TaxTMI Updates e-Newsletter
Aug 31,2026

Service of show cause notice through GST portal - Violation of principles of natural justice

Validity of adjudication where the show cause notice was uploaded only under the 'Additional Notice and Orders' tab on the GST portal without separate intimation to the petitioner - HELD THAT: - The Court found a prima facie case that, as the notice was uploaded only under the specified portal tab and no separate intimation was given, the petitioner was unable to respond to it. This constituted a violation of the principles of natural justice. Since the statutory appeal had been dismissed solely on limitation and not on merits, interference was warranted in the peculiar facts. [Paras 5, 6]

The adjudication and appellate orders, along with the consequential bank attachment, were quashed; the adjudicating authority was directed to reconsider the grounds in appeal on merits after granting a hearing and to pass a fresh reasoned order.

Final Conclusion: The writ petition was disposed of by quashing the adjudication and appellate orders and directing fresh adjudication on merits in accordance with law.

Regular bail in alleged fraudulent input tax credit transactions - Entitlement to regular bail in prosecution for alleged wrongful availment and passing of input tax credit without actual supply of goods - HELD THAT: - The complaint had been filed against the applicant, a co-accused had been granted bail, the applicant had remained in custody, and the trial was likely to take considerable time. Although further investigation was continuing, these circumstances warranted release on bail. [Paras 10]

The applicant was directed to be released on bail on furnishing the stipulated personal bond and solvent surety, subject to the order remaining operative until disposal of the case.

Final Conclusion: The first application for regular bail was allowed in the stated terms.

Petitioner has not submitted any reply to the impugned show cause notice issued by the respondents u/ss 74 and 50 of the CGST/KGST Act, 2017

HELD THAT:- The petition was disposed of with liberty to the petitioner to reply to the show-cause notice with supporting documents within six weeks. The competent authority was directed to proceed in accordance with law after affording sufficient and reasonable opportunity.

Detention of goods for alleged reuse of e-way bill - Proof of intention to evade tax - Presumption cannot substitute proof -

Whether the goods being transported by the appellant first time or second time using same E-way bill? - HELD THAT: - The goods were accompanied by invoice, e-invoice and e-way bill, and no discrepancy in their description, quantity, value or ownership was established. The inference of re-transportation rested only on an earlier verification or location of the vehicle, without independent and cogent material proving that the same goods had completed an earlier journey or that the e-way bill had been reused. Contravention of the GST law and intention to evade tax could not be presumed from suspicion; the department was required to establish them by evidence. [Paras 5, 7]

The detention and penalty proceedings were unsustainable; the appellate and original orders were set aside and the amount deposited pursuant to those proceedings was directed to be refunded in accordance with law.

Final Conclusion: The appeal was allowed as the alleged reuse of the e-way bill and intention to evade tax were not established by cogent evidence. The impugned orders were set aside and refund of the deposited amount was directed in accordance with law.

Alleged reuse of e-way bill - detention and penalty proceedings - Proof of intention to evade tax in goods-detention proceedings

HELD THAT: - The goods were accompanied by invoice/e-invoice and e-way bill, with no discrepancy in their description, quantity, value or ownership. The conclusion of re-transportation rested solely on an inference drawn from an earlier verification of the e-way bill; the department produced no independent and cogent material to establish that the goods had completed an earlier journey or had been delivered. Intention to evade tax cannot be presumed from suspicion, and the presumption of evasion cannot substitute proof of the underlying contravention. The department also failed to establish that the vehicle-repair bill was fake or forged.

In the case of Umacharan Shaw & Bros. [1959 (5) TMI 11 - SUPREME COURT] it was held that it is settled law that suspicion, however strong, cannot take the place of legal proof.[Paras 32, 33]

The detention and penalty proceedings were unsustainable; the appellate and original orders were set aside, with refund of the amount deposited in accordance with law.

Final Conclusion: The appeal was allowed, and the orders sustaining detention and penalty for alleged reuse of the e-way bill were set aside. The deposited amount was directed to be refunded in accordance with law.

Quantum of amount in dispute - lower amount of tax and penalty in dispute - HELD THAT:- The departmental appeal was summarily dismissed under section 112(2) of the CGST/UPGST Act, 2017, having regard to the low amount of tax and penalty in dispute.

Classification of Psyllium seeds (Isabgol) - GST exemption for fresh or chilled Psyllium seeds - Goods of seed quality exemption - Psyllium seeds supplied after procurement through APMC auctions and storage in dry ventilated godowns

Whether raw and unprocessed Psyllium Seeds (Isabgol) procured through APMC auctions qualify as fresh seeds exempt under Entry 87 of Notification No. 10/2025-Central Tax (Rate) dated 17.09.2025; (ii) Whether the Psyllium Seeds qualify as goods of seed quality exempt under Entry 77 of Notification No. 10/2025-Central Tax (Rate) dated 17.09.2025? - HELD THAT: - Psyllium seeds are specifically covered by tariff sub-heading 1211 90 13 and fall within Heading 1211. Eligibility for exemption depends upon the condition of the goods at the time of the applicant's supply, rather than processes undertaken before their procurement from farmers. The stated storage in dry ventilated godowns was held to amount to drying; further, no material established that the goods remained fresh from harvest until onward supply. Applying the clarification distinguishing fresh goods from goods dried in any manner, the seeds could not be regarded as fresh or chilled. They consequently fell within the rate entry for dried goods under Heading 1211, and not within the exemption for fresh or chilled goods. The alternative exemption for goods of seed quality was also declined in view of that conclusion. The cited Gujarat advance ruling was not relied upon, as its facts were unavailable and it was not binding. [Paras 13, 14, 16, 18, 19]

Ruling:- Psyllium Seeds (Isabgol) supplied by the applicant can not be said to qualify as “fresh” Isabgol seeds and are not exempted under Entry 87 (HSN 1211) of Notification No. 10/2025-Central Tax (Rate) dated 17.09.2025 as “Plants and parts of plants (including seeds and fruits) of a kind used primarily in perfumery, in pharmacy or for insecticidal, fungicidal or similar purpose, fresh or “chilled.” The same are liable to tax @ 5% under Notification No. 09/2025-CT dt 17.09.2025 and ineligible for the claimed GST exemptions as “goods of seed quality” under Entry 77 (HSN 12) of Notification No. 10/2025-Central Tax (Rate) dated 17.09.2025.

Petition for quashing of CBDT Circular No. 11 of 2020 dated 08.05.2020 with a consequential direction to frame a Compassionate Tax Policy granting at least sixty days exemption to Indian Seafarers, who stayed more than 182 days in a financial year in India during the COVID-19 pandemic - HELD THAT:- We, without expressing any opinion on merits, dispose of this petition with a direction to the respondents to consider that representation(s) sympathetically and particularly in light of the decisions reported in Gaurav Baid vs. Union of India [2021 (2) TMI 1414 - SC ORDER], Arjun Panditrao Khotkar [2020 (7) TMI 740 - SUPREME COURT (LB)] Gujarat Assembly Election Case [2002 (10) TMI 813 - SUPREME COURT] Azadi Bachao Andolan, [2003 (10) TMI 5 - SUPREME COURT] and Shri Bhagwati Steel Rolling Mills [2015 (11) TMI 1172 - SUPREME COURT]

It shall be appreciated if an appropriate decision is taken within four weeks.The Writ Petition is, accordingly, disposed of.

Rejection of books of account and estimation of coaching-fee income - Scope of appellate interference with findings of fact under section 260A - Scope of Tribunal's appellate jurisdiction over fee-refund relief

Rejection of books of account and estimation of coaching-fee income - Findings of fact under section 260A - Rejection of the assessee's books of account and estimation of income, including acceptance of the claim for refund of fees, on the basis of seized material - HELD THAT: - The Tribunal's affirmation of rejection of the books was founded on the seized material, books of account and the parties' submissions. Whether the transactions reflected in loose sheets were recorded in the books and whether refunds to students were established required factual examination. Once the books were rejected, determination of income and the extent of allowable fee refunds were matters of estimation; a possible alternative computation did not raise a substantial question of law. Findings based on evidence cannot be reopened under section 260A unless perverse, unsupported by evidence or contrary to law. [Paras 9, 10, 11, 12, 15]

No perversity or error of law was shown in the Tribunal's findings; consequently, no substantial question of law arose on rejection of books, estimation of income or fee refunds.

Scope of Tribunal's appellate jurisdiction over fee-refund relief - The Tribunal's authority to examine the basis and extent of fee-refund relief granted by the Commissioner (Appeals) where the Revenue had appealed against that relief and the assessee had filed a cross-objection - HELD THAT: - The issue of fee refunds and the corresponding relief was before the Tribunal through the Revenue's challenge to the relief granted and the assessee's cross-objection against the sustained addition. The Tribunal was therefore entitled to examine the basis and extent of that relief and did not travel beyond the scope of the appeal. The decisions in J.K. Bankers [1972 (4) TMI 33 - ALLAHABAD HIGH COURT] and S.P. Kochhar [1982 (5) TMI 3 - ALLAHABAD HIGH COURT] were distinguished as arising in different circumstances. [Paras 13, 14]

The Tribunal had jurisdiction to examine the fee-refund relief, and its consideration of that issue was upheld.

Final Conclusion: No substantial question of law arose from the Tribunal's factual findings on rejection of books, estimation of income and fee refunds, or from its examination of the appellate relief. The appeal was dismissed.

Amortisation of Registrar of Companies fees for issue of share capital u/s 35D(2)(c)(iv) - Scope of expenditure connected with issue of shares -

Eligibility of fees paid to the Registrar of Companies for increasing share capital, by issue of shares to the holding company, for amortisation as preliminary expenditure - HELD THAT: - The provision covers expenditure incurred in connection with the issue of shares. The Tribunal incorrectly read the expression by omitting the comma after the word "issue" and restricting the benefit to the enumerated expenses connected with a public subscription. The listed expenses are descriptive in nature; consequently, fees paid to the Registrar of Companies for issuance of share capital fall within the provision. [Paras 11, 12, 13]

The disallowance was unsustainable; the order of the Tribunal and the Assessing Officer was set aside and the order allowing amortisation of the Registrar of Companies fees was restored.

Final Conclusion: The appeal was allowed and the question of law was answered in favour of the assessee. The claimed amortisation of fees paid to the Registrar of Companies for issue of share capital was allowed.

Decoding of numerical entries in seized documents - Attribution of rough-diamond transactions reflected in seized documents

Decoding of numerical entries in seized documents - Undisclosed income from unrecorded diamond-business transactions - Interpretation of the numerical entries on pages 4 and 5 of Annexure B-3 for determining undisclosed income from the assessee's unrecorded diamond-business transactions - HELD THAT: - The Tribunal, having held that multiplication of the recorded figures by either one hundred or one thousand lacked basis, could not sustain an addition by appending one zero without assigning reasons. The Commissioner (Appeals) had, however, furnished cogent reasons for reading the entries by appending two zeros, having regard to the nature of the entries and the surrounding material. [Paras 7]

The Tribunal's order was modified and the addition computed by reading the figures with two zeros appended, as determined by the Commissioner (Appeals), was restored.

Attribution of rough-diamond transactions reflected in seized documents - Unexplained investment and undisclosed profit from seized rough-diamond records - additions for unexplained investment and undisclosed profit based on rough-diamond entries in Annexures B-1, B-2 and the other seized records - HELD THAT: - The Commissioner (Appeals) and the Tribunal concurrently found that the relevant entries had been considered for taxation in the case of M/s. Shivam Exports, and that the assessee lacked the financial capacity to undertake such large-scale business independently. [Paras 8, 9]

The concurrent deletion of the additions was upheld in favour of the assessee.

Final Conclusion: The Revenue's appeals were partly allowed by restoring the addition determined by the Commissioner (Appeals) from pages 4 and 5 of Annexure B-3. The deletion of additions arising from the remaining rough-diamond entries was sustained.

Unexplained investment - addition for alleged on-money - Presumption as to seized documents - scope of section 132(4A)

Unexplained investment - addition for alleged on-money - Addition as unexplained investment for alleged cash on-money payment in acquisition of land, founded solely on information contained in a file received from the DRI - HELD THAT: - The concurrent factual findings were that, apart from the file received from the DRI, the AO had gathered no evidence of payment of on-money. Despite being called upon to verify the prevailing market rate of the land, the Assessing Officer made no independent inquiry, including at the remand stage, to establish that the assessee had paid any amount over and above the recorded consideration. The controversy was therefore fact driven and disclosed no substantial question of law. [Paras 12]

The deletion of the addition under section 69B was sustained and the proposed question of law was not entertained.

Presumption as to seized documents - scope of section 132(4A) - Applicability of the presumption u/s 132(4A) to a third-party assessee in regular assessment proceedings - HELD THAT: - The presumption under section 132(4A) applies to the person searched and is confined to search-and-seizure proceedings under section 132; it is unavailable for framing a regular assessment. As the assessee was not the person searched, the Revenue could not invoke that presumption against it. [Paras 13]

The Revenue's reliance on section 132(4A) was held misplaced, and no substantial question of law arose.

Final Conclusion: The Revenue's appeal was dismissed, as the addition lacked supporting material beyond the DRI file and the statutory presumption concerning seized documents could not be invoked against the assessee in regular assessment proceedings.

Revision of assessment prejudicial to Revenue u/s 263 - Substitution of opinion in revisionary jurisdiction

Assumption of revisionary jurisdiction over an assessment accepting the assessee's claim of indexed cost of acquisition and cost of improvement on sale of property - HELD THAT: - The material placed by the assessee had been disclosed before the Assessing Officer, who considered the explanation and consciously made no addition. The twin requirements of an erroneous assessment order and prejudice to the Revenue must coexist for revision; a revisionary authority cannot invoke that jurisdiction merely by substituting its view as to the inquiry that ought to have been undertaken by the Assessing Officer. See MALABAR INDUSTRIAL CO. LTD. [2000 (2) TMI 10 - SUPREME COURT] [Paras 18, 19]

No substantial question of law arose from the Tribunal's order quashing the revisionary order.

Final Conclusion: The Revenue's tax appeal was dismissed, as the revisionary jurisdiction could not be exercised to replace the Assessing Officer's considered view on the material disclosed during assessment.

Revision of assessment for lack of inquiry - Erroneous and prejudicial assessment order

Validity of revision of the scrutiny assessment on the ground that the Assessing Officer had failed to inquire into depreciation on fixed assets, commission paid to a non-resident and deduction claimed for employment of new workmen - HELD THAT: - The Tribunal's findings that the AO had conducted inquiries during assessment, applied mind to the matters in question, and that the Principal Commissioner had identified no flaw in the assessee's replies or specific defect in the prescribed audit report were findings of fact. The High Court found no legal infirmity in those findings warranting interference. [Paras 6, 7]

The revision order was rightly quashed; no substantial question of law arose from the Tribunal's order.

Final Conclusion: The tax appeal was dismissed, as the Tribunal's factual finding of due inquiry and application of mind in the original assessment disclosed no legal infirmity.

Addition u/s 56(2)(viia) - Fair market valuation of unquoted preference shares - Accountant's valuation report under Rule 11UA - Additional evidence before the Tribunal

Accountant's valuation report under Rule 11UA - Validity of valuation of unquoted preference shares on the basis of a report issued by an accountant- HELD THAT: - Rule 11UA expressly permits the assessee to obtain a valuation report from an accountant in respect of unquoted shares and securities other than equity shares. The Department could not, therefore, insist that the valuation be supported only by a report of an independent valuer or merchant banker. [Paras 4]

The valuation certificate issued by an accountant was accepted as permissible under Rule 11UA.

Additional evidence before the Tribunal - Whether the valuation certificate had been produced for the first time before the Tribunal? - HELD THAT: - The appellate record specifically showed that the valuation certificate, based on the audited financial records of the issuing company, had been furnished and considered in the first appellate proceedings. The premise that it was first introduced before the Tribunal was therefore factually incorrect. [Paras 5]

The objection founded on admission of fresh evidence before the Tribunal was rejected.

Fair market valuation of unquoted preference shares - Comparable transaction for share valuation - Determination of fair market value of preference shares transferred between group companies where the AO relied on an isolated acquisition of a portion of the shares - HELD THAT: - The seller was entitled to choose the block of shares transferred from its existing holdings, and the Revenue could not assume that the shares sold were exclusively those acquired in the isolated transaction relied on by it. The redemption terms recorded in the audited financial statements also supported the consideration paid. The Assessing Officer had disregarded the statutory valuation rules by substituting a value derived from an isolated third-party transaction. [Paras 6]

The consideration paid for the preference shares was held to be within the statutory valuation parameters, and the addition under section 56(2)(viia) was not sustainable.

Final Conclusion: No substantial question of law arose from the Tribunal's order. The Tax Case Appeal was dismissed and the Tribunal's order was upheld.

Interest on refund of self-assessment tax - Entitlement to interest on refund arising from excess self-assessment tax after appellate relief

HELD THAT: - Where self-assessment tax paid exceeds the tax ultimately chargeable as a result of appellate proceedings, the resulting refund carries interest as a statutory and non-discretionary consequence.

Hon’ble Supreme Court, in the matter of Union of India Vs. Tata Chemicals Ltd. [2014 (3) TMI 610 - SUPREME COURT] held that the refund becomes due when the tax deducted at source, advance tax paid, self-assessment tax paid, and tax paid on regular assessment exceed the tax chargeable for the year as a result of an order passed in appeal or other proceedings under the Act.

Applying the principle that, in cases not governed by the specified categories for computation of interest, interest on excess tax is payable from the date of its payment, the Court held that the petitioners were entitled to interest up to the date from which interest had already been paid. [Paras 11]

The respondents were directed to determine and pay interest on the refund from the date of payment of tax until 01.06.2016, within 60 days.

Final Conclusion: The petitions were disposed of with a direction to grant the unpaid interest on the refund arising from excess self-assessment tax for the specified period.

Advance-tax precondition for admission of appeal where no return has been filed - Failure to consider claim of absence of advance-tax liability

Dismissal of the quantum appeal for non-compliance with the advance-tax payment condition applicable where no return of income has been filed - HELD THAT: - Where no return has been filed, payment of advance tax otherwise payable is a condition for admission of appeal, subject to the appellate authority's power to grant exemption on an application showing good and sufficient reason. However, as neither the assessee nor the Assessing Officer had computed advance tax, the assessee's specific claim that no taxable income existed and, consequently, no advance-tax liability arose, could not be summarily discarded without calling for an explanation. The assessee had not sought exemption by an application under the proviso, but that omission did not justify disregarding his claim without examination. [Paras 15, 16]

The dismissal was set aside and the matter remanded for fresh consideration of the applicability of the advance-tax condition, with opportunity to the assessee; if the condition is held inapplicable or exemption is granted, the appeal shall be decided on merits.

Admission of penalty appeals dismissed for non-compliance with advance-tax condition - Dismissal of the appeals against penalties for under-reporting of income and failure to get accounts audited on the same admission ground - HELD THAT: - The penalty appeals involved the same facts and the same objection regarding compliance with the condition for admission of appeal. Their disposal was consequently governed by the directions issued in the quantum appeal. [Paras 19, 20]

The penalty appeals were also set aside and remanded on the same terms.

Final Conclusion: All three appeals were allowed for statistical purposes, and the matters were remanded for fresh adjudication in accordance with the stated directions.

Bogus share transactions - tax-motivated capital loss - artificial loss - Colourable device and tax planning - Disallowance of short-term capital loss on sale of unlisted shares to the assessee's husband as a colourable device - HELD THAT: - The Tribunal found that the Revenue had not disputed the actual execution or genuineness of the purchase and sale of shares, which were supported by banking records and transfer documentation. No adverse material established that the transaction was an artificial or pre-conceived arrangement; further, the sale price was higher than the price at which the assessee's son had acquired shares in the company. A genuine transaction otherwise valid in law could not be disregarded merely because it resulted in a tax loss. [Paras 18]

The disallowance of the claimed short-term capital loss was deleted.

Final Conclusion: The appeal was allowed and the addition arising from disallowance of the short-term capital loss was deleted.

Addition u/s 56(2)(vii)(b) - difference between the purchase consideration and stamp-duty value of agricultural land

HELD THAT: - The lower authorities had not disputed the agricultural character of the land purchased. Agricultural land falling outside the definition of capital asset is outside the scope of the deeming provision in section 56(2)(vii)(b); consequently, the difference between its purchase consideration and stamp-duty value could not be assessed as income from other sources. [Paras 10]

The addition was deleted and the assessee's ground was allowed.

Final Conclusion: The appeal was allowed, as the impugned addition under section 56(2)(vii)(b) in respect of agricultural land was unsustainable.

Assessment of other person under section 153C - jurisdictional satisfaction after 1 April 2021

Validity of proceedings under section 153C where the search preceded 1 April 2021 but the jurisdictional satisfaction for the other person was recorded thereafter - HELD THAT: - The applicability of the assessment regime was determined by the jurisdictional event of recording satisfaction in the case of the other person, and not merely by the date of search. Since satisfaction was recorded after 1 April 2021, the substituted reassessment provisions introduced by the Finance Act, 2021 applied; consequently, assessment could not be made under section 153C and had to proceed under sections 147 and 148.

The submissions of the assessee has merit, as held in the case of Harigovind & G. Ravindran (HUF) [2025 (11) TMI 103 - MADRAS HIGH COURT]. [Paras 6]

The jurisdictional ground was allowed and the appeals for the relevant assessment years were allowed; the remaining grounds were kept open.

Final Conclusion: The assessments initiated under section 153C were held unsustainable because the jurisdictional satisfaction was recorded after the substituted reassessment regime had come into force. All the appeals were allowed.

TP adjustment of royalty paid to non-associated enterprise - Disallowance of independently agreed royalty expenditure

Disallowance of royalty paid under a licence agreement to a foreign licensor, by benchmarking the royalty rate despite the parties not being associated enterprises - HELD THAT: - The licensor was not disclosed as a related party in the financial statements or in communications furnished to the tax authorities. Transfer-pricing provisions apply to transactions between related parties and cannot be invoked for an independent third-party transaction absent material establishing a deemed associated-enterprise relationship through a prior agreement or specific arrangement. No such material was brought on record. Further, where independent contracting parties had bona fide agreed upon the royalty under the licence agreement, the Assessing Officer could not, merely by treating the rate as excessive and using external royalty comparables under section 37, disturb the transaction. [Paras 12, 13, 14]

The royalty disallowance was deleted and the additional grounds on this issue were allowed; the remaining grounds were kept open.

Final Conclusion: The appeal was allowed by deleting the disallowance arising from the royalty payment. The other grounds were not adjudicated and were kept open.

Transfer pricing comparability of ITeS support-service providers - Functional comparability of ITeS support-service providers - Exclusion of comparables having significant R&D, intangibles or diversified operations - Absence of segmental information -

Selection of comparables for benchmarking the assessee's provision of ITeS support services to its associated enterprise under TNMM - HELD THAT: - Tata Elxsi Ltd. was engaged in design and engineering services, digital-content creation and significant R&D activities, with substantial intangibles and predominant software-development revenue, and was therefore functionally dissimilar to the assessee's ITeS support-service operations. TTEC India Customer Solutions Pvt. Ltd. provided BPO services, including transaction processing, email management, voice support and technical helpdesk, besides technology solutions and AI-enhanced services, and could not be compared with the assessee. CHEERS was engaged in ITeS and other services but did not disclose segmental information; its mixed operations could therefore not be reliably compared. The Tribunal followed the relevant coordinate-bench decisions and directed exclusion of all three concerns. [Paras 24, 25]

The relevant transfer-pricing grounds were allowed and Tata Elxsi Ltd., TTEC India Customer Solutions Pvt. Ltd. and CHEERS were directed to be excluded from the final list of comparables.

Final Conclusion: The appeal was partly allowed by directing exclusion of the three functionally unsuitable comparables. The issue concerning the assessee's unaudited segmental information was left open.

Challenge to show cause notice - Exercise of writ jurisdiction against a show cause notice concerning classification of imported LCD monitors and invocation of the extended period of limitation

HELD THAT: - The identity of the imported goods with those considered in the earlier Division Bench decision M/S. VIEWSONIC TECHNOLOGIES INDIA PRIVATE LIMITED [2024 (8) TMI 1761 - MADRAS HIGH COURT] and the questions whether there was misdeclaration or suppression warranting invocation of the extended period, require examination by the respondent upon the petitioner's explanation. The Court could not undertake that factual enquiry at the stage of challenge to the show cause notice. [Paras 6, 7]

The writ petition was disposed of, directing the petitioner to submit its explanation and the respondent to consider it in accordance with law, including the earlier Division Bench judgment and the reply to the audit consultative letter.

Final Conclusion: The challenge to the show cause notice was not entertained on merits. The respondent was directed to adjudicate the petitioner's objections after receiving its explanation.

Belated recovery of drawback for non-realisation of export proceeds - Reasonable time for statutory recovery proceedings - Recovery of drawback availed on garment exports, on the allegation of non-production of proof of realisation of export proceeds, after an inordinate and unexplained delay

HELD THAT: - It is a settled principle of law that fraud vitiates all solemn acts and that a person cannot be permitted to take advantage of his own fraud, irrespective of the passage of time.

In the present case, there is no allegation that the petitioner fraudulently obtained the drawback or suppressed any material facts. The only allegation is that the petitioner had not produced proof of realisation of the export proceeds. Therefore, the decision of the Delhi High Court in Rajbir Singh [2025 (4) TMI 1122 - DELHI HIGH COURT] which proceeded on allegations of fraudulent availment of drawback, would not apply to the facts of the present case.

Though Rule 16 prescribes no limitation for recovery of erroneously paid drawback, proceedings must still be initiated within a reasonable time, depending upon the facts of each case. There was no allegation of fraudulent availment or suppression; the allegation was only non-production of proof of realisation of export proceeds.

The delayed initiation of proceedings and the further unexplained delay in adjudication rendered the recovery proceedings unsustainable. Since the impugned order was beyond a reasonable period and without statutory authority, the alternative appellate remedy and any delay in invoking writ jurisdiction did not bar relief.

In view of Rule 16 of the Amendment Rules, which does not prescribe any period of limitation for recovery of drawback erroneously paid, and in view of the decision of the Gujarat High Court in Pratipa Sitex Ltd. [2013 (3) TMI 480 - GUJARAT HIGH COURT] followed by the Co-ordinate Bench of this Court, the recovery proceedings initiated against the petitioner after such an inordinate delay cannot be sustained. [Paras 14, 15, 16, 17, 18]

The recovery order and consequential attachment of the bank account were set aside.

Final Conclusion: The writ petition was allowed, the belated drawback-recovery order and consequential bank-account attachment having been held unsustainable.

Classification of mixed-fibre polyester warp knitted fabrics - Burden of proof in customs reclassification - Finality of accepted customs assessment

Classification of "Mixed Lot of Polyester Warp Knitted Fabrics" under Customs Tariff Item 6005 9000, as against reclassification under the tariff entries applicable to synthetic-fibre warp knitted fabrics, and consequential eligibility for concessional duty - HELD THAT: - The burden to establish that the declared classification was incorrect lay upon the Revenue. Classification of fabrics under Chapter 60 depended upon fibre composition and textile construction, which could not be determined merely from the invoice, packing list, visual examination or the description "Polyester Warp Knitted Fabrics".

The Department neither drew samples nor produced laboratory reports or other cogent technical evidence to establish that the fabrics were exclusively of synthetic fibres. The accepted self-assessment could not be reopened without fresh evidence of misdeclaration or suppression; nor could the goods be classified under a range of multiple tariff entries. In the absence of evidence disproving the claim that the fabrics comprised mixed fibres, the declared residual classification could not be rejected. [Paras 11]

The classification under Customs Tariff Item 6005 9000 and the claimed concessional Basic Customs Duty benefit were upheld; the differential duty demand, interest and penalties for alleged misdeclaration and misclassification were set aside.

Final Conclusion: The appeal was allowed with consequential relief. The reclassification, consequential duty demand and penalties were held unsustainable.

Territorial jurisdiction under Article 226(2) - Forum conveniens in writ jurisdiction

Territorial jurisdiction to challenge an investigation order concerning companies having their registered offices and records in Mumbai - HELD THAT: - The mere fact that the Ministry of Corporate Affairs issued the investigation order from Delhi, or that an SFIO officer at its Delhi headquarters filed an affidavit, did not establish a substantial nexus with Delhi. Although Article 226(2) permits exercise of jurisdiction where part of the cause of action arises within the territory, its discretionary language requires consideration of the appropriate and convenient forum. The companies' registered offices and records, the concerned Registrar of Companies, pending insolvency proceedings, and the competent Special Court for any consequential prosecution were all situated in Mumbai; proceedings concerning the same investigation were also pending before the High Court of Bombay. [Paras 17, 18, 19, 21, 22]

The High Court of Bombay was held to be the appropriate and convenient forum, and the petition was dismissed for want of territorial jurisdiction without examining the merits of the investigation.

Final Conclusion: The writ petition was dismissed on the ground that Mumbai had the principal and substantial nexus with the impugned investigation. No opinion was expressed on the merits or any other issue relating to the investigation.

Approved insolvency resolution plan - waiver of indirect tax liabilities - Applicability of the approved insolvency resolution plan to GST liabilities for the period subsequent to 01.04.2022

HELD THAT: - The tax-dues waiver contemplated by the resolution plan did not extend to the period subsequent to 01.04.2022. The Supreme Court decision Ghashyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited [2021 (4) TMI 613 - SUPREME COURT] cited by the petitioner was held inapplicable on the facts, and the legal position was also stated to have been clarified by the Principal Bench of this Court in Tata Play Limited [2025 (7) TMI 772 - MADRAS HIGH COURT] [Paras 4]

The challenge was not accepted on the basis of the resolution plan; the petitioner was granted liberty to pursue the statutory appeal subject to the prescribed pre-deposit.

Final Conclusion: The writ petition was disposed of with liberty to the petitioner to file a statutory appeal, subject to compliance with the pre-deposit requirement.

Maintainability of writ petition against provisional attachment under the PMLA - Efficacious alternative remedy - Maintainability of a writ petition challenging a provisional attachment order and consequential proceedings under the PMLA while adjudication before the Adjudicating Authority is pending - HELD THAT: - The PMLA establishes a complete adjudicatory hierarchy under which the Adjudicating Authority initially examines the legality of provisional attachment after hearing the affected person, followed by appeals to the Appellate Tribunal and the High Court. Though availability of an alternative remedy does not oust writ jurisdiction, its exercise is ordinarily declined where the statutory remedy is efficacious and no exceptional circumstance, including patent lack of jurisdiction, breach of natural justice or statutory violation, is established. The objections concerning proceeds of crime, jurisdiction and validity of attachment could be raised before the statutory forum. [Paras 14, 19, 20, 21, 22]

The writ petition was dismissed as not maintainable, with liberty to the petitioners to pursue the remedies available under the PMLA; the Adjudicating Authority was directed to decide the proceedings independently and in accordance with law.

Final Conclusion: The writ petition challenging the provisional attachment and consequential PMLA proceedings was dismissed as not maintainable because the petitioners had an efficacious statutory remedy and disclosed no exceptional ground for exercise of writ jurisdiction.

Bank's power to freeze customer accounts - Enhanced due diligence under anti-money-laundering law

Validity of the Bank's unilateral freezing of the petitioners' current accounts on suspicion arising from transaction volume - HELD THAT: - A bank is a custodian of funds and not an investigating agency. Upon noticing suspicious transactions, it may report the matter to the competent investigating agency, but it cannot unilaterally freeze a customer's account without statutory authority. Section 12AA of the Prevention of Money Laundering Act confers compliance-related powers of identity verification, examination of records and requisition of information; it does not confer investigative or adjudicatory power to freeze an account.

Nor do the RBI KYC Directions authorise an indefinite account freeze merely because transaction volume exceeds a prescribed threshold; the contemplated measures are customer due diligence, obtaining information, monitoring and regulatory reporting. The statutory power to attach property or freeze accounts rests with the competent authorities under the prescribed legal procedure. [Paras 10, 11, 13, 14, 15]

The freezing of the petitioners' accounts was held arbitrary and unsustainable in law; the action was set aside and the accounts were directed to be de-frozen within 48 hours.

Final Conclusion: The writ petitions were allowed, the Bank's account-freezing action was set aside, and the petitioners' accounts were directed to be de-frozen within 48 hours.

Works contract service - repair and maintenance involving transfer of goods - Supply of electricity - sale of goods

Works contract service - repair and maintenance involving transfer of goods - Service-tax abatement on composite maintenance contracts - Classification of the composite maintenance, repair and upkeep services rendered to residents as works contract service, and entitlement to the corresponding abatement - HELD THAT: - The assessee established through purchase records, invoices and VAT returns that goods were consumed in executing the maintenance and repair contracts and that VAT as well as service tax had been charged. A composite contract involving transfer of property in goods taxable as a sale does not cease to be a works contract because labour and service form an incidental component. The denial of abatement solely for alleged absence of evidence of transfer of goods or VAT invoices was therefore untenable. Cases followed M/S. KONE ELEVATOR INDIA PVT. LTD. [2014 (5) TMI 265 - SUPREME COURT (LB)], WIPRO GE MEDICAL SYSTEMS (P.) LTD.[2008 (8) TMI 207 - CESTAT, BANGALORE] confirmed by SC [2009 (9) TMI 926 - SC ORDER] and M/S. XEROX INDIA LIMITED AND VICE-VERSA [2018 (3) TMI 1006 - CESTAT CHANDIGARH] [Paras 7, 8, 9]

The service-tax demands, interest and penalties arising from denial of works contract classification and abatement were set aside, and the assessee's appeals were allowed with consequential relief.

Service tax demand under the category of 'transmission or distribution of electricity' supplied by the assessee to its various individual flat owners - Supply of electricity - sale of goods - Service-taxability of electricity charges recovered from users - Leviability of service tax on electricity supplied by the assessee to individual flat owners. - HELD THAT: - Electricity is goods, and its supply to users against payment is a sale of goods rather than a service. The decision relied on by the Revenue was distinguished because there was no evidence that the assessee had collected service tax from the users, apart from the other factual distinction noted by the Tribunal. The consistent treatment of identical electricity supply by the assessee's group units as outside service tax also supported the conclusion. Case of SRIJAN REALTY (P) LTD.[2019 (3) TMI 821 - CALCUTTA HIGH COURT] distinquished.

Electricity is globally recognized as ‘goods’, and the activity of supplying electricity to users against payment constitutes nothing but a ‘sale of goods’. Consequently, it falls outside the ambit of service tax. This view stands fortified by the decision of DLF Infocity Developers (Kolkata) Ltd [2025 (8) TMI 1658 - CESTAT KOLKATA][Paras 13, 14, 15]

The dropping of the demand on electricity income was upheld and the Revenue's appeal was dismissed.

Final Conclusion: The assessee's appeals were allowed as the maintenance contracts qualified as works contracts involving sale of goods. The Revenue's appeal was dismissed because electricity supplied to users constituted sale of goods and was not liable to service tax.

Best-judgment assessment based on actual records - Taxability of exempt, non-taxable and reimbursable receipts - Export and SEZ service exemption verification - CENVAT credit adjustment - Extended limitation for suppression - Duplicative service tax demand

Best-judgment assessment based on actual records - Best-judgment assessment of the taxable value of security agency services by assumed growth, pro-rata enhancement or adoption of an earlier peak turnover - HELD THAT: - Best-judgment assessment is an exceptional statutory machinery and cannot amount to a best guess. Where audited financial statements, statutory records and other primary material were available or capable of verification, the Department could not replace actual data with arbitrary projections without establishing a rational nexus with the services rendered and consideration received. The mutually inconsistent treatment of the appellant's financial records further disclosed non-application of mind. [Paras 34]

The best-judgment assessments for the concerned notices were held unsustainable and the demands were remanded for fresh determination on actual and verifiable records.

Taxability of exempt, non-taxable and reimbursable receipts - Pure-agent exclusion for reimbursable expenditure - Inclusion of exempt, non-taxable and reimbursable receipts in the taxable value of security agency services without verification of their legal character - HELD THAT: - A receipt reflected in accounts does not become taxable merely by such reflection. The nature of each receipt and its nexus with consideration for the taxable service must be determined from the underlying records. Before the statutory amendment, genuine reimbursable expenses not constituting consideration could not be included in taxable value; for the subsequent period, exclusion depends upon satisfaction of the statutory requirements applicable to a pure agent. [Paras 26, 35, 41, 47]

The claims were remanded for transaction-wise and period-wise verification, with legally admissible exempt, non-taxable and reimbursable receipts to be excluded from taxable value.

Export and SEZ service exemption verification - Rejection of exemption claimed for export of services and services provided to SEZ units solely for non-production of supporting documents - HELD THAT: - Although the Department may call for material supporting an exemption claim, non-production of documents alone is not substantive proof that the underlying transactions are taxable. Eligibility required a reasoned examination of the agreements, invoices, nature and place of provision of services, remittance particulars and other contemporaneous material. [Paras 40]

The exemption dispute for Financial Years 2013-14 and 2014-15 was remanded for independent verification and grant of the benefit wherever the applicable statutory conditions are satisfied.

CENVAT credit adjustment - Denial of CENVAT credit adjustment towards service tax liability on the generalized premise that the appellant's expenditure was predominantly salary expenditure - HELD THAT: - CENVAT credit is a substantive statutory benefit and cannot be denied on assumptions or selective reliance on financial records. Salary expenditure does not justify the sweeping inference that no eligible administrative or operational input expenditure was incurred. The Department was required to examine the relevant records and determine the admissibility and utilisation of the credit; for the earliest period, the Tribunal found that the credit adjustment could not be denied. [Paras 27, 36, 42, 48]

Credit adjustment for the period covered by the first notice was directed to be allowed, while the credit claims for the other relevant periods were remanded for verification and allowance to the extent admissible.

Extended limitation for suppression - Statutory outer limit for service tax demand - Invocation of the extended period of limitation for service tax demands founded on audited financial records and successive notices issued after departmental audit and investigation - HELD THAT: - The extended period requires proof of fraud, collusion, wilful misstatement, suppression or contravention with intent to evade tax; non-filing or delayed filing of returns does not automatically establish those ingredients. As the demands were substantially based on disclosed and audited records and the Department had previously audited the appellant on the same factual foundation, the requisite deliberate suppression was not established. Further, the extended period cannot travel beyond the statutory five-year outer limit. [Paras 30, 37, 43, 49, 51]

The extended period was held unavailable wherever invoked; any liability surviving fresh adjudication must be confined to the normal limitation period, and the portion of the first demand relating to April 2005 to September 2005 stands set aside as beyond the statutory outer limit.

Duplicative service tax demand - Possibility of duplicate service tax recovery arising from the jurisdictional proceedings and the parallel investigation concerning Financial Year 2016-17 - HELD THAT: - A parallel investigation does not by itself invalidate the proceeding, but the same taxable transactions cannot be subjected to duplicated demands or double recovery. The scope of the parallel investigation, including its period, transactions, taxable value and any demand or adjudication, requires verification. [Paras 46]

The demand for Financial Year 2016-17 was remanded with a direction to exclude any taxable value or transaction already subjected to demand or determination in the parallel proceedings.

Final Conclusion: The impugned order was set aside and all eight notices were remanded for de novo adjudication subject to the findings on valuation, CENVAT credit, limitation and avoidance of duplicate recovery. Consequential interest and penalties were directed to abide by the fresh determination.

Wet leasing of CNG compressor equipment-supply of tangible goods service - Extended limitation for service tax on wet lease transactions - Merger of rectification order with original adjudication order

Wet leasing of CNG compressor equipment-supply of tangible goods service - Transfer of right to use goods - Taxability of wet leasing of CNG compressors and related equipment as supply of tangible goods service rather than a transfer of the right to use goods - HELD THAT: - Under the wet lease arrangements, the assessee installed and commissioned the compressors and related equipment at its own cost, operated and maintained them through its own skilled personnel, and retained possession and effective control over them. The agreements therefore did not transfer the right to use the equipment to the customers; they enabled the customers to use equipment controlled and managed by the assessee. The activity was consequently taxable as supply of tangible goods service for the earlier period and as a taxable service for the subsequent period. [Paras 5, 9, 10]

The confirmation of service tax liability on all the wet lease transactions was upheld.

Extended limitation for service tax on wet lease transactions - Suppression of facts with intent to evade tax - Invocation of the extended period for demanding service tax on the wet lease transactions - HELD THAT: - The contractual terms unambiguously showed that possession and effective control remained with the assessee, while the statutory provisions and the departmental clarification defined the transaction as taxable. Payment of sales tax on the basis of a different understanding of the agreements did not absolve the assessee of service tax liability. The Tribunal also took note of concealment concerning the status of the High Court judgment [2024 (11) TMI 1413 - DELHI HIGH COURT] and held that the extended period had been validly invoked. [Paras 6, 7, 8]

The extended period invoked in the show cause notices was sustained.

Merger of rectification order with original adjudication order - Binding effect of High Court judgment - Effect of the order passed pursuant to rectification directions where it dealt expressly with only one of the four show cause notices - HELD THAT: - The remaining show cause notices had already been adjudicated in the original order, whose findings were upheld by the High Court. The subsequent order, passed pursuant to directions to consider the rectification application, was held to form part and parcel of the original adjudication order. The High Court decision upholding the original findings was binding. [Paras 10]

The departmental appeal was disposed of on the basis that the impugned order merged with the original adjudication order, and the assessee's appeal was dismissed.

Final Conclusion: The wet lease arrangements were held taxable as supply of tangible goods service, and the extended period for demand was sustained. The departmental appeal was disposed of by treating the impugned order as part of the original adjudication, while the assessee's appeal was dismissed.

Taxability of erection services prior to 10 September 2004 - Extended period of limitation - absence of suppression

Taxability of erection services prior to 10 September 2004 - Service-tax liability on receipts for erection work performed before 10 September 2004 - HELD THAT: - Erection service was brought within the service-tax net only from 10 September 2004. The Board circular and the exemption notification clarified that erection services rendered before that date were not taxable. The demand relating to the pre-10 September 2004 erection work was therefore unsustainable; the balance short-paid tax for the subsequent period had already been discharged. [Paras 6]

The service-tax demand was set aside on merits, and the consequential interest and penalty were also set aside.

Extended period of limitation - absence of suppression - Invocation of the extended period for service-tax demand based on information available in the departmental records - HELD THAT: - The discrepancy was raised by audit on the basis of information available in the records, and no suppression of information by the appellant was established. The extended period of limitation was consequently unavailable. [Paras 6]

The demand was also held unsustainable on limitation.

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

CENVAT credit on capital goods - clearance as waste and scrap -

Whether waste and scrap of capital goods, on which CENVAT credit stood availed, is liable to central excise duty upon its clearance, notwithstanding the appellant's plea that such scrap is not covered under any specific tariff entry and does not emerge from any process of manufacture undertaken by the appellant? - HELD THAT: - Rule 3(5A) creates a self-contained statutory obligation requiring payment equal to the duty leviable on the transaction value where credit-availed capital goods are cleared as waste and scrap. The liability is attached to the availment of credit and the subsequent clearance of the capital goods in scrap form; it does not depend on the scrap being a product manufactured by the assessee or on the availability of a separate tariff entry for the scrap. The Court applied the pari materia reasoning of the earlier rule governing such clearances. Case followed GNFC LTD. VERSUS UNION OF INDIA [2006 (2) TMI 58 - HIGH COURT, GUJARAT] [Paras 6, 7, 10, 12]

The duty demand on clearance of the credit-availed capital goods as waste and scrap was upheld.

Final Conclusion: The appeal was dismissed, the Court finding no infirmity in the order sustaining duty on clearance of waste and scrap from credit-availed capital goods.

Admissibility of CENVAT credit on capital goods procured through a contractor - Capital goods incorporated in an immovable captive plant - Admissibility of CENVAT credit on duty-paid capital goods purchased by an EPC contractor, received in the manufacturer's factory as consignee, and used for installation of a captive cogeneration plant

HELD THAT: - The qualifying capital goods were received in the factory under invoices showing the appellant as consignee and were used for installation of the captive plant, which was indispensable for manufacture of the finished goods. The statutory entitlement does not depend upon ownership of the capital goods at the time of receipt or upon their direct purchase by the manufacturer; nor is it defeated because, after installation, the goods form part of an immovable plant. [Paras 9, 10]

CENVAT credit could not be denied on the capital goods merely because they had been purchased by the contractor; consequently, no penalty was imposable.

Final Conclusion: The impugned order denying CENVAT credit and imposing penalty was set aside, and the appeal was allowed with consequential relief.