TaxTMI Updates e-Newsletter
Jul 30,2026

Input Tax Credit conditional upon supplier's tax payment - Constitutional validity of Section 16(2)(c) of the CGST Act - Validity of the condition for availing Input Tax Credit under the CGST Act requiring payment of tax by the supplier-dealer, notwithstanding the purchasing dealer's asserted bona fides. - Distinction from Delhi VAT regime – Reference to decisions of Gujarat and Tripura High Courts - HELD THAT: - The Gujarat High Court, in [2026 (5) TMI 127 - GUJARAT HIGH COURT], undertook a detailed analysis of the differences between the Delhi Value Added Tax Act, 2004 and the CGST Act, 2017, including the scheme governing availment, reversal and subsequent re-availment of Input Tax Credit. Such an exercise was not undertaken by the Tripura High Court in Sahil Enterprises v. Union of India & Ors. [2026 (1) TMI 385 - TRIPURA HIGH COURT].

The statutory scheme under the CGST Act, including the provisions for reversal and subsequent re-availment of Input Tax Credit after discharge of tax liability by the supplier-dealer, is materially distinct from that under the Delhi VAT Act. Consequently, a purchasing dealer under the CGST regime cannot claim parity with a purported bona fide purchasing dealer under the Delhi VAT Act where the supplier fails to pay the requisite tax. The condition in Section 16(2)(c) was therefore neither unconstitutional nor liable to be read down. [Paras 2, 3, 4]

Accordingly, the Gujarat High Court was fully justified in holding that no grounds were made out either to declare Section 16(2)(c) of the CGST Act unconstitutional or to read down its provisions.

The challenge to Section 16(2)(c) of the CGST Act was rejected and the judgment upholding its validity was affirmed.

Final Conclusion: The special leave petitions were dismissed, affirming the validity of the supplier-tax-payment condition for Input Tax Credit under Section 16(2)(c) of the CGST Act.

Communication of GST notices through Additional Notices and Orders tab - Opportunity of personal hearing before adverse GST adjudication - Excess input tax credit - Principles of Natural Justice - Opportunity of Hearing - HELD THAT: - Uploading notices and orders in the Additional Tab does not constitute sufficient communication for proceedings under Section 73. Further, since an adverse decision was contemplated, the authority was statutorily obliged to afford a hearing under Section 75(4). The absence of any specified date, time and venue for personal hearing resulted in non-compliance with Sections 73(9) and 75(4). [Paras 9, 10, 12, 14]

The ex parte adjudication order was set aside, with liberty to submit a reply to the show-cause notice and a direction for fresh reasoned adjudication after affording a hearing.

Final Conclusion: The writ petition was disposed of by setting aside the ex parte adjudication order for deficient communication and denial of the statutory opportunity of hearing. The matter was directed to be decided afresh after receipt of the petitioner's reply and grant of personal hearing.

Opportunity of personal hearing before adverse GST adjudication - Principles of natural justice - Validity of an adverse GST order passed without affording the assessee an opportunity of personal hearing. - HELD THAT: - Similar issue has been decided in Kemexel Ecommerce Pvt. Ltd. [2026 (4) TMI 982 - PUNJAB AND HARYANA HIGH COURT]

Section 75(4) of the GST Act, 2017 mandates grant of a hearing where an adverse decision is contemplated against a person chargeable with tax or penalty. As personal hearing had admittedly not been afforded, the impugned order was passed in breach of the statutory requirement and principles of natural justice. [Paras 3, 5]

The impugned order was set aside, with a direction to pass a fresh reasoned order after an effective personal hearing and supply of all documents relied upon against the petitioner.

Final Conclusion: The writ petition was disposed of by setting aside the adverse GST order for denial of personal hearing and directing fresh adjudication in accordance with law.

Cancellation of GST registration - Opportunity of Hearing - Natural Justice - HELD THAT:- The writ petition was disposed of with directions to apply for revocation, furnish draft returns and clear taxes due, whereupon the registering authority shall consider restoration of registration.

Condonation of delay in GST appeal- Sufficient Cause - Access to appellate remedy - non-payment of reverse-charge tax on royalty and related expenses - HELD THAT: - Although the Appellate Authority is bound by the statutory limitation under section 107 of the RGST/CGST Act, the reasons preventing the petitioner from filing the appeal within time were found to be beyond its control. Denial of adjudication on merits in those circumstances would cause grave injury and prejudice. Following the consistent view taken in earlier decisionsn in M/s M R Traders[2026 (2) TMI 99 - RAJASTHAN HIGH COURT], M/s Molana Construction Company [2024 (8) TMI 384 - RAJASTHAN HIGH COURT], Man Singh Tanwar [2024 (9) TMI 1232 - RAJASTHAN HIGH COURT], RPC PSIPL JV [2025 (7) TMI 1998 - RAJASTHAN HIGH COURT] and RPC PSIPL JV [2025 (8) TMI 1794 - RAJASTHAN HIGH COURT]argues that sufficient cause of delay in filing the appeal due to circumstances beyond control has been shown and thus appeal be directed to be considered on merits after condoning the delay by this Court. [Paras 6, 7, 8, 9]

The delay was condoned, and the Appellate Authority was directed to entertain and decide the appeal on merits if filed within the stipulated period.

Final Conclusion: The writ petition was allowed to the extent of condoning the delay and restoring access to the statutory appellate remedy. The challenge to the validity of section 107(4) of the CGST Act was not pressed and was left open.

Application seeking for a temporary GST ID to facilitate the statutory appellate remedy - HELD THAT:- Despite repeated requests, including an email, the department has withheld the password for the temporary GST ID, without which the petitioner cannot access the portal to file the statutory appeal electronically, effectively frustrating both the appellate remedy and the liberty granted by the Court.

The writ petition was disposed of with an expectation that the Competent Authority shall decide the application for a temporary GST ID in accordance with law within 30 days.

Consolidated show cause notice under GST law - Validity of a consolidated/common show cause notice issued under Section 74 of the CGST/KGST Act, 2017 for multiple tax periods. - HELD THAT: - Following the earlier judgment in [2026 (5) TMI 125 - KARNATAKA HIGH COURT] and connected matters, the Court held that a consolidated/common show cause notice is permissible. As the matter remained at the stage of submission of objections to the notice, the objections were required to be considered by the Adjudicating Authority. [Paras 3, 4]

The order quashing the common show cause notice was set aside, and the matter was remitted to the Adjudicating Authority to receive and consider objections and pass an order in accordance with law.

Final Conclusion: The writ appeal was allowed. The respondent was granted four weeks to file objections to the common show cause notice, after which the Adjudicating Authority was directed to proceed in accordance with law.

Composite show-cause notice for multiple financial years - Validity of a consolidated show-cause notice issued for multiple financial years - HELD THAT: - A composite notice covering more than one financial year was not legally sustainable, in view of the principles laid down in M/s. Lakshmi Mobiles Accessories [2025 (2) TMI 666 - KERALA HIGH COURT] and Tharayil Medicals [2025 (4) TMI 1152 - KERALA HIGH COURT] [Paras 2]

The consolidated show-cause notice, the consequential order-in-original and summary order were quashed, with liberty to issue separate notices for the relevant financial years; the period from issuance of the composite notice until receipt of the certified copy of the judgment was directed to be excluded in computing limitation for fresh proceedings.

Final Conclusion: The writ petition was disposed of by quashing the composite proceedings for the stated financial years, while preserving the respondents' liberty to initiate separate proceedings subject to the directed exclusion of time for limitation.

Alternative statutory remedy under GST law - Exclusion of time spent in writ proceedings for appellate limitation - Maintainability of a writ petition challenging demand and penalty for alleged wrongful availment and utilisation of input tax credit when an appellate remedy under the CGST Act was available. - HELD THAT: - Since an appeal to the Appellate Authority was statutorily available against the impugned adjudication order, the Court declined to entertain the writ petition without exhaustion of that remedy. As the writ petition had been instituted within the applicable appellate period, the Court directed the Appellate Authority to exclude the time spent before the Court in computing limitation, if the appeal was filed within the stipulated further period. [Paras 5, 7, 8]

The writ petition was dismissed with liberty to pursue the statutory appeal on all legal and factual grounds; the time spent in the writ proceedings was directed to be excluded for limitation purposes if the appeal was filed within 30 days.

Final Conclusion: The challenge to the GST demand and equivalent penalty was relegated to the statutory appellate remedy, subject to exclusion of the time spent in the writ proceedings for filing the appeal.

Input tax credit on bona fide inward supplies - Input tax credit time limit for September return - Constitutional validity of input tax credit conditions - recipients claiming input tax credit could seek relief under the specified GST circulars upon establishing payment of tax by their suppliers - Retrospective Operation of Procedural Amendment - GST return mismatch - HELD THAT: - Similar questions of facts and law involved in these writ petitions were decided by judgment in M/S. M. TRADE LINKS [2024 (6) TMI 288 - KERALA HIGH COURT] and connected matters held that " Section 16(2)(c) and Section 16(4) are constitutionally sustainable and not violative of Articles 14 or 19; Court held that ITC is a statutory benefit/concession, not an absolute right, subject to conditions and restrictions. The provisions were deemed necessary to prevent revenue loss and ensure workable GST implementation. The court rejected arguments that time limits were arbitrary, noting that unrestricted ITC claims would impact revenue collection and budgetary allocations."

Final Conclusion: The writ petitions were disposed of by adopting the earlier ruling. Eligible input tax credit claims are to be considered under the applicable circulars and the retrospectively applicable 30 November deadline, while the constitutional challenge stands rejected.

Cancellation of registration - non-filing of the returns and non-payment of tax - HELD THAT:- In similar circumstances, this Court in M/S RAMAKRISHNA HOUSING PRIVATE LIMITED [2024 (10) TMI 1387 - ANDHRA PRADESH HIGH COURT], had disposed of the Writ Petition with certain directions.

Following the same the writ petition was disposed of by permitting the petitioner to seek revocation of GST registration, subject to filing draft returns and payment of taxes due, with consequential directions for consideration by the registering authority.

Condonation of delay in GST appeal - HELD THAT: - Having regard to the Division Bench of this Court in the case of Yallappa Patil [2025 (9) TMI 1840 - KARNATAKA HIGH COURT] and co-ordinate Bench decision in the case of Jai Hind Enterprises [2025 (1) TMI 1848 - KARNATAKA HIGH COURT] and other cited cases on similar facts, the Court held that the writ petition merited consideration notwithstanding the contention that no provision existed for condonation of the delay. [Paras 5]

The appellate order was set aside, the appeal was restored, and the delay in filing it was condoned for adjudication on merits; all merits contentions were kept open.

Final Conclusion: The writ petition was allowed in part. The delayed GST appeal for the tax period 2018-19 was restored and directed to be decided on merits in accordance with law.

Passing on of additional input tax credit benefit in construction services - Anti-profiteering under section 171 of the CGST Act - Commensurate Reduction in Price - Passing on of Benefit - Contravention of the anti-profiteering requirement in respect of additional input tax credit arising on construction services supplied to pre-GST homebuyers. - HELD THAT: - In the interregnum, the Hon’ble Delhi High Court, in Reckitt Benckiser India Pvt. Ltd. [2024 (1) TMI 1248 - DELHI HIGH COURT], laid down guiding principles governing the methodology for determination of profiteering.

Section 171(1) requires the supplier to pass on the benefit arising from additional input tax credit through commensurate reduction in prices. The revised computation, after inclusion of the pre-GST goods component, determined the benefit required to be passed on; however, the documentary evidence established, and the DGAP accepted, that the Respondent had passed on a benefit exceeding that amount to the eligible pre-GST homebuyers. Revision of the computation methodology could not sustain an allegation of profiteering where the entire determined benefit had already been passed on in excess. [Paras 17, 18, 19, 20]

No contravention of section 171 of the CGST Act was made out, and the revised DGAP Report was accepted.

Final Conclusion: The proceedings were disposed of on the finding that the additional input tax credit benefit had been passed on to eligible homebuyers in excess of the amount required, and hence no profiteering was established.

Bogus share trading loss - Retraction of statement on oath - Perverse appellate order - As decided by HC [2025 (7) TMI 2053 - CALCUTTA HIGH COURT] Tribunal's deletion of the disallowance was held perverse as assessee neither substantiated the loss through documents nor appeared before the AO. The Tribunal failed to appreciate this material factual position and its reliance on the retraction and its finding regarding cross-examination were held erroneous and indicative of non-application of mind.

HELD THAT:- Delay was condoned and the Special Leave Petition was dismissed, no ground being found to interfere with the impugned order.

Issuance of a notice u/s 153C - Mandation of recording of the satisfaction note - delay of 22 months in recording the satisfaction - As per HC impugned notices under Section 153C (AY 2017-18) quashed and set aside for failure to record the requisite satisfaction note within the immediate period mandated by the Calcutta Knitwears ratio [2014 (4) TMI 33 - SUPREME COURT] and Circular No. 24/2015

HELD THAT:- No good ground to interfere with the impugned order passed by the High Court.

Special Leave Petition is, accordingly, dismissed.

Penalty u/s 270A for misreporting of income - Defective show cause notice - Requirement to disclose basis of misreporting in show cause notice - Validity of penalty proceedings for alleged misreporting of income where neither the show cause notices nor the penalty order disclosed the factual basis for characterising the under-reporting as misreporting

HELD THAT: - Misreporting, being a species of under-reporting accompanied by bad faith, entails a higher penalty and renders an application for immunity from penalty unavailable. In view of these drastic consequences, the show cause notice must specify the basis on which misreporting is alleged, so as to enable a meaningful response.

Given these two drastic consequences, it is necessary that the show cause notice relating to the penalty proceedings indicates the basis on which the assessee is called upon to show cause as to why there is misreporting. Subsection (9) of Section 270A appears to exhaustively list the categories of misreporting of income.

Unless the basis on which the assessee is called upon to show cause is indicated in the show cause notice, it is not possible for the assessee to respond meaningfully to the show cause notice and endeavour to avert the drastic consequences of misreporting. In this regard, we endorse the principle laid down in Verizon Data Services [2026 (2) TMI 879 - MADRAS HIGH COURT]to the effect that there should be misrepresentation or any other form of bad faith to justify proceedings for misreporting.

The notices merely alleged under-reporting in consequence of misreporting, without particulars, and the penalty order also recorded misreporting without reasons. The computation of tax sought to be evaded also required reconsideration having regard to the difference between the assessed normal income under the intimation and the assessment order. [Paras 7, 8, 9, 10, 11]

The penalty order was set aside as unsustainable, with liberty to initiate fresh proceedings in accordance with law; all contentions were left open.

Final Conclusion: The writ petition was disposed of by setting aside the penalty order for failure to disclose or support the basis of alleged misreporting, while leaving the Revenue at liberty to commence fresh proceedings in accordance with law.

Reassessment based on seized material - Live nexus between seized document and assessee

Validity of reassessment notice founded on an inquiry-register entry seized from a real-estate broker, alleging unrecorded consideration in the assessee's land purchase - HELD THAT: - The register entry predated the assessee's purchase and, on the broker's own statement, represented land available for sale and its asking rate rather than a concluded transaction. The entry neither named nor otherwise linked the assessee or its co-purchasers; the person named in it was not examined. The broker's statements also undermined the Revenue's assumption that every register entry evidenced an actual financial transaction.

A survey-number match alone did not establish the required live and direct nexus between the seized material and the assessee. Applying Naliniben Jagdishkumar Gandhi [2026 (1) TMI 1326 - GUJARAT HIGH COURT] and the reasoning in Trupti Aakash Desai[2026 (4) TMI 921 - GUJARAT HIGH COURT] and Kantilal Parsotamdas Patel [2026 (4) TMI 1889 - GUJARAT HIGH COURT], the Court held that the material could not sustain reopening. [Paras 11, 12, 14, 15, 16]

The reassessment notice was quashed as being founded on conjectures and surmises, without any direct or indirect link between the seized entry and the assessee.

Final Conclusion: The writ petition was allowed and the notice reopening the assessment for Assessment Year 2022-23 was quashed.

Accumulation of “surplus” in accordance with the provisions of section 11(2) denied -delay in filing Form No. 10 - Genuine hardship under section 119(2)(b)

HELD THAT: - CBDT Circular No. 7/2018 authorised the Commissioners to admit belated Form No. 10 applications for AY 2016-17, subject to satisfaction regarding reasonable cause and investment of the accumulated amount in the modes prescribed under section 11(5). The authority was required to consider the genuine hardship arising from denial of the claim where the surplus had been invested in term deposits. The power under section 119(2)(b) is intended to advance substantial justice; genuine hardship must receive a meaningful and justice-oriented consideration, while taking account of any unexplained or deliberate delay. [Paras 8, 9]

The rejection of condonation was quashed, and the respondents were directed to condone the delay in filing Form No. 10 to enable the petitioner to claim exemption under section 11.

Final Conclusion: The writ petition was allowed. The impugned rejection of the condonation application was quashed, and delay in filing Form No. 10 was directed to be condoned.

Disallowance of expenditure against exempt incomeu/s 14A -Book profit adjustment for expenditure disallowed u/s 14A - Mark-to-market loss on foreign-currency swap contracts

Disallowance of expenditure against exempt income - Disallowance of expenditure relating to an investment yielding exempt income where no exempt income was earned or claimed during the relevant year - HELD THAT: - The Tribunal's finding that the assessee neither earned exempt income nor claimed any exemption in the return for the relevant year was a finding of fact. On that undisputed basis, deletion of the disallowance under section 14A read with rule 8D gave rise to no question of law as the Tribunal has followed the decision in the case of CIT vs. Corrtech Energy Pvt. Ltd. [2014 (3) TMI 856 - GUJARAT HIGH COURT] [Paras 4]

The challenge to deletion of the disallowance under section 14A was rejected.

Book-profit adjustment for expenditure disallowed under section 14A - HELD THAT: - As no disallowance under section 14A survived, its inclusion for computing book profit under section 115JB(2) did not arise. The Tribunal had also found the ground infructuous because the computed book profit was negative and the minimum alternate tax provisions were inapplicable. [Paras 6]

The challenge concerning adjustment to book profit was dismissed.

Mark-to-market loss on foreign-currency swap contracts - Deductibility of mark-to-market exchange loss on swap contracts entered into for converting rupee loans into foreign-currency loans at lower interest rates - HELD THAT: - The loss recognised under the consistently followed accounting method in accordance with Accounting Standard-11 was held to be an accrued and subsisting liability arising from foreign-exchange fluctuation, and not a contingent or hypothetical liability. The Tribunal's allowance of the deduction was consistent with the decisions noted by the Court in M/s. Suzlon Energy Ltd [2018 (2) TMI 1789 - GUJARAT HIGH COURT] and Aadani Power Maharashtra Ltd [2025 (6) TMI 1147 - GUJARAT HIGH COURT] [Paras 8, 9, 10]

No question of law arose from the allowance of the mark-to-market exchange loss.

Final Conclusion: The Tax Appeal was dismissed, as none of the proposed questions gave rise to a question of law.

Exemption of political parties - genuine political contributions and statutory reporting - Bogus donation receipts - commission income - exemption u/s 13A

Bogus donation receipts - commission income - Addition of commission income arising from issuance of bogus donation receipts after deletion of the addition of the entire purported donations - HELD THAT: - The Tribunal's finding that the assessee issued bogus donation receipts, returned the purported donations to the contributors and thereby enabled claims of deduction was a finding of fact not open to interference in appeal under Section 260A. On that finding, assessment of 6% of the total purported donations as the assessee's income, rather than assessment of the entire amount, disclosed no error. [Paras 6, 7, 8]

The addition of 6% of the purported donations as income was sustained.

Exemption of political parties u/s 13A - genuine political contributions and statutory reporting - Eligibility of a political party for exemption where its accounts did not reflect genuine contributions and it failed to comply with the statutory reporting requirement to the Election Commission - HELD THAT: - Deletion of the addition under Section 68 did not entitle the assessee to exemption under Section 13A. A party facilitating false donation receipts could not claim the exemption, particularly when its books did not present a true and correct picture and it had either filed an improper report or failed to file the prescribed report with the Election Commission. [Paras 9, 10, 11]

The assessee was held ineligible for exemption under Section 13A.

Final Conclusion: The appeals were dismissed. The finding of issuance of bogus donation receipts sustained the assessment of commission income and disentitled the assessee from exemption available to political parties.

Final assessment pending Dispute Resolution Panel objections - Statutory deferral of assessment proceedings

Validity of a final assessment order made after the assessee had filed objections to the draft assessment order before the Dispute Resolution Panel and intimated the Transfer Pricing Officer - HELD THAT: - Under the scheme of Section 144C, objections to a draft assessment order are to be considered by the Dispute Resolution Panel, while the Faceless Assessing Officer must keep the assessment proceedings in abeyance and await its directions. Since the filing of objections and intimation thereof were undisputed, the final assessment could not have been made before the Dispute Resolution Panel decided those objections. The Court followed Express Freight Consortium [2026 (1) TMI 1207 - DELHI HIGH COURT] . [Paras 9, 10]

The final assessment order and consequential demand notice were quashed; the respondents may proceed in accordance with law after the Dispute Resolution Panel decides the objections.

Final Conclusion: The writ petition was allowed and the final assessment order and consequential demand notice were quashed, without affecting the pending Dispute Resolution Panel proceedings.

Reassessment after expiry of four years - full and true disclosure of material facts - Change of opinion in reassessment - Transfer pricing - operating character of associated enterprise subsidy - Aggregation of closely linked distribution transactions

Reassessment after expiry of four years - full and true disclosure of material facts - Change of opinion in reassessment - Validity of reassessment of subsidy income after expiry of four years from the end of the relevant assessment year where the original assessment had been completed u/s 143(3) - HELD THAT: - Where an assessment has been completed u/s 143(3), reopening beyond four years requires establishment of the assessee's failure to disclose fully and truly all material facts necessary for assessment. The Assessing Officer neither established such failure nor brought fresh material on record. The subsidy transaction had been disclosed in the financial statements and was considered in the original assessment; reopening on the same material amounted to a change of opinion. A different understanding of law or failure to draw inferences from disclosed facts cannot be rectified through reassessment. [Paras 32]

The reassessment was held to be beyond jurisdiction and invalid.

TP Adjustment - operating character of associated enterprise subsidy - Aggregation of closely linked distribution transactions - Treatment of subsidy received from the associated enterprise by a distributor of high-end fashion products as operating income for transfer-pricing benchmarking - HELD THAT: - The subsidy was paid under the distribution agreement to compensate unabsorbed costs and ensure the distributor's profitability, and was linked directly to its distribution activity. It was not a one-time award, but was routinely determined with reference to annual performance; similar compensation in an earlier year had also been accepted. A subsidy having such direct nexus with the distribution operations forms operating income and must be considered in benchmarking the closely connected distribution transactions.

We observed that in the case of Nalco Water India Ltd [2019 (9) TMI 609 - ITAT PUNE] and MSD Pharmaceutical P Ltd [2020 (1) TMI 774 - ITAT DELHI] wherein it has been held that subsidy/support payments from AE to compensate losses are operating in nature and must be considered while bench marking. Therefore, in the given case, the subsidy received by the assessee is only to compensate for the unabsorbed expenditure, it has direct nexus with the distribution activities, therefore, in our view, the treatment of the above subsidy from the AE is part of the operation and treatment given by the assessee in their books of account is proper[Paras 33]

The subsidy was held to be operating income, and the transfer-pricing adjustment was deleted.

Final Conclusion: The appeal was allowed. The reassessment was held invalid, and, independently, the transfer-pricing adjustment made by excluding the associated enterprise subsidy from operating income was deleted.

Tax deduction at source on pure reimbursement of common expenditure - Disallowance for tax deducted and paid subsequently - Year-end provisions for accrued business liabilities

Tax deduction at source on pure reimbursement of common expenditure - Disallowance for non-deduction of tax at source - Disallowance of the assessee's contribution towards legal and professional expenses incurred by a shipping-lines association, on the footing of non-deduction of tax at source - HELD THAT: - The material established that the association initially incurred the legal and professional expenses and apportioned the actual expenditure among its members. No income or profit element in the recovery by the association was established, and tax had already been deducted by it while paying the actual legal professionals. The accounting nomenclature of the payment as professional fees could not determine its true character.

Nomenclature adopted in the books of account cannot determine the true character of the transaction. The real nature of the payment has to be seen from the facts on record and the documentary evidence available on record. The material placed before us shows that the assessee merely reimbursed its share of the common legal and professional expenditure incurred by CSLA. The recovery by CSLA from its members was only towards common expenditure and not towards any professional services rendered by CSLA to the assessee.

Thus, impugned payment were in the nature of a pure reimbursement of actual expenditure without any income element in the hands of CSLA. [Paras 11, 12, 13, 14]

The payment was held to be a pure reimbursement without an income element in the hands of the association; consequently, tax deduction provisions were inapplicable and the disallowance was deleted.

Disallowance for tax deducted and paid subsequently - Allowability of professional-fee expenditure in the assessment year where tax was deducted and deposited subsequently - HELD THAT: - Having deducted tax at source on the payment, the assessee could not contend that no tax was deductible. Where deductible tax is deducted and paid subsequently, the expenditure is allowable in the year in which the statutory conditions are fulfilled; the disallowance is thus not permanent but deferred. [Paras 16, 17]

Deduction was not allowable in the assessment year under consideration, but may be claimed in the relevant subsequent assessment year, subject to verification of tax deduction, payment and other statutory requirements.

Disallowance u/s 37(1) in respect of the year-end provisions -Year-end provisions for accrued business liabilities - Additional evidence requiring verification - HELD THAT: - The party-wise break-up and supporting particulars, not having been produced before the lower authorities, required verification before the nature and crystallisation of the liabilities could be determined. Mere production of the break-up did not establish allowability; the assessee remained obliged to prove through cogent evidence that each provision represented an ascertained business liability accrued during the relevant year. [Paras 21, 22, 23]

The additional evidence was admitted and the issue was remanded to the Assessing Officer for de novo examination of the accrual, evidentiary support and allowability of each provision.

Final Conclusion: The appeal was partly allowed for statistical purposes. The reimbursement disallowance was deleted, while the professional-fee claim and the year-end provision claim were dealt with in accordance with the directions stated.

Qualification for registration as a charitable institution -Charitable purpose and public benefit - Mutuality of Residents Welfare Association activities - Registration of Residents Welfare Association u/s 12AB

Registration as a charitable institution -Residents welfare association providing maintenance and allied facilities exclusively to residents of a particular residential complex - Charitable purpose and public benefit - HELD THAT: - Charity necessarily requires a public benefit founded on altruism rather than reciprocal advantage. Concept of charity necessarily presupposes an element of public benefit.

The Association collected contributions from its members and, in return, provided maintenance, security, housekeeping and other common facilities to the same closed body of residents. Its activities were therefore governed by mutuality and constituted reciprocal services for consideration, not any recognised charitable purpose. Absence of a profit motive could not by itself transform arrangements for members' mutual convenience and benefit into charity.

The beneficiaries of the present assessee are confined exclusively to its members and residents of a particular housing complex. There is no element of benefit available to the public at large or to an indeterminate section of the public. The activities are restricted to a closed and identifiable body of contributors who receive services commensurate with their contributions. Such activities may fundamentally governed by the doctrine of mutuality and not by the principles governing charitable institutions.[Paras 5, 6, 7, 8]

The objects and activities did not satisfy the requirement of charitable purpose under section 2(15); rejection of registration under section 12AB was upheld.

Effect of the claim that only one hearing opportunity was afforded before rejection of the application for charitable registration - HELD THAT: - Though inadequate opportunity would ordinarily warrant fresh adjudication, remand was unwarranted because the rejection rested on the admitted nature and character of the Association's objects and activities, rather than on any evidentiary deficiency. A further opportunity could not alter the legal conclusion that those activities were not charitable. [Paras 9]

No remand was directed.

Final Conclusion: The appeal was dismissed and the rejection of the application for registration under section 12AB was sustained.

Renewal of charitable registration - scope of enquiry at the stage of grant/renewal of registration u/s 12AB(1)(b) - Three-year look-back period for Form 10AB

Renewal of charitable registration - scope of enquiry - Genuineness of charitable activities - Rejection of renewal of registration of a society running a CBSE-affiliated school on the basis of earlier search material, without examining the evidence furnished in response to the Form 10AB enquiries - HELD THAT: - At the stage of renewal under Section 12AB(1)(b), the enquiry is confined to the genuineness of the activities and compliance with requirements of material laws for achieving the objects. The competent authority did not identify any deficiency in, or doubt the evidence furnished for, the relevant period, but rested the conclusion of non-genuineness upon retracted statements and third-party search material relating to earlier years. The core educational activity was not shown to have ceased or to have become non-charitable. [Paras 9, 10, 11, 16, 17]

The rejection was held unsustainable; the application for renewal of registration and consequential approval was directed to be granted.

Three-year look-back period for Form 10AB - Periodic renewal of charitable registration - rejection of renewal based on pre-2021 search material - Whether renewal of charitable registration could be declined by examining financials and activities preceding the immediately preceding three financial years? - HELD THAT: - When the concept of perpetual registration has been given away in this new regime for periodic renewal the intention is certainly to examine the activities of the assessee in the previous period for which the assessee has held registration under the new regime and objective application of changes brought in the Act and prudence too do not justify that the financials or activities of period beyond 01.04.2021 can be subject of inquiry to reject the application of renewal of registration. If this plea of department is accepted it will dilute the intention of legislature which seem to bring in more check and balance by introduction of new regime. Thus, where assessee had already enjoyed registration under the new regime w.e.f AY: 2022-23 to AY: 2026-27 and was seeking renewal for the purpose of clause (ac) of Section 12(1) of the Act then the scheme of law and the intention of legislature seems to be to examine the financials and activities of the assessee for immediately 3 preceding years only. It only suggests that while seeking renewal of the registration the competent authority cannot go beyond immediately preceding three years to even call for information.

Here it is pertinent to note that in the show cause communication dated 13.03.2026, by which the search and investigation findings of period prior to 01.04.2021 were confronted to assessee, a reference is actually made about violations of some "Meenakshi Foundation", an entity wholly unconnected with the Appellant, demonstrating non-application of mind, but ritualistic measures taken to reach a preconceived notion on the basis of search and investigation wing findings, which were subject to challenge before Tribunal and order of cancelation of registration with retrospective effect was quashed. This also shows that when in response to the notice raising queries assessee had filed all the responses and evidences, as called for, then without showing any alleged act, leading to conclusion that activities of assessee are not genuine, on the basis of response and evidences submitted by assessee by reply dated 09.01.2026, this show cause notice dated 13.03.2026 was issued and impugned order was passed on 31.03.2026, which had no legs to stand, legally or factually, on its own.

The periodic-registration regime, read with Rule 17A(2)(g), was held to constitute a complete code requiring examination, for renewal, of the immediately preceding three years for which the entity held registration under the new regime. The competent authority could not travel beyond that period even to call for information and rely on allegations relating to pre-1 April 2021 years to reject renewal. [Paras 12, 13, 14, 15]

Reliance on material pertaining to earlier years was held impermissible for rejecting the renewal application.

Final Conclusion: The appeal was allowed. The competent authority was directed to grant registration on the Form 10AB application and consequential approval under Section 80G(5).

Foreign exchange fluctuation loss on capital borrowing - Restatement of external commercial borrowing utilised for capital assets - allowable as a revenue deduction OR belonged to the capital field

Whether the foreign exchange fluctuation loss arising on year-end restatement of an External Commercial Borrowing obtained from the parent company, which was subsequently converted into equity shares, is allowable as a revenue deduction or is to be treated as a capital loss not allowable under the Act? - HELD THAT: - The borrowing was in the capital field, having been obtained for acquisition of capital assets. Consequently, the loss arising upon restatement of the outstanding liability retained its capital character and could not be claimed as a business expenditure. As no distinguishing facts or change in law from the earlier orders in the assessee's own case were shown [2025 (6) TMI 2148 - ITAT CHENNAI] the co-ordinate Bench decision [2017 (9) TMI 2067 - ITAT CHENNAI] A.Y. 2012-13 was followed. [Paras 6, 7]

The foreign exchange fluctuation loss was held to be capital loss and its disallowance was sustained.

Final Conclusion: The appeal was dismissed and the disallowance of the foreign exchange fluctuation loss on the capital borrowing was upheld.

Unexplained share application money and share premium - Proof of identity, creditworthiness and genuineness u/s 68 - Commercial justification for share premium - essential tests while confirming the pre proviso Section 68

HELD THAT: - The assessee furnished the basic particulars and financial documents of the investor companies, including evidence bearing on their identity, creditworthiness and the genuineness of the transactions.

AO neither conducted an independent enquiry nor identified any infirmity in that evidence, but relied substantially upon the Investigation Wing report. A high share premium, without investigation into valuation and without disproving the statutory ingredients governing the credit, could not by itself render the share application receipts unexplained. The subsequently inserted proviso to section 68, requiring explanation of the source of the investor's funds, was effective only from AY 2013-14 and did not govern the year in question. [Paras 9, 10]

The deletion of the addition under section 68 was upheld and the Revenue's grounds were dismissed.

Final Conclusion: The Revenue's appeal was dismissed, and the deletion of the addition for share application money and share premium was sustained. The additional grounds raised under Rule 27 were left open.

Taxability of fee received towards research management support services as Fees for Technical Services (‘FTS’) - India-Singapore Double Taxation Avoidance Agreement (‘DTAA’) - make available test - Business support and research oversight services under India-Singapore DTAA - Limitation for final assessment following draft assessment

Fees for technical services - make available test - Research management support services - Business profits in absence of permanent establishment - India-Singapore DTAA - HELD THAT: - For services to qualify as fees for technical services under Article 12(4)(b) and (c), the service provider must make available technical knowledge, experience, skill, know-how or processes, or develop and transfer a technical plan or design, enabling the recipient to apply it independently. The continued rendering of the services year after year demonstrated that the Indian group entity remained dependent upon the assessee and had not acquired the capability to perform them on its own. Any incidental benefit from the services did not establish a transfer of technology or know-how.

As decided in Bio-Rad Laboratories (Singapore) Pte. Ltd. [2023 (10) TMI 1039 - DELHI HIGH COURT] as held "mere incidental advantage to the recipient of services is not enough. The real test is the transfer of technology and on the given facts of the case, there is no transfer of technology and what has been appreciated by the Assessing Officer/ld. CIT(A) is the incidental benefit to the assessee which has been considered to be of enduring advantage" [Paras 13, 15]

The receipts were not fees for technical services; being business income, they were not taxable in India in the absence of a permanent establishment, and the addition was directed to be deleted.

Validity of the assessments on the ground that final assessment orders were barred by limitation - HELD THAT: - The limitation challenge was rejected in view of the retrospectively operative provisions governing completion of assessment pursuant to the draft-assessment procedure. [Paras 17]

The grounds challenging the assessments as time-barred were dismissed.

Final Conclusion: The appeals were partly allowed: the addition treating the service fees as fees for technical services was deleted, while the limitation grounds were rejected. The issues concerning reopening and absence of DIN were left open.

Unjust enrichment in customs-duty refund - Rebuttal of statutory presumption by Chartered Accountant's certificate - HELD THAT: - This Court in Customs Appeal [2025 (11) TMI 711 - KARNATAKA HIGH COURT] has held that the certificate from the Chartered Accountant who certifies annual accounts of the importer certifying that the SAD has not been passed on by the importer to the buyer would fulfill the requirement and discharge the statutory presumption of unjust enrichment.

Section 28D creates a rebuttable presumption, while the applicable circulars prescribe no criterion beyond production of a certificate from the Chartered Accountant certifying the importer's annual accounts. Such certificate, stating that the burden of 4% special additional duty had not been passed on to buyers, fulfils the requirement for rebutting unjust enrichment.

Following the earlier decision in identical circumstances, the Revenue's appeal was dismissed and the order allowing the refund claim was sustained.

Final Conclusion: The Revenue's appeal was dismissed, the Chartered Accountant's certificate being accepted as sufficient to discharge the presumption of unjust enrichment.

Classification of synthetic bonded knitted fabrics - Denial of concessional-duty benefit under Notification No. 82/2017-Customs without evidentiary basis - Reclassification of Chinlon knitted bonded fabrics and bonded fabrics (Eva Lycra) as bleached and dyed synthetic fabrics, with consequential denial of the claimed customs exemption. - HELD THAT: - The adjudicating authority proceeded on the premise that the appellant's voluntary statement established that the imported fabrics were bleached and dyed. The statement, however, only described the fabrics as synthetic in nature and did not contain any admission that they were bleached and dyed. In the absence of a test report or other evidence substantiating that characteristic, the reclassification and denial of the exemption could not be sustained. [Paras 18, 20]

The exemption benefit could not be denied; the impugned order was set aside.

Final Conclusion: The appeal was allowed with consequential relief, as the reclassification and denial of exemption rested on an unsupported finding that the fabrics were bleached and dyed.

Validity of show cause notice for imported areca nuts - Penalty for involvement in obtaining defective certificates of country of origin - Areca nuts imported on certificates of country of origin issued in Sri Lanka - HELD THAT: - The High Court had held that a show cause notice under Section 28 could not be issued against the importer in the case. The adjudicating authority therefore rightly dropped the proceedings initiated under that provision. [Paras 6]

The Revenue's appeal against dropping of the proceedings was dismissed.

Penalty for involvement in obtaining defective certificates of country of origin - Penalty on the proprietor for alleged involvement in obtaining defective certificates of country of origin for imported areca nuts. - HELD THAT: - Neither the show cause notice nor the impugned order specified the proprietor's role or involvement in obtaining the defective certificates from the Sri Lankan authorities. In the absence of such material, penalty could not be imposed. [Paras 7]

The penalty imposed under Section 112(a) and (b) of the Customs Act, 1962 was set aside.

Final Conclusion: The Revenue's appeal was dismissed, and the proprietor's appeal was allowed by setting aside the penalty.

Appellate jurisdiction over baggage matters -Maintainability of an appeal before the Tribunal against an appellate customs order concerning gold brought into India as baggage - HELD THAT: - The statutory exclusion of the Tribunal's appellate jurisdiction applies where the disputed goods were brought as baggage. The remedy against the order of the Commissioner (Appeals) consequently lies by revision before the Revisionary Authority of the Government of India.

The appeal was disposed of as not maintainable, with liberty to the appellant to approach the Revisionary Authority; the delay occasioned by pursuing the appeal before the Tribunal was directed to be considered sympathetically.

Final Conclusion: The Tribunal held that it lacked jurisdiction over the baggage-related dispute and left the appellant to pursue the statutory revision remedy before the Government of India.

Maintainability of subsequent advance ruling application - Classification of off-road mining tyres - Objective characteristics of goods - Principal intended use - Dominant use - Commercial parlance - Scope of HSN Explanatory Notes

Maintainability of a fresh advance ruling application concerning the same off-road mining tyres after an earlier ruling by the Authority - HELD THAT: - Section 28-I(2) bars an application only where the question is pending before an officer of Customs, the Appellate Tribunal or a Court, or has been decided by the Appellate Tribunal or a Court. An earlier advance ruling by the Authority itself is not within those specified categories. Further, the fresh application was founded on additional technical evidence bearing directly on the goods' classification and was not a request for reconsideration on an identical factual record. [Paras 6]

The application was held maintainable and was examined on merits.

Classification of off-road mining tyres - Objective characteristics and principal intended use - Tyres of a kind used on mining vehicles - Classification of new pneumatic radial tyres of patterns WD989/RLB989, designed for dumpers and tippers in mining and construction operations, as tyres for buses or lorries or as tyres for construction, mining or industrial handling vehicles and machines. - HELD THAT: - Classification under the Customs Tariff is governed by Rule 1 of the General Rules for Interpretation of Import Tariff, according to which classification shall be determined according to the terms of the headings, sub-headings and the relevant Section Notes and Chapter Notes. The Hon'ble Supreme Court in Wood Craft Products Ltd.[1995 (3) TMI 93 - SUPREME COURT], HPL Chemicals Ltd.[2006 (4) TMI 1 - SUPREME COURT], and Simplex Mills Co. Ltd. [2005 (3) TMI 117 - SUPREME COURT] has consistently held that tariff classification must be based upon the language of the tariff entries read with HSN Explanatory Notes and the objective characteristics of the goods.

It is equally well settled that classification cannot be determined merely on the basis of trade description or commercial nomenclature, marketing literature, internal nomenclature adopted by a manufacturer, or the fact that a product may be grouped under a particular commercial segment by the supplier. What is relevant is the design, construction, engineering characteristics, intended use and the class of vehicles for which the goods are principally designed.

The expression "of a kind used" does not require exclusive use. The manufacturer's clarification and catalogues, website material, Chartered Engineer's certification and end-use documents established reinforced construction, deep mining-specific tread, specialised compounds, low-speed operation and resistance to cuts and punctures, distinguishing the tyres from conventional highway truck tyres. The Authority applied the principle recognised in The Tyre Mark [2021 (12) TMI 1242 - CESTAT BANGALORE], that classification turns on objective characteristics, engineering design and principal use, notwithstanding occasional road use or the appearance of the vehicle on which tyres are fitted. [Paras 6]

The tyres were held classifiable under Customs Tariff Item 4011 80 00 as tyres of a kind used on construction, mining or industrial handling vehicles and machines.

Final Conclusion: The fresh application was maintainable notwithstanding the earlier advance ruling. On the additional technical and end-use evidence, the subject off-road mining tyres were ruled classifiable under Customs Tariff Item 4011 80 00.

Rectification of company name on similarity with prior registered company - Central Government's suo motu power upon information received from an aggrieved company - HELD THAT: - Section 16(1)(a) confers a wider power upon the Central Government to form its opinion and direct rectification where a newly registered company's name is identical with or too nearly resembles that of a previously registered company. The fact that information prompting formation of that opinion was supplied through an application by an aggrieved existing company does not deprive the Central Government of jurisdiction or convert the proceeding into one under Section 16(1)(b). The petitioner admittedly operated in the same field of DNA testing, and the two company names were held too similar to be ignored. The decision in M/S T.T. Ltd. v. Union of India & Anr [2022 (8) TMI 1630 - MADRAS HIGH COURT] was distinguished as arising from its particular facts. [Paras 8, 9, 10, 11, 12]

The direction requiring change of name was held valid and within jurisdiction.

Final Conclusion: The petition was dismissed, the Court holding that an application by an aggrieved existing company may furnish the information on which the Central Government forms its opinion under Section 16(1)(a) of the Companies Act, 2013.

Insolvency moratorium confined to corporate debtor - Continuation of consumer proceedings against non-corporate-debtor respondents -HELD THAT: - The scope of the moratorium is statutory. It is not open either to the adjudicating authority or the Court to enlarge its ambit beyond what the statute contemplates. A plain reading of the provision makes it clear that the moratorium operates against the corporate debtor alone. No other category, whether it be any subsidiary company, any managers/ directors, personal guarantors etc. can be added to it unless specifically provided. This Court in P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd.[2021 (3) TMI 94 - SUPREME COURT] while discussing the scope of applicability of the moratorium on Section 138 of Negotiable Instruments Act, 1881 proceedings, noted that Section 14 applied only to the corporate debtor and that natural persons can be held liable under the Act.

Again in Ansal Crown Heights Flat Buyers Association v. Ansal Crown Infrabuild Pvt. Ltd [2024 (2) TMI 23 - SUPREME COURT] wherein a consumer complaint was filed against the developers, this Court held that a moratorium against the corporate debtor does not give protection to the promoters and directors of the corporate debtor and that proceedings can continue against them.

A similar approach is reflected in the decision of this Court in Saranga Anilkumar Aggarwal. Saranga Anilkumar Aggarwal v. Bhavesh Dhirajlal Sheth & Ors.[2025 (3) TMI 373 - SUPREME COURT]. Though the case arose in context of Section 96 IBC, the underlying principle remains instructive. It was held that the protective sweep of a moratorium must remain in the four walls as carved out by the statute. It ought not be expanded in a manner that stultifies remedies envisaged under the Consumer Protection Act, unless expressly provided. The object of the Code is to facilitate the resolution process and not to eclipse the statutory remedies.

In the absence of a moratorium or other legal bar in favour of the remaining respondents, the consumer complaint could proceed against them. The Commission erred in treating the alleged deficiency as attributable only to the corporate debtor at the interlocutory stage, although liability had yet to be adjudicated; it was required to determine the liability of the remaining respondents upon the pleadings and objections. [Paras 7, 8, 11, 12, 13]

The rejection of the applications was set aside, and the consumer complaint was directed to proceed against the remaining respondents, while proceedings against the corporate debtor remain subject to the statutory moratorium.

Final Conclusion: The appeals were partly allowed. The consumer complaint shall be adjudicated against the respondents not protected by the moratorium, without any expression of opinion on their ultimate liability.

Recall of ex parte order in insolvency proceedings - Service of notice through admitted email address - Sufficient cause for delayed recall application - HELD THAT: - Notices and communications concerning the liquidator's application had repeatedly been sent to the appellants' admitted email address and had not bounced. The resulting presumption of service was unrebutted. The record further established that adequate opportunities had been afforded before the appellants were proceeded ex parte. The recall application was filed after a delay of about 400 days, without cogent explanation or sufficient cause for non-appearance; such delay could not be condoned or ignored in time-bound proceedings under the IBC. There was also no fraud or misrepresentation in the ex parte order. [Paras 28, 33, 34, 35]

The refusal to recall the ex parte order was upheld and the appeal was dismissed.

Final Conclusion: The appeal was dismissed as devoid of merit, with no order as to costs.

Applications for condonation of delay - Entitlement to bail in a prosecution for money-laundering arising from the alleged leaking of a police recruitment examination question paper - HELD THAT:- Applications for condonation of delay were rejected for insufficient cause, and the special leave petitions were dismissed as time-barred.

Provisional Attachment Orders (PAO) - power and jurisdiction of authority of the Enforcement Directorate/Authorities forattachment- “reason to believe” that the subject properties were proceeds of crime involved in the money laundering - Impugned judgment(s) and order(s) [2026 (1) TMI 655 - BOMBAY HIGH COURT], held that attached properties were directed to be released, with modification only as to the apportionment of accrued interest on the deposited sums. - HELD THAT:- Delay was condoned and the special leave petitions were dismissed without interference with the impugned judgment(s) and order(s).

Supply of tangible goods for use service - Freight concession as consideration - Service provider-service recipient relationship - Taxability of railway wagons procured under the Liberalized Wagon Investment Scheme and freight concession received by their owner - HELD THAT: - The Hon’ble Supreme Court in the case of All India Federation of Tax Practitioners [2007 (8) TMI 1 - SUPREME COURT], has held that service tax is a value added tax on services and necessarily presupposes rendition of service. Similarly, in the case of Man Trucks India Pvt Ltd [2020 (4) TMI 76 - CESTAT NEW DELHI], the Tribunal held that mere price adjustment cannot be treated as consideration for a taxable service.

The same principle has subsequently been reiterated in the case of Bharti Airtel Ltd Vs CCGST, Gurugram [2025 (1) TMI 1322 - CESTAT CHANDIGARH] and in the case of CCGST & CE, Mumbai East Vs Edelweiss Financial Services Ltd. [2022 (2) TMI 1359 - CESTAT MUMBAI], wherein it has been categorically held that in the absence of consideration flowing for a service, no service tax liability can arise.

Service tax requires an identifiable service rendered by one person to another for consideration. The wagons were procured by the appellant for transportation of its own goods, remained dedicated to its traffic, and were not hired by the Railways for independent commercial use. The transportation service flowed from the Railways to the appellant on payment of freight. The freight concession was a policy incentive reducing freight payable in consideration of capital investment in wagon capacity, not consideration for an independent supply of tangible goods service. The arrangement could not be artificially split into transportation by the Railways and a taxable supply of wagons by the appellant. [Paras 14, 19, 20, 21, 22]

No taxable service was rendered to the Railways; consequently, the service-tax demand, interest and penalties were unsustainable.

Final Conclusion: The impugned orders were set aside and the appeals were allowed with consequential relief. The freight concession under the Liberalized Wagon Investment Scheme was held not to be consideration for a taxable service.

Exemption for coaching leading to educational qualifications recognised by law - Whether coaching imparted by the appellant leads to grant of educational qualification recognized by law within the meaning of Notification No.33/2011-ST ? - HELD THAT: - This Tribunal in the case of Sri Chaitanya Educational Committee [2018 (4) TMI 664 - CESTAT HYDERABAD], examined Notification No.33/2011-ST and held that coaching imparted for recognized educational qualifications is not liable to service tax. The same principle has subsequently been followed in the case of Academy for Professional Excellence [2019 (10) TMI 1328 - CESTAT KOLKATA], Asian School of Media Studies [2021 (11) TMI 514 - CESTAT ALLAHABAD] and Pr. CC, GST & CX, Delhi Vs IILM Undergraduate Business School [2025 (4) TMI 1333 - CESTAT NEW DELHI], wherein the Tribunals consistently held that educational coaching leading to recognized qualification cannot be subjected to service tax.

The notification does not confine exemption to coaching for the final stage of an educational programme. CA-CPT is a mandatory and inseparable first stage of the statutory CA course, and ICWA-Foundation is likewise a prescribed statutory stage; progression to a subsequent level does not deprive the qualification obtained at those stages of legal recognition. Nor could exemption for Intermediate coaching be denied by importing conditions relating to fee collection or proof of affiliation, which the notification does not prescribe. In the absence of any change in facts or law, the Revenue could not adopt an inconsistent stand after accepting the exemption for similar coaching in subsequent periods. [Paras 13, 15, 16, 17, 18]

The coaching was held eligible for exemption under Notification No. 33/2011-ST.

Final Conclusion: The service-tax demands, interest and penalties were set aside, and the appeals were allowed, with refund left admissible in accordance with law.

Service tax liability of sub-contractors-Extended limitation for interpretational disputes

Liability of a sub-contractor to pay service tax on consideration received from the principal contractor notwithstanding payment of tax by the principal contractor - HELD THAT: - A sub-contractor has an independent obligation to discharge service tax on the consideration received for taxable services. Payment of service tax by the principal contractor does not extinguish that liability, the issue having been settled by the Larger Bench in CST New Delhi vs Melange Developers Pvt. Ltd. [2019 (6) TMI 518 - CESTAT NEW DELHI-LB]. [Paras 4, 8]

The appellant was liable to service tax on merits.

Extended limitation for interpretational disputes - HELD THAT: - The Department produced no substantive evidence establishing the ingredients for invoking the extended period or wilful suppression of facts with intent to evade tax. Since the sub-contractor's liability had earlier involved contradictory views and was settled only by the Larger Bench, the matter was interpretational; consequently, the extended period under the proviso to section 73(1) could not be invoked. [Paras 7, 8]

The show cause notice was time-barred and the service tax demand was unsustainable.

Final Conclusion: Although the appellant was liable to service tax as a sub-contractor, the demand was barred by limitation because the extended period was unavailable. The appeal was allowed and the impugned order modified accordingly.

Excise duty on unaccounted samples removed for testing - Maintainability of departmental appeal under Section 35G of the Central Excise Act - Marketability - Removal for Home Consumption

Levy of excise duty on pharmaceutical samples cleared for in-house testing and testing through outside laboratories without maintenance of prescribed records - HELD THAT: - It is clear from ITC [2002 (12) TMI 85 - SUPREME COURT] that in case of non-maintenance of records in relation to removal of samples, the Department was justified in levying excise duty.

The undisputed clearance of samples and the absence of records regarding their value attracted the prescribed procedure for removal of samples. In the absence of records substantiating their use for testing, the samples had to be treated as goods removed for home consumption. The plea that the goods attained marketability only after in-house testing could not arise where the assessee had defaulted in maintaining the requisite records; the Tribunal decisions cited by the appellant were distinguishable as records had been maintained in those cases. [Paras 11, 12, 16]

Excise duty on the samples was rightly leviable, and the High Court's reversal of the Tribunal's order was upheld.

Maintainability of departmental appeal under Section 35G of the Central Excise Act - HELD THAT: - The appeal fell within the parameters of Section 35G and was not excluded by its exclusion clause. [Paras 17]

The objection to the maintainability of the department's appeal was rejected.

Final Conclusion: The appeals were dismissed. The High Court's orders sustaining the levy of excise duty on unaccounted testing samples and entertaining the department's appeal were affirmed.

Clandestine removal based on stock discrepancy - Extended limitation in absence of mala fides - Burden of Proof - Tangible Evidence - Corroborative Evidence

Demand for alleged clandestine removal of pig iron, mixed coke and crude tar founded on discrepancies between estimated physical stock and statutory stock records - HELD THAT: - The Tribunal in the case of Micky Metal Ltd [2023 (7) TMI 357 - CESTAT KOLKATA] wherein it was alleged that the appellant therein had suppressed the facts from the Central Excise Department by not mentioning the production and clearance in Central Excise Returns in form ER-1 and therefore had evaded payment of duty; thus Show Cause Notice were issued.

The stock discrepancy arose where production of pig iron was recorded on yield basis in the absence of a proper weighment system and stock-taking was undertaken by eye estimation rather than detailed physical weighment. No weighment report or tangible evidence of actual unaccounted manufacture or clearance was produced. A shortage derived from estimation and assumptions, without evidence of clandestine clearance, cannot sustain the charge. [Paras 10, 11, 12, 13, 16]

The charge of clandestine manufacture and removal was held unproved, and the duty demand was set aside.

Extended period of limitation - Absence of mala fides - HELD THAT: - The appellant was a public sector undertaking and the Revenue had not established mala fides. The extended period invoked in the show cause notice was therefore unavailable. [Paras 17]

The demand pertaining to the extended period of limitation was independently held unsustainable.

Final Conclusion: The appeal was allowed. The duty demand and consequential penalty were set aside, as clandestine removal was not established and the extended period was not invocable.

Statutory composition of Micro and Small Enterprises Facilitation Council - Void arbitral award for lack of jurisdiction - Writ jurisdiction despite alternative arbitral remedy - Validity of an award rendered by a Micro and Small Enterprises Facilitation Council comprising eight members, contrary to the statutory limit of three to five members, and maintainability of writ petitions despite the remedy to set aside an arbitral award. - HELD THAT: - The Hon’ble Apex Court in the case of India Glycols Ltd. v. MSEFC [2023 (11) TMI 1240 - SUPREME COURT], while considering the scope of Section 18 and 19 of the Act 2006 has observed that in terms of Section 19, an application for setting aside an award of the Facilitation Council cannot be entertained by any court unless the appellant has deposited seventy-five per cent of the amount in terms of the award. In view of the provisions of Section 18(4), where the Facilitation Council proceeds to arbitrate upon a dispute, the provisions of the 1996 Act are to apply to the dispute as if it is in pursuance of an arbitration agreement under sub-section (1) of Section 7 of that Act. Hence, the remedy which is provided under Section 34 of the 1996 Act would govern an award of the Facilitation Council.

It is settled position of law that the power of the High Court under Article 226 of the Constitution of India to issue writs/directions is a basic feature of the Constitution and cannot be curtailed by parliamentary legislation. However, the High Court under Articles 226 of the Constitution of India would interfere rarely in exceptional circumstances in the arbitral proceedings, when the order passed by the Facilitation Council/Arbitral Tribunal is perverse and patently lacking in inherent jurisdiction and, when there is no semblance of “Award” as contemplated under Section 18 of the MSMED Act.

The law is well settled that the constitution of Council is to be as per the mandate of the statute. It has been mandated under Section 21 of the Act, 2006 that the number of the members of the Council will be in between 3 to 5.

The Hon'ble Apex Court in Manoranjan Chakraborty & Ors.[2000 (11) TMI 1079 - SUPREME COURT], has observed that that if gross injustice is done and it can be shown that for good reason the Court should interfere, then notwithstanding the alternative remedy which may be available by way of an appeal, the Writ Court can in an appropriate case exercise its jurisdiction to do substantive justice, accordingly, in view of the fact that the constitution of the Council was itself ultra-vires of Section 21 of the MSMED Act, the alternative remedy cannot be taken as a bar for entertaining the present writ applications.

The statutory prescription governing the Council's composition is mandatory; a Council constituted with more than five members is contrary to the parent enactment and lacks jurisdiction to render an award. The defect concerns the very competence of the adjudicatory forum and is not a mixed question requiring recourse to the arbitral remedy. Though an award of the Council is ordinarily assailable through the statutory mechanism for setting aside arbitral awards, that alternative remedy does not bar writ jurisdiction where the award is void ab initio for want of inherent jurisdiction. [Paras 60, 61, 62, 66, 70]

The award and the consequential review order were quashed; the dispute was remitted to a duly constituted Council for fresh and expeditious adjudication in accordance with law.

Final Conclusion: The writ petitions were allowed. The award rendered by the improperly constituted Council and the consequential review order were quashed, and the matter was remitted for fresh consideration in accordance with law.

Independence of criminal investigation from fraud-account classification - Judicial interference with investigation into economic offences - Effect of suspension of a bank account's administrative classification as fraud on criminal investigation and searches conducted pursuant to an FIR alleging cognizable economic offences - HELD THAT: - The allegations contained in the FIR pertain to offences punishable under Sections 120-B, 420, 468, 471 and 477A IPC together with offences under the Prevention of Corruption Act, 1988 involving allegations of diversion and siphoning of substantial public funds. Investigation into such allegations cannot ordinarily be interdicted in exercise of writ jurisdiction merely because the administrative classification of the account as "Fraud" is under challenge before a constitutional Court.

The Hon'ble Court also extracted the principles laid down in Gian Singh [2012 (9) TMI 1112 - SUPREME COURT]and reiterated that economic offences involving public institutions and offences under special statutes stand on a different footing and ordinarily ought not to be quashed merely because a settlement has been arrived at between the parties.

The principles laid down by the Hon'ble Supreme Court in W.N. Chadha [1992 (12) TMI 216 - SUPREME COURT] and Anju Chaudhary [2012 (12) TMI 1129 - SUPREME COURT] reinforce the settled position that criminal investigation ordinarily ought not to be obstructed by insistence upon pre-investigation adjudication or prior hearing to the proposed accused persons. The investigative process under criminal law must necessarily be allowed to proceed unhindered so long as it remains within the bounds of statutory authority.

The interim order suspending the fraud classification operated in the regulatory and administrative sphere arising under the RBI framework; it could not be enlarged by interpretation into an omnibus restraint on the exercise of statutory criminal powers. Although the underlying facts may overlap, an FIR registered after the investigating agency applies its mind to information disclosing cognizable offences gives the investigation an independent statutory character. Criminal investigation and searches undertaken pursuant to judicial warrants are not merely consequential administrative actions flowing from the fraud classification. In the absence of an express restraint on the investigation, and since no patent lack of jurisdiction, manifest mala fides or abuse of process was shown, writ jurisdiction could not be invoked to stifle the investigation at its nascent stage. The contention that records were available with the asset reconstruction company did not preclude searches for electronic, digital and other material relevant to the alleged conspiracy and movement of funds. Disputed allegations concerning the execution of the searches were not amenable to adjudication on competing affidavits and could be pursued through remedies under criminal law. [Paras 36, 37, 38, 39, 40]

The suspension of the administrative fraud classification did not prohibit registration of the FIR, continuation of the criminal investigation, or searches conducted pursuant to judicial warrants; interference was declined.

Final Conclusion: The writ petition was dismissed. The ongoing criminal investigation and the search and seizure operations pursuant to judicial warrants were held not to be interdicted by the interim suspension of the administrative fraud classification.