TaxTMI Updates e-Newsletter
Sep 01,2026

Refund of statutory pre-deposit - Finality of appellate order to extent of relief granted

Entitlement to refund of the pre-deposit attributable to the demand set aside in first appeal, notwithstanding the petitioner's intended further appeal against the sustained demand - HELD THAT: - The intended further appeal concerned only the part of the appellate order adverse to the petitioner. As the Department had not challenged the relief granted in appeal, the appellate proceedings had attained finality to the extent of the demand set aside. A statutory pre-deposit is a security furnished as a condition for hearing the appeal and must be returned where the appellant succeeds, wholly or partly.

It is pertinent to note that under the erstwhile indirect tax regime, the amount paid as a condition precedent for hearing an appeal, did not bear the character of duty but bears the character only of a security deposit, being a statutory condition precedent for hearing of the appeal. Such an amount needs to be returned to the concerned appellant, whether the appellant succeeds fully or partly. If any authority is needed in support of this proposition, we may refer to Nelco Limited [2001 (11) TMI 1007 - SC ORDER]

The appellate order setting aside that part of the demand was binding, and consequential refund of the corresponding pre-deposit could not be refused on the ground that the petitioner proposed to challenge the remaining sustained demand. [Paras 9, 10, 11, 12, 13]

The rejection of the refund claim was quashed, and refund of the pre-deposit attributable to the demand set aside in appeal was directed to be processed and paid within six weeks.

Final Conclusion: The writ petition was allowed and the refusal of consequential refund was set aside. The petitioner did not press its claim for interest.

Safeguards in special procedure for input tax credit - Validity of the six-month application period prescribed for rectification of orders denying input tax credit otherwise made available for the specified financial years by the amended provision - HELD THAT: - Although the Government is empowered to prescribe a special procedure under Section 148, that power is subject to conditions and safeguards. The amended provision created an entitlement to input tax credit for returns filed by the stipulated date without prescribing a period for applying for the benefit. A procedure that restricts that entitlement to an application made within six months, without permitting further time where sufficient cause prevented timely application, fails to safeguard the taxpayer's interest and curtails the accrued statutory right. [Paras 4, 5, 6]

The notification was held not to withstand scrutiny under Section 148 for want of a safeguard enabling extension of time for sufficient cause; however, the matter was directed to be listed for further consideration after impleading the Union of India, the State of Maharashtra and the GST Council.

Final Conclusion: The Court found that the prescribed six-month period, without a provision for extension on sufficient cause, failed to safeguard the statutory entitlement to input tax credit. Further consideration was directed after impleadment of the Union of India, the State of Maharashtra and the GST Council.

Composite show cause notice u/s 73 for multiple financial years - Binding force of High Court precedent within territorial jurisdiction - Financial-year-wise limitation for GST assessment and recovery - Binding force of High Court precedent within territorial jurisdiction

Validity of a single show cause notice under section 73 of the CGST Act covering alleged suppression and short payment of tax for multiple financial years - HELD THAT: - The statutory scheme treats each financial year as a distinct tax period for assessment, return filing, demand and recovery. The limitation for demand and assessment operates separately with reference to the annual return for the relevant financial year; a consolidated notice would impermissibly aggregate tax periods having distinct due dates, limitations, grounds and opportunities of response.

With the above liberty, and for the reasons set out in Milroc Good Earth Developers [2025 (10) TMI 867 - BOMBAY HIGH COURT] and Rite Water Solutions (India) Ltd. [2025 (11) TMI 1939 - BOMBAY HIGH COURT] the petition is partly allowed. The show cause notice dated 24/04/2025 issued by respondent no. 1 is quashed and set aside. The respondents, however, are at liberty to re-issue notice strictly in terms of the provisions of Section 73 of the CGST Act, if there is no other legal impediment. [Paras 8, 9, 10, 12, 16]

The composite show cause notice was quashed, with liberty to issue a fresh notice in conformity with section 73, subject to there being no other legal impediment.

Final Conclusion: The petition was partly allowed and the composite show cause notice was quashed, while preserving the respondents' liberty to issue a fresh notice in accordance with law.

Availability of an appeal against the GST appellate and adjudication orders - Statutory appellate remedy unavailable due to non-constitution of Tribunal - Exclusion of pendency period for appellate limitation

HELD THAT: - The petitioner approached the Court when the statutory appellate forum was unavailable. Upon the Tribunal becoming functional, the Court considered it appropriate to permit recourse to that remedy and directed that the period for which the writ petition remained pending be taken into account while considering the appeal. [Paras 4, 5]

Liberty was granted to file an appeal before the GST Appellate Tribunal within fifteen days; the appeal was directed to be admitted subject to statutory compliance, with due consideration of the pendency of the writ petition before the Court.

Final Conclusion: The writ petition was disposed of with liberty to pursue the statutory appellate remedy before the GST Appellate Tribunal, subject to the stipulated conditions.

Show cause notice issued to deceased taxable person - GST liability of legal representatives - Validity of GST adjudication initiated against a deceased proprietor without issuance of notice to the legal representatives

HELD THAT: - A notice issued to a deceased person is a nullity and tax cannot be determined against a non-existing person. This proposition has been categorically observed in the case of Arvind Traders Vs. State of Uttar Pradesh and Anr.[2025 (4) TMI 1380 - ALLAHABAD HIGH COURT] wherein as been held that a “Show Cause Notice cannot be issued in the name of a dead person for determination of the liability of the deceased without giving an opportunity to the legal representative.”

While Section 93(1)(b) makes legal representatives liable, to the extent of the deceased's estate, it does not provide machinery for assessing the deceased. The statutory machinery for determination requires a show cause notice to the person liable; consequently, notice must be issued to the legal representatives in their capacity as such, followed by an opportunity to reply and be heard. [Paras 19, 21, 22, 23, 29]

The impugned show cause notice, adjudication order and recovery notice were quashed. A fresh notice was directed to be issued to the legal representatives, and the matter was remitted for adjudication after granting them an opportunity of hearing, without examination of the merits.

Final Conclusion: The writ petition was disposed of by quashing the proceedings initiated in the name of the deceased proprietor and directing fresh adjudication against the legal representatives in accordance with law.

Input tax credit denied to bona fide purchaser for default of supplier in depositing tax/ non-filing of GSTR-3B/non-reflection in GSTR-2A - non-application of mind, breach of principles of natural justice, and invalid invocation of Section 74 for Financial Year 2018-19 - Writ jurisdiction - violation of natural justice despite alternate appellate remedy

HELD THAT: - In view of the discussions made herein and in view of the law laid down in Suncraft Energy Private Limited [2023 (8) TMI 174 - CALCUTTA HIGH COURT] which has been affirmed by the Supreme Court [2023 (12) TMI 739 - SC ORDER] this Court is of the view that the impugned Order in Original suffers from non-application of mind, violation of principles of natural justice and is without jurisdiction to the extent it invokes section 74 CGST Act, 2017 for the period 2018-19 and accordingly the Writ Petition is disposed of the with the following directions:-

I. The Order in Original passed by the respondent authorities along with the consequential recovery notice dated 12.06.2026 is hereby quashed and set aside.

II. The respondent No. 1 is directed to revisit the issue involved herein in the present Writ Petition by reconsidering the reply dated 10.11.2025 filed by the petitioner, along with all documents, in the light of the judgments relied upon by the petitioners namely Suncraft Energy Private Ltd. (supra) and G.R. Infra Projects Private Ltd. Ratlum [2026 (8) TMI 1497 - SC ORDER] passed by the Hon’ble Supreme Court.

III. The respondent No. 1 shall consider and pass a reasoned and speaking order in accordance with law upon affording an opportunity of personal hearing to the petitioners within a period of four weeks from the date of communication of this order.

IV. It is however, made clear that the petitioners shall not pray for any unnecessary adjournments.

Final Conclusion: The writ petition was allowed. The adjudication order and consequential recovery notice were quashed, and the matter was remanded for fresh adjudication in accordance with law, subject to the conditions imposed by the Court.

Failure to consider reconciled turnover records - Fresh adjudication of GST show-cause notice

Validity of the GST demand order where the detailed year-wise HSN-wise reconciliation of turnover furnished in reply to the show-cause notice was not considered - HELD THAT: - The adjudicating authority rejected the explanation on the footing that no complete, authenticated and reconciled documents had been produced. Since the petitioner had, however, furnished a detailed year-wise HSN-wise reconciliation of turnover, the order was passed without considering material submitted in response to the notice. The order was consequently unsustainable; the merits of the tax liability were left open. [Paras 5, 6, 8]

The impugned order was set aside and the show-cause notice was remanded to the adjudicating authority for fresh adjudication after hearing the petitioner and in accordance with law.

Final Conclusion: The writ petition was disposed of by setting aside the impugned order and remanding the matter for fresh adjudication, without any determination on the merits of the parties' contentions.

Place of supply of international passenger air transportation - Continuous journey and transit stop - Transportation of deceased as neither supply of goods nor services

Place of supply of international passenger air transportation - Continuous journey and transit stop - Place of supply and GST liability for international passenger air transportation undertaken by unregistered passengers, including continuous journeys involving a short transit stop - HELD THAT: - For passenger transportation where the supplier or recipient is outside India, the place of supply is the place of embarkation for the continuous journey. A short transit stop does not constitute a stopover and does not interrupt continuity of the journey. Accordingly, journeys commencing outside India, whether terminating in India or continuing between foreign countries through an Indian transit point, have a place of supply outside India. Where both supplier and passenger are located in India, the place of supply is the place of embarkation; consequently, a journey commencing from Kolkata is an intra-State supply. [Paras 4]

No GST is payable on journeys embarking outside India, including continuous journeys with a short transit stop in India. Journeys embarking from Kolkata, including continuous journeys to a foreign country, are liable to CGST and WBGST at the applicable notified rate, subject to the conditions governing economy-class travel.

Passengers on continuous journey with a single ticket from India to a foreign country with a transit stop in Dhaka - HELD THAT:-The Applicant has elaborated that in this case the passenger boards a London-bound flight from Kolkata and there will be a short transit stop at Dhaka. The applicant’s representative submits that this transit stop is for a few hours only. Accordingly, this transit stop does not break the continuity of the journey undertaken by the passenger from Kolkata to London. In our considered view, this transit stop cannot be equated with a stopover as defined in the explanation clause to Section 2(3) of the IGST Act, 2017. It is to be regarded as a continuous journey.

Clearly, the location of the supplier (the applicant) and recipient (the passenger) of service here is in West Bengal, India, and the place of embarkation is also in West Bengal, India. As per the provisions of Section 12(9), the place of supply is the location from where the passenger embarks on the aircraft i.e. Kolkata. Since the location of the supplier and the place of supply of services are in the same state, it will be treated as an intra-state supply under Section 8(2) of the IGST Act, 2017. Accordingly, CGST and WBGST at the appropriate rate will apply in this case.

The tax rate in this case will be as under:

(A) 2.5% CGST + 2.5% SGST under item no. (iii) of serial no. 8 of the table in Notification no. 11/2017- Central Tax (Rate) dated 28.06.2017, as amended on the condition that credit of input tax charged on goods used in supplying the service has not been taken, as explained in Explanation no. (iv) of the notification ibid in case the passenger travels in economy class

(B) 9% CGST + 9% SGST under item no. (v) of serial no. 8 of the table in Notification no. 11/2017- Central Tax (Rate) Dated 28.06.2017, as amended in case the passenger travels in any class other than economy class.

Transportation of deceased as neither supply of goods nor services - GST treatment of transportation of human remains by air between India and outside India - HELD THAT: - Transportation of the deceased is expressly included within funeral, burial, crematorium or mortuary services under Schedule III. Such activity is statutorily treated neither as a supply of goods nor as a supply of services and is therefore outside the scope of supply. [Paras 4]

Transportation of human remains is not taxable under GST.

Final Conclusion: International passenger journeys are taxable in India only where the statutory place-of-supply conditions locate the supply in India; a short transit stop does not alter the place of embarkation for a continuous journey. Transportation of the deceased is outside the scope of supply under GST.

Faceless assessment - show cause notice after necessary enquiry and consideration of reply - Personal hearing - reasonable opportunity in faceless assessment

Faceless assessment - Validity of Show cause notice - prior enquiry and specific clarification - Non-consideration of assessee's explanation - violation of natural justice - Validity of the faceless assessment founded on a blanket show cause notice without prior enquiry and without considering the assessee's explanations concerning bank receipts, Category III AIF redemption proceeds and sale proceeds of unlisted shares - HELD THAT: - The prescribed SOP requires that a show cause notice be issued only after necessary enquiries, verification and collection of relevant information. The Assessing Officer neither sought the relevant particulars through a further inquiry notice nor considered the explanations and reconciliation furnished by the assessee. An addition based on redemption of shares, though the disclosed receipt was from redemption of a Category III AIF, and treatment of explained sale proceeds of unlisted shares as unexplained credits on the purchaser's source of funds, which had not been sought, disclosed arbitrariness and non-application of mind. The Court expressed no view on the merits of the additions. [Paras 9, 10, 11, 12, 14]

The assessment was held to be vitiated by breach of natural justice and was set aside; the matter was remanded from the show cause notice stage for fresh proceedings in accordance with the prescribed procedure.

Faceless assessment - violation of natural justice - Denial of an effective personal hearing in the faceless assessment proceedings. - HELD THAT: - The hearing notice afforded only a same-day opportunity, and, despite intimation that the video-conference link was not working, no further hearing was granted. The assessment order did not address the request for personal hearing. This constituted an independent violation of the principles of natural justice. [Paras 13, 14, 18]

Upon remand, if an adverse order is proposed, the assessee shall be given a personal hearing on at least five working days' notice.

Final Conclusion: The assessment order, consequential demand and penalty show cause notices were set aside, and the assessment was remanded for fresh disposal by a speaking and reasoned order.

Crystallisation of liability under corporate guarantee - Year of allowance of business loss

Deductibility of liability incurred by the assessee under a corporate guarantee given for its subsidiary - HELD THAT: - The settlement of the guaranteed liability was arrived at during the previous year relevant to the assessment year in question, and the factual findings that the liability had then crystallised were not doubted. The subsequent filing of consent terms merely implemented and discharged the liability already determined; it did not postpone the year in which the deduction became allowable. [Paras 5]

The liability was deductible in Assessment Year 1998-99; the question of law was answered in favour of the assessee and the appeal was allowed.

Final Conclusion: The settlement liability under the corporate guarantee had crystallised in the previous year relevant to Assessment Year 1998-99. Its later discharge through consent terms did not defer the deduction, and the assessee's appeal was allowed.

Prosecution for failure to furnish return of income - Assessee proceeded against u/s 276CC - statutory threshold based on tax payable after tax deducted at source

Maintainability of prosecution for failure to furnish the return of income where no tax remained payable after adjustment of tax deducted at source - HELD THAT: - The proviso to Section 276CC precludes prosecution where the tax payable on the total income determined on regular assessment, after reduction of advance tax and tax deducted at source, does not exceed the prescribed threshold. As the record showed that no tax was due and tax deducted at source was available in excess, the petitioner could not be proceeded against for failure to furnish the return within time. [Paras 7]

The pending prosecution was held to be an abuse of process of law and was quashed.

Final Conclusion: The Criminal Original Petition was allowed and the proceedings for the alleged offence under Section 276CC were quashed.

Limitation for reassessment notice - Deemed service of notice

Validity of the notice issued u/s 148 after expiry of the extended limitation applicable to the assessment year - HELD THAT: - The original six-year limitation expired on 31.03.2020. The notifications extended limitation only for notices whose original limitation fell within the respective specified periods; the notification extending time up to 30.04.2021 applied where the original limitation expired on 31.03.2021, not to the petitioner's case. The notice issued on 01.04.2021 was therefore beyond limitation. [Paras 9, 10, 12]

The notice under Section 148 was held barred by limitation, and the consequential assessment orders were quashed.

Deemed service of notice - Applicability of Section 292BB to cure an objection that the reassessment notice was issued beyond limitation - HELD THAT: - Section 292BB concerns an objection to service of notice where the assessee has participated in the proceedings despite ineffective service. It does not apply to, or cure, a notice issued after expiry of the prescribed limitation. [Paras 11]

The Department's reliance on Section 292BB was rejected.

Final Conclusion: The writ petition was allowed. The reassessment notice and the consequential assessment orders were set aside as barred by limitation.

Validity of Reassessment - change of opinion - Reopening of the completed scrutiny assessment on the ground that interest expenditure arising from unlicensed money-lending activity may have been wrongly allowed - HELD THAT: - Reassessment cannot rest on a genuine change of opinion upon a fresh review of material already examined. However, that bar does not apply where the ground forming the basis for reopening was not considered in the original assessment. The licensing implication of the money-lending activity and the consequent allowability of the claimed interest expenditure had not been examined earlier; the reopening was therefore not founded on a mere change of opinion. [Paras 9, 10, 15]

The rejection of the objections to reopening was affirmed.

Money-lending through negotiable instruments-statutory licensing exemption - HELD THAT: - Though money advanced through negotiable instruments falls outside the licensing requirement, the assessee had not placed specific particulars of the instruments before the Assessing Officer while objecting to reopening. The Court declined to determine the claim on submissions unsupported by the record and left its factual verification to the Assessing Officer. [Paras 10, 12, 13, 15, 16]

The assessee was permitted to furnish particulars of the negotiable instruments, which the Assessing Officer shall examine and proceed in accordance with the applicable statutory exemption.

Final Conclusion: The writ petition was disposed of after affirming the rejection of the objections to reopening, while permitting the assessee to place the relevant negotiable-instrument particulars before the Assessing Officer for examination.

Capital gains on sale of land claimed as agricultural land -proportionate interest expenditure disallowable u/s 36(1) - Presumption of utilisation of own funds for advances

Capital gains on sale of land claimed as agricultural land - Taxability of gains from sale of land claimed to be agricultural land, including the assessment year of taxability. - HELD THAT: - The land was purchased from the housing authority having jurisdiction over urban lands; no evidence established its agricultural character, and the assessee admitted that no agricultural activity had been undertaken on it since 1981. Its location adjacent to the railway station also showed that it fell within the prescribed municipal distance. The registered sale deed established that the transfer occurred in the relevant previous year. [Paras 5]

The land was held to be a capital asset, and the long-term capital gain was rightly taxable in AY 2013-14.

Interest disallowance on non-business advances u/s 36(1) - Presumption of utilisation of own funds for advances - Disallowance of interest expenditure in respect of advances where the assessee maintained a common fund flow and possessed sufficient own funds - HELD THAT: - As the assessee had sufficient own funds and maintained a common fund flow, the advances were presumed to have been made from own funds rather than interest-bearing borrowings.

As assessee maintained common fund flow, therefore, as per decision of Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] the advances were given from the assessee’s own funds and not from the interest bearing funds.The decision relied upon by the Revenue was distinguishable on facts. [Paras 6]

The interest disallowance was directed to be deleted.

Final Conclusion: The appeal was partly allowed: the addition of long-term capital gain was sustained, while the interest disallowance was deleted.

Search assessment beyond six assessment years - Escaped income represented in the form of an asset - Alleged on-money receipts - HELD THAT: - The additional legal ground, going to the root of the assessment and requiring no facts beyond the existing record, was admitted. The extended period beyond six assessment years under the fourth proviso to section 153A(1) is available only where the material in the Assessing Officer's possession reveals escaped income represented in the form of an asset of the stipulated nature and value. The assessment orders contained no finding that the alleged on-money receipts were represented by any such asset; the additions were founded solely on the allegation of receipt of on-money from project buyers. The statutory condition for invoking the extended period was therefore not fulfilled. [Paras 7, 10, 11]

The reopening beyond six years and the consequential reassessment orders were held invalid and void ab initio; the appeals for all the relevant assessment years were allowed.

Final Conclusion: The assessments for AY 2012-13 to AY 2014-15, having been initiated beyond the permissible six-year period without material showing escaped income represented by an asset, were declared void ab initio. All eight appeals were allowed.

Validity of reassessment proceedings - Non-supply of recorded reasons despite the assessee's request - HELD THAT: - The Assessing Officer's factual report confirmed that no record established communication or supply of the recorded reasons to the assessee. Reassessment proceedings initiated without furnishing the recorded reasons upon request are invalid. [Paras 9]

The reassessment order was quashed and the corresponding ground was allowed.

Final Conclusion: The reassessment order was quashed for non-supply of the recorded reasons. The remaining grounds were dismissed as infructuous and the appeal was partly allowed.

Denial of taxation under the new tax regime u/s 115BAC - return of income was filed after the due date u/s 139(1), despite timely filing of Form 10-IE - Directory requirement for filing Form 10-IE

HELD THAT: - Following coordinate Bench decision Arun Kumar Sharma [2025 (7) TMI 1732 - ITAT DELHI] the requirement concerning the timing of filing Form 10-IE was treated as directory rather than mandatory. On the same principle, delay in filing the return of income was held condonable; therefore, a belated return could not deny the assessee the claimed concessional tax regime where Form 10-IE had been filed in time. [Paras 2]

The claim for taxation under section 115BAC was allowed and the appeal was allowed.

Final Conclusion: The assessee was held entitled to the concessional tax regime under section 115BAC notwithstanding the belated filing of the return of income.

Foreign tax credit denied - delayed filing of Form 67

HELD THAT: - The parties fairly submitted that the controversy stood covered by Narendra Vishnubhai Mistry [2024 (11) TMI 1101 - ITAT AHMEDABAD] As no change in the factual matrix or legal proposition was shown, the Tribunal followed that order, which held that delay in filing Form 67 cannot prejudice the right to foreign tax credit where taxes have been paid in India and abroad. [Paras 7]

The denial of foreign tax credit was not sustained and the assessee's appeal was allowed.

Final Conclusion: Following the earlier Tribunal order on the identical issue, the appeal was allowed and the claimed foreign tax credit was directed to be granted.

Taxability and tax deduction at source on export commission paid to non-resident agents - Chargeability to tax in India of commission paid to non-resident agents for procuring export orders from services rendered outside India, and the consequential disallowance for non-deduction of tax at source - HELD THAT: - Commission earned by non-resident agents for services rendered outside India is not chargeable to tax in India merely because it relates to export orders executed by an Indian assessee. Tax deduction at source arises only where the payment is chargeable to tax in India.

The Hon’ble Supreme Court in CIT v. Toshoku Ltd.[1980 (8) TMI 2 - SUPREME COURT] held that commission earned by non-resident agents for services rendered outside India does not accrue or arise in India merely because the orders were obtained for an Indian assessee. Further, in GE India Technology Centre Pvt. Ltd. [2010 (9) TMI 7 - SUPREME COURT] it was held that tax is deductible under section 195 only where the payment is chargeable to tax in India.

As the Revenue produced no material establishing that the agents rendered services in India or had a permanent establishment or business operations in India, the commission could not be treated as taxable merely because it became payable in connection with the assessee's Indian export business. [Paras 6]

The assessee was not liable to deduct tax at source on the foreign commission payments, and the disallowance under section 40(a)(i) was deleted.

Final Conclusion: The appeal was allowed and the disallowance of foreign commission for non-deduction of tax at source was deleted.

Reassessment sanction by competent authority - Validity of notice issued after three years - Validity of reassessment notice issued after expiry of three years from the end of the relevant assessment year on sanction granted by the Principal Commissioner.

HELD THAT: - Coordinate Bench of this Tribunal in the case of Rajkumar Gupta [2026 (8) TMI 1552 - ITAT AGRA] held that the order u/s 148 dated 12.04.2023 issued in consequence of invalid sanction dated 11.04.2023 u/s 151 of the Act for AY. 2019-20, was bad in law because the approval was taken of the Ld. PCIT beyond the lapse of 3 years for which the assessment was being reopened and had set aside and quashed the assessment order dated 06.01.2025 passed in consequence thereof.

As more than three years had elapsed from the end of the relevant assessment year, the competent authority to grant approval u/s151 was the Principal Chief Commissioner and not the Principal Commissioner. The sanction obtained from the Principal Commissioner was therefore invalid, rendering the consequential notice and reassessment proceedings bad in law. [Paras 7]

The reassessment notice and the assessment made pursuant thereto were quashed; the remaining grounds were left open as academic.

Final Conclusion: The appeal was allowed and the reassessment was quashed for want of a valid sanction from the competent authority.

Mechanical sanction for reassessment - Application of mind by sanctioning authority - Validity of sanction for reassessment where the approval pro forma omitted the prior scrutiny assessment and recorded a bare, undated satisfaction - HELD THAT: - Though sanction is an administrative act, it must disclose reasons demonstrating consideration of the relevant material. The approval pro forma neither referred to the earlier scrutiny assessment nor did the recorded reasons do so; the sanctioning authority merely endorsed that the case was fit for issuance of notice, without referring to any material, and the approval was undated. These circumstances established that sanction had been accorded mechanically and without application of mind. [Paras 10, 11, 12, 14]

The sanction was invalid; consequently, the assumption of reassessment jurisdiction, notice and consequential reassessment were quashed, with the remaining grounds left open.

Final Conclusion: The assessee's appeal was allowed and the reassessment was quashed for want of a valid sanction. The other grounds were left open.

Unexplained investment - Admissibility of WhatsApp electronic records in income-tax assessment - Presumption from search material against third parties

Addition for alleged unexplained cash investment in bhisi transactions founded solely on WhatsApp data recovered from a third party's mobile phone - HELD THAT: - The Hon’ble Supreme Court in the case of Arjun Panditrao Khotkar vs. Kailash Kushanrao Gorantyal [2020 (7) TMI 740 - SUPREME COURT (LB)] has held that the certificate required u/s 65B(4) of the Indian Evidence Act, 1872 is a condition precedent to the admissibility of evidence by way of electronic record. As per section 79A of the Information Technology Act, 2000, electronic evidence from a digital device is admissible only if it has been extracted by an Examiner of Electronic Evidence.

The search presumption could not bind the assessee as a third party. The authenticity of the WhatsApp chats was not established through the certificate required for electronic records or through compliance with the requirement concerning extraction by an Examiner of Electronic Evidence. In the absence of any independent evidence apart from the chats recovered from the third party's phone, the material could not sustain the addition. [Paras 37, 38]

The addition as unexplained investment was deleted and the assessee's appeal was allowed.

Final Conclusion: The order sustaining the addition was set aside, as the unauthenticated WhatsApp data from a third party's phone was unsupported by independent evidence. The appeal was allowed.

Live broadcasting rights as royalty under the India-UK DTAA - Contractual allocation between live and non-live broadcasting rights - Release fee for athletes' participation under Article 18 of the India-UK DTAA

Live broadcasting rights as royalty - Copyright and scientific work - Taxability of licence fees for live broadcasting rights as royalty under Article 13 of the India-UK DTAA - HELD THAT: - A live transmission is a one-time event and confers no enduring benefit on the broadcaster. Live broadcasting is neither a scientific work nor a right in which copyright subsists; repeat telecasts and highlights fall within non-live broadcasting, the receipts from which had already been offered to tax.

As per DELHI RACE CLUB (1940) LTD. [2014 (12) TMI 265 - DELHI HIGH COURT] live Broadcasting is neither ‘scientific work’ nor any ‘copyright’ subsists in such rights. Therefore, any fee received towards live broadcasting rights cannot be classified as royalty under Article 13(3) of India-UK DTAA or section 9(1)(vii) of the Act. [Paras 13]

The fee for live broadcasting rights was held not taxable as royalty under Article 13(3) of the India-UK DTAA.

Allocation of broadcasting rights fees - Validity of the contractual allocation of rights fees between live and non-live broadcasting rights - HELD THAT: - ThWe find that the allocation of rights fee between the live rights and non-live rights in the ratio 95:5 has been mutually decided between assessee and Sony. The said ratio has been accepted by the revenue in the case CIT vs. Fox Network Singapore Pte. Ltd.[2024 (1) TMI 1008 - DELHI HIGH COURT] as well as in the case of CIT vs. Sri Lanka Cricket [2026 (1) TMI 1047 - DELHI HIGH COURT]. We see no reason to disturb the ratio of allocation of rights fee mutually agreed between two parties by virtue of agreement without there being any material to substantiate that the ratio mutually decided is unjustified. [Paras 14]

The agreed allocation between live and non-live broadcasting rights was sustained.

Release fee for athletes' participation - Article 18 of the India-UK DTAA - Taxability of release fee received for permitting English players to participate in the Indian Premier League under Article 18 of the India-UK DTAA - HELD THAT: - Under the release arrangement, the fee received by the assessee was over and above the league fee paid to the player and did not form part of the player's remuneration. Article 18 was held inapplicable to the assessee, since it concerns income received or accrued to an athlete from personal activities.

In the case of Wizcraft International Entertainment (P) Ltd.[2014 (5) TMI 149 - BOMBAY HIGH COURT] the Hon’ble Bombay High Court hold that where payment is made to Event Management Company based outside India to bring artists in India, the payment made to agent did not arise from personal activities, clause (2) of Article 18 would not apply. [Paras 17]

The release fee was held not taxable under Article 18 of the India-UK DTAA.

Final Conclusion: The appeal was partly allowed: the live broadcasting licence fee and release fee were excluded from taxation, while the challenge to consequential interest was dismissed.

Technical expert opinion in customs classification disputes - Writ jurisdiction despite alternative statutory remedy

Technical expert opinion in customs classification disputes - Eligibility for customs-duty concession on Battery Management Systems and Cell Supervisory Circuits - Disregard of the technical opinion on whether Battery Management Systems and Cell Supervisory Circuits were Printed Circuit Board Assemblies excluded from the concessional customs-duty notification - HELD THAT: - Where classification and exemption eligibility turn on specialised technical considerations, an expert opinion based on physical inspection and component-level analysis must be meaningfully evaluated. The adjudicating authority could not discredit the technical opinion merely as irrelevant by substituting its own technical perception, without a reasoned technical rebuttal or commensurate expert or scientific material.

The decision in M/s. Parle Agro (P) Ltd. [2017 (5) TMI 592 - SUPREME COURT], Shahnaz Ayurvedics (supra) [2004 (1) TMI 94 - ALLAHABAD HIGH COURT], Panama Chemical Works [1992 (7) TMI 68 - HIGH COURT OF MADHYA PRADESH, INDORE BENCH] and Neena Uppal [2024 (3) TMI 704 - BOMBAY HIGH COURT] are authorities for the proposition that where classification or taxability turns on specialised technical or scientific considerations, the adjudicating authority is bound to meaningfully evaluate expert opinion, and, if it seeks to disagree therewith, it must do so only on the basis of commensurate expert or scientific material and not on subjective assumptions. [Paras 17, 19, 22]

The order denying the concessional rate was quashed and the show-cause notice was remanded for fresh adjudication on merits after appropriate consideration of the technical opinion, with liberty to obtain a counter-expert opinion.

Writ jurisdiction despite alternative statutory remedy - Maintainability of the writ petition despite the statutory appellate remedy against the customs adjudication order - HELD THAT: - In the particular facts, the challenge concerned adjudication of a specialised technical issue after the expert opinion had been brushed aside without a reasoned technical basis. The Court therefore declined to relegate the petitioner to the statutory appeal. [Paras 20, 21]

The writ petition was entertained notwithstanding the alternate statutory remedy.

Final Conclusion: The writ petition was allowed; the customs adjudication order was quashed and the matter remanded for fresh adjudication in accordance with law.

Classification of lead-bearing powder - Burden of proof for reclassification - Conflicting scientific test reports - Classification of the imported lead-bearing powder declared as lead concentrate under heading 2607 OR lead waste and scrap under tariff item 78020090

HELD THAT: - The scientific reports were conflicting and did not conclusively establish that the goods were lead waste and scrap. The reports showed that the material principally consisted of lead oxide and lead sulphate, with metallic lead only in negligible traces. Heading 7802 applies to lead in metallic or primary form, whereas lead oxide and lead sulphate are separately covered under Chapter 28. Technical literature and descriptions in import-export documents could not displace the declared classification when the identity of the goods itself had not been conclusively established through scientific evidence. The burden to establish the proposed reclassification lay on the Revenue and was not discharged. [Paras 6, 7]

The Revenue's proposed classification under tariff item 78020090 was unsustainable; the classification declared by the appellants as lead concentrate was left undisturbed and the appeals were allowed.

Final Conclusion: The proposed classification of the imported goods as lead waste and scrap was not established by reliable and conclusive scientific evidence. The appeals were allowed.

Oppression and mismanagement in an RBI-regulated NBFC - Regulatory breach as conduct prejudicial to public interest - Related-party transactions and corporate improbity - Proportionality of administrator-led corporate governance relief

Oppression and mismanagement - Appellate interference with discretionary corporate relief - governing standard for oppression and mismanagement, and the scope of appellate interference with the discretionary relief granted in respect of the company - HELD THAT: - Conduct prejudicial to public interest or to the interests of the company is independently actionable, and, in the case of an RBI-regulated NBFC, departure from binding prudential norms may satisfy that standard when accompanied by other indicia of mismanagement. The conduct complained of must be assessed cumulatively as a continuing course of events, rather than by isolating individual transactions. Appellate interference with a fact-intensive equitable exercise of discretion is unwarranted merely because another view is possible, unless the findings are perverse, unsupported by evidence, contrary to settled law, or capricious. [Paras 96, 97, 98, 101, 102]

The Tribunal was competent to entertain the allegations and to grant suitable protective relief; no ground for appellate interference with its discretionary assessment was made out.

Pleadings in oppression and mismanagement proceedings - Independent sustainability of findings - Whether reliance upon replies filed by non-members vitiated the finding of oppression and mismanagement? - HELD THAT: - Though relief in oppression and mismanagement proceedings must rest on the petitioner's pleaded case and the Tribunal's reliance on replies of non-members disclosed an internal inconsistency, that defect did not go to the root of the order. The material allegations concerning the regulatory breach, conversion of instruments, related-party dealings, resignations, non-implementation of RBI approval and removal of independent directors were independently available from the petitioners' pleadings, the company's replies and the Tribunal's own orders. Acquisition of shares after the impugned transaction or knowledge of disclosures did not by itself extinguish the question whether the conduct lacked probity or amounted to mismanagement. [Paras 105, 106, 107]

The impugned order was held sustainable independently of the replies of non-members, and the pleaded material disclosed a prima facie case warranting intervention.

Leverage-ratio breach by NBFC - Concurrent regulatory and oppression jurisdiction - Conversion of OCDs into CCPS - Whether breach of the NBFC leverage ratio and conversion of OCDs into CCPS constituted conduct prejudicial to the company and public interest, notwithstanding the RBI penalty mechanism and the dispute regarding prior RBI approval? - HELD THAT: - The admitted raising of funds beyond the prescribed leverage ceiling constituted a serious departure from binding prudential norms, and the record supported the finding that the breach persisted without timely disclosure or complete remediation. The RBI's power to impose a penalty operates in the distinct field of regulatory supervision and does not impliedly exclude the Tribunal's jurisdiction to consider whether the same conduct is prejudicial to the company, its members or public interest. Even if the contention that conversion into CCPS did not technically trigger the approval threshold were accepted, it was not decisive: the transaction had to be assessed with the overall course of conduct and the requirement of probity and fair dealing. The RBI's subsequent findings of leverage-ratio and compliance breaches reinforced the conclusion that the regulatory departure was not a merely private capital-structuring matter. [Paras 118, 119, 122, 123, 124]

The Tribunal's conclusion that the regulatory breach and the conversion formed part of oppression and mismanagement was upheld; the RBI penalty remedy did not bar such jurisdiction.

Related-party transactions - Omnibus approval - Corporate fiduciary standards - Whether the purchase of the Bentley motor car and related-party loans were protected by omnibus approval and whether they disclosed improbity in the conduct of the company's affairs? - HELD THAT: - Transactions predating the circular resolution relied upon for omnibus approval could not ordinarily be retrospectively validated by it; moreover, the transactions were not shown to conform even to the stated limits of that approval. The absence of loan documentation, security or hypothecation, inadequate recovery arrangements and adjustment of a related-party loan against the vehicle purchase supported a prima facie inference of circularity and self-dealing. Viewed cumulatively, the related-party dealings were inconsistent with the fiduciary standards expected of those managing an RBI-regulated lender. [Paras 126, 127, 129]

No infirmity was found in the conclusion that the vehicle purchase and related-party dealings disclosed improbity in the company's management.

Corporate governance safeguards - Mass resignation of compliance personnel - Removal of independent directors - Whether the mass resignation of compliance personnel and removal of independent directors were relevant to the oppression and mismanagement inquiry? - HELD THAT: - The Tribunal was justified in treating the objective fact of a near-simultaneous departure of personnel responsible for legal, financial and business compliance, together with the removal of independent directors during the pending proceedings, as relevant circumstances. It was not required at that stage to undertake a roving inquiry into the veracity of every individual allegation. The removal of independent directors in the stated circumstances bore directly on whether governance safeguards were being dismantled while the management's conduct was under scrutiny. [Paras 137, 138, 140]

These events were held to be probative corporate-governance material, to be examined and finally adjudicated by the Tribunal in the pending company petition.

Non-implementation of RBI-approved share allotment - dispute concerning non-implementation of the RBI-approved arrangement for proposed additional share allotment - HELD THAT: - The company had obtained RBI clearance for the proposed allotment, but the contemplated public notice was not issued. The dispute as to the proposed investment, the alleged adjustment against a personal loan and the resulting obligations could affect the affairs of the company, but required a fuller factual examination. The appellants could not identify a demand requiring payment of the proposed investment. [Paras 132, 133, 134]

The issue was left for detailed consideration and final adjudication by the Tribunal in the pending company petition.

Observer's reports - Compliance with judicially appointed observer's directions - treatment of the Observer's reports and the non-payment of remuneration due to the judicially appointed Observer - HELD THAT: - The appellants' failure to obtain the Observer's confirmation of board-meeting minutes and the substantial delay in forwarding the minutes were not appreciated. Since the contents of the Observer's reports had not been fully considered in the appeals, their examination required notice and opportunity to all parties. The Observer's claim for remuneration also required determination according to the terms of appointment. [Paras 142, 143, 144]

The Observer was directed to place the reports before the Tribunal for consideration in accordance with law, and the Tribunal was directed to resolve the remuneration issue promptly, with the company ensuring payment as directed.

Proportionality of protective corporate relief - Appointment of administrator and suspension of board - Whether appointment of an independent Administrator and suspension of the Board for a defined period were disproportionate remedies? - HELD THAT: - The protective measures pursued the legitimate object of preventing further prejudice pending fuller inquiry. In light of the admitted regulatory breach, the alleged related-party dealings and the departure of compliance personnel, no equally effective but materially less intrusive alternative was shown. The measures were therefore suitable and proportionate to the circumstances identified by the Tribunal. [Paras 145, 146]

The appointment of the Administrator and temporary suspension of the Board were held not to be disproportionate.

Final Conclusion: Both appeals were dismissed. The main company petition and pending applications were remitted to the Tribunal for independent determination in accordance with law, without being influenced by the observations made in the appellate order.

Operational debt arising from consortium supply obligations - Pre-existing dispute in operational-debt insolvency proceedings

Operational debt arising from advance payment for supply of goods - Existence of operational debt where a consortium agreement allocated supply obligations to the corporate debtor and the lead consortium member advanced payment for the supplies - HELD THAT: - An operational debt requires a claim bearing nexus to the provision of goods or services; an invoice is not indispensable where other documents establish the debt. The consortium agreement expressly contemplated supply by the corporate debtor and payment by the appellant for supplies and services rendered according to their respective scope of work. The admitted receipt of the advance, the issuance of cheques by the corporate debtor, and its subsequently withdrawn invoice claiming supply of goods supported the appellant's case that the advance was towards supply of goods. The plea that the amount was a security deposit lacked contractual or documentary support. The Adjudicating Authority therefore erred in treating the consortium arrangement as excluding inter se commercial transactions without examining its real nature. [Paras 21, 23, 24, 28, 30]

The appellant established an operational debt exceeding the statutory threshold, and the rejection of the application on the ground that no operational debt existed was unsustainable.

Absence of pre-existing dispute - Existence of a pre-existing dispute disentitling the appellant from initiating insolvency proceedings for the unpaid advance - HELD THAT: - The corporate debtor did not controvert, upon receipt of the demand notice, the assertion that the advance had been made for supply of goods; it merely stated that its accounts were being reconciled. No material established a dispute existing before issuance of the demand notice. The subsequent defence concerning the character of the payment could not constitute a pre-existing dispute. [Paras 18, 29]

No pre-existing dispute was shown, and the corporate debtor could not resist admission of the insolvency application on that ground.

Final Conclusion: The appeal was allowed and the order rejecting the insolvency application was set aside. The application was revived for admission, while permitting the corporate debtor a time-bound opportunity to liquidate the debt and establish such payment before the Adjudicating Authority.

Service tax on international ocean and air freight - Freight forwarder's mark-up on principal-to-principal transactions - Valuation rules cannot create taxability - Invocation of the extended period

Levy of service tax on the freight recovered, including the mark-up, by a freight forwarder arranging international transportation of import and export cargo on a principal-to-principal basis - HELD THAT: - Transportation of goods by vessel or aircraft from outside India to a customs station in India was not taxable under the positive-list regime and was expressly excluded under the negative-list regime during the disputed period. Rule 5 of the Valuation Rules and Section 67 regulate the value of an otherwise taxable service and cannot create taxability or convert a non-taxable transaction into a taxable service merely because the freight forwarder is not a pure agent. The freight recovered from customers, together with the commercial margin, remained consideration arising from the non-taxable transportation activity and could not be severed and re-characterised as consideration for support service of business or commerce. [Paras 8, 9, 10, 11]

Since the demand itself fails on merits for the entire disputed period, the question of the invoke-ability of the extended period of limitation under the proviso to Section 73(1) does not strictly call for determination. The appellant’s reliance on Star Freight Pvt. Ltd. [2023 (9) TMI 71 - CESTAT AHMEDABAD] and International Clearing and Shipping Agency [2025 (2) TMI 615 - CESTAT CHENNAI] is well founded in this regard. It follows that the penalty imposed under Section 78(1) of the Act, being consequential upon a demand that does not survive, also cannot be sustained.

The demand on the freight and mark-up for the entire disputed period, with interest, was held unsustainable; the consequential penalty also could not survive.

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

Service tax was chargeable on study materials/books, hostel and mess charges, 'other fee', and other ancillary collections - Sale of study material by coaching provider - Hostel and mess charges unconnected with coaching service - Taxability of ancillary collections without nexus to coaching service - Extended limitation for service-tax demand - Penalty waiver for reasonable cause - Renting of premises to an educational institution

Sale of study material by coaching provider - Exclusion of goods from taxable value of coaching service - Service-taxability of books and study material supplied by the provider of commercial training and coaching service - HELD THAT: - Books and study material, though exempt from VAT, remained goods leviable to VAT and could not be treated as a service. Separate invoices and accounting for study-material charges established a distinct sale transaction; the absence of individual pricing did not negate that character. For the period before the negative-tax regime, the exemption for goods and materials sold was available, since the appellant established that no credit on the relevant inputs had been availed. Treating the supply as an integral or bundled part of coaching was also beyond the allegations in the show-cause notice. [Paras 12, 13, 14, 15]

The demands on books and study material were set aside, and the benefit of the exemption notification was held available up to 30.06.2012.

Hostel and mess charges unconnected with coaching service - Inclusion of hostel accommodation and mess charges in the taxable value of commercial training and coaching service - HELD THAT: - The taxable value of coaching service must bear nexus to that service. Hostel accommodation and food were independent facilities, and the department had earlier accepted that such lodging and boarding charges lacked nexus with coaching. The appellant did not offer a compulsory residential course and students could avail the facilities separately. [Paras 16, 17, 29]

Hostel-fee and mess-fee demands were held unsustainable, and the departmental appeal seeking to tax mess charges was dismissed.

Taxability of other fee with reference to its nexus to coaching service - Service-taxability of collections shown as other fee - HELD THAT: - Other fee could not be included merely by its accounting description. To the extent it represented study material, hostel fee or mess fee, or otherwise lacked nexus with the coaching activity, it was outside the taxable value. Where the nature and allocation of such collections required factual determination, the demand could be re-determined only in accordance with that principle. [Paras 17, 28]

The other-fee demands were set aside to the extent attributable to non-taxable collections; in the appeals requiring factual allocation, the issue was remanded for re-determination.

Differential service tax based on receivable entries - Demand of differential service tax on tuition charges merely because income-receivable entries appeared in the accounts - HELD THAT: - The differential entries represented receivables for which neither the service had been completed nor advances received or invoices issued, and the related tax was paid in the immediately succeeding month. The accounting treatment, without more, did not establish any escape of service tax. [Paras 18]

The differential demand founded solely on the income-receivable entries was set aside.

Burden to establish taxable character of ancillary collections - Taxability of disclosed income without proof of taxable service - Service-taxability of additional income disclosed for income-tax purposes and other incidental collections, including application-related charges, deposits and sale proceeds - HELD THAT: - The department was required to establish that the income arose from a taxable service. Acceptance of an amount as income under income-tax law did not establish its receipt for commercial training and coaching service. Nor was there material showing that the various incidental collections were connected with coaching; several were in the nature of sale of goods or had no nexus with the taxable service. [Paras 20, 23]

The demands on the additional disclosed income and the identified incidental collections were set aside.

Renting of premises to an educational institution - Service-taxability of rent received from an educational institution - HELD THAT: - The premises had been rented to an educational institution operating a senior college. Such renting was covered by the applicable negative-list and exemption provisions. [Paras 27]

The demand on rental income was set aside.

Extended limitation for service-tax demand - Suppression of facts - Invocation of the extended period for demands concerning exclusion of components from the gross value of coaching service - HELD THAT: - The dispute over inclusion of study material and other components in the taxable value had been the subject of earlier proceedings, and the statutory change did not make the essential controversy new. The disclosure made to the income-tax authorities was not withheld from the department, while the department failed to establish that it represented consideration for a particular taxable service. Mere non-payment, particularly in an interpretative dispute, did not establish suppression. [Paras 23, 24]

The extended period was held not invocable.

Penalty for non-payment under bona fide belief - Reasonable cause for failure to pay service tax - HELD THAT: - As the extended period was not available, the penalty linked with suppression could not survive. The appellant had paid tax on tuition charges and had omitted tax on the disputed receipts under a bona fide interpretation that they were not taxable; this constituted reasonable cause during the period when the statutory protection was available. [Paras 25, 26]

Penalty under section 78 was set aside, and penalties under sections 76 and 77 were waived for the period covered by section 80.

Final Conclusion: The appellant's appeals were partly allowed and the impugned orders modified: service tax was sustained only on tuition charges where applicable, while the remaining demands were set aside or remanded for limited re-determination. The departmental appeals were dismissed.

Service tax liability of sub-contractors providing taxable services - Liability of a sub-contractor providing taxable construction, maintenance and manpower services where the main contractor was claimed to have discharged service tax on its behalf

HELD THAT: - A sub-contractor, being the provider of taxable service, is independently liable to discharge service tax in the absence of an exemption, notwithstanding payment of tax by the main contractor. Such payment does not result in double taxation, since the main contractor may avail CENVAT credit. In any event, the claim that the main contractor had paid the disputed liability was unsupported by challans. See MELANGE DEVELOPERS PVT. LTD. [2019 (6) TMI 518 - CESTAT NEW DELHI-LB][Paras 7, 8]

The confirmation of service tax demand, interest and penalties was upheld and the appeal was dismissed.

Final Conclusion: The impugned order was upheld, as the appellant remained liable for service tax as a sub-contractor and failed to establish payment of the disputed tax by the main contractor.

Export of Category III services - Refund of unutilised CENVAT credit - Consistency of Revenue's stand

Eligibility to refund of accumulated CENVAT credit on Business Auxiliary Services supplied to a foreign recipient and claimed as export services - HELD THAT: - Revenue could not deny the Rule 5 refund by treating the services as not exported while not initiating appropriate proceedings to recover service tax on the footing that the same services were taxable in India. Such contrary positions in respect of the same services were impermissible. Further, the applicable Board clarification treated Category III services, including Business Auxiliary Services, as exports where supplied in relation to business or commerce to a recipient located outside India, notwithstanding that the activities were performed in India, provided the benefit accrued outside India. [Paras 4]

The services qualified as export services and the refund claims were allowable; the order rejecting them was set aside and the appeals were allowed.

Final Conclusion: The refund claims for accumulated CENVAT credit were held admissible because the services qualified as exports and Revenue could not adopt inconsistent positions regarding their export status.

Taxable value of construction services provided to existing occupants under a redevelopment scheme - Valuation of redevelopment flats allotted to existing occupants - Comparable service under service-tax valuation rules

Service-tax valuation of flats and a commercial unit allotted without monetary consideration to existing occupants under a redevelopment scheme by reference to the sale value of flats sold to new buyers - HELD THAT: - For applying the comparable-service method, the comparison must be between service recipients standing on the same footing. The sale value of flats sold to new buyers could not determine the value of services provided to existing occupants under the redevelopment arrangement. As service tax had been discharged on flats sold to new buyers, the demand founded on an assumed value for the flats allotted to existing occupants was unsustainable. [Paras 4]

The service-tax demand was set aside, with consequential interest and penalty; the appeal was allowed.

Final Conclusion: The demand based on valuing redevelopment flats allotted to existing occupants with reference to sales to new buyers was held unsustainable. Consequential interest and penalty were also set aside, and the appeal was allowed.

Service tax on ocean freight - Extended period of limitation for service tax demand

Sustainability of the service tax demand on ocean freight, raised by treating differential income reflected in income-tax returns as service income, including its invocation of the extended period of limitation. - HELD THAT: - The Tribunal followed the Gujarat High Court MESSRS SAL STEEL LTD. & 1 OTHER (S) VERSUS UNION OF INDIA [2019 (9) TMI 1315 - GUJARAT HIGH COURT] ruling governing ocean freight. As the departmental challenge to that ruling was not stayed, the demand could not be sustained either on merits or on limitation. [Paras 3]

The demand was held unsustainable on merits as well as on limitation.

Final Conclusion: The appeal was allowed and the service tax demand was held unsustainable on merits as well as on limitation.

Scope of show cause notice in denial of Cenvat credit on sales commission - Adjudication Confined to Show Cause Notice - Denial of Cenvat credit on service tax paid on sales commission by attributing part of the disputed credit to commission paid to overseas agents

HELD THAT: - An adjudicating or appellate authority cannot travel beyond the allegations, charges and calculations in the show cause notice. The notice sought denial of credit on total sales commission but neither alleged availment of credit on commission paid to overseas agents nor contained evidence supporting such availment; rather, it recorded the appellant's assertion that no such credit had been taken. The appellate authority therefore erred in presuming that the disputed credit included credit relating to overseas agents and in remanding the matter for bifurcation. [Paras 12]

The order remanding the matter for verification and bifurcation was set aside, and the dropping of the proceedings pursuant to the show cause notice was upheld.

Final Conclusion: The appeal was allowed and the appellate order was set aside, with consequential relief to the appellant, if any.

Service tax exemption for Government water pipeline works - Exemption to sub-contractor under exempt main works contract

Availability of service-tax exemption to a sub-contractor for repair, maintenance and shifting of water pipelines forming part of a Government-awarded works contract - HELD THAT: - The appellate authority's conclusion that the sub-contract work could not have been performed during the disputed period rested on an incorrect reading of the date of the principal work order. The record established that the pipeline work had been awarded by a Government undertaking and that a part thereof was sub-contracted to the appellant. Services relating to construction, repair or maintenance of pipelines for water treatment, being supplied to the Government, were exempt; where the principal works contract was exempt, the corresponding services rendered by the sub-contractor were also exempt. [Paras 6, 7, 8]

The demand and consequential penalties were not sustainable; the appellate order was set aside and the original order dropping the demand was affirmed.

Final Conclusion: The appeal was allowed, the impugned appellate order was set aside, and the order dropping the service-tax demand was restored.

Refund of Education Cess and Secondary and Higher Education Cess paid under mistake of law - Section 11B limitation for refund claims - Refund of Education Cess and Secondary and Higher Education Cess mistakenly paid on Oil Industry Development Cess, where the refund claim was made beyond one year from the relevant date

HELD THAT: - Section 11B governs refunds of duty of excise and interest paid on such duty, and does not extend to an amount collected without authority of law. Education Cess and Secondary and Higher Education Cess paid under a mistaken notion, though not payable, did not acquire the character of excise duty merely because the refund application referred to Section 11B. The Department could not retain such amounts, and the one-year limitation under Section 11B was therefore inapplicable. [Paras 14, 15, 16, 17]

The respondents were entitled to refund of the mistakenly paid cess; Section 11B did not bar the claims.

Final Conclusion: The appeals were dismissed. The Department was required to refund the Education Cess and Secondary and Higher Education Cess mistakenly paid by the respondents.

CENVAT credit on inputs used in factory - half-cut pipes and waste and scrap of pipes used for repair of pollution-control equipment - one-to-one correlation between inputs and finished goods

HELD THAT: - We find that the appellant has taken the credit on ‘half-cut pipes’ and ‘waste and scrap of pipes’ for which the vendor has duly issued the Invoices which can be termed as proper documents in terms of Rule 9 of Cenvat Credit Rules, 2004. These invoices show the value of the goods and also the Excise Duty paid hereon

The invoices were proper documents under the Cenvat Credit Rules, 2004, recording the value of the goods and excise duty paid. The Rules did not require proof of a one-to-one correlation between inputs and finished products. Where goods are used in the factory producing dutiable finished goods, credit cannot be denied; the credit and stock receipt were also recorded in the prescribed records and return. [Paras 4, 5]

The Revenue having failed to establish a case for denial of credit on merits, the impugned order was set aside and the appeal was allowed with consequential relief in accordance with law.

Final Conclusion: The denial of CENVAT credit on the disputed pipes and pipe scrap was set aside and the appeal was allowed.