audited accounts - HELD THAT: - The Tribunal found that the Commissioner (Appeals) had examined, in detail, the balance sheets, the Chartered Accountant's certificate, the certified ER-1 particulars, the certificate regarding the seven performance incentive invoices, the reconciliation of duty liability, and the audited accounts of the Kolkata Sales Office. On that documentary basis, the appellate authority had concluded that the excess debit was in fact made inadvertently, that the refund amount stood reflected in the books as receivable, and that the incidence of duty had not been passed on to any other person. Since the impugned appellate order rested on scrutiny of the relevant documents, the Revenue's contention that such documents had not been supplied or that unjust enrichment was not disproved was held to be unsustainable. [Paras 8]

The finding that the respondent had established non-passing of duty incidence and was entitled to refund was upheld.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and sustained the appellate order allowing refund. It held that the documentary material accepted by the Commissioner (Appeals) sufficiently established that the excess duty incidence had not been passed on and that the claim was not barred by unjust enrichment.

Best judgment assessment - Service of notice - approached a wrong forum -Reasonable opportunity of hearing - assessment orders passed on best judgment basis for works contracts awarded by the petitioner - doubt regarding prior service of notices and the circumstances showing that the petitioner had been attempting to seek relief, though before a wrong authority - Principles of Natural Justice - HELD THAT: - The Court found that, although the petitioner had not responded to the notices said to have been issued by the Commercial Tax Officer, there was doubt as to whether those notices had in fact been properly brought to the petitioner's notice before the assessments were made. The Court also took into account that the petitioner had thereafter tried to obtain relief by approaching the Territorial Deputy Commissioner, though that was not the proper forum. In that view, the Court did not examine the disputed question of the applicable rate of tax on merits and held that the assessments should be reopened by the Assessing Authority after giving due notice and opportunity to the petitioner. [Paras 10, 11, 12]

The impugned assessment orders were set aside and the matters were remanded to the Assessing Authority for fresh determination of tax liability, if any, after due notice and opportunity, to be completed expeditiously.

Final Conclusion: The writ petition was allowed by setting aside the best judgment assessment orders for the periods 2007-08 to 2011-12 and remanding the matter for fresh assessment after affording due notice and opportunity to the petitioner. The Court left the merits of the tax liability, including the rate question, to be decided by the Assessing Authority.