TaxTMI Updates e-Newsletter
Aug 27,2026

Extended limitation for GST demand - foundational facts of fraud, wilful misstatement or suppression - Willful Misrepresentation - Suppression of Facts

Limitation for GST demand under Section 73 - Limitation for initiating demand proceedings for the subject financial years where the due dates for annual returns had been extended and the pandemic exclusion applied - HELD THAT: - The extensions granted for furnishing annual returns altered the commencement of the statutory limitation. Giving effect to the exclusion of the pandemic period, the three-year limitation u/s 73 stood extended to the same terminal date for the first two financial years, while for the third year it remained unchanged; the impugned notice was issued after expiry of that limitation. [Paras 5, 6, 7]

The notice could not be sustained within the ordinary limitation under Section 73.

Satisfaction for invocation of Section 74 - Foundational facts of fraud, wilful misstatement or suppression - whether the SCN can be sustained based on the extended period of five years as available u/s 74 which can be availed by the Department only if there is an allegation of fraud/willful misrepresentation/ facts/suppression? - HELD THAT: - Proceedings under Sections 73 and 74 require the Assessing Officer's satisfaction; for Section 74, such satisfaction must extend to fraud, wilful misrepresentation or suppression causing the alleged tax shortfall or input tax credit mismatch. Audit objections cannot substitute that satisfaction. The notice contained only a bald assertion of availment of input tax credit without documentary evidence and suppression of facts, without disclosing foundational facts from which a deliberate device to evade tax or avail excess credit could be inferred. Mechanical recital of the statutory expressions cannot justify recourse to the extended period. [Paras 11, 12, 13, 14, 15]

The show-cause notice and the consequential order were set aside; the Department was left at liberty to initiate appropriate proceedings under Section 74, if warranted, on a notice disclosing foundational facts and within the available extended period.

Final Conclusion: The appeal was allowed and the impugned show-cause notice and consequential order were set aside, subject to liberty to the Department to proceed afresh in accordance with Section 74 and the applicable extended limitation.

Alternative statutory remedy in disputed questions of fact - Service of show cause and hearing notices - Exercise of writ jurisdiction against an adjudication order where service of the show cause notice, hearing notice and order was disputed

HELD THAT:- The Special Leave Petition was dismissed, the Court declining to interfere with the impugned High Court order [2026 (8) TMI 1498 - DELHI HIGH COURT]

Fair hearing in budgetary support claims - Opportunity to explain discrepancy in input tax credit declaration

Validity of concluding a budgetary support claim by relying on the input tax credit declaration despite an apparent discrepancy with the Chartered Accountant certificate furnished at the respondents' direction, without affording the claimant an opportunity to explain the discrepancy - HELD THAT: - The Court held that the matter was not one of post-conclusion rectification in the ordinary sense. The defect was anterior: the proceedings had been concluded without considering the discrepancy apparent between the declaration and the Chartered Accountant certificate, and without permitting the petitioner to explain an asserted error in the declaration. Fairness required the officer to call for an explanation and consider supporting material; only upon finding that explanation unsatisfactory could the claim be concluded on merits. [Paras 8, 10, 11, 12, 13]

The impugned order was set aside to the extent challenged, and the respondents were directed to afford the petitioner an opportunity to explain and substantiate the asserted mistake in the declaration before deciding the claim.

Final Conclusion: The writ petition was allowed to the limited extent of the challenge. The claimant was permitted to produce supporting documents, and the respondents were required to reconsider the matter after granting a reasonable opportunity of hearing.

Revocation of GST registration cancellation for non-filing of returns

HELD THAT: - The Court found no impediment to consideration of revocation where the petitioner has furnished the outstanding returns. If such returns remain unfiled, the petitioner must be afforded time to file them; upon compliance with statutory requirements, the revocation application must be considered favourably and without delay. [Paras 3]

The petitioner was directed to apply for revocation, and the respondents were directed to communicate any required statutory compliance and thereafter consider the application for revocation within the stipulated time.

Final Conclusion: The writ petition was allowed and disposed of with directions for prompt consideration of revocation of the cancelled GST registration upon compliance with the required statutory formalities.

Bail - alleged fraudulent input tax credit claims - seeking bail by an accused alleged to have operated a firm used for fraudulent availment of input tax credit - HELD THAT: - The Court noted that, though the firm stood registered in the name of the accused's wife, it was operated by the accused. Material investigation concerning him was almost complete, some co-accused had been enlarged on bail, and the period of detention, balanced against the nature and gravity of the allegations, did not warrant further custodial detention in the interest of investigation. [Paras 7, 8]

The accused was enlarged on bail subject to furnishing bond and surety and appearing before the Investigating Officer monthly until submission of the charge-sheet.

Final Conclusion: The bail application was disposed of by granting bail subject to the stipulated bond, surety and investigation-cooperation conditions.

Adjudication beyond show cause notice - Mandatory limitation on confirmation of tax demand

Validity of an adjudication order confirming tax demand in excess of the demand proposed in the show cause notice - HELD THAT: - The statutory restriction against confirming a demand exceeding that proposed in the show cause notice is mandatory. An adjudicating authority is consequently without jurisdiction to confirm a demand beyond the proposed demand. [Paras 2, 3, 4]

The adjudication order was set aside and the matter was remitted for fresh adjudication after affording an opportunity of hearing to the petitioner.

Final Conclusion: The writ petition was disposed of by setting aside the adjudication order, which had confirmed a demand beyond that proposed in the show cause notice, and remitting the matter for fresh decision.

Input tax credit u/s 16(5) of the Central Goods and Services Tax Act, 2017 - Entitlement to input tax credit on a return filed for Financial Year 2018-19 within the period preserved by section 16(5) of the Central Goods and Services Tax Act, 2017

HELD THAT: - Section 16(5), notwithstanding section 16(4), entitles a registered person to take input tax credit relating to the specified financial years where the return under section 39 was filed up to 30.11.2021. As the return for Financial Year 2018-19 had been filed on 23.10.2019, denial of the claimed input tax credit was impermissible. [Paras 5, 6]

The Order-in-Original denying input tax credit was set aside and quashed.

Final Conclusion: The writ petition was disposed of by setting aside and quashing the impugned Order-in-Original, as the petitioner was entitled to the claimed input tax credit under section 16(5) of the Central Goods and Services Tax Act, 2017.

Validity of Proceedings u/s 153C - limitation provided under the third proviso to Section 153B(1) - as per HC [2025 (11) TMI 1854 - BOMBAY HIGH COURT] notices and proceedings under Section 153C for A.Y. 2014-15 to A.Y. 2019-20 are time-barred and quashed

HELD THAT:- We do not find a good ground to interfere with the impugned judgment in exercise of our jurisdiction under Article 136 of the Constitution of India. Accordingly, the special leave petition is dismissed.

Addition u/s 56(2)(vii)(b) for the difference between stamp-duty value and purchase consideration - Deemed income on acquisition of immovable property for inadequate consideration by joint purchasers - Beneficial interest in jointly acquired property determined by contribution to consideration

HELD THAT: - Where evidence established that the entire purchase consideration was paid by the other joint purchaser, the presumption of equal interest in the property did not apply. The respective contributions of joint purchasers must be considered for determining liability on the difference between the stamp duty value and consideration; consequently, the provision could not be invoked against a co-owner who had contributed no amount towards the purchase.

Even for the purpose of making addition u/s 56(2)(vii)(b) of the Act, the Revenue shall consider the respective shares which the purchasers advanced shall be taken into account. Precisely in the present case, if at all addition has to be made i.e., in the husband as the husband who has paid the entire sale consideration. Invocation of the provision of Section 56(2)(vii)(b) of the Act against the Assessee who has not contributed any amount for the purchase of the immovable property cannot be sustained. Accordingly, addition made by the Assessing Officer which has been confirmed by the Ld. CIT(A) is hereby deleted.[Paras 8]

Final Conclusion: The appeal was allowed and the addition made in the assessee's hands on account of the difference between stamp duty value and purchase consideration was deleted.

Reassessment on audit objection without fresh tangible material - Change of opinion in reassessment proceedings

Validity of reassessment where it was initiated solely on the Revenue audit objection and further verification of records already examined in the original scrutiny assessment - HELD THAT: - Section 147 does not empower the Assessing Officer to reopen a completed assessment merely on a change of opinion. Reassessment must be founded on tangible material coming to the Assessing Officer after the original assessment and outside the existing record. An audit objection, without new facts or fresh tangible material, concerning matters already examined in the original assessment, could not validly found the reopening. [Paras 8]

The reassessment was held invalid; the addition made in the reassessment was deleted and the appeal was allowed.

Final Conclusion: The reassessment founded solely on an audit objection and existing assessment records was invalid as a mere change of opinion. The addition made in reassessment was deleted and the appeal was allowed.

Penalty u/s 271B - delayed furnishing of tax audit report - Completion of tax audit within prescribed time - Levy of penalty for failure to furnish the tax audit report with the return, where the accounts had been audited within the prescribed period and the report was produced during assessment proceedings

HELD THAT: - Section 271B employs the expression "may direct"; consequently, penalty is not automatic. Where the audit had actually been completed within the prescribed time and the audit report was made available to, and considered by, the Assessing Officer before completion of assessment, delayed furnishing of the report did not establish non-compliance with section 44AB. [Paras 8, 9]

The penalty under section 271B was deleted.

Final Conclusion: The assessee's appeal was allowed and the penalty for delayed furnishing of the tax audit report was deleted.

Additional evidence on GST refund mismatch - Unexplained cash credit - trade payables arising from purchases

Additional evidence on GST refund mismatch - Adjustment reducing the returned business loss on account of a mismatch concerning GST refund reported in the tax audit report - HELD THAT: - The additional documentary evidence, produced for the first time before the Tribunal, was found vital to proper adjudication and to verification of the assessee's claim regarding the accounting and tax treatment of the GST refund. Since the evidence required verification by the lower authority and the Revenue did not object to its admission, the issue could not be decided on merits by the Tribunal. [Paras 9]

The impugned order on this issue was set aside and the matter was restored to the Assessing Officer for de novo adjudication after granting opportunity of hearing.

Unexplained cash credit - trade payables arising from purchases - Addition as unexplained cash credit in respect of outstanding trade payables arising from purchases, despite reconciled differences in creditor balances - HELD THAT: - The Tribunal noted that reconciliations of the differences between the creditors' books and the assessee's books had been furnished before the lower authorities. The appellate authority had considered those reconciliations and the other documentary evidence, together with the legal position governing application of the unexplained cash credit provision, before holding the addition unsustainable. As the Revenue brought no contrary material or judicial precedent to controvert that finding, no infirmity was found in its order. [Paras 14, 15]

Deletion of the addition relating to the trade payables was upheld and the Revenue's appeal was dismissed.

Final Conclusion: The assessee's appeal was allowed for statistical purposes by remanding the GST refund mismatch adjustment for fresh adjudication. The Revenue's appeal against deletion of the addition for trade payables was dismissed, rendering the assessee's cross-objection infructuous.

Validity of Reassessment proceedings - sanction by competent specified authority - Penalty for failure to obtain tax audit - unproved share-trading turnover - Reasonable cause for non-audit

Validity of Reassessment proceedings - sanction by competent specified authority - Jurisdictional precondition for reassessment - Validity of reassessment where approval for issuance of notice was obtained from the Principal Commissioner after the period requiring sanction under section 151(ii) had elapsed - HELD THAT: - Applying Union of India v. Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] Tribunal held that sanction under section 151 is a substantive safeguard and a jurisdictional precondition for assumption of reassessment jurisdiction. TOLA extended only until 30.06.2021 the period during which the authority under section 151(i) could grant approval; it did not preserve that authority's competence thereafter. As the order under section 148A(d) and consequential notice under section 148 were issued in July 2022, approval was required from the higher authority specified under section 151(ii). Approval by the Principal Commissioner was neither substantial compliance nor a curable defect under section 292B. [Paras 38, 39, 40, 41, 42]

The reassessment and the resultant addition were quashed for want of valid jurisdiction.

Penalty u/s 271B for failure to obtain tax audit-unproved share-trading turnover - Reasonable cause for non-audit - Levy of penalty for failure to obtain tax audit on the basis of an unreconciled aggregate of share purchases, delivery-based sales and alleged derivative transactions - HELD THAT: - For penalty under section 271B, the Revenue had first to establish that the assessee carried on a business and that the legally relevant sales, turnover or gross receipts of that business exceeded the prescribed limit. The aggregate relied upon combined purchases, delivery-based sales and alleged derivative transactions; purchases could not by themselves constitute turnover. Neither the existence of a systematic share-trading business nor the alleged futures and options transactions was established from primary material, and no legally relevant turnover was computed. Further, the consistent disclosure of shares as investments and the resulting income as capital gains furnished a bona fide and reasonable basis for the assessee's belief that tax audit provisions did not apply. [Paras 52, 53, 54, 55, 56]

The conditions for applicability of section 44AB were not established and, in any event, reasonable cause was proved; the penalty was deleted.

Final Conclusion: The reassessment was annulled for want of approval from the competent specified authority. The penalty for failure to obtain tax audit was deleted because business activity and legally relevant turnover were not established and reasonable cause was shown.

Admission of relevant additional evidence in disallowance of commission expenditure - Deduction u/s 80P on enhanced income of co-operative credit society - Ad hoc estimation of interest on loans carrying differential rates

Disallowance of commission paid to daily deposit collection agents where supporting additional evidence was not admitted by the first appellate authority - HELD THAT: - The additional evidence, comprising material relevant to substantiate the commission claim, had not been examined by the lower authorities. The refusal to admit such evidence was unjustified when it was directly relevant to the controversy. [Paras 6]

The additional evidence was admitted and the issue was restored to the jurisdictional Assessing Officer for fresh consideration in accordance with law.

Estimated interest on non-performing loans - Deduction under section 80P on enhanced income - Addition of estimated interest on loans to members on which no interest had been charged, stated to be non-performing loans - HELD THAT: - The assessee, being a co-operative society providing credit facilities to its members, was eligible for deduction under section 80P(2)(a)(i) in respect of the interest income from those activities. An estimated addition of such interest would correspondingly enhance the eligible deduction and was therefore revenue neutral. [Paras 7]

The estimated interest addition was deleted.

Ad hoc estimation of interest income - Differential interest rates on loan categories - Deduction under section 80P on enhanced income - Addition of interest income by applying a uniform rate to housing, mortgage, personal, deposit-backed and overdraft or cash-credit loans carrying differential rates of interest - HELD THAT: - A uniform ad hoc interest rate could not be applied to all loan categories when the loans carried differential rates and that material fact had been ignored. Further, any enhancement of interest income from credit facilities to members would increase the income eligible for deduction under section 80P(2)(a)(i). [Paras 8, 9]

The estimated interest addition was deleted.

Final Conclusion: The appeal was partly allowed. The commission disallowance was remanded for fresh consideration after admitting the additional evidence, while both estimated interest additions were deleted.

Unexplained cash credits - evidentiary burden for corporate loan creditors - Ad hoc disallowance of business expenditure during commercial inactivity - Interest expenditure on loans treated as non-genuine - Set-off of current-year business loss against capital gains

Unexplained cash credits - evidentiary burden for corporate loan creditors - Addition for unexplained cash credits in respect of loans from thirteen corporate creditors - HELD THAT: - The assessee furnished confirmations, tax particulars, audited financial statements, ledger accounts and bank records to establish the identity, financial capacity and genuineness of the loan creditors. Once such primary material was produced, the Revenue was required to displace it by lender-wise examination or independent, transaction-specific material. General investigation information concerning alleged accommodation-entry providers, without correlation with the particular credits or proof that the documentary trail was false, could not sustain the addition. [Paras 8, 10, 11, 12]

The addition under section 68 was deleted.

Ad hoc disallowance of business expenditure during commercial inactivity - disallowance of business expenditure solely because no business receipts were shown during the year - HELD THAT: - Absence of business receipts in a particular year does not by itself establish cessation or abandonment of business. Where expenditure details and ledger accounts were furnished, allowability had to be examined with reference to the nature of each expense. No particular item was found fictitious, personal, inflated or unrelated to business, and no rational basis was given for disallowing a fixed fraction of the aggregate expenditure. [Paras 16]

The ad hoc disallowance of business expenditure was deleted.

Interest expenditure on loans treated as non-genuine - Disallowance of interest paid on two loans solely because the underlying loans had been treated as unexplained cash credits - HELD THAT: - The interest disallowance rested entirely on the earlier treatment of the underlying loans as non-genuine. Since the addition in respect of those loans was deleted and there was no independent finding that the interest was not paid, was fictitious or excessive, or related to non-business use of funds, the foundation for the disallowance did not survive. [Paras 17]

The consequential interest disallowance was deleted.

Set-off of current-year business loss against capital gains - Set-off of current-year business loss against capital gains arising from sale of commercial property - HELD THAT: - The assessee accepted assessment of the gain from sale of the property under the head 'Capital Gains'. A current-year loss under the head 'Profits and gains of business or profession', unlike a brought-forward business loss governed by a separate regime, is eligible for inter-head adjustment under section 71(2), subject to applicable statutory conditions. The business result required recomputation after deletion of the disallowances. [Paras 18, 19]

The Assessing Officer was directed to recompute the current-year business loss and allow its eligible set-off against capital gains.

Final Conclusion: The appeal concerning the unexplained cash-credit addition was allowed. In the connected appeal, the ad hoc expenditure and consequential interest disallowances were deleted, while the gain remained assessable as capital gains subject to eligible set-off of recomputed current-year business loss.

Royalty - licence to use copyrighted software without transfer of copyright rights - Fees for technical services-supply of video-conferencing equipment with installation and training

Royalty-licence to use copyrighted software without transfer of copyright rights - Withholding tax on non-resident software payments - Characterisation of payment for a non-exclusive, non-transferable and non-sublicensable licence to use software for internal business purposes as royalty under the India-USA DTAA - HELD THAT: - The agreement reserved title, copyright and all proprietary rights in the software to the licensor and prohibited commercial exploitation, sublicensing, modification, creation of derivative works, reverse engineering and copying except for backup purposes. The assessee therefore acquired only the facility to use a copyrighted article as an end-user, and not any right in the copyright or other intellectual-property right contemplated by Article 12(3). The specialised nature of the software or its use in engineering or manufacturing processes could not, by itself, render the payment royalty. [Paras 5, 6, 7, 8]

The software payment was not royalty; consequently, no obligation to deduct tax or consequential liability as assessee in default survived in respect of that payment.

Fees for technical services-supply of video-conferencing equipment with installation and training - Characterisation of the payment to a German supplier for a video-conferencing system, associated products, installation, setup and training as fees for technical services - HELD THAT: - The contemporaneous order confirmation established that the transaction was predominantly for procurement of identified video-conferencing equipment and allied products, rather than for clinical research trials or independent technical services. The entire payment could not be treated as fees for technical services on an assumed factual premise. However, the document separately stipulated consideration for installation, setup and training, and there was insufficient material to establish that those services were confined to routine installation and operational demonstration. The assessee accepted withholding on that separately identified service component; the conclusion was confined to the facts and was not a precedent on the characterisation of incidental installation, commissioning or training services generally. [Paras 12, 13, 14, 15, 16]

The payment attributable to equipment and other non-service components was directed to be excluded from fees for technical services, and withholding-tax liability was restricted to the separately identified installation, setup and training component at the applicable India-Germany DTAA rate, with consequential recomputation.

Final Conclusion: The appeal was partly allowed. The software payment was held not liable to withholding as royalty, while the payment for video-conferencing equipment was excluded from fees for technical services except for the separately identified installation, setup and training component.

Income Disclosure Scheme, 2016 - immunity from further taxation - Unabated assessment under section 153A - addition based on incriminating material

Addition u/s 68 in respect of differential sale proceeds of shares, after the corresponding long-term capital gain had been declared under the Income Disclosure Scheme, 2016 - HELD THAT: - Once the long-term capital gain from sale of shares had been declared under the Income Disclosure Scheme, 2016 and tax paid thereon, the assessee was entitled to immunity from further taxation of that income. [Paras 8]

The deletion of the addition for Assessment Year 2014-15 was upheld.

Unabated assessment under section 153A - addition based on incriminating material - Additions in unabated search assessments for alleged bogus capital gains or short-term capital loss from share transactions, founded on third-party investigation material rather than material found in the assessee's search - HELD THAT: - In an unabated assessment under section 153A, no addition can be made without incriminating material found during the search conducted in the assessee's case. The impugned additions were founded on investigation material and a statement recorded in third-party proceedings, and not on incriminating material recovered from the assessee as relying on ABHISAR BUILDWELL P. LTD [2023 (4) TMI 1056 - SUPREME COURT] [Paras 8]

The deletions of the additions for both assessment years were sustained.

Final Conclusion: The Department's appeals were dismissed and the deletions sustained. The cross-objections, having not been pressed, were also dismissed.

Limitation for reassessment notice under amended reassessment regime - validity of the reassessment notice for A.Y. 2017-18 issued after expiry of the surviving limitation period

HELD THAT: - Applying the observations of the Supreme Court in RAJEEV BANSAL [2024 (10) TMI 264 - SUPREME COURT (LB)] regarding the surviving period for issuance of notice, the Tribunal held that the extended due date had expired on 11-06-2022. The notice issued on 27-07-2022 was consequently beyond limitation, as three years had elapsed from the end of the relevant assessment year. [Paras 9]

The reassessment notice was held time-barred and the reassessment order was quashed; the assessee's cross-objection was allowed and the Revenue's appeal was dismissed.

Final Conclusion: The reassessment notice having been issued beyond the surviving limitation period, the reassessment order was quashed. The Revenue's appeal was dismissed and the assessee's cross-objection was allowed.

Reassessment based on borrowed satisfaction - Unexplained cash credit - loan transactions through banking channels

Validity of reassessment founded on investigation-wing information without independent verification by the Assessing Officer - HELD THAT: - The reasons referred to an annexure which merely named certain entities and did not identify the assessee's transactions with them. The Assessing Officer reproduced the investigation-wing report without making an independent enquiry, analysis or verification of the material received. The reopening was thus founded on borrowed satisfaction. [Paras 5, 6, 7]

The reassessment order was held void ab initio and was quashed.

Unexplained cash credit - loan transactions through banking channels - Right to cross-examine adverse witnesses - HELD THAT: - The material showed that the assessee had received only the recorded loan through banking channels, paid interest thereon with tax deduction and repaid it through banking channels; the alleged further credit was a reversal of payment to another creditor. Documentary evidence and lender confirmation corroborated the transaction, but no adverse material was brought to displace it. Further, statements of third parties were used without affording the assessee the requested opportunity to cross-examine them, and the Assessing Officer could not require the assessee to produce such witnesses. [Paras 8, 10, 11, 12]

The unexplained cash-credit addition was held unsustainable and was quashed.

Commission expenditure alleged in relation to unexplained credit - commission-expenditure addition consequential to the alleged unexplained cash credit - HELD THAT: - Since the underlying cash-credit addition was unsustainable, the consequential addition for alleged commission expenditure could not survive. [Paras 12]

The commission-expenditure addition was also held unsustainable and was quashed.

Final Conclusion: The reassessment, the unexplained cash-credit addition and the consequential commission-expenditure addition were quashed. The appeal was allowed.

Approval u/s 80G for institutions with religious objects - Predominant-object and actual-activities test - Essential Religious Practices test

Eligibility of a society for approval under section 80G where its objects include construction or maintenance of places of worship, alongside educational, medical and public-utility activities - HELD THAT: - Denial of approval merely from references to religious objects in the memorandum was unjustified, particularly on renewal, without examining the applicant's recent financials and identifying actual religious expenditure. The financial records disclosed no expenditure on the alleged religious activities, while the bye-laws showed charitable objects directed towards social cohesion, education and medical facilities. The determination must rest on the institution's predominant and actual intent, including whether an activity discriminates on grounds of religion, promotes a particular faith to the exclusion of others, or involves proselytisation. In the absence of a statutory definition, the Essential Religious Practices test may broadly guide the inquiry; secular public-utility activities associated with places of worship do not by themselves establish a prohibited religious activity. [Paras 5, 6, 7, 8, 9]

The rejection of approval was held erroneous, the appeal was allowed, and the prescribed authority was directed to grant approval.

Final Conclusion: The appeal was allowed. The society was held entitled to approval under section 80G, as its actual activities and predominant objects were charitable rather than prohibited religious activities.

Unexplained cash credit - creditworthiness of purchaser - Source of source - prospective applicability of proviso to section 68

Addition as unexplained cash credit in respect of an advance received from the purchaser under an agreement for sale, based solely on the purchaser's comparatively low declared income - HELD THAT: - The assessee furnished the agreement for sale, banking records, ledger account, and the purchaser's PAN and address, and also sought independent verification by exercise of the Assessing Officer's powers under sections 131 and 133(6). The Assessing Officer made no such enquiry. Low declared income of the purchaser, without further enquiry or material disproving the documented transaction, could not conclusively establish absence of creditworthiness. Further, the requirement to explain the source of the source under the proviso to section 68 was applicable from Assessment Year 2023-24 and did not govern the year in question. [Paras 11, 12, 13]

The addition under section 68 was held unsustainable and deleted.

Final Conclusion: The appeal was allowed and the addition made under section 68 was deleted.

Ex parte first-appellate order - Effective opportunity of hearing in faceless appellate proceedings - Speaking appellate order

Validity of the ex parte disposal of the first appeal where the assessee was allowed less than fifteen days to respond to each of the hearing notices - HELD THAT: - The opportunities afforded through the notices were held to be neither real, reasonable nor effective, since each allowed less than fifteen days for compliance. Such paper opportunities did not enable the assessee to produce evidence and effectively support the claims made in the return, resulting in denial of reasonable opportunity and breach of natural justice. [Paras 5, 6, 7, 8]

The ex parte appellate order was set aside and the matter was remitted to the NFAC for de novo adjudication by a speaking order in accordance with section 250(6), without any finding on the merits.

Final Conclusion: The appeal was allowed for statistical purposes. The first appellate order was remitted for fresh adjudication after affording the assessee a real and reasonable opportunity of hearing.

Suit seeking rights in property purchased by a father in the names of his minor sons - Retrospective operation of declaratory and procedural benami-law amendments - Guardian-ward fiduciary relationship in benami property transactions - Rejection of plaint barred by law

Maintainability of a suit concerning property allegedly purchased by a father in the names of his minor sons, in the face of the statutory bar against benami claims - HELD THAT: - The declaratory provision defining and excepting acquisitions in the name of a child was held retrospectively applicable, since the amended provisions relied upon were declaratory in nature and not penal.

Though the Hon'ble Supreme Court in the case of Manjula [2026 (5) TMI 593 - SUPREME COURT] has now conclusively held that the amendment would be retrospective except in penal provisions, but even if the unamended provisions are seen, then also the transaction would be saved in terms of unamended Section 4(3)(b) of Act of 1988.

The alleged acquisition by the father in the names of his minor sons consequently fell within the statutory exception. Independently, under the unamended law, the relationship of guardian and ward was fiduciary; therefore, the transaction was protected by the exception for property held by a person standing in a fiduciary capacity. [Paras 9, 11, 14, 15]

The suit was not barred by the Prohibition of Benami Properties Act, 1988, and rejection of the plaint was rightly refused.

Final Conclusion: The revision was dismissed. The refusal to reject the plaint was sustained because the asserted transaction was protected under both the amended and unamended statutory regimes.

Release of seized gold jewellery - Statutory time-limit for show-cause notice - Waiver of show cause notice and personal hearing - Show cause notice before confiscation of goods - Non- compliance with Section 124

HELD THAT:- Petitioner has fairly stated that in identical matter Special Leave Petition [2026 (6) TMI 77 - SC ORDER] has been dismissed by a coordinate Bench of this Court. In such view of the matter, the special leave petitions are dismissed.

Advance licence obtained by misrepresentation or fraud is voidable until cancelled - validity of imports under an endorsed transferable advance licence where licensing authority has not cancelled or suspended the licence - authority and duty of licensing authority to suspend or cancel licences obtained by fraud - liability for customs duty where importer is transferee who imported under a valid advance licence - penalty under Section 112(a) of the Customs Act for acts or omissions rendering goods liable to confiscation - confiscation and duty demands vis-a -vis goods imported under a licence later alleged to have been fraudulently obtained

HELD THAT:- We are of the view that no error, not to speak of any error of law, could be said to have been committed by the High Court [2011 (1) TMI 1303 - GUJARAT HIGH COURT] in passing the impugned Judgment and Order.

Even otherwise, as fairly pointed out that this Appeal can be disposed of on the ground of low tax effect.

Release of detained gold articles after expiry of notice period - Warehousing charges on release of detained goods

Clarification of the release order concerning the weight of the detained gold articles, the scope for further departmental proceedings, and the period for which warehousing charges were payable - HELD THAT: - The Court corrected the collective weight of the gold bangle and gold chain in the release order. Having regard to its earlier determination that the period for issuance of a show-cause notice had elapsed, the Court held that permitting further proceedings would unnecessarily prolong the matter and cause undue harassment. The release remained conditional upon payment of applicable customs duty and warehousing charges, which were confined to the period up to the original release order. [Paras 8, 11, 14, 15]

The review petition was disposed of with the correction and clarifications; the detained articles were to be released subject to payment of applicable duty and warehousing charges up to the original release order, and subject to any order in a Supreme Court SLP.

Final Conclusion: The Court disposed of the review petition after correcting the recorded weight of the detained gold articles and clarifying the conditions of release. No further clarification preserving future departmental proceedings was granted.

Monetary threshold for departmental Customs appeals - Post-export amendment of shipping bills for MEIS claim

Monetary threshold for departmental Customs appeals - Maintainability of the Departmental appeal against amendment of shipping bills where no Customs duty, interest, fine or penalty was involved and the disputed MEIS entitlement was below the prescribed monetary threshold - HELD THAT: - The Board's monetary-limit instructions issued under the statutory scheme require regard to be had to the circumstances in which departmental appeals are filed. The appeal was below the applicable threshold, and the Revenue did not establish that the dispute concerning amendment of shipping bills fell within any specified exception. Continuing such an appeal would defeat the object of limiting Government litigation and concentrating departmental resources on qualifying matters. [Paras 12, 13, 14]

The Departmental appeal was not maintainable under the applicable monetary-limit policy.

Post-export amendment of shipping bills for MEIS claim - Contemporaneous documentary evidence for amendment - Prospective operation of limitation for shipping-bill amendment - Permissibility of amending exported shipping bills from "NO" to "YES" to enable pursuit of MEIS benefit under Section 149 of the Customs Act, 1962 - HELD THAT: - Section 149, as applicable when the exports were made, permitted post-export amendment upon contemporaneous documentary evidence and contained no prescribed limitation period. A subsequently introduced time restriction could not be retrospectively applied. Repeated "NO" declarations and delay were relevant to the proper officer's discretionary assessment of the asserted contemporaneous intention, but did not constitute an absolute legal bar; nor did the fiscal consequence of amendment place it outside Section 149. Amendment merely enables presentation of corrected shipping bills, while eligibility for MEIS remains for the competent authority to determine independently under the applicable scheme. [Paras 20, 21, 22, 23, 24]

The order permitting the respondent to seek amendment of the shipping bills was sustained, subject to independent determination of MEIS eligibility by the competent authority.

Final Conclusion: The Revenue's appeal was dismissed as being below the applicable monetary threshold and, independently, on merits. The amendment of the shipping bills was sustained without conferring any automatic entitlement to MEIS benefit.

Classification of natural rubber latex toy balloons - Specific functional tariff classification over residual material-based classification - Penalty for deliberate misclassification to evade customs duty

Classification of imported natural rubber latex balloons as toy balloons under CTH 9503 OR as other inflatable articles of vulcanised rubber under CTH 4016 OR festive articles under CTH 9505 - HELD THAT: - The HSN Explanatory Notes are a safe and internationally accepted guide for tariff interpretation. They specifically include toy balloons in Heading 9503; consequently, recourse to the general or residual material-based heading for vulcanised rubber articles, or to the general festive and entertainment articles heading, was impermissible. Under GRI 1, the specific functional classification prevailed, and the notification clarification also supported classification of natural rubber latex toy balloons under Heading 9503. [Paras 10, 11, 12, 13, 14]

The reclassification under CTH 95030090 was sustained, and classification under CTH 4016 or CTH 9505 was rejected.

Penalty for deliberate misclassification to evade customs duty - HELD THAT: - The appellants had earlier classified the goods under CTH 9503 and thereafter caused the classification on shipping documents to be changed. The change from CTH 9503 to CTH 4016 was made to avoid conformity with BIS standards, and the record also disclosed incorrect availment of exemption and other conduct evidencing mala fide intent. The plea that there was no intention to evade duty was therefore not accepted. [Paras 15]

The penal consequences imposed in the impugned orders were upheld.

Final Conclusion: The impugned orders confirming the reclassification, consequential duty demand, interest and penalties were upheld. The appeals were dismissed.

Customs valuation of imported wall paper based on contemporaneous similar goods - Speaking order in customs assessment after remand

Rejection of declared transaction value - Transaction value of contemporaneous similar goods - Enhancement of the declared customs value of imported wall paper on the basis of contemporaneous imports of similar goods - HELD THAT: - The declared transaction value could be rejected under Rule 12 where higher import values of identical goods recorded in the National Import Database gave the assessing officer reasonable doubt as to its truth or accuracy. The comparable imports relied upon were found to be at the same commercial level, in comparable quantity and from the same country of origin, and the lowest value among the contemporaneous imports had been adopted under Rule 5. The appellant's earlier self-assessed import did not displace those factual findings, particularly when the invoices and packing lists did not specify the size or thickness of the wall paper. Case followed JKC GENERAL TRADING COMPANY THR. ITS PARTNER [2025 (12) TMI 719 - BOMBAY HIGH COURT] [Paras 6, 7, 8, 9, 10]

The enhancement of value and the order upholding it were sustained.

Speaking order on customs assessment - Non-issuance of a speaking order on the assessment of imported wall paper despite an earlier remand directing such order after personal hearing - HELD THAT: - Section 17(5) requires the customs officer to issue a speaking order. While noting that no speaking order had been passed despite the earlier remand, the Tribunal held that the assessment could not be quashed on that ground when the appellant remained free to approach the concerned authorities for issuance of the speaking order. [Paras 10]

The direction permitting the appellant to pursue issuance of a speaking order before the competent authorities was upheld.

Final Conclusion: The Tribunal found no infirmity in the enhancement of the customs value of the imported wall paper or in the treatment of the pending speaking-order requirement. The appeal was dismissed.

Recovery of drawback from non-recipient exporter - Confiscation of goods after export u/s 113 - Penalty for knowingly using false customs documents

Recovery of drawback from non-recipient exporter - Recovery of claimed drawback and interest from the garment exporter whose goods were shipped under another entity's IEC - HELD THAT: - Drawback processing through ICES results in credit to the bank account of the IEC holder. As no shipping bill was filed in the exporter's name, no drawback could have been credited to it. Recovery of wrongly paid drawback is an execution proceeding and does not require adjudication; however, repayment with applicable interest would arise if the department establishes that any drawback was actually paid to the exporter. [Paras 10]

The recovery of drawback and interest from the exporter was unsustainable in the absence of evidence that it received the drawback.

Confiscation of goods after export under section 113 - Penalty for improper export - Penalty on the garment exporter and its directors for acts alleged to have rendered the garments liable to confiscation under section 113 - HELD THAT: - Section 113 applies only to export goods, namely goods intended to be taken out of India. Upon being taken outside India, the garments ceased to be export goods and became exported goods, which are not liable to confiscation under that provision. The finding of confiscability was therefore contrary to section 113, and the consequential penalty under section 114 could not survive. [Paras 12, 13, 14]

Penalty on the garment exporter and its directors for alleged use of false shipping bills and documents in exports made through another entity's IEC - HELD THAT: - The appellants neither made nor filed any declaration, statement or document before Customs. The false shipping bills had been filed by the freight forwarder in the name of an unrelated IEC holder. Although export using another person's IEC contravened the foreign trade law, there was no evidence that the appellants knowingly or intentionally made or used a materially false customs declaration, statement or document. [Paras 16, 17]

The penalties under section 114AA were set aside.

Final Conclusion: The appeals were allowed and the impugned order was set aside with consequential relief.

Demand of differential customs duty - foreign customs declarations received through an overseas enquiry - Presumption as to overseas customs documents - Rejection and re-determination of transaction value for import undervaluation - Mandatory penalty for customs duty evasion

Evidentiary value of declarations received from foreign Customs authorities and admissions made by the importer concerning undervaluation of imported kitchenware - Presumption as to overseas customs documents - Admissibility of statements under customs summons - HELD THAT: - The declarations obtained through the Consulate pursuant to an overseas enquiry were documents received from outside India in the course of investigation and attracted the presumption under Section 139(ii). The department established that they were received through proper channels and were accompanied by authenticated English translations; the importer produced no material to disprove their contents. The Tribunal further treated the importer's statements recorded by Customs officers under Section 108 as admissible evidence, Customs officers not being police officers, and found that the admissions corroborated the undervaluation. [Paras 7, 8, 9]

The foreign Customs declarations and the importer's admissions were held sufficient evidence of undervaluation; the contrary finding of the Commissioner (Appeals) was rejected.

Rejection of transaction value for misdeclaration - Sequential customs valuation - Validity of rejection and re-determination of the transaction value of imported urea-formaldehyde kitchenware on account of misdeclaration of quantity and brand and established undervaluation - HELD THAT: - The discrepancies found on examination concerning quantity and brand furnished sufficient grounds to reject the declared transaction value under Rule 12 of the Customs Valuation Rules. Once the transaction value stood rejected, valuation was required to proceed sequentially under Rules 4 to 9. The re-determination was based on the value of identical goods received from the same exporter, and the Tribunal held that the prescribed sequential process had been followed. [Paras 10]

The re-determined value and the consequential differential customs duty demand were upheld.

Penalty for differential customs duty evasion arising from wilful misstatement and suppression in the import declarations - HELD THAT: - Having upheld the differential customs duty demand, the Tribunal held that the penalty prescribed under Section 114A was mandatory and equal to the duty determined. [Paras 10]

The penalty imposed by the original adjudicating authority was sustained.

Final Conclusion: The departmental appeals were allowed, the orders of the Commissioner (Appeals) were set aside, and the differential customs duty demands and corresponding mandatory penalties were restored.

Interest on refund of redemption fine - Compensatory interest on revenue deposit - Entitlement to interest on redemption fine refunded after the confiscation - HELD THAT: - The amount paid for redemption of the goods, once the confiscation and redemption fine were set aside, was a revenue deposit and not a refund of duty governed by the statutory scheme for delayed duty refunds. The absence of a specific provision prescribing interest on refund of such deposit did not defeat the claim, since interest is compensatory for the period during which the Department retained an amount not legally payable. The authorities concerning interest on duty refunds under the Customs Act were therefore inapplicable.

In view of the facts and circumstances and relying upon the judgment of M/s Parle Agro Pvt. Ltd. [2021 (5) TMI 870 - CESTAT ALLAHABAD] upheld by the Allahabad High Court [2025 (11) TMI 2024 - ALLAHABAD HIGH COURT] and M/s Riba Textiles Ltd. [2022 (3) TMI 693 - PUNJAB & HARYANA HIGH COURT] I set aside the impugned order and allowed the appeals of the appellant and hold that the appellant is entitled to interest @ 12% from the date of the revenue deposit till the actual payment.[Paras 6, 8, 9]

Final Conclusion: The appeals were allowed. Interest at 12% per annum was directed on the refunded redemption fine from the date of revenue deposit until actual payment.

Penalty u/s 117 for unestablished customs contravention - Detention and demurrage waiver for customs-attributable delay

Penalty for unestablished customs contravention - Judicial exercise of penalty discretion - Validity of penalty under the residual penalty provision in respect of re-export of a technical-grade mono ammonium phosphate consignment - HELD THAT: - Penalty under the residual provision is attracted only upon a finding of contravention of the Act, abetment of such contravention, or failure to comply with a statutory duty where no separate penalty is prescribed. The adjudicating authority recorded that the re-export request was bona fide, the goods were unobjectionable on examination, the intended transhipment failed for want of a coastal vessel, and the requisite no-objections were available, yet identified no contravention or statutory failure by the appellant. Statutory discretion to impose penalty must be exercised reasonably, rationally and proportionately; it does not authorise mechanical imposition of the statutory maximum. [Paras 12, 15, 18, 19, 23]

The penalty was held arbitrary, disproportionate and unsustainable, and was set aside in toto.

Detention and demurrage waiver for customs-attributable delay - Entitlement to waiver of detention and demurrage charges where re-export was delayed by Customs authorities - HELD THAT: - The continued detention of the goods after the appellant had sought re-export and complied with the imposed condition could not be disregarded where the delay in permitting re-export was attributable to Customs authorities. Detention and demurrage charges for such period cannot justly be fastened upon the importer or exporter, particularly when the adjudication ultimately resulted in no penalty. [Paras 24, 25, 27]

The jurisdictional Customs authority was directed to issue a waiver certificate under the Handling of Cargo in Customs Areas Regulations, 2009, for detention and demurrage charges up to the issuance and availability of the let export order.

Final Conclusion: The appeal was allowed by setting aside the penalty and directing issuance of a detention and demurrage waiver certificate for the period of Customs-attributable delay in permitting re-export.

Provisional release of seized goods - non affording a personal hearing and without considering the pending request for re-test - non observance of natural justice - Audi Alteram Partem

HELD THAT: - It is seen that in decision in Mohini Jewellers [2023 (8) TMI 755 - KERALA HIGH COURT] has held that the Act of adjudicating authority in deciding an application for provisional release is adjudicating procedure and not a ministerial act and therefore the adjudicating authority is bound to adhere to the elementary principles of natural justice by adverting to the contentions raised in an application seeking provisional release and afford the applicant an opportunity of being heard.

An application for provisional release entails an adjudicatory procedure and is not a ministerial act; the applicant must therefore be afforded an opportunity of hearing and its contentions must be considered. The impugned order did not indicate that the importer had been heard, refer to a request for provisional release, or consider the pending request for re-test, the result of which could bear upon adjudication. [Paras 7, 8, 9, 10]

The provisional release order was set aside and the customs authority was directed to grant a personal hearing, permit evidence, and pass a reasoned fresh order on provisional release in accordance with prevailing instructions and judicial pronouncements.

Final Conclusion: The appeal was allowed by setting aside the provisional release order and remitting the matter for a fresh reasoned decision after affording the importer a personal hearing.

Redemption fine and penalty on re-export of misdeclared imported goods - Quantum of redemption fine and penalty where imported goods declared as mixed metal scrap were treated as e-waste, re-exported, and not cleared for home consumption

HELD THAT: - The finding that the goods were e-waste rested only on the Chartered Engineer's report, which was held not to be conclusive evidence for classification. As the goods had already been re-exported in compliance with the order and had not entered home consumption, the redemption fine and penalty required substantial reduction. [Paras 7, 8]

The redemption fine and penalty were each reduced to Rs. 50,000, and the appeal was partly allowed.

Final Conclusion: The impugned order was modified by substantially reducing the redemption fine and penalty in view of re-export of the goods and the inconclusive basis for their classification.

Undervaluation of imported heavy earth-moving machinery - Admissibility of unauthenticated electronic invoices - Corroboration of alleged extra remittances

Rejection of the declared value of imported heavy earth-moving machinery on the basis of unsigned invoices, computer printouts and uncorroborated statements alleging undervaluation - HELD THAT: - Unsigned and unauthenticated invoices could not attract a presumption u/s 139. The computer-generated invoices were inadmissible, as the statutory safeguards u/s 138C(2) for electronic records had not been satisfied. The statements relied on were neither independently corroborated nor supported by admissible evidence establishing additional payment by the appellant to the overseas supplier. The same investigation and substantially identical evidence had already been found insufficient to sustain allegations of undervaluation in connected proceedings, and no contrary material justified a departure from that view.

We find that the very same issue in respect of proceedings arising from the very same investigation and substantially the same evidentiary material has already been decided by this Tribunal in the case of Shri Ranaji Ganguly [2025 (2) TMI 1286 - CESTAT KOLKATA] wherein held that the allegation of undervaluation could not be legally sustained. Also see ABHIJIT RAY BURMAN [2025 (12) TMI 833 - CESTAT KOLKATA] [Paras 10, 11, 13, 14]

The allegation of undervaluation was unsustainable; the redetermination of value, differential duty, interest, confiscation, redemption fine and penalties were set aside.

Final Conclusion: The appeal was allowed with consequential relief. The impugned orders against the appellant were set aside.

Transfer of winding-up proceedings for corporate revival - Irreversible stage of winding up - Transfer of the winding-up petition to the National Company Law Tribunal at the instance of a financial creditor, despite sales of certain assets outside the winding-up proceedings

HELD THAT: - A financial creditor may seek transfer for revival within the time-bound rehabilitative framework of the IBC. Transfer is to be declined only where winding up has reached an irreversible stage; admission of the winding-up petition, appointment of a liquidator, or possession of assets does not by itself establish such irreversibility. The sale of assets by secured creditors outside the winding-up proceedings likewise did not preclude transfer where assets remained available and revival remained possible. The limited steps taken by the Official Liquidator did not amount to corporate death. We are fortified by the decision of the Supreme Court in A. Navin Chandra Steels Pvt. Ltd. [2021 (3) TMI 38 - SUPREME COURT] [Paras 8, 9, 10, 11]

The order transferring the winding-up petition to the National Company Law Tribunal was upheld.

Final Conclusion: The appeal was dismissed, and the transfer of the winding-up petition to the National Company Law Tribunal for consideration under the IBC framework was sustained.

Corporate applicant's insolvency application - bona fide invocation - Penalty for malicious insolvency application - proportionality

Corporate applicant's insolvency application - bona fide invocation - Malicious intent to defeat secured recovery proceedings - Maintainability of the corporate applicant's application for initiation of insolvency resolution where it was filed after recovery action had commenced and hypothecated plant and machinery were found missing - HELD THAT: - Proof of debt and default does not require automatic admission of an application by a corporate applicant. The Adjudicating Authority is duty-bound to sift the material on record to determine whether the application is a genuine effort to resolve indebtedness or is intended to derail recovery proceedings. The unexplained removal of hypothecated assets during recovery proceedings, coupled with the timing of the application after coercive action under the SARFAESI Act had begun, established that the application was intended to secure a moratorium and defeat the creditors' recovery process rather than achieve resolution. [Paras 23, 25]

The dismissal of the application for malicious intent was sustained.

Penalty for malicious insolvency application - proportionality - Quantum of penalty imposed for filing the insolvency application with malicious intent - HELD THAT: - A penalty for fraudulent or malicious conduct must be supported by reasons reflecting the magnitude of the fraudulent act and the basis for the quantum imposed. The principle of proportionality applies, and the impugned order did not provide reasons justifying the penalty imposed. [Paras 26, 27]

The penalty was reduced.

Final Conclusion: The appeal was partly allowed. The dismissal of the corporate applicant's insolvency application was affirmed, while the penalty was reduced.

Minimum default threshold for corporate insolvency - Part repayment before admission of insolvency application - Maintainability of the financial creditors' application for initiation of corporate insolvency resolution process after repayments reduced the outstanding default below the statutory threshold - HELD THAT: - The admitted payments made before admission of the application left only the balance amount due, which was below the threshold of rupees one crore. The financial creditors ought to have apprised the Adjudicating Authority of those payments; had that occurred, the insolvency application might not have been admitted. The admission order consequently could not withstand legal scrutiny. [Paras 16, 17, 18]

The admission order was set aside and the appeal was allowed; any CIRP costs were directed to be borne by the appellant.

Final Conclusion: The corporate insolvency admission was set aside because the default outstanding on the date of admission was below the statutory threshold.

Modification of judicially awarded interest in insolvency proceedings - Insolvency proceedings not a recovery forum for contractual default interest - Judicial discretion in award of interest

Modification of interest awarded on the balance loan dues after repayment of the principal amount by substituting the contractual default rate for the judicially fixed rate - HELD THAT: - The earlier direction awarding interest formed part of a final adjudication rendered after considering the loan terms, the repayment of the entire principal and a substantial part of interest, and the circumstances in which the insolvency admission was set aside. Contractual terms are ordinarily binding, but a judicial forum may mould relief having regard to the nature of the proceedings and the surrounding circumstances.

The contractual default rate could not be mechanically enforced through modification, since the surviving dispute concerned the quantum of interest after the insolvency proceedings had ceased to survive; permitting enhanced penal interest would effectively convert proceedings under the Code into a recovery mechanism.

The liberty granted by the Supreme Court only enabled the Financial Creditor to seek modification and did not establish any entitlement to it. Any contractual claim for enhanced interest could be pursued before the competent forum contemplated by the loan agreement.

We find that the direction awarding interest at 9% per annum strikes a fair balance between the competing rights of the parties. It ensures that the Financial Creditor is compensated for the delayed payment, while at the same time recognising the undisputed fact that the Corporate Debtor had already repaid the entire principal amount together with a substantial portion of the interest even before the appeal was finally decided.

Replacing that rate with contractual default interest of 3% per month would convert the corporate insolvency resolution proceedings which have been closed by this Tribunal, into a recovery proceeding, which would be contrary to the objectives of the Code. [Paras 40, 42, 43, 44, 45]

No ground for modifying the interest rate of 9% per annum was made out, and the application seeking substitution of the contractual default rate was dismissed.

Final Conclusion: The application for enhancement of interest to the contractual default rate was dismissed. The previously awarded interest at 9% per annum on the balance amount was maintained.

Moratorium-prohibition on transfer of corporate debtor's assets - Public announcement of CIRP-deemed knowledge of moratorium - Remedy for violation of moratorium

Moratorium-post-CIRP transfer of corporate debtor's funds - Public announcement of CIRP-deemed knowledge of moratorium - Trust claim over funds held by corporate debtor - Remittance of funds transferred from the corporate debtor's account during the moratorium period, claimed to relate to pre-CIRP work and to be held in trust - HELD THAT: - The transactions were established from the corporate debtor's bank records as having occurred during the moratorium, without the Resolution Professional's knowledge. Public announcement and publication of the CIRP proceedings gave rise to deemed knowledge of the moratorium; ignorance of the proceedings was therefore unavailable as a defence. The assertion that the funds were held in trust was unsupported, as no trust relationship or basis for treating the transferred funds as trust money was established. Transfer or disposal of the corporate debtor's assets during moratorium attracted the prohibition under Section 14(1)(b). [Paras 18, 19, 20, 24, 25]

The direction to remit the funds transferred during the moratorium was upheld.

Remedy for violation of moratorium - Availability of proceedings under Section 60(5) read with Section 14(1)(b), notwithstanding the appellant's belated reliance on Section 74 of the Code - HELD THAT: - The contention founded on Section 74 had neither been pleaded nor urged before the adjudicating authority, and no finding on that provision existed. Further, Section 74 had been omitted by the Insolvency and Bankruptcy Code (Amendment) Act, 2026. The earlier decision relied upon by the appellant was rendered when Section 74 was in force and was held inapplicable. On the established facts of a moratorium breach, recourse under Section 14(1)(b) was available.

Because of the stipulations contained under Section 13(1)(b) to be r/w Section 15, which makes it mandatory to cause a publication, which is to be read with provisions of Regulation No. 6 as contained under the IBBI Insolvency Corporate Persons Regulation, 2016. The declaration made thereof would be in public domain and it would be leading to a deeming inference and knowledge to the appellant about the imposition of moratorium. For the aforesaid reasons, we don’t find any merits in the company appeal and the company is accordingly dismissed.[Paras 21, 22, 23, 24, 25]

The challenge to the maintainability of the proceedings under Section 60(5) read with Section 14(1)(b) was rejected.

Final Conclusion: The company appeal was dismissed. The direction for remittance of funds transferred from the corporate debtor during the moratorium was sustained.

Withdrawal of corporate insolvency resolution process after admission - Statutory bar on withdrawal before constitution of committee of creditors

Withdrawal of the corporate insolvency resolution process following a post-admission settlement between the operational creditor and the corporate debtor - HELD THAT: - The amended Section 12A, applicable to the case, makes the procedure for withdrawal more stringent and, by its non obstante clause, prohibits withdrawal of an application admitted under Sections 7, 9 or 10 before constitution of the committee of creditors.

The precedents concerning settlements reached before admission to the corporate insolvency resolution process were held inapplicable, since the settlement here was executed after admission and the parties themselves acknowledged that closure was subject to compliance with the Code and the prescribed procedure. [Paras 4, 5]

The IRP was left at liberty to apply before the Adjudicating Authority under Section 12A, which was requested to decide such application within 15 days in accordance with law.

Final Conclusion: The appeal and settlement application were disposed of without terminating the CIRP. The parties were required to pursue withdrawal before the Adjudicating Authority through the procedure prescribed by Section 12A.

Continuation of pre-liquidation asset sale process - Employee claims under liquidation waterfall

Challenge by former employees to the sale of aircraft assets during liquidation, where the sale process had commenced during the corporate insolvency resolution process and was subsequently adopted by the Stakeholders' Consultation Committee - HELD THAT: - The decision to sell the aircraft had been approved during the insolvency process and its completion had been upheld in earlier proceedings. The Adjudicating Authority had also held that the Code did not bar the liquidator from continuing a sale process initiated before liquidation. The Stakeholders' Consultation Committee adopted the earlier decision, and the appellants failed to show any material irregularity or illegality in the completed sale process. As former employees, their concern was confined to receipt of their dues in accordance with the statutory waterfall under Section 53 of the Code. [Paras 38, 39]

No illegality in the sale of the aircraft or in the impugned order was established; the appeal was dismissed, with the appellants' dues to be dealt with under the Section 53 waterfall mechanism.

Final Conclusion: The appeal was dismissed for failure to establish any material irregularity or illegality in the aircraft sale. The former employees' dues remain payable in accordance with the liquidation waterfall mechanism.

Limitation for personal guarantor's insolvency application - Acknowledgment of liability under the Limitation Act - Unilateral acknowledgment of liability

Maintainability of the personal guarantor's insolvency application filed after invocation of the guarantee, on the basis that the guarantor's one-time settlement proposals extended limitation - HELD THAT: - For an application by a personal guarantor, limitation commences upon invocation of the guarantee. Section 18 of the Limitation Act permits a fresh limitation period only upon a written acknowledgment by the party against whom the asserted right is claimed; a party cannot extend limitation through its own unilateral acknowledgment. An OTS proposal by the guarantor is an admission which the creditor may use against the guarantor, but which the guarantor cannot invoke for personal benefit. [Paras 39, 40, 41, 42, 43]

The Section 94 application was barred by limitation, and its dismissal was upheld.

Final Conclusion: The appeal and the application challenging the auction notice were dismissed, as the personal guarantor's insolvency application was time-barred.

Refund claim after acceptance of possession - Maintainability of a home allottee's claim for refund of charges after accepting possession, making payment and registering the unit - HELD THAT: - The Corporate Debtor was undergoing CIRP and the Resolution Professional had completed construction and offered possession while running it as a going concern. Having accepted possession, paid the demanded amount and obtained registration of the unit, the allottee could not subsequently seek refund; any objection to the charge ought to have been raised before taking possession and registration. [Paras 8, 9]

The rejection of the refund application was upheld.

Final Conclusion: The appeal was dismissed, as the allottee's post-possession claim for refund was not entertainable.

Continued freezing of property under the PMLA - recording and communication of reasons to believe for search, freezing and adjudication complied with the Prevention of Money Laundering Act

Recording and communication of reasons to believe under the PMLA - Validity of the seizure, freezing and adjudication proceedings on the ground of non-recording or non-communication of reasons to believe - HELD THAT: - The reasons to believe under Section 17 had been recorded, as reflected in the respondent's reply and the impugned order. Their communication to the appellants after recording was not mandatory. The show-cause notice itself incorporated the reasons to believe under Section 8(1), and the Adjudicating Authority was not required to record reasons under that provision in the manner contended. [Paras 27]

The challenge founded on absence, non-recording or non-communication of reasons to believe was rejected.

Freezing of property held by a person not arraigned in the scheduled offence - Requirement that the holder of property must be an accused in the scheduled offence or in money-laundering proceedings before the property can be seized or frozen - HELD THAT: - Attachment, seizure or freezing is not confined to property held by a person arraigned in the scheduled offence or for money laundering. The statutory scheme extends to any person involved in a process or activity connected with proceeds of crime, the object being attachment and confiscation of such proceeds irrespective of the name in which they are held. [Paras 28]

The objection based on the appellants not being named in the FIR, charge-sheet or ECIR was rejected.

Proof of proceeds of crime in the hands of the property holder - Statutory finding that property is involved in money-laundering - Continued freezing of the appellants' bank accounts and fixed deposits, and retention of digital devices, without specific evidence connecting the property with proceeds of crime and without the statutory finding that the property was involved in money laundering. - HELD THAT: - The material relied upon contained only general and non-specific allegations concerning alleged bribery, without identifying a transaction from which the appellants derived proceeds of crime or quantifying the proceeds available in their hands. Allegations that the appellants acted as intermediaries or participated in a general practice of bribery did not establish that the frozen assets constituted proceeds of crime. The appellants' explanations of the sources of the bank balances and fixed deposits were not specifically rebutted. Further, the Adjudicating Authority permitted retention and continued freezing solely on the stated necessity of ongoing investigation, without recording the mandatory finding that all or any of the properties referred to in the notice were involved in money laundering. Retention or continued freezing cannot rest merely on the need to facilitate investigation. [Paras 31, 32, 33, 34]

The continued freezing and retention were held unsustainable, and the impugned order was set aside qua the appellants.

Appellate Tribunal's jurisdiction after filing of prosecution complaint - Effect of filing a prosecution complaint before the Special Court on the Appellate Tribunal's jurisdiction to decide an appeal against continued retention or freezing of property. - HELD THAT: - The filing of a prosecution complaint does not oust the Appellate Tribunal's jurisdiction to examine the Adjudicating Authority's finding under Section 8(2) and to confirm, modify or set aside the order appealed against. Challenge to the confirmation order operates as an embargo on conclusion of the consequential proceedings until that order attains finality. [Paras 35]

The respondent's objection that only the Special Court could decide the fate of the seized records and properties was rejected.

Final Conclusion: The appeals were allowed and the order permitting continued freezing of the appellants' bank accounts and fixed deposits, and retention of the seized devices, was set aside qua the appellants.

Clearing and Forwarding services - service tax - limitation u/s 73 - penalty under subsection 4A of Section 73 - acknowledgement of debt u/s 18 of the Limitation Act, 1936 - order of remand - Estoppel against law (no estoppel against statute) - HELD THAT:- We see no reason to entertain the appeals challenging the impugned judgment and order passed by the High Court [2026 (2) TMI 289 - CALCUTTA HIGH COURT].

Review jurisdiction - error in judgment - Maintainability of review of the earlier judgment on the asserted error concerning the statutory provision under which the show-cause notice was issued - HELD THAT: - The Court held that its observations in the earlier judgment were founded on the facts and were consistent with the judgment as a whole. It further held that even an incorrect judgment cannot be rectified in review under Order XLVII Rule 1 of the Code of Civil Procedure. [Paras 3, 4]

The review application was rejected.

Final Conclusion: The review application was rejected, with no order as to costs.

Interest on refund of pre-deposit - Entitlement to interest on refunded service-tax pre-deposit for the period during which the appellant delayed seeking refund after succeeding before the High Court - HELD THAT: - Section 35FF mandates interest from the date of pre-deposit until its refund, without making the entitlement dependent on the cause of the intervening delay. The appellant's unexplained delay in forwarding the High Court judgment and seeking refund could not curtail the statutorily prescribed period of interest; considerations of fairness or equity cannot override the provision. [Paras 6, 10]

The appellant was held entitled to interest for the entire period from payment of the pre-deposit until its refund, including the period of delay attributable to the appellant.

Final Conclusion: The appeal was allowed and the impugned order was modified to grant interest on the refunded pre-deposit for the entire period until refund.

Security agency service - statutory welfare board providing ex-servicemen guards without commercial activity - Extended limitation for service tax demand - absence of suppression or intent to evade

Security agency service - statutory welfare board providing ex-servicemen guards without commercial activity - Liability of a statutory welfare board to service tax as a security agency for facilitating deployment of ex-servicemen as guards to banks - HELD THAT: - The Board was constituted under statute and performed welfare functions for ex-servicemen. It merely facilitated the deployment of guards and collected their remuneration for disbursement to them, without earning profit or carrying on a commercial business of providing security services. Its activities consequently did not fall within the statutory definitions of security agency or security agency service. [Paras 6, 7, 8, 9]

The demand under the category of security agency service was unsustainable on merits.

Extended limitation for service tax demand - absence of suppression or intent to evade - Validity of invoking the extended period where non-payment arose from a bona fide understanding of taxability and the ingredients of suppression or intent to evade were not established - HELD THAT: - The finding that the appellant acted under a bona fide belief based on legal interpretation was inconsistent with invocation of the extended period. As Revenue failed to establish fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade tax, the longer limitation period could not be invoked.

As relying on M/S INDIAN RED CROSS SOCIETY VERSUS COMMISSIONER OF CE & S.T., CHANDIGARH [2025 (3) TMI 333 - CESTAT CHANDIGARH] we are of the considered view that the services rendered by the appellant as statutory board cannot be subject to service tax under the category of security agency service and they do not fall in the definition of security agency as prescribed under law, therefore, on merit, we are of the considered view that the impugned orders are not sustainable and are liable to be set aside and we do so.[Paras 10, 11]

Invocation of the extended period of limitation was held bad in law.

Final Conclusion: The impugned orders were set aside and all the appeals were allowed with consequential relief, as the appellant was not liable to service tax as a security agency and the extended period was unavailable.

Service tax liability of local bodies for sale of advertisement space - Statutory advertisement tax as consideration for taxable service - Extended limitation against public undertakings

Service tax liability of local bodies for sale of advertisement space - Liability of a municipal corporation to service tax on amounts collected for permitting display of advertisements before the definition of "person" was introduced in the Finance Act, 1994 - HELD THAT: - The Tribunal held that its earlier final order in the appellant's own case [2026 (7) TMI 96 - CESTAT CHANDIGARH], concerning the identical service and the same legal position, squarely governed the dispute. The earlier ratio treated a municipal corporation as not falling within "person" for the relevant pre-negative-list period and, consequently, outside the taxable-service provision for sale of space for advertisement. [Paras 7]

The demand for service tax was held unsustainable.

Statutory advertisement tax as consideration for taxable service - Whether advertisement tax levied by a municipal corporation under its statutory authority could be subjected to service tax as consideration for sale of space for advertisement? - HELD THAT: - By applying the ratio in the appellant's own earlier case, the Tribunal accepted that the levy collected as advertisement tax was a statutory levy and not consideration chargeable to service tax. [Paras 7]

The statutory levy could not sustain the impugned service-tax demand.

Extended limitation against public undertakings - Invocation of the extended limitation period for the service-tax demand against a municipal corporation on an issue involving legal interpretation - HELD THAT: - The Tribunal followed its earlier ruling in the appellant's own case, which held that suppression with intent to evade tax could not be alleged against a government local body where the dispute turned on interpretation of law. [Paras 7]

The extended period was unavailable; interest and penalties consequently did not survive.

Final Conclusion: Following the binding ratio in the appellant's own earlier case, the Tribunal set aside the impugned order and allowed the appeal with consequential relief.

Business Support Service - service tax under the category of “Support Services of Business or Commerce” - Contractual nexus for service tax levy - Adda-fee collection under State concession agreement

Liability to service tax as Support Services of Business or Commerce on collection of adda-fee by a management contractor operating and maintaining State bus terminals - HELD THAT: - Service tax is a contract-based levy, requiring examination of the contractual relationship between the service provider and recipient. The appellant's agreement was with the State undertaking for development, operation and maintenance of public bus-terminal infrastructure, and no contract existed with bus operators for provision of support services. Collection of adda-fee under the State concession arrangement, therefore, did not constitute Business Support Service rendered to bus operators.

The Tribunal followed Rohan And Rajdeep Infrastructure Pvt. Ltd. vs. CCE & ST, Ludhiana [2026 (2) TMI 236 - CESTAT CHANDIGARH] wherein the Tribunal, after considering all the submissions and facts, has held that the collection of adda-fee under a State concession agreement, in the absence of a direct contractual relationship with bus operators, does not constitute “Business Support Service”. [Paras 6, 7]

The service-tax demand under Support Services of Business or Commerce, with consequential interest and penalties, was set aside and the appeal was allowed on merits.

Final Conclusion: The impugned order was set aside and the appeal was allowed on merits. The limitation issue was left undecided.

Exemption for renting immovable property to an educational institution - Extended limitation for non-payment of service tax

Eligibility for exemption on renting of immovable property claimed to have been provided to an educational institution - HELD THAT: - The exemption was available only where the renting service was received by an educational institution. The lease deed described the lessee as a registered society and permitted office, commercial, education, counselling, research and hostel use; it did not establish that the lessee was an educational institution or that the premises were rented exclusively for educational purposes. The subsequent certificate issued by a university neither established the tenant's status nor its connection with the tenant. Since the burden of proving exemption eligibility lay on the assessee and exemption notifications required strict construction, the claim failed. We draw our support from the decision of M/s Dilip Kumar and Company[2018 (7) TMI 1826 - SUPREME COURT (LB)] [Paras 6, 7, 9, 10]

The denial of exemption was upheld.

Invocation of the extended period for recovery of service tax on the renting service - HELD THAT: - Invocation of the extended period requires a positive act evidencing intent to evade tax and cannot rest on mere non-payment. The plea of bona fide belief based on exemption was not accepted because the assessee had failed to establish that the tenant was an educational institution or that the premises were rented for educational use. See PUSHPAM PHARMACEUTICALS COMPANY[1995 (3) TMI 100 - SUPREME COURT]. [Paras 11, 12]

The extended period was held rightly invoked; however, the demand beyond five years was set aside, the remaining demand was confirmed, and the penalty was proportionately reduced.

Final Conclusion: The appeal was partly allowed. While the exemption denial and invocation of the extended period were sustained, the demand beyond five years was set aside and the penalty was proportionately reduced.

Service tax on commission from DTH recharge-voucher distribution - Business Auxiliary Services - Double taxation of commission embedded in MRP - Service tax liability and equivalent penalty on commission received for distribution of DTH recharge vouchers where service tax had been discharged by the DTH operator on the maximum retail price inclusive of such commission

HELD THAT: - Where the DTH operator has discharged service tax on the maximum retail price of recharge vouchers, which includes the distributor's commission, a separate levy of service tax on that commission amounts to double taxation. The identical issue having been decided in Kumar's Electronics [2019 (6) TMI 852 - CESTAT CHENNAI] that decision was held applicable on all fours. [Paras 7]

The demand under Business Auxiliary Services, with interest and the equivalent penalty, was set aside.

Final Conclusion: The appeal was allowed and the service-tax demand on the distributor's commission, together with interest and equivalent penalty, was set aside with consequential relief in accordance with law.

Extended period of limitation for service-tax demand - Adjudication on merits of time-barred demand

Extended period of limitation for service-tax demand - Suppression of facts with intent to evade tax - Invocation of the extended limitation period for service tax alleged to be payable under reverse charge on services received from the overseas recording-service provider - HELD THAT: - The extended period under the proviso to section 73(1) is attracted only upon fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade tax. The show-cause notice neither identified the statutory limb of Business Auxiliary Service allegedly attracted nor contained evidence establishing the alleged service relationship. It also disclosed no positive act evidencing fraud, wilful suppression or misstatement with intent to evade payment of service tax.

Revenue has failed to adduce any evidence or establish that the respondent engaged in wilful or deliberate suppression of material facts, and there is nothing on record to suggest that the appellant acted with any intention to mislead the authorities or evade payment of service tax. Decisions abound, and a reference to the Judgements of the Apex Court in CCE v. H.M.M. Ltd [1995 (1) TMI 70 - SUPREME COURT], Pushpam Pharmaceuticals Company [1995 (3) TMI 100 - SUPREME COURT], Stemcyte India Therapeutics Ltd [2025 (7) TMI 1007 - SUPREME COURT], Uniworth Textiles [2013 (1) TMI 616 - SUPREME COURT] and Bharat Hotels Ltd [2018 (2) TMI 23 - DELHI HIGH COURT] would amply suffice.[Paras 15, 16, 17]

The extended period was unavailable; the service-tax demand was wholly barred by limitation and was set aside, along with consequential interest and penalty.

Adjudication on merits of time-barred demand - HELD THAT: - Once the demand was held time-barred, there was no occasion to examine its merits. The Tribunal followed the binding principle that adjudication on merits after holding the demand barred by limitation is impermissible. [Paras 18, 19, 20]

The Tribunal refrained from deciding the classification and taxability dispute on merits and allowed the appeal on limitation.

Final Conclusion: The appeal was allowed as the service-tax demand was wholly barred by limitation. The impugned order, together with the consequential interest and penalty, was set aside.

Taxability of technical Know-How under Intellectual Property Right Service - Permanent transfer versus temporary licensing of intellectual property rights - Penalties for non-registration in respect of non-taxable Intellectual Property Right Service

Technical Know-How as intellectual property right - Permanent transfer of intellectual property rights - Taxability of consideration under the Asset Sale and Purchase Agreement for Know-How and related assets as Intellectual Property Right Service - HELD THAT: - For levy under Intellectual Property Right Service, the property must be an intellectual property right recognised under Indian law and the transaction must involve only a temporary transfer or permission to use it. Know-How was not shown to be recognised as a distinct intellectual property right under any law in force in India. Independently, the Agreement, read as a whole, effected an absolute sale: title, property and risk passed to the appellant, while the transferor was restrained from using or disclosing the Know-How. The royalty linked to future gross sales was expressly part of the sale consideration and its deferred mode of payment did not convert the completed sale into a continuing licence. The customs valuation treatment could not determine service-tax classification under a distinct enactment. [Paras 14, 15, 16, 17, 18]

The transaction was a permanent, outright transfer falling outside Intellectual Property Right Service; the service-tax demand was set aside in its entirety.

Penalty for non-registration and non-filing of service-tax returns - Reasonable cause for waiver of penalty - Sustainability of penalties for alleged failure to obtain registration and comply with service-tax requirements in respect of the impugned transaction - HELD THAT: - As the demand itself failed, there was no underlying obligation to obtain registration or discharge service tax in respect of the transaction. In any event, the appellant's bona fide and arguable interpretation of law and its correspondence with the Department constituted reasonable cause for waiver of penalties. [Paras 20]

The penalties imposed under Sections 77(1)(a), 77(2) and 78(1) were held unsustainable and were set aside.

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

Mistake apparent from the record warranting rectification - Statutory outer limit for condonation of appeal delay - final order dismissing the statutory appeal as time-barred - Rectification of mistake not a substitute for review - Jurisdiction of Commissioner (Appeals) to condone delay

Statutory outer limit for condonation of appeal delay - Jurisdiction of Commissioner (Appeals) to condone delay - HELD THAT: - The Tribunal held that condonation of delay, if any, in filing the appeal before it was distinct from delay in filing the original appeal before the Commissioner (Appeals). Where the statute prescribes a normal limitation period and a further specified condonable period, the first appellate authority lacks jurisdiction to condone delay beyond that outer limit; sufficient cause, equity or hardship cannot enlarge a jurisdiction withheld by statute. Proceedings on merits before the Tribunal, including an interlocutory condonation order, could not confer such jurisdiction. [Paras 10, 11, 12, 13, 14]

The appeal before the Commissioner (Appeals) having been filed beyond the maximum condonable period, its dismissal as time-barred was legally sustainable.

Maintainability of the rectification application seeking reconsideration of the dismissal of the appeal as time-barred - HELD THAT: - Rectification jurisdiction is confined to correcting a patent and self-evident mistake apparent from the record and cannot be employed to review, re-hear or secure a fresh adjudication on merits. Since the final order conformed to the statutory limitation and the binding law governing the outer condonable period, no mistake apparent from the record was established. [Paras 12, 13, 15]

No rectifiable error was found in the final order.

Final Conclusion: The rectification application was dismissed, the Tribunal holding that the final order disclosed no mistake apparent from the record and that the statutory limitation governing the first appeal could not be extended.

Waiver of penalty for reasonable cause - Service tax composition scheme for ongoing works contracts - Verification of service tax liability based on reconciled records

Waiver of penalty for reasonable cause - Service tax composition scheme for ongoing works contracts - Penalty for short-payment of service tax and improper filing of returns in relation to ongoing construction projects taxed under the composition scheme - HELD THAT: - The dispute concerning applicability of the valuation scheme to projects commenced before 01.06.2007 attained clarity only upon the Supreme Court decision Nagarjuna Construction Company Limited vs. Union of India [2012 (11) TMI 404 - SUPREME COURT] . The assessee's initial adoption of the composition scheme therefore constituted reasonable cause; it had also paid the differential tax and interest and reversed the inadmissible Cenvat credit before adjudication. [Paras 7, 8]

The penalties under Sections 76 and 77 of the Finance Act, 1994 were set aside by extending the benefit of Section 80.

Verification of service tax liability based on reconciled records - Validity of determination of short-paid service tax on the basis of the assessee's reconciliations, Cenvat records, challans and Chartered Accountant certificates - HELD THAT: - The adjudicating authority had examined the Cenvat register, GAR-7 challans, reversal of Cenvat credit and reconciliation charts furnished with the Chartered Accountant certificate. The further certificate explained the nature of the questioned income, and no infirmity was found in the determination or appropriation made in the impugned order. [Paras 12]

The Revenue's appeal was dismissed and the impugned order was upheld.

Final Conclusion: The assessee's appeal was allowed and the penalties were deleted on the ground of reasonable cause. The Revenue's appeal challenging the determination of service tax liability was dismissed.

Taxable event for assignment of mining rights - Revenue neutrality and penalty for suppression

Taxable event for assignment of mining rights - Reverse-charge service tax on royalty - Liability to service tax under reverse charge on periodic royalty paid for iron ore mining rights granted under a lease executed before 1 April 2016 - HELD THAT: - The said issue was considered in the case of S.R. Traders [2023 (5) TMI 766 - CESTAT NEW DELHI] wherein it was held that amounts paid to the Government towards periodical charges for assignment of the right to use natural resources would not be exigible to Service Tax even after 01.04.2016, where the agreements conferring such rights had been entered into prior thereto

For service-tax levy, the taxable event is the time at which the service is provided or agreed to be provided. The assignment of the right to use the natural resource occurred under the mining lease executed before the service became taxable; subsequent periodic royalty payments could not attract the later levy. The Point of Taxation Rules govern the date for payment of tax and do not determine whether a service is taxable. [Paras 9, 10, 11]

The demand of service tax and consequential interest on the royalty payments was held unsustainable and was set aside.

Revenue neutrality and penalty for suppression - Penalty for alleged suppression in relation to service tax on royalty paid for captive iron ore mining rights - HELD THAT: - The extracted iron ore was used as an input in the appellant's own manufacturing facility, and any service tax paid would have been available as CENVAT credit. The transaction was therefore revenue neutral, and suppression of facts or intent to evade service tax could not readily be sustained. [Paras 12, 13]

No penalty was imposable.

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

Voluntary Compliance Encouragement Scheme - rejection of declaration on basis of routine summons - Inquiry or investigation-scope of summons for information

Validity of rejection of the VCES declaration on the footing that the summons issued to the declarant constituted a pending inquiry or investigation under Section 106(2) of the Finance Act, 2013 - HELD THAT: - The summons, issued for production of annual reports, foreign-currency expenditure details and royalty agreements, was routine and roving in nature; it disclosed neither any identified mischief nor suppression by the declarant. It therefore could not assume the character of an inquiry or investigation within Section 106(2) so as to defeat an otherwise valid VCES claim. The prescribed time limits governing departmental action under the scheme were binding, and the absence of any follow-up notice alleging a substantially false declaration further supported the conclusion that rejection was unjustified. [Paras 9, 10]

The rejection of the VCES declaration and the appellate order affirming it were set aside; the appeal was allowed and the Designated Authority was directed to issue the discharge certificate in Form VCES-3 within 30 days.

Final Conclusion: The VCES declaration was held wrongly rejected, since the routine summons did not amount to a pending inquiry or investigation under Section 106(2). The Designated Authority was directed to issue the discharge certificate.

Refund of unutilised Cenvat credit on exported services - Eligibility of unchallenged Cenvat credit at refund stage - Input service nexus for exported output services

Eligibility of unchallenged Cenvat credit at refund stage - Denial of refund of unutilised Cenvat credit relating to exported business support and information technology software services where the availment of credit had not been challenged - HELD THAT: - Where the Department had not disputed availment of Cenvat credit under Rule 14 of the Cenvat Credit Rules, it could not deny refund of that credit by resort to Rule 5. Tribunal treated the issue as settled by the decisions cited before it. [Paras 7]

The refund could not be rejected by reassessing the eligibility of credit at the refund stage.

Input service nexus for exported output services - General insurance, construction and works contract services as input services - Refund of credit on general insurance, commercial or industrial construction and works contract services denied for alleged absence of nexus with exported output services - HELD THAT: - The applicable definition of input service during the disputed period was exhaustive, and the services in question had been held to be input services in the decisions relied upon. Refund had been denied solely on the asserted lack of nexus with exported services. [Paras 8, 9]

The denial of refund on these input services was unsustainable.

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

Assessable value - buyer-supplied drawings and designs - Additional consideration under Central Excise valuation

Whether the cost of drawings, designs or royalty paid by MSIL to Suzuki Motor Corporation Japan can be added to the assessable value of the goods manufactured and supplied by the Appellant under Rule 6 of the Central Excise Valuation Rules, 2000? - HELD THAT: - Rule 6 applies only where goods or services supplied by the buyer constitute additional consideration and are used in, or necessary for, production of the goods. Specification drawings supplied to prospective vendors at the vendor-selection stage merely communicate the buyer's requirements; they are not detailed manufacturing drawings and do not relieve the manufacturer of the cost of producing the goods.

Royalty paid by the buyer to its foreign collaborator likewise does not constitute additional consideration flowing to the manufacturer where it has no nexus with manufacture or clearance of the components. Cases followed M/s Precision Tech Enterprises [2025 (1) TMI 731 - CESTAT CHANDIGARH] and Denso India Private Limited [2024 (3) TMI 686 - CESTAT NEW DELHI] [Paras 6, 7]

The cost of the drawings and designs and the buyer's royalty payment were not includible in the assessable value; the impugned order was set aside and the appeal was allowed with consequential relief in accordance with law.

Final Conclusion: The appeal was allowed and the demand, interest and penalty founded on inclusion of the buyer's specification drawings, designs and royalty payment in the assessable value were set aside.

CENVAT credit reversal on clearance of used refractory-brick waste and scrap - Scope of Rule 3(5A) in relation to capital goods - Used refractory bricks as inputs and not capital goods -

HELD THAT: - Rule 3(5A) applies where capital goods are cleared as waste and scrap. The refractory bricks, though credit had been availed on them, were used in manufacture and thereafter became waste and scrap; they were inputs and could not be treated as capital goods. The Tribunal further noted that the settled Tribunal view treated waste and scrap of used refractory materials as not attracting duty where not specified under the Central Excise Tariff. See Vasavadutta Cement [2003 (3) TMI 503 - CEGAT, BANGALORE] and Century Cement [2017 (3) TMI 1071 - CESTAT NEW DELHI].[Paras 13, 14, 15]

Rule 3(5A) was held inapplicable; no reversal of CENVAT credit was payable, and the consequential demand and penalty were unsustainable.

Final Conclusion: The impugned order was set aside and the appeal allowed with consequential relief. The demand for reversal of CENVAT credit, interest and penalty was held unsustainable.

The State of Rajasthan was directed to return the amount deposited towards interest within eight weeks following dismissal of the review petition, and the Miscellaneous Application was disposed of.