TaxTMI Updates e-Newsletter
Sep 04,2026

Fraudulent availment of input tax credit on invoices issued by non-existent suppliers - Fraud or suppression for demand under Section 74 - Reverse charge liability-absence of suppression - Consolidated show cause notice for multiple financial years - Appellate modification of tax determination

Input tax credit mismatch between GSTR-3B and GSTR-2A - Appellate modification of tax determination - Modification by the first appellate authority of tax liability arising from mismatch between input tax credit availed in GSTR-3B and credit reflected in GSTR-2A - HELD THAT: - The first appellate authority had determined the liability after comparing the returns and the DRC-03 reversals. The appellate authority was empowered to modify the tax determined by the proper officer, with consequential modification of interest and penalty; its computation therefore did not exceed jurisdiction. [Paras 21, 22]

The modified demand under Section 73, with consequential interest and penalty, was upheld.

Reverse charge liability - absence of suppression - Strict construction of suppression of facts - Invocation of Section 74 for reverse charge tax alleged on conveyance, freight, legal and travelling expenses - HELD THAT: - The taxpayer's accounts and annual financial statements disclosed the relevant expenses, and the record did not establish any deliberate suppression of material information to evade tax. Suppression for the purpose of Section 74 requires deliberate non-disclosure and cannot arise merely from an omission where the material facts were available.

In the light of the judgment of the Hon’ble Apex Court in Pushpam Pharmaceuticals [1995 (3) TMI 100 - SUPREME COURT] we cannot but agree with the finding of the first appellate authority that Section 74, CGST Act, 2017 cannot be invoked for enforcement of this demand. [Paras 24, 25, 26]

The reduced reverse charge liability, recoverable under Section 73 with interest and penalty, was upheld; Section 74 was held inapplicable.

Fraudulent availment of input tax credit on invoices issued by non-existent suppliers - Burden of proof for input tax credit - Actual physical movement of goods - Applicability of Section 74 to input tax credit availed on invoices issued by suppliers found to be non-existent - HELD THAT: - In recent case M/S. TATA STEEL LIMITED VERSUS UNION OF INDIA THROUGH THE SECRETARY MINISTRY OF FINANCE AND ORS. [2026 (8) TMI 1587 - SUPREME COURT] held that the foundational facts which led the assessing officer to arrive at the inference of fraud/ wilful misrepresentation/ suppression should be evident from the notice itself.

The burden of proving entitlement to input tax credit lay on the claimant. Production of invoices and banking particulars did not establish the actual physical movement of goods, which was essential to prove the genuineness of the transactions. The show cause notice disclosed the foundational facts concerning the fictitious suppliers and their registrations, and the Tribunal found that the taxpayer knowingly claimed credit without actual receipt of goods and made wilful misstatements in self-assessment. [Paras 37, 41, 42, 43, 44]

The finding that Section 74 was inapplicable was rejected, and the demand for wrongful input tax credit with applicable interest and penalty under Section 74 was restored.

Validity of a consolidated show cause notice under Section 74 covering multiple financial years - HELD THAT: - The statutory expressions 'for any period' and 'for such periods' permit a notice concerning more than one financial year. The nature of fraudulent input tax credit may require examination of connected transactions across different financial years, and a consolidated notice is not thereby impermissible. [Paras 46]

A consolidated show cause notice for multiple financial years under Section 74 was held permissible.

Final Conclusion: The Revenue's appeal was partly allowed: the demand concerning input tax credit claimed on invoices of non-existent suppliers was restored under Section 74, while the modified mismatch and reverse charge demands under Section 73 were sustained. Any application for the available statutory waiver was directed to be decided within three months of filing.

Bail condition requiring security for alleged tax liability - Onerous bail condition - bail condition requiring security bond equal to the alleged tax and penalty - HELD THAT: - The appellant was held to be on the same footing as the co-accused in whose case the condition had been modified as onerous and vague [2026 (5) TMI 1160 - SC ORDER]. Since the family assets had been disclosed by affidavit, those declared assets could stand as security in place of the stipulated security bond. [Paras 4]

The respondent was directed not to insist upon compliance with the impugned security-bond condition, and the declared family assets were directed to constitute security for the alleged dues.

Final Conclusion: The appeal was allowed by modifying the bail condition requiring a security bond, with the assets disclosed on behalf of the family treated as security for the alleged amount due.

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

Validity of GST adjudication where the show cause notice was uploaded only under the 'Additional Notice and Orders' tab of the GST portal without separate intimation, preventing the petitioner from responding - HELD THAT: - The Court found that, in the peculiar facts, uploading the show cause notice only under the specified portal tab without separate intimation resulted in the petitioner being unable to submit a reply. This was held to constitute a violation of the principles of natural justice. [Paras 7, 8, 9]

The show cause notice, adjudication order and consequential notices were quashed. A fresh show cause notice was directed to be issued, followed by a reasoned decision after considering the petitioner's reply and affording personal hearing.

Final Conclusion: The writ petition was disposed of by quashing the impugned GST proceedings for violation of natural justice and directing fresh adjudication in accordance with law.

Service of show cause notice through GST portal - Natural justice in GST adjudication

Validity of GST adjudication where the show cause notice was uploaded only under the portal tab 'Additional Notice and Orders' without separate intimation to the taxpayer - HELD THAT: - The Court found that, owing to the manner in which the notice was uploaded and absence of separate intimation, the petitioner was unable to respond to the show cause notice. This constituted a violation of the principles of natural justice and warranted interference. [Paras 7, 8]

The show cause notice and adjudication order were quashed; a fresh notice was directed to be issued and adjudicated after receipt of the petitioners' reply and affording personal hearing.

Final Conclusion: The writ petition was disposed of by setting aside the impugned GST proceedings for breach of natural justice and directing fresh adjudication in accordance with law.

Levy for payment of service tax for the normal period of limitation along with interest - Penalty for non-payment of service tax on consultancy services rendered to Government institutions where the assessee acted under a bona fide belief that the services were non-taxable

HELD THAT: - The contemporaneous departmental communications supported the assessee's understanding that the services were not exigible to service tax. Further, the Tribunal's unchallenged finding that there was no wilful suppression of facts with intent to evade tax materially bore upon the allegation underlying the penalty proceedings. The resulting interpretational uncertainty, absence of fraud, wilful misstatement or intent to evade, and the Department's own initial view constituted reasonable cause under Section 80 of the Finance Act, 1994; the default was neither deliberate nor contumacious. [Paras 22, 23, 24, 27]

The penalty imposed under Section 78 was set aside and the appeal was allowed.

Final Conclusion: The appeal was allowed and the penalty under Section 78 of the Finance Act, 1994 was set aside on the assessee establishing reasonable cause for non-payment of service tax.

Applicability of omission of Rule 96(10) to pending proceedings - Benefit of the omission of Rule 96(10) of the CGST Rules, 2017 to pending proceedings arising under that rule - HELD THAT: - The omission of Rule 96(10) through Notification No.20/2024 with effect from 8.10.2024 was held to enure to the benefit of assessees in all pending proceedings.

The issue raised in this batch is no longer res integra, as the Gujarat High Court in the case of Addwrap Packaging Private Limited [2025 (6) TMI 1156 - GUJARAT HIGH COURT] held that the omission of sub-rule (10) of Rule 96, through the Notification No.20/2024 with effect from 8.10.2024, would enure to the benefit of all assessee’s in the pending proceedings also.

The Hon’ble Supreme Court, in the case of Goodluck India Limited [2026 (8) TMI 719 - SUPREME COURT] upheld the decision of the Gujarat High Court holding that the deletion of sub-rule (10) of Rule 96 would be applicable to all the pending proceedings. Further, the Supreme Court directed that the issues in respect of challenge to Rule 96(10) in various High Courts would be placed before the Courts having roster, after obtaining orders from the Hon’ble Chief Justice for passing appropriate orders, as the issue would get settled in view of the decision of the Supreme Court. [Paras 7, 8, 9, 10]

The writ petitions were disposed of on the basis that the omission applies to all pending proceedings; challenges to notices and orders-in-original, and consequential refund claims, are to be processed accordingly.

Final Conclusion: The writ petitions were disposed of by applying the omission of Rule 96(10) to all pending proceedings. Consequential claims arising from notices, orders-in-original and remittances are to be dealt with in accordance with law.

Rejection of input tax credit on construction intended for leasing without applying the Supreme Court precedent - Recovery without mandatory pre-recovery intimation

Input tax credit on construction intended for leasing - Failure to consider binding precedent - Reconsideration of denial of input tax credit on construction-cum-leasing services without considering the Supreme Court ruling on construction intended for lease or licence - HELD THAT: - Chief Commissioner of CGST and others v. Safari Retreats Pvt. Ltd. and others [2024 (10) TMI 286 - SUPREME COURT] explained that construction intended to be sold, leased or licensed cannot be regarded as construction on the taxable person's own account. As the impugned assessment findings rejected the leasing-based claim without considering that ruling, the matter required reconsideration. [Paras 6, 8]

The assessment orders and consequential DRC-07 orders were set aside and remanded for fresh consideration after granting reasonable opportunity; no finding on entitlement to input tax credit was rendered on merits.

Recovery without mandatory pre-recovery intimation - Re-credit of electronic ledgers - Validity of debiting electronic cash and credit ledgers without the prescribed recovery intimation and opportunity to pay - HELD THAT: - Rule 142B requires electronic intimation in Form GST DRC-01D calling upon the person in default to pay the recoverable amount within seven days, and recovery measures may follow only upon non-payment after that period. The prescribed sequence was not complied with; moreover, the assessment orders forming the basis of recovery had been set aside. [Paras 12]

The respondents were directed to re-credit or refund the amounts debited from the electronic cash or credit ledgers to the corresponding ledger.

Final Conclusion: The assessment and consequential orders were set aside for reconsideration of the input tax credit claim, and the amounts recovered by debiting the electronic ledgers were directed to be re-credited or refunded.

Breach of principles of natural justice in tax adjudication - Failure to consider reply to show-cause notice

Validity of an order determining tax dues where the assessee's detailed reply and supporting documents were not considered and no hearing was afforded - HELD THAT: - Though the order referred to the reply, the assessee's stand and the documents relied upon, it disclosed no consideration of the contentions advanced. As the order was also passed without hearing the assessee, it was rendered in breach of the principles of natural justice. The pendency of a statutory appeal filed to preserve limitation did not warrant relegating the assessee to that remedy. [Paras 5]

The impugned order was quashed and set aside, with a direction to the State Tax Officer to afford a hearing, consider the response and pass a fresh order in accordance with law.

Final Conclusion: The writ petition was disposed of by quashing the order determining dues and directing fresh adjudication after hearing the assessee and considering its response.

Blocking of Input Tax Credit under Rule 86A of the Tamil Nadu Goods and Services Tax (TNGST) Rules, 2017 - One-year limitation on restriction of electronic credit ledger

Whether blocking of input tax credit under Rule 86A could continue after expiry of one year from the date on which the restriction was imposed? - HELD THAT: - Rule 86A(3) expressly limits a restriction imposed under Rule 86A(1) to one year from its imposition, upon expiry of which it ceases to have effect. The restriction cannot be continued indefinitely merely on the strength of an internal communication; the authority must independently satisfy the requirements for invoking Rule 86A. Since the prescribed period had expired, the blockage was required to be automatically removed. Completion of assessment and, where necessary, recovery proceedings in accordance with law remain open to the authorities. [Paras 6, 7, 8]

The respondents were directed to forthwith unblock the Input Tax Credit in the petitioner's credit ledger, without prejudice to completion of assessment and lawful recovery proceedings.

Final Conclusion: The writ petition was disposed of by directing unblocking of the Input Tax Credit, as the Rule 86A restriction had expired after one year. The authorities may proceed with assessment and recovery in accordance with law.

Condonation of delay in GST appeal on medical grounds - Extraordinary writ jurisdiction despite statutory limitation

Condonation of delay in filing a statutory GST appeal where medical circumstances prevented timely filing - HELD THAT: - Though the Appellate Authority was bound by the statutory limitation governing the appeal, the medical reasons for the delay were beyond the petitioner's control. In the circumstances, denial of adjudication on merits would cause grave injury and prejudice, warranting exercise of writ jurisdiction to condone the delay. [Paras 7, 8]

The appellate order dismissing the appeal as time-barred was set aside, and the appeal was directed to be decided on merits in accordance with law, subject to payment of admissible late fees, penalty and statutory deposits.

Final Conclusion: The writ petition was allowed. The petitioner's delayed GST appeal was restored for decision on merits, subject to the applicable statutory deposits.

Input tax credit denied for delayed filing of the March 2020 return u/s 16(4) - Retrospective input tax credit under Section 16(5) of the CGST Act - Statutory right not curtailable by circular

Entitlement to input tax credit for the monthly return for March 2020, denied for delay under Section 16(4) of the CGST Act, after the retrospective insertion of Section 16(5) - HELD THAT: - Section 16(5), introduced with retrospective effect, confers a statutory right upon taxpayers who furnished returns within its stipulated cut-off date and operates notwithstanding the time-limit under Section 16(4). That right cannot be denied or curtailed by a circular. The notification requiring a rectification application within a specified period was inapplicable, since it contemplated cases in which no appeal against the assessment order had been filed; the petitioner had pursued an appeal before the amendment. [Paras 5, 6, 7]

The assessment and appellate orders denying input tax credit, along with consequential demands, were quashed, and the assessing authority was directed to reconsider and grant the benefit under Section 16(5), if the petitioner is otherwise eligible.

Final Conclusion: The writ petition was disposed of by quashing the denial of input tax credit and directing reconsideration under Section 16(5) of the CGST Act.

Anti-profiteering - offset of additional input tax credit benefit by genuine cost escalation

Whether verified escalation in construction-input costs could offset the benefit of additional input tax credit and negate profiteering under the anti-profiteering framework? - HELD THAT: - The Tribunal held that genuine commercial factors, including proven cost escalation, may be considered in determining whether a supplier has retained an additional input tax credit benefit. The escalation in the costs of major construction materials was supported by an independent Chartered Accountant's certificate, verified with supporting records and accepted by the investigating authority. The revised computation, which deducted the verified cost escalation from the savings arising from additional input tax credit, was found legally sound, as the resulting net savings were negative. [Paras 11, 13, 14]

No profiteering was established, since the additional input tax credit benefit was entirely offset by the verified increase in construction-material costs; consequently, there was no contravention of the anti-profiteering provision.

Final Conclusion: The investigation report, as revised through the clarification accepting verified cost escalation, was accepted. The respondent was not found to have profiteered in respect of the project.

Passing on GST rate-reduction benefit through electronic gift vouchers - Unpassed residual profiteered amount - Prospective application of anti-profiteering penalty

Electronic gift vouchers as mode of passing GST benefit - Substance over form in traceable e-wallet credits - Validity of electronic gift vouchers issued as credits to customers for passing on the benefit of GST rate reduction. - HELD THAT: - Section 171 does not prescribe a particular mode for passing on the benefit; the essential requirement is that the benefit reaches the ultimate recipient and is not retained by the supplier. The electronic gift vouchers were credited as monetary value to identified customers' e-wallets, were unconditional, without expiry or usage restrictions, and traceable to the relevant invoices and supplies. Their system-generated description as "Offers and cashback" could not displace the documented nexus between the credits and the rate-reduction benefit. The objection based on forms of benefit which do not constitute a direct monetary transfer was inapplicable to such e-wallet credits. [Paras 16, 17, 18]

Electronic gift vouchers constituted a valid, effective and unconditional mode of passing on the GST rate-reduction benefit.

Residual anti-profiteering benefit not passed on to identifiable recipients - Deposit in Consumer Welfare Fund - Compliance with the obligation to pass on the rate-reduction benefit where a residual amount could not be traced to any customer or invoice. - HELD THAT: - Credit notes relating to cancelled or returned supplies had already been accounted for. While the benefit passed through credit notes and traceable electronic gift vouchers stood established, the respondent could not show that the remaining differential amount had been passed to an identifiable recipient. As customer-wise State data was unavailable, its offer to deposit that residual amount in the Central Consumer Welfare Fund was accepted. [Paras 20, 21, 22, 23, 24]

The respondent was held to have substantially complied with Section 171, but was directed to deposit the unpassed residual benefit in the Central Consumer Welfare Fund with applicable interest.

Prospective operation of anti-profiteering penalty provision - Liability to penalty for failure to pass on the rate-reduction benefit during a period preceding the coming into force of the penal provision. - HELD THAT: - The alleged contravention related to a period before the penal provision came into force. [Paras 25]

No penalty was leviable under Section 171(3A) of the CGST Act, 2017.

Final Conclusion: Electronic gift vouchers, being unconditional and traceable monetary credits to customers, were accepted as a valid mode of passing on the GST rate-reduction benefit. The respondent was liable only for the untraceable residual benefit, to be deposited with applicable interest in the Central Consumer Welfare Fund, and was not liable to penalty.

Consolidated show cause notice for multiple tax periods - Taxability of school-affiliation services - Educational examination-services exemption - Taxability of annual school-registration charges - Cum-tax valuation - Extended limitation for wilful suppression - Interest and penalty consequential to tax demand

Consolidated show cause notice for multiple tax periods - Validity of a common show cause notice invoking the ordinary and extended demand provisions for different tax periods - HELD THAT: - The distinction in the ingredients, limitation and penal consequences of the two demand provisions does not create a statutory prohibition against their consolidation. The expressions "for any period" and "for such periods" contemplate a notice spanning more than one financial year. In the absence of demonstrated prejudice, confusion, denial of opportunity or lack of jurisdiction, consolidation is a matter of procedural form and does not invalidate the proceedings. See Ambika traders [2025 (8) TMI 315 - DELHI HIGH COURT] [2025 (9) TMI 1338 - SC ORDER] held 'Sections 74(3), 74(4), 73(3) and 73(4) of use the term ‘for any period’ and ‘for such periods. This would be in contrast with the language used in Sections 73(10) and 74(10) of the CGST Act where the term ‘financial year’ is used. The Legislature is thus conscious of the fact that insofar as wrongfully availed ITC is concerned, the notice can relate to a period and need not be for a specific financial year.' [Paras 38, 45, 46]

The consolidated notice and consequential proceedings for July 2017 to November 2023 were not vitiated merely because they covered multiple tax periods.

Taxability of school-affiliation services - taxable supply- Educational examination- services exemption - Strict construction of fiscal exemption - Whether affiliation and affiliation form-processing charges received from schools constituted taxable supplies or exempt services relating to admission to or conduct of examinations? - HELD THAT: - The appellant, being a registered society regularly rendering identifiable affiliation, registration, examination and allied services for fees, made supplies for consideration in the course or furtherance of business. The exemption for services relating to admission to or conduct of examination must be strictly construed. Affiliation entails assessment of a school's infrastructure, financial capacity and compliance with prescribed norms, and is a threshold eligibility function performed for the school as an institution; it is neither rendered to students nor directly and immediately connected with conducting examinations. Decisions concerning statutory universities exercising compulsory statutory functions could not mechanically apply to a society whose governance, finances and fee structure were self-determined. The regularisation of affiliation services on an as-is-where-is basis remained confined to the specified period. [Paras 71, 76, 77, 78, 79]

Affiliation and affiliation form-processing charges were held to be independent taxable supplies outside the exemption; the demand for 18.06.2021 to November 2023 was upheld, subject to cum-tax valuation.

Taxability of annual registration charges and late registration charges - Whether annual registration charges and late registration charges are independent taxable supplies or are intrinsically connected with affiliation/examination functions and are eligible for exemption under the said Notification? - HELD THAT: - Annual registration and late registration charges were administrative and preparatory charges for continuation of affiliation and did not constitute services directly related to admission or conduct of examinations. Non-payment leading to de-affiliation did not change their character into examination-related services. The regularisation circular was expressly confined to affiliation services and could not be extended by implication to annual registration, renewal or late registration charges, notwithstanding their common regulatory setting.

We conclude that the appellate authority had rightly held that annual registration charges and late registration charges do not qualify for exemption under Entry 66(b)(iv) of the Exemption Notification dated 28.06.2017. The strict construction mandate in Dilip Kumar [2018 (7) TMI 1826 - SUPREME COURT (LB)] forecloses any extension of the exemption to activities that are only preparatory to, and not constitutive of, the conduct of examination. The commercial consequence of non-payment, namely de-affiliation, is a contractual matter internal to the CISCE framework and cannot alter the nature of the charge.[Paras 93, 96, 97, 99, 100]

Annual registration charges and late registration charges were held taxable and outside both the examination-services exemption and the affiliation-services regularisation, subject to the limitation finding for July 2017 to August 2018.

Binding effect of GST Council-based circular - Affiliation distinguished from accreditation - Validity and applicability of the circular clarifying taxability and regularisation of affiliation services - HELD THAT: - Although affiliation was found factually distinct from accreditation, the circular expressly addressed affiliation services and did not depend upon equating the two concepts. It operationalised a recommendation of the GST Council and retained binding effect upon departmental authorities. Interlocutory prima facie observations in a pending writ proceeding did not finally determine the circular's validity. In any event, taxability of the post-regularisation affiliation charges was independently sustained under the charging provisions and the exemption notification. [Paras 109, 113, 114, 115, 116]

The challenge to reliance on the circular was rejected, and its application by the first appellate authority was upheld.

Cum-tax valuation - Entitlement to treat the amounts collected for taxable services as inclusive of GST - HELD THAT: - Where tax was not separately collected from recipients, the gross amount received had to be treated as cum-tax value for determining the taxable value. The cum-duty and cum-tax valuation principles developed under the earlier indirect-tax enactments were held applicable to the corresponding valuation mechanism under the GST law. The absence of separate tax collection discharged the appellant's burden to establish tax inclusiveness. See M/S. Uniworth Textiles Ltd vs Commnr. Of Central Excise, Raipur [2013 (1) TMI 616 - SUPREME COURT] [Paras 128, 129, 130, 131, 132]

The amounts collected were held inclusive of GST, and cum-tax valuation was directed.

Validity of invocation of the extended demand provision for July 2017 to August 2018 on the ground of fraud, wilful misstatement or suppression of facts with intent to evade tax - HELD THAT: - Mere non-payment does not attract the extended period; fraud, wilful misstatement or deliberate suppression with intent to evade tax must be affirmatively established. The sector-wide regularisation of affiliation services demonstrated genuine interpretational uncertainty, while the appellant's earlier disclosure of item-wise particulars established that the Department possessed specific knowledge of the relevant receipts before the investigation. Belated registration and non-payment, without positive material of deliberate concealment, were insufficient to establish the statutory conditions for the extended period.

On the issue of invocation of extended period of limitation, the Hon’ble Apex Court in Easland Combines Coimbatore vs Collector of Central Excise Coimbatore [2003 (1) TMI 107 - SUPREME COURT] held that for invoking the extended period of limitation duty should not have been paid, short levied or short paid or erroneously refunded because of either fraud, collusion, wilful misstatement, suppression of fact or contravention of any provision or rules. [Paras 145, 146, 148, 155, 156]

Invocation of the extended demand provision for July 2017 to August 2018 was held invalid, and the demand for that period, with consequential interest and penalty, was set aside.

Interest and penalty consequential to tax demand - Penalty for failure to self-assess taxable supplies - Sustainability of interest and penalties after modification of the tax demands - HELD THAT: - Interest and penalty are ancillary to a valid tax demand and could not survive for the period for which the extended demand was invalidated. They also could not be levied on affiliation charges regularised on an as-is-where-is basis, since regularisation rendered the underlying demand irrecoverable. However, the penalty for the tax demand sustained under the ordinary demand provision, proportionately modified, and the general penalty for failure to correctly self-assess taxable supplies, remained sustainable. Interest was payable only on the sums confirmed. [Paras 157, 158, 159, 160]

Interest and penalties relating to the invalidated and regularised demands were deleted; the modified penalty, general penalty and interest on the sustained demands were upheld.

Final Conclusion: The appeal was partly allowed. The extended-period demand, consequential interest and penalty for July 2017 to August 2018 were set aside; the post-regularisation demands were sustained subject to cum-tax valuation, with consequential recomputation of tax, interest and penalty.

Kar Vivad Samadhan Scheme - scope of conclusive settlement - bar against reopening settled income-tax demand

HELD THAT:- The Special Leave Petition was dismissed as no reason to interfere with the impugned order of the High Court [2026 (4) TMI 1913 - RAJASTHAN HIGH COURT].

Rejection of application u/s 197 - certificate at ‘nil’ rate - treatment of domain name registration charges under the India-USA DTAA - Competent authority's duty to decide applications on merits having regard to treaties and not revenue targets

HELD THAT:- No good ground to interfere with the impugned judgment/order(s)[2026 (2) TMI 769 - DELHI HIGH COURT]. The Special Leave Petition is, accordingly, dismissed.

Validity of reopening of assessment u/s 147 - no approval / sanction of the Competent Authority as contemplated u/s 151 - as alleged no sanction has been given by the wrong authority - scope of provisions of the TOLA - Notice issued within a period of four years

HELD THAT:- The Special Leave Petition was dismissed, as the Special Leave Petition against the relied upon judgment had already been dismissed.

Bogus Long-term capital gains from listed share transactions - addition as unexplained cash credit - Test of human probabilities-need for corroborative evidence - Penalty consequent upon unsustained addition - Reassessment founded on set-aside assessment order

Bogus LTCG from listed share transactions - addition as unexplained cash credit - Test of human probabilities-need for corroborative evidence - HELD THAT: - In an appeal confined to substantial questions of law, factual findings of the Tribunal could be interfered with only upon perversity. The documentary trail of stock-exchange trades, payment of Securities Transaction Tax and receipt through banking channels was undisputed. Though the circumstances raised suspicion about price movement, the Revenue neither completed investigation of identifiable purchasers nor produced positive material connecting either assessee with price manipulation, payment of unaccounted cash, or any arrangement with operators. The test of human probabilities remains a valid evidentiary tool, but does not dispense with corroborative material where the primary documents are unchallenged. [Paras 15, 16, 17, 18, 20]

The Tribunal's deletion of the additions and allowance of the claimed exemption were upheld, as its factual findings disclosed neither error of law nor perversity.

Penalty levied consequent upon the addition relating to gains from sale of shares - HELD THAT: - Since the underlying additions were upheld as having been rightly deleted for want of cogent and corroborated evidence, the basis for the penalty did not survive. [Paras 23]

The Tribunal's deletion of the penalty was upheld.

Reassessment founded on set-aside assessment order - Reopening of assessment or reassessment proceedings founded on the assessment orders concerning the share-sale gains - HELD THAT: - The proposed reopening or reassessment was founded on assessment orders whose material additions had not survived judicial scrutiny. [Paras 24]

The impugned reopening or reassessment proceedings were set aside to the extent they were based on those assessment orders.

Final Conclusion: The Revenue's appeals against deletion of the additions and consequential penalties were dismissed. The writ petitions were allowed to the limited extent that reopening or reassessment founded on the unsustained assessment orders was set aside.

Curable defect in memorandum of appeal - Opportunity of adjudication on merits

Dismissal of the assessee's appeals for unsigned memoranda of appeal without adjudication on merits - HELD THAT: - The unsigned memoranda constituted a curable and relatively trivial defect. Though the appellant ought to have filed proper memoranda and promptly rectified the defects when notified, refusal to restore the appeals would deprive the appellant of adjudication on the merits and render the Tribunal's orders final without such adjudication. [Paras 10, 11, 12]

The appeals were allowed subject to compliance with the stipulated condition; the Tribunal was directed to restore the appeals, permit rectification of defects within the prescribed time, and thereafter decide them on merits in accordance with law.

Final Conclusion: The substantial question of law was answered in favour of the appellant. The dismissal for curable defects was set aside conditionally, with restoration of the appeals for decision on merits.

Reassessment notice issued to deceased assessee - Proceedings against legal representative

HELD THAT: - A valid notice for reassessment is a jurisdictional condition precedent. A notice issued against a deceased person is null and void and cannot confer jurisdiction upon the Assessing Officer.

The legal representative's statutory liability does not validate a notice initially issued to a dead person; proceedings against the legal representative may continue only where they had been initiated while the assessee was alive. As the legal heir had objected to the notice, the Assessing Officer could not treat the invalid notice as one issued to the legal heir.

This Court in case of Bhupendra Bhikhalal Desai [2021 (3) TMI 892 - GUJARAT HIGH COURT] has held that the notice issued for commencement of assessment or reassessment proceedings against the dead person is null and void and such notice cannot be sustained. Against the said decision of this Court, the Hon’ble Supreme Court has dismissed the Special Leave Petition. [2021 (9) TMI 431 - SC ORDER]

The facts of the present case are also similar to the decision in case of Himadri Kandarp Mehta [2022 (8) TMI 1038 - GUJARAT HIGH COURT] wherein, in similar facts, a notice for re-opening was set aside having been issued against the dead person and this decision is followed in the case of Nishant Daxeshbhai Mehta [2023 (5) TMI 795 - GUJARAT HIGH COURT] by quashing such notice issued against the dead person.[Paras 8, 10, 14]

The reassessment notice and the order rejecting the objection were without jurisdiction and were quashed.

Final Conclusion: The petition was allowed. The notice initiating reassessment against the deceased assessee and the consequential order treating it as issued to the legal heir were quashed for want of jurisdiction.

Closure of the criminal case when the tax liability had not attained finality at the time of the closure order - Non-speaking closure of criminal prosecution - Consideration of subsequent developments on remand

HELD THAT: - When the criminal case was closed, the dispute concerning tax liability had not attained finality. The tax demand was determined, accepted and complied with only after the closure order. The Trial Court therefore could not have closed the case on the footing that the tax liability stood fully satisfied, without considering the relevant subsequent developments. [Paras 9, 10, 11]

The closure order was set aside and the matter remanded to the Trial Court for fresh consideration in accordance with law, without any opinion on the merits of the criminal case.

Final Conclusion: The appeal was allowed in part; the order closing the criminal case was set aside and the matter remanded for fresh consideration.

Reassessment after scrutiny assessment - Change of opinion - Failure to disclose fully and truly material facts

Validity of reassessment based on bank-account cash deposits and corresponding RTGS transactions after scrutiny assessment - HELD THAT: - The completed scrutiny assessment was preceded by a detailed questionnaire requiring bank-account particulars and supporting evidence, and the bank statements were produced before the Assessing Officer. Acceptance of the returned income therefore reflected conscious application of mind to the transactions. The insight-portal information merely intimated the cash deposits already reflected in those bank statements and did not disclose any new material. Where one of the possible views on a transaction has been taken in scrutiny assessment, reassessment cannot be initiated because the succeeding officer does not concur with that view.

The Court distinguished Chetan Sabharwal [2019 (8) TMI 410 - DELHI HIGH COURT] . Further, the recorded reasons neither acknowledged the earlier scrutiny assessment nor identified any transaction or information concealed by the assessee; consequently, the allegation of failure to make a full and true disclosure was without application of mind and vitiated the approval and reopening. [Paras 18, 20, 21, 22, 23]

The reassessment notice was held to be without jurisdiction, arbitrary and violative of Articles 14 and 300A; it and the consequential assessment and demand notice were quashed.

Final Conclusion: The writ petition was allowed and the reassessment proceedings, consequential assessment and demand notice were quashed.

Reassessment based on conjectures and surmises - Reopening of assessment - absence of direct nexus with assessee

Validity of reassessment proceedings founded on an uninvestigated undated complaint and material recovered from the mobile phone of a person unconnected with the assessee - HELD THAT: - The complaint forming the sole basis of reopening had not been investigated, and its author was not summoned by the Assessing Officer. The material was recovered during action concerning other entities and a person with whom the assessee had no established connection. Further, the statements recorded after reopening and the image of the alleged cash receipt did not disclose any cash transaction by the assessee. The reopening was thus founded on conjectures and surmises without a direct link between the search material and the assessee. [Paras 8, 9]

The reassessment order and the consequential notices were quashed and set aside.

Final Conclusion: The writ petition was allowed, and the impugned reassessment proceedings for Assessment Year 2019-20 were quashed.

Profit adjustment under section 10A(7) read with section 80-IA(10) - Deduction for export-oriented undertaking - addition made by reducing profits eligible for deduction u/s 10A on the ground that the assessee's net profit margin exceeded that of comparables

HELD THAT: - The Court accepted that the controversy was covered against the Revenue by the coordinate-Bench decisions in Schmetz India (P) Ltd. [2012 (9) TMI 407 - BOMBAY HIGH COURT] and Pragati Aroma Oil Distillers Private Ltd. [2026 (4) TMI 1640 - BOMBAY HIGH COURT] wherein the question of law has been answered against the Revenue and in favour of the Assesses. The Revenue fairly conceded that Pragati Aroma Oil Distillers Private Ltd. governed the issue. [Paras 6, 7]

No substantial question of law arose, and the Tribunal's deletion of the addition was affirmed.

Final Conclusion: The Revenue's appeal was dismissed, as the challenge to deletion of the profit adjustment was covered by binding coordinate-Bench decisions against the Revenue.

Reassessment notice - statutory approval by competent authority - Jurisdictional defect in reassessment proceedings

Validity of reassessment notice issued after expiry of three years from the end of the relevant assessment year on approval of the Principal Commissioner instead of the Principal Chief Commissioner or Chief Commissioner - HELD THAT: - Section 151(ii) mandates prior approval of the Principal Chief Commissioner or Chief Commissioner where notice under section 148 is issued after expiry of three years from the end of the relevant assessment year. Approval by the Principal Commissioner did not satisfy that statutory requirement and vitiated the jurisdiction to issue the notice. [Paras 3, 5]

The notice under section 148 was declared invalid; the consequential reassessment proceedings, assessment order and first appellate order were quashed and set aside. The remaining grounds were kept open as academic.

Final Conclusion: The appeal was allowed on the jurisdictional ground that the reassessment notice lacked approval of the authority mandated by section 151(ii).

Refusal of registration u/s 12AB - investor-protection fund benefited specified persons - Charitable purpose-proviso to section 2(15) - Approval under section 80G-consequential rejection

Eligibility of a regulated investor-protection trust for registration under section 12AB despite contributions from the stock exchange and its trading members - HELD THAT: - Compensation was payable to eligible investors only upon default by a trading member and insufficiency of that member's assets. The defaulting member received no compensation, acquired no enforceable right in the fund, and was not relieved of its liability by the Trust. Contributions made under the regulatory framework did not make the contributors beneficiaries. Investors participating in the recognised securities market constituted a section of the public sharing a common public interest. The activities were genuine, conformed to the Trust's objects, and neither constituted trade, commerce or business nor involved services rendered for consideration; consequently, the proviso to section 2(15) was inapplicable. The Tribunal left open the question whether the objects fell under education or advancement of general public utility. [Paras 5]

The refusal of registration under section 12AB was held unsustainable, and registration was directed to be granted.

Rejection of approval under section 80G(5) solely consequent upon denial of registration under section 12AB - HELD THAT: - As registration under section 12AB was directed to be granted and no independent disqualification for approval under section 80G(5) had been recorded, the consequential rejection could not survive. [Paras 6]

The rejection was set aside and approval under section 80G(5) was directed to be granted from A.Y. 2027-28 onwards in accordance with law.

Final Conclusion: The appeals were allowed, with directions to grant registration under section 12AB and consequential approval under section 80G(5) from A.Y. 2027-28 onwards.

Due date for return where accounts are audited under another law - Rectification of mistake apparent from record

Due date for return where accounts are audited under another law - Carry forward of business loss - Applicability of the extended due date for filing the return by an LLP whose accounts were statutorily required to be audited under the LLP law, and consequent entitlement to carry forward business loss - HELD THAT: - Explanation 2(a)(ii) to section 139(1) separately covers accounts required to be audited under the Income-tax Act and those required to be audited under any other law in force. The independent audit obligation under the LLP Act and the LLP Rules therefore attracted the extended due date; the absence of liability to tax audit under section 44AB was immaterial. As the return was filed within that due date, the premise for treating it as belated and denying carry forward of business loss under section 80 failed. [Paras 8, 9, 10, 11, 13]

The return was filed within the due date prescribed under section 139(1), and the assessee was entitled to carry forward the business loss in accordance with law.

Rectification of mistake apparent from record - Rectifiability of the erroneous treatment of the LLP as a non-audit case for determining the due date of its return - HELD THAT: - The audit particulars, the statutory audit requirement and the relevant provision were evident from the return and the material on record. Correction required neither fresh factual investigation nor resolution of competing reasonable views; the application of the non-audit due date was thus a mistake apparent from the record. [Paras 12]

The rejection of the rectification application was unsustainable, and the Assessing Officer was directed to allow the claim.

Final Conclusion: The impugned order was set aside and the appeal was allowed, with a direction to allow carry forward of the business loss in accordance with law.

Addition as unexplained money without examination of books of account - Penalty u/s 271(1)(b) for non-compliance with statutory notices - subsequent compliance

Cash deposits reflected in books of account - Addition as unexplained money - unexplained money addition u/s 69A without examination and rejection of those books - HELD THAT: - The assessee had furnished purchase and sales registers, cash book, bank ledgers and journal, and had sought to correlate the deposits with cash balances recorded therein. The Assessing Officer neither examined those books nor recorded a finding that they were unreliable or fabricated. An addition as unexplained money without examination and rejection of the books could not be sustained. [Paras 12]

The addition was set aside and remanded to the Assessing Officer for examination of the documents and such further enquiry as considered necessary; the matter was restored for a fresh order on the nature of the cash deposits, without adjudication on merits.

Penalty u/s 271(1)(b) for non-compliance with notices - Subsequent compliance - Penalty for alleged failure to comply with notices issued during assessment proceedings despite subsequent compliance by the assessee - HELD THAT: - The assessment order itself showed that the assessee had ultimately responded to the notices and that replies had been considered before the addition was made. Penalty for complete failure to comply was therefore not attracted, particularly when the subsequent compliance had not been examined in its entirety. [Paras 13]

The penalty sustained by the first appellate authority was deleted.

Final Conclusion: The assessment appeal was allowed for statistical purposes by remanding the cash-deposit addition for fresh examination. The penalty appeal was allowed and the penalty was deleted.

Deduction of Work Contract Tax under cash system of accounting - Compensatory interest on delayed payment of Work Contract Tax

Deduction of Work Contract Tax under cash system of accounting - Selective application of mercantile accounting - Allowability of Work Contract Tax pertaining to earlier financial years but actually paid during the relevant previous year by an assessee consistently following the cash system of accounting - HELD THAT: - Under the cash system, expenditure is ordinarily recognised upon actual payment. Having accepted the books and the regularly followed method of accounting, the Assessing Officer could not selectively apply mercantile principles to deny deduction merely because the statutory liability related to earlier years. In the absence of material establishing adoption of the mercantile system, manipulation of the method of accounting, or defects warranting action under section 145, the actual payment of Work Contract Tax during the relevant previous year was allowable. [Paras 9]

The disallowance of Work Contract Tax was deleted.

Compensatory interest on delayed payment of Work Contract Tax - Business deduction for delayed statutory dues - Allowability of interest paid for delayed payment of Work Contract Tax - HELD THAT: - Interest arising solely from delay in payment of statutory dues compensates the State for the period of default and is not a penalty for an infraction of law. As the payment was compensatory, actually made, and connected with the assessee's statutory business liability, it was allowable as a deduction. Case followed MAHALAKSHMI SUGAR MILLS COMPANY [1980 (4) TMI 1 - SUPREME COURT] [Paras 13]

The disallowance of interest on delayed payment of Work Contract Tax was deleted.

Final Conclusion: The appeal was allowed. The disallowances of Work Contract Tax and compensatory interest on its delayed payment were deleted.

Review petition - Maintainability of SLP - monetary limit involved in the SLP - Valuation - Determination of Customs duty - HELD THAT:- We have perused the review petition and the materials on record. We do not find any such error apparent on the face of record which may warrant a review of our order [2025 (9) TMI 271 - SC ORDER]

Writ jurisdiction against baggage-confiscation appellate order - Efficacious statutory revision remedy - Maintainability of a writ petition against an appellate order directing absolute confiscation of a gold bar imported as baggage when a statutory revision remedy was available

HELD THAT: - The power under Article 226 is discretionary and ordinarily ought not to be exercised where an efficacious statutory remedy is available, subject to recognised exceptions. The asserted failure to issue a valid notice, the alleged oral notice, the effect of the statement and alleged waiver, and compliance with the statutory requirements raised disputed factual and legal questions requiring examination of the complete record. Since the statutory Revisional Authority could examine all such grounds and no case of lack of jurisdiction, challenge to vires, or established breach of natural justice was made out, the writ jurisdiction was not liable to be invoked. [Paras 30, 34, 35, 36, 37]

The writ petition was dismissed on account of the efficacious revision remedy, with all questions concerning notice, seizure, confiscation and procedural compliance left open for the Revisional Authority.

Final Conclusion: The writ petition was dismissed in view of the efficacious statutory revision remedy. The merits of the confiscation proceedings and the alleged non-compliance with statutory notice requirements were left open for consideration by the Revisional Authority.

Statutory return of seized goods - mandatory notice period - Writ jurisdiction - disputed factual questions concerning oral show cause notice

Whether unconditional release of detained gold and gold jewellery could be directed under Section 110(2) of the Customs Act, 1962, when compliance with Section 124 of that Act through an alleged oral show cause notice was factually disputed? - HELD THAT: - Failure to issue notice within the period prescribed by Section 110(2), or within a valid extension, entails return of the seized goods; the Department cannot retain them indefinitely. However, the Department specifically asserted that the contemporaneous proceedings constituted an oral notice, while the Petitioners disputed the execution, explanation and voluntariness of the documents. Whether those proceedings amounted to a valid oral notice and satisfied the statutory requirements required examination of the complete record, including the relevant statements and other contemporaneous material, which could not appropriately be undertaken in writ jurisdiction. [Paras 38, 42, 43, 46, 47]

Unconditional release was declined, and the competent adjudicating authority was directed to independently determine the legal effect of the documents, the alleged oral notice and compliance with the statutory requirements after affording a reasonable hearing and completing adjudication expeditiously.

Final Conclusion: The petitions were dismissed without determining the merits of the alleged Green Channel violations or the validity of the asserted oral notice. The competent adjudicating authority was directed to adjudicate the matter independently and in accordance with law.

Unconditional release of seized gold pending customs adjudication - Disputed oral show cause notice - Entitlement to unconditional release of seized gold where the Department asserted issuance of an oral show cause notice and the petitioner disputed its validity and the voluntariness of the statement recorded under the Customs Act

HELD THAT: - The Department's assertion that an oral show cause notice had been issued created factual questions as to the nature of the proceedings and the statement relied upon. The validity of the alleged oral notice, voluntariness and evidentiary value of the statement, alleged non-declaration, confiscability of the gold and penalty liability were matters for statutory adjudication, particularly as no Order-in-Original had been passed.

The writ court would not undertake that fact-finding exercise; however, the statutory object against indefinite retention of seized goods required expeditious completion of adjudication. [Paras 29, 31, 32, 33, 34]

Unconditional release was declined; the petitioner was directed to participate in adjudication, and the adjudicating authority was directed to afford hearing and complete the proceedings within the stipulated period, with all merits left open.

Final Conclusion: The petition was dismissed subject to directions for a fair and time-bound statutory adjudication. The questions concerning the alleged oral notice, the statement, confiscation, penalty and consequential charges were left open.

Unconditional release of the detained gold bars on the alleged absence of a written show-cause notice - validity of Oral show-cause notice under the Customs Act

Entitlement to unconditional release of the seized gold bar on the assertion that no written show-cause notice had been issued within the statutory period - HELD THAT: - The statutory consequence of return follows where no notice under Section 124(a) is issued within the period stipulated by Section 110(2). However, the first proviso to Section 124 permits the notice and representation to be oral at the request of the person concerned. The Department specifically asserted that an oral notice was issued, while the contemporaneous statement recorded that the petitioner did not require a show-cause notice or personal hearing. The statement alone could not constitute an oral notice, but, read with the Department's assertion, it raised a seriously disputed factual question as to whether an oral notice was in fact given and whether the statutory conditions for oral proceedings were met. Such disputed factual issues, including the alleged coercion in recording the statement, could not be resolved in writ jurisdiction. [Paras 21, 23, 24, 25, 28]

The claim for automatic release merely because no written notice was produced was rejected; the questions concerning the validity of the oral proceedings and the underlying customs liability were left open for the competent authority.

Final Conclusion: The writ petition seeking unconditional release of the seized gold bar was dismissed, since the alleged absence of a statutory notice depended upon disputed facts incapable of adjudication in writ proceedings.

Writ jurisdiction and efficacious alternative remedyagainst a customs confiscation order - availability of a statutory appellate remedy

HELD THAT: - The existence of an efficacious statutory remedy is not an absolute bar to writ jurisdiction, which may be exercised in appropriate cases, including jurisdictional defects or breach of natural justice. However, the alleged invalidity of the statement, issuance of an oral show-cause notice, and waiver of notice and personal hearing required examination of the contemporaneous adjudication record and disputed facts. Such matters were held appropriate for examination in statutory appellate proceedings rather than in writ jurisdiction. [Paras 15, 17, 18, 19, 20]

The petition was not entertained on merits; the petitioner was relegated to the statutory appellate remedy, with all contentions left open for independent consideration in accordance with law.

Final Conclusion: The petition was disposed of with liberty to pursue the statutory appellate remedy against the confiscation order. Any question of limitation or condonation of delay is to be considered by the competent appellate authority in accordance with law.

Unconditional release of the detained gold bars on the alleged absence of a written show-cause notice - validity of Oral show-cause notice under the Customs Act

Whether unconditional release of the detained gold bars could be directed solely because no separate written show-cause notice was issued within the period contemplated by Section 110(2) of the Customs Act, 1962? - HELD THAT: - The absence of a separate written notice was not, by itself, conclusive because the statutory scheme permits an oral notice at the request of the person concerned. Whether an oral notice was in fact given, the grounds communicated, and whether the proceedings complied with the statutory requirements required examination of the contemporaneous record. The challenge to the voluntariness and evidentiary value of the statement also involved disputed factual questions requiring appreciation of evidence, which could not be undertaken in writ jurisdiction. [Paras 25, 28, 29, 32, 33]

Unconditional release was declined; the competent adjudicating authority was directed to afford a personal hearing and adjudicate the matter, including compliance with the notice requirement and the objections to the statement, within the stipulated period.

Final Conclusion: The writ petition was disposed of without directing unconditional release of the detained gold bars. All questions concerning the alleged violation, the statement and statutory compliance were left for adjudication by the competent authority.

Exhaustion of alternative statutory remedy in writ jurisdiction - Delay and laches in challenge to customs adjudication

Exercise of writ jurisdiction to challenge confiscation of a seized gold bar and imposition of penalty, despite an available statutory appeal and prolonged inaction - HELD THAT: - Although the existence of an alternative statutory remedy does not absolutely bar writ jurisdiction, exhaustion of an efficacious statutory remedy is the governing rule. The challenge concerning service of notice, denial of hearing, the purported waiver, and the adjudication record required examination in the statutory appeal. The petitioner, despite knowledge of the seizure, remained inactive for several years, did not respond to the public notice, and did not challenge the adjudication order before the appellate authority; no satisfactory explanation for the delay was furnished.

The judgments relied upon by the Petitioner, including Jatin Ahuja [2025 (10) TMI 1285 - SUPREME COURT] and Shubhangi Gupta [2024 (11) TMI 620 - DELHI HIGH COURT] do not require this Court to examine the concluded adjudication proceedings in the present writ petition, particularly when the Order-in-Original is amenable to statutory appeal.[Paras 16, 17, 18, 19, 20]

The writ petition was dismissed on account of unexplained delay and laches, with the available statutory appellate remedy being an additional reason for declining writ jurisdiction; the merits of the confiscation and penalty were left open.

Final Conclusion: The petition challenging the concluded customs adjudication was dismissed for unexplained delay and laches and in view of the available statutory appeal. No opinion was expressed on the merits of the challenge.

Extinguishment of unfiled pre-CIRP customs claims upon approval of resolution plan - Writ jurisdiction despite alternative statutory remedy

Pre-CIRP customs claim - Binding effect of approved resolution plan - IBC overriding effect - Enforceability of customs duty, interest and penalty arising from a pre-CIRP import transaction where the Customs Department did not submit its claim during CIRP and the resolution plan was subsequently approved - HELD THAT: - A claim under the IBC arises from the underlying right to payment and need not have been adjudicated or quantified before commencement of CIRP. The statutory public announcement mechanism places the responsibility of identifying and submitting a claim on the creditor; individual intimation to every potential statutory creditor is not required. Upon approval of the resolution plan, Section 31(1) binds governmental authorities, and unfiled pre-CIRP claims stood extinguished under the approved plan. Although the Customs authorities may determine liability during CIRP subject to the IBC, they cannot enforce a pre-CIRP claim after its extinguishment upon approval of the plan. Where the Customs Act conflicts with those consequences, Section 238 gives overriding effect to the IBC. [Paras 56, 58, 59, 60, 61]

The demand for differential customs duty, interest and penalty could not be sustained, as it concerned an unfiled pre-CIRP claim extinguished upon approval of the resolution plan.

Maintainability of the writ petition despite the statutory appellate remedy under the Customs Act - Jurisdiction to enforce extinguished claim - HELD THAT: - The challenge concerned the legal authority to continue proceedings for a pre-CIRP claim after approval of the resolution plan, and not the merits of classification, valuation or quantification of duty. The statutory appellate remedy could not require recourse under a regime subject, in the circumstances, to the overriding consequences of the IBC. [Paras 52, 53, 54]

The writ petition was maintainable notwithstanding the availability of an appeal under the Customs Act.

Final Conclusion: The writ petition was allowed and the impugned order was quashed, as it enforced an extinguished pre-CIRP customs claim. No opinion was expressed on the merits of classification or exemption.

Availment of preferential customs duty on High Grade Tin Ingots manufactured in Malaysia by MSC - Unincorporated treaty dispute-resolution mechanism - Customs recovery power for preferential tariff claims - Article 24 of AIFTA as a bar to customs proceedings concerning preferential duty claimed on Malaysian-origin Tin Ingots

Availment of preferential customs duty on High Grade Tin Ingots manufactured in Malaysia by MSC - Unincorporated treaty dispute-resolution mechanism - Whether Article 24 of the ASEAN-India Free Trade Area ousted the jurisdiction of Customs Authorities to initiate proceedings under the Customs Act, 1962? - HELD THAT: - Article 24, containing the inter-State consultation mechanism, had not been incorporated into municipal law through legislation or subordinate legislation. The Rules of Origin gave effect to AIFTA only for determining origin criteria and did not incorporate that mechanism. An unincorporated treaty obligation could not be enforced by a private party to displace the statutory jurisdiction of Customs Authorities under the Customs Act, 1962. [Paras 32, 33, 34]

The objection to the jurisdiction of Customs Authorities on the basis of Article 24 of AIFTA was rejected.

Pre-existing customs recovery power for preferential tariff claims - Suppression of facts in bill of entry declarations - Whether Customs Authorities lacked power, before insertion of Section 28DA, to recover duty on an incorrect preferential-tariff claim? - HELD THAT: - The unamended Sections 28 and 46 already empowered recovery of duty short-levied or short-paid by reason of suppression of facts, while requiring a truthful declaration in the bill of entry and supporting documents. Particulars supporting a preferential claim, including regional value-content particulars in a certificate of origin, formed part of that declaration. Chapter V-AA and Section 28DA introduced an additional certificate-of-origin-specific verification procedure; they neither created a previously absent recovery power nor curtailed the general power under Section 28. [Paras 42, 43, 44, 45, 46]

The challenge founded on the absence of enabling power before insertion of Chapter V-AA and Section 28DA was rejected.

Final Conclusion: The petition was dismissed on the jurisdictional challenges. The petitioner was left to pursue the statutory appellate remedy, with the merits of duty quantification, confiscation and penalty left open.

Effect of omission of Rule 96(10) - interest paid on repayment of additional customs duties

Whether interest paid on repayment of additional customs duties was legally leviable, and whether its refund was due after Rule 96(10) was deemed omitted from inception? - HELD THAT: - This Court in Mahindra & Mahindra Ltd. Vs. Union of India [2022 (10) TMI 212 - BOMBAY HIGH COURT] and A. R. Sulphonates Pvt. Ltd. Vs. Union of India [2025 (4) TMI 578 - BOMBAY HIGH COURT] held that there were no provisions under the Customs Tariff Act, 1975 during the relevant period which empowered the Customs Authorities to levy and collect interest on belated payment of additional duties of customs. Further, it is profitable to rely upon the decision of recent origin of the Hon’ble Supreme Court in Goodluck India Ltd. Vs. Union of India [2026 (8) TMI 719 - SUPREME COURT] which holds that Rule 96(10) is deemed to be omitted since inception.

Rule 96(10) having been deemed omitted since inception, the petitioner was under no legal obligation to repay the additional duties of customs availed on imports.

Customs Tariff Act, 1975 contained no provision during the relevant period authorising levy and collection of interest on belated payment of such additional duties. Consequently, no interest could be levied on the repayment. [Paras 9, 10]

The writ petition was allowed and the proper authorities were directed to process and expeditiously refund the interest paid.

Final Conclusion: As Rule 96(10) stood omitted since inception and interest on the repayment of additional duties lacked statutory authority, the interest paid was directed to be refunded.

EPCG duty exemption - fulfilment of export obligation

Export Obligation Discharge Certificate under EPCG Scheme - Compliance with EPCG exemption conditions - Sustainability of duty demand, redemption fine and penalty for alleged non-fulfilment of EPCG notification conditions where the Export Obligation Discharge Certificate was issued subsequently and the customs bonds were cancelled. - HELD THAT: - The installation certificates established compliance with the installation requirement, while the Export Obligation Discharge Certificate issued by the competent licensing authority established fulfilment of the export obligation. The certificate had not been produced during adjudication because, despite the appellant's application and submission of documents, it had not then been issued by the licensing authority. Customs subsequently accepted the certificate and cancelled the bonds for all the EPCG authorisations. Confirmation of demand for non-production of the same document was consequently inconsistent with the subsequent acceptance of compliance by customs authorities. [Paras 7, 8, 9]

The duty demand, redemption fine and penalty were held legally unsustainable and were set aside.

Final Conclusion: The impugned order was set aside and the appeal was allowed, as the appellant had fulfilled the EPCG notification conditions.

Penalty u/s 114(i) on authorised courier for export of prohibited goods - Due diligence by authorised courier under Courier Regulations

Penalty on an authorised courier for processing an export consignment declared as piano parts but found on customs examination to contain prohibited Red Sander Logs - HELD THAT: - The appellant had obtained and processed the documents accompanying the consignment, including the consignor's identity documents, and presented it for customs examination. As the declared goods were piano parts and opening an export package after presentation of documents required permission of the proper officer, the appellant could not be faulted for not opening the consignment. The Tribunal also followed the earlier order in the appellant's own case, which held that due diligence under Regulation 12 had been undertaken. [Paras 4, 5, 6, 7]

The appellant had exercised the required due diligence; consequently, penalty under Section 114(i) of the Customs Act, 1962 was set aside.

Final Conclusion: The appeal was allowed and the penalty imposed on the authorised courier was set aside with consequential relief in accordance with law.

Contempt-undertaking to court - Interim protection of foreign money decree in execution

Contempt-undertaking to court - Clarificatory statement - Whether statement made by IQuest in its counter-affidavit did not constitute an undertaking enforceable in contempt? - HELD THAT: - An undertaking must be clear, express and capable of conveying to the Court a firm conviction that the party has bound itself to act or refrain from acting in terms of Babu Ram Gupta [1979 (4) TMI 164 - SUPREME COURT] and Patanjali Ayurved Ltd. [2024 (8) TMI 1763 - SUPREME COURT]. The statement that IQuest had, at that point, decided not to proceed with the acquisition was merely clarificatory and did not amount to a solemn, unambiguous or binding undertaking. In the absence of such undertaking, no contempt was made out against IQuest or the other respondent entities. [Paras 59, 60]

The High Court's finding that the statement did not invite contempt action was upheld.

Reciprocal enforcement of foreign decrees - Interim security in execution proceedings - Interim protection and additional security for enforcement of the foreign money decree pending execution proceedings - HELD THAT: - The foreign decree, being of a superior court of a reciprocating territory, was prima facie executable in India, and comity of nations required that due weight be accorded to it at the interlocutory stage. The sequence of corporate transactions and changes in control disclosed a prima facie case of attempts to camouflage or dissipate assets, giving the decree-holder a genuine apprehension of being left with an unexecutable decree. While leaving the questions of corporate veil lifting and liability of family-controlled entities to the executing courts, the Court held that the protective conditions imposed in relation to the merger ought not to have been disturbed and that status quo could not be vacated without adequate security. [Paras 67, 69, 71, 73, 74]

The respondents were directed jointly and severally to furnish additional security, subject to the outcome of the pending execution proceedings; the issue whether assets of family-controlled entities could satisfy the decree was left open for determination by the Commercial Courts.

Final Conclusion: The appeals were disposed of by upholding the finding that no contempt was made out, while preserving interim protection for enforcement of the foreign decree through additional security. The executing courts were directed to decide the execution petitions and pending applications expeditiously, uninfluenced by observations on the unresolved corporate-veil issue.

Forensic audit in execution proceedings - Corporate veil and dissipation of decree assets - Third-party assistance in breach of judicial orders

Forensic audit in execution proceedings - Dissipation of assets represented for satisfaction of a foreign award - Disputed pledge and top-up transactions - Appointment of a forensic auditor to investigate the progressive depletion of the promoter shareholding and other assets represented as available for satisfaction of the foreign arbitral award - HELD THAT: - The Court found that, notwithstanding repeated assurances and the status quo orders, the shareholding held through the promoter holding entity had undergone substantial diminution. The decree holder, judgment debtors and lenders advanced conflicting accounts as to whether the depletion resulted from voluntary dealings in unencumbered shares or from enforcement of pre-existing securities, pledges and top-up arrangements. Such factual disputes, including the nature and purpose of borrowings secured by the shares, could not appropriately be resolved on the existing pleadings and documents. A forensic audit was necessary to reconstruct the shareholding and fund trail, ascertain the status of encumbrances, examine the relevant transactions and identify the persons and entities involved. The audit was directed as a fact-finding measure and does not, by itself, enlarge the decree or determine civil liability.

It is relevant to mention that the application of the Decree Holder is for an audit in respect of all 17 Banks involved in the transaction. During the course of oral arguments, they restricted this prayer to only 3 Banks. After the hearing, a written note was circulated on behalf of the Decree Holder, stating that they do not wish for any forensic audit of any Bank, and are only keen on an audit of FHL and the Judgement Debtors. This Court, however, keeping in mind the observations of the Apex Court in Vinay Prakash Singh vs. Sameer Gehlaut [2019 (11) TMI 1844 - SUPREME COURT] and Daiichi Sankyo Co. Ltd. vs. Oscar Investments Limited [2022 (9) TMI 1292 - SUPREME COURT] and the arguments advanced herein, finds it fit for a forensic audit to be ordered in respect of all banks and financial institutions involved in defeating the value of assurances to this Court. Needless to say, the Decree Holder’s personal volte face, is immaterial to this consideration.

This Court would have had the power to order for forensic audit, with or without the application, and their change or softening in stance towards these banks and financial institutions, does not take away from the fact that, these organisations may have knowingly assisted in the flouting of the orders of this Court, as well as the Apex Court.[Paras 268, 269, 270, 271, 272]

The applications were allowed and a forensic audit was ordered into the dealings in the shares, the connected loan, pledge and top-up arrangements, the movement and utilisation of proceeds, and the role of the concerned entities, banks and financial institutions.

Piercing of corporate veil - Listed company's role in promoter-shareholding transactions - Third-party assistance in violation of court orders - Whether the separate corporate personality of the listed company precluded a forensic examination into its possible role in the dissipation of promoter shareholding represented as available for execution. - HELD THAT: - The Court held that the freely transferable character of securities could not override solemn assurances given to a constitutional court. Where the persons controlling the promoter holding entity also controlled and managed the listed company, the corporate form could not be invoked at the threshold to foreclose inquiry into whether the structure was used to dissipate assets and frustrate enforcement. The regulatory framework and the company's code of conduct required examination of the role of its directors, officers and compliance function in the impugned dealings. A third party that knowingly aids or facilitates the violation of court orders may be proceeded against; however, the audit is confined to establishing the factual foundation, with all questions of liability and consequential relief reserved for subsequent determination. [Paras 251, 258, 259, 260, 261]

The listed company's plea of separate corporate personality was not accepted as a ground to exclude it from the forensic audit; its possible knowledge, facilitation and regulatory compliance are to be examined without any present adjudication of its liability.

Final Conclusion: The applications were allowed and a forensic auditor was appointed to undertake a comprehensive factual examination of the dissipation of assets represented as available for execution of the foreign award. The audit is to be completed with the cooperation of the concerned entities, banks, financial institutions and public bodies, while all questions of liability remain open for determination after receipt of the report.

Professional Clearing Member's obligation to verify Trading Member clients' debit and credit positions - Statutory power of stock exchange clearing committee to order restitution - Professional Clearing Member's liability for Trading Member's default

Professional Clearing Member's obligation to verify Trading Member clients' debit and credit positions - Client-wise collateral visibility - Whether a PCM had a statutory duty and regulatory visibility to verify TM clients' debit/credit positions before liquidating collateral? - HELD THAT: - Under the regulatory framework prevailing when the collateral was liquidated, the Trading Member was the constituent of the Professional Clearing Member. The prohibition against using one client's margin for another applied to the Trading Member in relation to its individual clients and to the Professional Clearing Member only between different Trading Members. The reporting framework then in force required monthly or weekly collateral reporting, but did not provide real-time disclosure of individual clients' debit and credit positions. The CM-TM agreement conferred an entitlement to seek constituent information, not a statutory obligation to verify such positions before liquidation. The later daily reporting regime, expressly providing client-level visibility and allocation of collateral, underscored the absence of that mechanism during the relevant period. [Paras 40, 41, 51, 52, 54]

The Professional Clearing Members had neither a statutory obligation nor regulatory visibility to verify individual clients' debit and credit positions before liquidation, and no regulatory violation was established against them.

Statutory power of stock exchange clearing committee to order restitution - Restitution as monetary penalty - Power of the Member and Core Settlement Guarantee Fund Committee to direct restitution of liquidated securities or to block equivalent collateral - HELD THAT: - The statutory authority to frame stock-exchange bye-laws permits only the specified disciplinary penalties and expressly excludes a penalty involving payment of money. In contrast, the power of disgorgement is expressly vested in SEBI under the governing enactments. Restitution of securities, and the alternative direction to block an equivalent value from the Professional Clearing Member's collateral, were in substance monetary exactions for which neither the bye-laws nor the statute conferred authority on the clearing corporation or its Committee. A procedural rule could not furnish substantive power, and equitable considerations could not override the express statutory bar. The restitution precedents were inapplicable, there being no unlawful retention, unjust enrichment, or reversal of an order requiring restoration of the status quo. [Paras 46, 47, 48, 49, 54]

The Committee lacked statutory power to impose restitution or its monetary alternative; the alleged failure to give prior notice of that proposed penalty was consequently inconsequential.

Professional Clearing Member's liability for Trading Member's default - Client claims arising from illegal assured-return schemes - Individual clients' claim against a Professional Clearing Member for losses resulting from a Trading Member's default and liquidation of collateral furnished under illegal assured-return schemes - HELD THAT: - The Trading Member had used client securities in an illegal assured-return arrangement while acting in multiple capacities. The Professional Clearing Members had no privity of contract with the Trading Member's individual clients and were not shown to have breached the regulatory framework governing the liquidation. The obligation arising from the assured-return arrangement remained that of the Trading Member, and the investors had participated in the scheme with knowledge that their securities were being furnished as collateral. [Paras 29, 30, 45, 54]

No claim could be maintained against the Professional Clearing Members for the Trading Members' defaults; the clients were left at liberty to pursue remedies against their respective Trading Members, subject to just exceptions.

Final Conclusion: The appeals of the Professional Clearing Members were allowed and the restitution orders of the Committee and the Securities Appellate Tribunal were set aside. The individual investor's appeal seeking restoration of cash margin was rejected as not maintainable.

Continuation of the provident fund inquiry during the insolvency moratorium - Moratorium on provident fund assessment and recovery proceedings - Extinguishment of pre-resolution approval provident fund claims - Immunity of corporate debtor and its assets for pre-CIRP offences

Continuation of the provident fund authority's Section 7A inquiry after commencement of CIRP and during the moratorium - HELD THAT: - The moratorium prohibits proceedings against the corporate debtor that create new liabilities. The impugned Section 7A order was not confined to a mere determination of dues: it raised a demand and contemplated coercive recovery, damages, interest and prosecution. Having been pursued despite knowledge of the CIRP and moratorium, the inquiry and the resultant order were held to be impermissible proceedings in the nature of recovery. [Paras 10, 13, 18, 20, 24]

The continuation of the Section 7A inquiry during the moratorium rendered the resultant order unsustainable.

Extinguishment of pre-resolution approval provident fund claims - Survival of the provident fund authority's additional claim after approval of the resolution plan where its claim had been lodged and dealt with under the plan - HELD THAT: - Section 31(6), retrospectively applicable from the commencement of the Code, extinguishes claims against the corporate debtor and its assets that arose before approval of the resolution plan, unless preserved by the plan, and prohibits continuation or institution of proceedings, including assessment proceedings, on the basis of such claims. While the claim admitted under the resolution plan remained saved, the additional amount determined by the impugned order did not. The authority had not challenged the resolution plan. [Paras 19, 20, 21, 26]

The post-resolution approval claim determined under the impugned order stood extinguished and could not be recovered.

Immunity of corporate debtor and its assets for pre-CIRP offences - Recovery, damages, interest and prosecution for pre-CIRP provident fund defaults against the corporate debtor and its assets after approval of a resolution plan resulting in change of management or control - HELD THAT: - Section 32A protects the corporate debtor and its assets, upon the stipulated change of management or control under an approved resolution plan, in respect of offences committed prior to commencement of CIRP. The proposed recovery action against the assets of the corporate debtor for such defaults was therefore unsustainable.

Section 32A also protects the property of the corporate debtor in relation to such an offence and the impugned order which provides for recovery action under Section 8B to 8G of the Provident Fund Act qua the assets of the corporate debtor is unsustainable. [See Shiv Charan vs Adjudicating Authority [2024 (3) TMI 136 - BOMBAY HIGH COURT]].

The “clean slate” principle enunciated in the decision of Ghanshyam Mishra And Sons Private Limited [2021 (4) TMI 613 - SUPREME COURT] has been given legislative effect by introducing Sub Section (6) to Section 31 of IBC.[Paras 25, 26]

The proposed coercive action against the corporate debtor and its assets could not be sustained.

Final Conclusion: The petition was allowed and the impugned provident fund order was quashed and set aside, as the inquiry was continued during moratorium and the additional claim stood extinguished upon approval of the resolution plan.

Proof of default in Section 7 insolvency applications - Information utility record of default - Relevance of a precedent concerning reliance on photocopies where default was recorded with the information utility and was undisputed by the corporate debtor in a Section 7 insolvency application

HELD THAT: - The requirement was for the NCLT to examine whether default was recorded in the information utility or established by other specified record or evidence. Since the financial creditor had placed the NeSL record of default with the application and the corporate debtor had not disputed the default, the cited decision Tharammel Peethambaran [2026 (2) TMI 1477 - SUPREME COURT] concerning photocopies was held wholly irrelevant. [Paras 5]

The Court clarified that there was no occasion to refer to the cited decision in its earlier order.

Final Conclusion: The praecipe for speaking to the minutes was disposed of by directing correction of the appearance column. The Court also clarified that the cited decision concerning photocopies was inapplicable to the earlier dismissal of the petition.

Independent and legally enforceable financial debt against the Corporate Debtor - proof of independent liability of corporate debtor

Whether the Appellant has been able to establish the existence of an independent financial debt against the Corporate Debtor? - HELD THAT: - A claim can continue in the insolvency process only upon reliable material establishing an independent and legally enforceable debt. The original payment was made to AEZ; no banking trail established transfer by the Appellant to the Corporate Debtor. The ledger and financial-statement entries, being internal accounting adjustments among entities under common control and showing subsequent reversal, did not prove an independent financial transaction. The memorandum of understanding remained preliminary, no definitive allotment agreement was executed, and the Appellant pursued arbitration and execution only against AEZ. Since an independent financial debt was not established, the Resolution Professional's reconsideration and rejection of the claim constituted verification and updation of claims, not adjudication of disputed rights. [Paras 51, 53, 54, 56, 57]

Thus, we find that (i) the original payment was admittedly made only to AEZ Infratech Private Limited; (ii) no independent evidence establishes transfer of funds by the Appellant to the Corporate Debtor; (iii) the documents relied upon by the Appellant are internal records exchanged amongst entities under common management and do not establish an independent liability; (iv) the Memorandum of Understanding dated 07.10.2010 remained only a preliminary understanding and never matured into a concluded commercial agreement; (v) despite knowledge of the Occupancy Certificate, the Appellant never enforced any alleged allotment rights against the Corporate Debtor and instead pursued arbitration and execution only against AEZ; and (vi) the Appellant has failed to establish an independent financial debt against the Corporate Debtor within the meaning of Section 5(8) of the Code.

Final Conclusion: The appeal was dismissed, the rejection of the Appellant's claim having been upheld for failure to establish an independent financial debt against the Corporate Debtor.

Arbitration clause and statutory insolvency remedy - Operational creditor status for debt arising from supply of goods - Pre-existing dispute in operational debt proceedings

Arbitration clause and statutory insolvency remedy - Maintainability of an operational debt application where the underlying contract contains an arbitration clause - HELD THAT: - Given the fact that, the existence of an arbitration clause, as already observed by us is a private legal remedy and is not statutorily prescribed under law to be mandatorily resorted too, any arrangement for resolving of a dispute by way of an arbitration clause which is a private legal remedy, will not deprive the Appellant to invoke a statutory remedy, which is otherwise reserved to the party, under the intention of law to be availed by person, who seeks to recover the defaulted amount, which is due to be paid. The said principle has been laid down in Hasan Shafiq Vs. CT Technologies [2022 (2) TMI 625 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI]

Almost a similar view was taken by the Hon'ble Apex Court, while dealing with the identical issue as to whether a statutory remedy under I&B Code can be resorted to when a private remedy of an arbitration clause, as settled between the parties is already available and has been initiated. The aforesaid issue was settled in the matters of Indus Biotech Pvt Ltd Vs. Kotak India Venture (Offshore) Fund & Ors. [2021 (3) TMI 1178 - SUPREME COURT] held that it is perfectly valid to admit Section 7 application even when arbitration route has been taken, provided debt and default are established. Hence the conclusion drawn by Learned NCLT that availability of arbitration clause in a dispute between the parties, would debar the Appellant from exercising his statutory rights as protected by law, is not acceptable to us, as the remedies available to the Appellant under the statute would still be a remedy available to the Appellant to be left open for the Appellant to be resorted to, irrespective of their private settlement rights as agreed between the parties for invocation of arbitration clause. We hold that Arbitration Clause under the contract will not supersede or override or create a cloud over a statutory rights bestowed by the Code upon the Appellant. Hence, this question is answered in favour of the Appellant. [Paras 22, 23, 24]

The arbitration clause did not preclude the operational debt application.

Operational creditor status for debt arising from supply of goods - whether the Appellant would be falling within the ambit of an Operational Creditor, as per the definition contained under Section 5 (20) of I&B Code for the purpose of invoking Section 9 of the Code? - HELD THAT: - The settlement amount arose from disputes connected with the parties' transaction involving supply of raw cotton. A claim arising in respect of provision of goods is an operational debt; consequently, the person to whom that debt is owed is an operational creditor. The interpretation of a claim "in respect of" provision of goods cannot be restrictively applied. [Paras 25, 26, 27]

The claimant was held to be an operational creditor entitled to invoke the statutory remedy.

Pre-existing dispute in operational debt proceedings - Existence of a pre-existing dispute where the corporate debtor raised a claim for damages in reply to the demand notice - HELD THAT: - A dispute capable of defeating an operational debt application must not be a patently feeble contention or an assertion unsupported by evidence. Although prior communications referred to inter se claims, no actual dispute had been agitated before any adjudicatory or arbitral forum; the alleged breach and damages claim was raised, apart from a stray email, only in the reply to the demand notice. A dispute raised after service of the demand notice is not a pre-existing dispute. [Paras 28]

No pre-existing dispute was established; the impugned order was quashed, and the application was directed to be admitted and proceeded with in accordance with law after imposition of moratorium.

Final Conclusion: The appeal was allowed and the rejection of the operational debt application was quashed. The application was directed to be admitted and taken forward in accordance with law.

Anticipatory bail under the Prevention of Money Laundering Act - Twin conditions for bail in money-laundering offences - Independence of money-laundering proceedings from predicate offences

Entitlement to anticipatory bail in a money-laundering case where the material disclosed a financial trail linked to alleged proceeds of crime and the applicant had not complied with summons - HELD THAT: - The statutory twin conditions apply equally to anticipatory bail. At the bail stage, the Court is required to assess the available material on probabilities, without conducting a mini-trial. The statements recorded under Section 50 were not considered in isolation, but were found prima facie corroborated by bank-account analysis and the financial trail. The applicant's failure to appear pursuant to repeated summons was also treated as an attempt to avoid the inquiry. Having regard to this material and the gravity of the alleged economic offence, there were no reasonable grounds to believe that the applicant was not guilty of the alleged offence. [Paras 61, 63, 64, 65, 66]

The condition under Section 45(1)(ii) of the PMLA was not satisfied, and anticipatory bail was refused.

Independence of money-laundering proceedings from predicate offences - Effect of pre-arrest protection granted in a predicate offence on proceedings for money laundering - HELD THAT: - Protection granted in connection with a predicate FIR operates only within that proceeding and does not automatically extend to the distinct and independent offence of money laundering. Pre-arrest protection in the PMLA proceedings could not therefore be claimed merely because such protection had been granted in the predicate offence. [Paras 54]

The protection in the predicate offence did not furnish a basis for granting anticipatory bail in the PMLA proceedings.

Final Conclusion: The application for anticipatory bail was dismissed, as the applicant failed to satisfy the statutory requirement that there were reasonable grounds for believing that he was not guilty of the alleged money-laundering offence.

Bail in money-laundering prosecution - Prolonged pre-trial incarceration - Grant of bail to an accused in a money-laundering prosecution after prolonged custody - HELD THAT: - The Court held that the continued incarceration of appellant No. 1 was no longer required, having regard to the charge levelled against him and the period for which he had remained in custody. [Paras 7, 8, 9]

The impugned order was set aside and appellant No. 1 was granted bail on terms and conditions to the satisfaction of the concerned Trial Court.

Final Conclusion: The appeal was allowed and bail was granted to appellant No. 1. The connected special leave petition was dismissed as infructuous.

Single-member Adjudicating Authority under PMLA - Reasons to believe for provisional attachment under PMLA - Independent satisfaction in PMLA adjudication - Attachment of property acquired before scheduled offence

Single-member Adjudicating Authority under PMLA - Constitutional validity of non-judicial Member - Constitutional validity of an attachment-confirmation order rendered by a single Finance Member of the Adjudicating Authority - HELD THAT: - The Adjudicating Authority scrutinises proceedings initiated for attachment and does not exercise functions hitherto vested in High Courts. The principle requiring a judicially trained presiding member where court functions are transferred to a tribunal was therefore inapplicable. The statutory appellate structure, providing an appeal to the Appellate Tribunal and a further appeal to the High Court on facts and law, also negatived the constitutional challenge. A single-member Bench constituted by the Chairperson may validly comprise a non-judicial Member. [Paras 9, 10, 14]

The challenge to the validity of the order rendered by the single Finance Member was rejected.

Reasons to believe for provisional attachment under PMLA - Validity of the provisional attachment on the ground that the Deputy Director had not recorded reasons to believe that non-attachment would frustrate proceedings under the PMLA - HELD THAT: - The provisional attachment order expressly recorded the Deputy Director's reasons to believe that immediate non-attachment of the property involved in money laundering was likely to frustrate proceedings under the PMLA. A writ court would not undertake a detailed examination of the factual basis for that satisfaction; any challenge to its factual correctness must be pursued through the statutory appellate remedy. [Paras 15]

The challenge to the provisional attachment for absence of the requisite reasons to believe was rejected.

Independent satisfaction in PMLA adjudication - Reasons to believe possession of proceeds of crime - Validity of the Adjudicating Authority's order on the ground that it lacked an independent finding that the petitioners possessed proceeds of crime - HELD THAT: - The Adjudicating Authority's order contained a detailed consideration of the facts and recorded its satisfaction, before issuing notice, that there were reasons to believe that the petitioners possessed proceeds of crime. The recorded reasons reflected an independent assessment and were not a mere restatement of the Deputy Director's conclusions. [Paras 16]

The challenge alleging absence of independent satisfaction by the Adjudicating Authority was rejected.

Attachment of property acquired before scheduled offence - Proceeds of crime under PMLA - HELD THAT: -The law laid down by the Three Judge Bench of the Hon’ble Supreme Court in Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT (LB)] leaves no room for any doubt about the authority of the Deputy Director of Enforcement and the Adjudicating Authority to proceed with the attachment of properties which were acquired even before the commission of the scheduled offence. The aforesaid dictum of the Hon’ble Supreme Court has been followed in Abdul Rasheed @ Dr A.R. Babu v. Deputy Director, Directorate of Enforcement [2025 (12) TMI 1897 - KERALA HIGH COURT]. Therefore, the challenge raised by the petitioners against the attachment of the properties which were acquired prior to the registration of the predicate offence is devoid of merit. [Paras 18]

The challenge to attachment of properties acquired before the scheduled offence was rejected.

Final Conclusion: The writ petitions were dismissed. The observations were confined to the exercise of writ jurisdiction, and the competent authorities were directed to decide the matter untrammelled by those observations.

Proceeds of crime - share application money allegedly arising from coal-block allocation - Attachment under PMLA - nexus with scheduled offence

Whether share application money received by the appellant company could be treated as proceeds of crime derived from the scheduled offences concerning coal-block allocation, so as to sustain attachment of the properties? - HELD THAT: - The Directorate's initial case that investors were induced to invest by the coal-block allocation was contradicted by the statements recorded from the investor companies, which did not establish that the allocation induced the investments. Its subsequent assertion that the investors were entities controlled by the appellant company's Directors was inconsistent with the allegation of deception; if so controlled, the entities could not have been deceived and no public funds were shown to be involved. The further assertion that such entities had received public funds was unsupported by particulars, complaint or FIR. The required nexus between the scheduled offence and the alleged share application money was therefore not established, and the Directorate could not presume an underlying scheduled offence. See M/S PAWANJAY STEEL AND POWER LTD. & ANR. [2024 (12) TMI 292 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI] [Paras 44, 45, 46]

The attachment confirmation order was set aside qua the appellant company and the appeal was allowed.

Final Conclusion: The appeal was allowed and the order confirming attachment of the appellant company's properties was set aside, as the alleged share application money was not shown to have the requisite nexus with the scheduled offence.

Provisional attachment of the buildings as proceeds of crime or their value under the Prevention of Money Laundering Act, 2002 - charge-sheet alleged scheduled offences involving fraudulent procurement of regulatory permissions through fabricated infrastructure and records, unlawful fee collections, retention of student deposits and misuse of government funds - HELD THAT: - Proceedings under the PMLA do not adjudicate reciprocal obligations under the memorandum of understanding or the fairness of its implementation. The charge-sheet alleged scheduled offences involving fraudulent recognition, manipulated records and wrongful appropriation of funds. The authorised officer had extensively referred to material in his possession, establishing a rational nexus between the material and the belief that proceeds of crime existed; mere apprehension of prejudice did not invalidate the attachment. [Paras 11, 13]

The provisional attachment was validly initiated under Section 5(1) of the PMLA.

Attachment of value of proceeds of crime - Attachment of buildings and infrastructure constructed from funds alleged to have been generated through scheduled offences as the value of proceeds of crime - HELD THAT: - Money-laundering does not depend on the commercial success or failure of the underlying enterprise, but on whether property was directly or indirectly derived or obtained through criminal activity relating to a scheduled offence. The material established a nexus between the alleged scheduled offences, the generation of proceeds of crime and their utilisation in constructing the attached buildings; consequently, the buildings were attachable as the value of such proceeds.

Attachment by the Respondent Directorate of such building was of ‘value thereof’ of the proceeds of crime. We may refer to the judgment of the Apex Court in the case of Vijay Madanlal Choudhary and Others v. Union of India & Ors [2022 (7) TMI 1316 - SUPREME COURT (LB)] wherein held that 'precondition for being proceeds of crime is that the property has been derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence. The sweep of section 5(1) is not limited to the accused named in the criminal activity relating to a scheduled offence. It would apply to any person (not necessarily being accused in the scheduled offence), if he is involved in any process or activity connected with the proceeds of crime. Such a person besides facing the consequence of provisional attachment order, may end up in being named as accused in the complaint to be filed by the authorised officer concerning offence under section 3 of the 2002 Act'. [Paras 14, 15]

The attachment of the buildings as value of the proceeds of crime was upheld.

Final Conclusion: The appeals were dismissed and the confirmation of the provisional attachment of the medical college buildings was upheld.

Levy of service tax - applicability of exclusion to ‘transport terminal’ provided in Section 65(105)(zzza) - construction of Traffic and Transit Management Centers (TTMC) - construction of bus terminals appeared to have not been recognised as a separate activity - invocation of extended period of limitation

HELD THAT:- We find no grounds to interfere with the impugned judgment and order passed by the Customs Excise and Service Tax Appellate Tribunal [2025 (11) TMI 603 - CESTAT CHENNAI]. Hence, Civil Appeal stands dismissed.

Adjudication of service-tax show-cause notice within reasonable time - Alternative remedy and writ jurisdiction

Adjudication of service-tax show-cause notice within reasonable time - Unexplained delay in adjudication - Validity of the service-tax adjudication order passed after prolonged delay from the show-cause notice - HELD THAT: - Section 73(4B)(b) requires determination, where possible, within one year in cases invoking the extended period. The expression "where it is possible to do so" permits only a reasonable and legally justifiable departure and does not confer unrestricted discretion to leave a show-cause notice undecided for an inordinate period. The material contained in the notice itself enabled adjudication, and the petitioner's representations seeking exemption or alleged adjournments could not justify the delay, particularly when adjournments were statutorily restricted. See IDFC First Bank vs. Union of India [2023 (8) TMI 1153 - BOMBAY HIGH COURT] [Paras 20, 25, 26, 27]

The unexplained and inordinate delay vitiated the adjudication; the impugned order was held arbitrary, contrary to Section 73(4B)(b), and bad in law, and was quashed.

Maintainability of the writ petition despite the statutory appellate remedy - HELD THAT: - Although constitutional courts ordinarily exercise self-restraint where a statutory appeal is available, the challenge based on the meaning and application of Section 73(4B) raised a question of law. Since the impugned adjudication was arbitrary on account of the unexplained delay, it also offended Article 14. [Paras 29]

The availability of an alternative remedy did not preclude exercise of writ jurisdiction in the circumstances of the case.

Final Conclusion: The writ petition was allowed on the ground of unjustified delay in adjudication. The impugned service-tax order was quashed without examination of the remaining substantive challenges.

Writ jurisdiction against service tax demand - Proof of entitlement to exemption - Interference in writ jurisdiction with the service tax demand where exemption for handling and transportation services was claimed without producing the relevant tender document and supporting work orders

HELD THAT: - The Court found that the assessing authority had considered the petitioner's defence and documents. The petitioner had not produced the relevant tender document either before the assessing authority or before the Court, and had also not responded to the Food Corporation of India's counter affidavit concerning the contractual rate. In these circumstances, no case for interference with the impugned order in extraordinary writ jurisdiction was made out.

Hon'ble Supreme Court in Mysore Metal Industries [1988 (5) TMI 42 - SC ORDER] observed- “The burden is on the party who claims exemption, to prove the facts that entitled him to exemption."

Recently in the case of Dilip Kumar & Company [2018 (7) TMI 1826 - SUPREME COURT (LB)] the Hon'ble Apex Court has held that burden to prove entitlement of tax exemption in terms of the Notification is on the person claiming such exemption.[Paras 13, 14, 15, 16]

The writ application was dismissed, with liberty to the petitioner to pursue the statutory remedy available in law; the competent forum was directed to consider the period spent before the Court if limitation arose.

Final Conclusion: The Court declined to exercise writ jurisdiction against the service tax demand because the petitioner failed to produce material contractual documents supporting the claimed exemption. The petitioner was left to pursue the statutory remedy in accordance with law.

Classification of separately priced coal transportation and handling services - Business Auxiliary Service-service rendered on behalf of a client - Extended limitation-wilful suppression in disclosed transactions - Interest and penalties on unsustainable service-tax demands

Classification of separately priced coal transportation and handling services - Cargo Handling Service - Classification of the separately priced handling, port-related and ocean-transportation components of the coal-movement contract as Cargo Handling Service - HELD THAT: - The contract separately identified the consideration for ocean freight, statutory port charges and handling activities, and the respective activities were performed by different persons. Taxability had to be determined from the true nature of each service and the consideration attributable to it; the fact that the activities facilitated a single movement of coal did not render them one indivisible cargo-handling service. Services performed within the port area were also required to be treated as port services under the applicable statutory scheme. [Paras 25, 26, 27, 28, 49]

The aggregate demand under Cargo Handling Service and the appropriation made towards it were set aside; service tax correctly paid under the respective applicable service classifications remained unaffected.

Business Auxiliary Service-service rendered on behalf of a client - Specific levy on coastal transportation - Liability under Business Auxiliary Service on ocean freight paid under a charter party for coastal transportation before the introduction of Transport of Goods by Waterways service - HELD THAT: - The vessel owner performed carriage under a charter party or contract of affreightment as a principal, and not as an agent rendering a service on behalf of the appellant to a third party. A service rendered for a contracting party does not, without more, constitute a service rendered on its behalf. Further, where carriage of goods by sea between Indian ports was specifically brought within the tax net under a new entry, the same activity could not ordinarily be taxed for the anterior period under a general entry unless the later entry was demonstrably carved out of that entry. [Paras 31, 32, 33, 34, 35]

The Business Auxiliary Service demand for the pre-Transport of Goods by Waterways period was set aside on merits and limitation.

Extended limitation-wilful suppression in disclosed transactions - Revenue neutrality in reverse-charge tax demand - Invocation of the extended period for reverse-charge tax on ocean transportation classified as Transport of Goods by Waterways service - HELD THAT: - The demand was beyond the normal limitation period and could survive only upon proof of wilful suppression with intent to evade tax. The Department had prior knowledge of the same contract and activities through earlier notices, the transactions and ocean freight were disclosed in the records, and the dispute substantially concerned competing classifications. Revenue neutrality, though not by itself destructive of the substantive levy, was a material circumstance in assessing the alleged intent to evade. No positive evidence of deliberate withholding of information was established. [Paras 39, 40, 41, 42, 43]

The invocation of the extended period was held unsustainable, and the Transport of Goods by Waterways demand was set aside as time-barred.

Interest and penalties on unsustainable service-tax demands - Survival of interest, penalties and the Department's claim for an additional penalty after the underlying service-tax demands failed - HELD THAT: - Interest could not survive without a legally sustainable tax demand. The failure to establish wilful suppression also removed the basis for penalty for suppression. Since no underlying demand survived, there was no independent foundation for an additional penalty for failure to pay service tax; consequently, it was unnecessary to decide the divergence on simultaneous penalties under the relevant provisions. [Paras 44, 47, 48]

The penalties imposed and consequential interest were set aside, and the Department's appeal seeking imposition of an additional penalty was dismissed.

Final Conclusion: The appellant's appeal was allowed, with all impugned demands, consequential interest and penalties set aside. The Department's appeal for imposition of an additional penalty was dismissed.

Validity of show cause notice - Reimbursable expenses - Taxability of imported services under the positive-list and negative-list regimes - Cum-tax valuation under reverse charge - Extended limitation and revenue neutrality - Penalty for suppression of service-tax liability - Penalty for incorrect ST-3 returns

Validity of show cause notice - Specificity of service-tax demand - Validity of the show cause notice in respect of foreign-currency expenditure under Annexure C - HELD THAT: - The notice identified the respective heads of expenditure and the service categories proposed thereagainst. The appellant furnished transaction-wise, year-wise and invoice-wise explanations and admitted payment of service tax on certain services. Having thus fully understood and answered the allegations, the appellant could not contend that the notice was vague in respect of Annexure C. [Paras 4]

The plea that the show cause notice was vague in respect of Annexure C was rejected.

Reimbursable expenses - Consideration for imported services - Character of payments made for services received from foreign service providers and the Denmark branch office - HELD THAT: - The payments represented charges for services received by the appellant, whether paid directly to foreign service providers or through its branch office. They were not expenses incurred by a service provider over and above the value of a service under an agreement, and therefore could not be treated as reimbursable expenses. [Paras 4]

The payments were held not to be reimbursable expenses.

Taxability of imported services under the positive-list and negative-list regimes - Classification of taxable services - Taxability of services received from outside India before and after 01.07.2012 - HELD THAT: - For the period before 01.07.2012, when only specified taxable services could be taxed, the notice and the order did not establish the service category under which the transactions were taxable. Mere payment to a foreign recipient against invoices could not establish taxability. After 01.07.2012, consideration paid for an activity undertaken by one person for another was taxable under the changed scheme, and the approach adopted in the impugned order was not found faulty. [Paras 4]

The demand for the period before 01.07.2012 was set aside, while the demand otherwise falling within the normal period after the change in the taxation scheme was upheld.

Cum-tax valuation under reverse charge - Applicability of cum-tax valuation to service tax payable by the recipient under reverse charge - HELD THAT: - The provision for treating the gross amount charged as inclusive of service tax applies where tax is demanded from the service provider under forward charge. It does not apply where the recipient is liable to pay service tax on reverse charge in respect of services received from outside India. [Paras 4]

The payments to foreign entities were not liable to be treated as cum-tax consideration.

Extended limitation and revenue neutrality - Absence of mala fide intention - Invocation of the extended period for reverse-charge service-tax demand on services received from outside India - HELD THAT: - The tax paid under reverse charge would have been available to the appellant as credit, rendering the demand revenue neutral. In the absence of mala fide intention to evade payment of service tax, the extended period of limitation could not be invoked. [Paras 4]

The demand raised by invoking the extended period, including the demand for the period before 01.07.2012, could not survive.

Penalty for suppression of service-tax liability - Penalty for alleged non-payment of reverse-charge service tax - HELD THAT: - Since the extended period was unavailable for want of mala fide intention, the requisite element for penalty based on suppression or deliberate evasion was absent. [Paras 4]

The penalty imposed for suppression of service-tax liability was set aside.

Penalty for incorrect ST-3 returns - Penalty for alleged failure to file true and correct ST-3 returns - HELD THAT: - The appellant had filed ST-3 returns throughout the relevant period. The finding of contravention of the return-filing requirement was therefore unsustainable. [Paras 4]

The penalty for alleged incorrect filing of ST-3 returns was set aside.

Final Conclusion: The appeal was partly allowed. The demand was confined to the admitted payments and the period within normal limitation; the demand for the period before 01.07.2012 and the penalties were set aside.

Service-tax demand based on uncorrelated 26AS receipts - Attribution of receipts to multiple service-tax registrations under the same PAN

Sustainability of service-tax demand raised by attributing the entire 26AS receipts to one of multiple registrations held under the same PAN - HELD THAT: - The same income-tax information was processed simultaneously against three separate service-tax registrations sharing the same PAN, and the entire receipts reflected in 26AS were treated as undeclared receipts of each registrant. The authorities had dropped demands raised on the same information in respect of the other registrations. As the notices were issued without verification or correlation of the receipts with the appellant's activities from its registered premises, the demand lacked merit. [Paras 4]

The confirmation of service tax demand was held unsustainable and the appeal was allowed.

Final Conclusion: The Tribunal found no merit in the impugned demand founded on uncorrelated 26AS receipts attributed in full to the appellant's registration, and allowed the appeal.

Works-contract service exemption for Government projects - Governmental-authority status for service-tax exemption - Reverse-charge liability on works-contract services - Service-tax penalties for registration, return-filing and payment defaults

Works-contract service exemption for Government projects - Exemption for construction of road and protection of a river ghat undertaken for the Irrigation Department during 2014-15 - HELD THAT: - The documents produced established that the receipts were for construction of an interlocking road and protection of a river ghat for the Government department. Such works-contract services were covered by the exemption available for original civil works provided to Government or a governmental authority; the same nature of services had also been treated as exempt for the subsequent period. [Paras 4]

The service-tax demand relating to these receipts was set aside.

Governmental-authority status for service-tax exemption - Reverse-charge liability on works-contract services - Exemption and reverse-charge liability in respect of repair of residential quarters undertaken for Bharat Coking Coal Limited - HELD THAT: - Bharat Coking Coal Limited was not shown to have been constituted by Central or State legislation or to satisfy the prescribed governmental shareholding requirement, and therefore did not qualify as a governmental authority under the exemption notification. The recipient's payment of tax under reverse charge extended only to its stipulated half share; the service provider remained liable for tax on the balance share of the works-contract service. [Paras 4]

The exemption was denied and the service-tax demand on the service provider's reverse-charge share was upheld.

Service tax on unsupported works-contract receipts - HELD THAT: - The appellant did not dispute the relevant facts and conceded its inability to produce documents establishing that the receipts related to exempt services. [Paras 4]

The demand on these receipts was upheld.

Service-tax penalties for registration, return-filing and payment defaults - Penalties for failure to obtain service-tax registration, file statutory returns and pay service tax by the prescribed date - HELD THAT: - The penalties were civil consequences of the established statutory contraventions. The appellant had provided taxable services without timely registration and return filing, resulting in non-payment or short-payment of service tax; proof of mens rea was not required for such civil penalties. The penalty for non-payment was correspondingly reduced upon reduction of the tax demand. [Paras 4]

The penalties for failure to obtain registration and file returns were upheld, while the penalty for delayed payment was reduced in line with the reduced tax demand.

Interest on delayed payment of service tax - HELD THAT: - Interest on service tax not deposited by the due date follows as a natural consequence of the tax liability upheld. [Paras 4]

Interest was upheld in respect of the sustained service-tax demand.

Final Conclusion: The appeal was partly allowed. The demand concerning the exempt Government works was deleted, while the remaining tax demand and consequential interest were sustained, with a corresponding reduction in the penalty for delayed payment.

Speaking order in de novo adjudication - Consideration of submissions on remand - Validity of the de novo service-tax adjudication after remand, where the adjudicating authority adopted findings in an earlier order that had been set aside without independently examining the evidence and submissions

HELD THAT: - A quasi-judicial authority must give cogent reasons demonstrating consideration of the material, evidence and submissions before it. The impugned order merely concurred with the findings in the earlier set-aside order, without the threadbare examination directed on remand or findings on the appellant's submissions and the decisions required to be considered. Such non-application of mind rendered the order non-speaking, contrary to judicial hierarchy and violative of natural justice.

Case of Kranti Associates Pvt Ltd. vs Masood Ahmed Khan [2010 (9) TMI 886 - SUPREME COURT] was relied upon for the requirement that quasi-judicial conclusions be supported by reasons. [Paras 4]

The impugned order was set aside and the matter remanded for fresh adjudication upon a complete consideration of the facts, figures, evidence and submissions, consistently with the earlier remand directions and principles of natural justice.

Final Conclusion: The appeal was allowed, the non-speaking de novo order was set aside, and the matter was remanded for fresh adjudication in accordance with the earlier remand directions and principles of natural justice.

CENVAT credit for input services received at unregistered premises - CENVAT credit on works contract services for construction of BPO branches - Extended limitation for declared CENVAT credit - Interest on inadmissible CENVAT credit - Penalty for non-inclusion of premises in centralized registration

CENVAT credit for input services received at unregistered premises - Admissibility of CENVAT credit on input services received at premises not included in centralized registration - HELD THAT: - Receipt of input services at a registered premises is not a condition precedent for availment of credit. Credit could not be denied merely because the BPO premises had not been included in the centralized registration. See Samsung India Pvt. Ltd. [2017 (9) TMI 590 - ALLAHABAD HIGH COURT] [Paras 4]

The demand relating to credit availed on services received at unregistered premises was set aside.

CENVAT credit on works contract services for construction of BPO branches - Admissibility of CENVAT credit on works contract services used for construction or setting up of BPO branches - HELD THAT: - The finding that the works contract services were used for construction or setting up of BPO branches was not shown to be perverse, and no concrete evidence established their use exclusively for modernization, repair or renovation of existing facilities. Works contract services are distinct from repair and maintenance services; the exclusion applicable to the service portion of works contracts used for construction of a building or civil structure therefore governed the claim. [Paras 4]

The demand for credit availed on works contract services was upheld, subject to restriction to the normal limitation period.

Extended limitation for declared CENVAT credit - Invocation of the extended period for recovery of inadmissible CENVAT credit declared in statutory returns and reflected in refund claims - HELD THAT: - Invocation of the extended period depends upon the existence of the statutory conditions arising from an act or omission of the assessee, not upon the manner in which the Department detected the disputed credit. Where the credit had been declared in ST-3 returns and refund claims had been processed through show cause notices, mere detection during audit did not establish suppression or another requisite condition for invoking the extended period. [Paras 4]

The extended-period demand was set aside and restricted to the normal period, namely 2014-15; the matter was remanded for recomputation of the demand for that period.

Liability to interest on inadmissible CENVAT credit sustained for the normal period - HELD THAT: - Since credit on works contract services used for construction or setting up of the BPO branches was held inadmissible and recoverable for the normal period, interest under Section 75 followed as a mandatory consequence. [Paras 4]

Interest was confirmed in respect of the recoverable credit.

Penalty for irregular CENVAT credit - Penalty for availment of inadmissible CENVAT credit where the extended period was not invocable - HELD THAT: - The conditions attracting the extended period and the penalty provision are the same. As the extended period was held unavailable, the penalty for deliberate suppression or intent to evade could not be sustained. [Paras 4]

The penalty imposed under Section 78 was set aside.

Penalty for non-inclusion of premises in centralized registration - HELD THAT: - The appellant held centralized registration and filed ST-3 returns disclosing receipts from the premises not included in its registration certificate. In the absence of a case that turnover from those premises was excluded from the returns, their non-inclusion in the certificate did not establish contravention of the registration requirement. [Paras 4]

The penalty imposed under Section 77 was set aside.

Final Conclusion: The appeal was partly allowed. Credit relating to unregistered premises and the penalties were set aside, while credit on works contract services and consequential interest were sustained only for the normal period, with remand for recomputation for 2014-15.

Classification of composite engineering services - Export of engineering services - Technical Inspection and Certification Service

Classification of the composite assignment involving engineering, development, quality coordination and dispatch assistance as Consulting Engineer Service rather than Technical Inspection and Certification Service - HELD THAT: - Classification had to be determined from the substance and essential character of the contracted service, without selectively isolating its inspection-related elements. The contemporaneous documents showed a wider engineering assignment comprising drawing assistance, casting and pattern development and rectification, technical clarification, material specifications, quality coordination and dispatch assistance. Inspection formed only one component, with no separate charge or engagement as an independent inspection or certification agency. [Paras 8, 14, 15]

The services were held to be engineering advice, consultancy and technical assistance, classifiable as Consulting Engineer Service for the pre-negative-list period, and not as Technical Inspection and Certification Service.

Export of engineering services - Place of provision of services - Physical availability of goods - Eligibility of engineering services rendered to a foreign contractual recipient for export treatment during the respective statutory periods - HELD THAT: - For the period after 27.02.2010, the omitted requirement that a service be provided from India and used outside India could not be reintroduced merely because certain activities were physically performed in India. For the preceding period, the Department did not establish that the Indian manufacturer, rather than the foreign contractual recipient paying in convertible foreign exchange, was the recipient or user of the service. From 01.07.2012, Rule 4 of the Place of Provision of Services Rules applied only where physical availability of goods was necessary to provide the service; physical presence of the castings during some quality-related activities was insufficient. The general rule therefore applied, making the place of provision the location of the foreign recipient. [Paras 20, 22, 25, 26, 27]

The services qualified as export throughout the periods in dispute; the service tax demands consequently failed on merits, and the consequential interest and penalties could not survive.

Extended limitation - Wilful suppression with intent to evade tax - Invocation of the extended period for the first service tax demand despite prior disclosure of the foreign engineering-service arrangement - HELD THAT: - Extended limitation requires wilful suppression, misstatement or contravention with intent to evade tax, and cannot rest on a subsequent departmental view of the assessee's tax position. The arrangement and relevant activity details had been disclosed to the Department before issuance of the notice, and no material established deliberate suppression with intent to evade tax. [Paras 29, 30]

The extended period invoked for the first demand was held to be unavailable.

Final Conclusion: The impugned orders were set aside and the appeals allowed with consequential relief. The engineering services rendered to the foreign contractual recipient were treated as export of services, with no surviving liability for service tax, interest or penalties.

Show cause notice as foundation of service-tax demand - Appellate introduction of a new taxable-service classification - Consequential interest and penalty on unsustainable tax demand

Show cause notice as foundation of service-tax demand - Appellate introduction of a new taxable-service classification - Sustainability of service-tax demands on foreign-currency expenditure for the pre-01.07.2012 positive-list period where the notices did not identify the taxable service and the appellate authority supplied classifications for tuition and membership payments - HELD THAT: - Under the positive-list regime, reverse-charge liability required the Department to establish that the expenditure was consideration for a specified taxable service. The notices merely alleged foreign-currency expenditure without identifying any taxable category, notwithstanding that the transactions comprised distinct kinds of expenditure. The appellate authority could not cure that foundational omission by, for the first time, classifying tuition payments as Commercial Training or Coaching Service and membership payments as Club or Association Service, since this changed the basis of the demand and denied the assessee notice of the statutory charge to be met. Subsequent tax payments under the negative-list regime could not establish taxability under the earlier statutory scheme. [Paras 17, 18, 19, 20, 21]

The pre-01.07.2012 demands could not be restored on classifications never proposed in the notices.

Consequential interest and penalty on unsustainable service-tax demand - Penalty for suppression without a foundational taxable classification - HELD THAT: - Interest is consequential upon a legally recoverable tax liability and could not survive after the restored demand was held unsustainable. The penalty also failed because the absent taxable classification deprived the demand of the necessary foundation for alleging suppression with intent to evade; the assessee had maintained books and produced the relevant expenditure particulars and supporting documents. [Paras 22, 23, 26]

The consequential interest and the penalty under Section 78 were set aside.

Scope of departmental appeal concerning subsequent service-tax notices - Reopening of the adjudicating authority's findings on the post-01.07.2012 notices in appeals directed against the dropping of the pre-01.07.2012 demands - HELD THAT: - The departmental appeal concerned only the dropping of the pre-01.07.2012 demands. The separately examined findings on the subsequent notices, including taxes already paid or accepted and the distinction drawn between taxable services and other expenditure, were therefore outside the scope of the present appeals. [Paras 25, 27]

The findings concerning the post-01.07.2012 notices remained undisturbed.

Final Conclusion: The impugned appellate order was set aside insofar as it restored the pre-01.07.2012 demand with consequential interest and penalty. The original adjudication order was restored to that extent, while the findings concerning the subsequent notices remained undisturbed.

Extinguishment of statutory dues under an approved resolution plan - Service-tax demand on notice-pay recoveries for a period preceding the resolution-plan closing date, where the Central Government had not lodged any claim under the plan

HELD THAT: - The Department confirmed that no claim had been made against the Order-in-Original. The Tribunal held that the demand pertaining to the period before the closing date stood discharged and settled under the approved Resolution Plan. [Paras 4]

The confirmed service-tax demand stood discharged and settled as per the Resolution Plan.

Final Conclusion: The appeal was decided by holding that the service-tax demand for the relevant period stood discharged and settled under the approved Resolution Plan.

Penalty where service tax and interest are paid before show-cause notice - Adjustment of excess service tax in succeeding months or quarters

Penalty where service tax and interest are paid before show-cause notice - Imposition of penalties for short-payment of service tax where the tax and interest had been paid before issuance of the show-cause notice - HELD THAT: - Section 73(3) affords relief from penalty where the amount in question is paid with interest before issuance of the show-cause notice. Since the short-paid service tax and interest stood paid and were appropriated in the order-in-original, imposition of penalties was unwarranted. [Paras 3, 10]

The penalties imposed for the short-paid service tax were set aside, while appropriation of the tax and interest already paid was upheld.

Adjustment of excess service tax in succeeding months or quarters - Adjustment of excess service tax paid in September 2009 against the liability for January 2010 under Rule 6(4A) of the Service Tax Rules, 1994 - HELD THAT: - The expressions "succeeding month" and "quarter" in Rule 6(4A), read with the General Clauses Act, include their plural. The Rule does not restrict adjustment of undisputed excess service tax to the immediately succeeding month or quarter; such excess may be adjusted against liability in any succeeding months or quarters. Revenue could not retain the assessee's undisputed excess tax merely because it was adjusted after the immediately following month. [Paras 6, 7, 9]

The demand founded on the alleged contravention of Rule 6(4A) was set aside.

Final Conclusion: The demand based on the restriction of adjustment to the immediately succeeding month and all penalties were set aside. Appropriation of the service tax and interest already paid was sustained, with consequential relief in accordance with law.

Extended limitation for service-tax demand - Wilful suppression with intent to evade tax - Bona fide belief arising from interpretation of exemption notification - demand of service tax on airfield-drainage services claimed as exempt under the exemption notification - HELD THAT: - The question whether an airfield drainage system fell within the entry for sewerage treatment or disposal under the exemption notification was one of interpretation. That interpretative issue afforded the appellant a bona fide belief that the services were exempt. Mere non-payment or non-declaration does not establish wilful suppression; invocation of the extended period requires evidence of a positive act of suppression with intent to evade payment of service tax, which was absent. [Paras 4]

The extended period under section 73 could not be invoked; the demand upheld on that basis was unsustainable.

Final Conclusion: The appeal was allowed, as the service-tax demand sustained by invoking the extended period was not justified in the absence of evidence of wilful suppression with intent to evade tax.

Service tax on construction of residential complexes before 1 July 2010 - Builder's works contracts as self-service

Liability to service tax on construction of residential complexes undertaken by a builder under works contracts before insertion of the Explanation with effect from 1 July 2010 - HELD THAT: - The Explanation introduced with effect from 1 July 2010 expanded the taxable scope by deeming construction intended for sale by a builder to be a service to the buyer. Before its insertion, construction of residential complexes by a builder for prospective purchasers was in the nature of self-service and was not taxable, whether undertaken as a service simpliciter or as a composite works contract. The Revenue's contention that the Board Circulars were inapplicable to works contract services was therefore rejected. See M/S. SOBHA DEVELOPERS LTD. [2026 (3) TMI 844 - CESTAT BANGALORE][Paras 6]

The orders dropping the service-tax demands were upheld and the Revenue's appeals were dismissed.

Final Conclusion: The impugned orders dropping the service-tax demands were upheld, and the Revenue's appeals were dismissed.

Manufacture by lamination of fabric with plastic - Job-work exemption conditional on principal manufacturer's undertaking - SSI exemption for laminated HDPE fabrics - Valuation of job-work clearances and cum-duty valuation - Extended limitation for duty on unexempted job-work clearances - Penalty on authorised signatory in absence of confiscation

Manufacture by lamination of fabric with plastic - Lamination of cotton, jute or man-made fabrics with LDPE, PP or HDPE amounts to manufacture - HELD THAT: - We find that the principle to be followed to determine if a process amounts to manufacture or not has been laid down by a five member Constitutional bench of Supreme Court in Union of India versus Delhi Cloth and General Mills Co. Ltd. [1962 (10) TMI 1 - SUPREME COURT]. We respectfully follow the judgment of the Supreme Court in Laminated Packings [1990 (8) TMI 141 - SUPREME COURT] and hold that lamination does amount to manufacture.

A fabric laminated with plastic is a commercially distinct article, known by a different name and having different uses from the original fabric. The process consequently results in a new product possessing a distinct name, character and use. [Paras 9, 10, 11]

The finding that lamination amounts to manufacture and the consequent duty demand were upheld.

Job-work exemption conditional on principal manufacturer's undertaking - Exemption for goods manufactured on job-work basis was available only where the requisite undertaking of the principal manufacturer had been furnished - HELD THAT: - The undertaking by the principal manufacturer to use the processed goods in further manufacture of excisable goods and to discharge duty thereon is the basis of the job-work exemption and not a procedural formality. However, use of some materials by the job worker does not by itself cease the activity to be job work; the exemption remains available to the extent valid undertakings from principals were produced. [Paras 12, 14]

Job-work exemption was allowed only to the extent covered by the requisite declarations or undertakings of principal manufacturers.

SSI exemption for laminated HDPE fabrics - whether Laminated HDPE fabrics were eligible for the small-scale industry exemption? - HELD THAT: - The SSI notifications exempted all excisable goods except specified exclusions. The exclusion under Chapter 39 concerned plastic strips intended for weaving fabrics or sacks, and did not extend to laminated HDPE fabrics. [Paras 17]

The assessee was held entitled to the SSI exemption for the relevant years.

Valuation of job-work clearances - Cum-duty valuation of own-account sales - assessable value of job-work clearances and goods sold by the assessee determination - HELD THAT: - Rule 10A governed valuation of goods manufactured by a job worker and contained no basis for adding notional profit. Where goods were cleared after job work without sale by the job worker, their value had to be determined under that Rule. Conversely, where the assessee sold goods cleared on its own account, the sale price had to be treated as cum-duty value. [Paras 19, 20]

Job-work clearances not covered by principal manufacturers' declarations were directed to be valued under Rule 10A, while duty on own-account sales was directed to be recalculated on a cum-duty basis.

Extended limitation for duty on unexempted job-work clearances - HELD THAT: - The assessee was aware that exemption for job-work clearances depended upon obtaining the prescribed undertaking from the principal manufacturer, which shifted liability to that principal. In the absence of such undertaking from other principals, the assessee remained liable to duty, furnishing sufficient grounds for invoking the extended period. [Paras 21]

Invocation of the extended period of limitation was upheld.

Penalty on authorised signatory in absence of confiscation - Penalty on the authorised signatory under the applicable Central Excise Rules where no confiscation order had been made - HELD THAT: - The penalty provisions invoked applied to acts or omissions rendering goods liable to confiscation. As the impugned order contained no order of confiscation, the statutory foundation for penalty against the authorised signatory was absent. [Paras 22]

The penalty imposed on the authorised signatory was set aside.

Final Conclusion: The assessee's appeal was partly allowed by extending the available job-work and SSI exemptions and directing revaluation of the relevant clearances, while sustaining manufacture, the duty demand and extended limitation. The penalty on the authorised signatory was set aside.

Central excise refund limitation - Payment of duty under protest

Refund of central excise duty for the disputed period where the appellant could not produce protest letters or contemporaneous endorsements of payment under protest - HELD THAT: - The final determination that no duty was payable did not exclude the operation of the limitation prescribed for refund claims; refund of duty not payable remains subject to the statutory refund provision. The earlier remand directing examination of limitation had also attained finality. However, in the peculiar circumstances, the appellant's inability to retrieve old records was plausible, and the available protest letters for periods before and after the disputed period, coupled with its continuous challenge to excise liability throughout, established that the disputed payments were also to be reckoned as having been made under protest. [Paras 12, 13, 14, 17, 18]

The duty paid during the disputed period was held to have been paid under protest, entitling the appellant to refund without application of limitation.

Final Conclusion: The impugned order was set aside and the appeal was allowed. Refund of the duty paid for the disputed period was directed without limitation.

Excise valuation of batteries supplied under buyback arrangements - Extended limitation for excise duty demand - Penalty for undervaluation of excisable goods

Transaction value where price is below cost of manufacture - Buyback arrangement and arm's-length price - Valuation of batteries supplied to torch manufacturers under arrangements requiring co-packing of the batteries with torches and sale of the co-packed products back to the appellant - HELD THAT: - The buyers were contractually bound to manufacture torches to the appellant's specifications, co-pack them with the batteries supplied by the appellant and sell the finished products only to the appellant. The contractual price of identical batteries supplied under this arrangement was substantially below the cost-based value adopted for stock transfers to the appellant's own unit.

Admittedly, the Appellant was selling these batteries to the two buyers who in terms of the MOU were bound to manufacture torches as per specifications etc. prescribed by the Appellant and co-pack them alongwith these batteries, hence sell them to the Appellant. Even if we conclude that there was no mutuality of interest between the Appellant and the two buyers contrary to the finding recorded in the impugned order, we are of the view that for such buyback agreement the price in respect of these two identified batteries was not at arm’s length for the reason it was below the cost of manufacture of the said batteries.

From decision Fiat India Pvt. Ltd.[2012 (8) TMI 791 - SUPREME COURT] it is quite evident that the price at which the goods were being sold even if to the independent buyers and that price being much below the cost of manufacture then the same needs to be rejected and the value for determination for excise duty should be adopted as per the cost of manufacture in term of determined as per CAS-4.

Such price was not at arm's length and could not be accepted as transaction value merely because the buyers might not be related persons; a price continuously below manufacturing cost was liable to be rejected and valuation determined on the basis of cost under CAS-4. [Paras 4]

The duty demands based on cost-based valuation of the batteries were sustained, subject to limitation.

Extended limitation for excise duty demand - Validity of invoking the extended period for the demand relating to undervaluation of batteries - HELD THAT: - The appellant was registered, had filed the prescribed returns, and the agreements and relevant facts were on record with the Revenue. Consequently, the extended period was unavailable. The demand raised for the earlier period was entirely time-barred, whereas the demands for the subsequent periods were within the normal period of limitation. [Paras 4]

The demand for November 2013 to November 2014 was set aside as time-barred; the subsequent demands, with interest, were upheld.

Penalty for undervaluation of excisable goods - Penalty beyond the show cause notice - HELD THAT: - As we have held that extended period could not have been invoked, penalties imposed upon the Appellant by invoking Section 11AC needs to be set aside in lieu of the observations made by the Hon’ble Supreme Court in the case of Union of India V/s Rajasthan Spinning & Weaving Mills [2009 (5) TMI 15 - SUPREME COURT]

Further, the adjudicating authorities imposed penalty under the provision governing wrongly taken or utilised CENVAT credit, although that provision was neither invoked in the notices nor applicable to undervaluation of goods. The penalties therefore lacked both the requisite basis and statutory applicability. [Paras 4]

All penalties imposed under Section 11AC were set aside.

Final Conclusion: The appeals were partly allowed. The time-barred demand and all penalties were set aside, while the demands within the normal limitation period, together with interest, were sustained on cost-based valuation.

Inclusion of amortised tooling cost in assessable value - Extended limitation and penalty for alleged suppression of tooling advances

Inclusion of amortised tooling cost in assessable value - Inclusion in assessable value of buyer-funded tooling advances used for manufacture of automobile seats - HELD THAT: - The valuation scheme requires inclusion of the value of buyer-supplied tools only to the extent appropriately apportioned to the excisable goods produced with their aid; it does not permit automatic loading of the entire tooling advance on clearance or receipt. A Cost Accountant's certificate under the Circular is not a mandatory statutory precondition where the amortisation is supported by reliable tooling, production, invoice and payment records. As no specific defect was identified in the tool values, expected life, production quantities or amortisation computation, the documentary evidence could not be rejected merely because the certificate was issued by a Chartered Accountant. [Paras 9, 10, 13, 14, 15]

Only the proportionate amortised tooling cost attributable to the finished goods was includible; the remand for fresh valuation was unsustainable and the order dropping the demand was restored.

Invocation of the extended limitation period and imposition of interest and penalty for alleged suppression of tooling advances - HELD THAT: - In Sankar Sealing Systems Pvt. Ltd. v[2024 (6) TMI 1175 - CESTAT CHENNAI] the coordinate Bench held that mere failure or negligence in adopting the correct valuation or payment of duty does not, by itself, establish suppression with intent to evade, particularly where the dispute concerns valuation. The present case stands on a stronger footing because the tooling advances and the proposed method of valuation were specifically brought to the Department’s notice during audit.

The tooling advances and the proposed method of amortisation had been disclosed to the Department during audit before the show-cause notice. The dispute concerned the valuation methodology for tooling cost, and the Department failed to establish wilful suppression, misstatement or deliberate withholding of material facts with intent to evade duty. Revenue neutrality, considered with the disclosure, bona fide valuation method and payment on the amortised cost, also did not establish the requisite intent for penalty. [Paras 17, 18, 19, 20, 21]

The extended period was not invocable, and the consequential interest and penalty did not survive.

Final Conclusion: The appeal was allowed. The order remanding valuation was set aside, the order dropping the proceedings was restored, and the proposed demand, interest and penalty did not survive.

Railways as dealer under sales-tax law - Sale of rolling stock under financing and lease arrangement - Territorial taxability of rolling-stock sales

Railways as dealer under sales-tax law - statutory capacity of the Railways to be treated as a dealer in respect of the rolling-stock transactions - HELD THAT: - The statutory definitions cover the Central Government when it carries on the business of selling goods, and profit motive is immaterial. The settled position that disposal of goods incidental or ancillary to railway operations may constitute business establishes that the Railways is not immune from sales-tax legislation merely because it performs public functions. That capacity, however, does not establish that every transaction involving railway property is a sale.

In District Controller of Stores, Northern Railway, Jodhpur v. Assistant Commercial Taxation Officer [1975 (12) TMI 143 - SUPREME COURT] the Supreme Court held that the sale of scrap and unserviceable material by the Railways was connected with or ancillary to its activity as a carrier. The Railways was consequently held to be a dealer for the purposes of the concerned sales-tax enactment.

The same principle was applied in Member, Board of Revenue, West Bengal v. Controller of Stores, Eastern Railway [1989 (4) TMI 284 - SUPREME COURT]The disposal of unclaimed goods was held to be incidental to the Railways’ business as a carrier, while the sale of scrap and unserviceable material was treated as covered by District Controller of Stores (supra).[Paras 40, 41, 42, 43, 44]

The Railways can answer the description of a dealer; whether it effected taxable sales of the rolling stock required separate determination.

Sale of rolling stock under financing and lease arrangement - Agency in procurement of rolling stock - Whether the transfer of rolling stock financed by IRFC constituted sales by the Railways to IRFC? - HELD THAT: - A sale requires that property first vested in the Railways and was thereafter transferred to IRFC for consideration. Possession, procurement functions and advance financing are relevant but not conclusive of title. Railway-manufactured stock, owned by the Railways before identified stock was adjusted against IRFC funds and ownership vested in IRFC, satisfied the elements of a sale. Privately manufactured stock also constituted a sale only where the Railways purchased as principal and subsequently transferred title; where it procured the stock on IRFC's behalf as agent, no intermediate sale arose. An adverse inference for non-production of records could not erase these legally distinct classes of transactions. [Paras 70, 72, 73, 74, 75]

The composite assessments treating all rolling stock financed through IRFC as sales by the Railways were unsustainable and were remitted for transaction-wise segregation and computation in accordance with the stated legal criteria.

Territorial taxability of rolling-stock sales - Burden of proving exclusion from local sales tax - Whether transactions established as sales by the Railways were excluded from sales tax in Delhi as inter-State sales or sales outside Delhi? - HELD THAT: - In State of A.P. v. National Thermal Power Corporation Ltd. [2002 (4) TMI 694 - SUPREME COURT] the Supreme Court reiterated that the situs attributed to a transaction is immaterial once the sale answers the statutory test of an inter-State sale. Neither State legislation nor a contractual stipulation can convert an inter-State sale into an intra-State sale.That principle would apply if the Petitioner established that the sale by the Railways to IRFC occasioned inter-State movement. The present record does not establish that connection in respect of the transactions which otherwise answer the description of sales by the Railways.

The burden to prove non-liability operates only after a sale is established, while the statutory tests for an inter-State sale or a sale outside Delhi depend on the connection between the particular sale and movement of goods, or on the location of identified goods at the relevant contractual or appropriation stage. Manufacture, dispatch or subsequent use outside Delhi did not by themselves establish that the sale by the Railways to IRFC occasioned inter-State movement. Nor could the location of head offices, the absence of assessment elsewhere, or a deemed-appropriation clause in the subsequent lease conclusively determine the situs of the antecedent sale. As transaction-wise material establishing exclusion was not produced, the plea of non-liability failed for transactions otherwise shown to be sales. [Paras 96, 97, 98, 99, 100]

Territorial taxability did not warrant exclusion of transactions established as sales, subject to the limited fresh exercise for segregation and computation.

Final Conclusion: The composite assessments and revisional orders were set aside because they failed to distinguish taxable transfers of Railway-owned rolling stock from procurement undertaken on behalf of IRFC. The matters were remitted for a limited, transaction-wise determination and computation without reopening the legal conclusions recorded by the Court.

Challenge to consequential demand notices after finality of assessment - Maintainability of challenge to demand notices issued pursuant to assessment orders that had been unsuccessfully challenged in the available appellate and revisional proceedings

HELD THAT: - The demand notices were merely consequential to the assessment orders. Since the assessments had attained finality after the petitioner had exhausted challenges before the competent authorities, a challenge to the consequential notices could not be entertained as a means to reopen the concluded assessments. The alleged illness of counsel did not establish denial of reasonable opportunity, particularly when the petitioner had pursued several remedies against the assessments. [Paras 8, 9, 10]

The writ petitions were dismissed, with liberty to pursue any alternate statutory remedy upon compliance with its prerequisites; all contentions in such remedy were left open.

Final Conclusion: The challenge to consequential demand notices was not entertained because the underlying assessments had attained finality. The petitions were dismissed with liberty to invoke an alternate statutory remedy.

Enhancement of turnover without proof of suppression - Input tax credit and subsequent cancellation of supplier registration

Enhancement of turnover without proof of suppression - Whether turnover could be enhanced and books of account rejected without quantified suppression or supporting adverse material? - HELD THAT: - The penalty proceedings arising from the seizure had been dropped and no material was shown to establish their reversal or pendency before a higher forum; consequently, no adverse inference could be founded on that premise. Though seven invoices could not be verified, that circumstance could not justify enhancement of turnover in the absence of a specific finding identifying the suppression detected. Enhancement must be commensurate with the suppression found during survey. [Paras 8, 10]

The Tribunal's order sustaining enhancement of turnover was held unsustainable.

Input tax credit and subsequent cancellation of supplier registration - Whether input tax credit could be reversed where the supplying dealers were registered on the transaction dates but their registrations were subsequently cancelled? - HELD THAT: - The selling dealers held valid registrations on the transaction dates, and the material on record showed payment through banking channels and physical movement of goods to the revisionist. In the absence of cogent material establishing that the registrations stood cancelled on the transaction dates, subsequent cancellation could not deprive the revisionist of input tax credit.

This Court in the case of M/s Safecon Lifescience Private Limited [2025 (9) TMI 919 - ALLAHABAD HIGH COURT] which has been confirmed by the Apex Court [2026 (7) TMI 1276 - SC ORDER] wherein, the proceedings under section 74 of the GST Act were challenged holding that ITC has wrongly been availed under the GST regime, has quashed the proceedings holding that the registration was valid on the date of transaction and therefore, the benefit cannot be denied. [Paras 11, 12, 13]

The reversal of input tax credit was not justified.

Final Conclusion: The revision was allowed and the impugned Tribunal order was set aside, as neither the enhancement of turnover nor the reversal of input tax credit was sustainable.

Levy the penalty u/s 10A of the Central Sales Tax Act - Mens rea or false representation for penalty for false representation in use of Form C

HELD THAT: - The revisionist was admittedly engaged in civil work contracts involving mining and excavation, and the excavator was purchased for execution of such work. Its registration was subsequently amended to include civil contractor. In these circumstances, there could be no false representation merely because Form C had been issued for the purchase. Since none of the authorities had recorded a finding regarding mens rea, an essential ingredient for penalty under section 10A, the levy could not be sustained.

Similar view has been taken in the case of M/s. Sanjiv Fabrics [2010 (9) TMI 461 - SUPREME COURT] where the Court has specifically held that the requirement of mens rea is an essential ingredient for levying penalty under Section 10A of the Central Sales Tax Act.

In S/S. Bhawani Paper Mills Ltd. [2006 (1) TMI 561 - ALLAHABAD HIGH COURT] where the dealer was a registered manufacturer and seller of paper and purchased dye, color, starch after issuing Form- C, the Court has confirmed that there was no mala fide or mens rea for importing the goods against Form- C and removed the penalty. [Paras 6, 9, 10, 11]

The penalty order was quashed and the revision was allowed in favour of the revisionist.

Final Conclusion: The penalty imposed under section 10A of the Central Sales Tax Act was quashed for want of a finding of mens rea or false representation in the issuance of Form C.

Access to Exclusive Economic Zone for purse seine fishing - Federal distribution of fisheries regulation - Cooperative federalism in regulatory clearances

Federal distribution of fisheries regulation - Exclusive Economic Zone and territorial waters - Regulatory competence over purse seine fishing in the Exclusive Economic Zone and in Tamil Nadu territorial waters - HELD THAT: - Fishing and fisheries beyond territorial waters fall within the Union's legislative and executive sphere, whereas fisheries in territorial waters fall within the State's legislative and executive sphere. The respective regulatory regimes operate in distinct provinces; the powers are co-equal and autonomous within their constitutional fields, and no conflict arises between them. [Paras 14]

Fishing in the Exclusive Economic Zone and regulation of transit through territorial waters are governed by the respective Union and State regulatory regimes.

Access to Exclusive Economic Zone for purse seine fishing - Cooperative federalism in regulatory clearances - Transit through territorial waters for purse seine fishing in the Exclusive Economic Zone and processing of access-pass applications - HELD THAT: - Effective implementation of the distinct regulatory regimes requires cooperative federalism between the Union issuing authority and the State verifying authority. Delay in verification and processing of access-pass applications, resulting in virtual denial of access, amounts to an impermissible unwritten ban. The State must facilitate regulated transit by designating a specified channel, consistently with the applicable rules and the Expert Committee's recommendations. [Paras 15, 16, 17]

The State was directed to ensure effective and timely clearance of applications and to frame rules or regulations designating a specified transit channel from territorial waters to the Exclusive Economic Zone for purse seine fishing.

Final Conclusion: The application was disposed of by directing that the parties be governed by the applicable Union and State fisheries regimes, with timely processing of access-pass applications and regulated transit through a channel to be designated by the State.