TaxTMI Updates e-Newsletter
Jul 09,2026

Input tax credit on alleged bogus supplies - Judicial review of assessment founded on uncontroverted factual findings - Disallowance of input tax credit claimed on supplies from Rathod Enterprise - assessment was founded on findings that the supporting agreement was not genuine and the invoices were not acceptable - HELD THAT: - The Court noted that the impugned orders examined the agreement relied on by the petitioner and recorded specific findings that the original agreement was not produced, that the agreement bore a date earlier than the purchase of the stamp paper on which it was said to have been executed, and that the invoice was issued after cancellation of the supplier's GST registration. Since the petitioner was unable to controvert these findings, the Court held that no infirmity was made out in the assessment orders so as to justify interference in writ jurisdiction. [Paras 5, 6]

The challenge to the assessment orders failed and the disallowance of the claimed input tax credit was sustained.

Final Conclusion: The writ petitions were dismissed. The Court declined to interfere with the assessment orders for the relevant periods because the findings treating the underlying agreement and transaction documents as not genuine remained uncontroverted.

Maintainability of writ petition despite statutory appellate remedy - Delay in filing statutory appeal under GST - Sufficient cause - Statutory Pre-deposit - HELD THAT: - The Court, having regard to the facts and circumstances placed before it, held that the matter should be pursued before the appellate authority instead of being examined in writ jurisdiction. It therefore permitted the petitioner to file an appeal within the time granted, along with the delay condonation application and statutory pre-deposit, leaving it open to raise all grounds in law and on facts before the appellate authority. The Court further directed that the appellate authority should consider the question of delay on the reasons stated in the condonation application and, if satisfied, decide the appeal on merits. [Paras 6]

The writ petition was disposed of with liberty to file a statutory appeal within two weeks; till then, no coercive steps were to be taken pursuant to the impugned garnishee notices.

Final Conclusion: The Court did not adjudicate the challenge on merits and relegated the petitioner to the statutory appellate remedy. Liberty was granted to file the appeal with a delay condonation application and statutory pre-deposit, with interim protection against coercive recovery for the limited period granted.

Levy of GST - Contractual reimbursement of incremental GST on works contracts - Limits on judicial directions affecting statutory GST compliance - Writ petitioners claimed that they had entered into works contracts/composite supply contracts with the appellants prior to the rollout of the GST regime on 01.07.2017 and thereafter

Incremental GST liability under pre-GST or transitional works contracts - Statutory scheme governing GST returns, interest, penalty and limitation -HELD THAT: - The Court held that the controversy raised by the writ petitioners was confined to reimbursement of the incremental tax burden as between the contractors and their employers under the contracts. That contractual dispute could not alter the statutory scheme governing levy, assessment, recovery and enforcement of GST. Since liability under the GST enactments must be determined strictly in accordance with the relevant statutes, no direction could be issued permitting revised returns contrary to statute, nor could plenary relief be granted waiving interest, penalty or limitation under the GST laws. [Paras 10, 11, 12]

The impugned order was set aside to the extent it incorporated directions affecting GST compliance, returns, interest, penalty and limitation vis-a-vis the tax authorities.

Employer's liability to reimburse incremental GST under works contract - Distinction between contractual reimbursement and tax administration - HELD THAT: - The Court clarified that the claim for reimbursement of incremental GST was strictly inter se between the writ petitioners and the employers with whom they had entered into the contracts. In that context, the tax authorities had no role in the contractual reimbursement dispute, and directions concerning reimbursement could not be read as fastening any obligation on them. [Paras 12, 13, 14]

The reimbursement direction was construed as confined to the concerned employer, and the order was set aside insofar as it was treated as issuing directions to the tax authorities or the State.

Final Conclusion: The appeal was disposed of by limiting the scope of the Single Judge's order. The Court held that the dispute concerned only contractual reimbursement of incremental GST by the employers, and therefore any direction affecting GST returns, limitation, interest or penalty under the tax statutes could not be sustained against the State or the tax authorities.

Wrongful availment of Input Tax Credit (ITC) - Burden of Proof - Failure to consider material evidence of genuine supply - Genuineness of supply - Reasonable Opportunity of Hearing -HELD THAT: - The Court found that the record showed the supplier to be a registered person during the relevant period, that the invoices contained vehicle details, and that the petitioner had pointed out that the supplier arranged transport and had filed returns and paid tax in respect of the supplies. In these circumstances, a further examination of the genuineness of the supplies was required. Confirmation of the proposal merely because lorry receipts and weighment slips were not produced, without undertaking that examination, rendered the order unsustainable. [Paras 5, 6]

The impugned order was set aside and the matter was remanded for reconsideration, with liberty to the petitioner to produce additional documents and with a direction to pass a fresh order after reasonable opportunity of hearing.

Final Conclusion: The writ petition was disposed of by setting aside the order denying input tax credit and remanding the matter for fresh consideration. The reconsideration was directed to be undertaken after permitting the petitioner to place additional material on record and after affording a reasonable opportunity of hearing.

Legality of methodology adopted for determining profiteering in the real estate project - Project-wise computation -Additional input tax credit benefit - Commensurate reduction in prices - Recipient-specific restitution of profiteered amount - Interest on amount not passed on - Prospective operation of penalty provision - contravention of Section 171(1)

Whether the DGAP Report and the methodology adopted therein for determination of the benefit of additional ITC and computation of the profiteered amount are legally sustainable and correctly applied to the facts and circumstances of the present case? - HELD THAT: - The record demonstrates that the Respondent was issued notice during the course of investigation and was afforded adequate opportunity to participate in the proceedings. The Respondent furnished detailed replies, produced documentary evidence in support of its contentions and was granted access to the non-confidential record. No specific prejudice has been demonstrated to have been caused to the Respondent on account of the alleged procedural irregularities. It is well settled that a plea of violation of natural justice cannot be sustained in the absence of prejudice. Accordingly, the proceedings cannot be said to be vitiated on this ground.

Equally untenable is the contention that the proceedings have travelled beyond the scope of the original complaint filed by a single homebuyer. Section 171 of the CGST Act, 2017 casts an obligation upon every registered person to pass on the benefit of tax reduction or additional ITC to the recipients of the supply. The statutory enquiry is therefore directed towards examining whether such benefit has been passed on in respect of the relevant supply and is not confined solely to the individual complainant. Consequently, once an investigation is validly initiated, the DGAP is empowered to examine the position of all similarly situated recipients in the project. The investigation therefore, cannot be said to have exceeded its lawful scope.

The Tribunal held that Reckitt Benckiser India Pvt. Ltd. [2024 (1) TMI 1248 - DELHI HIGH COURT] recognises that no fixed formula governs all anti-profiteering cases and permits adoption of a fair and reasonable case-specific methodology. In real estate matters, the impermissibility identified by the High Court was confined to a turnover-based approach; the accepted approach is project-wise determination of savings and their allocation over the total area so that similarly situated homebuyers receive proportionate benefit. The DGAP's revised comparison of pre-GST and post-GST credit vis-a-vis purchase value, followed by area-based allocation, was therefore consistent with the High Court's directions. The Tribunal further held that the Standing Committee had validly formed a prima facie view for investigation, adequate opportunity had been given to the respondent, no prejudice was shown, the enquiry could validly extend to all similarly situated buyers in the project, and the time limits under the Rules were directory and did not vitiate the proceedings. [Paras 27, 28, 29, 30, 31]

The DGAP Report was upheld on methodology and all procedural and jurisdictional objections were rejected.

Whether the Respondent had derived any additional benefit of ITC consequent upon the implementation of GST with effect from 01.07.2017 in respect of the project “Gurgaon Greens”? - HELD THAT: - The Tribunal accepted the DGAP's finding that the respondent's credit ratio increased from the pre-GST position to the post-GST position, thereby yielding additional ITC benefit within the meaning of Section 171. It held that once additional ITC becomes available in the GST regime, the supplier must pass that benefit to recipients, and such benefit includes credit on both goods and input services. The contention that higher post-GST credit merely reflected higher tax incidence on inward supplies was rejected, as the material showed availability and utilisation of a higher quantum of credit for output tax liability. On verification of the respondent's records, the Tribunal found that credit had been given where substantiated, but the total benefit passed on still fell short of the statutory requirement. Since the obligation under Section 171 is recipient-specific, excess benefit passed to certain homebuyers could be adjusted only with those recipients and not set off against deficits owed to other homebuyers. [Paras 40, 41, 42, 43, 44]

The respondent was held to have contravened Section 171(1), and the balance amount remaining to be passed on to the identified eligible homebuyers was sustained as computed in the DGAP Report.

Interest on amount not passed on - Compensatory interest in anti-profiteering - HELD THAT: - The Tribunal held that Rule 133(3)(b) expressly authorised return of the amount not passed on together with interest at 18% from the date of collection of the higher amount until return or recovery. It treated such interest as compensatory, intended to restore to recipients the time value of money represented by the withheld benefit. The respondent's contention based on delay in the proceedings was rejected because the statutory liability to interest arises from retention of the benefit at the relevant time and is not extinguished by later culmination of proceedings. [Paras 46, 47, 48, 49, 50]

The respondent was held liable to pay interest at 18% per annum on the profiteered amount from the respective dates of collection till actual return or refund.

Whether, consequent upon the contravention of Section 171(1) of the CGST Act, 2017, the Respondent is liable for payment of interest and levy of penalty under the applicable provisions of the CGST Act, 2017? - HELD THAT: - The Tribunal found that the entire investigation period preceded the coming into force of Section 171(3A). Since a penal provision creates substantive liability, it cannot be applied retrospectively absent express legislative intent. The respondent was therefore liable only to pass on the amount not passed on together with interest, but not to penalty under the later-inserted provision. [Paras 52, 53, 54]

Penalty was held to be not leviable.

Final Conclusion: The Tribunal accepted the DGAP Report and held that the respondent had not passed on the full additional ITC benefit arising under GST to eligible homebuyers in the project. The balance amount not passed on was directed to be returned with interest at 18% per annum, while penalty was declined as the penal provision was not applicable to the period in question.

Validity of Reassessment proceedings - escapement of income was founded on presumptions or direct material relating to the petitioner - Reason to believe for reopening assessment - Reopening based on group concern material - Reopening of the completed assessment on the basis of material relating to a sister concern and a presumed cash component in the petitioner's sales -

HELD THAT: - The Court held that the reassessment was founded on presumptions and surmises. The alleged escapement was computed by assuming that the petitioner had also received cash amounting to 50% of the recorded sale consideration merely because unaccounted receipts were alleged in the case of M/s. Skyline Enterprises.

The only connecting factor noted was that one of the petitioner's directors had a profit-sharing interest in that firm, and an Excel file relating to that firm's project was found in his Gmail account. Such material did not furnish a valid basis to infer that the petitioner itself had received on-money. Since the reopening proceeded on a presumed parallel practice rather than material showing escapement in the petitioner's own case, the notice could not be sustained. [Paras 9, 10, 11]

The impugned notice under section 148 was quashed and the writ petition was allowed.

Final Conclusion: The High Court held that the reassessment notice was based only on assumptions drawn from the affairs of a sister concern and not on material establishing escapement of income in the petitioner's own case. The notice was therefore quashed.

Nature of expenditure - Revenue versus capital expenditure - Market research expenditure - Enduring benefit test - Consistency in tax treatment

Whether Market research expenditure incurred for studying consumer behaviour, feedback, and marketing strategy in the ordinary course of business held to be revenue expenditure or capital expenditure? - HELD THAT: - The Court accepted the Tribunal's finding that there was no dispute as to the nature of the expenditure or that it was incurred for business purposes. The Tribunal had found that the expenditure was incurred in the normal course of business to understand consumers, their habits, reactions, and feedback on products, through engagement of agencies for market research activities, with a view to improving marketing strategy and thereby increasing sales and profits. On that factual appreciation, the mere circumstance that such expenditure could assist in brand awareness or future business advantage did not render it capital in nature.

The Court further held that reliance on CIT V/S Glenmark Pharmaceuticals Ltd [2013 (1) TMI 488 - BOMBAY HIGH COURT] was proper, the facts being similar, and also agreed that the Revenue's consistent allowance of the same expenditure as revenue expenditure in earlier assessment years supported the conclusion. [Paras 5]

The Tribunal was right in deleting the disallowance and in treating the market research expenditure as revenue in nature.

Final Conclusion: The appeal was dismissed, the Court holding that no substantial question of law arose from the Tribunal's finding that the assessee's market research expenditure was revenue in nature.

Scope of assessment u/s 153A in unabated assessments - Incriminating material found during search - Addition under section 69A for foreign bank accounts - Ownership as a condition for unexplained money addition

Unabated assessment u/s 153A - Search-related incriminating material - Base Note as foundation for addition - whether Assessment under section 153A for Assessment Year 2006-07 could not include additions based solely on the Base Note where the assessment had attained finality and no incriminating material relating to the additions was found during search? - HELD THAT: - The Court held that, on the admitted facts, no assessment proceeding for the relevant year was pending on the date of search and the earlier processing under section 143(1) had become final, with the result that the assessment was unabated. In such a case, the power under section 153A could be exercised only on the basis of incriminating material found during the course of search. The additions regarding the HSBC Geneva accounts were founded only on the Base Note received from the French Government, which was already available with the Revenue and was not material found in the search. Applying the law as settled in Abhisar Buildwell (P) Ltd.[2023 (4) TMI 1056 - SUPREME COURT] and followed Milan Kavin Parikh [2025 (12) TMI 355 - BOMBAY HIGH COURT] the Court held that in respect of completed or unabated assessments, no addition can be made under section 153A in the absence of incriminating material unearthed during search. [Paras 19, 20, 22]

The challenge to the Tribunal's view on the scope of section 153A failed, and questions (A) to (C) were held not to raise any substantial question of law.

Section 69A unexplained money - Ownership of foreign bank account balances - Burden on Revenue to establish ownership - HELD THAT: - The Court held that the first requirement of section 69A is that the assessee must be found to be the owner of the money or valuable article sought to be taxed. On the findings accepted by the Court, the bank accounts stood in the names of White Cedar Investments Ltd. and Ruby Enterprises Inc.; the bank had confirmed that the assessee neither visited nor opened or operated those accounts; and the material placed through letters and statements explained the investment through the Estate of Late Mr. Ramniklal Mehta and White Cedar Investments Ltd. The Revenue, therefore, failed to discharge the threshold burden of proving ownership in the assessee. In that view, the Tribunal was justified in deleting the additions under section 69A, and the factual findings supporting that conclusion were not shown to be perverse or controverted by the Revenue. [Paras 21, 22]

The deletion of the additions under section 69A was upheld, and question (D) in one appeal and the question in the companion appeal were held not to give rise to any substantial question of law.

Final Conclusion: Both appeals filed by the Revenue were dismissed. The Court held that, for the unabated assessment year in question, additions under section 153A could not be made without incriminating material found during search, and that the additions under section 69A were unsustainable because the Revenue failed to establish that the assessee owned the foreign bank account balances.

Substantial question of law under section 260A - Concurrent findings of fact - Allocation of employee benefit expenses to agricultural activity

Whether Tribunal's affirmation of proportionate allocation of employee benefit expenses to agricultural activity did not give rise to any substantial question of law? - HELD THAT: - The Court held that the Tribunal had recorded a finding of fact, while affirming the orders of the lower authorities, that the assessee had not produced supporting evidence to justify the salary and wages allocated by it to agricultural activity. Since the impugned determination rested on concurrent factual findings regarding the adequacy of evidence and the correctness of expense allocation, the matter did not warrant interference in appeal under section 260A. The High Court declined to re-enter the factual arena merely because the Tribunal had examined the details while acting as the final fact-finding authority. [Paras 5, 6]

No substantial question of law arose from the Tribunal's order, and the challenge to the allocation of employee benefit expenses failed.

Final Conclusion: The High Court dismissed the appeal, holding that the controversy regarding allocation of employee benefit expenses to agricultural activity was concluded by concurrent findings of fact and did not raise any substantial question of law under section 260A.

Revisional jurisdiction under section 263 - Hindsight reliance on consequential assessment order - De novo remand - whether Tribunal could not rely on the assessment order passed pursuant to the Principal Commissioner's order under section 263 while deciding the validity of the assumption of revisional jurisdiction under that very order? - HELD THAT: - The Court held that the correctness of the Principal Commissioner's exercise of revisional jurisdiction had to be examined on the basis of the material relevant to that order itself. Since the Tribunal justified the assumption of jurisdiction under section 263 by referring to the later assessment order passed by the Assessing Officer pursuant to the revisional direction, it adopted an impermissible hindsight approach.

On that ground alone, and without examining the merits of the controversy under section 263, the Tribunal's order was quashed and the appeal before it was directed to be heard afresh after giving opportunity to both sides. [Paras 7, 8]

Question D was answered in favour of the assessee; the Tribunal's order was set aside and the matter was remanded for fresh decision de novo.

Final Conclusion: The High Court held that the Tribunal erred in sustaining the revisional action under section 263 by relying on a subsequent assessment order made in consequence of that very revisional order. Without deciding the merits of the section 263 controversy, it set aside the Tribunal's order and remanded the appeal for fresh adjudication.

Maintainability of appeal on factual findings - Interference with Tribunal's appreciation of evidence - Substantial question of law - Reversal of Commissioner (Appeals) on factual appreciation - addition on the basis of the partner's statement recorded during search proceedings

Whether challenge to the Tribunal's reversal of the Commissioner (Appeals) on the addition based on the partner's statement did give rise to a substantial question of law? - HELD THAT: - The Court found that the Tribunal had undertaken a detailed consideration of the addition, including the reasoning of the Commissioner (Appeals), the factual distinction drawn from ACIT v. Shyamlal Developers [2006 (9) TMI 633 - GUJARAT HIGH COURT] and the circumstance that the disclosure relied upon by the Assessing Officer had not been retracted before filing of the return. In view of that detailed factual discussion by the Tribunal, the grievance that the Tribunal reversed the Commissioner (Appeals) without cogent reasons or without appreciating the record was treated as a purely factual dispute. The Court therefore declined to examine the matter under appellate jurisdiction meant for substantial questions of law. [Paras 5, 6]

Question (iii) was declined as involving only factual appreciation, and no interference was warranted.

Final Conclusion: The Court declined to answer the only surviving question on the ground that it raised merely a factual controversy, the Tribunal having given detailed reasons while reversing the Commissioner (Appeals). The other two questions were not pressed, and the appeal was dismissed.

Revision for excess depreciation claim on Windmill - Twin conditions u/s 263 - HELD THAT: - The Court accepted that the assessment order was erroneous in having allowed depreciation at 80% instead of 15%. It nevertheless held that revision could not be invoked because the Tribunal had recorded findings of fact that, even if depreciation were restricted to 15% for the year under consideration, there was no taxable income on account of business loss, and even up to the year in which the Windmill was sold there was no positive income chargeable to tax.

Since the assessee had also offered short-term capital gains on sale of the Windmill in assessment year 2019-20, the Tribunal was justified in holding that the requirement of prejudice to the interests of the Revenue, in addition to error, was not satisfied. [Paras 6, 7]

The Tribunal was right in quashing the revision order, and no substantial question of law arose.

Final Conclusion: The appeal was dismissed. The Court held that, though the assessment contained an error in the rate of depreciation allowed, the absence of any prejudice to the Revenue on the facts found by the Tribunal barred revision under section 263.

Writ maintainability against reassessment - Alternative efficacious remedy - Challenge to reopening after completion of assessment

HELD THAT: - The Court held that once the reassessment proceedings had culminated in an assessment order, the assessee could not seek to invalidate that order in writ jurisdiction by reverting to the earlier notice and contending that the threshold under the extended period for reopening was not met. It emphasised that the statutory expression permitting reopening where escaped income is likely to amount to the prescribed threshold shows that final quantification emerges only on completion of assessment, and a subsequent determination of a lower figure does not by itself nullify the notice.

As the Act provides a complete appellate mechanism against the reassessment order, and no exceptional circumstance such as violation of natural justice or action dehors the statute was shown, the writ remedy was declined. [Paras 8, 9, 10]

The assessee was relegated to the statutory appeal, and the writ petitions were rejected.

Final Conclusion: The High Court declined to entertain the writ petitions and held that the challenge to the reassessment proceedings and consequential assessment order must be pursued through the statutory appellate remedy. Finding no exceptional ground to bypass that remedy, it rejected the petitions.

Revision u/s 263 - Limited scrutiny under CASS - Twin conditions of erroneous and prejudicial order - Principal Commissioner invoked revisional jurisdiction against the assessment completed in limited scrutiny on the ground that income disclosed during survey ought to have been taxed differently - HELD THAT: - The Court accepted the Tribunal's finding that the case was selected for limited scrutiny, that the assessee had disclosed the survey declaration and furnished details in response to notice under section 142(1), and that the Assessing Officer completed the assessment after considering those materials.

Applying the principle in Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME COURT] and Arvind Jewellers.[2002 (7) TMI 50 - GUJARAT HIGH COURT] the Court held that section 263 can be exercised only where the assessment order is both erroneous and prejudicial to the interests of the Revenue; mere disagreement by the Principal Commissioner with the conclusion reached by the Assessing Officer on the same material is insufficient. In the facts found by the Tribunal, no error justifying revision was made out, and therefore the Tribunal was justified in quashing the revisional order. [Paras 6, 7]

The order under section 263 was rightly set aside and no substantial question of law arose from the Tribunal's order.

Final Conclusion: The High Court held that, on the facts found by the Tribunal, the assessment order in limited scrutiny could not be treated as erroneous and prejudicial merely because the Principal Commissioner preferred a different view on taxation of the survey disclosure. No substantial question of law arose, and the Revenue's appeal was dismissed.

Substantial question of law u/s 260A - Findings of fact in search assessment additions - Composite appellate findings in search assessment - Unaccounted advances and cash receipts - additions sustained for unaccounted advances received from two parties - HELD THAT: - The Court held that the Commissioner (Appeals) and the Tribunal had passed common orders after considering the entire material arising from the search and had taken a composite view of the transactions across the relevant years. Mere absence of separate elaborate reasoning by the Tribunal for the year under consideration was not, by itself, a ground to remand the matter, particularly when the Tribunal had affirmed the factual findings of the Commissioner (Appeals) and the assessee had not pursued challenge in the same manner for the other years covered by the common order.

The controversy in the appeal arose from appreciation of seized material and concurrent findings on the additions, and therefore remained within the domain of findings of fact, not giving rise to a substantial question of law under Section 260A. [Paras 15, 16]

The appeal for A.Y. 2010-11 was dismissed as no substantial question of law arose from the Tribunal's common order.

Final Conclusion: The High Court held that the impugned additions for A.Y. 2010-11 were affirmed on concurrent findings of fact based on the search material and the composite appellate orders. No substantial question of law arose under Section 260A, and the appeal was dismissed.

Book profit under MAT - Depreciation on revalued assets - Auditor's qualification note - depreciation on the enhanced value of revalued fixed assets while computing book profit denied merely because the statutory auditor had noted that revaluation of some plant and machinery was selective and not in conformity with Accounting Standard AS-10 - HELD THAT: - The Court held that the Tribunal proceeded on an erroneous premise in treating the auditor's note as meaning that the book results were not approved or that the profit and loss account did not present a true and fair view. Once the audited accounts complied with the requirements of the Companies Act and were certified under the statutory audit framework, the AO could not go behind the book profit except to the limited extent permitted under the MAT provisions.

A note by the auditor regarding selective revaluation did not, by itself, disqualify the certified accounts or justify reduction of depreciation on the revaluation component from book profit. Tribunal was therefore not justified in distinguishing the assessee's earlier years, which had already been decided on the same principle, and in restoring the assessment solely on the strength of the auditor's note. [Paras 13, 15, 16, 17, 18]

The substantial question was answered in favour of the assessee; the Tribunal's view was reversed and the order of the CIT(A) was restored.

Final Conclusion: The Court held that the Tribunal erred in denying depreciation on the revaluation component while computing book profit for MAT merely on the basis of the auditor's note. The appeal was allowed, the substantial question was answered in favour of the assessee, and the order of the CIT(A) was restored.

Approval u/s 80G for trust having charitable and religious objects - Failure to examine 5% religious expenditure threshold - Commissioner rejected the application solely because some objects were religious - whether expenditure on religious purposes exceeded the statutory threshold?

HELD THAT: - The Court accepted the Tribunal's factual finding that the Commissioner had not called for or examined the material necessary to determine whether the trust had utilized more than 5% of its total income towards religious purposes. The determinative principle applied was that, before denying approval on the ground that the trust had religious objects or incurred expenditure of a religious nature, the authority had to address the statutory threshold recognised under section 80G(5B). Since that aspect had not been analysed and the Tribunal had only restored the matter for fresh consideration and verification, no infirmity arose in the Tribunal's order and no substantial question of law could be said to arise. [Paras 5, 6]

The remand directing fresh examination of the application with reference to the 5% limit on religious expenditure was upheld, and the Revenue's appeal was dismissed for absence of any substantial question of law.

Final Conclusion: The High Court held that the Tribunal had merely directed a fresh examination of the trust's claim for approval under section 80G after verification of the statutory limit relating to religious expenditure. As the Commissioner had not undertaken that exercise, no substantial question of law arose and the Revenue's appeal was dismissed.

Limitation for cancellation of registration - Jurisdiction of Principal Commissioner (Central) to cancel registration after transfer of case - Inapplicability of section 12AA after 1-4-2021 - Specified violation under section 12AB(4) - Violation of section 13(1)(c) and cancellation of registration - Skill development as education - Incidental business activity of charitable institution

Limitation for cancellation of registration - First notice under section 12AB(4)(i) - Whether cancellation order was not barred by limitation? - HELD THAT: - The Tribunal held that the limitation under section 12AB(5) runs from the end of the quarter in which the first notice under section 12AB(4)(i) is issued by the Principal Commissioner or Commissioner. The date of survey under section 133A or the date of an internal proposal for cancellation could not be substituted for the statutory trigger expressly provided in section 12AB(5). Since the first show-cause notice was issued on 10-2-2025, the period of six months had to be computed from the end of the quarter ending March 2025, and the order passed on 29-9-2025 was within time. [Paras 47]

The objection that the order was time-barred was rejected.

Jurisdiction of Principal Commissioner (Central) after transfer under section 127 - CBDT notifications on exemption and central jurisdiction - whether Principal Commissioner (Central) had jurisdiction to cancel the registration after the case stood transferred to the Central Circle? - HELD THAT: - On a conjoint reading of CBDT Notification Nos. 52/2014, 50/2014 and 70/2014, the Tribunal held that the jurisdiction of the Commissioner (Exemptions) is confined to exempt entities assessed or assessable by the specified field charges, and does not extend to cases assigned under section 127 to Assessing Officers subordinate to the Principal Commissioner (Central). Once the assessee's case was transferred to the Central Circle, the Principal Commissioner (Central) acquired authority to exercise all powers and perform all functions under the Act in relation to that case, including cancellation of registration. [Paras 60, 62]

The challenge to the jurisdiction of the Principal Commissioner (Central) failed.

Inapplicability of section 12AA after 1-4-2021 - Invalid notice under discontinued provision - whether notices issued and the cancellation made under section 12AA(3) and 12AA(4) after 1-4-2021 were invalid? - HELD THAT: - The Tribunal held that section 12AA(5) expressly provides that nothing contained in section 12AA shall apply on or after 1-4-2021. Consequently, after that date, no notice could be issued and no order could be passed under section 12AA(3) or section 12AA(4). Since both the show-cause notices and the impugned order invoked those provisions after 1-4-2021, the action to cancel the earlier registration by resort to section 12AA was without authority of law and liable to be quashed. [Paras 79, 80, 82]

The notices under section 12AA(3) and 12AA(4) and the consequential cancellation under those provisions were quashed.

Specified violation under section 12AB(4) - Pre-1-4-2022 conduct - whether alleged HUF India sham billing transactions up to December 2020 could sustain cancellation under section 12AB(4)? - HELD THAT: - The Tribunal accepted the legal objection that the concept of specified violation was introduced in section 12AB(4) with effect from 1-4-2022. Since the alleged transactions with HUF India Pvt. Ltd. related to an earlier period, they could not be treated as specified violations for invoking cancellation under section 12AB(4). The Tribunal therefore held that assumption of jurisdiction under section 12AB(4) on the basis of such pre-amendment conduct was not in accordance with law. [Paras 102, 103, 104, 106, 107]

Cancellation based on the HUF India transactions was held unsustainable under section 12AB(4).

Violation of section 13(1)(c) and cancellation of registration - Specified violation under section 12AB(4) - Alleged benefits to related persons and related concerns justification for cancellation of registration - HELD THAT: - The Tribunal held that allegations concerning reimbursement of personal expenses, salaries, loans and advances, and repair or maintenance expenses were, at best, matters for assessment and denial of exemption to the extent warranted; they did not by themselves fall within the statutory definition of specified violation for cancellation under section 12AB(4). The Tribunal also found that some allegations were unquantified or unsupported, including the presumption that employees on the assessee's payroll were working for group concerns, and that maintenance of the office premises used by the assessee without payment of rent could not, on the facts recorded, be treated as a ground for cancellation. It was further held that the statute does not draw any distinction between minor and major violations of section 13(1)(c) for the purpose of cancellation, and that such alleged diversions are to be dealt with by proportionate denial of exemption rather than withdrawal of registration. [Paras 160, 161, 163, 164, 166]

Cancellation on the footing of alleged violations of section 13(1)(c) or section 13(1)(d) was set aside.

Hotel and restaurant activity incidental to skill development - Incidental business activity of charitable institution - whether hotel and restaurant activity carried on under the government-linked arrangements was established to be a commercial activity alien to the assessee's objects? - HELD THAT: - The Tribunal found that the activity was carried on under memoranda of understanding with Maharashtra government undertakings for hospitality training and that most of the surplus, if any, was contractually payable to those entities, while deficits were borne by the assessee. On the material produced, the activity could not be treated as running a hotel or restaurant on commercial lines independent of skill development. The Tribunal also held that the letter relied upon by the Principal Commissioner related to a different arrangement and had not been properly appreciated. [Paras 172, 173, 174]

Cancellation on the ground of hotel or restaurant activity was held unjustified.

Cash stipend payments - Procedural non-compliance with apprenticeship guidelines for cancellation of registration - HELD THAT: - The Tribunal held that even if payment of stipend in cash to some trainees was contrary to NAPS guidelines, the lapse was procedural in character. In the absence of material showing action by the concerned department or material sufficient to negate the genuineness of the assessee's activities, such cash payments could not be treated as a valid basis for cancellation of registration under section 12AA(3), section 12AA(4) or section 12AB(4). [Paras 179, 180]

Cancellation on the ground of cash stipend payments was set aside.

Skill development as education - Facilitator and third-party aggregator functions - whether assessee's skill development and apprenticeship training activities were charitable and fell within education or to be treated as mere manpower supply or facilitation? - HELD THAT: - The Tribunal examined the assessee's objects, its appointment under NEEM and NAPS arrangements, the agreements with industry partners, the approved curricula, the employment of full-time faculty, the training calendars and the conduct of theoretical and basic training. On that material, it held that the assessee was not merely mobilising candidates or acting as a conduit for compliance, but was engaged in structured skill development and training activities. The use of business associates for mobilisation did not establish violation of the governing schemes, and contractual labour placement or salary benchmarking services, in the factual setting found by the Tribunal, were treated as aligned with or incidental to the assessee's skill-development objects. The statement proposing surrender of registration was held to rest on an incorrect factual premise regarding the so-called Learn and Earn Scheme and could not support cancellation. [Paras 229, 230, 231, 232, 233]

The finding that the assessee was not carrying on charitable or educational activities was reversed.

Final Conclusion: The Tribunal held that the Principal Commissioner (Central) had jurisdiction and that the order was within limitation, but set aside the cancellation of registration on the merits. It held that action under section 12AA after 1-4-2021 was invalid, that pre-1-4-2022 conduct could not be treated as specified violation under section 12AB(4), and that the assessee's skill-development activities were charitable in nature; the registration was directed to be restored.

Exemption of compensation under BSNL Voluntary Retirement Scheme-2019 - Retrenchment compensation exemption - Leave encashment exemption on retirement

BSNL VRS-2019 compensation exemption - Retrenchment compensation - Government-approved voluntary retirement scheme - Compensation received under BSNL Voluntary Retirement Scheme-2019 entitlement to exemption under section 10(10B) - HELD THAT: - The Tribunal recorded that it was undisputed that the assessee had received compensation under BSNL VRS-2019 on voluntary retirement from BSNL. Finding the facts to be identical to those considered in an earlier co-ordinate Bench decision Jayeshkumar Tulsidas Sutaria [2026 (2) TMI 930 - ITAT AHMEDABAD], it followed that view and held that compensation received under the Government-approved restructuring scheme was to be treated as eligible for exemption u/s 10(10B). On that basis, the amount received under the scheme could not be brought to tax, with consequential refund of tax deducted or paid thereon. [Paras 9]

The assessee was held entitled to exemption for BSNL VRS-2019 compensation u/s 10(10B), subject to verification, and the receipt was directed not to be taxed.

Leave encashment exemption - Statutory limit under section 10(10AA) - CBDT notification limit - HELD THAT: - On leave encashment, the Tribunal held that the claim had to be examined in the light of the facts on record and the CBDT Notification dated 24.05.2023. It therefore directed the AO to verify the claim and allow exemption in accordance with the statutory ceiling prescribed under section 10(10AA). [Paras 9]

The Assessing Officer was directed to verify and allow exemption on leave encashment as per the statutory limit under section 10(10AA).

Final Conclusion: Both appeals were allowed. The compensation received under BSNL VRS-2019 was held exempt under section 10(10B), subject to verification of eligibility, and the leave encashment claim was directed to be examined and allowed in accordance with section 10(10AA) and the applicable notification for both assessment years.

Penalty u/s 270A - under-reported income - Non-filing of return and levy of penalty - Bona fide explanation excluding under-reported income-Voluntary disclosure during reassessment

HELD THAT: - The Tribunal found that the assessee's non-filing of return was explained by a plausible and bona fide belief that tax had already been deducted at source on the incomes reflected in Form 26AS. During reassessment, the assessee furnished the computation of income, voluntarily admitted the income ultimately assessed, and discharged the corresponding tax liability before completion of assessment. Save for the denial of Chapter VI-A deduction for want of supporting evidence and the addition u/s 69A, there was no variation between the income offered and the income assessed; and the addition under section 69A had in any event been deleted in the quantum proceedings.

On these facts, the Tribunal held that section 270A(6)(a) applied, since the assessee had offered a bona fide explanation and had not concealed material facts. The minor variation arising from disallowance of deduction could not, by itself, justify penalty for under-reporting of income. [Paras 8, 9]

The case was held to fall within the statutory exception under section 270A(6)(a), and the penalty under section 270A was deleted.

Final Conclusion: The Tribunal held that the assessee's explanation for non-filing of return was bona fide and that the case was covered by the exception in section 270A(6)(a). The penalty levied for under-reporting of income was therefore held to be unsustainable and was deleted.

Reduction of penalty quantum under customs law - Penalty on company officers acting in official capacity - Vicarious liability of company officers - acts of commission and omission - import and export transactions - Principles of natural justice

Whether, the Tribunal was justified in reducing the penalty on Chairman and Managing Director despite having upheld the acts of commission and omissions on their part ? - HELD THAT: - The Tribunal has exercised its discretion to reduce the penalty which was levied by order-in-original on the ground that penalty is liable to be imposed on the person who does or omits to do any act which act or omission renders goods liable to confiscation or abets the doing or omission of such an act under Sections 112 and 114 of the Act respectively.

The Court held that the Tribunal had upheld the applicability of penalty under Sections 112 and 114 and had only reduced the quantum on the view that the penalty imposed by the adjudicating authority was on the higher side. Once the liability to penalty was maintained, the Tribunal's exercise of discretion in moderating the amount was treated as a factual determination. In the absence of perversity, mere reduction in quantum could not be interfered with in appeal as a substantial question of law. [Paras 7, 8]

The reduction of penalty on the Chairman and Managing Director was upheld.

Whether, the Tribunal was justified in setting aside the penalty on the officers of the company, namely, Mr. B.L. Dhaluka and Mr. Dinesh Thakur, despite upholding their indulgence in malpractice ? - HELD THAT: - The Court accepted the Tribunal's factual finding that the concerned officers were employees carrying out company instructions and had no dealings with the impugned goods otherwise than in their official capacity. On that basis, the Tribunal was justified in holding that penalty under the Customs Act was not imposable on them personally. The finding being one of fact, no error warranting interference was made out. [Paras 9, 10]

The setting aside of penalty on the company officers was upheld.

Final Conclusion: The appeals were dismissed. The Court held that the Tribunal's reduction of penalty on the Chairman and Managing Director was a discretionary factual exercise not giving rise to any substantial question of law, and that deletion of penalty on the company officers was justified on the finding that they acted only in their official capacity as employees.

Royalty includibility in transaction value - Condition of sale for imported goods - Judicial consistency in identical valuation dispute - Addition of royalty payment to the value of imported raw materials for demanding differential customs duty - HELD THAT: - The Tribunal found that the controversy stood covered by its earlier order in the appellant's own case in [2024 (6) TMI 61 - CESTAT CHENNAI], which had already examined the same Technology Assistance Agreement and held that the royalty payment was not entirely related to the import of raw materials and was not shown to be a condition of sale of the imported goods. In the present appeal, the Revenue did not establish any change in facts, any new document, or any change in law warranting a different view. The earlier ratio, having settled the valuation issue, was therefore followed and the impugned demand based on addition of royalty could not be sustained. [Paras 6, 7]

The impugned order confirming differential duty, interest and penalty on the basis of royalty addition was set aside and the appeal was allowed with consequential benefits.

Final Conclusion: Following its earlier decision on the same valuation issue in the appellant's own case, the Tribunal held that the royalty could not be added to the transaction value of the imported raw materials in the absence of any change in facts or law. The demand of differential duty with interest and penalty was therefore set aside.

Application seeking rectification of mistake - Error apparent on record - Re-determination of customs duty

Rectification of calculation error in customs duty demand - Limited remand for re-quantification - HELD THAT: - The Tribunal found it to be an admitted position that, for some imported items, additional duty had been inadvertently added though not leviable, and in some other cases the applicable rate of duty had been wrongly taken. On perusal of the departmental Chart B, the Tribunal held that the quantum of duty re-determined in the original order, which had merged with the final order, required modification only in terms of those acknowledged errors. Since the defect was confined to computation of duty and stood admitted on record, rectification was confined to re-quantification on that basis.

The matter was remanded to the original adjudicating authority only for fresh re-determination of the quantum of differential customs duty in accordance with Chart B and the applicable law, without any further hearing.

Scope of rectification jurisdiction - Error apparent on record - HELD THAT: - The Tribunal observed that the grounds referred to by the appellant had already been dealt with in the final order and therefore disclosed no apparent error. As regards the grievance against the recording of admission on misdeclaration, the Tribunal held that such a challenge travelled beyond the scope of rectification under the statutory power to correct only an apparent mistake on record; a matter requiring argument or reappreciation could not be treated as such a mistake. For this principle, reliance was placed on Jyoti Industries [2000 (11) TMI 448 - CEGAT, NEW DELHI] and M/s. International Seaport Dredging Ltd. [2019 (10) TMI 1330 - CESTAT CHENNAI].

No rectification was granted on these grounds.

Final Conclusion: The rectification application was partly allowed. The Tribunal upheld the final order on all issues except the admitted computation errors in duty re-determination, for which a limited remand was made to the original adjudicating authority for fresh re-quantification.

Retracted statements - Evidentiary value of Panchnama - Diversion of export goods and misuse of the duty drawback scheme - Denial of cross-examination and effective hearing - Violation of Natural justice

Retracted statements - Corroborative evidence - Evidentiary value of Panchnama -HELD THAT: - The Tribunal held that the Revenue case was founded mainly on the statements of the principal noticees, both of which stood retracted at the first available opportunity while in judicial custody. Those retractions were neither rebutted, nor followed by further examination in adjudication. The Panchnama at the airport, which formed the foundation of the proceedings, was also held unreliable since the panch witnesses were not examined despite specific request, and the record itself supported the grievance that they were not present throughout the material events. The allegation that jewellery exported by the SEZ unit had been diverted and rerouted through the other exporter was found unbelievable and unsupported by cogent evidence, especially when the latter exporter had an existing export business, had received export remittances, and its supplier transactions stood supported by tax registration, returns and banking records. In the absence of independent corroborative material, the allegations were held vague and unsubstantiated. [Paras 7, 8, 10, 11]

The Tribunal rejected the evidentiary basis of the demand, confiscation and penalties and set aside the impugned order.

Cross-examination of relied-upon witnesses - Natural justice in adjudication - Ex parte adjudication - HELD THAT: - The Tribunal found that repeated written requests for cross-examination of the persons whose statements were relied upon, including the panch witnesses, were not decided by any reasoned order and the opportunity itself was denied. The adjudicating authority also failed to grant adequate hearing despite adjournment requests during the Covid-19 period, and the detailed written reply filed by the appellants was not considered while passing the order. The failure to state reasons for denying cross-examination and oral hearing, coupled with non-observance of the Board instructions regarding cross-examination and hearing through video conference, amounted to denial of proper opportunity and went to the root of the adjudication. [Paras 8, 9, 11]

The Tribunal held the adjudication to be in breach of natural justice and, on that ground also, set aside the impugned order.

Final Conclusion: The Tribunal set aside the common ex parte order in its entirety, holding that the case was unsupported by reliable evidence and stood further vitiated by denial of cross-examination and effective hearing. All four appeals were allowed with consequential benefits, including return of the seized gold and gold jewellery.

Penalty for abetment of attempted export of prohibited goods- non-compliance with the requirement of secure transport of export cargo under Regulation 6(1)(k) - knowledge that goods are liable to confiscation - Evidentiary burden - Vicarious liability - HELD THAT: - The Tribunal found that the only allegation against the appellant was breach of Regulation 6(1)(k) of the Handling of Cargo in Customs Area Regulations, 2009. The adjudicating authority had already examined that allegation and dropped the penalty proceedings for want of evidence showing active participation or positive collusion in the smuggling attempt. In the absence of any admissible evidence that the appellant had knowledge that the goods were liable to confiscation, the essential basis for penalty under Section 114 was not established. A mere omission relating to the secure transport obligation, without proof of such knowledge or abetment, was insufficient to sustain the penalty imposed in Revenue's appeal. [Paras 9, 10]

The penalty imposed under Section 114 of the Customs Act, 1962 was held unsustainable and was set aside.

Final Conclusion: The Tribunal held that breach of the secure transit obligation, by itself, did not justify penalty for abetment in the absence of admissible evidence showing knowledge that the goods were liable to confiscation. The impugned penalty was therefore set aside and the appeal was allowed.

Penalty for storing suspected smuggled goods - Corroboration of inculpatory statement - Lack of verification - Penalty on the appellants for storing foreign-origin goods in their house - HELD THAT: - The Tribunal found that the statement of the first noticee attributing ownership of the goods to the appellants remained uncorroborated, and no in-depth investigation had been undertaken to verify the appellants' consistent stand that the goods had been stored at the request of others. In the absence of supporting evidence, the penalty could not be sustained at the level imposed merely on the basis of that statement. At the same time, since the appellants had admittedly allowed the goods to be stored in their house without proper verification of their nature or ownership, a reduced penalty was held justified on that limited ground. [Paras 6, 7, 8]

The penalty was reduced and modified to a lesser amount on each appellant.

Final Conclusion: The Tribunal partly allowed the appeals and held that, in the absence of corroborative evidence connecting the appellants with smuggling, the confirmed penalties could not be maintained at the original level. A reduced penalty was, however, sustained because the appellants had permitted storage of the goods without proper verification.

Penalty on alleged intended recipient of smuggled goods - Non-cooperation with investigation - recipient of confiscated foreign-origin black pepper - Proportionality of penalty - HELD THAT: - The Tribunal found that the seized goods had been intercepted before reaching the appellant and that no specific offence was made out against him on the available record merely on the basis that he was stated to be the person who was to receive the goods and direct their delivery to buyers. The absence of any other claimant or appellant also left the nature of the appellant's contravention insufficiently established. However, the adjudication record showed that the appellant had been summoned several times and had failed to appear for recording of his statement, thereby delaying the investigation. On that basis, the Tribunal held that while the original penalty was not warranted in the normal course, a reduced penalty was justified in the interest of justice. [Paras 4, 5]

The penalty was reduced and confined to the amount considered appropriate for the appellant's non-cooperation with the investigation.

Final Conclusion: The Tribunal partly allowed the appeal by holding that the material on record did not justify the original penalty against the appellant as the alleged recipient of the goods, but sustained a substantially reduced penalty on account of his failure to cooperate with the investigation.

Limitation for show cause notice after seizure on smuggling allegation - Reason to believe for customs seizure - Burden of proof for inland seizure of unmarked gold - Evidentiary value of retracted custodial police statement - Confiscation and penalty for alleged smuggled gold - licit ancestral ownership of the gold

Limitation under Section 110(2) - Initial seizure by police on smuggling allegation -HELD THAT: - The Tribunal held that the first seizure on 01.11.2019 by the police was itself a seizure on the allegation of smuggling, as the Investigating Officer had stated before the Magistrate that the matter concerned smuggling and was outside police jurisdiction. The limitation under Section 110(2) therefore commenced from that date and not from the later transfer of custody to Customs. Since no notice was issued within six months and no extension was ever sought or granted, the outer statutory limit also expired before Customs drew the later panchnama. The subsequent show cause notice was therefore held to be void ab initio and without jurisdiction, and the proceedings founded on it were equally void. [Paras 10]

The show cause notice was held time-barred and invalid.

Reason to believe - Mechanical receipt of goods from police custody - HELD THAT: - The Tribunal held that reason to believe is the jurisdictional foundation of seizure and must exist prior to seizure on objective material. In the present case, Customs only received the gold from the police or treasury pursuant to a court order. No prior inquiry, intelligence, technical examination, statement, or contemporaneous satisfaction of the Customs officer was shown. The gold had no foreign markings and was intercepted at an inland check post, and general reliance on regional smuggling trends could not substitute specific material relating to the goods in question. The purported Customs seizure was therefore only a mechanical transfer of custody and not a lawful seizure in terms of Section 110(1). [Paras 11]

The purported Customs seizure was held void for want of the jurisdictional pre-condition of reason to believe.

Section 123 burden of proof - Foreign origin of unmarked gold - HELD THAT: - The Hon'ble Supreme Court in Ganesh Das Bhojraj, held that before the burden shifts to the person seized under Section 123, it must first be established that the goods are of foreign origin, and that mere suspicion is insufficient for this purpose. In Abdul Gani, the Hon'ble Supreme Court held that in the absence of foreign markings or documentation establishing foreign origin, the Section 123 presumption cannot be invoked by mere assertion.

The Tribunal, Kolkata in Shri Balwant Raj Soni [2023 (5) TMI 940 - CESTAT KOLKATA] has held that the burden under Section 123 of Customs Act, to prove that the gold is not smuggled one, does not lie on the Appellants as it involved town seizure of unmarked gold.

The Tribunal, Allahabad in Sarvendra Kumar Mishra [2021 (9) TMI 405 - CESTAT ALLAHABAD], has held that the gold in that case did not have any foreign markings and the onus would be on the department to prove the smuggled nature of the goods

The Tribunal held that the Department must first establish foreign origin before the statutory burden in respect of notified goods can shift. Here, the gold bars bore no foreign markings, were seized at an inland location, and the hallmarking report only recorded purity without indicating foreign origin. No forensic, documentary, or testimonial material establishing foreign origin was produced. On that basis, the adjudicating authority erred in treating the appellant as bound to prove that the gold was not smuggled. The Tribunal therefore held that Section 123 had no application to the facts of the case. [Paras 12]

The statutory presumption under Section 123 was held inapplicable.

Retracted custodial police statement - Licit ancestral ownership of gold - HELD THAT: - The Tribunal held that a statement recorded by the police while the appellant was under arrest could not be treated as evidence in Customs adjudication in the manner of a voluntary statement under Section 108. Since that statement was later retracted in subsequent voluntary statements before Customs and lacked independent corroboration, it could not sustain adverse findings. On the other hand, the purchase receipt relied upon by the appellant was not shown by any forensic authority to be forged or fabricated, and multiple statements of family members recorded under Section 108 consistently supported the claim of ancestral family ownership. As the Department produced no cogent rebuttal and the alleged supplier named in the police statement was never traced or examined, the Tribunal accepted the claim of licit ancestral ownership. [Paras 13, 14]

The police statement was discarded as without evidentiary value, and ancestral family ownership was held affirmatively proved.

Confiscation under Section 111 - Penalty under Sections 112 and 114AA - HELD THAT: - The Tribunal held that confiscation under Section 111 presupposed proof of importation or attempted importation in contravention of law, but the gold was seized at an inland road check post, had no foreign markings, and there was no proof of foreign origin, import, attempted import, or violation of any prohibition. The only basis for alleging smuggling was the retracted custodial police statement, which had already been rejected. Once confiscation failed, the foundation for penalty under Section 112 also failed. Penalty under Section 114AA was likewise held unsustainable because the Department did not establish that the purchase receipt was false or that it was deliberately used with knowledge of falsity, and oral testimony of family members could not attract that provision. The penalties on the family members were therefore also held untenable. [Paras 15, 16]

The order of confiscation and all penalties were set aside.

Final Conclusion: The Tribunal allowed the appeal in full, holding that the show cause notice was void for limitation, the subsequent Customs seizure lacked the required reason to believe, the burden under Section 123 never shifted, and the evidence relied upon by the Department was insufficient in law. The confiscation of the gold and the penalties imposed were accordingly set aside, with a direction for release of the gold.

Entitlement to the benefit of Notification No. 97/2004-Cus. for import of second-hand textile machinery under the EPCG Scheme -Absence of vintage restriction in customs exemption notification - Fulfilment of export obligation under EPCG Scheme - HELD THAT: - The Tribunal held that the imports were made under a valid EPCG authorisation issued by the DGFT and it was not the Revenue's case that the conditions of Notification No. 97/2004-Cus. were otherwise breached. It found that the department had produced no concrete evidence to establish that the machinery was more than ten years old, and in any event the notification itself did not prescribe any condition regarding the year of manufacture of second-hand machinery. The subsequent redemption of the EPCG licence by the DGFT on fulfilment of export obligation showed due compliance with the EPCG Scheme. Following the reasoning noticed from M/s. Devanshi Textiles[2024 (12) TMI 966 - CESTAT NEW DELHI], the Tribunal held that a restriction not found in the EPCG authorisation or the customs notification could not be imported by linking the case to the TUF Scheme. On that basis, the duty demand, interest and consequential penalties, including penalty on the Director, could not survive. [Paras 3, 4]

The exemption benefit was held to have been rightly availed, and the confirmed demand with interest and penalties was set aside.

Final Conclusion: The Tribunal held that the EPCG exemption for the imported second-hand textile machinery could not be denied by introducing a vintage restriction not found in the notification or authorisation, particularly when export obligation stood fulfilled and the licence had been redeemed by the DGFT. The impugned order was therefore set aside and the appeals were allowed.

Confiscation of transport vehicle for removal of imported goods without Out of Charge - Penalty on transporter for unauthorised removal from customs area

Confiscation of transport vehicle for removal of imported goods without Out of Charge - Redemption fine - HELD THAT: - The Tribunal found that the customs duty on the imported goods had already been fully discharged and that the importer had accepted responsibility for directing movement of the goods. The appellant, being the transporter, had acted on the instructions of the importer and the customs broker and there was no case that the vehicle carried contraband or that the goods were restricted or prohibited. Though movement without waiting for Out of Charge amounted to a contravention, the Tribunal held that the infraction was not so serious as to warrant confiscation of the vehicle. [Paras 6]

The confiscation of the vehicle and the consequential redemption fine were set aside.

Penalty on transporter for unauthorised removal from customs area - Penalty on the transporter for moving the consignment without obtaining Out of Charge documents - HELD THAT: - The Tribunal held that the appellant had admittedly moved the consignment without obtaining Out of Charge documents and had thereby committed a contravention. The fact that he acted on the directions of the importer and the customs broker did not completely absolve him, since the movement still took place in breach of the required customs procedure. At the same time, having regard to the circumstances, the Tribunal considered that the ends of justice would be met by reducing the penalty. [Paras 7, 8]

The penalty was sustained in principle but reduced.

Final Conclusion: The Tribunal partly allowed the appeal by setting aside confiscation of the vehicle and the redemption fine, while maintaining penalty on the transporter in a reduced amount.

Reasoned order in bank fraud classification-failure to consider the petitioner's defence under the RBI fraud directions- Compliance with the Master Directions on Fraud Risk Management - Reinitiation of fraud proceedings for the review period - Non-speaking order - Non-application of mind

Validity of the order declaring the petitioner as fraud - Non- compliance with the requirement of a reasoned order under the Fraud Master Circular of 2024 - HELD THAT: - The Court held that clause 2.1.1.4 of the Fraud Master Circular of 2024 mandates a reasoned order containing the relevant facts and circumstances relied upon, the submissions made against the show-cause notice, and the reasons for classification as fraud or otherwise. On examining the impugned order, the Court found that it merely set out the banking facilities, the NPA date, the appointment of the forensic auditor, and reproduced the forensic auditor's observations, but did not deal with the petitioner's defences or explain why they were unacceptable. The order was found to be almost identical to the show-cause notice and to contain only the final conclusion without reasoning. The Court therefore held that the order was wholly unreasoned and unsustainable. [Paras 12, 13, 14, 15]

The impugned order classifying the petitioner as fraud was quashed and set aside as being wholly unreasoned and contrary to the mandate of the Fraud Master Circular of 2024.

Reinitiation of fraud proceedings for the review period - HELD THAT: - Though the Court noted that, ordinarily, quashing of the order would permit the bank to restart the proceedings after considering the petitioner's defences, it declined such liberty in the facts of the case. The determinative consideration was that the petitioner was a director only for 1 month and 25 days during the review period, and the forensic audit report did not refer to any transaction during the period for which he remained a director. On that basis, the Court held that fraud proceedings against the petitioner for the review period forming the subject matter of the forensic audit report could not in any event be sustained. [Paras 16]

No liberty was granted to the bank to reinitiate proceedings for declaring the petitioner as fraud for the review period covered by the forensic audit report.

Final Conclusion: The writ petition was allowed. The order declaring the petitioner as fraud was set aside for failure to pass a reasoned order and, in the facts found by the Court, the bank was denied liberty to recommence fraud proceedings for the review period in question.

Proof of debts in insolvency - Claims before Official Assignee without decree - Pending proceedings against insolvent - Whether for making claim by the creditor with the official assignee is it mandatory that such a claim should be based only on the basis of a decree or final adjudication order ?

Claims before Official Assignee without decree - Inclusive meaning of creditor and debt - Proof of debts in insolvency - HELD THAT: - It is important to note that the role of the official assignee is not to accept the claim made by the creditor mechanically and without any verification or examination. Even if the insolvent agrees that the debt is payable to the creditor, the official assignee has to independently examine and verify whether such a debt is payable at all and if so, to what extent it is payable by the debtor to the creditor or by the insolvent to the creditor. If the official assignee is of the view that, for any reasons in law or on facts, the amount does not become payable to the creditor, then the official assignee is entitled to reject the same by giving reasons in writing and merely because the insolvent does not object to such a claim, it would not entitle the creditor to recover any dividend from the assets of the insolvent. There could be various reasons for the amount not becoming payable, which the official assignee has to examine on the facts of each case. The official assignee has to also examine whether there is any collusion between the insolvent and the creditor in this regard and take appropriate decision thereon. The blanket submission that once the insolvent agrees, the official assignee has to consider the claim of the creditor positively, cannot be accepted. This would also not be in the interest of the other creditors if it is found that the amount is not payable and/or due and payable to such a creditor whose debt the insolvent admits.

Section 47 of the Act provides for set off, it states that where there have been mutual dealings between an insolvent and a creditor proving or claiming to prove a debt then sum due from one party can be set off against sum due from the other party. The phrase “proving or claiming to prove a debt” clearly indicates that it would govern a case of a non-decree holder because if there is a decree then a debt is already proved and no further proof is required except in some cases as narrated in the decision in the case of Abdul Shakoor [1964 (9) TMI 72 - SUPREME COURT].

On a harmonious reading of the Presidency-Towns Insolvency Act, 1909, the expressions creditor, debt and liability are used in an inclusive and wide sense and are not confined to decree-holders. The scheme of the Act permits a non-decree holder creditor to initiate insolvency, participate in meetings of creditors, oppose protection, prove debts, question the insolvent, and share in dividends. Sections dealing with proof of debts, administration of property, distribution, set-off and dividends, read with the Second Schedule and prescribed forms, require proof of debt and not production of a decree as a condition precedent. The official assignee must therefore examine the proof independently, admit or reject it by a reasoned decision, and cannot refuse to entertain the claim merely because there is no decree. If the claim is rejected and requires fuller adjudication, the creditor may pursue appropriate proceedings with leave where required, but such possible future adjudication does not justify insisting on a decree at the threshold. [Paras 77, 78, 79, 80, 81]

The official assignee cannot insist that a creditor must first obtain a decree or final adjudication order before lodging a claim where no proceedings had been instituted before adjudication; the claim has to be examined on its own proof and dealt with by a reasoned order.

Pending proceedings against insolvent - No transfer of pending claims to Official Assignee - Retention of assets for undetermined debts -HELD THAT: - There is no provision in the Insolvency Act where all the pending proceedings before any forum can be transferred to the official assignee nor does the official assignee has the power of the Civil Court or any other forum for adjudication of the pending proceedings. It is the exclusive domain and jurisdiction of the forum before whom the proceedings are pending to adjudicate the same. Also matters pending before various specialised Forums can never be transferred to Civil Court. The Insolvency Court may request the forum for expeditious disposal keeping in mind the completion of the insolvency proceedings and distribution of dividend in accordance with the Act. Delegation of powers under section 6 would not include power to decide matters pending before other forums.

On adjudication order being passed, the official assignee may be sued by the name of the official assignee. This indicates that the proceedings post adjudication order have to be by making official assignee, a party. This supports the reasoning that pending matters have to be decided by the competent forum and not by official assignee and same can be considered for dividend distribution.

Sections dealing with stay of pending proceedings and the effect of adjudication show that pending suits or other proceedings do not stand transferred to the official assignee or the Insolvency Court for trial. The power to stay is discretionary, and the forum before which the proceedings are pending retains exclusive authority to determine them. The official assignee has no general power to assume the role of a civil court or specialised forum in adjudicating such pending disputes. In such cases, the creditor must inform the official assignee of the pending claim, and the official assignee should entertain it as a pending claim, retain or set aside sufficient assets while calculating dividends, and consider final payment on the basis of the eventual adjudication by the competent authority. Thus, absence of a decree on the date of lodging the claim is not a bar, though a final adjudication order becomes necessary at the stage of actual distribution in such pending-claim situations. [Paras 92, 93, 94, 95, 109]

A creditor with pending proceedings need not possess a decree when lodging the claim, but the official assignee must await the outcome before the competent forum, while preserving the claim appropriately for dividend distribution.

Precedential effect of adjudication order for all creditors - Per incuriam and overruled view - HELD THAT: - The Court held that the decisions in Mandvi Co-operative Bank Ltd. [2006 (10) TMI 528 - BOMBAY HIGH COURT], Ramavatar Gupta [2009 (1) TMI 957 - BOMBAY HIGH COURT] and the Division Bench decision in Akshay D. Thakkar [2021 (3) TMI 1494 - BOMBAY HIGH COURT] support the proposition that once an adjudication order is passed, insolvency proceedings continue for the benefit of all creditors, irrespective of whether the petitioning creditor has been settled. The order in Vikas Jhunjhunwala [2019 (3) TMI 2109 - BOMBAY HIGH COURT] was treated as confined to its facts and not as laying down any universal rule requiring a decree in every case. The decision in Amarpreet Kaur Chadha [2019 (6) TMI 1758 - BOMBAY HIGH COURT] was held incapable of supporting such insistence, particularly in view of the later binding Division Bench ruling and the observation in Manoj Arvindbhai Sukhadia [2025 (1) TMI 1838 - BOMBAY HIGH COURT] that Amarpreet Kaur Chadha stood overruled. Sarat Chandra Roy [1972 (1) TMI 122 - SUPREME COURT (LB)] was distinguished as dealing with continuation of insolvency after payment of the petitioning creditor and not with the right of a non-decree holder creditor to lodge a claim before the official assignee. [Paras 104, 105, 106, 107, 108]

The Court declined to follow decisions invoked to support a decree-only requirement and accepted the binding view that insolvency adjudication operates for the benefit of all creditors, not merely decree-holders.

Final Conclusion: The Court answered the reference by holding that the official assignee cannot insist, at the stage of lodging a claim, on a decree or final adjudication order as an inflexible pre-condition. A creditor may lodge and prove a claim without a decree, and where proceedings were already pending, the claim must be entertained subject to the result before the competent forum and appropriately accounted for at the stage of dividend distribution.

Maintainability of interlocutory applications - HELD THAT: - Certain interlocutory applications were heard; orders were reseved, with liberty to file additional judgments and rebuttal. The remaining applications were directed to be listed on the stated future date.

Alleged custodial assault during summons proceedings - Writ relief against alleged coerced statement - Denial of access to legal assistance while allegedly being subjected to physical torture - violative of Articles 21 and 22(1) of the Constitution and the principles governing the rights of persons summoned by investigating agencies - HELD THAT: - The Court noted that the petitioner had been summoned in the course of a lawful investigation and had ultimately appeared before the authorities. It held that the foundation of the writ petition was the allegation of physical assault, coercion and extraction of confession, but apart from the petitioner's assertions and medical documents subsequently relied upon, there was no independent contemporaneous material conclusively linking the alleged injuries to the proceedings of the relevant date. On the other hand, the respondents had specifically denied the allegations and relied on CCTV material, contemporaneous records and the incident report. The Court also treated as relevant the circumstance that no complaint of assault was made during the proceedings, no medical aid was sought at the premises and no immediate police complaint was lodged. Taking note of the respondents' stand that the CCTV footage showed the petitioner leaving the premises without visible facial injuries, the Court found no basis to grant the writ relief sought. [Paras 5, 6, 7, 8]

The challenge founded on alleged assault, coercion and forced confession was not accepted, and the writ petition was dismissed.

Final Conclusion: The Court declined to exercise writ jurisdiction on the petitioner's allegations of assault and coercion during summons proceedings, holding that no sufficient contemporaneous or independent material was shown to substantiate the claim. The writ petition was accordingly dismissed.

Provisional attachment under PMLA - Reason to believe - Show-cause notice under PMLA - Legality of the appellate tribunal's order setting aside the attachment in part and directing release of the properties - Interference in the appeal under Section 42 - Non-application of mind - Judicial propriety - HELD THAT: - The Court noted that the impugned Tribunal order formed part of a common order which had already been examined by a co-ordinate Division Bench in Vanpic Ports Private Limited [2022 (9) TMI 1287 - TELANGANA HIGH COURT] Following that decision, the Court accepted that the provisional attachment did not disclose a valid reason to believe as required for attachment under the PMLA, that the notice issued in the adjudication proceedings was held to have been issued mechanically without the requisite application of mind, and that such defects went to the root of jurisdiction. Since the earlier Division Bench had treated those defects as rendering the attachment and its confirmation illegal, null and void, and as the present appeals arose out of the same common Tribunal order on substantially identical facts, the Court found no fresh ground warranting a different view. On grounds of judicial propriety, and in the absence of any additional material strong enough to dislodge the earlier ruling, the same view was followed. [Paras 22, 23]

The appeals filed by the Enforcement Directorate were dismissed and the Tribunal's direction for release of the properties subject to indemnity bond was left undisturbed.

Final Conclusion: Following its earlier Division Bench decision on the same common Tribunal order and materially identical facts, the Court declined to interfere with the Tribunal's view that the attachment proceedings were vitiated by jurisdictional defects. The batch of appeals filed by the Enforcement Directorate was accordingly dismissed.

Statutory limitation for appeal - Works contract services - Condonation of inordinate delay - explanation based on the medical condition - Writ jurisdiction against time-barred appeal - discrepancy between the turnover reflected in the Income Tax Returns/Form 26AS and the turnover disclosed in the ST-3 returns and also alleging non-payment of service tax liability for certain periods - HELD THAT: - As seen from the record, the Order-in-Original was passed on 16.08.2023. Admittedly, the statutory appeal came to be filed only on 13.01.2025 after an inordinate delay of about seventeen months. The appellate authority, upon examining the statutory provisions governing limitation, dismissed the appeal holding that the delay was beyond the condonable period available under law. The said view is in consonance with the settled principle that where the statute prescribes a specific period of limitation together with a limited period for condonation, the appellate authority cannot assume jurisdiction to condone delay beyond the statutory limit, as noticed in Sambhu Synthetic Private Limited [2021 (4) TMI 118 - CESTAT NEW DELHI].

The Hon'ble Supreme Court in Pathapati Subba Reddy (Died) by Legal Representatives [2024 (5) TMI 1319 - SUPREME COURT], held that inordinate delay has to be properly and satisfactorily explained and that in the absence of sufficient cause, the writ jurisdiction cannot be invoked to overcome statutory limitation.

The appeal against the original adjudication order had been filed after a prolonged delay, and the explanation based on the medical condition of the petitioner's son was found not to constitute cogent and convincing justification for such inordinate delay. The Court further held that, in the absence of sufficient cause, its extraordinary jurisdiction under Article 226 could not be exercised to overcome the statutory bar of limitation or to revive a time-barred appeal. [Paras 7, 8, 9, 10]

The appellate authority was justified in dismissing the appeal as time-barred, and no interference in writ jurisdiction was warranted.

Final Conclusion: The writ petition was dismissed. The Court upheld the appellate order rejecting the statutory appeal as barred by limitation and declined to exercise writ jurisdiction to reopen the time-barred remedy.

Extended period of limitation and suppression - Reimbursement of electricity charges as consideration for service - Treatment of electricity as "goods" under sales tax legislation - show cause notice barred by limitation - CENVAT credit on employee welfare and personal use services - Interpretation of law - Demand relating to rent received on sub-lease of premises - Suppression with intent to evade - Terms “sub-contract” and “sub-lease” - Input service nexus - Natural justice - Actual prejudice

Extended period of limitation - Suppression with intent to evade tax - Sub-lease rent under renting of immovable property service - CENVAT credit demand under show cause notice - HELD THAT: - A ‘lease’ or ‘sub-lease’ is not defined in the Finance Act, 1994. Under Section 105 of the Transfer of Property Act, 1882, a lease is the transfer of a right to enjoy immovable property for a specified period in return for consideration. The essential feature of a lease is the transfer of possession and enjoyment of the property to the exclusion of others. A sub-lease arises when a tenant transfers this right to a sub-tenant. Rent involves two major elements: parting with possession and consideration for such possession. The concept of a sub-lease mirrors that of a lease. What is a lease between an owner and a tenant becomes a sub-lease when the tenant grants similar rights to another person. However, for the purpose of levy of Service Tax the renting of immovable property does not cover lease simpliciter, it covers the renting of immovable property or any other service in relation to such renting, for use in the course of or for furtherance of, business or commerce. The appellant, whose activity satisfies these criteria, would prima facie be covered by the levy.

Larger Bench Order in the case of Commr. of S.T., New Delhi Vs Melange Developers Pvt Ltd.[2019 (6) TMI 518 - CESTAT NEW DELHI-LB]. It would not be proper to cite an Order as a precedent by merely ‘matching the colour of one case against the colour of another’ ipse dixit, without examining the ratio of the judgment and its similarity to facts and law, which in this case are different. Merely because the prefix “sub” appears in the terms “sub-contract” and “sub-lease”, do not make the ratio of a case binding on the other. A sub-contractor performs work on behalf the main contractor, whereas a sublessee occupies the premises to further its own business/ commerce interests and pays consideration for such use. The roles of the parties in the two situations are fundamentally different: a sub-contractor provides services for consideration, whereas a sub-lessee receives the service and pays consideration. The two are therefore not comparable.

In the case of a sub-contractor, prior to the issue of the Master Circular in 2007, Boards Circulars held that Service Tax was not required to be paid by certain categories of sub-contractors, provided the principal had paid the Service Tax. Which was never the issue in this case of a sub-tenant. The Hon’ble Supreme Court in Union Of India & Anr. Vs Major Bahadur Singh [2005 (11) TMI 467 - SUPREME COURT], cited the words of Lord Dennings which have become locus classicus, that each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching the colour of one case against the colour of another. To decide, therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive.

In Apeejay [2026 (6) TMI 112 - CESTAT CHENNAI] held that the legal point which is claimed to be an ‘interpretation issue’, must be debatable and unresolved, due to the lack of a clarification or binding precedent at the time the lis arose, or a subsequent clarificatory circular being issued evidencing prior ambiguity, which affect the rights of parties in rem under the statute. No submissions showing ambiguity or a dispute on the taxability of rent received from a sub-leased property has been made before us. A mere reference to Sempertrans Nirlon [2017 (10) TMI 512 - CESTAT MUMBAI] does not help their cause and is without merit.

The Tribunal held that a plea of interpretational dispute cannot succeed by mere assertion and that the appellant's attempt to equate a sub-lease with a subcontracting arrangement was misconceived. Even so, the extended period under the proviso to section 73(1) could be invoked only on proof of fraud, wilful misstatement or deliberate suppression. The order-in-original merely treated non-disclosure in returns as suppression, without any positive act showing intent to evade tax, and the audit had not unearthed unrecorded transactions or deliberate withholding of information. On that basis, the extended period was held to be unavailable.

The service tax demand on rent from sub-leased premises and the CENVAT credit denial covered by the show cause notice were set aside as time-barred, and all penalties founded on the allegation of suppression were also set aside.

Electricity as goods - Reimbursement of electricity charges - Taxable value in renting transactions - HELD THAT: - In Kumbakonam Electric Supply Corporation Ltd. [1963 (9) TMI 43 - MADRAS HIGH COURT], held that electricity qualifies as "goods" under sales tax legislation. Rejecting the petitioner's argument that electricity cannot be traditionally possessed or moved, the Hon’ble High Court reasoned that because electricity can be transmitted, delivered, and consumed, it constitutes movable property under the Sale of Goods Act, 1930. The judgment was later noticed and affirmed by the Hon'ble Supreme Court in the case of Madhya Pradesh Electricity Board, Jabalpur [1968 (11) TMI 85 - SUPREME COURT]. Further, electricity is specifically recognized as "goods" under the Central Excise Tariff Act and various State VAT laws.

Therefore, collection or reimbursement of actual electricity charges based on units consumed cannot be treated as consideration for a service rendered in the renting arrangement. The issue did not involve any conflict between competing legal provisions but a wrong application of law to such recoveries. [Paras 7]

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

CENVAT credit on input services - Nexus with output service - Personal use or employee welfare exclusion - Whether the Appellant is eligible for CENVAT credit on services such as mobile phones for individuals, rent-a-cab, travel, group/vehicle insurance, vehicle maintenance, club membership, guest house, parking and housekeeping for the period from April 2007 to March 2011 (SCN) and April 2011 to March 2012 (SOD) ? - HELD THAT: - The Tribunal accepted that disputes over the admissibility of the various input services were interpretational in character, but on merits held that credit is available only where the service has a real and sufficient nexus with the output service and is not primarily for personal use or consumption of employees.

In Manikgarh Cement [2010 (10) TMI 10 - BOMBAY HIGH COURT], following Maruti Suzuki Ltd. [2009 (8) TMI 14 - SUPREME COURT], the Hon’ble Bombay High Court held that unless a nexus is established between the services rendered and the business carried on by the assessee, the benefit of CENVAT credit was not allowable. Further the expression ‘relating to business’ in Rule 2(l) of CCR, 2004 refers to activities which are integrally related to the business activity of the assessee and not welfare activities undertaken by the assessee. Post 01.04.2011 the definition of ‘input service’ was amended, primarily removing the phrase ‘activities relating to business’ and excluding certain specific services including services used primarily for personal use or consumption of any employee, from its definition.

Hence though the phrase ‘relating to business’ in Rule 2(l) of CCR, 2004 was deleted from the definition of ‘input services’, an assessee could avail of Cenvat credit if the input service satisfied the “means‟ part of the definition by having a real and sufficient nexus with the assessee’s output service, without being for the personal use or consumption of any of its employee.

Applying that test, it found no error in the appellate authority's segregation of eligible and ineligible services, and upheld the denial of credit on mediclaim covering family members, staff dining charges, anniversary expenses, vehicle maintenance, vehicle insurance, and membership or subscription expenses. The challenge based on vagueness of the notice was rejected for want of demonstrated prejudice. The quantified amount stated by the appellant was directed to be verified before recovery with interest, with a worksheet and hearing to be given if any quantification dispute remained. [Paras 8, 10]

The denial of CENVAT credit under the statement of demand, with applicable interest, was upheld subject to verification of quantification by the original authority.

Final Conclusion: The appeals were partly allowed. The demands on sub-lease rent and on the CENVAT credit covered by the show cause notice were held time-barred, the demand on electricity reimbursements was set aside on merits, the CENVAT credit denial under the statement of demand was sustained subject to verification of quantification, and all penalties were set aside.

Transfer of right to use goods - Supply of tangible goods service - Deemed sale and service tax exclusion - Possession and effective control - HELD THAT: - The Tribunal held that liability under the taxable entry for supply of tangible goods arises only where the goods are supplied for use without transferring right of possession and effective control. On examination of the lease deeds, it found that the machineries were placed at the lessee's premises for the agreed period, the lessee was entitled to use them freely for its own purposes, and during the subsistence of the lease the lessor could neither use the machineries nor assign their use to any other person. Applying the test laid down in Bharat Sanchar Nigam Limited [2006 (3) TMI 1 - SUPREME COURT], the Tribunal held that the transaction involved transfer of the right to use the machineries. Clauses regarding repairs, insurance, taxes, loss and damage were treated as insufficient to negate such transfer. The Tribunal also noted that VAT had been paid by treating the transaction as a deemed sale and, following earlier Tribunal decision in M/s Eastman Impex [2025 (11) TMI 1278 - CESTAT CHANDIGARH]; MSPL Ltd. [2022 (2) TMI 901 - CESTAT BANGALORE] Hon’ble Apex Court [2023 (2) TMI 1096 - SC ORDER], dismissed the appeal of the Department and upheld the order of the Tribunal; Universal Power Transformers Pvt. Ltd.[2025 (7) TMI 2037 - CESTAT BANGALORE] affirmed in principle, concluded that such leasing was not exigible to service tax under the category of right to use tangible goods service. [Paras 6, 8, 9, 11, 12]

The service tax demands confirmed in the impugned orders were unsustainable and all three appeals were allowed with consequential relief.

Final Conclusion: The Tribunal held that the machinery lease transactions involved transfer of the right to use, with possession and effective control passing to the lessees, and therefore did not fall within taxable supply of tangible goods service. All three impugned orders confirming service tax demand were set aside and the appeals were allowed with consequential relief.

Liability to service tax on supply of food and beverages - Non-air-conditioned portion of the restaurant situated in the same establishment as an air-conditioned portion - Interpretation of exemption entry using "other than" - Exemption structure under Notification No. 25/2012-ST as amended by Notification No. 03/2013-ST - Relevancy of Circular No. 173/8/2013-ST - Contemporanea Expositio - Severability of Restaurant Services

Liability to service tax on supply of food and beverages in the non-air-conditioned portion of the restaurant situated in the same establishment as an air-conditioned portion - HELD THAT: - The fact that in subsequent orders of the Adjudicating Authority as well as the Appellate Authority in respect of a similarly situated restaurant, relief has been granted is also an indication of the Revenue’s stand. The letter dated 26-11-2025 by the Secretary, Tamil Nadu Hotels Association, addressed to the Chief Commissioner of Service Tax, Chennai, stating inter-alia that just because there is no name for the non-AC restaurant, the exemption granted to non-AC restaurant cannot be denied, and that therefore the food supplied in non-AC restaurant is eligible for the exemption from payment of service tax vide notification No.25/2012-ST dated 20.06.2012 as clarified by Board vide Circular dated 07.10.2013, cements the pragmatic stance adopted by the Department in such circumstances.

The Apex Court in K.P. Varghese [1981 (9) TMI 1 - SUPREME COURT], whereby it was held that it is a well-settled principle of interpretation that courts in construing a statute or notification will give much weight to the interpretation put up on it at the time of enactment or issue and since, by those who have to construe, execute and apply the said enactments. They are in the nature of contemporanea exposition furnishing legitimate aid in the construction of the relevant provisions.

The Member (Judicial) held that, after the change in the exemption entry with effect from 01-04-2013, the levy attached only to services provided by a restaurant answering the description of one having air-conditioning in any part of the establishment, but the exemption entry had to be read in the light of the genesis of the levy, which was intended for air-conditioned restaurants. The Board's clarification dated 07-10-2013 was treated as recognising that, in a complex having more than one restaurant which are clearly demarcated and separately named though supplied from a common kitchen, only the specified air-conditioned restaurant is taxable and the non-air-conditioned restaurant remains exempt. On facts, the physical demarcation, separate billing, different pricing and separate operational features established segregation between the air-conditioned and non-air-conditioned restaurants notwithstanding the common kitchen. The contention that the non-air-conditioned sales were mere sales outside the service tax net was not accepted in view of the statutory scheme and the decisions noticed by the Tribunal, but the exemption was still held available to the non-air-conditioned restaurant. The Member (Judicial) further reasoned that an interpretation taxing every service in an establishment merely because some part had air-conditioning would make the entry excessively broad and inconsistent with the object of the levy. The jurisdictional High Court decision in Anjappar Chettinad A/C Restaurant [2021 (6) TMI 226 - MADRAS HIGH COURT] was treated as fortifying the view that the tax targeted attendant service elements in an air-conditioned restaurant.

The Member (Technical) agreed with the conclusion on merits and with setting aside the demand, but stated that the discussion in paragraph 46 referring to L. Chander Kumar [1997 (3) TMI 90 - SUPREME COURT] was unnecessary because no challenge to constitutional validity had been raised. [Paras 55, 56, 57, 58, 59]

The appellant was held not liable to service tax on food and beverages served in the non-air-conditioned portion during the disputed period, and the impugned order was set aside; both Members agreed in the result, though the Member (Technical) declined to concur with the reference to tribunal competence on constitutional validity.

Final Conclusion: The Tribunal held that, for April 2013 to March 2015, service tax was not leviable on food and beverages served in the appellant's non-air-conditioned restaurant area merely because an air-conditioned restaurant functioned in the same establishment and both drew food from a common kitchen. The demand and penalty were therefore set aside with consequential relief; the Members agreed on the outcome, though one Member treated the discussion on tribunal competence to examine vires as unnecessary.

Extended period of limitation - Form 26AS-based service tax demand - Lack of proper verification in show cause notice - HELD THAT: - The Tribunal found that the show cause notice had been issued on the basis of Form 26AS details and that a substantial part of the original demand itself had been dropped by the Commissioner (Appeals) on examination of documents produced by the appellant. This showed that the notice had been issued without proper verification and investigation. Following the consistent view in Tabassum Enterprises [2025 (9) TMI 1275 - CESTAT KOLKATA] that mere reliance on income-tax data or Form 26AS, without corroborative material establishing taxable service and without proper scrutiny of the receipts, cannot sustain such proceedings, the Tribunal held that the invocation of the extended period was not justified. [Paras 5, 6, 7, 8]

The demand was set aside as time-barred and the appeal was allowed with consequential relief according to law.

Final Conclusion: The Tribunal held that the show cause notice, founded only on Form 26AS data without proper verification, could not justify invocation of the extended period of limitation. On that ground, the impugned order was set aside and the appeal was allowed with consequential relief.

Classification of subcontract service as works contract or manpower supply - Demand raised on reverse charge basis by treating the services received from sub-contractors as supply of manpower service - HELD THAT: - The Tribunal held that, on a combined reading of the Spot Memo and the show cause notice, the very basis of the demand was inconsistent, since the audit had treated the activity as works contract service whereas the notice proceeded on the footing of supply of manpower service. The documentary evidence, including the contract material and the Chartered Accountant's certificate, showed that the sub-contractors were engaged for specified work on rate or lump-sum basis and were not providing manpower to the appellant. The certificate also clarified that only in one instance, where a bill had been raised for manpower supply, service tax had already been paid. On these facts, the confirmed demand could not be sustained. [Paras 10, 12, 13]

The impugned order was set aside and the appeal was allowed with consequential relief as per law.

Final Conclusion: The Tribunal allowed the appeal and set aside the service tax demand sustained for the disputed period, holding that the services received from the sub-contractors were works contract activities executed on lump-sum or rate-contract basis and not manpower supply service liable under reverse charge.

Exemption for road cutting services relating to public roads - Exemption for services by Government or local authority in relation to Panchayat functions - Benefit of exemption under Entry 13 and Entry 60 of Notification No. 25/2012-ST -Monetary threshold under amended Mega Exemption notification - Extended period of limitation in interpretational disputes - Suppression of Facts - Intent to Evade Duty - Reverse Charge Mechanism - Exemption from Service Tax - Demand of service tax on the services received by the appellant from government or local authority under reverse charge mechanism [RCM] invoking the extended period of limitation under section 73

Road cutting services - Mega Exemption for public roads -HELD THAT: - In the case of M/s MP Audyogik Kendra [2024 (8) TMI 1409 - CESTAT NEW DELHI], where the learned, Single Member of the Tribunal, considered whether the amount received towards road cutting charges, would fall under Entry 13(a) of the exemption notification on which the categorical finding has been arrived that the benefit of the exemption notification cannot be denied in so far as the road cutting charges were concerned.

The Tribunal held that the exemption entry covering services by way of construction, repair, maintenance, renovation or alteration of a road is widely worded and is not confined to construction alone. On that construction, the activity of road cutting was treated as falling within the scope of the exemption for roads used by the general public. The Tribunal adopted the same view as taken in an earlier Tribunal decision on road cutting charges and held that service tax was not chargeable on that activity under reverse charge on that basis. [Paras 7]

The benefit of the exemption was held available in respect of road cutting activity.

Applicability of Entry 60 of the notification -Services by Government or local authority - Functions entrusted to Panchayat - HELD THAT: - The Tribunal found that the first condition stood satisfied because the services were admittedly rendered by Government or local authorities. It further held that the services were in relation to functions entrusted to a Panchayat under Article 243G, specifically roads and rural electrification. Since the appellant's work related to laying optical fibre cable in rural areas and included road cutting and rural electrification related activity, the services received were held to fall within that exemption. [Paras 8]

The services received were held to be covered by the exemption for activities in relation to Panchayat functions.

Amended Mega Exemption notification - Gross amount threshold for services by Government or local authority - HELD THAT: - The Tribunal accepted the Revenue's contention that the exemption notification had to be read together with the amending notification. It held that, by virtue of the amended entry prescribing exemption only where the gross amount charged did not exceed the stated monetary limit, the earlier benefit stood restricted in cases exceeding that limit. Since the payments in the present case were beyond that threshold, the Tribunal held that the monetary-limit condition was not satisfied. [Paras 9, 12]

The amended notification was held applicable, and the exemption was treated as restricted by the monetary threshold.

Extended period of limitation - Absence of mala fide in interpretational dispute - HELD THAT: - The Tribunal held that the dispute turned on the applicability of exemption notifications and was therefore interpretational in nature. It further held that, the appellant being a Government undertaking, mala fide intention to evade payment could not be attributed, and the settled requirements for invoking the extended period demand proof of fraud, collusion, wilful misstatement or suppression with intent to evade duty, and something positive beyond mere inaction. As the entire demand had been confirmed only by invoking the extended period, it was held to be unsustainable. [Paras 10, 11]

Invocation of the extended period was held invalid, and the demand confirmed on that basis was set aside.

Final Conclusion: The Tribunal held that road cutting and the services received in relation to Panchayat functions were covered by the claimed exemption entries, though it also held that the amended notification imposed a monetary threshold restriction on exemption for services by Government or local authority. Nevertheless, as the entire demand was founded on the extended period in an interpretational dispute without mala fide, the demand, interest and penalty could not survive, and the impugned order was set aside except to the extent of the finding on applicability of the amending notification.

Extended period of limitation - Exemption for Government and public welfare works contracts - Taxability of mobilization advance - Revenue neutrality under reverse charge - Exemption for statutory trade licence fees - Penalty for suppression with intent to evade - Interpretation of exemption notification - Post-harvest storage infrastructure - Construction of the 50,000 MT food grain godown for the Food Corporation of India - Exemption under Notification No. 25/2012-ST

Extended period of limitation - Bona fide interpretational dispute - Suppression of facts - HELD THAT: - The Tribunal held that a mere allegation of suppression or wilful misstatement does not justify invocation of the proviso to Section 73(1). The contracts related to public projects awarded through tender processes, the transactions were reflected in the appellant's records, and the dispute essentially turned on the interpretation and applicability of the Mega Exemption Notification and related taxing provisions. In the absence of cogent material showing deliberate withholding of information or intent to evade tax, the necessary ingredients for extended limitation were not established. [Paras 10]

Demands falling beyond the normal period were held time-barred.

Exemption for food grain godown construction - Post-harvest storage infrastructure - Governmental authority works contract - Construction of the food grain godown for Food Corporation of India was entitled to exemption. - HELD THAT: - Entry Nos. 12 and 12A of Notification No. 25/2012-ST dated 20.06.2012, read with Section 102 of the Finance Act, 2016, extends exemption to Works Contract services provided to Government, local authority or governmental authority in respect of original works. The impugned order, however, appears to have confined its analysis only to Entry No. 14(d) and has failed to examine the applicability of the aforesaid provisions, which have a direct bearing on the issue involved.

The adjudicating authority has laid considerable emphasis on the observation that rice was one of the commodities intended to be stored in the godowns and, relying upon CBEC Circular No. 177/3/2014-ST dated 17.02.2014, proceeded to deny the benefit of exemption.

The Tribunal found that the work was executed for Food Corporation of India, a governmental authority, for creation of public warehousing infrastructure connected with procurement, storage and distribution of food grains. The project was not for commerce or business. The adjudicating authority erred in confining the matter to a narrow reading based on storage of rice and in failing to examine the applicability of the entries granting exemption to original works provided to Government or governmental authority. The expression relating to works 'pertaining to' post-harvest storage infrastructure was held to be of wide amplitude, and the construction of such godowns squarely fell within it. [Paras 12]

The demand relating to construction of the FCI godown was set aside on merits.

Exemption for farmers' market infrastructure - Predominant purpose test - Public agricultural infrastructure - Construction of the Integrated Farmers' Market Complex - Exemption under Notification No. 25/2012-ST - HELD THAT: - The project constitutes public property belonging to the Directorate of Horticulture, Government of Meghalaya and the work was executed through the State Government's implementing agency. In such circumstances, the benefit of exemption available under Entry No. 12A of Notification No. 25/2012-ST, as amended, cannot be denied merely on the basis of assumptions regarding commercial intent. No material has been brought on record by the Revenue to establish that the structure was intended predominantly for commerce, industry or any other business or profession.

Besides, it is a fact on record that the facilities created under the project were integrally connected with agricultural activities and marketing infrastructure for agricultural produce. The project envisaged provision of facilities for storage, warehousing, exhibition, dissemination of information and training to farmers and thus bore a direct nexus with agricultural development. The approach adopted in the impugned order, in treating the entire project as a commercial complex merely on account of the existence of a revenue-sharing arrangement, does not accord with the true nature and purpose of the project.

A clause providing for collection of user charges or sharing of revenue could not alter the essential character of the project, and no material showed that the structure was predominantly intended for commerce, industry or business. On that basis, denial of exemption was found unsustainable.

The benefit of exemption under Notification No. 25/2012-ST could not have been denied in respect of the construction of the Integrated Farmers' Market Complex at Ampati, West Garo Hills, Meghalaya. Consequently, the demand confirmed on this count is unsustainable and is liable to be set aside. [Paras 13]

The demand on the Integrated Farmers' Market Complex was set aside on merits.

Exemption for educational infrastructure - Work order preceding formal agreement - Limitation - Demand on construction of Phase-A works of Jawahar Navodaya Vidyalaya, Haflong - HELD THAT: - It is a settled principle of contract law that a binding contractual relationship does not necessarily arise only upon execution of a formal agreement where the essential terms have already been accepted and the parties have unequivocally manifested their intention to be bound. The work order dated 20.02.2015, which preceded the formal agreement, assumes significance in this context. The appellant has relied upon judicial precedents to contend that once the offer stood accepted and the work stood awarded, the contract must be regarded as having come into existence, the subsequent execution of the formal agreement being merely a consequential act evidencing the arrangement already concluded between the parties.

The project admittedly pertains to a Government educational institution; the award of work had already been finalized before the cut-off date; and the subsequent execution of the formal agreement on 02.03.2015 appears, prima facie, to be a continuation of the contractual arrangement already set in motion by the work order dated 20.02.2015. In such circumstances, a hyper-technical interpretation of the exemption entry, detached from the substance of the transaction, would not be justified.

Even assuming for the sake of argument that the Revenue's interpretation were to be accepted, the demand would nevertheless not survive on the ground of limitation. As already discussed hereinbefore, the show cause notice dated 20.04.2019 has been issued beyond the normal period prescribed under Section 73 of the Finance Act, 1994 and the ingredients necessary for invocation of the extended period have not been established. Consequently, the demand pertaining to this work order would, in any event, be unsustainable on the ground of limitation.

In any event, the demand was also held unsustainable since the show cause notice had been issued beyond the normal period and extended limitation was not available. [Paras 14]

The demand on the Jawahar Navodaya Vidyalaya work was set aside, both on merits and, in any case, on limitation.

Taxability of mobilization advance - Recoverable financial accommodation - Point of Taxation Rules - mobilization advance received for the College of Agriculture project - HELD THAT: - The Tribunal found that the amount was released under a contractual clause for mobilization, carried interest, was secured by bank guarantee and was recoverable from future running bills. Those features distinguished it from an ordinary advance constituting consideration for services. The Revenue had proceeded only on nomenclature without establishing that the amount represented consideration received for provision of taxable service. Such a recoverable and interest-bearing mobilization advance could not be taxed merely by invoking the Point of Taxation Rules. The demand was also held time-barred, the issue being interpretational and the relevant particulars being available in the appellant's records. [Paras 15]

The demand on mobilization advance was set aside on merits and also on limitation.

Non-availability of exemption - Government contracts - Limitation - For the boundary wall and ground tank/fire-fighting works at Ministry of Textiles premises, exemption - HELD THAT: - The Tribunal recorded the appellant's fair concession that these contracts were entered into after the cut-off date under the relevant exemption entry and that exemption on merits was therefore unavailable. Even so, it held that the demands could not survive because the contracts were Government projects, the transactions were reflected in the books of account, and the Revenue's case rested only on a different interpretation of the exemption notification. In the absence of fraud, collusion, wilful misstatement or suppression with intent to evade, the extended period could not be invoked. [Paras 16]

The corresponding demands, interest and penalties were set aside as time-barred.

Revenue neutrality under reverse charge - Goods Transport Agency service - Limitation - HELD THAT: - The Tribunal accepted that, as a body corporate receiving GTA services, the appellant was ordinarily liable under reverse charge. It nevertheless found the entire demand to be revenue neutral because, if service tax had been paid, corresponding CENVAT credit would have been available to the appellant for use in its works contract business, and the Revenue had not disputed such availability or shown any net loss to the exchequer. Revenue neutrality, coupled with absence of intent to evade, was treated as fatal to the demand, which was ultimately set aside on limitation. [Paras 17]

The GTA reverse charge demand, with consequential interest and penalties, was set aside.

Royalty on natural resources - Reverse charge - Limitation - Demand on royalty paid for extraction and use of minor minerals under reverse charge failed on limitation, though the contention that royalty is a tax was rejected. - HELD THAT: - The Tribunal held that, in view of Steel Authority of India Ltd. [2024 (7) TMI 1390 - SUPREME COURT (LB)], royalty payable under the mining law is not a tax, and the appellant's argument that service tax on royalty amounted to taxing a tax was therefore untenable. However, the demand pertained to a period in which the taxability of royalty under the category of assignment of right to use natural resources was a contentious and interpretational issue. Since the demand was based on entries in the appellant's books and there was no material establishing suppression, fraud or intent to evade, invocation of the extended period was impermissible. [Paras 18]

The royalty-related demand, with interest and penalties, was set aside as barred by limitation.

Exemption for statutory trade licence fees - Registration by local authority - HELD THAT: - The Tribunal found that the payment was a statutory fee under municipal law for obtaining and maintaining a trade licence and was in the nature of a regulatory levy by a local authority, not consideration for an independent taxable service. It further held that the activity was covered by the exemption for services provided by Government or local authority by way of registration required under law. On either footing, the demand was unsustainable. [Paras 19]

The demand on trade licence fees was set aside on merits.

Penalty for suppression with intent to evade - Interpretational dispute - HELD THAT: - The Tribunal held that the disputes principally arose from interpretation of exemption notifications and other legal provisions, while the relevant facts and transactions were available from the appellant's books, agreements and records. There was no material showing deliberate falsification, concealment or conscious attempt to evade tax. Mere non-payment or short-payment arising from an interpretational dispute does not establish fraud, wilful misstatement or suppression so as to attract penalty. [Paras 20]

The penalty imposed under Section 78 was set aside.

Final Conclusion: The Tribunal held that the extended period of limitation was not available and that each component of the service tax demand failed either on merits or as time-barred. The entire demand, together with interest and penalty, was therefore set aside and the appeal was allowed.

Service tax demand based solely on Form 26ASand CBDT data without corroborative evidence of taxable services - Attribution of receipts to proprietor concern -Extended period of limitation without independent basis

Attribution of receipts to proprietor concern - Form 26AS mismatch - HELD THAT: - The appellate authority had sustained part of the demand on the ground that there was no material to establish that Aditya Enterprise belonged to the appellant. The Tribunal found that the appeal record contained a Chartered Accountant-certified asset and liability statement showing the appellant as proprietor of Aditya Enterprise. Since the confirmation of demand rested on the inability to ascertain that relationship, and that fact stood established from the record, the confirmed demand was liable to fail on that ground itself. [Paras 3, 4]

The confirmed demand was set aside insofar as it had been sustained by disregarding the material showing that Aditya Enterprise was the appellant's proprietary concern.

Service tax demand based solely on Form 26AS - Extended period of limitation without independent basis - HELD THAT: - The Tribunal reiterated the consistent view that mere reliance on Form 26AS or income-tax data cannot by itself establish service tax liability. In the absence of independent or corroborative evidence regarding rendition of taxable services, such mechanical reliance is legally insufficient. Following that principle in Tabassum Enterprises[2025 (9) TMI 1275 - CESTAT KOLKATA], the Tribunal also held that the impugned order was liable to be set aside on the ground of limitation, as the extended period could not be sustained in such circumstances. [Paras 5, 6, 7, 8]

The impugned demand was set aside as not legally sustainable when based solely on Form 26AS data, and was also held barred by limitation.

Final Conclusion: The Tribunal allowed the appeal and set aside the impugned order. It held that the surviving demand could not stand once the material showed that the receipts related to the appellant's proprietary concern, and in any event a service tax demand founded solely on Form 26AS data without corroborative evidence was unsustainable and time-barred.

Service tax on ocean freight mark-up - Reimbursable expenses as pure agent - Exchange rate fluctuation income

Service tax on ocean freight mark-up - excess ocean freight (mark-up of ocean freight being the difference of actual ocean freight charges paid to the shipping line and the freight charges collected from the customers of the Appellant - HELD THAT: - This Tribunal in Appellant's own cases [2026 (3) TMI 1724 - CESTAT BANGALORE] has allowed the appeals and Appellant's own cases before the Hon'ble CESTAT, Chennai [2024 (7) TMI 1784 - CESTAT CHENNAI] on the issue of excess ocean freight, the Tribunal set aside the Order demanding service tax and allowed the Appeal following the decision of the Honourable Supreme Court in the case of Baroda Electric Meters Ltd. [1997 (7) TMI 126 - SC ORDER]; on the issue of ocean freight and the margin mark-up of ocean freight, this Honourable Tribunal in a recent decision in the case of Freight links International (India) Private Limited [2024 (10) TMI 1629 - CESTAT BANGALORE], following the decision of the Hon'ble CESTAT Delhi in the case of Tiger Logistics (India) Limited [2022 (2) TMI 455 - CESTAT NEW DELHI] held that ocean freight or the mark-up on the same cannot be subject to levy of service tax and set aside the impugned Orders; Hon'ble CESTAT, Ahmedabad in the case of Gudwin Logistics [2009 (11) TMI 157 - CESTAT, AHMEDABAD] had held that Ocean Freight is not liable to service tax; Hon'ble Supreme Court in the case of Baroda Electric Meters (supra), had also held that when ocean freight actually paid is less than the amount collected, the differential amount cannot be included in the assessable value as the same is profit.

Proceeding on that basis, it accepted that the mark-up or differential in ocean freight was not liable to service tax and found the contrary view in the impugned orders to be unsustainable. [Paras 10, 11]

The demand of service tax on excess ocean freight was set aside.

Reimbursable expenses as pure agent - Amounts collected towards boat hire, launch hire, barge expenses and watchman charges in the capacity of a pure agent - HELD THAT: - The issue stands covered by the decision of the Hon'ble Supreme Court in the case of Intercontinental Consultants and Technocrats Private Limited[2018 (3) TMI 357 - SUPREME COURT] which held that reimbursable expenses have become taxable only on and from 14.05.2015. Following the same, it held that the impugned orders taxing such reimbursable expenses were not sustainable. [Paras 10, 11]

The demand of service tax on boat hire, launch hire, barge expenses and watchman charges was set aside.

Exchange rate fluctuation income - HELD THAT: - The Tribunal recorded that this issue also was squarely covered by the decisions (supra) cited in support of the appellant's case. On that footing, it held that levy of service tax on exchange fluctuation gains could not be sustained. [Paras 10, 11]

The demand of service tax on exchange rate fluctuation income was set aside.

Final Conclusion: The Tribunal held that all three components of the demand, namely excess ocean freight, reimbursable pure-agent expenses, and exchange fluctuation income, were covered by binding and persuasive precedent. The impugned appellate orders were therefore set aside and all the appeals were allowed with consequential relief.

Demand on Distributor's commission and related incentives - Taxability of activities under the definition of Business Auxiliary Service - Amway distributor commission - Remand following binding precedent -HELD THAT: - The Tribunal held that the controversy was squarely covered by the earlier decisions in Mt. Paramjit Kaur [2015 (6) TMI 585 - CESTAT NEW DELHI]. Proceeding on that basis, it adopted the course already directed in those decisions, namely that the matter had to be reconsidered by the original authority with reference to the distinction between non-taxable earnings arising from purchase and retail sale on own account and commission, if any, attributable to the distributor's sales group, together with the connected questions directed to be examined on remand under the earlier order. As the impugned orders had not been tested on that basis, they were set aside and the matter was remitted for fresh adjudication in terms of the earlier Tribunal order. [Paras 5, 6, 7]

The impugned orders were set aside and the appeals were allowed by remand to the original authority for de novo consideration in accordance with the earlier Tribunal decision.

Final Conclusion: Following earlier Tribunal rulings on the same Amway distribution model, the Tribunal held that the impugned orders could not stand and remitted the matter to the original authority for fresh adjudication in accordance with that precedent.

Interference under Section 35G with factual findings - CENVAT credit on raw material shortages - Substantial question of law - diversion of imported raw material - requirements of Section 9D -Compliance with examination of witnesses for reliance on statements

CENVAT credit on raw material shortages - Processing loss and posting errors - Absence of perversity in factual findings - HELD THAT: - The Court noted that the Tribunal had considered the respondent's explanation that one part of the shortage was due to posting errors in the registers and the balance shortage was due to processing loss within an acceptable range. The Tribunal also found that, having regard to the overall purchases and manufacture, the difference was negligible and that there was no other material showing diversion of inputs. The High Court held that acceptance of this explanation was fair and reasonable and could not be termed perverse, and therefore no substantial question of law arose. [Paras 6, 7]

The challenge to the Tribunal's setting aside of denial of CENVAT credit on raw material shortages was not entertained.

Proof of diversion of duty-paid inputs - Compliance with examination of witnesses for reliance on statements - Absence of perversity in factual findings - HELD THAT: - The Court recorded that the Tribunal examined the reliance placed on statements of truck owners and drivers and found that the procedure adopted by the adjudicating authority was not in consonance with the requirements of Section 9D, as there was no proper examination-in-chief in relation to some witnesses and cross-examination was allowed only in a restricted manner. The Tribunal did not rest its conclusion there, but also examined the record on facts and found no material to establish diversion of the imported inputs. The High Court held that the Tribunal was justified in reaching that conclusion, particularly when the Revenue did not contend that the Tribunal's factual findings were perverse or contrary to the record, and therefore no substantial question of law arose. [Paras 8, 9, 10]

The challenge to the Tribunal's setting aside of denial of CENVAT credit on alleged diversion of imported raw material was not entertained.

Final Conclusion: The High Court held that the Tribunal's conclusions on raw material shortages and alleged diversion of imported inputs were findings of fact supported by the record and not shown to be perverse. As no substantial question of law arose, the appeal was dismissed and the plea for remand was also rejected.

Activity of converting raw materials supplied by the principal manufacturer into semi-finished springs on job work basis - deemed manufacture - incidental or ancillary process -Business Auxiliary Service exclusion for manufacture - Rule 6 Cenvat Credit inapplicability to manufactured job-worked goods - Whether the appellants were engaged in the activity that also amounted to manufacture of goods or otherwise ? - HELD THAT: - The Tribunal held that the process undertaken by the appellant resulted in emergence of a distinct product, namely semi-finished springs, having its own name, purpose and use. It further held that, even otherwise, a process incidental or ancillary to completion of the final manufactured product is deemed manufacture under section 2(f) of the Central Excise Act. On that basis, the appellant's job work activity was held to be manufacture of excisable goods and not a service falling within Business Auxiliary Service. The fact that excise duty was not paid on clearance to the principal manufacturer did not alter the character of the activity, and in the factual matrix there was no occasion to treat the activity as exempted service merely because the Notification No. 214/86 procedure had not been followed. The case laws relied in this regard by the appellant in the case of Sterlite Industries (I) Ltd Vs CCE, Pune [2004 (12) TMI 108 - CESTAT, MUMBAI (LB)], DK Electromech [2009 (12) TMI 815 - CESTAT NEW DELHI] & Kinetic Engg Ltd [2006 (5) TMI 410 - CESTAT, MUMBAI]. Therefore, once having held that the activity undertaken by the appellant amounted to manufacture, it is obvious that said activity cannot be brought under the purview of service tax under the category of BAS in terms of definition of the said service. nce the activity was held to be manufacture, the foundation of the show cause notice that the appellant was providing exempted service and was therefore liable under Rule 6 did not survive. The Tribunal therefore did not examine the alternative contentions regarding reversal at prescribed percentages, proportionate reversal, or extended period. [Paras 11, 12, 13]

The demand was held unsustainable on merits, and the impugned order was set aside.

Final Conclusion: The Tribunal held that the appellant's job work activity amounted to manufacture of excisable goods and therefore could not be taxed as Business Auxiliary Service. Consequently, the very basis for invoking Rule 6 of the Cenvat Credit Rules failed, and the demand was set aside with the appeal being allowed.

Priority of secured creditors vis-a-vis statutory first charge - Statutory first charge for sales tax and value added tax dues - Prospective and retroactive operation of amended provisions - Recovery of Central Sales Tax dues through State first charge mechanism - Failure to hear interested claimant before permitting sale outside liquidation - Concepts of prospective, retrospective and retroactive operation of statutes

Priority of secured creditors vis-a-vis statutory first charge - Statutory first charge under State tax enactments - CERSAI registration and priority in payment - HELD THAT: - In Punjab and Sind Bank [2023 (12) TMI 1506 - SUPREME COURT (LB)], the secured creditor had issued a notice under Section 13(2) of the SARFAESI Act on 06.09.2013. The State, on the other hand, claimed a statutory first charge under the provisions of the Punjab Value Added Tax Act, 2005 (“PBVAT Act”), and initiated recovery proceedings in the year 2014. Both proceedings commenced prior to the insertion of Section 26E into the SARFAESI Act by the Amendment Act of 2016, which was brought into force on 20.01.2020. While deciding the case, the Hon'ble Apex Court took note of the subsequent amendment introducing Section 26E and held that the statutory first charge created under the State enactment would prevail over the claim of the secured creditor, since Section 26E operates prospectively. The Apex Court further held that Section 35 of the SARFAESI Act, as it stood prior to the amendment, did not eclipse the statutory first charge created under the State enactment and that there was no inconsistency between the provisions of the PBVAT Act and the SARFAESI Act with regard to the creation and enforcement of the statutory first charge.

The Apex Court further observed that, prior to the 2016 amendment; the SARFAESI Act did not confer any statutory priority upon a secured creditor, whereas Section 35 of the PBVAT Act expressly created a statutory first charge over the assets of the tax defaulter.

The Apex Court in Punjab & Sind Bank (supra), has held that Section 26E is prospective. Thus, the said judgment by Apex Court is not an authority on the question whether the priority in payment under Section 26E of the SARFAESI Act, prevails over statutory first charge. Said judgment holds that Section 26E is prospective in operation. It is settled principle that the ratio is what the Court decides but not everything that logically flows from it.

The Court held that the controlling principle is the distinction between a provision that merely gives priority in payment and one that independently creates a first charge. Under the State enactments, the first charge was held to exist dehors the non obstante clause. Section 26E of the SARFAESI Act, on the other hand, was construed as conferring priority after registration of security interest, but not as creating a statutory first charge. On that basis, the later non obstante clause in the SARFAESI Act could not displace a valid statutory first charge already created under the State tax laws. The Court also held that, even otherwise, Section 26E is prospective, and on either footing Omkara Assets could not claim precedence over the Commercial Tax Department. [Paras 45, 46, 55, 56, 90]

The claim of Omkara Assets to recall the attachment orders on the basis of priority under Section 26E failed.

Prospective and retroactive operation of amended provisions - Section 26E of the SARFAESI Act - HELD THAT: - The Full Bench of the Bombay High Court in Jalgaon Janata Sahakari Bank Ltd.[2022 (9) TMI 163 - BOMBAY HIGH COURT] has held that a CERSAI registration effected before or after 20.01.2020 would confer priority in payment, including over a statutory first charge, provided that the statutory first charge had not crystallised into a vested right by the initiation of recovery proceedings in accordance with law. Thus, although the Full Bench held Chapter IVA to be prospective, it nevertheless took into account transactions and events that had occurred prior to its introduction. In a way, the statutory first charge created by operation of law, and not crystallised into a vested right (for want of further steps to enforce statutory charge) yielding to CERSAI registration exhibits a degree of retroactive operation.

If the broad principles governing prospective, retrospective and retroactive applications are kept in mind, and also considering the actual application of the said principles as applied by the Full Bench of the Bombay High Court supra, it is possible to take a view that doctrines “prospective”, “retrospective”, “retroactive”, quasi retroactive”, “true retroactive” which are essentially judicial constructs cannot be applied like inflexible formula.

It stated that a provision may operate prospectively while still taking into account antecedent events, depending on statutory language, legislative intent and context. At the same time, it drew a clear limit on the High Court's role: if the superior court has declared a provision to be prospective while excluding retrospective or retroactive operation, that conclusion cannot be revisited. If, however, only prospectivity has been decided and retroactive application has not been examined, the question may still be considered in an appropriate case. In the present matter, that discussion did not advance Omkara Assets because the Court had already held that statutory first charge prevailed over Section 26E. [Paras 70, 71, 72, 73, 90]

The Court answered the legal question in the abstract, but held that it did not alter the outcome against Omkara Assets.

Recovery of Central Sales Tax dues through State first charge mechanism - Incorporation of State recovery powers under the CST Act - HELD THAT: - The Court noted that the Central Sales Tax Act does not itself expressly create a statutory first charge. However, it held that Section 9(2) authorises the State sales tax authorities to assess, collect and enforce payment under the CST Act as if the dues were payable under the State sales tax law, and to exercise all powers available under that law. On that construction, the recovery machinery of the State enactments, including the statutory first charge attached to such recovery, stood incorporated for the limited purpose of recovering CST dues. In the absence of any exclusion in the CST Act, the State first charge was therefore available for recovery of CST dues as well. [Paras 78, 79, 80, 81, 90]

The Commercial Tax Department was held entitled to invoke the State statutory first charge while recovering dues under the CST Act.

Failure to hear interested claimant before permitting sale outside liquidation - HELD THAT: - The Court found that the earlier order allowing sale outside liquidation had been made without hearing the Commercial Tax Department, despite its claim against the property. Since the Department had a legally relevant claim that required consideration before such permission was granted, the earlier order could not be sustained. [Paras 92]

The recall application filed by the Commercial Tax Department was allowed and the earlier order permitting sale outside liquidation was recalled.

Final Conclusion: The Court held that the Commercial Tax Department's statutory first charge under the applicable State enactments, including for recovery of CST dues, prevailed over the priority claimed by the secured creditor under Section 26E of the SARFAESI Act. Omkara Assets' application to recall the attachment orders was dismissed, the earlier permission to sell outside liquidation was recalled for want of hearing the Department, and the Department was permitted to sell the property, subject to deposit of the sale proceeds with the Official Liquidator.

Entitlement to exemption under Notification No.48 - Soya flour - Interpretation of exemption notification for flour and besan - Taxability of flour made from oilseeds - Jurisdictional error - Principles of natural justice - Delay and laches - It is contended by the petitioners that respondent No.2 erroneously treated soya flour manufactured from soyabean husk as "flour of oil seeds", although soyabean husk is neither an oil seed nor covered under any taxable entry under the Act.​​​​​​​ - HELD THAT: - Petitioners submits that the issue is no longer res integra in view of the judgment of this Court passed in "M/s General Foods Pvt. Ltd.[1987 (1) TMI 461 - MADHYA PRADESH HIGH COURT], which has been affirmed by the Hon'ble Apex Court in "M/s General Foods Pvt. Ltd., [1998 (9) TMI 531 - SUPREME COURT]" wherein the Apex court held that flour made of husk from Soya is not oil seed and is not liable to tax under the Act.

The Court held that the notification exempted only atta of cereals and besan of pulses, except imported and registered branded goods. It accepted the distinction that soyabean is an oilseed and that soya flour is neither cereal flour nor besan of pulses. Since soya was not covered by the exempted categories in the notification, the benefit of exemption was unavailable and the levy of Central Sales Tax on interstate sales was not open to interference. [Paras 27, 29]

The challenge to denial of exemption and levy of tax on soya flour failed.

Final Conclusion: The writ petition was dismissed. The Court declined to interfere with the impugned orders, holding that soya flour, being derived from soyabean as an oilseed, was not covered by the exemption granted to atta of cereals and besan of pulses under Notification No.48 dated 23.04.2002.

Substantial questions of law -Stock variation based on physical verification - Differential treatment of commodities on distinct evidence - suppression arrived, based on stock difference in respect of marble, cuddapa and granite - appreciation of evidence - plausible explanation

Physical stock verification - Suppression of turnover from stock difference - HELD THAT: - The Court held that the fact-finding authorities had recorded a finding that there was physical verification of stock and that the suppression quantified for the concerned goods was based on such verification. In revision, that factual finding could not be reopened merely on the assessee's contention that measurement within the available time was impossible, particularly when no contra stock or purchase record was produced to displace the recorded finding. The challenge founded on alleged visual estimation alone was therefore rejected. [Paras 11]

The first substantial question of law was answered against the assessee.

Commodity-wise appreciation of evidence - Uniformity of treatment in stock suppression cases - HELD THAT: - The Court found that the relief granted in respect of ceramic tiles rested on specific reasoning drawn from document D7 and the explanation accepted as plausible by the appellate authority. Since no comparable explanation or evidentiary basis existed for cuddapah stones and granites, the authorities were justified in reaching a different result for those commodities. The Court therefore held that this was not a case of applying different yardsticks to similar material, but of differing outcomes flowing from differing evidence. [Paras 12, 13]

The second and third substantial questions of law were answered against the assessee.

Final Conclusion: The Tax Case Revision was dismissed. The Court upheld the Tribunal's acceptance of suppression based on physically verified stock difference and rejected the plea that all commodities had to be treated alike despite differing evidence.

Classification of gold coins as bullion or articles of gold - Common parlance test in sales tax classification - Whether the respondent bank, dealing in gold coins, is liable to pay tax on its turnover at the rate of 1% or at the rate of 4% in respect of gold coins imported from Switzerland and sold with the picture of Goddess Lakshmi ? -HELD THAT: - Applying the common parlance test stated by the Supreme Court in M/s.G.S.Pai & Co [1979 (10) TMI 193 - SUPREME COURT], the Court held that bullion denotes gold or silver in the mass, as raw material, such as bars, ingots or other unwrought forms. Once the metal undergoes manufacturing into coins and carries specific embossing or engraving, along with the weight marking, it ceases to retain the character of bullion and becomes a distinct commercial product. The Court further noted that such gold coins are sold with value addition, including making charges and wastage, and not at bullion rates; even the respondent had collected tax at the higher rate on part of the turnover under the category of gold jewellery/articles. On that reasoning, the Tribunal's view treating the coins as bullion was rejected and the Appellate Authority's classification was upheld. [Paras 7, 8, 9, 10, 11]

The sale of gold coins embossed with Goddess Lakshmi was held taxable as articles of gold and not as bullion.

Final Conclusion: The appeal was allowed. The Tribunal's view that the embossed gold coins were bullion was set aside, and the Appellate Authority's order treating them as taxable articles of gold at the higher rate was restored.

Dishonour of Cheque - Maintainability of complaint under Section 138, against dissolved company - Legally enforceable debt - Vicarious liability of former Director under Section 141 - Legal impediment - Functus officio - In charge of day-to-day affairs - Void ab initio - Juristic personality

Cheque issued after dissolution of company - Juristic personality of dissolved company - Legally enforceable instrument - HELD THAT: - On a blend of the judgments rendered by the Apex Court in VISHNOO MITTAL [2025 (3) TMI 839 - SUPREME COURT] and that of the High Court of Delhi in RAJ KUMAR JAIN [2020 (2) TMI 1131 - DELHI HIGH COURT] and KRISHAN LAL GULATI [2025 (10) TMI 1434 - DELHI HIGH COURT], what would unmistakably emerge is that, a cheque allegedly issued in the name of the company, after dissolution of the company, would not become a legally enforceable instrument, it would be void ab initio. It would be an altogether different circumstance if the cheque is issued and during the proceedings, the company would cease to exist. Then the Directors are to be held liable for fulfilling the legally enforceable instrument. This is what is declared by the Apex Court in BHARAT MITTAL [2025 (12) TMI 1238 - SUPREME COURT],holds that Directors can face conviction for offence under Section 138 of the Act if there is a legal snag, by virtue of which the company cannot be drawn in as an accused. Where a complaint has been properly filed both against the company and the category of persons – Directors or otherwise, but during the pendency of the proceedings, the company goes into liquidation or winding up or faces any other legal snag, the prosecution will continue only against the category of persons referred to under Section 141 of the Act and not against the company.

The Court found that the company stood dissolved long prior to the alleged issuance of the cheque and, therefore, had ceased to exist in law. On that footing, a cheque purportedly issued by or on behalf of such dissolved company could not be treated as a legally enforceable instrument and was void ab initio. The principle applied was that Section 138 presupposes a valid cheque drawn on an account maintained by a subsisting legal entity; where the company had already lost its juristic existence, the complaint could not be sustained. The Court distinguished cases dealing with liquidation, winding up or other legal impediments arising after issuance of the cheque, holding that those principles did not apply where the company had ceased to exist several years before the cheque itself was issued. [Paras 8, 9, 10, 12]

The complaint founded on a cheque allegedly issued after dissolution of the company was held legally non-maintainable.

Former Director's liability after dissolution - Necessary averments under Section 141 - Cheque drawn on company's account - HELD THAT: - The Court held that once the company had already been dissolved, the petitioner as a former Director could not be made liable for a cheque issued thereafter in the company's name. It further examined the complaint and found no averment that the petitioner was, at the relevant time, in charge of the day-to-day affairs of the company; the complaint merely described the company as represented by him. Since the cheque was drawn on the company's account and the proceedings themselves had arisen after dissolution, the foundational requirements for fastening vicarious liability under Section 141 were absent. On both the factual aspect disclosed by the complaint and the legal bar arising from prior dissolution, continuation of the prosecution was held unwarranted. [Paras 10, 11]

The proceedings against the petitioner as former Director were quashed, with liberty reserved to the complainant to pursue any other remedy available in law.

Final Conclusion: The High Court quashed the complaint under Section 138 of the Negotiable Instruments Act, holding that a cheque allegedly issued on behalf of a company that had already been dissolved could not found a valid prosecution. It also held that the former Director could not be fastened with liability in the absence of the necessary statutory averments and when the proceedings themselves had arisen only after the company's dissolution.