TaxTMI Updates e-Newsletter
Jul 11,2026

Statutory interest on refund of investigation deposit treated as pre-deposit - Interest on refund confined to statutory rate - Substantial question of law in statutory appeal - Entitlement to interest on the refunded deposit at a rate higher than 6% per annum, instead of the statutory rate under Section 35FF

HELD THAT: - It is settled law that where the statute itself creates the right to interest and also prescribes the rate at which such interest is payable, the entitlement cannot ordinarily travel beyond the statute itself.

The Court held that the refund had already been granted together with interest strictly in terms of the statutory mechanism governing such payment. Since the amount deposited during investigation was treated as a deposit akin to a pre-deposit for the purpose of refund interest, and the applicable notification prescribed interest at 6% per annum, the assessee's entitlement had to be determined within that framework. In the absence of any challenge to the validity of the statutory provision or the notification, the Court could not enhance the rate on equitable or restitutionary considerations. The Court further held that the decision in Sandvik Asia stood explained by Gujarat Fluoro Chemicals Ltd. [2015 (9) TMI 862 - SUPREME COURT], which clarified that an assessee is entitled only to such interest as the statute provides, and that the other authorities cited did not justify substitution of the statutorily prescribed rate in an appeal of this nature. [Paras 18, 19, 21, 22, 23]

Interest at 6% per annum as granted under the statutory provision and notification was upheld, and the claim for a higher rate was rejected.

Final Conclusion: The High Court held that once refund interest had been granted in accordance with the statutory provision and the notified rate, no higher rate could be awarded in the present statutory appeal. Finding no substantial question of law, the appeal was dismissed.

Sealed outlets - Authorization issued under Section 67(2), to conduct search of the 12 outlets - Petitioner failed to produce the books of accounts - HELD THAT:- The petition challenging sealing of the petitioner's outlets was disposed of after recording the petitioner's willingness to produce the books of account before the competent authority, which was directed to examine them and pass an order in accordance with law within the prescribed period, with liberty to pass an interim order for de-sealing if found appropriate.

Entitlement to bail in a successive application on the basis of parity with a co-accused - change in circumstances - GST evasion and fabrication of invoices and e-way bills -Economic offences and bail - HELD THAT: - The Court held that a successive bail application is maintainable only on a substantial change in facts or circumstances having a direct bearing on the merits. Grant of bail to a co-accused does not by itself compel release on parity; the Court must independently assess the individual role of the accused, the gravity of the allegations and the material collected during investigation.

It is well settled that economic offences constitute a class apart and are required to be viewed with a different approach while considering the prayer for bail as such offences involve deep-rooted conspiracies, committed with deliberate design for personal gain and have serious repercussions on the economy and the financial health of the nation. The Hon’ble Apex Court in the case of Y.S. Jagan Mohan Reddy [2013 (5) TMI 896 - SUPREME COURT], observed that economic offences constitute a class apart and need to be visited with a different approach in the matter of bail.

On the record, the petitioner was prima facie shown to have a direct and substantial role in creation and operation of fictitious firms, generation of fake invoices and e-way bills, and facilitation of alleged GST evasion, supported by documentary and electronic material as well as statements recorded under the CGST Act. The Court further applied the settled principle that economic offences stand on a distinct footing in bail matters and warrant a stricter approach. In that view, the later bail granted to the co-accused did not constitute such a change in circumstances as would justify interference with the earlier rejection of bail. [Paras 13, 14, 15, 16, 17]

The plea for bail on parity was rejected and the second bail application was dismissed.

Final Conclusion: The Court found no substantial change in circumstances after the earlier rejection of bail and held that the subsequent bail granted to the co-accused did not entitle the petitioner to release on parity. Having regard to the petitioner's prima facie distinct role and the settled approach in economic offences, the second bail application was dismissed.

Refund of unutilised input tax credit on input services - Retrospective applicability of amended Rule 89(5) - Curative and clarificatory amendment - Refund claim for unutilised input tax credit attributable to input services - HELD THAT: - The Court took note that the challenge to exclusion of input services under Rule 89(5) stood governed by the decision of the Supreme Court in VKC Footsteps India Pvt. Ld. [2021 (9) TMI 626 - SUPREME COURT]. It further noted the binding decision of the Coordinate Bench in Ascent Meditech Ltd. & Ors [2025 (12) TMI 642 - SC ORDER]; [2025 (5) TMI 149 - SC ORDER] holding that Notification No. 14/2022 introducing the amended formula in Rule 89(5) is retrospective, being curative and clarificatory in nature. Since that legal position was not disputed, the deficiency memo rejecting the refund claim could not survive and the claim was required to be processed in accordance with the amended rule and the law so declared. [Paras 6]

The deficiency memo was quashed and the respondents were directed to process the refund claim in light of VKC Footsteps, Ascent Meditech and Notification No. 14/2022.

Final Conclusion: Following the settled legal position under VKC Footsteps and the Coordinate Bench decision in Ascent Meditech, the Court set aside the deficiency memo and directed processing of the petitioner's refund claim for the relevant years under the amended Rule 89(5) read with Notification No. 14/2022.

Recovery of self-assessed tax - Mismatch between outward supplies and return - Mandatory intimation under Rule 88C - Garnishee proceedings under Section 79 - discrepancy between outward supplies furnished under Section 37 and the return furnished under Section 39 - HELD THAT: - The Court held that the explanation to Section 75(12) did not impose any additional liability beyond the liability otherwise arising from the mismatch between the details of outward supplies furnished under Section 37 and the return furnished under Section 39. Even so, where recovery is sought on that basis, Rule 88C requires the Proper Officer to issue an intimation in the prescribed FORM GST DRC-01B and give the registered person an opportunity either to pay the differential tax or furnish an explanation. Since the prescribed intimation was not issued and the petitioner could not respond in the manner contemplated by Rule 88C, resort to recovery under Section 79 through the impugned garnishee notice was held unsustainable. [Paras 10, 11, 12]

The garnishee notice was set aside, with liberty to the Revenue to proceed afresh only after complying with Rule 88C and considering the petitioner's response in FORM GST DRC-01B.

Final Conclusion: The writ petition was disposed of by setting aside the garnishee notice on the ground that recovery proceedings had been initiated without following the mandatory procedure under Rule 88C. The Revenue was left free to proceed in accordance with the Act and the Rules after issuing the prescribed intimation and considering the petitioner's explanation.

Entitlement to claim for IGST refund benefits on exported goods - Principles of Natural Justice - HELD THAT:- Without expressing any opinion on the merits of the petitioner's IGST refund claim, the Court permitted the petitioner to produce the required documents before the competent respondent and directed consideration of the claim on merits in accordance with law within the time stipulated.

Scope of tobacco leaves under GST rate notification - Sun-cured tobacco leaves procured from farmers and supplied as such, or after grading, bundling or butting, retain their character as tobacco leaves under Entry No. 162 of Schedule I to Notification No. 1/2017-Central Tax (Rate) - Essential character test - Circular vis-a-vis rate notification - HELD THAT: - The relevant GST rate notification specifically uses the expression “tobacco leaves” under Entry No. 162 of Schedule I. The notification does not qualify the said expression by restricting it only to green, fresh or uncured tobacco leaves. Had the intention been to confine the entry only to freshly plucked green leaves, the notification could have used appropriate restrictive words. In absence of such restriction, the expression “tobacco leaves” has to be understood in the context of commercial parlance, tariff structure and the nature of the commodity.

The clarification contained in Circular No. 332/2/2017-TRU, states that, for GST rate of 5%, tobacco leaves mean leaves of tobacco as such, broken tobacco leaves or tobacco leaf stems. The Appellant has sought to interpret the expression “leaves of tobacco as such” as referring only to uncured green leaves.

The Appellate Authority held that the classification turned on whether the goods continued to retain their identity and physical character as leaves. Curing undertaken at the farmers' level to reduce moisture and render freshly harvested leaves fit for storage, transport and sale was treated as a necessary step that did not, by itself, alter the essential character of the commodity. The rate notification used the expression "tobacco leaves" without restricting it to fresh, green or uncured leaves; hence such a limitation could not be introduced by interpretation. The HSN material was read as recognising that tobacco leaves may exist in cured form, and the circular relied on by the appellant was construed as referring to leaves retaining their character as leaves, not as confining the entry to freshly plucked green leaves. Grading by size, colour, shade, length or texture, bundling for handling and transport, and butting for packing convenience were held to be mere handling or segregation operations not resulting in a new commodity. The Authority expressly distinguished those activities from stemming, stripping or threshing, and clarified that its conclusion was confined to goods subjected only to curing, grading, bundling and butting, while leaving independently examinable cases where further processing alters the character of the goods. [Paras 28, 29, 30, 31, 32]

Sun-cured tobacco leaves supplied after storage or stocking, as well as tobacco leaves subjected only to grading, bundling or butting, were held to fall under the entry for tobacco leaves and to attract GST at 2.5% CGST and 2.5% SGST; the appeal was therefore rejected.

Final Conclusion: The Appellate Authority upheld the advance ruling and rejected the appeal. It held that tobacco leaves subjected only to curing, storage or stocking, grading, bundling and butting continue to retain their character as tobacco leaves and remain taxable at the concessional rate applicable to that entry, subject to the factual limitations stated in the order.

Supply of an electric three-wheeler (e-rickshaw) in completely knocked down form - classifiable as a finished electrically operated vehicle attracting the lower GST rate, or as individual parts and components -Essential character test under Rule 2(a) - Applicability of customs interpretative principles to GST classification - Contemporaneous commercial records

Classification of e-rickshaw supplied in CKD/SKD form - Essential character test under Rule 2(a) - HELD THAT: - The proper application of Rule 2(a) requires examination of whether the goods supplied constitute a complete e-rickshaw in unassembled form. In other words, all components necessary for assembly of a complete e-rickshaw should be supplied together as a single identifiable unit, kit or package corresponding to the number of e-rickshaws intended to be supplied.

The Appellate Authority accepted that Rule 2(a) may govern classification where a complete e-rickshaw is supplied in unassembled or disassembled form. However, it held that the criterion adopted in the advance ruling, namely motor plus any three of four identified components, does not arise from the language of Rule 2(a), the tariff or the GST rate notification. The proper test is whether the goods supplied, as presented, constitute a complete e-rickshaw in CKD/SKD form. For that purpose, all components necessary for assembly of the complete vehicle must be supplied together as a single identifiable unit, kit or package corresponding to the number of e-rickshaws intended to be supplied, and no essential component can be absent. The claim of supply of an unassembled vehicle must further be borne out by contemporaneous commercial documents such as the purchase order, invoice and packing list, and the physical contents of the consignment must match that description. Where the supply is of individual parts and components, even if some are major or essential, the goods retain their identity as parts and cannot be classified as the finished electrically operated vehicle. [Paras 26, 27, 32, 33, 34]

The advance ruling was modified by rejecting the motor-plus-three-components test and by holding that GST treatment as a complete e-rickshaw at the rate applicable to the finished vehicle is available only when a complete CKD/SKD kit, supported by consistent commercial records, is supplied.

Applicability of customs interpretative principles to GST classification - Limited scope of Rule 2(a) legal fiction - HELD THAT: - Relying on Rama Krishna Sales Pvt. Ltd. [2019 (2) TMI 149 - DELHI HIGH COURT], the Appellate Authority noted that Rule 2(a) of the Interpretative Rules is a legal fiction enacted for interpretation of the First Schedule to the Customs Tariff Act, 1975 and cannot be extended beyond that purpose. It further observed that the office order of the Customs Commissionerate, ICD Tughlakabad [2025 (2) TMI 1119 - CESTAT NEW DELHI], was not squarely applicable to a supplier of goods who was neither a manufacturer nor an importer. On the material available, the respondent was found to be procuring different components from different suppliers and selling them to retailers as individual parts and components, without establishing supply of complete e-rickshaws in knocked down condition. In that setting, customs-based criteria could not justify classification of the supplies as finished vehicles. [Paras 29, 30, 31, 32, 33]

The reliance placed in the advance ruling on the customs office order as the basis for the classification standard was not accepted in the facts of the case.

Final Conclusion: The Appellate Authority modified the advance ruling and held that supply of an e-rickshaw in CKD/SKD form can be treated as supply of the finished electrically operated vehicle only where all components necessary for assembly are supplied together as a complete identifiable kit and the commercial records and consignment contents consistently establish such transaction. Failing those conditions, the supply is to be classified and taxed as individual parts and components.

GST liability on statutory contributions linked to mining royalty - District Mineral Foundation contribution as consideration for mining lease - National Mineral Exploration Trust contribution as part of mining royalty - Statutory payments made towards District Mineral Foundation and National Mineral Exploration Trust by a mining lessee - HELD THAT: - The Appellate Authority held that the amounts payable to DMF and NMET were not voluntary contributions, since they were mandatorily fixed as a percentage of royalty and non-payment would legally hamper the right of coal extraction. On that reasoning, such payments formed part of the mining royalty paid in the course or furtherance of business. However, in view of the later departmental clarification that District Mineral Foundations set up by State Governments are Governmental Authorities eligible for the same GST exemptions as other Governmental Authorities, contribution to DMF was held not liable to GST. No such clarification covered NMET; consequently, contribution to NMET continued to be treated as part of mining royalty liable to GST. [Paras 12, 13, 14]

The appeal was allowed only to the extent of contribution to DMF, which was held not liable to GST; contribution to NMET remained liable to GST and the ruling of the lower authority was upheld to that extent.

Final Conclusion: The Appellate Authority confined the appeal to the issue of GST on contributions to DMF and NMET, holding that both payments were mandated incidents of mining operations and ordinarily part of mining royalty. Nevertheless, contribution to DMF was held not liable to GST in view of the later clarification treating DMF trusts as Governmental Authorities, while contribution to NMET remained liable to GST.

Exemption under S.No. 6(d), S.No. 7, or S.No. 9 of Notification No. 12/2017-Central Tax (Rate) for services by Government - Authorized service provider vis-a-vis State Government - Taxability of user charges collected over and above statutory fees - HELD THAT: - The Authority examined the Telangana Electronic Service Delivery Rules and the material placed on record and found that MeeSeva functions as an authorized service provider entrusted to execute specified services, and cannot be equated with the State Government. It further found that the amounts collected by MeeSeva are user charges levied over and above the statutory charges payable to the concerned departments, and that some services also relate to entities other than Government departments. On that basis, the Authority held that the exemption entries in Notification No. 12/2017 apply only to supplies made by Government and to the extent of statutory levy for discharge of statutory functions; collections made separately by MeeSeva over and above such statutory fee do not fall within those entries. [Paras 7]

Exemption was denied for all the categories of services in question, and the user charges collected by MeeSeva were held liable to GST.

Final Conclusion: The application was answered against the applicant. MeeSeva, being an authorized service provider and not the State Government, was held not entitled to the claimed exemptions, and the user charges collected by it were held taxable under the CGST/TGST Acts.

Reassessment of capital gains - Reference to Valuation Officer under unamended Section 55A - Prospective operation of statutory amendment - Fair market value as on 01.04.1981 - Prospective operation of amendment - Reopening of capital gains assessment

Validity of reopening of assessment for capital gains where the assessee had adopted the fair market value as on 01.04.1981 on the basis of a registered valuer's report at a figure higher than the value adopted by the AO - HELD THAT: - The Court held that, under unamended Section 55A(a), reference for valuation could be made only where the value claimed by the assessee on the basis of a registered valuer's estimate was, in the Assessing Officer's opinion, less than the fair market value. In the present case, the value adopted by the assessee was higher than the value worked out by the Assessing Officer; hence Section 55A(a) had no application. The residuary provision could not be invoked where the case was covered by clause (a). The amendment made by the Finance Act, 2012 substituting the expression with the wider formulation "is at variance with its fair market value" was held to be prospective and not applicable to the assessment year in question. The reopening founded on such impermissible valuation exercise was therefore unsustainable. [Paras 9, 10, 11]

The reopening notice was invalid and was quashed on the ground that the unamended valuation provision did not permit disturbance of the value adopted on the registered valuer's report in the facts of the case.

Final Conclusion: The writ petition was allowed and the notice for reopening the assessment for A.Y. 2010-11 was quashed. The Court held that the reassessment was founded on an impermissible invocation of unamended Section 55A, while the issue concerning notice issued to a dead person was expressly left open.

Faceless assessment - Opportunity of hearing before enhancement of addition - Violation of natural justice

HELD THAT: - The Court found that the show cause notice proposed one addition, whereas the final assessment order made a much larger addition on the basis of the balance-sheet and profit and loss account furnished by the petitioner in reply. Since no further opportunity was given to the petitioner to meet the enhanced addition before passing the order, the assessment order could not be sustained. The procedural defect lay in making the final addition without affording an effective opportunity to respond to that proposed variation. [Paras 4]

The impugned assessment order was quashed and treated as a show cause notice, with liberty to the petitioner to file a reply and seek a personal hearing before a fresh assessment order is passed.

Final Conclusion: The writ petition was allowed on the ground that the impugned faceless assessment order made an enhanced addition without giving the petitioner an opportunity to respond. The order was quashed and converted into a show cause notice for fresh consideration after reply and hearing.

Directors' liability for tax dues of public company - Reasonable opportunity in show-cause proceedings - Foundational facts for lifting the corporate veil

Validity of show-cause notice and order u/s 179 for want of reasonable time to respond - Reasonable opportunity in show-cause proceedings - Natural justice - show-cause notice u/s 179 and the consequential order challenged for want of reasonable time to respond - HELD THAT: - The Court found that the petitioners received the show-cause notice only on 22.12.2018 though it required a reply by 24.12.2018 at 10:30 p.m., leaving them barely two days to respond. This assertion remained uncontroverted in the reply affidavit. In these circumstances, the proceedings suffered from denial of reasonable opportunity, and the authority nevertheless proceeded to pass the order under Section 179. [Paras 6]

The notice and consequential order were set aside on the ground of breach of reasonable opportunity, with liberty to issue a fresh notice and grant reasonable time for reply.

Directors' liability for tax dues of public company - Foundational facts for lifting the corporate veil - Section 179 proceedings - whether Section 179 could be invoked against the petitioners, who asserted that the company was a public limited company, without the show-cause notice and order containing foundational facts to justify treating it as a closely held company and lifting the corporate veil? - HELD THAT: - The Court held that the petitioners had specifically asserted in the writ petition and in reply to the notice that the company was a public limited company. Yet neither the show-cause notice nor the impugned order set out the necessary factual basis to show that, despite its public character, it was in reality a closely held company possessing the attributes of a private limited company so as to attract Section 179. Nor did the notice allege that the company had been formed with an oblique motive to defraud the public exchequer. Applying Padmashi Devji Vithlani [2014 (3) TMI 391 - GUJARAT HIGH COURT] the Court held that such foundational facts had to be stated in the notice itself so that the petitioners could effectively meet them. [Paras 6, 8]

The notice and order were set aside for absence of foundational allegations and findings necessary to proceed under Section 179 against directors of a company asserted to be a public limited company; the matter was remanded for issuance of a fresh notice and reconsideration.

Final Conclusion: The writ petition was allowed. The show-cause notice, the order under Section 179, and consequential demands were quashed, and the matter was remanded to the Assessing Officer to issue a fresh notice, furnish reasonable opportunity, and proceed afresh in light of the Court's observations.

Time-barred reassessment - Notice issued on or after 1st April 2021 for Assessment Year 2015-16 - Reassessment proceedings under the post-2021 regime - TOLA

HELD THAT: - The Court held that, in view of the Revenue's concession recorded by the Supreme Court in Union of India vs. Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] all notices for Assessment Year 2015-16 issued on or after 1st April 2021 were liable to be dropped as they would not fall within the period prescribed under TOLA. Applying that position, the Court found that the reassessment proceedings against the petitioner, including the order under Section 148A(d) and the consequential notice under Section 148, were clearly time barred. [Paras 5, 6]

The impugned order under Section 148A(d) and the notice under Section 148 were quashed, and the writ petition was allowed.

Final Conclusion: The Court held that the reassessment proceedings for Assessment Year 2015-16 were barred by limitation, since the underlying notice had been issued on or after 1st April 2021. The impugned order under Section 148A(d) and the consequential notice under Section 148 were therefore quashed.

Limitation for reassessment order - Date of signing of assessment order - Exclusion of time for valuation report - reassessment order passed after reference to the Valuation Officer

HELD THAT: - The Court held that, for computing limitation, the crucial date was the date on which the Assessing Officer actually received the valuation report, and on the Revenue's own statement that the report was received on 25th February 2022, the balance period available under the proviso expired on 26th April 2022. The Court further held that the date mentioned on the assessment order was not determinative; the order would come into operation only upon its signing and not on the date on which it was prepared. Since the assessment order was digitally signed only on 26th May 2022, it was beyond limitation and therefore invalid. [Paras 7, 8]

The assessment order was held barred by limitation and was quashed along with consequential proceedings.

Final Conclusion: The writ petition was allowed. The reassessment order, having been digitally signed only after expiry of the limitation period as computed after exclusion of the valuation-reference period, was set aside together with all consequential proceedings.

Reopening after scrutiny assessment - Change of opinion on section 10AA deduction - Absence of fresh tangible material - Non-existent statutory condition - Manual claim in return computation

Validity of reassessment notice issued to withdraw the deduction claimed u/s 10AA, after the claim had been specifically examined and allowed in the original scrutiny assessment - HELD THAT: - The Court found that, during the original assessment u/s 143(3), the AO had specifically called for details regarding the deduction claimed u/s 10AA, the computation thereof, and the manner in which it was reflected in the return, and the assessee had furnished the requisite explanation and supporting computation.

Once that claim had been scrutinised and accepted, reopening on the basis of the same material amounted to a mere review of the concluded assessment and therefore to a change of opinion, which is impermissible even though the notice was issued within four years.

The first recorded reason, namely that losses of ineligible units had to be set off before granting the deduction, was held to be contrary to the law declared by the Supreme Court in M/S YOKOGAWA INDIA LTD. [2016 (12) TMI 881 - SUPREME COURT] and therefore incapable of constituting a valid reason to believe that income had escaped assessment. The second reason, based on non-bringing of foreign exchange into India within six months, was rejected because that requirement was introduced into section 10AA only with effect from 1st April, 2024 and was not part of the law applicable to the relevant assessment year; the Revenue could not import into section 10AA a condition found in section 10A. The third reason, that the deduction was not claimed in the designated schedule but through computation filed during assessment, was also held unsustainable because the claim had in fact been made in the return under the column for other allowable deductions, was fully explained in the original assessment, and the Revenue did not dispute the assessee's case that the return utility did not permit the claim to be correctly reflected in line with the governing legal position. The decision relied on by the Revenue concerning a fresh claim without a revised return was held inapplicable, since this was not a fresh claim but a previously disclosed and examined claim. [Paras 18, 19, 20, 21, 22]

The notice under section 148, the order disposing of objections, the draft assessment order, and consequential proceedings were quashed.

Final Conclusion: The Court held that the reassessment was founded entirely on a reappraisal of material already examined in the original scrutiny assessment and therefore amounted to an impermissible change of opinion. As none of the recorded reasons for reopening was legally sustainable, the entire reassessment proceeding was quashed.

Bogus purchases - profit element addition - Reassessment based on post-search information - Section 153C versus section 147

Bogus purchases - profit element addition - Acceptance of sales without rejection of books - HELD THAT: - The Tribunal noted that, although the AO doubted the genuineness of the purchases from the stated supplier, the corresponding turnover from the civil construction and infrastructure projects had been accepted and the books of account had not been rejected. The appellate authority had also considered the assessee's material showing utilisation of the goods in project execution, reflection of the transactions in the supplier's audited accounts with GST payment, the later confirmation of the supplier, and the prejudice caused by denial of cross-examination. In these circumstances, the Tribunal accepted the reasoning that, in cases of unverified purchases where sales are accepted, the proper course is to bring to tax only the extra profit element or saving embedded in such transactions. The estimate made at 3.5% on the disputed purchases, having regard to the assessee's past gross profit history, was held to be fair and reasonable. [Paras 6]

The restriction of the addition to 3.5% of the disputed purchases was upheld and the Revenue's challenge to full disallowance was rejected.

Reassessment based on post-search information - Section 153C versus section 147 - HELD THAT: - The Tribunal held that the Assessing Officer had acted on information flagged on the insight portal, supported by the proprietor's statement admitting accommodation entries, and had followed the procedure prescribed under section 148A. No procedural default in that exercise was shown by the assessee. The further contention that the case necessarily fell under section 153C was also rejected because the reopening was not founded on incriminating material found during the course of search in the third party's case, but on the post-search statement and post-search enquiries. On that factual basis, the Tribunal found no merit in the challenge to jurisdiction under section 147. [Paras 7]

The legal challenge to the reopening failed and the assessee's cross-objection on jurisdiction was dismissed.

Final Conclusion: The Tribunal upheld the estimation of only the embedded profit on the alleged bogus purchases, since sales were accepted and the books had not been rejected. It also sustained the reassessment, holding that the proceedings were validly initiated on post-search information and were not required to be taken under section 153C. All Revenue appeals and the corresponding cross-objections were dismissed.

Reassessment notice beyond three years - Sanction by specified authority - Invalid reopening for approval by incompetent authority - Jurisdictional invalidity of reopening -

HELD THAT: - The Tribunal found the factual position to be undisputed that the order u/s 148A(d) and the notice under section 148 were issued on 08.04.2022, that is, beyond three years from the end of the relevant assessment year, and that the approval had been obtained from the Principal Commissioner of Income Tax, Thane. In such a case, the applicable requirement under the amended law was approval from the authority specified u/s 151(ii), namely the Principal Chief Commissioner or other equivalent authority, and not the Principal Commissioner.

Applying the binding Bombay High Court decisions Pradeep Himatlal Shah [2024 (3) TMI 1479 - BOMBAY HIGH COURT], Alag Property Construction Pvt. Ltd. [2025 (9) TMI 1203 - BOMBAY HIGH COURT] as relying on Ashish Agrawal [2022 (5) TMI 240 - SUPREME COURT] and Union of India vs. Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] on the point, the Tribunal held that absence of sanction from the competent specified authority went to jurisdiction and rendered the notice under section 148 bad in law. Once the notice was invalid, the entire reopening and the consequential reassessment order could not survive. [Paras 7]

The notice under section 148 was quashed as invalid for want of approval from the competent specified authority, and the consequential reopening proceedings and reassessment order were also quashed; the remaining grounds were treated as academic.

Final Conclusion: The Tribunal allowed the appeal and held that, since the reopening was initiated beyond three years from the end of the relevant assessment year, approval from the authority specified under section 151(ii) was mandatory. As the approval had been taken from the Principal Commissioner, the notice under section 148, the reopening proceedings, and the consequential reassessment order were quashed.

Reassessment limitation under deemed notices - Sanction by specified authority for reassessment - Appellate power to restore invalid reassessment proceedings - Surviving period for consequential notice under section 148 - Time-barred reassessment under deemed section 148A(b) notice

Surviving period for consequential notice under section 148 - Time-barred reassessment under deemed section 148A(b) notice - HELD THAT: - The Tribunal applied the principle stated in Union of India v. Rajeev Bansal [2024 (10) TMI 264 - Supreme Court (LB)] that, where notices issued between 01.04.2021 and 30.06.2021 under the old regime were deemed to be show-cause notices under section 148A(b), the limitation clock stood stopped on the date of the original notice; the period till supply of information and material and the time allowed to the assessee to reply were to be excluded; and thereafter the Assessing Officer had to pass the order under section 148A(d) and issue the notice under section 148 within only the surviving balance period. On the undisputed dates, no effective surviving period remained for Assessment Year 2015-16, while only one day survived for Assessment Year 2016-17 and thirteen days for Assessment Year 2017-18. The consequential notices issued in July 2022 were, therefore, beyond the surviving period and failed the jurisdictional requirement of a valid notice under section 148. [Paras 25, 26, 28, 29]

The orders under section 148A(d), the consequential notices under section 148, and the reassessment proceedings founded thereon were invalid for all three assessment years.

Approval u/s 151(ii) - Jurisdictional defect in reassessment sanction - sanction obtained from the Principal Commissioner instead of the higher authority specified under section 151(ii) - HELD THAT: - Following the jurisdictional High Court decision in Ramesh Bachulal Mehta [2025 (8) TMI 1322 - BOMBAY HIGH COURT] Tribunal held that, once more than three years had elapsed from the end of the relevant assessment year, approval for passing the order under section 148A(d) and issuing notice under section 148 had to come from the authority specified under section 151(ii). TOLA extended the competence of the authority under section 151(i) only up to 30.06.2021. Since the orders under section 148A(d) and the notices under section 148 for Assessment Years 2016-17 and 2017-18 were issued on 27.07.2022, approval from the Principal Commissioner did not satisfy the statutory condition. The Tribunal treated such sanction as a jurisdictional precondition and not a curable procedural defect. [Paras 36, 37, 39, 40, 41]

The reassessment proceedings for Assessment Years 2016-17 and 2017-18 were independently bad in law for want of sanction from the competent specified authority under section 151(ii).

Restoration of invalid reassessment by Commissioner (Appeals) - Mischaracterisation of reassessment as best judgment assessment - HELD THAT: - The Tribunal noted that the assessment orders expressly recorded that they had been passed under section 147 read with section 144B, whereas the Commissioner (Appeals) proceeded on the footing that they were best judgment assessments under section 144 and set them aside for fresh adjudication. More fundamentally, once the orders under section 148A(d) and the notices under section 148 were held invalid, no legally subsisting reassessment proceeding remained capable of being remitted to the Assessing Officer. The appellate orders restoring such invalid proceedings were therefore unsustainable. [Paras 42, 43, 44, 45]

The orders of the Commissioner (Appeals) setting aside the reassessments for fresh adjudication were themselves set aside.

Final Conclusion: The Tribunal held that the reassessment notices issued under section 148 for Assessment Years 2015-16, 2016-17 and 2017-18 were jurisdictionally invalid, being barred by the surviving period of limitation, and that for Assessment Years 2016-17 and 2017-18 the sanction was also from an incompetent authority under section 151(ii). The reassessment orders and the appellate orders remitting the matters for fresh assessment were accordingly quashed, while the remaining grounds were left open as academic.

Deduction on interest from deposits with co-operative banks - Prima facie adjustment of debatable claims - Rectification of mistake apparent from record - Debatable claim under section 80P(2)(d)

Prima facie adjustment u/s 143(1) - Debatable claim under section 80P(2)(d) - Rectification u/s 154 - Disallowance of deduction claimed on interest from deposits with co-operative banks - HELD THAT: - The Tribunal held that the scope of processing under section 143(1) is confined to adjustments apparent from the return and does not extend to adjudication of contentious questions involving statutory interpretation or examination of competing judicial views.

It further held that rectification under section 154 is limited to an obvious and patent mistake apparent from the record, and a matter on which two views are reasonably possible falls outside that jurisdiction. Since the controversy regarding deduction on interest received from co-operative banks had been the subject of judicial examination and divergent views, the claim could not be treated as an incorrect claim apparent from the return or as a mistake apparent from the record. [Paras 9, 10, 12]

The adjustment under section 143(1) and the consequential rejection of rectification under section 154 were held to be without legal basis.

Deduction under section 80P(2)(d) - Interest from deposits with co-operative banks - Co-operative bank as co-operative society -HELD THAT: - The Tribunal accepted the distinction between a co-operative bank claiming deduction in respect of its own income and a co-operative society earning interest from investments made with a co-operative bank. It held that a co-operative bank remains a co-operative society carrying on banking business, and the exclusion introduced by section 80P(4) was directed against co-operative banks claiming deduction for their own income, not against a co-operative society investing with such bank. Following the co-ordinate Bench decision in Ekta Bhoomi Garden III, and noting the absence of any distinguishing feature, the Tribunal held that the deduction claimed under section 80P(2)(d) was allowable. [Paras 11, 12, 13]

The disallowance was directed to be deleted and the deduction claimed by the assessee was ordered to be granted.

Final Conclusion: The Tribunal allowed both appeals and held that the denial of deduction on interest earned from deposits with co-operative banks could neither be made through prima facie adjustment nor sustained in rectification. The assessee was held entitled to deduction under section 80P(2)(d) for both assessment years.

Addition u/s 68 for cash receipts from trade debtors - Cash deposits sourced from realization of credit sales - Realization of outstanding credit sales - Business cash deposits

HELD THAT: - The Tribunal held that the assessee had furnished details of the parties from whom cash was received against earlier credit sales, and had also produced supporting material including VAT returns to show that the sales pertained to the year in question. The AO had not doubted the underlying credit sales. In that situation, the Assessing Officer's method of treating the receipts during the period from 01.11.2016 to 08.11.2016 as unexplained by comparing them with the highest earlier monthly cash realization from debtors was found to be unjustified. Once the source was explained as realization of outstanding business dues and the credit sales themselves were not disbelieved, the addition u/s 68 could not be sustained. [Paras 8]

The addition was deleted and the assessee's challenge to the section 68 addition was allowed.

Final Conclusion: The Tribunal allowed the appeal and deleted the addition made under section 68, holding that the impugned cash receipts were explained as realizations from accepted credit sales. The issue regarding taxation under section 115BBE was treated as consequential and was not adjudicated.

Reassessment u/s 148A - Inquiry and disclosure of material before reopening - Bogus purchases as unexplained expenditure

Reassessment u/s 148A - Independent application of mind - Inquiry and disclosure of material before reopening - vague information received from the Investigation Wing without conducting the requisite inquiry - HELD THAT: - Tribunal held that under the post-01.04.2021 scheme, section 148A requires the AO to verify the information suggesting escapement of income, share such information and the result of any inquiry with the assessee, consider the reply, and then pass a reasoned order on whether it is a fit case to issue notice under section 148.

In the present case, the information supplied in the notice under section 148A(b) was only general and vague, as it did not identify which transactions or invoices were fictitious or the basis for treating them so.

AO expressly stated that no further inquiry was needed, yet in the order under section 148A(d) relied on material and reasoning not supplied earlier to the assessee. The Tribunal further held that the Investigation Wing had only expressed doubt about genuineness for want of substantiating material and had not furnished any concrete or conclusive evidence of bogus purchases. By treating that suspicion as conclusive and proceeding without the inquiry contemplated by clauses (a) to (d) of section 148A, the Assessing Officer failed to comply with the statutory requirement. The substituted provisions require a reasoned determination that it is a fit case for reopening, and not reopening merely on borrowed or unverified suspicion. [Paras 14, 16, 17]

The reopening was held bad in law, and the notice u/s 148, the order under section 148A(d), and the consequential reassessment order were quashed.

Bogus purchases as unexplained expenditure - Accepted sales and corresponding purchases - Addition based on unsubstantiated investigation report - HELD THAT: - The Tribunal found that the reassessment was triggered by scrutiny proceedings under the GST law regarding suspicious input tax credit from the same supplier, but the assessee's reply in those proceedings had been accepted by the GST Department and no further action was taken. It therefore held that the very basis on which the reopening had been triggered no longer survived.

On merits also, the Tribunal noted that the assessee had produced the audit report, GST returns, ledger account of the supplier, sample bills with e-way bills and lorry receipts, stock details, account confirmation, purchase register, and bank statements showing payment. AO had not pointed out any defect or infirmity in these materials and had merely proceeded on the unsubstantiated report of the Investigation Wing. Since the assessee was a trader and the corresponding sales were admitted, the Tribunal held that the purchases could not be rejected in this manner, particularly when it was not the Revenue's case that the goods had been purchased from some other source or the grey market. [Paras 19, 20, 22]

The addition treating the purchases as unexplained expenditure was deleted for both years.

Final Conclusion: Both appeals were allowed. The Tribunal quashed the reopening for failure to comply with the requirements of section 148A and also deleted the additions on alleged bogus purchases on the ground that they were unsupported by any proper inquiry or adverse finding against the evidences produced by the assessee.

Appellate order founded on incorrect factual premises - Failure to adjudicate actual grounds of appeal - assessee's claim that the land was rural agricultural land outside the ambit of capital asset - HELD THAT: - The Tribunal found that the first appellate order was vitiated at its foundation because it proceeded on entirely incorrect facts. Although the appeal before the Commissioner (Appeals) was against the assessment order passed under section 143(3), the order was framed as if it arose from a rectification order under section 154 and dealt with the maintainability of a rectification application before the Assessing Officer, which was admittedly never filed.

The subsequent rectification order did not dispute this factual position, but merely declined to rectify and advised the parties to approach the Tribunal. Since the actual grounds arising from the assessment order were never adjudicated, the Tribunal held that the earlier orders of the lower authorities could not stand.

As additional material regarding the claim that the land was rural agricultural land required factual verification, and the Tribunal expressed no view on merits, the matter was restored to the Assessing Officer for fresh adjudication after considering the assessee's submissions and after granting reasonable opportunity of hearing. [Paras 8, 9]

All earlier orders were set aside and the matter was restored to the Assessing Officer for fresh adjudication; the merits of the claim regarding the nature of the land were left open.

Final Conclusion: The Tribunal held that the first appellate order, and the rectification order declining to correct it, were unsustainable because they were based on wholly incorrect factual premises and did not decide the real appeal. The matter was remanded to the Assessing Officer for fresh adjudication, with all merits kept open.

Notice under section 148 barred by limitation - Exclusion of time u/s 148A(b) notice - Reassessment notice limitation for pre-2021 assessment years - First proviso to section 149 restricting retrospective reopening - HELD THAT: - The Tribunal held that, for assessment years prior to AY 2021-22, the first proviso to section 149 preserves the earlier six-year outer limit and prevents the Revenue from invoking the enlarged period under the new regime where such six-year period had already expired.

Applying that principle, the notice issued on 04.04.2022 for AY 2015-16 was beyond 31.03.2022 and was therefore time-barred. It further held that the exclusion of time contemplated for reply to the notice under section 148A(b) cannot be invoked unless the notice first survives the limitation test under section 149; once the notice failed by virtue of the first proviso, the question of excluding such period did not arise. [Paras 7, 8]

The notice under section 148 was held barred by limitation; the reassessment proceedings founded on that notice were quashed, and the grounds on merits were left open.

Final Conclusion: The Tribunal held that the notice issued under section 148 for AY 2015-16 after expiry of the six-year limit saved by the first proviso to section 149 was invalid. The reassessment was therefore quashed and the appeal was partly allowed, with the merits left open.

Exemption for capital gains on sale of immovable property - Deemed consideration under section 50C - Net consideration for section 54F computation - Net consideration vis-a-vis deemed full value of consideration - HELD THAT: - The Tribunal held that the statutory fiction in section 50C is confined to computation of capital gains under section 48 and cannot be extended to the expression net consideration used in section 54F.

Section 54F proceeds on the actual consideration received or accrued on transfer, reduced by transfer expenditure, whereas section 50C substitutes a deemed full value only for the limited purpose for which that fiction is created.

Since the assessee had invested an amount exceeding the actual sale consideration received from the transfer of the original assets in the new residential house, the condition for full exemption stood satisfied. Tribunal applied the settled principle that a deeming provision cannot be enlarged beyond its purpose, and therefore the deemed value under section 50C could not be imported into section 54F to curtail the exemption. [Paras 16, 17, 18, 19]

The assessee was entitled to full exemption under section 54F and the whole of the capital gain was held not chargeable to tax; the question whether the lands were agricultural lands was left open as academic.

Final Conclusion: The appeal was allowed. The Tribunal held that section 50C could not be imported into section 54F for computing net consideration, and since the actual sale consideration had been fully invested in the new residential house, the entire capital gain was exempt; the agricultural land issue was left open.

Demand cum Show Cause Notice - Pendency of the classification issue before the Supreme Court - Interim protection against coercive recovery -HELD THAT: - The Court recorded that both sides accepted the position that the Supreme Court Union of India & Ors. Versus GMR Airport Infrastructure Ltd. [2025 (5) TMI 320 - SC ORDER] had directed High Courts and the Tribunal to defer hearing of matters involving the same classification controversy. Acting on that direction, the Court refrained from adjudicating the merits of the classification dispute, kept all proceedings pursuant to the impugned order in abeyance, restrained coercive recovery and related action, and left all contentions open to be worked out after the Supreme Court's decision. The period during which the writ petition remained pending was also directed to be excluded for computing limitation for any appeal filed thereafter. [Paras 7]

Proceedings arising from the impugned order were directed to remain in abeyance till disposal of the pending SLP, with protection against coercive steps and liberty to pursue remedies thereafter.

Final Conclusion: The writ petition was disposed of without examining the merits of the classification dispute. The impugned order and all consequential proceedings were directed to remain in abeyance till the Supreme Court decides the pending SLP, with interim protection against recovery and allied action.

Seeking Provisional release of imported goods pending adjudication- second-hand digital multifunction print and copying machines - HELD THAT: - The Court did not adjudicate the merits of the dispute regarding importability or the requirement of BIS registration. Taking note that an identical issue had already been dealt with by this Court in the earlier batch and that the respondents stated that orders could be passed if the earlier conditions were fulfilled, the Court directed the Customs Department to pass orders for provisional release by imposing such conditions as permissible under the Customs Act, and to release the goods upon compliance with those conditions. The Court also made it clear that such provisional release would remain subject to final adjudication and would not fetter the Customs authorities in passing the final order. [Paras 6, 7]

The writ petitions were disposed of by directing consideration and grant of provisional release on appropriate conditions, without deciding the underlying merits, and subject to final adjudication.

Final Conclusion: The Court disposed of the writ petitions by directing the Customs Department to pass orders for provisional release of the imported goods on appropriate conditions and to release them upon compliance. The order was expressly made subject to final adjudication by the Customs authorities.

Imposition of Penalty - Smuggling of gold - Retracted statement under Section 108 - Uncorroborated co-accused confession - Admissibility of statements in adjudication - Retracted confession - Independent corroborative evidence - Procedure for admitting statements in evidence - HELD THAT: - Admittedly, Kartik Sen, who is the carrier of 40 pcs of gold was intercepted and the gold was recovered from his possession. After due process, the gold in question has been confiscated absolutely and there is no claimant towards the ownership of the same. From the records it is seen the other noticees have not even filed any appeal before the Commissioner (Appeals). Hence, even their appeals are not before the Tribunal. Thus the only appeal is that of the present appellant, who has been imposed with a penalty.

This decision of the High Court inof G-Tech Industries[2016 (6) TMI 957 - PUNJAB & HARYANA HIGH COURT] places high importance towards fulfillment of the procedure prescribed under Section 9D of CEA 1944. The Section 108 of the Customs Act 1962 is para materia to Section 9D of CEA 1944. In the present proceedings, the records nowhere show that this procedure was not followed by the Revenue, before admitting the recorded statements as evidence.

The Tribunal found that the entire case against the appellant rested on three statements. The statement of the alleged carrier and that of the person said to have introduced him gave conflicting versions and, therefore, did not furnish reliable corroboration. The appellant's own statement, though confessional, lost its evidentiary value because it was retracted before the Magistrate on the very next day in the presence of departmental officials. The Tribunal further held that statements recorded under Section 108 could not be relied upon as proof of their contents without following the mandatory procedure for admitting such statements in adjudication, and in the absence of that procedure, as well as any independent corroborative evidence, the Revenue's case failed. It was also reiterated that a co-accused statement is not substantive evidence and can at best be used only in support of other reliable material, which was absent here. [Paras 39, 41, 43, 45, 46]

The penalty imposed on the appellant was set aside, as the recorded statements were legally insufficient and unsupported by independent corroboration.

Final Conclusion: The Tribunal held that the penalty could not be maintained on the basis of a retracted confessional statement and inconsistent co-noticee statements unsupported by any independent evidence. The appeal was accordingly allowed and the penalty was set aside.

Classification of PVC insulated cable fitted with connectors - Scope of electrical signalling equipment for motor vehicles - Classification of automotive Driver Monitoring System sub-assemblies as motor vehicle parts - Exemption under S. No. 733 of Notification No. 69/2011-Customs

Classification of PVC insulated cable fitted with connectors - Specific heading prevailing over end-use as part of Driver Monitoring System - Exemption linked to tariff classification - HELD THAT: - The Authority found that the imported cable was a PVC insulated electric cable fitted with connectors at both ends and answered exactly to the description of heading 8544, more particularly CTI 8544 42 20. Since Section Note 2(a) of Section XVI requires a part that is itself specifically covered by a heading in Chapter 84 or 85 to be classified in that heading, its end-use as a part of the Driver Monitoring System did not displace the specific tariff entry. On that classification, the cable, being imported from Japan and falling within the covered range of sub-headings, was held eligible for the claimed exemption notification entry. [Paras 4]

Cable was ruled classifiable under CTI 8544 42 20 and eligible for exemption under S. No. 733 of Notification No. 69/2011-Customs.

Scope of electrical signalling equipment for motor vehicles - Classification of Driver Monitoring System Unit Assembly and Controller Assembly - Section XVII exclusion for goods of Chapter 85 - Residual classification as other parts and accessories of motor vehicles - HELD THAT: - The Authority held that heading 8512 covers apparatus whose essential function is to directly generate or emit warning or signalling output to the driver. The Driver Monitoring System under consideration did not itself emit any warning; the Unit Assembly only captured image data, the Controller Assembly only processed and transmitted that data, and the actual alert was generated later through the vehicle's external BCM and Buzzer or Indicator Lamp. For that reason, the system and its sub-assemblies did not fall within the class of signalling apparatus contemplated by the HSN examples under heading 8512, and the rulings cited by the applicant on directly signalling equipment were found inapplicable. The Authority further held that Note 2(f) to Section XVII excludes only those articles which are goods of Chapter 85 by specific coverage. As neither the Unit Assembly nor the Controller Assembly was specifically classifiable under any heading of Chapter 85, the exclusion did not operate. Being purpose-built, exclusively automotive sub-assemblies with no independent use outside the vehicle-integrated Driver Monitoring System, they were classifiable under heading 8708, and in the absence of any more specific sub-heading, under CTI 8708 99 00. Consequently, the exemption claim linked to classification under CTI 8512 90 00 did not survive. [Paras 4]

Unit Assembly and Controller Assembly were ruled classifiable under CTI 8708 99 00; their proposed classification under CTI 8512 90 00 was rejected, and the claimed exemption under S. No. 656 of Notification No. 69/2011-Customs was held not to arise.

Final Conclusion: The Authority ruled that the cable, being specifically covered as plastic insulated cable fitted with connectors, was classifiable under CTI 8544 42 20 and eligible for the claimed exemption. The Unit Assembly and Controller Assembly were held not to be parts of signalling equipment under heading 8512, but residual motor vehicle parts classifiable under CTI 8708 99 00, with the claimed exemption on the proposed 8512 classification therefore not arising.

Entitlement to a pre-cognizance hearing in the SFIO prosecution complaints - Deeming fiction of police report - Special statute overriding general criminal procedure - Special Court as Court of Session - Scope of Jurisdiction of Special Courts as a Court of Session under Companies Act, 2013 & Jurisdictional Application of Section 223, BNSS - Expressio unius - Expeditious trial

SFIO investigation report - Pre-cognizance hearing - Scope and Legislative Object of Deeming Fiction created by Section 212(15) of Companies Act, 2013 - HELD THAT: - Once the legislature has clearly provided that the SFIO investigation report shall be treated as a report under Section 173 of the Cr.P.C. (now Section 193 of the BNSS), the procedural consequences ordinarily flowing from a police report cannot be ignored while determining the nature of cognizance proceedings before the Special Court, particularly when Section 436(1)(d) of the Act, 2013 has reiterated that the investigation report to be taken as the material per se for taking cognizance by the Special Court.

The Court held that the statutory scheme of Sections 212, 436 and 439 of the Companies Act, 2013 treats an SFIO prosecution as a distinct category. Though cognizance is initiated on a complaint in writing, the complaint is founded on a completed statutory investigation and is accompanied by an investigation report which, by virtue of Section 212(15), is placed on the footing of a police report. The Court rejected the contention that the deeming fiction is confined in a narrow sense only to the stage of framing of charge, holding that the scheme of the Act requires cognizance to be taken on the complaint and the investigation report without importing an additional pre-cognizance hearing. Since the definition of complaint under the BNSS excludes a police report, the proviso to Section 223, which applies to complaint cases before a Magistrate, cannot be invoked in relation to an SFIO prosecution so structured by the special statute. [Paras 39, 60, 62, 63, 64]

The proposed accused had no right to claim a pre-cognizance hearing under Section 223 of the BNSS in an SFIO prosecution under the Companies Act, 2013.

Special statute overriding general criminal procedure - Self-contained procedural framework - Statutory complaint by public authority - HELD THAT: - It is well settled that where a special enactment prescribes a separate procedure, the same ordinarily prevails over the procedural provisions contained in general law. The principle of generalia specialibus non derogant i.e. ‘general law must yield to special law’ is firmly entrenched in Indian jurisprudence. Where a special statute provides a distinct procedure, the general provisions of criminal law stand excluded to the extent of inconsistency. Hence, special enactments prevail over general criminal procedure in matters of conflict.

The overriding effect of the Act, 2013 over the general provisions of the BNSS is further reinforced by Section 438 of the Act, 2013, as the said provision expressly stipulates that provisions of the Cr.P.C. (now the BNSS) shall apply to proceedings before Special Courts constituted under the Act, 2013 only insofar as they are not inconsistent with the provisions of the Act. The statute thereby creates a clear hierarchy: wherever the Act, 2013 prescribes a distinct procedure, that procedure prevails, and the general criminal procedure i.e. the BNSS stands excluded to the extent of inconsistency. Thus, the legislative intent is unambiguous that the Special Courts are to follow the scheme of the Act, 2013, and not be governed by procedural requirements under the BNSS to the extent of the inconsistency therewith.

The Court held that the Companies Act, 2013 is a special enactment containing a complete procedural framework for investigation, prosecution, cognizance and trial before Special Courts. By Sections 4 and 5 of the BNSS and Section 438 of the Companies Act, the general criminal procedure applies only insofar as it is not inconsistent with the special statute. The Act itself contemplates cognizance by the Special Court on the complaint and the accompanying investigative material, without any statutory requirement of notice or hearing before cognizance. The Court further accepted the distinction between a private complaint and a statutory complaint by the SFIO: the latter follows a detailed investigation by public servants, association of concerned persons during investigation, examination of the report by the competent authority, and a direction to prosecute. In that setting, introducing a pre-cognizance hearing would be inconsistent with the legislative design of expeditious prosecution under the Act. [Paras 47, 48, 49, 50, 51]

The Companies Act, 2013 overrides the general procedure under Section 223 of the BNSS, and no pre-cognizance notice can be required in an SFIO prosecution.

Special Court as Court of Session - Scope of Jurisdiction of Special Courts as a Court of Session under Companies Act, 2013 & Jurisdictional Application of Section 223, BNSS - HELD THAT: - The Court held that Section 223 of the BNSS, by its express language, applies to a Magistrate taking cognizance on a complaint. In contrast, the Special Court constituted under Sections 435 and 436 of the Companies Act for serious offences functions at the Sessions level and is empowered to take cognizance directly without committal. Read with Section 438 of the Act, the applicable procedural position is that such a Special Court takes cognizance under the scheme governing a Court of Session and not under the Magistrate's complaint procedure in Chapter XVI of the BNSS. Therefore, Section 223 could not be extended to such proceedings merely because the initiating document was described as a complaint or was administratively registered as one. [Paras 53, 54, 55, 56, 59]

Cognizance by the Special Court in the present prosecution was not subject to the procedure under Section 223 of the BNSS.

Final Conclusion: The High Court held that prosecutions instituted by the SFIO under the Companies Act, 2013 are not governed by the proviso to Section 223 of the BNSS and that no pre-cognizance hearing is required before the Special Court. The challenge to the order rejecting such hearing was therefore rejected and the petition was dismissed.

Depository liability for participant negligence - Supervisory obligations of depositories - Investor indemnification under the Depositories Act - Limited appellate interference under Section 37 of the Arbitration and Conciliation Act - Patent Illegality - Plausible View - Fungibility of Securities - Early Warning Mechanism - Vicarious Liability - Principal-Agent Liability

Depository liability for unauthorized pledge of client securities - Negligence of depository participant - Supervisory duties under SEBI circulars and depository bye-laws - Principal-agent liability in the depository system - HELD THAT: - The claim was opposed primarily on the ground that it was based on the misconstrued role of the Depository and the accusations levelled against BRH were in its capacity independently, as a Stock Broker and not a Depository Participant. One more aspect which was placed into service was absence of negligence, and it being demonstrated that the Depository had failed to discharge its statutory obligations.

It is evidently clear that the Depository plays an important role in the Securities market and the regulatory frame work in existence has determined its role and its relationship with its participants like BRH.

In exercise of this power, CDSL has formulated the bye-laws in tune with its role under the Depositories Act, which has received approval of SEBI as contemplated under Section 26(1) of the Depositories Act. The bye-laws itself is indicative of the supervisory role to be discharged by the Depository as it provides for constitution of committees like Functional Committee, Grievance Redressal Committee, Oversight Committee, Advisory Committee with composition of its members. The Advisory Committee is an Oversight Committee of CDSL and comprised of public interest directors and Depository Participants of CDSL and it exercise the power prescribed under the Regulations of 2018 and other applicable Regulations and is empowered to advise the Depository on non regulatory and operational matters including technology, charges and levies amongst others. There is also a Regulatory Oversight Committee which comprises of independent external persons which has powers prescribed under the Regulations of 2018 and is also empowered to monitor the dealings in the Securities of the key management personnel and also consider and decide the criteria for admission and withdrawal of Securities and continuous compliance requirements.

The Court held that the statutory scheme of the Depositories Act, the 2018 Regulations and the approved bye-laws did not confine the depository to a merely mechanical record-keeping function. The depository was entrusted with investor-protection, monitoring and internal-control responsibilities, including safeguards against participant misconduct. The SEBI circulars on enhanced supervision and early warning mechanism had statutory force and required vigilance, monitoring and preventive action in respect of diversion or pledge of client securities. The participant, though also acting as a broker, operated within the depository system as the depository's agent; its ability to effect the transfers and pledge arose from that position. The Court found that the depository failed to put in place and implement the mandated safeguards and remained oblivious to warning signals such as movement of securities from a dormant investor account, off-market transfers and subsequent pledge for the participant's own purposes. That failure constituted negligence under Section 16, even though the participant's conduct was fraudulent. The Court rejected the contention that principal liability was excluded because the participant acted beyond authority, holding that the fraud was facilitated in the course of the agency within the depository framework. Once negligence of the participant/depository in the statutory system was established, the beneficial owner's right to indemnification against the depository followed, with a corresponding right of recovery by the depository against the participant. [Paras 33, 34, 35, 36, 37]

The finding fastening indemnity liability on the depository was upheld.

Section 37 appellate restraint - Patent illegality in arbitral awards - Plausible view of arbitral tribunal - HELD THAT: - Since the rights and obligations of the Depository qua the Participant are clearly set out by the bye-laws and the participant was under an obligation to maintain a separate account for each beneficial owner and ensure that the Securities of the beneficial owner are not mixed up with its own Securities, the supervision or monitoring by CDSL as Depository was very much mandatory.

The Court reiterated that jurisdiction under Section 37 is narrower than that under Section 34 and does not permit reappreciation of facts or substitution of a different view merely because another view is possible. Since the award was based on evidence, disclosed reasons, and adopted a plausible view on the depository's liability, and since the Section 34 court had tested the award on permissible grounds and found no perversity or patent illegality, appellate interference was unwarranted. [Paras 38]

The appeal under Section 37 was dismissed and the award, as upheld by the Single Judge, was left undisturbed.

Final Conclusion: The Court held that the award and the order under Section 34 disclosed no perversity or patent illegality. Treating the depository's failure to implement and act upon statutory supervisory safeguards as negligence attracting Section 16 of the Depositories Act, the appeal under Section 37 was dismissed.

Adjudication time limit under service tax law - Directory nature of statutory period qualified by feasibility - Assessee disentitled from challenging delayed adjudication caused by own non-response - Expression 'where it is possible to do so' - Delay attributable to assessee - Doctrine against taking advantage of own wrong - HELD THAT: - It is undisputed that the appellant is registered under the Service Tax Act and has been submitting returns showing no turnover.

The language employed in Section 73(4B) of the Act of 1994 is important and clearly reflects the legislative intent behind introducing a period of limitation for the disposal of such matters. The provision categorically uses the expression ‘where it is possible to do so’ while prescribing that in respect of cases falling under sub-section (1), the order shall be passed within six months from the date of notice and, in respect of cases falling under the proviso to sub-section (1) or the proviso to sub-section (4A), within one year from the date of notice.

The Court held that the period indicated in Section 73(4B) of the Finance Act, 1994 is meant to secure expeditious conclusion of proceedings and to curb executive lethargy, but the provision is expressly qualified by the words where it is possible to do so. The statutory scheme, therefore, does not create an inflexible bar against passing an order after one year where delay is justified. On the facts, the Department had issued repeated notices and hearing opportunities, but the appellant failed to respond until the last notice, and the order-in-original was passed within three months thereafter. In these circumstances, the Court found that the delay was not of the nature contemplated by the provision and the appellant could not take advantage of his own default to invalidate the adjudication. [Paras 17, 18, 19, 20]

The challenge to the adjudication order on the ground of breach of the one-year period under Section 73(4B) was rejected.

Final Conclusion: The Court dismissed the appeal, holding that the adjudication order was not rendered illegal merely because it was passed beyond one year from the show cause notice, since the statutory period is qualified by feasibility and the delay in the present case was attributable to the appellant's own non-response.

Entitlement to exemption under serial No. 9 of Notification No. 25/2012-ST - Services relating to conduct of examination - Extended period of limitation on suppression of facts - Penalty for non-payment of service tax and statutory non-compliances

Exemption for services relating to conduct of examination - Services to educational institution - HELD THAT: - The Tribunal held that the agreements produced by the appellant themselves showed that the services were rendered to commercial entities and not to any educational institution. In relation to Mahindra & Mahindra, the work was for designing a computer based training module on code of conduct and had no nexus with admission to, or conduct of examination by, an educational institution. In relation to BAJA SAEINDIA, although the work involved assessment and test-related activities, the recipient was not an educational institution; the agreement also expressly contemplated payment of service tax, which negatived the appellant's plea of exemption and claimed bona fide belief. The finding of the Commissioner (Appeals) denying exemption was therefore endorsed. [Paras 4]

The demand on merits was upheld as the appellant's services did not fall within the exempted category.

Extended period of limitation on suppression of facts - Non-disclosure of records under Rule 5 of the Service Tax Rules - HELD THAT: - The Tribunal found that the appellant had not raised any limitation plea before the lower authorities and had also failed to produce the agreements and other called-for records despite repeated letters and summons. The contention that balance sheets and income-tax records were public documents was rejected because the appellant admitted that no declaration regarding such records being maintained on its website had ever been furnished to the jurisdictional authorities as required by Rule 5 of the Service Tax Rules, 1994. On these facts, there was a clear case of suppression, and the decisions cited by the appellant on limitation were held distinguishable. [Paras 4]

The plea of limitation was rejected and the demand raised by invoking the extended period was sustained.

Penalty for non-payment of service tax and statutory non-compliances - Interest as consequential liability - HELD THAT: - The Tribunal held that once the ingredients justifying invocation of the extended period stood established, penalty under Section 78 followed as a natural consequence. It further upheld the penalties imposed for failure to maintain proper records, furnish information, pay service tax electronically and file returns, relying on the principle that such fiscal penalties are civil in nature and do not require proof of mens rea unless the statute so provides. Interest was also held payable as a necessary corollary to the confirmed service tax demand. [Paras 4]

The penalties and interest were affirmed along with the tax demand.

Final Conclusion: The Tribunal dismissed the appeal and upheld the service tax demand for the financial year 2016-17, holding that the claimed exemption was unavailable, the extended period had been rightly invoked on suppression, and the consequential interest and penalties were valid.

Interest on delayed refund - Refund of tax paid under mistake - Illegal retention of tax without show cause notice - HELD THAT: - It is seen on record that the appellant was not a registered assessee and the amount in question was paid only on the specific direction of the Revenue officials. When the SCN is not issued, the amount sitting with the Revenue is illegal ab initio, since it is not appropriated.

The Tribunal found that the amount was paid only on the specific direction of the departmental officers, though no show cause notice had ever been issued for appropriation of that amount or for raising the underlying service tax liability. In the absence of such notice, the amount retained by the Revenue was held to be illegal ab initio. The earlier rejection of refund was also treated as void, since the refund claim had been resisted on the footing of tax liability without any prior lawful demand. The Tribunal further held that the adjudicating authority itself had ultimately found that the appellant's yearly receipts were below the threshold limit for each financial year and that no service tax was payable in the first place. On that basis, and relying on the principles governing delayed refunds, the Tribunal held that the Revenue could not deny statutory interest by linking it to the later order in refund proceedings, especially when the matter had also been delayed in de novo adjudication for more than three years without explanation.

The decision of the Supreme Court on similar issues in the RANBAXY LABORATORIES LTD.[2011 (10) TMI 16 - SUPREME COURT]; SANDVIK ASIA LTD. [2006 (1) TMI 55 - SUPREME COURT]; HAMDARD (WAQF) LABORATORIES[2016 (3) TMI 68 - SUPREME COURT]are binding in nature. Having regard to the illegal collection and prolonged retention of the amount, interest was directed to run from the date of payment of the amount to the date of refund, at 6% per annum. [Paras 17, 18, 20, 21, 22]

The appellant was held entitled to interest at 6% per annum on the refunded amount from 30.08.2012 till 18.08.2021, and the Revenue was directed to compute and pay the same within the time stipulated.

Final Conclusion: The Tribunal held that the service tax amount had been illegally collected and retained without any show cause notice and that, once refund was found admissible, interest could not be denied or shifted to a later starting point. The impugned order was set aside and interest at 6% per annum was awarded from the date of payment of the amount till the date of its refund.

Demand under the category of Real Estate Agent Services - Sale of immovable property on principal-to-principal basis-differential service tax - Works contract valuation - Applicability of Rule 2A(i) and Rule 2A(ii) -

Real Estate Agent service - Sale of immovable property on principal-to-principal basis - Agency relationship - land acquisition, conversion and subsequent transfer to the housing society - HELD THAT: - The Tribunal found that the agricultural lands were acquired in the name of an individual only because the appellant could not itself purchase or hold agricultural lands under the Karnataka Land Reforms Act, and the records showed that such acquisition was on behalf of the appellant. The Revenue's basis for treating the activity as real estate agent service, namely that the land was not registered in the appellant's own name, was held to be irrelevant in the facts found. The Tribunal further held that no service was rendered by the appellant to the society and that the Revenue had wrongly treated the difference between the sale consideration and the land cost as service charges. As the transaction was essentially one of sale of land and the conditions of the definition of real estate agent service were not satisfied, the demand was unsustainable. [Paras 6]

The demand under the category of Real Estate Agent services was set aside.

Works contract valuation - Applicability of Rule 2A(i) and Rule 2A(ii) - Determination of service portion after excluding value of goods - Differential service tax on works contract - HELD THAT: - The Tribunal held that there was no dispute regarding classification of the activity as works contract and that the only controversy was valuation of the service portion. Rule 2A(ii) was held to apply only where the value could not be determined under Rule 2A(i). The Revenue had demanded differential tax by selecting only those invoices on which service tax had been paid on 30% of the value, while accepting invoices where tax had been discharged on a higher service component. This selective approach was found impermissible, since for the same services the Revenue could not partially accept the appellant's calculation of the value of goods and partially reject it without first determining the service portion. The Tribunal also noted that there was nothing on record to show why Rule 2A(i) had been rejected. On that reasoning, the differential demand based on 40% of the total amount was not sustainable. [Paras 7]

The differential demand on works contract valuation was set aside in all the appeals.

Goods Transport Agency service - Uncontested tax demand - HELD THAT: - The Tribunal recorded that the appellant had already paid the tax during audit and did not contest the demand under this category. On that basis, the demand was confirmed. [Paras 5]

The demand on Goods Transport Agency service was confirmed.

Final Conclusion: The appeal concerning the first period was partly allowed only to the extent of sustaining the uncontested GTA demand, while the demands on Real Estate Agent service and on differential valuation of works contract were set aside. The other two appeals were allowed, and the penalties were also set aside.

Suo motu re-credit of Cenvat credit - Rebate on export by 100% Export Oriented Unit - Unjust enrichment - Recovery of Cenvat credit re-credited by a 100% Export Oriented Unit during pendency of its revision application against rejection of rebate claims - HELD THAT: - It is true that there is no provision under the Statute for suo motu re-crediting the amount to Cenvat Account, but ultimately it appears that the petitioners got frustrated in view of the pendency of the Revision Application, and after informing the respondent authorities, the re-credit was taken and deposited in the Cenvat Account.

The Court noted that the respondents did not dispute the petitioners' substantive entitlement to rebate or re-credit in respect of exports made in 2011, and that the revision application against rejection of the rebate claims had remained pending for a long time despite repeated requests for expeditious disposal. Although there was no statutory provision permitting suo motu re-credit in the Cenvat account, the Court treated the case as exceptional, holding that the petitioners had taken such re-credit after informing the authorities and in the backdrop of prolonged pendency of the revision proceedings. The Madras High Court decision in ICMC Corporation Limited [2014 (1) TMI 1473 - MADRAS HIGH COURT], was noticed, but the Court clarified that its view was not strictly applicable to the present case. Even so, to salvage the situation and bring the litigation to an end, the Court approved the petitioners' action in the peculiar facts, while expressly directing that the order should not be treated as a precedent. [Paras 8, 10, 12, 13]

The impugned recovery communication was quashed, and the petitioners' suo motu re-credit was accepted only in the peculiar facts of the case, without creating any precedent.

Final Conclusion: The writ petition was allowed and the communication demanding payment on the basis of the petitioners' suo motu withdrawal of credit was set aside. The Court accepted the re-credit only because the petitioners' entitlement was undisputed and the matter had remained pending for long, and made it clear that the order would not operate as a precedent.

MODVAT credit on fuel inputs - Intermediate product cleared to another unit of same manufacturer - Inapplicability of Rule 57CC to fuel inputs - HELD THAT: - The Court held that where a nil-rated product is cleared for consumption in another factory of the same manufacturer and is used in manufacture of dutiable final products, it remains an intermediate product and does not become the final product merely because it moves from one factory to another within the same entity. In such a case, MODVAT credit on the fuel used for producing that intermediate product is admissible so long as duty is paid on the ultimate final products. The Court further held that Rule 57CC, by expressly excluding inputs used as fuel from its adjustment and separate-account mechanism, does not govern fuel inputs.

The Judgment of Hon'ble Supreme Court in Ballarpur Industries Ltd. [2007 (8) TMI 10 - SUPREME COURT], this Court is of the view that the same is not applicable to the reference as it deals with non-fuel inputs. As the instant reference concerns only fuel input, and as fuel input is exempted from the mechanism under Rule 57CC, Ballarpur Industries Casedoes not apply to the instant reference. Moreover, in the facts of the given case, all the final products are dutiable in nature as explained infraand therefore, Ballarpur Industries Casewould not apply.

Since the D.B.M. manufactured from the furnace oil was used for dutiable final goods in both units of the manufacturer, there was no occasion to deny or reverse the credit. [Paras 9, 10, 11, 12, 13]

The Tribunal was right in holding that reversal of credit on furnace oil was not required in the facts of the case.

Final Conclusion: The reference was answered in favour of the assessee. The High Court held that MODVAT credit on furnace oil used for manufacture of D.B.M. was not liable to be reversed, as D.B.M. was only an intermediate product used for dutiable final goods within the same manufacturing entity.

Extended period of limitation - Wrongful availment of Cenvat credit - Penalty for suppression of facts - Intent to evade duty - service tax payable on the Annual maintenance charges (AMC) for computer software maintenance - Claim for refund

Extended period of limitation - HELD THAT: - The Court held that, during the relevant period, the normal period for action applied unless the case involved fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty. On the facts found, the contractual obligation with the foreign service provider had not been disclosed to the department, service tax had been paid belatedly, and the assessee had taken suo motu credit instead of pursuing refund. Treating the transaction as a whole, the Court concluded that suppression and fraud stood established, thereby attracting the extended period. [Paras 13, 15]

The plea of limitation was rejected and the demand raised within the extended period was upheld.

Penalty for suppression of facts - Wrongful availment of Cenvat credit - HELD THAT: - Applying Rule 15(2) read with Section 11AC, the Court held that the same facts which justified invocation of the extended period also satisfied the statutory requirement for penalty. Since the non-disclosure of the contractual arrangement and the taking of credit without entitlement were treated as establishing suppression and fraud, the levy of penalty was held to be legally justified. [Paras 15]

The penalty was sustained against the assessee.

Final Conclusion: The appeal was dismissed. The Court upheld both the invocation of the extended period and the penalty, holding that suppression of the contractual arrangement and wrongful suo motu availment of credit justified the departmental action.

Scope of Section 11D - retrospective or Prospective operation - non obstante clause - Amounts collected as excise duty - Penal character of taxing provision - HELD THAT: - The Court held that the decisive factor was the period of collection of the amount as representing duty of excise, and not the date of issuance of the show cause notice. It rejected the view that the use of the word "collected" in Section 11D made the provision retrospective. Reading the provision according to its plain meaning and legislative intent, the Court held that Section 11D applied only to amounts collected after its introduction on 20-9-1991. The Court further held that Section 11D had a penal character and, in the absence of any indication to the contrary, such a substantive provision must operate prospectively. The non obstante clause could make Section 11D prevail over inconsistent provisions, but it did not render the provision retrospective. [Paras 4, 8, 9]

The substantial question of law was answered against the revenue, and the demand based on collections made prior to 20-9-1991 was held unsustainable.

Final Conclusion: The High Court held that Section 11D operates prospectively and cannot be invoked to recover amounts collected and retained under the incentive scheme before 20-9-1991. The appeal was accordingly allowed and the Tribunal's order was set aside.

Determination of the proper classification of goods, for deciding on the appropriate levy of central excise duty under Section 3 - Boiler feed pumps and condensate extraction pumps - classifiable under Tariff Item 8413 7010 as power driven pumps primarily designed for handling water -Exemption under Sl. No. 235 of Notification No. 12/2012-Central Excise, or under Tariff Item 8413 7095 as boiler feed pumps - Specific description prevails over general description - Harmonized System of Nomenclature - General Rules for Interpretation - Trade parlance theory

Boiler feed pumps - Condensate extraction pumps - Centrifugal pumps primarily designed to handle water - HELD THAT: - The Tribunal held that classification had to be determined by the terms of the tariff and the structure of sub-heading 8413 70 read with the General Rules for Interpretation. On a reading of the tariff entries and the HSN explanatory notes, it found that sub-heading 8413 70 first carves out centrifugal pumps primarily designed to handle water under CETI 8413 7010, while the subsequent entries under 8413 7091 to 8413 7099 cover other centrifugal pumps handling liquids other than water, including boiler feed pumps. Since the disputed boiler feed pumps and condensate extraction pumps were found to be designed to handle water in the boiler feed system, they continued to fall under CETI 8413 7010. The Commissioner's approach of treating every boiler feed pump or condensate extraction pump as falling under CETI 8413 7095 merely because of its application in a boiler system was therefore rejected. [Paras 9, 10, 12]

The goods were held classifiable under CETI 8413 7010.

Notification No. 12/2012-C.E. - Power driven pumps primarily designed for handling water - Concessional rate of duty - HELD THAT: - The Tribunal read Sl. No. 235 of the notification as extending the concessional rate to power driven pumps primarily designed for handling water, including centrifugal pumps of horizontal and vertical type, falling under Chapter heading 8413. Having found that the disputed goods were centrifugal pumps primarily designed to handle water and classifiable under CETI 8413 7010, it held that the exemption entry squarely covered them. The Commissioner's view that the benefit was unavailable to boiler feed pumps and condensate extraction pumps was held to be legally unsustainable. As the duty demand failed on merits, the consequential demands of interest and penalties also could not survive. [Paras 10, 12]

The benefit of Sl. No. 235 of Notification No. 12/2012-C.E. was allowed, and the duty demand, interest and penalties were held unsustainable.

Final Conclusion: The Tribunal held that the boiler feed pumps and condensate extraction pumps, being centrifugal pumps primarily designed to handle water, were classifiable under CETI 8413 7010 and eligible for the concessional rate under Sl. No. 235 of Notification No. 12/2012-C.E. The duty demand, along with interest and penalties, was therefore set aside and the appeals were allowed.

Proceedings against non-existent amalgamating company - Tax recovery notices without jurisdiction - Recovery proceedings initiated on the basis of demand notices issued to the transferor company after its amalgamation with the petitioner - HELD THAT: - The Court held that the initial demand notices had been issued to the transferor company after it had ceased to exist on account of amalgamation. Since the subsequent show cause notice and attachment notices were founded on those notices, the entire recovery action against the non-existent entity was without jurisdiction. Following Kanakia Spaces Realty Private Limited [2026 (6) TMI 1351 - BOMBAY HIGH COURT], the Court held that a notice demanding tax dues from a non-existent entity is non est in law. The Court, however, confined its decision to the invalidity of proceedings against the non-existent transferor company and left open the authorities' right to proceed in accordance with law against the petitioner, if otherwise permissible. [Paras 9, 10, 11]

The impugned assessment orders, show cause notice and attachment notices were set aside to the extent they sought recovery against the non-existent transferor company, with liberty to the authorities to initiate lawful proceedings against the petitioner.

Final Conclusion: The Court allowed the writ petition and set aside the recovery-related assessment orders, show cause notice and attachment notices insofar as they were issued against the amalgamating transferor company which had ceased to exist. It clarified that no opinion was expressed on the merits of the tax dues and that lawful recovery proceedings against the petitioner, if otherwise permissible, remained open.