TaxTMI Updates e-Newsletter
Aug 07,2026

Interim protection against coercive recovery of entry tax - Legislative competence after omission of Entry 52 of List II -provisos to Section 174 (2) of the Haryana Goods and Services Tax Act, 2017 introduced through the Haryana Goods and Services Tax (Amendment) Act, 2021 -amendments to the saving provision and the removal-of-difficulty order

Seeking Interim protection against recovery of entry tax under the repealed entry-tax enactment pursuant to the removal-of-difficulty provisions and order - HELD THAT: - Through the 101st amendment to the Indian Constitution Entry 52 of List II in the Seventh Schedule was omitted and under Section 19 of the said amendment any provision of law relating to tax on entry of goods or services or both in force in any state immediately before the commencement of the 2016 Act, which was inconsistent with the provisions of the Constitution, as amended by the 2016 Act, shall continue to be in force until amended or repealed within one year. In compliance with such provisions the State of Haryana enacted the Haryana Goods and Services Tax Act, 2017 under Section 174(1) of which Act the 2008 Act was repealed but under Section 174(2) the State saved the actions already taken under the said repealed Act.

Through Haryana Goods and Services Tax (Amendment) Act, 2021, the State of Haryana introduced the three impugned provisos to Section 174 of the Haryana Goods and Services Tax Act, 2017 enabling the Government of Haryana to remove difficulties in the implementation of the 2008 Act repealed through the Haryana Goods and Services Tax Act, 2017 and deriving its power under the impugned provisos, the Government of Haryana issued the Removal of Difficulty Order dated 11.12.2024 laying down the procedure which facilitates the collection of entry tax under the 2008 Act prior to its repealing.

Prima facie, we are of the opinion that once the 2008 Act had been repealed and only the actions already taken under the 2008 Act, before its repeal, were saved by Section 174(2) of the Haryana Goods and Services Tax Act, 2017, then after the deletion of Entry 52 of List II of the Seventh Schedule to the Indian Constitution was done through the 101st Amendment to the Constitution in the year 2016, the State lost its legislative competency to make any provision to facilitate collection of entry tax, whether through an Act much less through an executive order.

Following omission of Entry 52 of List II, the State prima facie lacked legislative competence to make a provision, whether by legislation or executive order, facilitating collection of entry tax. The issue was kept open for final consideration. [Paras 13]

Pending final hearing, the State was restrained from taking coercive steps against the petitioners. For final hearing, adjourned to 17.07.2026 before which date the State may file its written response(s).

Final Conclusion: The petitions were adjourned for final hearing. Pending adjudication, no coercive steps could be taken against the petitioners.

Validity of arrest for cognizable and non-bailable GST offences - 'grounds of arrest' -Reasons to believe and necessity of arrest

Arrest under the CGST Act for online gaming tax evasion - Compliance with arrest safeguards - Validity of the arrest and consequent custody of the petitioner for alleged facilitation of GST evasion through online money gaming transactions routed via dummy entities - HELD THAT: - The Court found that the grounds of arrest had been served upon the petitioner and recorded material indicating his alleged role in facilitating transactions through fictitious entities, suppression of taxable value, layering of funds, apprehended tampering with evidence and the need for custodial investigation. The recorded grounds satisfied the departmental circular, which requires credible material and consideration of the necessity of arrest rather than a routine or mechanical exercise of power.

The Court further held that, even where the alleged offence is punishable with imprisonment up to five years, arrest may follow upon recorded reasons establishing necessity for investigation and prevention of further offence, disappearance or tampering of evidence, or influence over witnesses, as explained in Satender Kumar Antil v. Central Bureau of Investigation and Another [2022 (8) TMI 152 - SUPREME COURT]. [Paras 42, 43, 45]

The arrest was held to be in conformity with the applicable circular and not illegal.

Final Conclusion: The habeas corpus petition was dismissed and the reliefs seeking a declaration of illegal arrest and release from custody were declined.

Service of GST notice after cancellation of registration - Ex parte GST adjudication

Service of GST notice after cancellation of registration - Ex parte GST adjudication - Validity of an ex parte GST adjudication where the show-cause notice, issued after cancellation of registration, was served only through the Common Portal. - HELD THAT: - After cancellation of registration, the registered person may neither be obliged nor able to access the Common Portal and may consequently remain unaware of proceedings initiated thereafter. The Commissioner's binding circular requiring physical service of notice in such cases was founded on this practical requirement; the revenue did not dispute the position. [Paras 5, 6]

The ex parte adjudication order was set aside and the proceedings were restored for reply, consideration of any request for cross-examination or relied-upon documents, and fresh adjudication after adequate notice of personal hearing.

Final Conclusion: The writ petition was disposed of by setting aside the ex parte adjudication order and directing fresh proceedings in accordance with the stipulated opportunity of hearing.

Prohibition orders sealing the petitioner's premises pending GST search proceedings - HELD THAT:- On consensus of the parties and without examining the merits, the writ petition was disposed of with directions for de-sealing of the premises in the petitioner's presence and for any search to be conducted in accordance with the CGST Act and the CGST Rules, 2017.

Bail in GST prosecution for fraudulent input tax credit - Presumption of innocence and speedy trial - Pre-trial detention not punitive

Grant of bail in fraudulent input tax credit prosecution - Delay in commencement and conclusion of trial - Entitlement to bail of an accused prosecuted for allegedly availing and passing fraudulent input tax credit through shell entities. - HELD THAT: - Pre-conviction detention is not punitive; its object is to secure the accused's attendance at trial. Although the alleged offence was serious, the maximum punishment was five years, the case was triable by a Magistrate, investigation had concluded and the complaint had been filed, while charges had not been framed and the trial was unlikely to conclude within a reasonable time. In the absence of criminal antecedents, exceptional circumstances, or material indicating likelihood of absconding, witness intimidation or tampering with evidence, continued incarceration was not warranted. [Paras 14, 16, 17, 18, 19]

Bail was granted subject to conditions safeguarding the trial and preventing interference with evidence or witnesses.

Final Conclusion: The applicant was enlarged on bail, subject to conditions, as continued pre-trial detention was not justified on the material shown.

Alternative statutory remedy under the CGST Act - Appellate jurisdiction to determine reasonable period for notice

Maintainability of the writ petition challenging the show cause notice and order-in-original on the ground that the notice under the CGST Act was not issued within a reasonable period - HELD THAT: - The statutory appeal was held to be comprehensive and capable of examining the interpretation and application of the expression "reasonable period", which depends upon the facts of each case. The contention concerning invocation of the relevant provisions for particular financial years, as well as factual questions arising from the order-in-original, could also be examined by the Appellate Authority. In the presence of that efficacious remedy, writ jurisdiction was not warranted. [Paras 5, 6, 7]

The writ petition was not entertained and the petitioner was relegated to the statutory appellate remedy, with liberty to raise all questions before the Appellate Authority.

Final Conclusion: The petition challenging the notice and order-in-original was declined on account of the efficacious statutory appeal. The Appellate Authority was directed to determine all questions raised before it in accordance with law.

Anticipatory bail in an investigation concerning alleged wrongful availment and utilisation of input tax credit through invoices issued by non-existent entities.

HELD THAT:- The fact that the co-director has already been arrested and that the investigation is in progress cannot be ignored at this stage. Considering the magnitude of the alleged tax evasion and the necessity of the investigating agency to ascertain the role of the applicant and other persons involved in the transactions, this Court is of the considered view that custodial interrogation of the applicant cannot be ruled out. Therefore, without expressing any opinion on the merits of the case, the applicant is not entitled to the discretionary relief of anticipatory bail. Accordingly, the anticipatory bail application is rejected.

Release of detained goods where owner comes forward - Penalty on invoice/e-way bill value under detention proceedings

Release of detained goods and vehicle where the petitioner claimed ownership of the goods, and applicability of the statutory provision governing release upon payment by the owner - HELD THAT: - The Court accepted that, where the petitioner is the owner of the detained goods, their release is governed by Section 129(1)(a) of the CGST Act read with the IGST Act, and not by Section 129(1)(b). It also accepted the cited view that valuation cannot be enhanced for this purpose and that the penalty under Section 129(1)(a) must be determined on the basis of the invoice/e-way bill. [Paras 7]

The detention order was quashed and the authorities were directed to afford hearing and pass a fresh order under Section 129 after considering the documents produced by the petitioner.

Final Conclusion: The writ petition was allowed. The impugned detention order was set aside, with a direction to determine release of the goods afresh under Section 129 after hearing the petitioner and considering its documents.

GST proceedings against deceased taxable person - Validity of notice and demand order issued against a dead person

HELD THAT: - The death of the proprietor before initiation of the proceedings was undisputed. The impugned notice and order, having been issued against a dead person, could not be sustained and were required to be quashed. The respondents were, however, left at liberty to initiate proper proceedings in accordance with law against the legal heir for any outstanding demand. [Paras 6, 8]

The notice and demand order issued against the deceased proprietor were quashed and set aside, with liberty to the respondents to proceed against the petitioner in accordance with law.

Final Conclusion: The petition was allowed. The GST notice and demand order issued against the deceased proprietor were quashed, without prejudice to lawful proceedings against the petitioner for any outstanding demand.

Suppression of material facts in writ proceedings - Voluntary payment of GST dues - petitioner's allegation that GST and penalty were extracted through coercion, despite non-disclosure of the anticipatory bail application and its withdrawal - HELD THAT: - The withdrawal pursis recorded that the petitioner had deposited a reasonable amount with the Department under protest and was not apprehending arrest after appearing before the authorities and giving a statement.

The Court held that the omission to disclose the anticipatory bail proceedings and their withdrawal established, prima facie, that the payment was voluntary and that vital facts had been suppressed in the writ petition. [Paras 9, 11]

The petitioner was directed to deposit costs and file an affidavit explaining the suppression; further orders were kept open.

Final Conclusion: Prima facie finding suppression of material facts and voluntary payment, the Court directed deposit of costs and an explanatory affidavit, subject to further orders.

Communication of GST notices through portal - Violation of principles of natural justice in ex parte GST adjudication - Maintainability of writ petition despite dismissal of appeal against a distinct intimation

Communication of GST notices through portal - Violation of principles of natural justice in ex parte GST adjudication - Validity of the ex parte GST adjudication where the notices and adjudication order were uploaded under the 'Additional Notices and Orders' tab and the personal hearing was fixed before expiry of the time for reply. - HELD THAT: - Publication of notices and the adjudication order under the 'Additional Notices and Orders' tab did not constitute communication contemplated by the statutory scheme. Further, fixation of the personal hearing before expiry of the stipulated period for filing the reply denied an effective opportunity to defend the show-cause notice and amounted to a gross violation of natural justice. [Paras 6, 7, 8, 10, 13]

The ex parte adjudication order was quashed and the matter was remitted for fresh adjudication after permitting the petitioner to reply and granting a hearing; all merits were left open.

Maintainability of writ petition despite dismissal of appeal against a distinct intimation - Effect of the time-barred dismissal of an appeal filed against an intimation in DRC-OIA on the maintainability of the writ petition challenging the ex parte adjudication order - HELD THAT: - The dismissal of the appeal as time-barred did not affect the maintainability of the writ petition because that appeal had been filed against a different instrument, namely the intimation in DRC-OIA, and not against the impugned ex parte adjudication order. [Paras 9]

The writ petition remained maintainable.

Final Conclusion: The ex parte adjudication was set aside solely for breach of natural justice, with liberty to file a reply and a direction for fresh reasoned adjudication after hearing the petitioner.

Classification of railway ballast loading service - activity of loading ballast, stacked adjacent to the railway track, into railway wagons/hoppers placed on the track through deployment of a JCB loader (machinery) - independent supply of service, or a composite supply with supply of ballast as the principal supply, or a works contract service under the provisions of the CGST Act, 2017

What is the output GST rate for loading of ballast which is stacked adjacent to the railway tracks into the railway wagons which is stationed on the railway track by using JCB loader (Machinery)? -HELD THAT: - Supply of ballast and its subsequent loading were separately contracted, priced and invoiced. Title in the ballast passed to the Railways upon delivery, and the loading was thereafter undertaken independently on the Railways' instructions; hence, the activities were neither naturally bundled as a composite supply nor a works contract, which requires activities relating to immovable property. As the applicant only handled and loaded ballast into wagons, without transportation of goods or operation of railway rolling stock, the service fell under SAC 996719 as other cargo and baggage handling services under Heading 9967. [Paras 14, 15, 16, 17]

The loading service is an independent cargo-handling service classifiable under SAC 996719 and liable to GST at 18%; it does not attract the rate applicable to supply of ballast.

Final Conclusion: The ruling holds that loading Railway-owned ballast into railway wagons through JCB loaders is separately taxable as other cargo and baggage handling service at 18%.

Deduction available to Regional Rural Banks as co-operative societies u/s 80P - Statutory deeming fiction under the Regional Rural Banks Act

HELD THAT:- We are not inclined to interfere with the impugned order passed by the High Court [2025 (11) TMI 2045 - RAJASTHAN HIGH COURT]. However, questions of law, if any, are kept open.

Special Leave Petition is, accordingly, dismissed.

Royalties - fees for included services - fee for technical services - right to use (scientific) equipment - make available - non-exclusive limited licence - Withholding of tax u/s 195 - royalty and fees for technical service [FTS] - Assessee is a company incorporated in the United States of America and is a tax resident of that country as received certain sums of money from Indian entities for rendering cloud computing services, which, according to the AO are chargeable to tax as royalty and fees for technical service [FTS] under the Act as well as India-US DTAA

HELD THAT:- We are of the view that no case is made out for interference in the impugned judgment(s) and order(s) passed by the High Court. [2025 (6) TMI 84 - DELHI HIGH COURT]

The Special Leave Petitions are, accordingly, dismissed.

Unexplained expenditure u/s 69C - Bogus purchase expenditure and explained source of funds - Independent inquiry to discredit documentary evidence - expenditure represented by outstanding letters of credit as unexplained expenditure - HELD THAT: - Section 69C applies where the assessee offers no satisfactory explanation of the source of expenditure. The assessee had furnished documentary material supporting the transactions, while the source of the funds was the bank disbursement upon encashment of letters of credit.

AO's findings that no goods moved and that the supporting documents were forged were unsupported by any independent inquiry, verification, examination of the beneficiary entities, or cogent material discrediting the evidence. Treating transactions as bogus or accommodation entries is distinct from establishing that the source of expenditure was unexplained. The Assessing Officer having expressly made the addition under section 69C and accepted the sales, the addition could not be sustained by recasting it as one under another provision. [Paras 10, 11, 12, 13, 14]

The deletion of the addition under section 69C, and the consequential taxation under section 115BBE, was upheld.

Final Conclusion: No substantial question of law arose from the Tribunal's deletion of the addition. The Revenue's appeal was dismissed.

Special audit fee u/s 142(2A) - Liability for special audit fee - Liability to bear the fee of the Special Auditor appointed before the statutory amendment

HELD THAT: - Though the appointment preceded the amendment effective from 01.06.2007, the audit had been conducted pursuant to the Assessing Officer's order. Having regard to the spirit of the amendment and the assessee's non-appearance despite service, the Court directed that the audit cost be borne by the Union of India. [Paras 6]

The Union of India was held liable to bear the Special Auditor's fee.

Final Conclusion: The writ petition was disposed of as the audit had already been carried out, with the Union of India directed to bear the audit fee.

Reassessment jurisdiction - reason to believe based on tangible material - Stock-broker client receipts - absence of live link with income escapement

Validity of reassessment initiated on the basis that client funds received by a registered stock-broker exceeded its admitted turnover - HELD THAT: - The existence of a valid reason to believe that income chargeable to tax has escaped assessment is a jurisdictional precondition. Though adequacy of material is not subject to review, the recorded reasons must disclose a rational and direct live link between relevant material and the belief of escapement. The recorded reasons did not identify any document, ledger or material showing that funds received from the client were converted into the assessee's proprietary income; the inference of escapement from the excess of such receipts over the broker's turnover was founded on an erroneous assumption and amounted only to suspicion. Processing of the original return under section 143(1) excluded change of opinion but did not dispense with the requirement of tangible material establishing income escapement.

Even in a Section 143(1) scenario, the Assessing Officer must independently possess valid "reason to believe" based on tangible material showing income escapement. The decision in Rajesh Jhaveri [2007 (5) TMI 197 - SUPREME COURT] cannot be interpreted as granting the Assessing Officer a roving mandate to initiate reassessment on arbitrary assumptions or a complete misunderstanding of fundamental business facts.

We also note that the Tribunal properly adverted to settled principles regarding the interpretation of recorded reasons, including the decision in Hindustan Lever Ltd. v. R.B. Wadkar [2004 (2) TMI 41 - BOMBAY HIGH COURT] which holds that recorded reasons must be self-explanatory, without allowing the Revenue to impermissibly supplement or reconstruct them during appellate proceedings. [Paras 7, 8, 9, 10, 11, 12]

The Tribunal's finding that the reopening lacked jurisdictional foundation was upheld, and no substantial question of law arose.

Final Conclusion: The Revenue's appeal was dismissed. The reassessment was held to lack a valid jurisdictional basis, as the recorded reasons disclosed mere suspicion rather than tangible material having a live link with income escapement.

Classification of appeal under tax statute - appeal to the High Court under the Black Money and Imposition of Tax Act, 2015 required to be registered as a Tax Appeal or Income-tax appeal

HELD THAT: - Rule 1(3A) classifies appeals filed to the High Court under any other enactment providing for levy of tax as Tax Appeals. Since section 19 of the Act provides an appeal to the High Court against the Tribunal's order, the appeal falls within that classification. [Paras 5, 6, 7]

Permission was granted to convert the income-tax appeal into a Tax Appeal, subject to all other objections.

Final Conclusion: The income-tax appeal was disposed of for statistical purposes with permission to register it as a Tax Appeal.

Additions of unaccounted fees, based on seized loose sheets, visitors' slips and diary entries -Scope of interference with findings of fact under section 260A

Unaccounted admission fees - Corroboration of loose sheets and diary entries - Sustainability of additions for alleged unaccounted fees from MBBS Management/NRI quota seats, PG seats and COMED-K cancellation seats on the basis of seized loose sheets, visitors' slips and diary entries - HELD THAT: - The Tribunal had analysed the seized documents and the assessee's explanations, and found no enquiry with students or parents establishing receipt of fees beyond those recorded in the books. The material relating to particular years could not support extrapolated additions for other years; nor could estimated suppression for remaining PG seats be sustained without supporting material. In respect of COMED-K cancellation seats, the assumption that management-quota fees were collected was unsupported, particularly when the admissions were governed by an agreement prohibiting collection beyond prescribed fees and the assessee produced supporting admission records. The additions were therefore factual findings of presumption, estimation and extrapolation without adequate corroboration. [Paras 10, 11, 12, 13, 14]

The deletion of the additions for AYs 2009-10 and 2014-15 was upheld; the Revenue failed to establish perversity in the Tribunal's findings.

Appellate interference under section 260A - Perversity in findings of fact - HELD THAT: - The Tribunal, as the final fact-finding authority, had considered the evidence and given cogent reasons for its conclusions. In the absence of a demonstration that those findings were perverse or founded on no evidence, the High Court could not reappreciate the material and substitute its own factual conclusions. [Paras 9, 14]

The Revenue's challenge sought an impermissible reappreciation of evidence and was rejected.

Final Conclusion: The substantial questions concerning the additions were answered in favour of the assessee and against the Revenue, and the appeals were dismissed. The questions concerning denial of exemption were left open.

Unexplained share capital and share premium - Proof of identity, genuineness and creditworthiness - addition u/s 68 - Source of source for share subscription

Unexplained share capital and share premium - Proof of identity, genuineness and creditworthiness under Section 68 - HELD THAT: - The concurrent factual findings recorded that the assessee had furnished the subscriber's identity, financial statements, bank statements and the money trail; the subscriber had also disclosed the investment in its accounts, and its scrutiny assessment contained no adverse finding regarding that investment. Once these ingredients were established, the mere fact that shares were issued at a high premium could not justify an addition under Section 68. [Paras 7]

No substantial question of law arose from deletion of the addition towards share capital and share premium.

Source of source for share subscription - Applicability of the second proviso to Section 68 to the share subscription received in A.Y.2012-13 - HELD THAT: - The Court found it unnecessary to decide whether the second proviso operated prospectively or retrospectively, since the factual finding that the subscriber received funds from group companies for making the investment satisfied the condition concerning explanation of the nature and source of the credited sum. [Paras 10]

The Revenue's reliance on the second proviso did not give rise to a substantial question of law.

Final Conclusion: The Revenue's appeal was dismissed, as the concurrent factual findings established the genuineness and source of the share subscription and disclosed no substantial question of law.

Reassessment on suspicious transaction report - Reason to believe escapement of income

Validity of reopening based on a Suspicious Transaction Report concerning fully disclosed inter se transactions of the assessee's partnership firm and proprietorship concern - HELD THAT: - Reopening under section 147 requires reason to believe that income chargeable to tax has escaped assessment. Though the Revenue could act on the STR, mere suspicion arising from the transaction pattern could not justify reopening where the assessee had furnished the relevant books and transaction details, the orders incorrectly recorded non-furnishing of such material, and the Revenue possessed no material, information or third-party statement indicating that the transactions were bogus or accommodation entries. Loans between partners, without material showing escapement, could not found reassessment. [Paras 7, 8, 9]

The impugned show-cause notice and order for reopening were quashed and set aside.

Final Conclusion: The writ petition was allowed and the reassessment proceedings initiated on the basis of unsubstantiated suspicion arising from the STR were quashed.

Reassessment based on suspicious transaction report - Escapement of income from withdrawal of partner's capital - Mere suspicion without material for reopening assessment

Validity of reassessment proceedings founded on a suspicious transaction report concerning frequent capital-account transactions between a partner and its partnership firm - HELD THAT: - The Assessing Officer failed to deal with the assessee's detailed reply and supporting accounts showing that the impugned receipts represented capital infusion or withdrawal in the partnership firm. Withdrawal of the capital balance by a partner from its firm, being an inter se transaction governed by the partnership arrangement, could not by itself constitute escapement of income.

Revenue neither identified material or third-party information showing that the bank transactions were bogus or accommodation entries nor disputed that no interest expenditure had been claimed in respect of those transactions.

Though reassessment may be initiated on the basis of a suspicious transaction report, mere suspicion unsupported by material cannot sustain it. [Paras 7, 8, 9]

The show-cause notice, reassessment notice and order were quashed.

Final Conclusion: The writ petitions were allowed and the reassessment proceedings initiated on the impugned suspicious transaction report were quashed.

Amortisation of goodwill in transfer-pricing operating cost - Transactional net margin method

Treatment of amortisation of goodwill arising on acquisition of a business as operating expenditure for computing the assessee's profit level indicator under the transactional net margin method - HELD THAT: - Goodwill arising on acquisition is not a functional asset comparable to other intangibles deployed for generating operational profits. Its amortisation is an abnormal item arising from the acquisition of a business and not a regular operating expenditure; it therefore cannot form part of operating cost for transfer-pricing adjustment. See case of Hitachi Solutions India Private Limited [2025 (6) TMI 2151 - ITAT CHENNAI] [Paras 7, 8, 9]

The transfer pricing officer was directed not to treat amortisation of goodwill as operating expenditure, and the related grounds were allowed.

Final Conclusion: The appeal was allowed. Amortisation of goodwill arising from business acquisition was excluded from operating expenditure for determining the transfer-pricing margin.

Transfer pricing adjustment on transfer of electricity by Captive Power Plant ("CPP") - Allowability of compensatory patent-settlement expenditure - Explanation 1 to section 37(1) and foreign-law contraventions - Prospective operation of Explanation 3 to section 37(1) - Disallowance of expenditure relating to exempt income - Book-profit adjustment for exempt-income expenditure

Transfer pricing of captive-power transfers - Arm's length pricing of electricity transferred by the captive power plant to the assessee's manufacturing units - HELD THAT: - In the absence of any change in the factual matrix or legal proposition, the issue was held covered by the Tribunal's order in the assessee's own case for AY 2013-14 [2022 (8) TMI 1443 - ITAT AHMEDABAD] thus the addition made by the Assessing Officer is ordered to be deleted [Paras 6]

The transfer-pricing adjustment was deleted.

Disallowance of expenditure relating to exempt income u/s 14A -Book-profit adjustment for exempt-income expenditure - HELD THAT: - The disallowance was restricted to the amount of exempt dividend earned. The Tribunal further held that the provisions for computing book profit under section 115JB were not attracted to this disallowance. [Paras 7]

The assessee's ground was partly allowed and the Revenue's corresponding grounds were dismissed.

Allowability of compensatory patent-settlement expenditure - Explanation 1 to section 37(1) and foreign-law contraventions - Prospective operation of Explanation 3 to section 37(1) - Revenue character of litigation-settlement expenditure - Deductibility of expenditure incurred under an out-of-court settlement of United States patent-infringement litigation assumed under a court-sanctioned demerger scheme - HELD THAT: - A settlement of civil patent litigation, made without admission or adjudication of guilt, could not be treated as proof of an offence or as expenditure for a purpose prohibited by law. The payment was compensatory, incurred out of commercial expediency to resolve litigation and protect the existing business, and did not acquire a capital asset or enduring advantage in the capital field. For the relevant year, Explanation 1 to section 37(1) did not extend to an alleged infraction of foreign law; Explanation 3, which widened that scope, operated prospectively. The liability had crystallised after the appointed date and stood vested in the assessee by the court-sanctioned demerger scheme; in the absence of material showing that the scheme was a sham, it could not be characterised as a colourable device.

It is not in dispute that the profits arising from the sale of goods by the assessee to SPG FZE had been offered to tax by the assessee in the earlier years, and that the transactions between the assessee and the UAE entity were at all times subject to tax in India.

Revenue, having brought to tax the profits arising out of the very same business arrangement with the UAE entity, cannot be permitted to turn around and disown the corresponding liability arising out of that very business when it crystallised. Revenue cannot approbate and reprobate; having accepted and taxed the gains of the arrangement, it must also accept the liabilities associated with such arrangement.

We find that the out-of-court settlement expenditure was incurred genuinely out of commercial expediency, pertains directly to the assessee's business, is revenue in character, and is completely outside the restrictive bars of Explanation 1 to Section 37(1).[Paras 8]

The settlement expenditure was allowed as a revenue business deduction under section 37(1).

Interest on financing of allowable settlement liability - Deductibility of interest incurred on financing obtained for the patent-settlement liability - HELD THAT: - The interest claim was consequential to the allowance of the underlying settlement expenditure. [Paras 10]

The interest deduction was allowed; the related book-profit ground was infructuous.

Characterization of computer-software expenditure - Claim for revenue deduction of computer-software expenditure - HELD THAT: - As depreciation on the entire software expenditure had already been claimed and allowed, no interference with the finding treating it as capital expenditure was warranted. [Paras 11]

The assessee's claim was rejected.

Ad hoc disallowance of business-promotion expenditure incurred on gifts - HELD THAT: - Where expenditure was connected with business activities and its genuineness was not disproved, an ad hoc disallowance merely because complete particulars of recipients were not furnished could not be sustained without cogent material. [Paras 12]

The disallowance was directed to be deleted after due verification of expenditure details, and the ground was allowed for statistical purposes.

Deduction of foreign taxes not eligible for tax credit - Claim for deduction of foreign taxes for which no tax credit was available - HELD THAT: - The claim required verification. [Paras 13]

The matter was remanded to the Assessing Officer for verification and allowance in accordance with law.

Transfer-pricing adjustment on associated-enterprise loans - Transfer-pricing adjustment on sales to associated enterprises - Revenue's challenge to deletion of transfer-pricing adjustments concerning interest on loans to associated enterprises and pricing of sales to associated enterprises - HELD THAT: - The issues were covered by earlier Tribunal orders in the assessee's own case [2017 (6) TMI 1323 - ITAT AHMEDABAD] and [2017 (9) TMI 1804 - ITAT AHMEDABAD], and no change in facts or law was shown. [Paras 15, 16]

The relief granted by the Commissioner (Appeals) was affirmed.

Weighted deduction for in-house research and development expenditure - Allocation of research and development expenditure - HELD THAT: - The issues were held covered by earlier Tribunal orders in the assessee's own case [2017 (9) TMI 1804 - ITAT AHMEDABAD] and [2016 (12) TMI 1539 - ITAT AHMEDABAD], with no change in the factual matrix or legal proposition. [Paras 17, 18, 21]

The relief granted by the Commissioner (Appeals) was affirmed.

Wealth-tax provision in book-profit computation - Addition of provision for wealth tax in computing book profit under section 115JB. - HELD THAT: - The issue was covered by an earlier Tribunal order in the assessee's own case [2017 (9) TMI 1804 - ITAT AHMEDABAD], and no change in facts or law was shown. [Paras 19]

The relief granted by the Commissioner (Appeals) was affirmed.

Allowability of patent-settlement expenditure - payment under an out-of-court settlement of a patent-infringement suit - HELD THAT: - The issue was covered by the Tribunal's order in the assessee's own case for AY 2012-13 [2021 (9) TMI 1164 - ITAT AHMEDABAD], with no change in the factual matrix or legal proposition. [Paras 22]

The relief granted by the Commissioner (Appeals) was affirmed.

Final Conclusion: The assessee's appeal was partly allowed, with the principal patent-settlement expenditure and consequential interest allowed, while specified matters were remanded for verification. The Revenue's appeal was dismissed.

Disallowance of expenditure relating to exempt income - Prospective operation of the Explanation to section 14A

Disallowance under section 14A read with Rule 8D in respect of investments yielding exempt income, where the computed disallowance exceeded the exempt income earned - HELD THAT: - The Tribunal held that a disallowance under section 14A cannot exceed the exempt income earned during the relevant year. It further held that the Explanation inserted in section 14A by the Finance Act, 2022 is prospective and cannot apply to a year prior to 1.04.2022; consequently, the settled position restricting disallowance to exempt income continued to govern the year under consideration. As relying on Cheminvest Ltd. [2015 (9) TMI 238 - DELHI HIGH COURT] and Shivam Motors (P.) Ltd. [2014 (5) TMI 592 - ALLAHABAD HIGH COURT] with M/s Mahendra Educational (P.) Ltd [2025 (10) TMI 1450 - ITAT LUCKNOW] to hold that no disallowance over and above the amount of exempt income is permissible[Paras 6, 7]

The disallowance was restricted to the amount of exempt income, and the grounds challenging the excess disallowance were allowed.

Final Conclusion: The assessee's appeal was partly allowed by restricting the section 14A disallowance to the exempt income earned for assessment year 2018-19. The unpressed grounds were dismissed.

Unauthorised supervisory approval in assessment - Abdication of quasi-judicial discretion

Validity of an assessment u/s 143(3), following survey proceedings, where the AO recorded that it was passed with prior approval purportedly u/s 153D - HELD THAT: - An assessment consequent upon a survey under section 133A did not require prior approval from a supervisory authority. The recorded approval was unsupported by any statutory provision and constituted interference with the Assessing Officer's independent exercise of quasi-judicial authority. An assessment made under such unauthorised supervisory approval could not survive.

Hon'ble Punjab & Haryana High Court in the case of Findoc Finvest Private Limited [2025 (3) TMI 727 - PUNJAB & HARYANA HIGH COURT] held that "where there is no provision, the order of assessment would be vitiated in law if the Assessing Officer consults or seeks approval of the assessment from his superior officers". In the said judgment, Hon’ble High Court held that an order passed under the influence and directions of superior officers would mean that "the Assessing Officer has abdicated his authority and, therefore, the order has become vitiated in law". Thus, in view of the decision of the Hon’ble Punjab & Haryana High Court (supra), the same would constitute an act of interreference by the ld. Assessing Officer.[Paras 9]

The assessment under section 143(3) was quashed; the remaining grounds became academic.

Final Conclusion: The assessment, having been made with an unauthorised prior supervisory approval, was quashed. The assessee's appeal was allowed.

Penalty levied u/s 271(1)(c) - assessee having furnished inaccurate particulars of income by claiming excessive depreciation in contravention of section 32 r/w Appendix 1A and Rule 5(1A) and declaring incorrect taxable income resulting in willful concealment of income

Depreciation option under rule 5(1A) - Depreciation for power-generating undertaking - Exercise of the option by a power-generating undertaking to claim depreciation under rule 5(1) read with Appendix I instead of Appendix IA. - HELD THAT: - The second proviso to rule 5(1A) permits an undertaking engaged in generation or generation and distribution of power to opt for depreciation under rule 5(1) read with Appendix I. As no separate form or prescribed mode is stipulated for exercising that option, the claim made in the return, accompanied by the corresponding computation disclosed in Form No. 3CD, constituted its exercise. The original claim under Appendix I was therefore supported by a statutory option and could not be regarded as wholly unknown to law. The issue is directly covered by the decision of the Hon’ble Supreme Court in CIT v. Jindal Steel & Power Ltd.[2023 (12) TMI 417 - SUPREME COURT] [Paras 12, 15]

The original claim of depreciation under Appendix I was a legally permissible claim founded on exercise of the statutory option through the return.

Penalty for inaccurate particulars of income - Bona fide depreciation claim - Voluntary revision of claim before detection - HELD THAT: - Penalty for furnishing inaccurate particulars requires false, incorrect or erroneous factual particulars, and not merely a claim which is not accepted. The assets, their cost, use, applicable rate and depreciation computation were disclosed in the return and tax audit report; no asset, entry or primary fact was found to be bogus, false or misstated. The complete revised computation was furnished before the specific query on depreciation, and, since the time to file a revised return had expired, revision through letters and computation during assessment could not by itself negate bona fides. The successive communications reflected reconsideration of a legal claim rather than concealment. The decision concerning unrecorded transactions and an unsupported explanation was distinguished, as the assessee's explanation was substantiated, bona fide and accompanied by full disclosure of material facts.

The ratio laid down in CIT v. Reliance Petroproducts (P.) Ltd. [2010 (3) TMI 80 - SUPREME COURT] is that the mere making of a claim which is not accepted or is found to be unsustainable in law does not amount to furnishing inaccurate particulars, provided the particulars furnished in the return are not found to be incorrect, erroneous or false.

The present case stands on a stronger footing. The original claim was supported by the second proviso to rule 5(1A), the computation was disclosed in the tax audit report, and the claim was suo motu revised before the Assessing Officer raised any specific query. Even assuming that the original claim was not ultimately allowable, the ratio of Reliance Petroproducts applies because none of the particulars supplied by the assessee was found to be incorrect, erroneous or false.

The decision of Ashajyot Mercantile Private Limited [2024 (5) TMI 1715 - ITAT MUMBAI] also supports the assessee’s case. The ratio of the said decision is that, where an expenditure or deduction is genuine and otherwise allowable, but the dispute is confined to the year or manner of its allowability, such a dispute does not justify the levy of penalty under section 271(1)(c), particularly in the absence of any allegation of misrepresentation, bogus expenditure or false particulars.

The ratio in K.P. Madhusudhanan [2001 (8) TMI 8 - SUPREME COURT] that Explanation 1 need not be separately mentioned in the penalty notice is not in dispute. However, the application of Explanation 1 still depends upon the facts of each case. The present assessee neither failed to offer an explanation nor offered an explanation found to be false. The explanation was substantiated, bona fide and accompanied by disclosure of all facts material to the computation of income. Accordingly, the deeming fiction under Explanation 1 is not attracted.

In the present case, depreciation was otherwise allowable to the assessee under section 32. The dispute was confined to the applicable method and rate of depreciation under Appendix I or Appendix IA. Neither the assessment order nor the penalty order identifies any bogus asset, false entry or misrepresentation of a primary fact. The aforesaid decisions, therefore, support the conclusion that the assessee did not furnish inaccurate particulars of income.[Paras 13, 14, 16, 17, 19]

No furnishing of inaccurate particulars was established; deletion of the penalty was upheld.

Final Conclusion: The Revenue's appeal was dismissed. The deletion of penalty for the depreciation claim was sustained because the claim was statutorily supportable, fully disclosed and voluntarily revised before any specific departmental query.

Benami acquisition of shares through intermediary funding - Attachment limited to property identified in benami proceedings

Benami acquisition of shares through intermediary funding - Burden of proving benami transaction - Acquisition of shares by the alleged benamidar was a benami transaction for the benefit of the alleged beneficial owner - HELD THAT: - The Tribunal held that the benamidar lacked the economic capacity and genuine operational existence to acquire the shares. The admitted funding from an entity connected with the share broker, its repayment through funds received from entities in the promoter group, the absence of documentary support for the asserted commercial dealings, and the directors' lack of knowledge or control over the company's affairs established the fund trail and the beneficial owner's control.

Applying the recognised indicia for determining benami character, particularly the source of consideration, relationship of the parties and surrounding circumstances, Tribunal found that the consideration had been indirectly routed by the beneficial owner through closely connected entities. [Paras 8, 9, 10]

The confirmation of attachment of the identified shares as benami property was upheld; the beneficial owner and benamidar were held to be as alleged.

Attachment limited to identified benami property - Freezing of demat account beyond provisional attachment - Freezing of shares in excess of those identified in the show-cause notice, provisional attachment order and impugned order was impermissible - HELD THAT: - Tribunal found no material showing that the additional shares were the subject of the benami proceedings. The provisional attachment order, show-cause notice and impugned order consistently concerned only the specified shares; consequently, the general description of shares held in the demat account could not enlarge the attachment to other shares. [Paras 11]

The freezing and attachment of the excess shares was set aside, with a direction to clarify their release to the rightful owner.

Final Conclusion: The appeals challenging confirmation of attachment of the identified shares were dismissed. The excess shares, not forming part of the benami proceedings, were directed to be released.

Benami property attachment - inadequate investigation of alleged beneficial ownership - attachment of bank funds as alleged benami property - Whether no investigation into the source of demonetised currency, the persons controlling the alleged benamidar companies, and the genuineness of the bullion-sale transactions?

HELD THAT: - The Tribunal found that the record did not establish that the appellant had supplied demonetised currency to the directors of the alleged benamidar companies. The alleged person who delivered the currency had not been traced, and material particulars concerning the incorporation, shareholding, bank accounts and management of those companies had not been investigated. Equally, the appellant's claimed gold-bullion transactions required verification through stock records, sales to other purchasers, bank receipts, VAT statements and supporting invoices. A comprehensive re-investigation of these material aspects was therefore necessary. [Paras 4, 5, 6]

The attachment confirmation was not sustained on the existing investigation; the matter was remanded for re-investigation, while status quo over the attached properties was directed to be maintained.

Final Conclusion: The appeal was remanded for re-investigation of the alleged benami transactions. Status quo in respect of the attached funds was ordered pending further orders.

Re-export of confiscated passenger baggage - Special provision governing re-export of undeclared baggage - Discretionary redemption of prohibited goods

Re-export of confiscated passenger baggage - Special provision prevailing over general redemption power - Permissibility of directing re-export of confiscated undeclared gold forming part of passenger baggage by exercising the redemption power under Section 125 of the Customs Act - HELD THAT: - Section 80 is the special provision governing the detention and subsequent return or re-export of dutiable or prohibited articles comprised in passenger baggage, and its benefit is conditional upon a true declaration under Section 77. Section 125 confers a general power to offer redemption of confiscated goods on payment of fine, but neither independently authorises re-export of passenger baggage nor overrides Section 80.

It is a settled principle of statutory interpretation that a statute must be read as a whole and that every provision should be interpreted harmoniously so as to give effect to the legislative intent. Equally well settled is the principle that where a statute contains both a general provision and a special provision dealing with a particular subject, the latter ordinarily prevails over the former.

The special provision must prevail over the general provision; otherwise, a passenger who failed to declare goods could obtain through redemption the very re-export benefit statutorily reserved for a passenger making a true declaration. Since the gold was not declared and no detention under Section 80 was sought, the conditions for re-export were absent.

In the present case, it is an admitted position that the Petitioner neither declared the recovered gold under Section 77 nor requested detention of the same under Section 80. Rather, according to the record, she crossed the Green Channel and was intercepted only thereafter. The very jurisdictional facts necessary for invocation of Section 80 were, therefore, admittedly absent. Once the statutory conditions prescribed by the special provision were not fulfilled, the Adjudicating Authority could not have achieved the same result indirectly by invoking the general power contained in Section 125.

This Court is, therefore, in complete agreement with the reasoning adopted by the Revisional Authority that the order directing re-export was contrary to the statutory framework governing passenger baggage. The Revisional Authority merely restored the legislative balance contemplated by the Customs Act and cannot be said to have committed any jurisdictional error in doing so.[Paras 17, 21, 23, 25, 26]

The Revisional Authority rightly set aside the direction allowing re-export of the confiscated gold.

Redemption of prohibited goods - Revisional correction of statutory discretion - Validity of the Revisional Authority's interference with the adjudicating authority's discretion to permit redemption and re-export of confiscated prohibited gold - HELD THAT: - For prohibited goods, Section 125 uses the expression "may", unlike the mandatory redemption available for non-prohibited goods. The discretion is consequently neither automatic nor unstructured and must conform to the object and scheme of the Customs Act. A discretion exercised on an erroneous understanding of the statutory framework remains subject to correction in revision; the interference here rested on statutory interpretation and not on reassessment of disputed facts. [Paras 18, 19, 20, 34, 35]

The exercise of revisional jurisdiction to correct the legally impermissible direction for re-export was within the statutory power.

Final Conclusion: The writ petition was dismissed. The order withdrawing permission to re-export the confiscated undeclared gold was upheld.

Relinquishment of preferential tariff claim under coercive circumstances - SAFTA preferential duty benefit on valid certificate of origin - Confiscation and penalty for alleged misdeclaration

Relinquishment of preferential tariff claim under coercive circumstances - Right to appeal against reassessment - importer's letter foregoing the SAFTA preferential-duty benefit, written while the goods remained under prolonged detention and demurrage continued to accrue baring its appeal against reassessment - HELD THAT: - The record showed that the importer had consistently claimed the benefit and contested its denial. The letter was written because of the prolonged detention of goods urgently required for manufacture and mounting demurrage, and was not voluntary. Such compelled relinquishment could not be treated as relinquishment contemplated by section 28DA(4), and the importer retained the right to challenge the assessment. [Paras 6]

The appeal against denial of the preferential tariff benefit was maintainable.

SAFTA preferential duty benefit on valid certificate of origin - Verification of certificate of origin - Old and used iron and steel shafts obtained from ship breaking in Bangladesh were entitled to SAFTA concessional duty on the basis of the valid certificate of origin - HELD THAT: - The certificate of origin issued by the designated authority of Bangladesh was complete, within validity, and its authenticity had never been disputed. The SAFTA origin rules provided the self-contained procedure for verification, including retrospective verification where the importing State had reasonable doubt; no such prescribed step was taken. The valid certificate therefore established entitlement to the exemption under Notification No. 99/2011. [Paras 6]

Denial of the SAFTA benefit and consequential differential duty with interest were set aside.

Confiscation and penalty for alleged misdeclaration - Confiscation, redemption fine and penalty imposed on the importer for alleged misdeclaration in respect of the imported ship-breaking material were unsustainable - HELD THAT: - Physical examination disclosed no mismatch in quality, classification or valuation, and the goods had not been seized. Since the importer was entitled to the SAFTA benefit and no misdeclaration or fraud was established, there was no basis for confiscation; consequently, neither redemption fine nor penalty could survive. [Paras 6]

The confiscation, redemption fine and penalty were set aside.

Final Conclusion: The appeal was allowed with consequential relief. The importer was held entitled to the SAFTA concessional duty benefit, and the consequential demand, confiscation, redemption fine and penalty were set aside.

Advance Authorisation Scheme - import description and fulfilment of export obligation

Advance Authorisation Scheme - import description and fulfilment of export obligation - Consideration of the effect of fulfilment of export obligation under the Advance Authorisation Scheme on the dispute concerning the imported Sorbitol. - HELD THAT: - The Tribunal found that the decisions relied upon by the appellant had not been considered by the adjudicating authority and that the departmental representative did not oppose a remand for their consideration.

The matter was remanded to the adjudicating authority for fresh consideration in the light of the cited decisions and further submissions of the appellant, without adjudication on the merits.

Final Conclusion: The appeal was allowed by way of remand for fresh consideration of the appellant's case in the light of the cited decisions and any further submissions.

Refund of Extra Duty Deposit - Limitation for refund of customs duty

Extra Duty Deposit as security deposit - Inapplicability of limitation to refund of Extra Duty Deposit - Refund of Extra Duty Deposit collected during provisional assessment of related-party imports after acceptance of the declared transaction value. - HELD THAT: - Extra Duty Deposit is a security obtained pending final assessment and does not constitute customs duty or a statutory levy. Where final assessment accepts the declared value and no additional duty is payable, the basis for retaining the deposit ceases; consequently, its return is not a refund of duty governed by the limitation prescribed under section 27 of the Customs Act, 1962. [Paras 11, 12, 13, 14, 15]

The refund claims were not barred by limitation, and the Revenue's appeals were dismissed.

Final Conclusion: Extra Duty Deposit, being a security and not customs duty, was refundable upon finalisation of assessment without application of the limitation period governing refund of duty. The Revenue's appeals were dismissed.

Social Welfare Surcharge where Basic Customs Duty is exempt - MEIS/SEIS duty credit scrips

Social Welfare Surcharge where Basic Customs Duty is exempt - MEIS/SEIS duty credit scrips - Liability to Social Welfare Surcharge on Synthesis Menthol imported against MEIS/SEIS duty credit scrips where Basic Customs Duty was exempt under Notification Nos. 24/2015-Cus. and 25/2015-Cus. - HELD THAT: - Social Welfare Surcharge is computed on the aggregate customs duties payable and not on a notional Basic Customs Duty. Where the aggregate customs duty payable is nil by reason of the exemption availed against MEIS/SEIS scrips, the surcharge payable is also nil. The Tribunal followed its earlier decision in the appellant's own case and the clarification in Circular No. 3/2022-Cus. [Paras 8]

The appellant was not liable to pay Social Welfare Surcharge; the impugned orders were set aside and the appeals were allowed with consequential relief.

Final Conclusion: Social Welfare Surcharge was held not payable where Basic Customs Duty on the imports was exempt under the MEIS/SEIS notifications. The appeals were allowed with consequential relief.

Customs valuation - transaction value of imported goods - Renegotiated sale price after first importer's default - price actually paid for particular import transaction - substitution of the concept of ‘deemed value’ as replaced with the provision of “transaction value”-Difference of opinion among members - matter referred to third member

Assessable value of imported polyester chips where the original consignee neither paid the overseas supplier nor took delivery, and the goods were subsequently sold by the overseas supplier to another importer at a renegotiated price - HELD THAT: - The transaction value concept was dealt with by the Hon’ble Supreme Court in the case of C.C.E. & S.T., Noida Vs. Sanjivani Non-Ferrous Trading Pvt. Ltd [2018 (12) TMI 738 - SUPREME COURT] while upholding the order of the Tribunal, [2017 (3) TMI 359 - CESTAT ALLAHABAD] the Hon’ble Supreme Court has held that the assessable value has to be arrived at on the basis of the price of the imported goods, which was actually paid and mentioned in the bill of entry; and such value can be rejected by the assessing authority on an subjective analysis that the price paid was not the sole consideration of the transaction value.

The majority held that the amended Section 14 requires acceptance of the price actually paid or payable in the particular transaction where the buyer and seller are unrelated and the price is the sole consideration. The initial contract did not culminate in sale or delivery, since the original consignee neither honoured the letter of credit nor filed a bill of entry. The subsequent buyer paid the overseas supplier, obtained title and delivery, and there was no allegation of relationship between them, additional consideration, or payment beyond the declared price. The earlier deemed-value decisions relied upon by the dissent concerned the pre-amendment valuation regime and could not displace the transaction-value concept applicable to the dispute.

As in the case in hand, since all the parameters laid down in the amended Section 14 of the Act of 1962 had been complied with by the respondent, as discussed in the preceding paragraph, the price actually paid to the overseas supplier for the imported goods should be considered as transaction value. In other words, no interpretation can be placed to upset the declared value as the price paid by the respondent to the overseas supplier is the sole consideration for the sale of the disputed imported goods.

We are in agreement with the learned Member (Judicial) that the value declared in the bill of entry by the respondent should form the transaction value and accordingly, the appeal filed by Revenue is liable to be dismissed. [Paras 26, 27, 28, 29, 30]

The renegotiated price declared by the subsequent importer was accepted as the transaction value, and the Revenue appeal was dismissed by majority.

Final Conclusion: By majority, the declared price paid by the subsequent importer to the overseas supplier was sustained as the transaction value. The Revenue appeal was dismissed.

Related-party customs valuation - Deductive valuation method - Admissibility of post-importation deductions - MRP-based additional customs duty assessment - Interest and penalty on additional customs duties

Related-party customs valuation - Rejection of declared transaction value - Deductive valuation method - Acceptance of the declared value of IT products imported from related overseas HP entities under the ROVAC pricing policy and the method for redetermining value after its rejection - HELD THAT: - The declared value was not acceptable merely because the importer's ROVAC policy enabled recovery of its costs and an arm's length return. Under the interpretative notes, the relevant examination in a related-party sale concerns the seller's costs and profit, not the importer's selling costs and profit. The undisclosed funding discounts, reflected in Level A invoices but not in the customs invoices, their substantial range, and their inclusion of inadmissible elements furnished reasonable grounds to doubt the declared value. After rejection, valuation had to proceed under the deductive method, applied flexibly through the residual method, with CLCP taken as the deemed resale price in the absence of actual contemporaneous resale-price data.

Consequent to rejection of the declared transaction value, under Rule 10A/12 of CVR,1988/2007, as per clause(i) of Explanation to the said Rule, which only provides for the mechanism and procedure for rejection of declared value, and does not provide for the procedure or the method of valuation, the value shall be determined by proceeding sequentially in accordance with Rules 5 to 8 of CVR,1988 or Rules 4 to 9 of CVR,2007. This principle has been also laid by the Hon’ble Supreme Court in the context of of CVR,1988 in Eicher Tractor case [2000 (11) TMI 139 - SUPREME COURT]

The nerve chord of the dispute revolves around the ‘Funding Discount’ which has been deducted from the CLCP, in arriving at the net price declared in the invoices(Athena) submitted to customs.

In the present case since the actual price of the imported goods or identical goods or similar goods sold at or about the same time of importation or within ninety days from the date of importation are not available, the local List Price(LP) converted into dollar (CLCP) has to be considered as the deemed sale price at which the goods are sold; the starting point for determination of the deductive value under Rule 7 read with rule 8/9, that is, the price at which imported goods are deemed to be sold at or about the same time of importation but not later than ninety days from the date of importation.

Appellant’s objection to adopt the said List Price for the purpose of determining the deductive value does not merit consideration as the burden of submission of the said data rests on them. Also, the Appellant has never submitted the Reference price(RP), though available for each product, to justify their stance that the related transaction value is not influenced by relation, and further in absence of import of identical or similar goods; thus the only option available is to consider the List price as the deemed sale price for the purpose of determination of assessable value. [Paras 62, 66, 67, 68, 79]

Rejection of the declared transaction value was upheld; assessable value is to be redetermined by applying the principles of Rule 7 read with the residual valuation provisions.

Admissibility of trade discounts - Warranty charges - Post-importation expenses - Deductibility of funding-discount components, including trade discounts, warranty expenses, customs duties, customs brokerage and fees, in determining deductive value - HELD THAT:- Only discounts that are normal, capable of being known at the time and place of importation, and uniformly available at the relevant commercial level could be deducted from CLCP. Discounts granted later on account of special negotiations, price protection, end-of-life arrangements, cooperative marketing and influencer fees were not deductible.

Warranty was an attribute of the imported product, included in the reference price and local currency price under the importer's own policies; its cost could not therefore be treated as a post-importation selling expense. Customs duty, customs brokerage and fees were deductible post-importation expenses and, once accepted as general expenses, had also to be included in the VAC base for computation of ROVAC. [Paras 85, 89, 90, 105, 107]

Inadmissible discounts and warranty charges are excluded from deductions, while customs duty, customs brokerage and fees remain deductible and must be considered for ROVAC computation.

International freight and insurance - Deductive valuation - Addition of international freight and insurance to value redetermined under the deductive method - HELD THAT: - Once the assessable value was determined by adopting deductive-value principles and CLCP was treated as the fully delivered price in India, international freight and insurance already formed part of that price. Rule 10(2), governing additions to transaction value, could not be invoked to make a further addition to value determined under the deductive method. [Paras 111]

The addition of international freight and insurance under Rule 10(2) was set aside.

Valuation of warranty replacement printers - SRFR products - Valuation of stripped-down SRFR printer units imported for warranty replacement - HELD THAT: - The restriction of deductions to a standard discount for SRFR units was unjustified. The discounts held admissible for regular printers were equally admissible for SRFR products, in addition to the SRFR discount allowed for missing parts and accessories. [Paras 113]

Additional admissible discounts were directed to be allowed for SRFR products besides the SRFR discount.

MRP-based additional customs duty assessment - Declared maximum retail price - Whether CLCP could be substituted for the MRP declared on imported IT products for MRP-based assessment of additional customs duty? - HELD THAT: - CLCP was an internal trade-price mechanism used as a deemed first-commercial-level sale price for deductive valuation; it was not a retail sale price statutorily required to be declared on packages for ultimate consumers. It could not therefore be equated with MRP. The limited initial errors in MRP declarations and relabelling activity were reasonably explained and did not establish intentional alteration of MRP to reduce duty. [Paras 117, 118]

The differential duty based on the difference between CLCP and declared MRP was held unsustainable.

Special additional duty exemption - Strict construction of exemption notification - Availability of exemption from special additional duty under Notification No. 89/1982-Cus. upon payment of countervailing duty - HELD THAT: - The notification was issued when special additional duty had not been introduced and could not be construed as extending to that later levy. An exemption notification must be strictly construed, and any ambiguity operates in favour of Revenue. [Paras 120]

The claimed exemption from special additional duty was denied.

Extended limitation for undervaluation - Suppression of material facts - Invocation of the extended period for undervaluation arising from undisclosed funding discounts and dual invoicing - HELD THAT: - The earlier SVB and Tribunal proceedings did not disclose the Level A and Level B invoices, the rebilling arrangement, the funding discounts, or their composition. As the material pricing pattern and deductions had not been truly and fully disclosed, the earlier decision did not preclude the present proceedings and the allegation of suppression and misdeclaration was established. [Paras 121]

Invocation of the extended period was sustained.

Interest and penalty on countervailing duty and special additional duty - Penalty for customs undervaluation - Personal penalty on employees - Levy of interest, confiscation and penalties in relation to differential basic customs duty, countervailing duty and special additional duty, and penalties on employees - HELD THAT: - Following Mahindra & Mahindra Limited Vs. UOI [2022 (10) TMI 1004 - CESTAT NEW DELHI] the statutory incorporation applicable during the relevant period did not authorise interest or penalty on the CVD and SAD components. Interest and equivalent penalty remained leviable on the BCD component because suppression was established. Penalty under Section 114AA and confiscation were not sustainable. Employees implementing a headquarters-level pricing policy without personal benefit or individual suppression could not be penalised. [Paras 124, 125]

Interest and equivalent penalty were confined to BCD; penalties relating to CVD/SAD, penalty under Section 114AA, confiscation, and penalties on employees were set aside.

Final Conclusion: The declared related-party transaction value was rejected, and the matter was directed to be recomputed under deductive-value principles subject to the deductions and exclusions determined. The demand survives only to the extent consequentially redetermined; interest and equivalent penalty are confined to BCD, while the specified penalties, confiscation and MRP-based differential demand were set aside. Revenue's appeal was remanded only for verification of the quantum of customs-duty deduction.

Restoration of corporate debtor's assets depleted during moratorium - Adjudicating Authority's residuary jurisdiction in CIRP - Infructuous penal reference under omitted statutory provision

Restoration of corporate debtor's assets depleted during moratorium - Adjudicating Authority's residuary jurisdiction in CIRP - Restoration of funds dealt with by the suspended management during the CIRP moratorium, notwithstanding that the application also invoked fraudulent and wrongful trading provisions. - HELD THAT: - The application was not confined to the provision concerning fraudulent or wrongful trading; it expressly sought restoration of amounts withdrawn during the moratorium. The provisions governing moratorium and transfer of management operate independently of a finding of fraudulent trading. The Adjudicating Authority's jurisdiction must be determined by the nature of the relief sought, and its residuary jurisdiction extends to consequential directions necessary to preserve and restore the insolvency estate. The sale of the corporate debtor's mortgaged property and dealing with its funds during moratorium were in breach of the statutory framework; the explanation that the withdrawals represented authorised payments was unsupported by satisfactory material. Restoration of the funds protected the insolvency estate and was distinct from imposing liability for fraudulent or wrongful trading. [Paras 56, 57, 58, 60, 65]

The direction to restore the amount to the corporate debtor's account was upheld as a valid consequential direction under the moratorium provisions read with the Adjudicating Authority's jurisdiction in relation to CIRP.

Infructuous penal reference under omitted statutory provision - Validity of the direction forwarding the order to the IBBI and the MCA for action under the provision concerning contravention of moratorium. - HELD THAT: - The statutory provision under which the reference was made had been omitted and was no longer part of the statute. Consequently, the directions relating to that provision had become infructuous. [Paras 64]

The direction concerning action under the omitted provision was held infructuous.

Final Conclusion: The appeal was dismissed. The restoration direction for funds dealt with during the moratorium was sustained, while the reference for action under the omitted statutory provision was rendered infructuous.

Jurisdiction to decide CBI closure report - Effect of final Special Court order on investigation or trial

Jurisdiction to decide CBI closure report - The forum competent to take a final decision on a closure report filed by the CBI. - HELD THAT: - The final decision on the CBI's closure report must be taken by the Trial Court. [Paras 4, 5]

The Trial Court was directed to decide the closure report in accordance with law within two months.

Effect of final Special Court order on investigation or trial - Whether a concluded criminal proceeding before the Special Court amounts to impeding investigation or trial. - HELD THAT: - Where the Special Court has passed a final order following conviction, acquittal, or complete discharge of the accused, the matter would not amount to impeding the investigation or trial; the parties remain at liberty to avail the statutory remedy. [Paras 7]

The application was disposed of without interference with the earlier directions.

Final Conclusion: The clarification application was disposed of by directing the Trial Court to decide the CBI closure report. The other applications and petitions were disposed of in accordance with the respective directions, including as infructuous or withdrawn where applicable.

Writ jurisdiction against provisional attachment under PMLA - Alternative statutory remedy - time-bound adjudication of provisional attachment - Manifest lack of jurisdiction Scheduled offence and provisional attachment

Maintainability of the writ petition challenging the provisional attachment on the grounds of absence of a scheduled offence and inclusion of advertising revenue attributable to users outside India - HELD THAT: - Writ jurisdiction despite an efficacious statutory remedy is to be exercised sparingly and only upon a clear demonstration of mala fides, patent arbitrariness or manifest lack of jurisdiction. The provisional attachment referred to FIRs disclosing cheating, a scheduled offence, and the Enforcement Directorate had contemporaneously forwarded information to the jurisdictional police under the statutory disclosure mechanism.

A pre-registered criminal case is not indispensable for provisional attachment, provided the prescribed course for reporting the scheduled offence is followed. The challenge regarding revenue from advertisements targeted outside India concerned quantification of alleged proceeds of crime and disputed facts, not an ex facie jurisdictional defect; it was therefore amenable to the statutory adjudicatory process. [Paras 32, 36, 37, 38, 39]

No manifest lack of jurisdiction was established; the petitioners were relegated to the statutory remedies under the PMLA.

Final Conclusion: The writ petition was dismissed, with all rights and contentions left open for determination in the statutory proceedings under the PMLA.

Alternative remedy and writ jurisdiction - Reasoned quasi-judicial adjudication of works-contract service tax

Alternative remedy and writ jurisdiction - Maintainability of the writ petition against the service-tax adjudication order despite the statutory appellate remedy. - HELD THAT: - Availability of an alternative remedy is a rule of self-imposed restraint and not a bar to jurisdiction. The writ petition could not be rejected solely on that ground where the challenge concerned the basis of assessment, including alleged non-consideration of the works-contract valuation mechanism, the reverse-charge notification and constitutional limitations relevant to the levy. [Paras 15, 16]

The writ petition was held maintainable notwithstanding the available statutory appeal.

Valuation of service component in works contracts - Applicability of reverse-charge mechanism - Duty to record reasons - Validity of the service-tax determination on the gross value of works contracts without adjudicating the assessee's contentions on valuation, transfer of property in goods and applicability of the reverse-charge notification. - HELD THAT: - A works contract comprises transfer of property in goods and rendition of services; service tax is leviable only on the service element determined under the applicable valuation mechanism. The adjudicating authority did not meaningfully address the valuation rules, the service component, or the constitutional principles governing works contracts. Further, as applicability of the reverse-charge notification depended on the assessee's legal status, that foundational issue required a clear factual finding. A quasi-judicial authority must deal with substantial contentions and record reasons; mere reference to submissions does not constitute adjudication. [Paras 17, 18, 19, 20]

The adjudication order was quashed and the matter remanded for fresh, reasoned consideration after affording an adequate opportunity of hearing, without adjudication of tax liability on merits.

Final Conclusion: The writ petition was allowed. The impugned adjudication order was quashed and the matter remanded to the adjudicating authority for fresh consideration in accordance with law.

Service tax exemption for road construction works - Service tax demand based solely on Form 26AS data

Service tax exemption for road construction works - Service tax demand based solely on Form 26AS data - Sustainability of service tax demand on road construction works executed for Public Works Departments, raised solely from Form-26AS data without inquiry into the nature or taxability of the receipts. - HELD THAT: - Road construction work executed during the relevant period was exempt under Serial No. 13(a) of Notification No. 25/2012-ST. The Department raised the demand merely on third-party Form-26AS information, without examining the taxability of the receipts, the applicability of exemption or abatement, or the assessee's records. The burden lay on the Department to establish that the activities were taxable; it could not presume that the entire amount reflected in Form-26AS was liable to service tax. [Paras 9, 10, 11, 12, 13]

The service tax demand was set aside as unsustainable, and the consequential penalties were also set aside.

Final Conclusion: The appeal was allowed. The service tax demand founded solely on Form-26AS data in respect of exempt road construction works, along with the related penalties, was set aside.

Sale of packaged information technology software as goods - Service tax exclusion for deemed sales - Late fee for delayed service tax returns

Sale of packaged information technology software as goods - Service tax exclusion for deemed sales - Levy of service tax on sale of canned or packaged information technology software treated as a sale of goods. - HELD THAT: - Information technology software, once copied and marketed on a medium, possesses the attributes of goods; its sale is consequently a deemed sale excluded from the definition of service. Failure to establish the conditions of Notification No. 11/2016-ST could not convert a transaction constituting sale of such software into a taxable service. [Paras 7, 8]

The service tax demand attributable to the sale of packaged software, with consequential interest and penalty, was set aside.

Late fee for delayed service tax returns - Late fee for failure to file periodic service tax returns for three quarters after registration. - HELD THAT: - The Tribunal endorsed the appellate finding confirming late fee for non-filing of the prescribed periodic returns. [Paras 8]

The late fee was sustained.

Final Conclusion: The appeal was partly allowed by deleting the service tax demand on sale of packaged software and the consequential interest and penalty. The late fee for delayed filing of service tax returns was maintained.

Extended period of limitation for service tax demand - Pre-show cause notice consultation - Penalty for delayed filing of statutory returns

Extended period of limitation for service tax demand - Suppression of facts with intent to evade tax - Invocation of the extended period for service tax demand based solely on differences between Form 26AS and ST-3 Returns - HELD THAT: - The extended period under the proviso to Section 73(1) could not be invoked merely upon comparison of statutory records available to the Revenue. Fraud, collusion, wilful misstatement, suppression or contravention with intent to evade tax are jurisdictional facts requiring affirmative proof; they cannot be presumed from unreconciled differences in Form 26AS and ST-3 Returns. In the absence of independent investigation or cogent material establishing deliberate concealment, departmental failure to undertake timely scrutiny could not be made good through recourse to the extended period. The demand was also wholly beyond the normal limitation period, and pandemic-related extension could not revive a demand already time-barred before the relevant COVID-19 extensions took effect. [Paras 11, 12, 13, 14, 15]

The service tax demand, consequential interest and penalty under Section 78 were set aside as barred by limitation.

Mandatory pre-show cause notice consultation - Prospective operation of subsequent circular - Validity of service tax proceedings initiated without mandatory pre-show cause notice consultation - HELD THAT: - The applicable Board instructions mandated pre-show cause notice consultation for demands exceeding the prescribed threshold, except in preventive or offence-related matters, and the proceedings did not fall within the exception. Since no consultation was afforded, the initiation was vitiated. The subsequent circular dispensing with consultation in specified suppression-related cases could not retrospectively validate a notice issued contrary to the instructions prevailing when it was issued. [Paras 16, 17]

The absence of mandatory pre-show cause notice consultation independently rendered the notice and consequential proceedings unsustainable.

Penalty for delayed filing of ST-3 Returns - HELD THAT: - Timely filing of returns is an independent statutory procedural obligation. Although delayed returns did not establish fraud, suppression or intent to evade tax for invocation of the extended limitation period, the admitted delay attracted the separate penal consequence prescribed for procedural default. [Paras 18]

The penalty under Section 77 for delayed filing of ST-3 Returns was upheld.

Final Conclusion: The appeal was partly allowed. The service tax demand with interest and penalty under Section 78 was set aside as time-barred and procedurally vitiated, while the penalty for delayed filing of ST-3 Returns under Section 77 was sustained.

Service tax exemption for road repair and maintenance services - Failure to examine material evidence supporting exemption claim

Service tax exemption for road repair and maintenance services - Failure to examine material evidence supporting exemption claim - Entitlement to service tax exemption for construction-related services, including repair and maintenance of roads, claimed on the basis of certificates and documents issued by service recipients. - HELD THAT: - The authorities had rejected the exemption claim principally for want of financial records and had not examined the nature of the services disclosed in the certificates and documents produced by the appellant. As those documents related to repair and maintenance of roads and went to the root of the claimed exemption, the availability of exemption required re-examination. The Tribunal did not examine limitation. [Paras 4]

The demand and connected consequences were remanded to the Original Authority for de novo consideration on merits after observing principles of natural justice.

Final Conclusion: The appeal was allowed by remanding the matter for fresh adjudication of the exemption claim on the basis of the material produced. The limitation issue was left unexamined.

Extended period of limitation for service tax on mining royalty - Taxability of pre-1 April 2016 mining-right assignment - Point of taxation

Extended limitation for service tax on mining royalty - Suppression of facts with intent to evade tax - Invocation of the extended limitation period for service tax on royalty paid for assignment of mining rights under reverse charge - HELD THAT: - The taxability of royalty for assignment of the right to use natural resources was a contentious and interpretational issue marked by conflicting views. The transactions were disclosed in statutory VAT returns and the demand was founded on the appellant's own records. A bona fide belief that service tax was not payable could not constitute suppression, fraud, wilful misstatement or intent to evade tax; consequently, the extended period was unavailable.

This issue is no longer res integra and stands squarely settled by this Tribunal in M/s. Srinath Builders & Housing Company Pvt. Ltd [2026 (7) TMI 455 - CESTAT KOLKATA] wherein, on identical facts, the demand of Service tax on Royalty under reverse charge was set aside on the ground of limitation, this Tribunal holding that the issue was interpretational and that there was no proof of suppression or intent to evade. [Paras 6]

The entire demand, being beyond the normal limitation period, was set aside as time-barred.

Taxability of pre-1 April 2016 mining-right assignment - Point of taxation cannot enlarge the charging provision - Service tax liability on royalty paid after 1 April 2016 where the mining right had been allotted before that date - HELD THAT: - Taxability depended upon the date when the right to use natural resources was assigned or agreed to be assigned, not upon the later execution of the formal lease deed or subsequent payment of royalty. The allotment had crystallised the assignment before 1 April 2016, when the grant remained in the negative list. The Point of Taxation Rules could not enlarge the charge or render taxable a service that was not taxable when provided or agreed to be provided. See M/S. S.R. TRADERS [2023 (9) TMI 81 - SC ORDER], M/S. THE MADHYA PRADESH STATE MINING, CORPORATION LIMITED [2023 (4) TMI 1075 - CESTAT NEW DELHI], M/S. NATIONAL ALUMINIUM COMPANY LIMITED [2024 (5) TMI 621 - CESTAT KOLKATA], M/S TIRUPATI BUILD-CON PRIVATE LIMITED [2025 (8) TMI 408 - CESTAT NEW DELHI] and CESC LTD.[2025 (7) TMI 928 - CESTAT KOLKATA]. [Paras 7]

The service tax demand was unsustainable on merits; the consequential interest and penalties were also set aside.

Final Conclusion: The appeal was allowed. The service tax demand on royalty, along with consequential interest and penalties, was set aside both as barred by limitation and as unsustainable on merits.

Service tax exemption for public road construction and maintenance services - Sale of goods outside service tax levy - Extended limitation for service tax demand

Eligibility of construction and maintenance of public roads for exemption, and taxability of receipts representing sale of soil -HELD THAT: - The documents produced with the appeal established that the receipts for 2017-18 from the municipal authority and the Public Works Department related to construction and maintenance of roads, being services of the same exempt category for which exemption had already been allowed on other receipts. The remaining receipt for 2016-17 was supported by a certificate and ledger account showing supply of soil and therefore represented sale of goods, which could not be subjected to service tax. [Paras 4]

The disputed service tax demand was set aside.

Extended limitation in service tax matters - Bona fide belief regarding taxability - Invocation of the extended period for service tax demand where the appellant entertained a bona fide belief that the services were exempt or not taxable - HELD THAT: - As the appellant established that the services were exempt or not liable to service tax, the belief that service tax registration and payment were not required was bona fide. The extended period under the proviso to section 73(1) of the Finance Act, 1994 could consequently not be invoked. [Paras 4]

The demand was held barred by limitation; consequential interest and penalties were also set aside.

Final Conclusion: The appeal was allowed. The service tax demand, along with consequential interest and penalties, was set aside.

Manufacture-transformation into distinct marketable commodity - Deemed manufacture-conversion of incomplete article into complete article

Manufacture-kitting of photocopier modules - Distinct name, character or use test - Kitting imported photocopier modules by unpacking, plugging and pinning them into customer-specific sets did not amount to manufacture under the Central Excise Act. - HELD THAT: - Manufacture requires transformation resulting in a new article having a distinct name, character and use, ordinarily recognised and marketable as a separate commodity; labour, skill, expense or value addition alone is insufficient. The Tribunal's factual findings that the components were cleared in their original packing, that no physical assembly occurred at the warehouse, and that the relevant fittings had been made abroad were supported by the record and were not perverse. The Revenue failed to establish that the kitting activity brought a new photocopier into existence. [Paras 14, 15, 17, 20]

The activity did not attract excise duty as manufacture.

Note 6 to Section XVI-conversion of incomplete article - Classification of unassembled goods - Note 6 to Section XVI of the Central Excise Tariff Act was inapplicable to imported photocopier modules classified and assessed as complete machines. - HELD THAT: - The deeming provision requires proof both that the article presented was incomplete or unfinished and that it was converted by the person charged into the complete article. Neither condition was established: the goods were imported and assessed as complete machines and were cleared from the warehouse without any process performed on them. Rule 2(a) of the General Rules for Interpretation is only a classification rule and does not determine whether a subsequent process amounts to manufacture. [Paras 18]

The Revenue could not invoke Note 6 to sustain the demand.

Final Conclusion: The Revenue's appeals were dismissed. The Tribunal's finding that no manufacture occurred at the assessee's warehouse was upheld, and the excise-duty demand could not be sustained.

Clean Energy Cess on removal of raw coal - Penalty for dealing in confiscable excisable goods

Clean Energy Cess on removal of raw coal - Liability of tea-producing purchasers to pay Clean Energy Cess on coal purchased from a seller - HELD THAT: - Under the Clean Energy Cess Rules, 2010, cess on removal of raw coal is payable only by its producer. The appellants, being purchasers of coal for tea production and not producers of coal, were not liable to pay cess on the coal purchased by them. [Paras 5, 6]

The purchasers were held not liable for payment of cess on the purchased coal.

Penalty for dealing in confiscable excisable goods - Penalty on purchasers for possession of confiscated coal without a finding of knowledge or reason to believe that the coal was liable to confiscation - HELD THAT: - Rule 25 of the Central Excise Rules, 2002 was inapplicable because the appellants were not producers, manufacturers, warehouse registrants, importers or registered dealers of the coal. Penalty under Rule 26 required a definite finding that the purchasers knew or had reason to believe that the coal was liable to confiscation; no such finding had been recorded. In the absence of that essential condition, penalty could not be imposed for release of the confiscated coal. [Paras 7, 8, 9, 10]

The penalty was held unsustainable and the amount paid as penalty was directed to be released to the appellants.

Final Conclusion: The appeals were allowed and the impugned orders were set aside insofar as they fastened penalty liability upon the appellants for release of the confiscated coal.

CENVAT credit on proforma invoice containing statutory particulars - Extended period of limitation - absence of suppression

CENVAT credit on proforma invoice containing statutory particulars - Availability of CENVAT credit of service tax paid on services received for setting up the manufacturing plant, where credit was availed on a proforma invoice followed by regular invoices. - HELD THAT: - The service rendered, payment of service tax by the provider, and reflection of the credit in the ER-1 return were undisputed. The proforma invoice and subsequent regular invoices, read harmoniously, contained the relevant particulars concerning service tax registration, service rendered and tax amount. CENVAT credit could not be denied merely because the initial document was described as a proforma invoice when the substantive particulars and actual payment of tax stood established. [Paras 10, 11, 13]

The denial of CENVAT credit was set aside on merits.

Extended period of limitation - absence of suppression - Invocation of the extended period for recovery of CENVAT credit disclosed in the ER-1 return and subsequently noted in the audit report. - HELD THAT: - The credit had been disclosed in the ER-1 return and the audit report had quantified the alleged contravention. No query by the Range Officials after scrutiny of the return, nor any further investigation or verification explaining the delay in issuance of the notice, was shown. These circumstances did not establish suppression by the appellant so as to justify the extended period. [Paras 14]

The demand was independently set aside as time-barred.

Final Conclusion: The appeal was allowed: the CENVAT credit was held admissible on merits and the demand was also held barred by limitation, with consequential relief in accordance with law.

Compression of natural gas for transportation - Manufacture of compressed natural gas- Non payment of Central excise duty -Penalty on Chairman-CEO - HELD THAT: - Compression amounts to manufacture under Chapter Note 5 to Chapter 27 only when natural gas is compressed for marketing as CNG. Where compression is undertaken merely to facilitate transportation and the gas is decompressed at the customers' premises before sale as natural gas, the activity does not amount to manufacture.

The earlier decision concerning the appellant [2017 (9) TMI 413 - CESTAT KOLKATA], and the decision in the Essar Oil and Gas Exploration and Production Limited case [2024 (6) TMI 1010 - CESTAT KOLKATA] were held that the activity of compression taken up by the appellant for transportation does not amount to manufacture in terms of Section 2(f) of the CEA 1944, thus squarely applicable; consequently, the demand failed on merits and the penalty on the Chairman-CEO could not survive. [Paras 12, 13]

The excise duty demand, interest and penalties on the company, as well as the penalty on the Chairman-CEO, were set aside.

Final Conclusion: The appeals were allowed. Compression of natural gas solely for transportation, followed by its decompression and sale as natural gas, was held not to constitute manufacture of CNG.

Maintainability of writ petition in contractual money claims - Arbitration clause as remedy for contractual disputes - scope of private law and a public law remedy under Article 226 of the Constitution of India

Maintainability of a writ petition seeking payment of the differential tax component withheld under a works contract containing an arbitration clause - HELD THAT: - The dispute concerning deduction of the differential tax component arose from the contractual relationship and was a private-law money claim. A public-law remedy under Article 226 was unavailable for such contractual claim, particularly when the contractor had already invoked the agreed arbitral mechanism. The Court did not adjudicate the entitlement to the differential tax component, leaving it for determination in arbitration. [Paras 6, 7, 8]

The writ appeal was allowed and the writ court's order was set aside; the claim may be pursued in the pending arbitration proceedings.

Final Conclusion: The contractual claim for the differential tax component was held not amenable to writ jurisdiction. Its merits and entitlement were left to the arbitrator.

Transfer of right to use Electronic Data Capture Terminals - Separate rental charges for Electronic Data Capture Terminal machines - Deemed sale of goods - Service tax and VAT on distinct taxable components

Transfer of right to use Electronic Data Capture Terminals - Deemed sale of goods - Whether Rental charges for Electronic Data Capture Terminals installed at merchant establishments constituted consideration for transfer of the right to use identified goods? - HELD THAT: - Co-ordinate Bench of this Court in M/s. Atria Convergence Technologies Ltd’s [2025 (2) TMI 883 - KARNATAKA HIGH COURT] considering legal issue considered therein with regard to the scope of Section 2(29)(d) of the KVAT Act namely, whether retention of ownership and contractual obligations relating to maintenance or service would by themselves negate a transfer of the right to use goods, is relevant for consideration in the present case. The Co-ordinate Bench of this Court held that the determination of such issue depends upon the nature of the transaction, the terms of the agreement and the rights conferred upon the user. Mere retention of ownership by the supplier, by itself, would not be conclusive in determining whether there is a transfer of the right to use goods.

The relevant inquiry is whether the user was conferred the right to use identified goods for the agreed purpose, rather than whether title, maintenance obligations, supervisory powers or a right of repossession remained with the supplier. The terminals were tangible and identifiable equipment installed at merchant premises, separately rented and made available for merchants' operational use in accepting customer payments. Contractual restrictions protecting the Bank's ownership and its power to suspend or deactivate the terminals did not negate the right of use conferred during the agreement. [Paras 43, 44, 45, 64, 65]

The terminal rentals were liable to VAT as deemed-sale consideration under the KVAT Act.

Service tax and VAT on distinct taxable components - Payment of service tax on the consideration received from merchant establishments did not preclude VAT on the rental component attributable to transfer of the right to use Electronic Data Capture Terminals - HELD THAT: - A composite transaction may contain distinct service and sale elements taxable under separate statutes, provided the respective taxing fields and statutory requirements are satisfied. Service-tax payment on the service component does not exclude the State's power to tax the discernible deemed-sale component; the authorities had taxed only the terminal-rental charges and not the entire banking service. [Paras 47, 48, 49]

The objection founded on payment of service tax was rejected.

Penalty for non-disclosure of taxable terminal rentals - Statutory interest on VAT liability - Penalty and interest arising from non-disclosure of taxable Electronic Data Capture Terminal rentals were liable to be sustained - HELD THAT: - The concurrent findings established that separate terminal rentals had not been disclosed as taxable turnover. In the absence of perversity in those findings, no interference with the statutory penalty was warranted in revisional jurisdiction; interest followed consequentially from the tax liability. [Paras 57, 58, 59]

The levy of penalty and consequential interest was affirmed.

Final Conclusion: The revision petition was dismissed and the concurrent determination that terminal rentals represented taxable consideration for transfer of the right to use goods was affirmed. The substantial questions of law were answered in favour of the Revenue.

Binding effect of advance rulings - VAT composition on transfer of property in goods in works contracts - Taxability of advance consideration before registration of sale deed - expression “received or receivable” under Section 4(7)(d) of the APVAT Act

Whether VAT under the composition scheme could be levied on advance amounts received from prospective buyers before execution and registration of the sale deeds, despite a binding advance ruling? - HELD THAT: - We are of the considered opinion that the Advance Ruling dated 30.07.2006 issued under Section 67(4) of the APVAT Act which explicitly clarified that VAT liability arises only at the time of execution and registration of the sale deed, and not on advance amounts received during the construction phase has a binding precedence. Section 67(4) of the APVAT Act mandates that advance rulings are binding on all authorities of the Commercial Tax Department, The respondent No. 2 being a subordinate authority had no jurisdiction to deviate from or override this binding ruling. The respondent No. 2 therefore has completely disregarded this binding precedence.

An advance ruling issued under the statutory provision was binding upon all Commercial Tax Department authorities, and the assessing authority had no jurisdiction to depart from it. The ruling fixed the incidence of VAT at execution and registration of the sale deed, not at the stage of receipt of advances during construction. Applying Omega Shelters (P) Limited [2015 (7) TMI 230 - ANDHRA PRADESH HIGH COURT] the Court held that composition tax is computed on the entire consideration stipulated in the initial agreement, including consideration receivable for completion of construction, but becomes payable in the month in which the sale is concluded and registered. [Paras 16, 17, 19]

The assessment levying VAT on pre-registration advances was held contrary to the binding advance ruling and the governing composition provisions, and was quashed.

Final Conclusion: The writ petition was allowed and the assessment order was quashed as it impermissibly levied VAT on advances received before execution and registration of sale deeds in disregard of the binding advance ruling.

Penalty for incomplete transit declaration Form 38

Penalty for incomplete transit declaration Form 38 - Imposition of penalty for leaving columns 7 and 8 of Form 38 blank during transit of goods. - HELD THAT: - The issue stood settled by the earlier judgments of the Court relied upon by the revisionist. Mere non-filling of the specified columns in Form 38 could not warrant an adverse inference against the revisionist. [Paras 8]

The penalty order was quashed and the question of law was answered in favour of the revisionist.

Final Conclusion: The revision was allowed, the penalty was set aside, and any amount deposited was directed to be refunded.

Vicarious liability for dishonour of company cheque - Mandatory arraignment of company - Section 319 CrPC - curing fatal defect in complaint - vicarious liability of authorised signatory

Maintainability of prosecution against the authorised signatory for dishonour of a cheque drawn on the company's account, where the company was not arraigned as an accused, and the permissibility of subsequently impleading it under Section 319 CrPC - HELD THAT: - Where the cheque is drawn on an account maintained by the company, the company is the person that commits the offence under Section 138 of the Negotiable Instruments Act. Its arraignment is an express condition precedent for fastening vicarious liability upon persons responsible for its business. A complaint omitting the company therefore suffers from a fatal defect and cannot validly found cognizance.

The power under Section 319 CrPC cannot be employed to cure that foundational defect by initiating prosecution against the company beyond the statutory period; a fresh complaint may be instituted only subject to limitation, with delayed cognizance depending upon sufficient cause.

In N. Harihara Krishnan v. J. Thomas [2017 (9) TMI 1 - SUPREME COURT] somewhat similar issue had arisen for consideration before this Court. It was held that power under Section 319 of CrPC should not be used as a device to initiate prosecution against the company beyond the period of limitation stipulated under the Act. We respectfully agree with the aforesaid view of this Court. Besides, in our view, where the complaint suffers from so fundamental a defect that no cognizance can be taken thereupon, the Court cannot proceed and take recourse to the provisions of Section 319 to cure that defect.[Paras 11, 13, 14, 15, 16]

The complaint and all consequential proceedings were quashed; the direction to suo motu arraign the company under Section 319 CrPC was held to be beyond jurisdiction. High Court clearly exceeded its jurisdiction by directing the learned Magistrate/ Trial Court to suo moto arraign company as an accused.

Final Conclusion: The appeal was allowed. The complaint against the authorised signatory, instituted without arraigning the company on whose account the cheque was drawn, and all consequential proceedings were quashed.

Multiple FIRs arising from a single criminal conspiracy - Same transaction for joinder of charges and trial

Single FIR for offences arising from criminal conspiracy - Subsequent complaints as statements during investigation - Registration of a single FIR for alleged cheating of multiple investors pursuant to one criminal conspiracy - HELD THAT: - The reference was premature while investigation was ongoing, as it could not then be determined whether the alleged offences formed part of the same transaction. Chargesheets ultimately alleged a criminal conspiracy resulting in multiple acts of cheating. In that context, registration of one FIR and treatment of the remaining complaints as statements u/s 161 CrPC was the correct course; a subsequent FIR is impermissible where the information relates to the same cognizable offence, occurrence or connected transaction. [Paras 21]

The High Court's answer requiring a separate FIR for each complainant was set aside.

Tests of same transaction - Joinder of charges for connected offences - Joinder and trial of multiple alleged cheating offences against different victims as offences forming part of the same transaction - HELD THAT: - Whether acts constitute the same transaction depends upon unity of purpose and design, proximity of time and place, and continuity of action; these tests are not cumulative. Magistrate must determine from the investigation material whether the alleged acts of cheating form one transaction. If they do, the accused may be charged and tried together; if they constitute distinct transactions and offences, separate trials are required, subject to the statutory provision permitting trial of offences of the same kind committed within a year. Complainants treated as witnesses retain the right to file protest petitions against a closure report or proposed discharge. [Paras 19, 20, 22]

The question of consolidated charges and trial was left for the Magistrate's determination on the investigation material.

Final Conclusion: The appeal was allowed and the High Court's answers requiring separate FIRs and final reports for each complainant were set aside. The Magistrate must determine whether the alleged cheating offences form part of the same transaction for purposes of charge and trial.