TaxTMI Updates e-Newsletter
Aug 14,2026

Classification of wind turbine generators as movable goods - Composite supply of wind turbine generators and installation services

HELD THAT:- We find no grounds to interfere with the impugned judgment(s) and order(s) of the High Court [2025 (12) TMI 1888 - ANDHRA PRADESH HIGH COURT]. Hence, the present Special Leave Petitions stand dismissed.

Writ jurisdiction against goods and services tax show cause notice - Jurisdictional validity of proceedings for unpaid tax

Challenge to the show cause notice on the basis that GST had been paid to the supplier of rental services and that the supplier had failed to file, or had inadequately filed, returns - HELD THAT: - Whether the petitioner paid GST to the supplier and whether the supplier duly furnished returns were disputed questions of fact for adjudication by the Proper Officer. The show cause notice was founded on the Proper Officer's opinion regarding the existence of facts warranting proceedings, and disclosed no jurisdictional error. The petitioner could raise its factual and legal contentions, including the judgments relied on, in its reply to the notice. [Paras 5, 6, 7]

The writ petition was not entertained on the merits of the proposed tax demand; the petitioner was permitted to submit a reply to the show cause notice within the time granted.

Final Conclusion: The challenge to the show cause notice was rejected for want of jurisdictional error, leaving factual and legal objections to be determined in the statutory proceedings. The intervening period specified by the Court was directed to be excluded in computing limitation for passing the consequential order, and the interim stay was vacated.

Custody of seized documents, books and things - Prohibition order for goods liable to confiscation - Sealing of premises during GST search

Custody of seized documents, books and things - Custody of documents, books and things seized during GST search cannot be handed back to the person from whose custody they were seized while retaining their seizure - HELD THAT: - Seizure under Section 67(2) requires the seized documents, books and things to remain in the custody of the proper or authorised officer for so long as necessary for examination, inquiry or proceedings. Their return is governed by the statutory scheme, including the requirement of return of material not relied upon after issue of notice. Handing custody back to the petitioner after seizure indicated that their continued retention was not considered necessary. [Paras 31, 33, 34]

The respondents were permitted, upon de-sealing the premises, to take custody of any seized documents, books or things still required for examination or proceedings, by issuing a fresh seizure order relating back to the original seizure.

Prohibition order for goods liable to confiscation - whether order of prohibition under the first proviso to Section 67(2) can be issued only in respect of goods liable to confiscation where their seizure is impracticable? - HELD THAT: - The first proviso to Section 67(2), and consequently the prohibition mechanism, applies only to goods liable to confiscation and not to documents, books or things. The office equipment and files covered by the prohibition order were not goods liable to confiscation on the facts of the case. [Paras 32, 35, 41]

The prohibition order concerning the office equipment and files was held unsustainable and was quashed.

Sealing of premises during GST search - Denied access as condition for sealing - power to seal premises under Section 67(4) is confined to facilitating an ongoing search where access to the premises or receptacles is denied, and cannot be used to retain seized material after search is completed - HELD THAT: - Section 67(4) operates in conjunction with the search-and-seizure power under Section 67(2). Its exercise is expressly conditional on denial of access and is available only during the subsistence of search proceedings. As there was no material that access to the premises had been denied, sealing the office after completion of search and seizure to use it as a place for retaining seized material was beyond the statutory power. [Paras 37, 38, 39, 40, 41]

The sealing and continued sealing of the office premises were declared illegal and unauthorised, and the respondents were directed to de-seal the premises and restore possession to the petitioner.

Final Conclusion: The writ petition was disposed of by directing de-sealing and restoration of the office premises, while permitting fresh custody of any seized material still required in accordance with law. The prohibition order was quashed.

Revocation of cancellation of GST registration after compliance with return-filing, tax-payment and late-fee requirements

HELD THAT: - The Court held that, once the pending returns had been filed, taxes paid and late fee deposited, the competent authority was required to consider the request for revocation. Permanent cancellation of registration would impair the petitioner's ability to conduct business; and, since the returns were filed within 15 days of cancellation, the case warranted fresh consideration by the competent authority. [Paras 11, 12, 13]

The appellate order and the order rejecting revocation were set aside, and the matter was remitted to the competent authority for fresh consideration of the revocation application within two months.

Final Conclusion: The writ application was allowed to the extent of setting aside the orders refusing revocation and remitting the revocation application for fresh consideration.

Service of GST notice and order through Common Portal - Limitation for appeal against electronically uploaded adjudication order

Whether uploading a notice or order-in-original under the 'View Additional Notices and Orders' tab on the GST common portal constitutes valid service under Sections 169 and 146 of the Central Goods and Services Tax Act, 2017? - HELD THAT: - The Court followed its earlier decisions Luxmi Traders [2026 (7) TMI 1602 - PUNJAB AND HARYANA HIGH COURT] and The Amar Cooperative LC Society Ltd.[2026 (8) TMI 75 - PUNJAB AND HARYANA HIGH COURT] holding that the Common Portal cannot substitute formal service of a show-cause notice or adjudication order. The retrospective amendment enabling functions under the Central Goods and Services Tax Rules, 2017 to be performed on the portal did not alter that position, since the Rules do not provide for service of a show-cause notice or order through the Common Portal. Where the notice is only uploaded and remains unanswered, resulting in ex parte adjudication, the proceedings must be restored to the notice stage; where an order passed after contest is uploaded alone, the limitation for appeal is not triggered. [Paras 11]

Final Conclusion: Following the binding decisions of the same Court, the petition was disposed of on the footing that mere portal upload of the notice and adjudication order was not valid service.

Non-consideration of reply to show cause notice - Principles of natural justice in GST adjudication

Validity of the ex parte GST adjudication order where the assessee's detailed reply to the show cause cum demand notice was not considered - HELD THAT: - Although the petitioner had filed a detailed representation in response to the show cause cum demand notice, the adjudicating authority passed the ex parte order without considering that reply. Such non-consideration was contrary to the basic tenets of natural justice and rendered the order infirm and perverse. [Paras 15]

The adjudication order was quashed and the matter was remitted for consideration of the reply and fresh reasoned adjudication after an effective opportunity of hearing, without adjudication on the merits.

Final Conclusion: The writ petition was disposed of by setting aside the ex parte adjudication order and directing fresh independent consideration of the petitioner's reply in accordance with law.

Composite assessment order for multiple tax periods - Validity of a composite assessment order under the CGST Act covering more than one tax period - HELD THAT: - The legal and factual position that the impugned assessment order covered multiple tax periods was not disputed. A single composite assessment order for more than one tax period was therefore impermissible. [Paras 5]

The composite assessment order was set aside, with liberty to issue separate orders for each assessment year after affording due opportunity; the intervening period was directed to be excluded for limitation.

Final Conclusion: The writ petition was disposed of by setting aside the composite assessment order and permitting fresh separate assessments for the respective tax periods in accordance with law.

Alternative remedy under the CGST Act - Exceptions to writ jurisdiction - Maintainability of writ petitions challenging Orders-in-Original despite the statutory appellate remedy under the CGST Act - HELD THAT: - The statutory appeal provides an efficacious and comprehensive mechanism enabling examination of facts, law, evidence and the correctness of the adjudication. Allegations concerning non-consideration of replies, adequacy of hearing, service of notices, technical difficulties, prejudice, evidentiary value and authentication of electronic records and handwritten material, sufficiency of corroboration, denial of cross-examination, and voluntariness of payment require examination of the individual adjudication records and appreciation of evidence.

They did not establish a patent lack of jurisdiction or a manifest and common violation of natural justice warranting bypass of the appellate remedy. A petitioner that had already invoked the statutory appeal could not simultaneously pursue writ jurisdiction over the same order absent exceptional circumstances. [Paras 37, 38, 39, 40, 41]

The writ petitions were dismissed, leaving the petitioners to avail the statutory appeal; all merits and evidentiary questions were left open for independent consideration by the appellate authority.

Final Conclusion: The writ petitions were dismissed for failure to establish an exception to the efficacious statutory appellate remedy. The appellate authority may consider any appeal, including a plea for exclusion of the period spent in the writ proceedings, in accordance with law.

Input tax credit denied for delayed filing of returns - statutory entitlement under Section 16(5) retrospectively - returns for the relevant months were filed within the cut-off prescribed by section 16(5) of the CGST Act, notwithstanding failure to seek rectification within the period stipulated by the departmental circular - HELD THAT: - The right to claim input tax credit under section 16(5), being a statutory entitlement introduced retrospectively, could not be denied merely because the petitioner had not filed a rectification application within the stipulated time. The show-cause notice disclosed that the relevant returns had been filed within the time contemplated by section 16(5). [Paras 3, 4, 5]

The order declining input tax credit was quashed and the matter was directed to be reconsidered for grant of credit under section 16(5), subject to the petitioner being otherwise eligible.

Final Conclusion: The writ petition was disposed of by quashing the impugned order and directing reconsideration of the claim for input tax credit in accordance with section 16(5) of the CGST Act.

Release of refund pending departmental appeal - Release of a refund allowed in appeal despite the Revenue's pending appeal before the Appellate Tribunal - HELD THAT: - The refund had been allowed in the petitioner's appeal, whereas the Revenue's further appeal had been presented before the Tribunal without any hearing being fixed. Having regard to the petitioner's status as a manufacturing company and its undertaking to deposit any liability that may ultimately arise if the departmental appeal succeeds, withholding the refund was not warranted. [Paras 3, 4, 5]

The Revenue was directed to release the refund upon the petitioner furnishing the undertaking, within six weeks of furnishing the undertaking and a certified copy of the order.

Final Conclusion: The petition was disposed of with a direction for conditional release of the refund pending adjudication of the Revenue's appeal before the Tribunal.

Service of show-cause notice and order through GST Common Portal - Electronic service of GST adjudication orders

Whether Uploading a show-cause notice or an order-in-original in the 'View Additional Notices and Orders' tab of the GST Common Portal does not by itself amount to proper service under the Central Goods and Services Tax Act, 2017? - HELD THAT: - The Court held that the issue stood concluded by its earlier decisions Luxmi Traders [2026 (7) TMI 1602 - PUNJAB AND HARYANA HIGH COURT] and The Amar Cooperative LC Society Ltd [2026 (8) TMI 75 - PUNJAB AND HARYANA HIGH COURT]

Mere uploading on the Common Portal is insufficient service unless receipt is acknowledged or the assessee responds; the retrospective amendment enabling functions under the GST Rules to be performed through the portal does not enlarge the portal's specified functions into a substitute for formal service of a show-cause notice or order. [Paras 7]

The writ petition was disposed of on the same terms as the earlier decisions governing deficient portal-only service.

Final Conclusion: The writ petition was disposed of in terms of the settled view that portal-only uploading of a show-cause notice or adjudication order does not, without acknowledgment or response, constitute proper service.

Anti-profiteering - failure to pass on an additional input tax credit benefit to the applicant - Transitional VAT credit

HELD THAT: - Section 171(1) requires the benefit of additional input tax credit arising on implementation of GST to be passed on through commensurate reduction in price. The Tribunal accepted the project-specific CA-certified data relied upon in the investigation, since the respondent's statutory records contained consolidated figures for multiple projects and project-wise bifurcation was not feasible. As the ratio of credit availed to purchase value declined in the post-GST period, no additional ITC accrued.

The transitional VAT credit passed to eligible purchasers did not relate to the applicant's transaction, for which the agreement was executed after implementation of GST and no corresponding VAT credit had accrued. [Paras 16, 17, 18, 19]

The DGAP report was accepted and the allegation of profiteering was not established.

Final Conclusion: The proceedings were disposed of after acceptance of the DGAP report, as no additional ITC benefit had accrued for passing on to the applicant.

Maintainability of appeal against rejection of advance ruling application - Appealability of rulings under the advance ruling mechanism

Whether an appeal lies before the Appellate Authority against an order of the Authority for Advance Ruling rejecting an application under the first proviso to Section 98(2) of the CGST Act? - HELD THAT: - Section 100(1) permits an appeal to the Appellate Authority only against an advance ruling pronounced under section 98(4). Since the original authority rejected the application under the first proviso to section 98(2), rather than pronouncing a ruling under section 98(4), its order was not appealable before the Appellate Authority. [Paras 10]

The appeal was held not admissible.

Final Conclusion: The appeal against rejection of the advance ruling application was held to be not maintainable under section 100(1) of the CGST Act.

Supply of uncoated paper, falling under HSN Code 48025590 as specifically intended and used for the manufacture of notebooks and exercise books - exemption from levy of Central Goods and Services Tax under Entry No. 128 of Notification No. 10/2025-Central Tax (Rate) dated 17.09.2025 - exigible to CGST at the rate of 9% (i.e. 18% GST) - Advance ruling jurisdiction over exemption - availment procedures

Eligibility of uncoated paper under Heading 4802 for exemption when intended for manufacture of notebooks and exercise books - Strict construction of exemption notifications - Distinction Between Entry S. No. 128 (Exempt) and Schedule II (18%) of Notification No. 09/2025 -HELD THAT: - The exemption entry creates a use-based distinction within Heading 4802 and covers paper "used for" the specified books; uncoated paper is not exempt merely by its tariff classification. The expression denotes a factual relationship with the specified use, not a future intended use at the stage of supply. In the absence of a statutory deeming provision or prescribed certification procedure, purchaser declarations, purchase orders and contractual stipulations may evidence intention but cannot conclusively establish fulfilment of the end-use condition. An exemption must be strictly construed, and its scope cannot be enlarged by supplying omitted terms or procedures.

Uncoated paper used for exercise books, graph books, laboratory notebooks and notebooks is covered by the exemption, but intended use supported only by purchaser documentation does not conclusively establish entitlement at the time of supply.

Scope of advance ruling jurisdiction - Absence of statutory machinery for end-use verification - Whether the Authority could prescribe or recognise purchaser declarations and related documents as the mechanism for availing the end-use exemption? - HELD THAT: - Neither the Act, the rules, the relevant rate notifications nor any circular prescribes a framework for end-use verification, including certificates, bonds, declarations, post-supply monitoring, consequences of diversion or prescribed records. Recognising purchaser documents as legally sufficient would require the Authority to introduce an administrative compliance mechanism and evidentiary standards absent from the notification. Such an exercise would amount to rewriting or supplementing delegated legislation and falls outside the Authority's jurisdiction to interpret the applicable provisions.

No advance ruling could be issued declaring that purchaser declarations, purchase orders or similar documents by themselves entitle the supplier to the exemption; the procedure or manner of availing it lies outside the scope of an advance ruling.

Ruling:- Entry No. 128 of Notification No. 10/2025-Central Tax (Rate) dated 17.09.2025 exempts uncoated paper and paperboard used for exercise books, graph books, laboratory notebooks and notebooks. However, in view of the observations and findings made above, no advance ruling can be pronounced on the procedure/manner for availing the same, being outside the purview of Section 97(2) of the CGST Act, 2017. The application is answered accordingly.

Classification of compostable polymer bagsand packing materials made from PLA and PBAT - Concessional GST rate for biodegradable bags

Classification of compostable polymer bags - Classification of compostable bags and packing materials made from PLA and PBAT polymer blends as between Chapter 39 and Chapter 48 - HELD THAT: - The test report established that the compostable bags were manufactured from a blend of Poly Lactic Acid and Poly Butylene Adipate Terephthalate. Being articles made of plastic/polymer materials and not paper, they fall within Chapter 39 as articles for the conveyance or packing of goods of other plastics. [Paras 7]

The compostable bags and packing materials are classifiable under heading 3923 2990.

Concessional GST rate for biodegradable bags - Distinct standards for compostable and biodegradable plastics - Applicability of the concessional rate for biodegradable bags to compostable bags certified under the standard applicable to compostable plastics - HELD THAT: - The concessional entry applies only where the goods are biodegradable. Biodegradable plastics are required to conform to IS 17899 T:2022 and hold the requisite CPCB certification, whereas the applicant's bags were certified as compostable under IS/ISO 17088. The standard for biodegradable plastics specifically excludes compostable plastics within the IS/ISO 17088 regime; consequently, certification as compostable bags could not establish eligibility as biodegradable bags. The additional material concerning the press release and polymer composition was therefore inconsequential. [Paras 7]

The supplies are not covered by the entry for paper sacks/bags and biodegradable bags and are not eligible for the concessional 5% GST rate.

Final Conclusion: The compostable bags and packing materials, being made of polymer blends, were classified under heading 3923 2990. Their certification as compostable plastics did not satisfy the distinct requirements applicable to biodegradable bags for the concessional rate.

TCS u/s 206C - compounding fees received from illegal miners/transporters of minerals - Scope of Mines and Minerals (Development and Regulation) Act, 1957/ ‘the MMDR Act’ - offenders who do illegal mining or transportation/storage without having lease or license or have not entered into the contract for transfer of right in Mines or Quarry and from whom Compounding Fine is collected as per provisions under Rule 71(5) of the Chhattisgarh Minor Mineral Rules, 2015 - HELD THAT:-The Special Leave Petitions were dismissed in view of the disposal of the Special Leave Petitions [2026 (1) TMI 1423 - SC ORDER] And [2026 (5) TMI 619 - SC ORDER] challenging the common judgment.

Revision of self-assessment return u/s 264 - Unclaimed tolerance limit in return

Recourse to revision under Section 264 to claim a tolerance limit not claimed in the self-assessment return after expiry of the period for revising that return - HELD THAT: - The assessee's self-assessment return had been processed and the demand arose from that return. The tolerance-limit claim was neither made in the return nor pursued through a revised return within the statutory time. Revision under Section 264 could not be used as a means to revise the return after expiry of that period. [Paras 4, 5]

The High Court's remand was impermissible and was set aside; the assessee was liable to pay tax on the basis of the return on which the intimation and demand had been issued. The consequent reassessment had no effect.

Final Conclusion: Appeal allowed to the extent indicated. The Court left open the question whether the tolerance limit operates retrospectively or prospectively.

Reassessment proceedings founded on erroneous bank information - Limitation for reassessment beyond three years

Validity of reassessment initiation for assessment year 2015-16 on the basis of an erroneously reported term deposit - HELD THAT: - The Bank confirmed, and the Department did not dispute, that the information concerning the term deposit which formed the sole basis of the notice under section 148A(b) was attributable to a technical or system error. A notice beyond the normal three-year period could issue only where the statutory conditions for the extended period were satisfied; the erroneous information could not support such reopening. The notice under section 148A(b) was therefore not an effective basis for reassessment. [Paras 21, 22, 23]

The notice under section 148A(b) and the consequential reassessment, assessment and penalty orders were set aside.

Final Conclusion: The writ petition was allowed, the impugned reassessment-related and consequential orders were set aside, and litigation costs were directed against the Bank for furnishing the erroneous information.

Interim direction restraining processing of income-tax returns filed by sitting judges under the new regime - procedural problem to the respondents is the direction contained in para no. 17 of the order, which mandates that the returns filed by Hon’ble Judges ‘shall not be processed’ - HELD THAT:- The interim direction concerning non-processing of returns filed by Judges was modified to permit identification through intimation by their Private Secretaries; processed demands were kept in abeyance and refunds were withheld subject to the writ petition.

Binding nature of Dispute Resolution Panel directions - Final assessment following objections to draft assessment order

Validity of the final assessment order where timely objections to the draft assessment order had been filed before the Dispute Resolution Panel but were not intimated to the AO - HELD THAT: - The statutory scheme requires that, where an eligible assessee files objections to the draft assessment order, the Assessing Officer must complete the assessment in conformity with the directions of the Dispute Resolution Panel, which are binding.

The assessee's failure to intimate the Assessing Officer of the objections was a bona fide lapse causing it no gain and could not prejudice it. Transfer-pricing order forming the sole basis of the final assessment had been revised pursuant to the Dispute Resolution Panel's directions; consequently, sustaining the assessment based on the superseded order would be untenable.

The impugned final assessment order passed under Sections 143(3) read with Sections 144C(3) and 144B of the Act; notice of demand issued under Section 156 of the Act and the notice initiating penalty proceedings, issued under Section 274 read with Section 270A of the Act, all are set aside. The matter is restored at the stage of Section 144C(13) of the Act. See Pepsico India Holdings Pvt. Ltd. [2023 (12) TMI 226 - DELHI HIGH COURT] and Open Silicon Research Pvt. Ltd. [2023 (8) TMI 825 - KARNATAKA HIGH COURT][Paras 10, 11, 12, 13, 16]

The final assessment order, consequential demand notice and penalty-initiation notice were set aside, and the matter was restored for a fresh final assessment in conformity with the Dispute Resolution Panel's directions and the revised transfer-pricing order.

Final Conclusion: The petition was allowed. The assessment and consequential notices were set aside, with a direction to complete the assessment afresh in accordance with the Dispute Resolution Panel's directions and the revised transfer-pricing order.

Limitation for search-based reassessment notice - Computation of ten-year period under search assessment provisions

Validity of reassessment notice for Assessment Year 2015-16 issued following a search conducted on 09.05.2024 - HELD THAT: - For a search conducted within the period specified in section 152(3), the pre-amendment provisions of sections 147 to 151 governed the reassessment. Where the notice emanates from search proceedings, the first proviso to section 149(1) attracts the limitation framework of sections 153A and 153C. The statute prescribes distinct methods for computing six assessment years and ten assessment years: the ten-year period is to be reckoned from the end of the assessment year relevant to the previous year in which the search was conducted, and includes the search assessment year as its first year. On that computation, Assessment Year 2015-16 fell beyond the permissible ten-year period. [Paras 8, 9]

The notice under section 148 was without jurisdiction as it travelled beyond the ten-year limitation period and was quashed.

Final Conclusion: The writ petition was allowed and the reassessment notice for Assessment Year 2015-16 was quashed as barred by the applicable ten-year limitation.

Jurisdiction of Jurisdictional Assessing Officer to issue reassessment notice under faceless assessment regime - Algorithm-based random allocation for reassessment proceedings

Validity of reassessment proceedings initiated by the Jurisdictional Assessing Officer, followed by a final order under the faceless regime. - HELD THAT: - Following Sharda Devi Chhajer & Anr. [2025 (3) TMI 1229 - RAJASTHAN HIGH COURT] and Jasjit Singh [2024 (8) TMI 228 - PUNJAB AND HARYANA HIGH COURT] the Court held that reassessment proceedings could not have been initiated by the Jurisdictional Assessing Officer, and the subsequent passing of the order under the faceless regime could not cure that jurisdictional defect. Since the final order was already under challenge before the Commissioner of Income Tax (Appeals), the Court considered it inappropriate to pass an order that would render the pending statutory appeal redundant. [Paras 7, 8]

The petitioner was directed to place the jurisdictional objection before the Commissioner of Income Tax (Appeals), who was directed to consider it in accordance with the earlier judgments of the Court.

Final Conclusion: The writ petition was disposed of without independently quashing the assessment order, leaving the jurisdictional challenge arising from the reassessment notice issued by the Jurisdictional Assessing Officer to be considered in the pending statutory appeal.

Exemption u/s 11 denied - delayed furnishing of audit report in Form 10B - Form 10B was filed after the prescribed time, though available when the return was processed - HELD THAT: - Where the audit report in Form 10B had been furnished along with the return and was available with the Centralised Processing Centre before processing, delay in furnishing that report could not, by itself, justify denial of exemption. The settled principle is that exemption cannot be denied solely for delayed filing of the audit report when it is available at the stage of assessment or processing. See KINKINI [2026 (1) TMI 70 - ITAT JAIPUR], ASSOCIATION OF INDIAN PANELBOARD MANUFACTURER [2023 (3) TMI 1374 - GUJARAT HIGH COURT] and M/S. RANIWALA JEWELERS PVT. LTD. [2025 (5) TMI 2307 - ITAT JAIPUR] [Paras 4, 5]

The Assessing Officer was directed to allow the claimed exemption under section 11, subject to fulfilment of the other statutory conditions.

Final Conclusion: The appeal was allowed and the claimed exemption under section 11 was directed to be granted, subject to fulfilment of the remaining statutory conditions.

Condonation of delay in BSNL VRS-2019 exemption claims - Exemption of BSNL VRS-2019 ex gratia compensation as retrenchment compensation

Condonation of delay in BSNL VRS-2019 exemption claims - Condonation of delay in filing appeals claiming exemption for compensation received under the BSNL Voluntary Retirement Scheme-2019 - HELD THAT: - In identical cases of BSNL employees, the appellate authority and coordinate Benches had condoned substantial delays after considering the bona fide reasons for the delayed claims. Consistency required that the assessee's appeals also be admitted and decided on merits rather than rejected on limitation. [Paras 10]

The delays were condoned and the appeals were admitted for adjudication on merits.

Exemption of BSNL VRS-2019 ex gratia compensation as retrenchment compensation - Eligibility of ex gratia compensation received by a BSNL employee under the Voluntary Retirement Scheme-2019 for exemption under section 10(10B). - HELD THAT: - Following the consistent view of coordinate Benches on identical facts, like Raghavendra Latha Madhavi & 3 Others [2026 (8) TMI 785 - ITAT HYDERABAD] the compensation received under the BSNL VRS-2019 was held exempt under section 10(10B). The Assessing Officer was required to verify the claim in accordance with that finding and determine the consequential tax payable or refundable and admissible interest. [Paras 12]

The claimed exemption under section 10(10B) was allowed, subject to verification by the Assessing Officer and consequential computation.

Final Conclusion: The appeals were allowed for statistical purposes. The delay was condoned and the assessee's claim for exemption of BSNL VRS-2019 compensation under section 10(10B) was directed to be allowed subject to verification and consequential computation.

Revision of assessment - non-initiation of penalty proceedings u/s 270A by AO in the assessment order framed u/s 147 r.w.s. 144B -Independence of penalty proceedings from assessment proceedings

HELD THAT: - We find an identical issue had come up in the case of CIT (Central), Ludhiana vs. Shri Rakesh Nain Trivedi [2015 (12) TMI 979 - PUNJAB AND HARYANA HIGH COURT] wherein as held that the CIT cannot exercise power u/s 263 where the Assessing Officer failed to initiate penalty proceedings while completing the assessment

Penalty proceedings are independent and separate from assessment proceedings. The omission to initiate such proceedings in the assessment order does not render the assessment order erroneous or prejudicial to the interests of the Revenue so as to permit revision.

Case of Narendra Kumar Agrawal [2025 (6) TMI 2155 - ITAT RAIPUR] as relied upon by DR is distinquished. [Paras 7, 9]

The exercise of revisional jurisdiction was held unjustified, and the revisional order was quashed.

Final Conclusion: The assessee's appeal was allowed and the revisional order was set aside.

Assessment u/s 153A on material seized from director - Mechanical approval u/s 153D - Project Completion Method versus Percentage Completion Method - Double addition on seized loose papers

Assessment under section 153A on material seized from director - Use of loose papers seized from the assessee-company's Director for assessment u/s 153A in the assessee's hands - HELD THAT: - The Director was managing the day-to-day affairs of the company and was searched simultaneously. Material found in his possession could therefore be used in the assessee-company's assessment under section 153A; separate proceedings under section 153A were not required. [Paras 12]

The challenge to the assessments on the ground that proceedings ought to have been initiated under section 153C was rejected.

Mechanical approval u/s 153D - Validity of the consolidated approval under section 153D for the four assessment years - HELD THAT: - The approval, granted before 01.04.2021, was identical to that considered in the group company's case M/s Antriksh Engineers & Builders Pvt. Ltd. [2026 (8) TMI 749 - ITAT DELHI] and did not disclose application of mind to the year-wise issues or material. Following the co-ordinate Bench decision, it was held to be mechanical and without application of mind. [Paras 14, 15]

The section 153D approval was held invalid and the assessment orders for all four assessment years were quashed.

Project Completion Method versus Percentage Completion Method - Consistency in revenue recognition by real estate developer - Addition of income by replacing the consistently followed Project Completion Method with the Percentage Completion Method and estimating income from booking advances - HELD THAT: - For the unabated assessment years, no seized material concerning revenue recognition was identified, and the Assessing Officer had not invoked section 145(3). The assessee had consistently followed the accepted Project Completion Method, while the Percentage Completion Method was applied through an arbitrary estimation without examining project cost, estimated revenue, construction progress, or the relevant booking position. The settled principle of consistency precluded rejection of the established method without cogent basis.

The Hon’ble Supreme Court in the case of CIT v. Excel Industries Ltd. [2013 (10) TMI 324 - SUPREME COURT (LB)] has held that “that principal of consistency should be maintained. Once the Revenue has accepted the turnover, declared in the preceding year as well as in subsequent year, doubting the same in the year under appeal without even invoking the provisions of section 145(3) of the Act, no income could be estimated.”[Paras 16, 17]

The change from the Project Completion Method to the Percentage Completion Method was impermissible, and the additions made on that basis were deleted.

Double addition on seized loose papers - Unaccounted receipts and payments - Additions for alleged unaccounted receipts and payments recorded in seized papers after income based on the same papers had already been offered and accepted - HELD THAT: - The Assessing Officer treated both receipts and payments as income, although the payments were made out of the receipts and only one could form the basis of an addition. Since additional income offered on the basis of the same seized papers had already been accepted, a further addition would result in double addition of the same income. [Paras 18, 19]

The additions for unaccounted receipts and payments were directed to be deleted.

Final Conclusion: The appeals were allowed. The assessments were quashed for want of a valid approval under section 153D, and the additions based on altered revenue recognition and the seized papers were also deleted.

TP Adjustment - comparability - segmental trading results - Binding nature of Dispute Resolution Panel directions - Notional interest on delayed associated-enterprise receivables - Working capital adjustment

Transfer pricing comparability - segmental trading results - Binding nature of Dispute Resolution Panel directions - Inclusion of Nikhil Adhesives Limited and Solvo-chem (India) Private Limited as comparables for benchmarking the purchase of specialty fertilizers from associated enterprises - HELD THAT: - Directions of the Dispute Resolution Panel are binding on the Assessing Officer and, by necessary implication, on the Transfer Pricing Officer while giving effect thereto. Where audited segmental data identifies the trading segment and its segmental margin is used, an entity-level trading-income filter is inapplicable. Nikhil Adhesives Limited could not therefore be excluded on its entity-level trading revenue. Solvo-chem (India) Private Limited was engaged solely in trading during the relevant year, as confirmed by its audited financial statements, and satisfied the trading-income filter. [Paras 9, 10, 11]

The Assessing Officer/Transfer Pricing Officer was directed to include both companies as comparables, recompute the arm's length price, and delete the adjustment if the assessee's margin fell within the permissible range.

Notional interest on delayed associated-enterprise receivables - Working capital adjustment - Separate transfer pricing adjustment for notional interest on delayed receivables from associated enterprises where working capital adjustment had been granted - HELD THAT: - Although delayed receivables may constitute a separate international transaction requiring benchmarking, no separate adjustment is warranted where the working capital adjustment in the benchmarking already subsumes the impact of outstanding associated-enterprise receivables.

The authority relied on McKinsey Knowledge Centre [2018 (8) TMI 592 - DELHI HIGH COURT] by the Revenue was distinguishable, while the jurisdictional High Court ruling in Kusum Health Care [2017 (4) TMI 1254 - DELHI HIGH COURT] cited by the assessee directly governed the case. [Paras 14]

The addition towards notional interest on delayed receivables was directed to be deleted.

Final Conclusion: The appeal was partly allowed. The transfer pricing adjustment on purchase of specialty fertilizers was directed to be recomputed after inclusion of the two comparables, and the addition for notional interest on delayed receivables was deleted.

Receipt of immovable property u/s 56(2)(x) - Substance of property acquisition over delayed registration - Consequential penalty for under-reporting of income

Receipt of immovable property under section 56(2)(x) - Delayed registration of an earlier property transaction - Applicability of section 56(2)(x)(b) to an immovable property transaction where possession, consideration and substantive ownership rights had vested long before the relevant previous year, but the agreement was registered during that year - HELD THAT: - The expression "receives" must be construed with reference to the real nature and timing of the transaction. Where the purchase had been substantively completed, possession delivered, consideration paid and ownership rights effectively vested in the purchaser in an earlier year, subsequent registration of the earlier transaction is only a legal formality and does not amount to a fresh receipt of immovable property. The contemporaneous records, including continuous possession and rental income offered in earlier years, established that no property was acquired afresh during the relevant previous year. The Revenue could not treat registration as synonymous with acquisition or adopt an inconsistent position contrary to its earlier acceptance of rental income from the property.

Our aforesaid conclusion also receives considerable support from the decision of Navketan Premises Pvt. Ltd. [2025 (8) TMI 756 - ITAT MUMBAI] after analysing the provisions of section 2(47)(v) read with section 53A of the Transfer of Property Act, held that once the substantive rights and obligations arising from the transaction had already stood concluded in the earlier year, the subsequent registration of the document was merely a procedural or ministerial formality and could not postpone or shift the incidence of taxation to a later assessment year. The emphasis under the Act is always on the substance and real character of the transaction rather than on the mere completion of procedural formalities. [Paras 14, 16, 17, 18, 19, 20]

Section 56(2)(x)(b) was inapplicable, and deletion of the addition based on the stamp duty valuation as on the date of registration was upheld.

Consequential penalty for under-reporting of income u/s 270A - addition made under section 56(2)(x)(b) - HELD THAT: - The penalty rested exclusively on the quantum addition. Upon affirmation of deletion of that addition, no income remained that could be characterised as under-reported or misreported. A penalty that is purely consequential cannot survive once its sole statutory foundation has ceased to exist; the Revenue's further challenge to the quantum relief could not justify keeping such penalty alive. [Paras 23, 24, 25, 26]

Deletion of the penalty under section 270A was upheld.

Final Conclusion: The Revenue's appeals against deletion of the addition under section 56(2)(x)(b) and the consequential penalty under section 270A were dismissed.

TP Adjustment - Segmental comparability under TNMM for marketing support services - Arm's length interest on foreign currency loans to wholly owned subsidiaries - Working capital adjustment and delayed trade receivables

Segmental comparability under TNMM - Marketing support services commission - Inclusion of the indenting commission segment of Priya International Limited as a comparable for benchmarking commission paid to associated enterprises for marketing and business support services - HELD THAT: - Where reliable segmental information is available, comparability under TNMM turns primarily on functional, asset and risk analysis. The indenting services segment and the associated enterprises were similar low-risk service entities without inventory or credit risk. The comparable could not be excluded merely because the company was predominantly engaged in chemical trading or because the products differed, since TNMM places greater emphasis on functional comparability than product characteristics. [Paras 27, 28, 30]

Priya International Limited's indenting services segment was directed to be included in the final set of comparables, and the arm's length price and consequential transfer-pricing adjustment were directed to be recomputed for both assessment years.

Transfer-pricing adjustment on interest received or receivable on foreign currency loans advanced to wholly owned associated enterprises - LIBOR-based arm's length interest - HELD THAT: - LIBOR is the appropriate benchmark for foreign currency loans. A further risk mark-up is warranted only where differential risk parameters between the lender and the borrowing associated enterprise justify it. As the loans were advanced to wholly owned subsidiaries for business exigencies and their creditworthiness depended upon that of the assessee, no additional risk justified an ad hoc mark-up beyond the contractual LIBOR-plus rates. [Paras 38, 39]

The contractual rates of LIBOR plus 100 or 200 basis points, as applicable under the respective loan agreements, were accepted as arm's length, and the transfer-pricing adjustment was directed to be deleted for both assessment years.

Separate benchmarking of delayed trade receivables - Working capital adjustment - Transfer-pricing adjustment for interest on delayed realization of trade receivables from associated enterprises where the assessee claimed higher operating margins than comparables - HELD THAT: - Trade receivables from associated enterprises constitute an international transaction requiring separate examination; parity in credit terms with non-associated enterprises and aggregation of principal transactions under TNMM do not by themselves preclude benchmarking. However, where the impact of receivables is already reflected through working capital adjustment and the tested party's margin remains higher than that of comparables, a further adjustment for notional interest would distort profitability. The working capital-adjusted margins require verification. [Paras 46, 47, 48, 49, 50]

The matter was remanded to verify the assessee's margins vis-a -vis comparables after working capital adjustment; if the assessee's margin is higher, the adjustment for delayed trade receivables shall be deleted for both assessment years.

Final Conclusion: The assessee's appeals were allowed for statistical purposes: the marketing-support-services comparable was directed to be included, the foreign-currency-loan adjustment was deleted, and the delayed-receivables adjustment was remanded for verification. The Revenue's appeal was dismissed as infructuous.

Benami transaction - provisional attachment of the property - untraceable or fictitious provider of consideration -Proof of source of consideration for immovable property

Confirmation of attachment of land as a benami property where the recorded holder attributed the purchase consideration to loans from persons whose financial capacity and source of funds were not established - HELD THAT: - A transaction falls within Section 2(9)(D) where the person providing consideration is not traceable or is fictitious. The alleged lenders were not shown to possess the financial capacity to advance the claimed loans, and the loan documents lacked supporting material establishing their authenticity. There was no evidence of repayment or interest payment, and the recorded holder also failed to establish the source of the balance consideration and validation fee. The finding that the consideration provider was untraceable or fictitious was therefore sustained. [Paras 23, 24, 25, 28]

The provisional attachment, as confirmed by the Adjudicating Authority, was upheld and the appeal was dismissed.

Final Conclusion: The Tribunal sustained the finding that the land transaction was benami under Section 2(9)(D), as the alleged sources of consideration were not substantiated. The appeal was dismissed.

Prohibition of Benami Property Transactions - provisional attachment of the properties -Scope of third limb of the definition of “benami transaction” given u/s 2(9)(A) - benami transaction in question for the future benefit of the beneficial owner - transaction by brother to his sister and brother-in-law out of love and affection

HELD THAT:- The loan said to have been extended by the beneficial owner to his sister and brother-in-law out of love and affection. The Adjudicating Authority has dealt with the issue by holding that if an element of love and affection was existing, the beneficial owner could have gifted the property instead of transferring the funds to facilitate the benamidars to purchase the property in their names making a case of benami transaction.

In absence of any documentary evidence, it could not have been accepted to be a case of extending loan to benamidars for purchase of property. Thus, the theory of loan propounded by appellants cannot be accepted.

In fact, the funds for purchase of properties were transferred by the beneficial owner. The benamidars purchased the properties from the said funds and were otherwise unable to establish their source of income to justify purchase of the property

No merit in it because the expression “future benefit” under section 2(9)(A) of the Act of 1988 is defined without earmarking to any period. It can happen any time in future without the limitation of period and otherwise the fact on record shows availability of undisclosed and unaccounted funds with the beneficial owner and therefore utilized for the benami transaction for his future benefits.

The third limb of the definition of “benami transaction” need not be satisfied any time in future and not at the time when the property was provisionally attached. In fact, the provisional attachment, under section 24 of the Act of 1988, of the property is caused immediately to avoid alienation or transfer of the property, thus, it is caused at the first instance. Hence, we do not find any substance in the argument in regard to non-satisfaction of third limb of the definition. [Paras 10, 11, 12, 14, 15]

The transactions were held to be benami transactions, and confirmation of the provisional attachment was upheld.

Final Conclusion: The appeals were dismissed and the order confirming provisional attachment of the properties was sustained.

Classification of laser imagers as diagnostic apparatus or accessories - Classification of accessories suitable for use with machines under different tariff headings

Laser imagers as accessories to diagnostic equipment - Residuary classification of accessories under Chapter 90 - Classification of imported laser imagers-whether classifiable as other diagnostic instruments and apparatus under CTH 9018 90 19 or as accessories under residuary CTH 9033 00 00. - HELD THAT: - The laser imager had no independent diagnostic capability and merely printed diagnostic data received from other equipment; it was therefore an accessory, not a diagnostic instrument or apparatus. Under Chapter 90 Note 2(b), an accessory can be classified with machines only where it is suitable for use solely or principally with a particular kind of machine or with machines falling under the same tariff heading. As the laser imagers were compatible with machines falling under both CTH 9018 and CTH 9022, they could not be classified with either group under Rule 2(b), and fell within the residuary Rule 2(c). [Paras 8, 17, 18]

The laser imagers were held classifiable under CTH 9033 00 00, and not under CTH 9018 90 19.

Final Conclusion: The appeal was dismissed. The imported laser imagers, being accessories usable with machines under different tariff headings, were classifiable under residuary CTH 9033 00 00.

Interim protection of revenue in provisional clearance of imports - Balance of convenience in stay of customs appellate order

Interim arrangement for clearance of ongoing and future imports claiming duty benefit under the specified customs exemption notifications during pendency of the appeal - HELD THAT: - The Court held that arguable questions requiring consideration at final hearing had arisen and that the Revenue's concerns regarding protection of duty on ongoing imports could not be disregarded. The balance of convenience required an equitable arrangement safeguarding both parties rather than an unconditional stay of the appellate order.

Thus, without expressing any final opinion on the merits of the Appeal, we direct that, pending the disposal of the present Appeal, the Respondent shall be permitted to clear all ongoing and future consignments on a provisional basis, subject to furnishing a bond for 100% of the differential duty (BCD and IGST along with applicable cess or surcharges) along with a bank guarantee equivalent to 50% of the differential duty (BCD and IGST along with applicable cess or surcharges), where duty benefit is claimed by them under Notification No. 50/2017 (BCD) dated 30th June 2017 and Notification No. 1/2017 (Integrated Tax) dated 28th June 2017.[Paras 7, 8, 9, 10, 11]

Pending disposal of the appeal, ongoing and future consignments may be cleared provisionally upon furnishing a bond for the full differential duty and a bank guarantee for half of that duty; the arrangement remains subject to the appeal's final outcome, with all rights and contentions kept open.

Final Conclusion: The Interim Application was disposed of by prescribing conditional provisional clearance of the relevant imports during pendency of the appeal, without any final expression on the merits.

Request for provisional release of goods under Section 110A of the Customs Act -Prospective operation of exemption notification -

Applicability of the amended exemption notification to imported used digital multifunction print, copying and scanning machines covered by a Bill of Lading issued before the amendment came into force - HELD THAT: - In the absence of an express provision conferring retrospective operation, a statutory notification operates prospectively. Since the Bill of Lading preceded the commencement of the amendment, the amendment could not govern the import or be relied upon to decline consideration of provisional release. The respondents identified no distinguishing feature from the earlier common order concerning provisional release of similar goods. [Paras 5, 6]

The respondents were directed to consider the request for provisional release under Section 110A in accordance with law and, upon compliance with the conditions imposed, to release the goods provisionally; such release remains subject to the result of adjudication proceedings.

Final Conclusion: The writ petition was disposed of by directing consideration and consequential provisional release of the imported goods, subject to conditions and the independent outcome of adjudication proceedings.

Acceptance of examination findings by a Customs Broker - Natural justice in customs examination and assessment - Misdeclaration of imported heavy melting scrap

Customs Broker's authority to bind importer - Natural justice in customs examination - Acceptance by the Customs Broker of the Department's classification and valuation of the imported goods, in the absence of authority from the importer, could not be treated as acceptance by the importer - HELD THAT: - Revenue neither established that the importer had authorised the Customs Broker to represent it for accepting the classification and valuation nor identified any provision under the Customs Broker Licence Regulations conferring such authority. Examination in the Broker's presence could therefore not be equated with examination in the importer's presence or acceptance by the importer, resulting in breach of natural justice. [Paras 4]

The assessment proceedings were held vitiated by violation of the principles of natural justice.

Misdeclaration of imported heavy melting scrap - Classification and valuation based on visual examination - imported heavy melting scrap was not misdeclared in classification or value merely because a portion was treated as secondary and defective non-alloy steel coils on visual examination - HELD THAT: - Although end use is not a criterion for classification, the Department's determination of the quality and quantity of coils was unsupported by specialist opinion, market enquiry or testing. The claim that the material was damaged and incapable of use as such could not be denied; consequently, the Department's assertion regarding the nature of that part of the goods was not acceptable. [Paras 5]

There being no misdeclaration in classification or value, confiscability of the goods and the consequential redemption fine and penalty were unsustainable.

Final Conclusion: The appeal was allowed to the extent of setting aside the redemption fine and penalty, as the assessment was procedurally defective and the alleged misdeclaration was not established.

Penalty for shortage of duty-free jewellery-absence of intentional diversion - Admissibility of untested statements under the Customs Act - Separate penalty on proprietor and proprietorship concern

Penalty for shortage of duty-free jewellery-absence of intentional diversion - Penalty on the proprietorship concern and the person supervising its manufacturing operations for shortage of gold and silver jewellery - HELD THAT: - The shortage was reported by the proprietorship concern itself and the customs stock verification was undertaken on its information. The evidence indicated theft from the unit, while there was no material establishing intentional diversion of the goods with intent to evade customs duty. The differential duty and interest had also been paid, resulting in no loss of revenue. [Paras 9, 10]

The penalties imposed on the proprietorship concern and the person supervising the manufacturing operations were set aside; the differential customs duty and interest were upheld.

Admissibility of untested statements under the Customs Act - Penalty for alleged removal of duty-free jewellery-failure to establish involvement - Penalty on the alleged recipient of the gold and silver jewellery on the basis of statements whose makers did not appear for cross-examination - HELD THAT: - The case against the appellant rested on statements of persons who failed to appear after cross-examination had been permitted. As the statutory requirements for relying upon those statements were not complied with, and the statements lacked corroboration, they could not be relied upon. The police recovery of silver was not matched with the goods found short, and there was no conclusive evidence connecting the appellant with the alleged theft. [Paras 9]

The alleged involvement in the theft was not conclusively established and the penalty was set aside.

Separate penalty on proprietor and proprietorship concern - Separate penalty on the proprietor where penalty had already been imposed on the proprietorship concern - HELD THAT: - A proprietorship concern and its proprietor are one and the same; consequently, where a penalty has been imposed on the proprietorship concern, a separate penalty on the proprietor is not imposable. [Paras 11]

The separate penalty imposed on the proprietor was set aside.

Final Conclusion: The differential customs duty and interest were upheld. All penalties, including the separate penalty on the proprietor, were set aside.

Reasonable belief for customs seizure of inland unmarked gold and jewellery - Burden of proof u/s 123 for alleged foreign-origin goods - Admissibility of investigation statements under Section 138B of the Customs Act - Confiscation of gold and jewellery for unproved importation or smuggling

Reasonable belief for customs seizure of inland unmarked gold and jewellery - Burden of proof under Section 123 for alleged foreign-origin goods - Validity of seizure of inland gold ornaments and diamond jewellery without material establishing their foreign origin, and applicability of the statutory burden of proof - HELD THAT: - The confiscated ornaments and diamond jewellery bore no foreign markings, were seized inland, and were unsupported by forensic, documentary or testimonial material establishing foreign origin or smuggling. A general suspicion that foreign markings might have been erased could not constitute the specific and particularised reasonable belief required before seizure. In the absence of such reasonable belief and prima facie material of foreign origin, the statutory burden under Section 123 could not be invoked; the burden remained upon the Department. [Paras 11, 12]

The seizure was held invalid and Section 123 was held inapplicable; the Department failed to establish that the goods were smuggled.

Admissibility of investigation statements u/s 138B of the Customs Act - Evidentiary value of statements recorded during investigation for sustaining confiscation and penalties - HELD THAT: - Statements recorded during investigation do not automatically become substantive evidence. As the mandatory procedure under Section 138B had not been followed and the statements remained untested and substantially uncorroborated by independent evidence, they could not be accorded decisive evidentiary value or form the sole basis for confiscation and penalties. [Paras 14]

Reliance on the investigation statements by the adjudicating authority was held unsustainable.

Liability of inland-seized gold ornaments, diamond jewellery and alleged sale-proceeds cash to confiscation, and the consequential penalties - HELD THAT: - The undisputed domestic purchase invoices, available on the GST portal, supported procurement from the local market and had not been doubted by the Department. No importation, attempted importation, foreign origin, statutory prohibition or nexus between the cash and sale proceeds of smuggled gold was proved. The jurisdictional preconditions for confiscation under Section 111 were therefore absent. [Paras 13, 15]

The setting aside of confiscation, release of the cash and vacation of penalties was upheld.

Final Conclusion: The Revenue appeals were rejected. The order setting aside confiscation of the gold ornaments and diamond jewellery, releasing the cash and vacating penalties was upheld.

Limitation for customs appeal - Exclusion of time spent before wrong forum - Refund of customs duty paid under protest - Finality of assessment under separate bills of entry

Exclusion of time spent before wrong forum - Limitation for the appeal against assessment of alcohol ethoxylates, initially presented within time before the Commissioner of Customs instead of the Commissioner of Customs (Appeals) - HELD THAT: - The appeal papers had been presented within the stipulated period but remained in the office of an incorrect forum. The period for which they remained there was liable to be excluded in computing limitation; indeed, the receiving office ought either to have transferred the papers to the proper appellate authority or promptly returned them. The appellate authority had not examined the classification dispute on merits. [Paras 13, 14]

The appeal was held to be within time and was remanded to the Commissioner (Appeals) for decision on merits.

Electronic filing of customs appeal - Condonation of marginal delay - Limitation for the appeal against rejection of the refund claim, where the appeal was emailed within the statutory period and its hard copy was received thereafter - HELD THAT: - The appeal had been filed by email within time and dispatched by speed post on the same day. Even on the assumption that the date of physical receipt governed filing, the delay was only five days and lay within the appellate authority's condonable period. Since the appellate authority had also rendered findings on the refund merits, remand was unnecessary. [Paras 18]

The rejection of the appeal as time-barred was held unsustainable.

Refund of customs duty paid under protest - Finality of assessment under separate bills of entry - Refund of excess customs duty paid under protest on finally assessed bills of entry for alcohol ethoxylates declared under CTH 3824, without an appeal against those assessments - HELD THAT: - The bills of entry had been finally assessed in accordance with the importer's declared classification under CTH 3824, while duty had been paid under protest at the rate applicable to CTH 3402 because of apprehended reclassification. The importer was not required to challenge assessments that had been finalized as declared; if Revenue disputed them, it was for Revenue to pursue reclassification. The protest had not been vacated by any appeal or demand proceedings. Each bill of entry constituted a separate assessment, so pending proceedings concerning other bills of entry could not defer refund on the finally assessed bills. Classification was not adjudicated because it was not in dispute in the refund appeal. [Paras 21, 23, 25, 27, 29]

Refund was allowed only in respect of the finally assessed bills of entry on which excess duty had been paid under protest; the provisionally assessed bills were excluded.

Final Conclusion: The first appeal was allowed by remand for merits determination. The second appeal was partly allowed, with refund confined to excess duty paid under protest on finally assessed bills of entry.

Valuation of imported goods on transaction value of identical goods - Misdeclaration of imported brass scrap - Confiscation and penalty for misdeclaration

Enhancement of value of imported brass scrap - Transaction value of identical goods - Sustainability of rejection of the declared value and demand of differential duty on brass scrap and secondary defective brass pipes. - HELD THAT: - The authorities had neither discussed the basis for revising the classification of the pipes nor furnished specific particulars of contemporaneous imports of identical goods for valuation under Rule 5. Visual examination alone could not establish that the goods were other than the declared brass scrap, particularly in view of the contradiction regarding the pipes' length and the absence of a tariff prescription restricting the size or length of brass scrap. [Paras 9, 10]

The enhancement of value and consequential duty demand were held unsustainable.

Confiscation for misdeclaration of imported brass scrap - Penalty for misdeclaration by importer - Liability of the imported brass scrap and pipes to confiscation, redemption fine and penalty on the allegation of misdeclaration. - HELD THAT: - The wide tariff coverage of brass scrap, the contractual specification of brass scrap 'pallu', the absence of a prescribed size limitation, and the contradiction between the departmental visual assessment and the chartered engineer's report precluded a finding of misdeclaration. The department produced no documentary evidence establishing misdeclaration or serviceability of the goods; visual inspection could not prevail over the expert opinion. [Paras 9, 10]

Confiscation, redemption fine and penalty were held unsustainable.

Final Conclusion: The impugned order was set aside and the appeal was allowed. The differential duty demand, confiscation, redemption fine and penalty were held unsustainable.

Penalty for utilisation of forged DEPB licences and Transfer Release Advices - Reduced penalty under Section 114A of the Customs Act

Penalty for utilisation of forged DEPB licences and Transfer Release Advices - Due diligence by importer using transferable duty credit scrips - Penalty under Section 114A for clearance of shock absorber components against forged DEPB licences and Transfer Release Advices - HELD THAT: - The ingredients for invoking the extended limitation under the proviso to Section 28, namely collusion, wilful misstatement or suppression of facts, were held to be coterminous with the statutory triggers for penalty under Section 114A.

In Friends Trading Co. versus Union of India [2011 (2) TMI 382 - PUNJAB & HARYANA HIGH COURT] which stands affirmed by the Hon'ble Supreme Court in Munjal Showa Ltd. [2022 (9) TMI 1076 - SUPREME COURT] it was held that forged DEPB scrips are void ab initio, that duty demand is legally sustainable and that the extended period of limitation is invocable in cases involving fraud.

Since the Supreme Court had upheld the finding of fraud and invocation of the extended period, penalty under Section 114A followed as a mandatory consequence. Presentation of forged TRAs for duty-free clearance was a positive act of misstatement and deception, and the appellant had not established due diligence in verifying the documents with the issuing authorities; the broker also denied having sold the disputed scrips to the appellant. [Paras 7, 8, 9, 10]

The penalty under Section 114A was upheld.

Reduced penalty under Section 114A of the Customs Act - HELD THAT: - The first and second provisos to Section 114A permit reduced penalty where the prescribed proportion of penalty is paid within the stipulated period. The appellant's assertion of compliance was not controverted by the Department. [Paras 11]

The appellant was held eligible for payment of reduced penalty at 25 per cent under Section 114A.

Final Conclusion: The appeal was partly allowed only to extend the statutory benefit of reduced penalty. The penalty under Section 114A for use of forged DEPB licences and TRAs was otherwise sustained.

Fraudulent availment of advance-licence exemption - Extended limitation for duty evasion by fraud - Jurisdiction of DRI officers to issue show-cause notice - Manufacture by segregation and processing of mixed scrap - Simultaneous penalty on partnership firm and active partner

Jurisdiction of DRI officers to issue show-cause notice - Jurisdiction over SEZ duty demand - show-cause notice issued by DRI and its adjudication by the Commissioner of Customs - HELD THAT: - The Tribunal held that the jurisdictional objection stood concluded by the Supreme Court's subsequent decision validating the [2021 (3) TMI 384 - SUPREME COURT] statutory position under section 28(11). The Commissioner exercising jurisdiction over the SEZ was competent to adjudicate the matter, and the DRI-issued notice was not without jurisdiction. [Paras 4]

The challenge to the jurisdiction of the DRI and the Commissioner of Customs was rejected.

Recovery of duty after assessment of bills of entry - Recovery of duty under section 28 despite earlier assessment and clearance of bills of entry allowing exemption - HELD THAT: - Proceedings for recovery of duty not levied or short-levied under section 28 are distinct from the original assessment process. The fact that goods were earlier cleared after assessment did not preclude recovery proceedings where investigation subsequently disclosed facts showing that the claimed exemption was wrongly availed. [Paras 4]

The demand was not invalid merely because the assessments at the time of clearance had not been separately appealed against or set aside.

Fraudulent availment of advance-licence exemption - Extended limitation for duty evasion by fraud - Duty liability for diversion of SEZ goods into DTA - Duty liability on copper and brass scrap cleared from the SEZ unit against advance release orders issued in the names of non-existent buyers and supported by fraudulent advance-licence documentation - HELD THAT: - The evidence established that the stated recipient firms were non-existent at their declared addresses, the goods were not shown to have been received or used for fulfilment of export obligations, and payments were arranged through cash-funded bank instruments in accounts thereafter closed. The advance licences and supporting certificates were found to be cancelled, suspended, forged or fraudulent. The Tribunal held that the appellant had diverted duty-free goods into the DTA under the guise of exempt clearances. Fraud vitiated the claimed exemption; consequently, the subsequent cancellation or suspension of licences did not assist the appellant. The appellant, having claimed the exemption and participated in the fraudulent diversion, remained liable for duty, and the extended period was invocable. [Paras 4]

The customs and central excise duty demands, with interest, were upheld and were held not to be barred by limitation.

Manufacture by segregation and processing of mixed scrap - Whether the segregation and processing of imported mixed metal scrap into distinct copper and brass scrap amounted to manufacture? - HELD THAT: - Following the jurisdictional High Court decision MITESH IMPEX [2014 (4) TMI 484 - GUJARAT HIGH COURT], the Tribunal held that the series of manual and mechanical processes undertaken on imported mixed scrap brought into existence distinct and marketable commodities. The activity therefore amounted to manufacture. [Paras 4]

The contention that the process did not amount to manufacture was rejected.

Penalty for fraudulent duty-free diversion of SEZ goods - Simultaneous penalty on partnership firm and active partner - Sustainability of penalties on the partnership firm and its active partner for fraudulent diversion of duty-free scrap into the DTA - HELD THAT: - The findings supporting invocation of the extended period also established deliberate deception and intent to evade duty, attracting the penal provisions applicable to the firm. Simultaneous penalties on a partnership firm and its partner are permissible where the partner is shown to have actively participated in, or connived at, the contravention. The material established the active partner's role in arranging the purported clearances and diversion of the goods. [Paras 4]

The penalties imposed on the firm and its active partner were upheld.

Final Conclusion: The appeals were dismissed. The duty demands, interest, confiscation consequences and penalties arising from the fraudulent duty-free diversion of copper and brass scrap from the SEZ unit were sustained.

Proof of registration of partnership firm - Limitation for suit on unpaid invoices - Exclusion of time spent in winding-up proceedings

Proof of registration of partnership firm - Additional evidence in appeal - Maintainability of the suit by the respondent partnership firm in the absence of proof of its registration. - HELD THAT: - The memorandum issued by the Registrar of Firms recorded that the relevant documents had been filed, recorded and registered under the Indian Partnership Act, 1932, and disclosed the firm's registration. The certified copy of Form-VIII produced as additional evidence corroborated that memorandum. The additional document was rightly received since it furthered the cause of justice and enabled the Court to pronounce judgment. [Paras 4, 5, 6]

The respondent's registration as a partnership firm stood proved and the suit was properly instituted.

Limitation for suit on unpaid invoices - Winding-up proceedings and civil recovery suit - Acknowledgment of debt and part-payment - Limitation of the money-recovery claim founded on individual unpaid invoices after prior winding-up proceedings. - HELD THAT: - A winding-up proceeding and a suit for recovery of money are separate and independent remedies; prosecution of the former does not extend or suspend limitation for the latter. The suit was founded on specified invoices and not on a running account. The communication relied on neither acknowledged the debt claimed in the suit nor constituted part-payment towards those invoices; it only admitted and paid particular invoices, while disputing the remaining claim. Even the winding-up petition had been instituted after expiry of limitation in respect of the invoices for which security was offered, and the suit was filed after limitation had expired for the remaining unpaid invoices. [Paras 14, 15, 16, 17, 18]

The recovery claim was barred by limitation; the appellate decree granting recovery was reversed and the suit was dismissed.

Final Conclusion: The appeal was allowed. While the respondent firm was held to be validly registered and competent to institute the suit, its invoice-based recovery claim was held barred by limitation and the suit was dismissed.

Insider trading while in possession of unpublished price sensitive information - Rebuttable presumption under the 2015 PIT Regulations - Non-exhaustive defences to insider trading - Disgorgement of loss averted

Insider trading while in possession of unpublished price sensitive information - Rebuttable presumption under the 2015 PIT Regulations - Non-exhaustive defences to insider trading - Liability for sale of company shares while in possession of unpublished price sensitive information under Regulation 4(1) of the 2015 PIT Regulations - HELD THAT: - Once it was undisputed that the respondents possessed UPSI and traded in the company's shares during that period, the note to Regulation 4(1) raised the presumption that the trades were motivated by that information. The purpose for which sale proceeds were used, and the fact that little or no profit was made, were irrelevant. The defences following the word "including" were illustrative and not exhaustive, though any other defence must be of a like nature. The legitimate corporate-purpose approach under the 1992 PIT Regulations could not apply because the 2015 Regulations expressly exclude consideration of the purpose for which transaction proceeds are applied. [Paras 11, 13, 15, 19]

The respondents were held to have committed insider trading, and the appellate order exonerating them was set aside.

Disgorgement of loss averted - Penalty for insider trading - Code of conduct for trading by insiders - Restoration of disgorgement and penalties consequent upon the established insider trading violation - HELD THAT: - The explanation to Section 11B authorises disgorgement equivalent to the wrongful gain made or loss averted through contravention. As the trades had averted losses, restoration of the disgorgement direction was justified. The penalty for breach of the prescribed code of conduct was also sustained; however, the penalty under Section 15G imposed on the principal respondent was found excessive on a cumulative consideration of the circumstances and was reduced to the statutory minimum. [Paras 16, 17, 18]

The disgorgement and code-of-conduct penalty directions were restored, while the Section 15G penalty on the principal respondent was reduced to the minimum prescribed penalty.

Final Conclusion: The appeal was allowed. The finding of insider trading and the consequential disgorgement and penalties were restored, subject to reduction of the Section 15G penalty imposed on the principal respondent.

Limitation for operational-debt insolvency applications

Frustration of EPC contract - Effluxion of time - suspended EPC contract had neither been frustrated nor come to an end by effluxion of time - HELD THAT: - Termination under the contract required an election by either party and was not automatic upon prolonged suspension. Frustration requires an unforeseen supervening impossibility; suspension occasioned by non-performance of contractual obligations was not such an event and could not amount to self-induced frustration. Since the parties had not terminated the contract, its obligations remained unfulfilled and time was not stipulated to be of the essence, the contract continued to subsist. [Paras 46, 47, 89, 90, 91]

The plea that the EPC contract stood frustrated by effluxion of time was rejected.

Operational debt under works contract - Uncrystallised damages - Amounts payable for completed EPC-contract milestones constituted operational debt, whereas suspension, idling and demobilisation claims did not - HELD THAT: - Payments contractually due as consideration for the goods procured and works executed under the EPC contract fell within operational debt. Claims for suspension, idling and demobilisation arose from alleged contractual breach and were damages; such damages could not be treated as operational debt unless assessed and crystallised through adjudication by a competent court. [Paras 52, 53, 54, 92, 93]

The operational-debt character of the claim was upheld only to the extent of payments due under the EPC contract and its payment schedule.

Pre-existing dispute under operational-creditor insolvency proceedings - No pre-existing dispute concerning the operational-debt claim was established - HELD THAT: - A dispute barring an operational-creditor application must be genuine and need not have progressed to suit or arbitration, but must be discernible from the parties' conduct or communications. Although silence alone is not ordinarily conclusive, the corporate debtor's total and consistent silence in response to the legal and statutory demand notices, coupled with its first raising a defence in the insolvency proceedings, showed that no prior dispute existed. [Paras 63, 64, 94, 95, 96]

The absence of a pre-existing dispute did not bar the operational creditor's application.

Date of default for limitation under the IBC - Acknowledgment of liability - Continuing cause of action - The Section 9 application for EPC-contract dues was barred by limitation - HELD THAT: - Under the IBC, default occurs at the singular point when a due and payable debt is not paid; subsistence of the contract or the continuing consequences of non-payment does not create a continuing cause of action. Each invoice or payment claim carries its own date of default, and limitation runs for three years from that date. The acknowledged liabilities had crystallised more than three years before the insolvency application; unilateral legal notices, without a written acknowledgment by the corporate debtor before expiry of limitation, neither revived the claim nor reset limitation. The IBC cannot grant a fresh lease of life to time-barred debts. [Paras 88, 97, 98, 99, 100]

The admission of the Section 9 application was erroneous, as the default pre-dated the application by more than three years and no condonation of delay had been obtained.

Final Conclusion: The appeal was allowed and the orders admitting the Section 9 application were set aside as the operational-debt claim was time-barred. The operational creditor was granted liberty to pursue its claims before the dispute-resolution forum provided under the EPC contract.

Belated creditor claim in corporate insolvency resolution process - Challenge to approved resolution plan

HELD THAT:- No ground and reason to interfere with the impugned order passed by the National Company Law Appellate Tribunal, Principal Bench, New Delhi, in Company Appeal [2026 (5) TMI 1844 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI]. The appeal is, accordingly, dismissed.

Distribution under resolution plan to dissenting secured financial creditors - Commercial wisdom of Committee of Creditors - Pro rata distribution based on admitted claims - Commercial wisdom of Committee of Creditors

Whether the Committee of Creditors was right in approving the manner of distribution to the secured financial creditor in proportion to the claim ratio as admitted by the resolution professional during CIRP irrespective of the security interest i.e. on pro rata basis based on stagewise receipt of funds as per the captioned resolution plan? - HELD THAT: - The amount payable to different classes or sub-classes of creditors under a resolution plan lies within the commercial wisdom of the Committee of Creditors, subject to the statutory minimum payable to a dissenting financial creditor. A dissenting secured financial creditor cannot claim a higher distribution by reference to the value of its individual security interest. The approved distribution on a pro rata basis according to admitted claims was therefore consistent with the governing law. See In India Resurgence ARC Pvt Ltd Vs M/s Amit Metaliks Ltd and Anr [2021 (6) TMI 684 - SUPREME COURT] and Beacon Trusteeship Ltd Vs Jayesh Sanghrajka & Ors [2024 (6) TMI 630 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI]. [Paras 6, 7, 8, 9]

The approval of pro rata distribution among secured financial creditors on the basis of admitted claims was upheld, and the appeals were dismissed.

Final Conclusion: The Committee of Creditors' decision to distribute the resolution-plan amount among secured financial creditors according to admitted claims, rather than individual security interests, was sustained. Both appeals were dismissed.

Prima facie basis for seizure u/s 37A of FEMA - Seizure of equivalent-value property for foreign-exchange contravention - Effect of income-tax settlement on FEMA proceedings

Prima facie basis for seizure u/s 37A of FEMA - Whether the material relating to alleged hawala transfer of funds from India to Dubai disclosed a prima facie contravention of Section 4 warranting seizure u/s 37A(1) of FEMA? - HELD THAT: - At the stage of seizure, the requirement is a prima facie case, final adjudication being separately pending. The tally data, email communications, witness statements, and deposits reflected in the overseas bank accounts constituted material supporting the alleged unauthorised transfer. The Competent Authority erred in disregarding that material by requiring proof of the actual utilisation of the transmitted funds and by treating the evidence as insufficiently corroborative for the entire transmission. [Paras 27, 28, 29, 30, 32]

A prima facie case of contravention of Section 4 was established, and the refusal to confirm the seizure on that ground was erroneous.

Seizure of equivalent-value property for foreign-exchange contravention - Whether the respondent's property in India could be seized as property of equivalent value when the allegedly transferred funds were held in the bank accounts of an overseas limited liability company? - HELD THAT: - Section 37A(1) permits seizure of property of equivalent value situated in India where foreign exchange, foreign security, or property outside India is suspected to have been held in contravention of Section 4. The overseas company's bank accounts were relied upon as corroborative evidence of the alleged contravention by the respondent; the statutory power did not require seizure only of property belonging to that company. The separate legal personality of the overseas entity under foreign law could not override FEMA or defeat seizure of the alleged contravener's equivalent-value property in India. [Paras 36, 37, 38, 39, 41]

The distinction drawn between the respondent and the overseas company did not invalidate seizure of the respondent's equivalent-value property.

Effect of income-tax settlement on FEMA proceedings - Whether the subsequent order of the Settlement Commissioner under the Income Tax Act governed or nullified the FEMA proceedings? - HELD THAT: - The Income Tax Act operates in a different field, and the provisions concerning settlement do not have overriding effect over FEMA. Consequently, the settlement order could not override the statutory consequences of a contravention alleged under Section 4 of FEMA. [Paras 42]

The reliance on the settlement order was rejected.

Final Conclusion: The appeal was allowed and the order refusing confirmation of seizure was interfered with. The respondent was directed to pay costs.

Maintainability of writ petition challenging initiation of money-laundering proceedings - Interim relief against freezing of bank accounts under the Prevention of Money-Laundering Act - Alternative Remedy

HELD THAT:- The Special Leave Petitions were disposed of without interference with the High Court's interim order; liberty was reserved to place objections before the Special Officer.

Survival of money-laundering proceedings after compromise of scheduled offence - Twin conditions for bail under the Prevention of Money Laundering Act

Compromise of scheduled offence - Proceeds of crime - Continuation of money-laundering proceedings where the scheduled-offence FIR was quashed on the basis of a compromise - HELD THAT: - A quashing, discharge or acquittal on merits that finds the scheduled offence never occurred extinguishes the foundation for proceeds of crime. A quashing founded on compromise, however, does not entail such a finding and cannot, by itself, establish that no proceeds of crime were generated. The Enforcement Directorate's inquiry into dealings with proceeds of crime could not therefore be scuttled merely because the original complainant settled an individual grievance; the additional FIRs included in the ECIR also prima facie bore nexus with the alleged larger conspiracy. [Paras 17, 18, 20, 21, 22]

The money-laundering proceedings were held to survive the compromise and quashing of the original FIR.

Rigours of bail under the Prevention of Money Laundering Act - Reasonable grounds for believing that the accused is not guilty - Flight risk - Entitlement to bail in the money-laundering case notwithstanding the limited amount involved in the original scheduled-offence FIR - HELD THAT: - The money-laundering inquiry has a wider reach than the predicate investigation and concerns property derived or obtained directly or indirectly from criminal activity relating to a scheduled offence. At the bail stage, the Court must take a probabilistic view of the available material and is not required to conduct a mini-trial. The material concerning control of the forex entities, use of alleged dummy directors, conversion of funds, and the applicant's conduct in relation to travel and investigation made out a formidable prima facie case. The applicant was also found to be a flight risk; consequently, the Court could not be satisfied of either condition required for bail under Section 45 of the PMLA. [Paras 37, 39, 51, 53, 56]

The statutory twin conditions for bail were not satisfied, and the bail application was rejected.

Parity in grant of bail - Claim for parity with a co-accused who had been granted bail - HELD THAT: - The co-accused had been granted bail on considerations that did not apply to the applicant. The material before the Court identified the applicant as the principal operator of the alleged cash and forex conversion mechanism, requiring his bail claim to be assessed independently. [Paras 28]

Parity with the co-accused was denied.

Final Conclusion: The compromise-based quashing of the original scheduled-offence FIR did not terminate the money-laundering proceedings. The applicant having failed to satisfy the statutory conditions for bail and being found a flight risk, the bail application was rejected.

Proceeds of crime - property of equivalent value - Retention of seized property - failure to disclose source - Involvement in money-laundering activities

Retention of seized documents, digital devices and cash, and freezing of bank and Demat accounts belonging to persons connected with the company involved in the investment fraud - HELD THAT: - The material showed that the appellant was the majority shareholder and authorised signatory of the company, whose registered office was at his residential address, and that he was involved in the alleged criminal activity. His resignation as Director before the stated commencement of the crime did not displace that material. He failed to deny the material particulars or disclose the source of the property despite notice. The other appellant also failed to establish an independent source for the amounts and shares held by her. [Paras 17, 18, 19, 21]

The retention and freezing were upheld, as no ground for interference with the impugned order was made out.

Proceeds of crime - property of equivalent value - Attachment of property acquired before the scheduled offence - Seizure or freezing of property acquired before the alleged commission of the scheduled offence where the direct proceeds of crime were unavailable - HELD THAT: - Adopting the interpretation that the definition of proceeds of crime includes the value of property derived from criminal activity, the Tribunal held that, where the direct proceeds were not available, property of equivalent value could be proceeded against. Consequently, prior acquisition of the property did not by itself exclude it from seizure or freezing. [Paras 20]

The challenge based on the prior acquisition of the property was rejected.

Final Conclusion: The appeals were dismissed. The order permitting retention of the seized property and continuing the freezing of the bank and Demat accounts was sustained.

Goods Transport Agency service - consignment note - Service tax demand based on Form 26AS data - Extended limitation - suppression of facts

Goods Transport Agency service - bills as consignment notes - Reverse charge liability on GTA services - Classification of the transport services as Goods Transport Agency services where bills, rather than documents expressly titled consignment notes, were issued - HELD THAT: - The statutory definition does not prescribe a particular format or nomenclature for a consignment note. A bill containing the essential particulars evidencing transportation of goods may constitute a consignment note. The recipients' certificates that they received GTA services and discharged tax under reverse charge were cogent evidence of the nature of the services. [Paras 17, 18, 20]

The services were held to be GTA services, and classification could not be denied merely because the documents issued were described as bills.

Service tax demand based solely on Form 26AS - Third-party information without independent verification - Sustainability of service tax demand founded on differences between ST-3 returns and Form 26AS without examination of the books of account or underlying transactions - HELD THAT: - Form 26AS is not a statutory document for determining taxable turnover under service tax law, since its basis differs from that of service tax liability. A demand based only on third-party Income Tax data and payment figures, without examining the books of account, was held unsustainable. [Paras 21, 22]

The demand founded solely on Form 26AS and allied Income Tax records was held unsustainable.

Extended limitation - prior departmental knowledge - Suppression of facts - Invocation of the extended period for a subsequent service tax demand where the appellant regularly filed ST-3 returns and the material relied upon was already available to the Department when the first show cause notice was issued - HELD THAT: - Where relevant facts were already within the Department's knowledge when the first notice was issued, the same or similar facts could not subsequently support an allegation of suppression. As the appellant had regularly filed ST-3 returns, invocation of the extended period in the subsequent notice was not sustainable. [Paras 21, 22]

The demands raised by invoking the extended period of limitation were held unsustainable.

Final Conclusion: The impugned orders were set aside and both appeals were allowed with consequential relief.

Intellectual property right service - copyright exclusion - Information technology software service - prospective levy - Extended limitation-departmental knowledge and revenue neutrality

Information Technology Software Service - Microsoft software licence - intellectual property right service - Copyright exclusion from intellectual property right - Information technology software service-prospective levy - Liability to service tax under intellectual property right service on royalty paid for a non-exclusive licence to pre-install and sub-license Microsoft operating software in computers - HELD THAT: - Intellectual property right service covered only rights recognised under Indian law and expressly excluded copyright. The show cause notice and the impugned order failed to identify or establish the precise statutory intellectual property right involved. The software licence concerned exploitation of Microsoft's copyright through pre-installation and sub-licensing, which could not be taxed as intellectual property right service. Further, the right to use information technology software for commercial exploitation became taxable only upon introduction of information technology software service with effect from 16.05.2008; creation of that distinct entry established that the activity was not taxable under the earlier intellectual property right service entry. [Paras 6, 7]

The service tax demand under intellectual property right service for the period prior to 16.05.2008 was held unsustainable and was set aside.

Extended limitation-absence of suppression - Revenue neutrality-absence of intent to evade - Validity of invocation of the extended period for service tax on royalty paid under reverse charge - HELD THAT: - The Department had full knowledge of the appellant's activities from the audit and ensuing correspondence during the normal period. In the absence of suppression, a bona fide dispute regarding taxability and non-registration or non-filing of returns could not justify the extended period. Moreover, any service tax paid under reverse charge would have been available as CENVAT credit for manufacture of dutiable computers, creating a revenue-neutral situation inconsistent with intent to evade tax. [Paras 8, 9]

The demand confirmed by invoking the extended period of limitation was held legally unsustainable; consequential interest and penalties were also set aside.

Final Conclusion: The appeal was allowed. The service tax demand, interest and penalties were set aside on merits as well as on limitation.

Works contract service exemption for activities relating to agricultural marketing - Extended limitation in interpretational disputes - Threshold exemption for taxable rental income

Works contract service exemption for activities relating to agricultural marketing - Governmental authority exemption - Eligibility of works contract services for repair and painting of Mandi Samiti shops for exemption under Entry 60 of Notification No. 25/2012-ST - HELD THAT: - The recipient entities were accepted as Governmental Authorities. Repair and painting of shops used for facilitating marketing of agricultural produce were held to be activities relating to agricultural extension, a function entrusted to Panchayats under Article 243G. A legal claim to exemption could be raised before the Tribunal notwithstanding that it had not been advanced before the lower authorities. The earlier decision cited by Revenue was distinguished because eligibility under Entry 60 had not been examined therein. [Paras 9]

The works contract services were exempt under Entry 60, and the service-tax demand founded on denial of that exemption was unsustainable.

Extended limitation in interpretational disputes - Suppression with intent to evade tax - Validity of invocation of the extended period for service-tax demand concerning the claimed notification exemption - HELD THAT: - The dispute turned on interpretation of the exemption notification. In the absence of evidence of suppression, fraud, collusion or wilful misstatement with intent to evade tax, particularly where ST-3 returns were regularly filed with relevant disclosures, the extended period could not be invoked. [Paras 10]

The demand was independently held barred by limitation; consequently, interest and penalty could not survive.

Threshold exemption for taxable rental income - Eligibility for threshold exemption in respect of rent received from a bank - HELD THAT: - The gross taxable value for Financial Year 2016-17 comprised only the rental receipt, since the other receipts were exempt and could not be included for computing taxable value. The taxable value was below the prescribed threshold. [Paras 11]

The appellant was entitled to threshold exemption, and the service-tax demand on rental income was set aside.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief in accordance with law.

Service tax exemption for renting residential dwellings for use as residence - rent received from four immovable properties claimed to have been let for residential use - HELD THAT: - The exemption covers services by way of renting a residential dwelling for use as residence. The lease-deed evidence, including the finding in the appellant's own case for the subsequent period regarding three properties, established that all four premises were rented for residential purposes; the fourth property was specifically let for residence of employees. The rent receipts were therefore within the exempt category. [Paras 6]

The service-tax demand, interest and consequential penalty in respect of rent from all four properties were set aside.

Final Conclusion: The appeal was allowed with consequential relief, as the rental income from the four properties was exempt from service tax on their established residential use.

Validity of show cause notice - Extended limitation in audit-based service tax demand - Employee secondment as manpower supply service - Reasoned adjudication of service tax liability

Validity of show cause notice - Scope of adjudication - Validity of show cause notices alleging service tax on foreign-currency expenditure without service-wise identification of the expenditure, and whether the adjudication travelled beyond those notices - HELD THAT: - Though the notices did not specify the foreign-currency expenditure attributable to each identified service, they listed the services alleged to have been received. The assessee was able to identify the services and payments and furnish elaborate service-wise and amount-wise replies, which established that the notices were neither unintelligible nor prejudicial. Elaboration of the allegations in adjudication did not take the order beyond the scope of the notices. [Paras 14]

The notices were held valid, and the adjudicating authority was held not to have travelled beyond their scope.

Extended limitation in audit-based service tax demand - Invocation of the extended limitation period for service tax demanded on foreign-currency expenditure under the first show cause notice - HELD THAT: - The notice merely referred to the statutory provision but did not set out any act or omission constituting fraud, collusion, wilful misstatement or suppression with intent to evade tax. A prior audit-based notice had already been issued to the assessee, and the Department could not invoke the extended period again on the basis of a subsequent audit report. The extended period was also unavailable where the issue turned on interpretation concerning employee secondment. [Paras 16, 17]

All demands beyond the normal period were set aside.

Employee secondment as manpower supply service - Service tax liability on secondment of employees from overseas entities - HELD THAT: - The Supreme Court's ruling in Northern Operating Systems Pvt. Ltd. [2022 (5) TMI 967 - SUPREME COURT] governed the issue, and the facts were not distinguishable. Secondment of employees by overseas entities constituted supply of manpower to the assessee; however, liability was restricted to the normal limitation period. [Paras 17, 18]

The demand relating to employee secondment was confirmed only for the normal period.

Reasoned adjudication of service tax liability - Consideration of Chartered Accountant certificate - Adjudication of service tax demands on services other than employee secondment, including claims founded on accounting treatment, domestic-vendor payments and Chartered Accountant certification - HELD THAT: - The adjudicating authority had not considered all submissions and had not given valid reasons for rejecting the Chartered Accountant certificate. It had relied upon the assessee's figures and certificate for computation while rejecting its explanations without satisfactory findings. A rational and reasoned determination was required after considering the assessee's submissions, accounting standards and procedures, evidence, and subsequent decisions. [Paras 19]

The remaining service tax liabilities were remanded for fresh adjudication without a decision on merits.

Final Conclusion: The appeal was partly allowed. Demands beyond the normal period were set aside, the employee-secondment demand was sustained only for that period, and the remaining demands were remanded for fresh reasoned adjudication.

Service tax on job-work manufacture - Reimbursable expenses in taxable value before statutory amendment - Appropriation beyond show-cause notice and limitation

Service tax on job-work manufacture - Amounts collected as service tax - Liability to service tax on goods manufactured on job-work basis, where an amount was collected from the client as service tax - HELD THAT: - Once the activity was found to be manufacture on job-work basis and not a taxable service, no service-tax demand could be raised. The amount collected as representing service tax was required to be deposited with the Central Government under section 73A, but such collection neither created a charge of service tax nor authorised a further demand under section 73. [Paras 8, 9, 10]

The demand relating to manufacture undertaken on job-work basis was set aside.

Reimbursable expenses in taxable value before statutory amendment - Inclusion of wages and other reimbursable labour expenses in the value of manpower supply service up to 13.5.2015 - HELD THAT: - Service tax was not chargeable on reimbursable expenses during the relevant period. The appellant's self-assessment and payment of tax on such expenses in certain invoices could not confer authority to demand tax on other reimbursable amounts; the charge had to arise under the charging provision and valuation law, not from an erroneous self-assessment.

Neither the Commissioner nor any other officer has been conferred under the Act the power to confirm demand of service tax which admittedly was not chargeable on the disputed amounts during the relevant period as held by the Supreme Court in Inter-continental Consultants and Technocrats [2018 (3) TMI 357 - SUPREME COURT] [Paras 13, 15]

The demand on reimbursable expenses for the pre-amendment period could not be sustained.

Adjustment of service tax paid but not reflected in the ST-3 returns for the period June to August 2014 - Adjustment against the confirmed demand of service-tax payments omitted from returns and excess service tax paid - HELD THAT: - The claims concerning service tax paid for June to August 2014 but not reflected in the ST-3 return, and excess service tax paid during April 2017 to June 2017, required factual verification. [Paras 17, 19]

The Commissioner was directed to verify the payments and recalculate the demand as appropriate.

Appropriation beyond show-cause notice and limitation - Refund of investigation deposit - Appropriation and refund of service tax deposited during investigation for April 2014 to September 2014, a period not covered by the demand in the show-cause notice - HELD THAT: - The show-cause notice neither demanded service tax for the said period nor proposed appropriation of the deposit. Since adjudication could not extend beyond the five-year period and appropriation formed part of the adjudication proceedings, the appropriation was unsustainable. In the absence of a notice proposing demand or appropriation, the Revenue was bound to refund the amount deposited. [Paras 25, 26, 33, 34, 35]

The appropriation was set aside and the deposited amount was directed to be refunded with interest in accordance with law.

Final Conclusion: Both appeals were allowed with consequential relief. The impugned demands were set aside to the extent indicated, the payment-adjustment claims were remanded for verification, and the investigation deposit was directed to be refunded with interest in accordance with law.

Time-share accommodation rights - classification as Club or Association Service - Voluntary payment of service tax and interest before show cause notice - Penalty for alleged suppression in interpretational disputes

Time-share accommodation rights - classification as Club or Association Service - Substance over contractual nomenclature in service classification - Short Term Accommodation Service - effect of subsequent taxable entry - Taxability of the Time Share Holiday Scheme, granting customers contractual rights to occupy resort accommodation, as Club or Association Service for the disputed period - HELD THAT: - The use of the expression "Member" in the agreement was not determinative. The purchasers acquired only accommodation rights for a specified period and received neither ownership, shareholding, voting nor management rights; the relationship was consequently that of a commercial service provider and customer. The company and the purchasers did not possess the legal characteristics of a club and its members. The consideration was linked to the accommodation category, no conventional recurring subscription or separate consideration for club facilities was shown, and the resort was available to ordinary guests. The subsequent introduction of a distinct taxable entry for short-term accommodation supported the conclusion that accommodation services could not be brought under the earlier Club or Association Service entry. [Paras 34, 35, 39, 40, 41]

The Time Share Scheme was held to be an accommodation arrangement and not Club or Association Service; the demand under that taxable category was set aside.

Voluntary payment of service tax and interest before show cause notice - Statutory protection for pre-notice payment - Entitlement to statutory protection where tax and applicable interest on Mandap Keeper, Internet Cafe, Rent-a-Cab Scheme Operator and Renting of Immovable Property services were paid before issuance of the show cause notice - HELD THAT: - The tax and applicable interest for the stated taxable services stood voluntarily paid before the notice, and the Department did not dispute that fact or establish fraud, collusion or wilful suppression concerning those services. In the absence of material showing deliberate evasion, continuation of adjudication solely for imposition of penalties was unjustified. [Paras 44, 46, 47, 48, 49]

The appellant was held entitled to the benefit under Section 73(3) of the Finance Act, 1994 in respect of those services, and penal proceedings relating to those demands could not be sustained.

Penalty for alleged suppression in interpretational disputes - Suppression of facts - evidentiary requirement - Sustainability of penalties for delayed payment of service tax where the principal dispute concerned classification of the Time Share Scheme and the remaining tax liabilities had been paid with interest before notice - HELD THAT: - The Department's allegation of suppression was unsupported: the appellant maintained regular accounts, reflected Time Share receipts in audited financial statements, and produced the documents on which the investigation proceeded. The demand arose from a legal inference on classification rather than discovery of concealed transactions. A bona fide interpretational dispute, coupled with pre-notice payment of tax and interest for the other services, did not establish the ingredients for penal action. [Paras 52, 53, 54, 55]

Penalties under Sections 76, 77 and 78 of the Finance Act, 1994 were set aside.

Final Conclusion: The appeal was partly allowed. The demand under Club or Association Service and all penalties were set aside, while statutory protection was extended for the other taxable services in respect of which tax and interest had been paid before notice.

CENVAT credit attributable to trading activity - Reversal of common input service credit - Input service credit on rented premises used for taxable services

CENVAT credit attributable to trading activity - Reversal of common input service credit - Admissibility and quantification of CENVAT credit attributable exclusively to trading activity and of common input services used for trading and taxable output services - HELD THAT: - Both Members agreed that trading was not an eligible output activity for availment of CENVAT credit and that credit exclusively attributable thereto was inadmissible. Though trading was expressly included in exempted services only from 01.04.2011, the absence of a prescribed pre-amendment valuation method did not preclude reversal of wrongly availed common credit. The reversal for the earlier period was required to be quantified reasonably by applying the subsequently prescribed rule 6(3D)(c) formula. [Paras 10, 11, 17, 18]

The disallowance of credit attributable exclusively to trading was upheld, and the matter was remanded for re-quantification by applying the rule 6(3D)(c) formula, including for the period before 01.04.2011.

Input service credit on rented premises used for taxable services - CENVAT credit on renting of immovable property service where the premises were used partly for trading and partly for taxable output services - HELD THAT: - The appellant had produced layout plans showing separate sales and service areas, thereby rebutting the allegation that the premises were used exclusively for trading. Revenue neither verified that evidence nor established exclusive trading use. The failure of the building owner, if any, to remit service tax could not defeat substantive credit otherwise available to the appellant for the service portion of the premises. [Paras 9, 17, 18]

Proportionate credit attributable to use of the rented premises for taxable output services was held admissible.

Extended limitation for short payment of service tax - Demand for short payment arising from the difference between taxable value declared in ST-3 returns and income-tax returns - HELD THAT: - The short payment was not contested, but the record contained no finding establishing deliberate intent to evade tax. Mere failure to pay tax, without proof of a conscious and intentional contravention, was held insufficient to invoke the extended period. [Paras 7, 17, 18]

The demand for short payment, along with interest, was held time-barred.

Extended period of limitation for trading-related CENVAT credit - Binding effect of Supreme Court precedent - Invocation of the extended period for reversal of CENVAT credit attributable to trading activity - HELD THAT: - The Member (Technical) held that the decision in Lally Automobiles [2019 (6) TMI 414 - SC ORDER], affirmed by the Supreme Court, established that trading was never taxable and that the extended period was invocable where credit attributable to trading had been availed. The Member (Judicial) dissented, holding that the contemporaneous conflict of decisions, the clarificatory insertion concerning trading, and disclosure of material particulars in the appellant's records supported bona fide belief and excluded suppression with intent to evade. The Member (Technical) further held that the Supreme Court's approval of Lally Automobiles governed the issue under Article 141; the Member (Judicial) considered Shriram Value Services applicable on the facts and binding within the jurisdiction. The difference was referred for determination by a Third Member. [Paras 44, 56, 58, 61, 72]

No final determination was made; the question whether the extended period was invocable was referred for resolution by a Third Member.

Penalty for wrongful availment of CENVAT credit - Penalty for incorrect taxable-value declaration - Consequential penalties for wrongful CENVAT credit availment and incorrect declaration of taxable value in ST-3 returns. - HELD THAT: - The Member (Technical) held that the provisions invoked were adequate for penal action and that immunity under section 73(3) was unavailable where fraud, suppression or like circumstances applied; consequential penalty was to be reworked after re-quantification. The Member (Judicial), upon holding the dispute to be interpretational and the extended period unavailable, held that reasonable cause justified waiver of penalty. These divergent consequences remain dependent on resolution of the referred limitation issue. [Paras 17, 46, 47, 48, 54]

The question of consequential penalty remains unresolved pending determination of the difference of opinion.

Final Conclusion: The appeal was partly disposed of by allowing the rental-service credit and holding the short-payment demand time-barred, while remanding re-quantification of trading-related credit. The Members differed on the extended-period demand and consequential penalty, and the matter was directed to be placed before the President for reference to a Third Member.

Interest on refund of investigation deposits - Rate of interest on delayed refund

Interest on refund of investigation deposits - Entitlement to interest from the date of deposit on an amount refundable after having been deposited during investigation before determination of duty liability. - HELD THAT: - The jurisdictional High Court in M/s Parle Agro Private Limited [2025 (11) TMI 2024 - ALLAHABAD HIGH COURT] had upheld interest on the refundable amount from the date of deposit where no pre-existing duty liability was shown. The Third Member held that the present issue was squarely covered by that decision and that the contrary opinion of the Member (Technical) was not correct in law. [Paras 12]

The view denying interest from the date of deposit was held incorrect; the matter was directed to be placed before the Regular Division Bench for drawing the majority view.

Rate of interest on delayed refund - Sustainability of interest at a rate higher than the prescribed statutory rate on refund of an amount retained for a prolonged period - HELD THAT: - The jurisdictional High Court had found no substantial question of law in the Tribunal's award of interest at 12 per cent after considering the applicable notifications and the prolonged retention of the refundable amount. The Third Member treated the present controversy as covered by that decision and rejected the contrary technical view. [Paras 12]

The contrary view on the rate of interest was held incorrect, subject to the Regular Division Bench drawing the majority view.

Final Conclusion: The Third Member held that the jurisdictional High Court's decision governed both the entitlement to interest from the date of deposit and the rate of interest. The contrary technical opinion was held unsustainable, and the matter was placed before the Regular Division Bench for the majority view.

Gross turnover - Taxability of special drought relief paid to paddy farmers through procurement agencies where the relief component was included in the sale invoices and charged from the purchaser

HELD THAT:- Having heard the learned counsel appearing for the petitioner-Food Corporation of India and having gone through the materials on record, we find no good ground to interfere with the impugned Order passed by the High Court [2025 (12) TMI 1887 - PUNJAB AND HARYANA HIGH COURT]

Inter-State sale occasioned by pre-existing contract - Rebuttable presumption arising from Form F declarations - exempt branch stock transfers or taxable inter-State sales

Taxability of vehicle transfers from the manufacturing unit to Regional Sales Offices as inter-State sales rather than exempt branch stock transfers - HELD THAT: - Dealer-level firm orders accompanied by advance payments were consolidated through the Advance Planning Optimisation process and directly triggered manufacture and despatch of corresponding vehicles to the concerned branches. This established an unbroken causal link between the pre-existing contracts of sale and inter-State movement.

The substance of the arrangement, rather than the description of the planning document as a rolling plan or sales forecast, governed its character. Form F declarations raise only a rebuttable presumption, which stood displaced by the admitted business practice and audit material showing advance orders and payments. [Paras 21, 22, 23, 24]

The transfers constituted inter-State sales under Section 3(a) of the CST Act, 1956 and were exigible to tax; the claimed branch-transfer exemption and challenge to the assessment were rejected.

Final Conclusion: The writ petitions were dismissed and the assessment treating the impugned vehicle transfers as taxable inter-State sales was upheld.

Vicarious liability of Directors for dishonoured company cheques - Sufficiency of averments u/s 141 of the Negotiable Instruments Act - Scope of interference with summoning order - Maintainability of proceedings against a Director of the borrower company for dishonoured cheques, despite her not being a signatory, on the basis of the averments in the complaints

HELD THAT: - Liability under Section 141 of the Negotiable Instruments Act is not confined to the signatory of the cheque; a person in charge of and responsible for the conduct of the company's business when the offence was committed may also be proceeded against. At the stage of process, the Magistrate is required only to ascertain whether the complaint and supporting material disclose a prima facie case, and not whether there is sufficient material for conviction.

A meaningful reading of the complaints, which alleged that the Directors were responsible for the company's affairs and showed the petitioner as a Director during the relevant transactions, disclosed the foundational averments for trial. The petitioner's actual role in management and asserted non-involvement require evidence and cannot be determined in proceedings for quashing. [Paras 27, 28, 29, 30, 31]

No patent illegality, perversity or non-application of mind was found in the summoning orders; the challenge to the complaints and consequential proceedings was rejected.

Final Conclusion: The petitions seeking quashing of the summoning orders and cheque-dishonour complaints were dismissed. The petitioner may raise her defence concerning her role and liability before the Trial Court.