TaxTMI Updates e-Newsletter
Sep 11,2026

Scrutiny of returns and tax-determination proceedings - Fraud-based input tax credit proceedings-foundational allegations - Writ jurisdiction against show-cause notice

Section 61 scrutiny not condition precedent to Section 74A proceedings - Non-initiation of scrutiny of returns under Section 61 and Rule 99 did not vitiate the show-cause notice proposing denial of input tax credit arising from alleged bogus works-contract sub-contractors. - HELD THAT: - Section 61 is a pre-adjudicatory and verificatory mechanism confined to scrutiny of returns; it neither determines nor recovers tax. Proceedings for determination under Section 74A are independent and may be founded on material obtained through scrutiny, audit, inspection or independent verification. The mandatory procedure under Rule 99 applies only after scrutiny under Section 61 has been initiated. Since the notice was founded on independent verification concerning the alleged non-existence of the sub-contractors and not on scrutiny of the petitioner's returns, prior recourse to Section 61 was not obligatory. [Paras 26, 27, 28, 29, 37]

The challenge based on non-compliance with Section 61 and Rule 99 was rejected.

Fraudulent input tax credit claim-jurisdictional foundation - The invocation of Section 74A(5)(ii) was not without jurisdiction where the show-cause notice alleged that input tax credit was availed on fictitious invoices issued by bogus and non-existent sub-contractors. - HELD THAT: - An allegation that the sub-contract chain and corresponding invoices were engineered through fictitious entities constitutes, at the initiation stage, an allegation of fraudulent availment of input tax credit capable of attracting Section 74A(5)(ii). Whether the sub-contractors actually existed, rendered services and supported genuine transactions requires appreciation of evidence and falls within the adjudicating authority's domain; a dispute as to the correctness of the allegations is distinct from absence of jurisdictional facts in the notice. [Paras 38, 39, 40]

The notice disclosed sufficient foundational allegations for initiation under Section 74A(5)(ii), while the merits of those allegations were left for adjudication.

Writ jurisdiction against show-cause notice - Alternative statutory remedy - Exercise of writ jurisdiction to interdict the show-cause notice at the threshold was declined. - HELD THAT: - A show-cause notice ordinarily gives rise to no cause of action unless it is issued wholly without jurisdiction or falls within a recognised exception to the rule of alternative remedy. No such exception was established: the challenge involved disputed factual issues concerning the genuineness of the sub-contractors and the underlying transactions, and the petitioner had not filed a reply before the adjudicating authority. Interference would pre-judge matters requiring statutory adjudication. [Paras 41, 42, 43, 44, 45]

The writ petition was dismissed, with liberty to submit a reply to the show-cause notice; all factual and legal contentions on merits were kept open.

Final Conclusion: The writ petition challenging the show-cause notice was dismissed. The petitioner was permitted to submit its reply before the adjudicating authority, which must decide the matter on its merits without being influenced by the observations in the order.

Regular bail in GST evasion prosecution - Regular bail for alleged GST evasion through suppression of online money-gaming receipts

HELD THAT: - In Ratnambar Kaushik Vs. Union of India [2022 (12) TMI 263 - SUPREME COURT] as well, the Apex Court, while considering the fact that investigation was complete and charge sheet was filed; that offence u/s 132(1) of the Central Goods and Services Tax Act, 2017 was punishable with imprisonment upto 05 years and fine; that accused had already undergone incarceration of 04 months; that completion of trial was likely to take time, directed release of the petitioner on bail.

Investigation stood concluded; the offences were punishable with a maximum imprisonment of five years and triable by a Magistrate. The proposed evidence was documentary and the witnesses were official, making the likelihood of tampering with evidence or influencing witnesses negligible. The petitioners had been in custody for over four months, had roots in society, and the trial was unlikely to conclude shortly; further pre-trial detention was therefore unwarranted. [Paras 9]

Regular bail was granted, subject to adequate bonds and conditions restraining tampering with evidence, influencing witnesses, leaving the country without permission, and misuse of liberty.

Final Conclusion: Both petitions for regular bail were allowed on account of the completed investigation, documentary evidence, negligible risk of interference with the prosecution, and the likely delay in trial, subject to stipulated safeguards.

Condonation of delay in GST appeal - Condonation of delay in filing the statutory appeal against the GST assessment order - HELD THAT: - Having regard to the medical reasons stated for the delay and the factual aspects sought to be urged in appeal, the Court considered it expedient to afford the petitioner a further opportunity to prosecute the appeal, keeping in mind Simplex Infrastructures Ltd., and another v. Joint Commissioner of Central Tax and others [2022 (1) TMI 761 - KARNATAKA HIGH COURT] [Paras 6]

The dismissal of the appeal was set aside, the delay was condoned and the appeal was restored for adjudication in accordance with law after adequate opportunity of hearing; all merits contentions were kept open.

Final Conclusion: The writ petition was partly allowed by condoning the delay and restoring the statutory appeal for decision on merits. All contentions of the parties on merits were left open.

Voluntary payment of GST during investigation u/s 74(5) - Refund of involuntary tax payment - HELD THAT: - A payment under section 74(5) must be voluntary and be accompanied by interest and penalty. The payments disclosed in Form GST DRC-03 contained no payment towards interest or penalty; nor had the authorities issued the mandatory acknowledgment in Form GST DRC-04 under rule 142(2).

There was no prior demand or ascertainment of liability, and the later payment followed an intimation requiring personal appearance without specifying any enabling provision. These circumstances established that the payments could not be treated as voluntary. Mere initiation of proceedings under section 79 did not alter that conclusion. [Paras 20, 22, 23]

The rejection of the refund applications was erroneous; the appellate orders were quashed and refund of the amounts paid, with interest at 6% per annum from payment until refund, was directed.

Final Conclusion: The writ petition was allowed and the appellate orders rejecting refund were quashed. The parties' rival contentions in the pending show-cause notice and adjudication proceedings were kept open.

Input tax credit blocking under Rule 86A - Electronic credit ledger utilisation for appellate pre-deposit

Utilisation of amounts in the electronic credit ledger towards statutory pre-deposit for an appeal where the credit stands blocked under Rule 86A - HELD THAT: - Section 49(4) permits use of electronic credit ledger balances towards output-tax payments only subject to prescribed conditions and restrictions. Read with Rule 86A, an appellant may ordinarily utilise such balance for liabilities including appellate pre-deposit, but cannot do so while a valid restriction on debit of the ledger operates. Rule 86A is a provisional measure requiring written reasons for blocking and permits an application for unblocking where the conditions for restriction no longer exist. [Paras 7, 9]

The contention that Section 49(4) confers an absolute right to use blocked credit for appellate pre-deposit was rejected. The respondent was directed to expeditiously consider the pending unblocking request and, if rejection is proposed, pass a speaking order after affording reasonable opportunity.

Final Conclusion: The writ petition was disposed of with a direction to consider the request for unblocking of the electronic credit ledger in accordance with Rule 86A.

Quashing of criminal proceedings - contractual indemnity and alleged fraud - Cheating - dishonest intention at inception

Whether the FIR alleging cheating, criminal breach of trust, conspiracy, forgery and fraudulent GST transactions should be quashed under the inherent jurisdiction on the ground that the dispute arose from contractual supply agreements and was purely civil in nature? - HELD THAT: - An indemnity clause may create contractual liability, but does not preclude criminal prosecution where the allegations disclose cognizable offences. The allegations that the agent introduced non-existent suppliers, furnished documents to establish their genuineness, and facilitated fabricated GST invoices and related documents for wrongful input-tax-credit claims prima facie disclosed fraudulent intent from the inception of the transactions. Such allegations could not be treated as a mere contractual breach or adjudicated conclusively in proceedings for quashing. [Paras 36, 37, 38, 39, 40]

The FIR disclosed a prima facie case of cognizable offences and was not liable to be quashed; the disputed allegations were left for determination in criminal proceedings.

Final Conclusion: The petition was dismissed. The FIR and consequential criminal proceedings were permitted to continue, without any expression on the merits of the case.

Refund of integrated tax on zero-rated export of services by SEZ unit - Input Service Distributor credit - Supplier-only refund requirement for supplies to SEZ units - Declaration for refund of supplies to SEZ units

Refund of integrated tax on zero-rated export of services by SEZ unit - Input Service Distributor credit - Supplier-only refund requirement for supplies to SEZ units - Entitlement of an SEZ unit exporting services to refund of integrated tax paid by utilising input tax credit proportionately distributed through an Input Service Distributor - HELD THAT: - The proviso to Rule 89(1) applies where goods or services are supplied directly to an SEZ unit, in which event the supplier making the zero-rated supply is entitled to seek refund, while avoiding duplicate claims by the supplier and recipient. Where input services were received at the corporate level, credit was distributed proportionately through the Input Service Distributor and the SEZ unit thereafter used such credit to pay integrated tax on export of services, no supplier was in a position to claim the refund. The SEZ unit, being a registered person making zero-rated exports on payment of integrated tax, was consequently eligible to seek refund. [Paras 9, 10, 14]

The rejection of the refund claims was set aside and the claims were directed to be processed.

Declaration for refund of supplies to SEZ units - Applicability of the declaration prescribed for a refund arising from direct supplies to an SEZ unit - HELD THAT: - The declaration under Rule 89(2)(f) presupposes a direct supply to the SEZ unit and collection of tax from it. As the input services were not supplied directly to the SEZ unit, the prescribed declaration was inapplicable. [Paras 13]

The absence of the declaration could not defeat the refund claims.

Final Conclusion: The SEZ unit's refund claims for integrated tax paid on exported services by using Input Service Distributor credit were held maintainable. The impugned rejection orders were set aside and the claims were directed to be processed.

Reimposition of expired interim order - interim protection reimposing pending completion of pleadings - alternative appellate remedy - HELD THAT: - Although the extended interim order had expired, the Court held that it retained discretion to reimpose it in an appropriate case. The original order and its subsequent extension had not been challenged by the respondents. [Paras 11]

The interim order was reimposed for a limited period.

Final Conclusion: The application was disposed of after reimposing interim protection for a limited period. The question of maintainability of the writ petition in view of the alternative appellate remedy was directed to be heard first.

Refund u/s 54(3) of the CGST/KGST Act 2017 rejected - vague show cause notice issued and grounds beyond notice - determination of credit eligibility - absence of an order under section 73 / 74 of the CGST/KGST Act determining that the said ITC was wrongly availed or utilized.

Validity of rejection of the inverted-duty refund claim on the basis of a vague show cause notice and a ground introduced for the first time in appeal - HELD THAT: - The notice merely alleged an ineligible refund on account of wrong ITC claim, without identifying the invoices, the nature of ineligibility or the basis of the proposed rejection. The order-in-original likewise contained no specific or reasoned finding. Production of invoice details by the assessee could not cure the inherent vagueness of the notice. Further, the appellate authority could not sustain the rejection on the distinct ground that the supplies were not in the course or furtherance of business, when that ground was absent from the notice. [Paras 7, 8, 11]

The proceedings and the appellate order, to the extent based on grounds outside the show cause notice, were held unsustainable for breach of natural justice.

Refund of unutilised input tax credit - determination of credit eligibility - Inverted-duty refund - Rejection of refund of unutilised input tax credit on alleged ineligibility of credit without prior proceedings determining wrongful availment or utilisation of that credit - HELD THAT: - The Tribunal held that eligibility of input tax credit can be determined only through proceedings under sections 73 or 74. Until an order disallowing the credit is passed under those provisions, the credit is to be treated as in order. Refund proceedings under section 54(3) cannot be used as collateral proceedings to reopen and decide the eligibility of the underlying credit; where refund is proposed to be rejected for ineligible credit, the prescribed proceedings must also address recovery of the allegedly wrongful credit. [Paras 10, 11]

In the absence of proceedings and an order under sections 73 or 74, the Revenue could not deny the refund on the ground that the input tax credit was ineligible.

Final Conclusion: The appeal was allowed and the appellate order sustaining denial of the refund was set aside with consequential relief.

Monetary threshold for departmental appeal in interest-only dispute - Maintainability of the Revenue's appeal challenging deletion of interest on delayed payment of GST, where the disputed interest was below the prescribed monetary limit - HELD THAT: - Under the applicable circular fixing monetary limits for departmental appeals, an interest-only dispute is to be tested with reference to the amount of interest in dispute. The disputed interest was below the threshold prescribed for appeals before GSTAT, and the appeal did not fall within any stated exclusion. [Paras 7, 8]

The Revenue's appeal was held to be beyond the prescribed monetary limit and was dismissed.

Final Conclusion: The Revenue's appeal was dismissed as the interest amount in dispute was below the monetary limit prescribed for departmental appeals before GSTAT.

Appellate authority's power of remand under the CGST Act - Reasoned appellate order - Remand by the appellate authority to the adjudicating authority for verification of documents and consequential deletion or confirmation of tax demand

HELD THAT: - Section 107(11) authorises the appellate authority to undertake or cause further inquiry and thereafter confirm, modify or annul the order under appeal; it expressly excludes a reference back to the adjudicating authority. The appellate authority was required to verify the documents and figures at its own level and pass a reasoned final order stating the points for determination, decision and reasons, rather than leaving the demand to be decided afresh by the adjudicating authority. [Paras 14, 17, 18, 19, 20]

The remand direction was held void, illegal and beyond jurisdiction. The impugned appellate order was set aside to the extent it referred the matter back, and the matter was remanded to the appellate authority for fresh adjudication after necessary verification and observance of natural justice.

Final Conclusion: The Revenue appeal was allowed. The appellate authority must itself undertake the necessary verification and decide the appeal finally within the statutory limits, without remanding it to the adjudicating authority.

Cancellation of the registration and application for revocation of registration

HELD THAT:- On appeals being filed, the JC (Appeals) restored the registration, and the taxpayer had been filing the GST Returns regularly. Hence, the present appeals of the Revenue (CGST) becomes infructuous, as the respondent is already functioning as a regular taxpayer after the registration was restored. We do not find any reason to interfere with the impugned order of the JC (Appeals) dated 30-10-2024.

Statutory bar on remand by appellate authority under CGST Act - Duty to pass reasoned appellate order after further inquiry - Remand by the first appellate authority for verification of documents supporting the GST demand

HELD THAT: - Section 107(11) authorises the appellate authority to make further inquiry and thereafter confirm, modify or annul the order appealed against, but expressly prohibits referring the matter back to the adjudicating authority. The appellate authority was required to verify the documents and figures itself, if necessary by calling for records, and conclude the appeal through a reasoned order stating the points for determination, decision and reasons as required by Section 107(12). Its direction to the adjudicating authority to verify the evidence and delete the demand if found untenable amounted to an impermissible remand and afforded the original authority a second opportunity. [Paras 13, 16, 17, 18, 19]

The remand direction in the rectification order was held void, illegal and beyond jurisdiction; it was set aside and the matter was remitted to the first appellate authority to conduct necessary verification itself and pass a fresh reasoned order after observing natural justice.

Final Conclusion: The Revenue's appeal was allowed to the extent of the impermissible remand. The first appellate authority must decide the appeal afresh after undertaking the necessary verification at its own level.

Defective appeal - defect Memo was issued by the Registry listing out four defects which includes, non-uploading of SCN concerned, legible copies of OIO concerned, non-payment of full court fee as prescribed, non-furnishing basic details like Respondent etc.

HELD THAT:- Rule 10 of GSTAT Procedure Rules, 2025 preserves the Tribunal’s inherent powers to make orders necessary to secure justice or prevent abuse of process of law.

Further, Rule 42 of GSTAT Procedure Rules, 2025 states that “where on the day fixed for the hearing of the appeal or on any other day to which such hearing may be adjourned, the appellant does not appear when the appeal is called on for hearing, the Appellate Tribunal may, in its discretion, either dismiss the appeal for default or hear and decide it on merits”.

As stated above, the Appellant has not rectified the defects pointed out earlier three times by the Registry and three times by the Bench, which shows lack of interest on the part of the Appellant to proceed with this appeal.

Sufficient time has been given to the Appellant; no further time can be granted. Accordingly, the appeal is dismissed for want of prosecution without examining the merits.

Anti-profiteering - statutorily capped LIG and MIG apartment prices - Passing on additional input tax credit benefit to HIG homebuyers - Interest on unpassed anti-profiteering benefit - Penalty for anti-profiteering

Applicability of anti-profiteering provisions to LIG and MIG apartments whose prices were fixed under a State Government pricing notification - HELD THAT: - The notified maximum rates for LIG and MIG units permitted recovery of direct costs only and prohibited loading overheads, administrative expenses and indirect tax components into their sale prices. This statutory pricing mechanism materially differed from that governing HIG units, in respect of which commercial pricing discretion existed; the cinema-ticket price-fixation decision relied upon by the DGAP was therefore distinguishable. [Paras 14, 15, 16, 19, 20]

No profiteering was attributable to the LIG and MIG units, and the determination was confined to the HIG category.

HIG homebuyers-quantification of additional input tax credit benefit - Recipient-wise entitlement to anti-profiteering benefit - Determination of the additional input tax credit benefit payable to eligible HIG homebuyers - HELD THAT: - Units sold after issuance of the occupancy certificate were required to be examined under the statutory scheme governing sale of buildings, while unsold units could not be treated as taxable supplies merely because they formed part of the project. Their exclusion from the computation was thus justified. Further, each recipient was independently entitled to the commensurate benefit, and excess benefit passed to one buyer could not be set off against a shortfall relating to another buyer. [Paras 17, 18, 19, 20]

The additional input tax credit benefit for the HIG category was determined at Rs.70,58,488 inclusive of GST and was directed to be passed on to the eligible homebuyers.

Interest on unpassed anti-profiteering benefit - Liability to interest on the amount not passed on to the eligible homebuyers - HELD THAT: - Interest on the unpassed benefit is compensatory and secures restitution of the time value of money due to the recipients. No special reason existed to depart from the rate ordinarily awarded in such cases. [Paras 21, 24]

Interest at 18% per annum was made payable from the respective dates of collection of the higher amount until actual refund.

Penalty for anti-profiteering-contravention continuing after commencement of penalty provision - Levy of penalty where the period of contravention extended beyond the commencement of the penalty provision - HELD THAT: - As the contravention extended beyond the date on which the penalty provision came into force, penalty was attracted. The statutory protection against penalty upon passing on the profiteered amount within the prescribed period remained applicable. [Paras 25, 27]

Penalty at 10% of the profiteered amount was held leviable, subject to waiver if the entire amount was passed on to the eligible homebuyers within thirty days.

Final Conclusion: The respondent was directed to pass on the determined additional input tax credit benefit to the eligible HIG homebuyers with interest at 18% per annum. Penalty was held leviable, subject to the statutory waiver on timely passing on of the amount.

Bogus purchase additions - taxation of profit element - Estimation of income from accommodation-entry purchases

HELD THAT:- We do not find any good ground to entertain these petitions. The special leave petitions are, accordingly, dismissed. HC order confirmed [2025 (11) TMI 2062 - GUJARAT HIGH COURT]

Condonation of delay for revised return on account of double taxation - Genuine hardship arising from tax paid twice on the same income - Discretion to condone delay in filing revised return

Exercise of discretion to permit a revised return where the same interest income was offered to tax in two assessment years following revision of Form 26AS by the deductor - HELD THAT: - Special circumstances for exercise of discretion cannot be confined to a predetermined formula but must be assessed from the contextual facts. Payment of tax twice on the same income constituted genuine hardship and refusal of relief would result in unjust enrichment. The assessee had acted promptly by pursuing rectification remedies, and the ensuing delay was not attributable to any inaction on its part. [Paras 17, 18, 19, 20, 21]

The rejection of the application for condonation was quashed, and the assessee was permitted to file a revised return for assessment year 2016-17; the Assessing Officer was directed to verify the facts and pass an appropriate order in accordance with law.

Final Conclusion: The petition was allowed and the application seeking permission to file a revised return was granted, subject to verification of the relevant facts by the Assessing Officer.

Reassessment based on change of opinion - Validity of reassessment in respect of oil and gas exploration expenses and preliminary expenses examined during the original scrutiny assessment

HELD THAT: - The recorded reasons showed that reassessment was initiated because the succeeding AO disagreed with the view taken in the original assessment. The assessee had replied to the relevant queries during scrutiny assessment, and the AO, being satisfied, had not made additions. The absence of reproduction of the corresponding queries in the appellate order did not establish that the matters had not been examined. Reopening on the same material was therefore a mere change of opinion. [Paras 13, 14, 15, 16, 17]

The reassessment proceedings were rightly annulled, and the Revenue's appeal was rejected.

Final Conclusion: The High Court upheld the annulment of the reassessment proceedings for Assessment Year 2007-08 and rejected the Revenue's appeal.

Effect of appellate setting aside of assessment on income-tax prosecution - Vicarious liability of company directors in criminal prosecution

Effect of appellate setting aside of assessment on income-tax prosecution - Continuation of prosecution for alleged false verification and willful non-production of accounts after the underlying assessment was set aside for fresh adjudication - HELD THAT: - Although assessment or penalty proceedings and criminal prosecution may ordinarily proceed independently, prosecution cannot continue where the appellate process, on merits, removes the factual foundation of concealment, falsity, or willful default on which the complaint rests. The remand order was found to have been passed after considering the merits of the assessee's case; consequently, the original assessment forming the basis of the complaints could not sustain the prosecution. [Paras 23, 25]

The prosecutions founded upon the original assessment were held unsustainable and were quashed.

Vicarious liability of company directors in criminal prosecution - Maintainability of separate complaints against the Directors for alleged offences of the company without arraigning the company as an accused - HELD THAT: - For prosecution of Directors under a provision imposing vicarious liability, arraignment of the company is imperative.

The first complaint against the company and its two Directors is maintainable in view of Section 278B of the Act, for the roles attributed to them. But, for the same offence, separate complaints against the Directors are not maintainable, as they cannot be treated in isolation, without the company as an accused; and it is contrary to the principle laid down in the case of Aneeta Hada Vs. Godfather Travels & Tours (P) Ltd. [2012 (5) TMI 83 - SUPREME COURT] wherein, it has been held that for maintaining prosecution against Directors/Officers, under a vicarious liability provision, arraigning the company as an accused, is imperative and sine qua non. [Paras 25]

The separate complaints against the Directors were held unsustainable and were quashed.

Final Conclusion: The petitions were allowed and the criminal complaint cases were quashed.

TP Adjustment - Arm's length price-selection of comparables - Turnover filter in comparability analysis - Related-party transaction filter - Foreign exchange gain or loss-operating margin - Burden of proof in transfer-pricing comparability - Appellate-stage inclusion or exclusion of comparables - Transfer-pricing tolerance range - Working capital adjustment - Cross-objection in income-tax appeal

Selection of comparables - Functional comparability - Perversity in transfer-pricing findings - Inclusion or exclusion of software development and ITES comparables for determination of the arm's length price - HELD THAT: - The taxpayer's transfer-pricing study can be displaced only upon satisfaction of the conditions under section 92C(3). The TPO cannot reject taxpayer-selected comparables merely to substitute a standard departmental set; comparables must satisfy the statutory comparability requirements. Selection or exclusion of comparables is ordinarily a factual and data-driven exercise, open to interference only where violation of the Act or Rules, or perversity, is pleaded and established. The Tribunal may follow an earlier comparability finding where the functional analysis and relevant facts remain identical. The exclusions founded on functional dissimilarity, abnormal margins, high turnover, or the tested party's contractual risk profile were therefore not disturbed. The disputed inclusion of Satyam Computers Limited was also sustained, as no prima facie material established falsification of its accounts and its margin fell within the range of other accepted comparables. [Paras 26, 27, 28, 29, 31]

The Tribunal's comparable-selection findings were upheld as factual findings not shown to be contrary to the statutory framework or perverse.

Turnover filter - Size of comparable company - Validity of applying an upper turnover filter while selecting comparable companies - HELD THAT: - Company size is relevant to comparability because higher-turnover companies may possess brand value, bargaining power, valuable intangibles and economies of scale affecting profitability. In the absence of a statutory turnover limit, the Tribunal's upper turnover criterion was held rational and logical; being a factual determination, it could not be interfered with absent pleaded and proved perversity. [Paras 12]

The upper turnover filter adopted by the Tribunal was sustained.

Related-party transaction filter - Uncontrolled comparables - Appropriate related-party transaction threshold for selection of comparable companies - HELD THAT: - The related-party transaction filter is intended to minimise the influence of controlled transactions on the profitability of comparables. Where companies meeting a lower threshold are available, adoption of a lower filter is justified; a higher threshold may be adopted only upon a specific finding that sufficient comparables satisfying the lower threshold are unavailable. The Tribunal's application of a 15% filter was not shown to be arbitrary, contrary to law, or perverse. [Paras 13, 21]

The direction to apply the 15% related-party transaction filter was upheld, subject to adoption of a higher threshold where justified by non-availability of adequate lower-threshold comparables.

Foreign exchange gain or loss-operating item - Direct nexus with international transaction - Treatment of foreign exchange gain or loss as operating revenue or operating cost in determining the arm's length price - HELD THAT: - Foreign exchange gain or loss is an operating item only where it is intrinsically and directly connected with the international transaction. The assessee claiming such treatment must establish that the gain or loss is derived from that transaction. A gain or loss merely attributable to business because of foreign-exchange fluctuation, without such nexus, cannot be included in operating revenue or cost. The requisite factual verification was remitted to the TPO. [Paras 14, 22, 23, 26, 27]

The foreign-exchange issues were remitted to the TPO to determine the direct nexus with the relevant international transactions.

Burden of proof in comparable selection - Transfer-pricing documentation - Burden of substantiating the inclusion or exclusion of comparables in transfer-pricing proceedings - HELD THAT: - The taxpayer initially bears the burden of determining the arm's length price and maintaining prescribed documentation. Where the taxpayer seeks inclusion or exclusion of a comparable, it must support that plea with the required material. Once the TPO rejects the taxpayer's determination and selects or rejects comparables in a fresh determination, the TPO bears the burden of justifying that exercise. The burden is thus fact-dependent and rests upon the party asserting the relevant inclusion or exclusion. [Paras 15]

No universal burden-of-proof rule applies; the burden varies according to the comparable-selection challenge raised.

Appellate-stage comparables - Subsequently available data - Permissibility of seeking inclusion or exclusion of comparables before the Tribunal on the basis of subsequently available data - HELD THAT: - There is no absolute statutory bar against appellate consideration of better comparables revealed by subsequently available reliable data. Such consideration advances accurate benchmarking, particularly when the TPO also uses updated information in redetermining the arm's length price. The proposed comparables must nevertheless satisfy the mandatory requirements of section 92C and Rule 10B, and the Tribunal may decide the matter on available material or remit it for fresh determination. [Paras 16]

Appellate-stage inclusion or exclusion of comparables was held permissible, subject to compliance with the Act and Rules.

Transfer-pricing tolerance range - Retrospective operation of section 92C(2A) - Nature of the 5% variation under section 92C(2) and applicability of section 92C(2A) to the transfer-pricing adjustment - HELD THAT: - The prescribed variation is a tolerance range within which the actual transaction price is deemed to be the arm's length price; it is not a standard deduction to be reduced before determining whether the variation exceeds the permissible limit. Section 92C(2A) operates retrospectively from Assessment Year 2002-03 and withdraws the earlier option where the variation exceeds the prescribed percentage. [Paras 17, 26, 31]

The Tribunal's grant of a standard deduction was held unsustainable; the related matters, including reconsideration of exclusions founded on that benefit, were remitted for fresh determination in accordance with law.

Working capital adjustment - Comparability adjustment - Nature and grant of working capital adjustment in arm's length price determination - HELD THAT: - Working capital adjustment is a comparability adjustment, not a filter for selecting comparables, intended to neutralise material differences in receivables, payables, inventory and financing costs that affect profit margins. Its grant, method and extent are data-driven factual matters, subject to interference only upon statutory violation or perversity. [Paras 18, 28]

No substantial question of law arose from the Tribunal's direction concerning working capital adjustment.

Cross-objection under section 260A - Maintainability of a cross-objection in an appeal under section 260A of the Income-tax Act. - HELD THAT: - A cross-objection is not maintainable in an appeal under section 260A. [Paras 30]

The cross-objection was dismissed as not maintainable.

Final Conclusion: The appeals were disposed of by sustaining the Tribunal's factual comparable-selection and filter findings where no statutory violation or perversity was established. The foreign-exchange issues and the matters affected by the impermissible standard deduction approach were remitted for fresh determination, while the cross-objection was dismissed as not maintainable.

Recovery of outstanding demand pending statutory appeal - Interim protection against recovery of outstanding demand during pendency of statutory appeal

HELD THAT: - Having regard to the continued pendency of the appeal and the parties' submissions, the Court directed its expeditious disposal by a speaking and reasoned order after affording the petitioner an opportunity of hearing. [Paras 8, 9]

Recovery of the outstanding demand was restrained until final disposal of the appeal, which was directed to be decided within the stipulated time.

Final Conclusion: The writ petition was disposed of with a direction for expeditious appellate disposal and interim protection against recovery pending such decision.

Receipt on relinquishment of disputed property and litigative rights - Deduction of expenditure against interest income

Nature of receipt - surrender of litigative rights - Taxability under the residuary head of income - Taxability of consideration received under the Deed of Assignment for surrendering rights, claims and entitlements relating to disputed partnership property and pending litigation - HELD THAT: - The character of the receipt depended upon the true nature of the right surrendered and not upon the nomenclature used in the deed. Where the assigned rights represented an enforceable beneficial or proprietary interest, their extinguishment was on capital account; alternatively, if the assessee had only a right to contest the pending suit and pursue consequential claims, the surrendered right was a litigative right or a mere right to sue. On either hypothesis, the one-time consideration for complete divestment of the underlying source retained its capital character. The residuary head applies only to a receipt which first constitutes income and cannot convert an intrinsically capital receipt into revenue income merely because it is not chargeable under capital gains. [Paras 11, 12, 13, 14, 16]

The consideration was held to be a capital receipt and the addition made under the head "Income from other sources" was deleted.

Deduction of expenditure against interest income - Wholly and exclusively incurred expenditure - Deductibility of expenditure claimed against interest income assessable under the head "Income from other sources." - HELD THAT: - A deduction against income from other sources requires proof that the expenditure was laid out or expended wholly and exclusively for making or earning that income. The fact that the claimed expenditure was lower than the interest income did not establish deductibility. In the absence of cogent material proving the nature of the expenditure and its direct and proximate nexus with the interest income, the statutory conditions for deduction were not satisfied. [Paras 18]

The disallowance of the claimed expenditure was sustained.

Final Conclusion: The appeal was partly allowed. The addition under the head "Income from other sources" was deleted as the receipt was capital in nature, while the disallowance of expenditure claimed against interest income was sustained.

Royalty under India-Singapore DTAA - regional support services - Fees for technical services - make available condition

Royalty under India-Singapore DTAA - regional support services - Taxability of consideration for regional strategic, operational, finance, legal, human-resources and marketing support services as royalty - HELD THAT: - The services under the Regional Services Agreement were support services intended to assist the Indian group entity in improving efficiency and maintaining group standards. The Department failed to establish any transfer of the use of, or right to use, information concerning industrial, commercial or scientific experience, or any imparting of technical, industrial, commercial or scientific knowledge, experience or skill. Application by the service provider of its own knowledge and experience in rendering services, without enabling the recipient to independently deploy it, does not constitute royalty. [Paras 16, 17, 18, 19]

The regional support-service receipts were not royalty under Article 12(3)(a) of the India-Singapore DTAA or under section 9(1)(vi) of the Act.

Fees for technical services - make available condition - Taxability of consideration for regional support services as fees for technical services under the India-Singapore DTAA - HELD THAT: - Even assuming that the services could be regarded as managerial, technical or consultancy services, the Department did not demonstrate that the assessee made available technical knowledge, experience, skill, know-how or process enabling the Indian recipient to apply it independently. The continued requirement of the assessee's services under the agreement showed that the recipient had not acquired such independent capability. Royalty and fees for technical services are distinct characterisations and could not simultaneously be assigned to the same receipts on the Department's uncertain analysis. [Paras 20, 21]

The make-available condition under Article 12(4)(b) was not satisfied; the receipts were business receipts and, in the absence of a permanent establishment in India, were not taxable in India.

Short grant of TDS credit - Entitlement to credit for tax deducted at source. - HELD THAT: - The claim required factual verification. [Paras 22]

The Assessing Officer was directed to verify the facts and grant TDS credit in accordance with law.

Final Conclusion: The appeal was partly allowed. Consideration for regional support services was held not taxable in India as royalty or fees for technical services, subject to verification and grant of the claimed TDS credit.

Excess business stock found during survey - undisclosed business income or unexplained investment - Higher tax rate on deemed unexplained income

Excess business stock found during survey - undisclosed business income or unexplained investment - Higher tax rate on deemed unexplained income - Characterisation of excess stock found during survey as undisclosed business income rather than unexplained investment attracting the higher rate applicable to deemed income - HELD THAT: - The higher rate provision is consequential and applies only after the income is validly brought within a specified deeming provision. Excess stock comprising the same commodities as those regularly traded, found at regular business premises, and contemporaneously explained as acquired from suppressed business profits, bears a direct nexus with the regular business. Mere non-recording of purchases does not establish that the stock was acquired from a source extraneous to that business; invocation of the unexplained-investment provision required material establishing such distinct source. The accounting entries, viewed as a whole, brought the stock into the books and separately credited the surrendered income; the purchase debit was reflected in closing stock and did not reduce taxable income. In the absence of contrary material, the stock retained its character as undisclosed business income. [Paras 17, 18, 19, 20, 21]

The excess stock was directed to be assessed as undisclosed business income under the normal provisions; the unexplained-investment provision and the consequential higher rate were held inapplicable.

Interest for delayed return filing - period of default - Correct period for computation of mandatory interest for delayed filing of return - HELD THAT: - Although the levy is mandatory and consequential, its computation depends upon the statutory due date, the actual filing date and the resulting period of default. [Paras 22]

The matter was remitted to the Assessing Officer for verification of the relevant dates and recomputation of interest in accordance with law after crediting interest already charged or paid.

Final Conclusion: The appeal was allowed to the extent that the excess stock was taxable as undisclosed business income at normal rates. Computation of consequential interest was remitted for verification and recomputation.

Bogus LTCG - Genuineness of dematerialised equity-share transactions - Long-term capital gains claim on sale of equity shares - Unexplained cash-credit addition for alleged bogus share-sale proceeds - Consequential disallowance of alleged commission expenditure -

HELD THAT: - The assessee discharged the initial onus by producing documentary evidence supporting the share transactions. The transactions were routed through banking channels, and the Assessing Officer did not identify any defect in or rebut the documentary evidence. The impugned additions therefore lacked justification; the commission addition, being consequential to the cash-credit addition, could not survive independently. [Paras 11, 12, 13]

The additions concerning the claimed long-term capital gain and the alleged unexplained share-sale proceeds were deleted, and the consequential addition for commission was also deleted.

Final Conclusion: The appeal was allowed. The additions made in respect of the share transaction and the consequential commission addition were deleted.

Deduction u/s 80-IB - furnishing of audit report in Form 10CCB - Substantial compliance with electronic filing requirement - Technical unavailability of electronic filing facility

Entitlement to deduction under section 80-IB where the audit report in Form 10CCB, though prepared within the prescribed time, was scanned and uploaded as an attachment to the tax audit report because no separate electronic filing facility or offline utility was available - HELD THAT: - The audit report had been duly prepared and signed within the due date and its scanned copy was uploaded with Form 3CA-3CD. The Revenue did not rebut the assessee's explanation that Form 10CCB could not then be separately e-filed. Since the assessee had substantially complied with the statutory requirement and the technical shortcoming was not attributable to it, the deduction could not be denied merely for want of separate electronic filing of the form. [Paras 9]

The order denying the claimed deduction was set aside and the Assessing Officer was directed to allow the deduction under section 80-IB.

Final Conclusion: The assessee's appeal was allowed, and the claimed deduction under section 80-IB was directed to be allowed.

Transfer-pricing adjustment for corporate guarantees - Interest on convertible loans - Disallowance of payments to non-residents - Revenue character of product, trademark and patent registration expenditure - Weighted deduction for in-house research and development expenditure - Depreciation on vehicle registered in director's name - Disallowance of expenditure relating to exempt income - Partner's remuneration - Unexplained foreign-currency receipts - Duplicate disallowance of employee contributions

Transfer-pricing adjustment for corporate guarantees - HELD THAT: - The issue stood concluded against the Revenue by earlier decisions in the assessee's own case AYs. 2009-10 & 2010-11 [2017 (4) TMI 462 - ITAT AHMEDABAD] and AYs. 2012-13 to 2015-16 [2021 (12) TMI 200 - ITAT AHMEDABAD] Revenue did not dispute either the applicability of those decisions or the absence of any difference in the facts for the relevant assessment year. [Paras 4]

The deletion of the adjustment was sustained and the Revenue's grounds were dismissed.

Interest on convertible loans - transfer-pricing adjustment in respect of interest on convertible loans - HELD THAT: - Earlier decisions in the assessee's own case AYs. 2008-09 to 2010-11 [2024 (7) TMI 397 - ITAT AHMEDABAD] & AYs 2012-13 to 2015-16 [2021 (12) TMI 200 - ITAT AHMEDABAD] covered the controversy, and the Revenue did not dispute that the facts remained unchanged. [Paras 4]

The deletion of the adjustment was sustained and the Revenue's grounds were dismissed.

Disallowance of payments to non-residents - HELD THAT: - The Tribunal followed the earlier Hon’ble Gujarat High Court in Assessee’s own case for AY 2010-11 [2018 (5) TMI 1166 - GUJARAT HIGH COURT] whose applicability and factual parity were not disputed by the Revenue. [Paras 4]

The deletion of the disallowance was sustained and the Revenue's ground was dismissed.

Revenue character of registration expenditure - Allowability as revenue expenditure of product-registration expenses, product-registration support-service expenses, and trademark and patent registration fees - HELD THAT: - The issues were covered by earlier decisions in the assessee's own case AYs 2006-07 to 2010- 11 [2016 (5) TMI 530 - ITAT AHMEDABAD], and AYs 2012-13 to 2016-17 [2024 (2) TMI 1279 - ITAT AHMEDABAD]. In the absence of any disputed difference in facts, those decisions were followed. [Paras 4]

The allowance of the expenditure as revenue expenditure was sustained and the Revenue's grounds were dismissed.

Weighted deduction for in-house research and development expenditure - HELD THAT: - The Tribunal followed its earlier decisions in the assessee's own case AYs 2006-07 to 2010- 11 [2016 (5) TMI 530 - ITAT AHMEDABAD] and AYs 2012-13 to 2016- 17 [2024 (2) TMI 1279 - ITAT AHMEDABAD] as the Revenue did not dispute that the facts of the relevant year were the same. [Paras 4]

The allowance of weighted deduction was sustained and the Revenue's ground was dismissed.

Depreciation on vehicle registered in director's name - Allowance of depreciation on a vehicle registered in the name of a director. - HELD THAT: - The issue was covered by the earlier decision in the assessee's own case [2026 (9) TMI 641 - GUJARAT HIGH COURT] and the Revenue did not dispute the factual similarity. [Paras 4]

The allowance of depreciation was sustained and the Revenue's ground was dismissed.

Partner's remuneration addition - HELD THAT: - The Tribunal followed the earlier decision in the assessee's own case AY 2012-13 [2024 (6) TMI 809 - ITAT AHMEDABAD] whose applicability to the facts of the relevant year was undisputed. [Paras 4]

The deletion of the addition was sustained and the Revenue's ground was dismissed.

Disallowance of expenditure relating to exempt income u/s 14A - Foreign investments yielding taxable dividends - HELD THAT: - The disallowance could be computed only with reference to eligible investments yielding exempt income. Since dividend income from the identified foreign investments was taxable, the direction to exclude them while recomputing the disallowance, subject to verification by the Assessing Officer, disclosed no infirmity. [Paras 6]

The direction for recomputation after verification of eligible investments was sustained and the Revenue's ground was dismissed.

Unexplained foreign-currency receipts - addition treating royalty receipts in Japanese Yen as unaccounted income - HELD THAT: - The receipts from the subsidiary had been accounted for and offered to tax. The Assessing Officer, despite opportunity in remand proceedings, produced no material to justify their treatment as undisclosed income, and the Revenue did not dispute this factual finding. [Paras 7]

The deletion of the addition was sustained and the Revenue's ground was dismissed.

Duplicate disallowance of employee contributions - disallowance to the extent employee contributions had already been disallowed by the assessee - HELD THAT: - The amount deleted had already been disallowed suo motu by the assessee and was again included in the disallowance made in assessment. The Tribunal treated the resulting duplication as an undisputed factual finding. [Paras 8]

The deletion of the duplicated disallowance was sustained and the Revenue's ground was dismissed.

Final Conclusion: The Revenue's appeal was dismissed. The Tribunal followed earlier decisions in the assessee's own case on the covered issues and sustained the remaining factual and recomputation directions of the appellate authority.

Capital gains on redevelopment undertaken by co-operative housing society for members

Whether capital gains attributed to redevelopment transactions could be assessed in the hands of the cooperative housing society rather than its individual members? - HELD THAT: - The society executed the development agreement on behalf of its members in accordance with the applicable redevelopment directive, while the developer entered into permanent alternate accommodation agreements with the individual members. The society received no sale consideration, and the Assessing Officer treated the transactions as its sales solely on the basis of AIR information. As rights in the flats belonged to the individual members and the redevelopment was undertaken for them, any taxability arising from the transaction could arise only in their hands and not in the hands of the society. [Paras 5]

The addition of long-term capital gains in the hands of the society was deleted.

Final Conclusion: The assessee's appeal was allowed and the capital-gains addition arising from the redevelopment transactions was deleted.

Characterization of loss on transfer of allotment rights in real-estate units - Computation of capital loss

Characterisation of the loss on transfer of allotment rights in eighteen real-estate units as business loss or capital loss - HELD THAT: - Though book entries are not conclusive of the true nature of a transaction, the assessee bears the burden of establishing the character of the entries and the resultant claim. The units were never disclosed as closing stock, were reflected as short-term loans and advances, and the resultant loss was claimed under other expenses. In the circumstances, the assessee's claim of business loss was inconsistent with its accounting treatment and remained unsubstantiated. [Paras 7]

The disallowance of the claimed business loss was upheld; the allotment rights were treated as capital assets, with indexation and carry-forward of the resultant long-term capital loss remaining allowable.

Computation of long-term capital loss - Interest component of cost of acquisition - Whether the computation of capital loss required reconsideration regarding the interest component of acquisition cost? - HELD THAT: - As the assessee and the Assessing Officer had taken contrary stands regarding the claim for interest, the computation required reconsideration after affording the assessee an adequate opportunity to furnish evidence supporting its claim. [Paras 7]

The orders of the lower authorities on this limited aspect were set aside and the matter was remanded to the Assessing Officer for fresh computation after granting opportunity of hearing.

Final Conclusion: The appeal was partly allowed. The treatment of the transfer as involving capital assets was sustained, while the limited question of the interest component in the capital-loss computation was remanded for fresh consideration.

Taxability of unconverted FCCDs under section 56(2)(viib) - consideration received on issue of fully and compulsorily convertible debentures, before their future conversion into equity shares

HELD THAT: - Section 56(2)(viib) applies where consideration is received for issue of shares and neither the provision nor Rule 11UA creates a deeming fiction treating FCCDs as shares before conversion. The issue of an FCCD and its subsequent conversion into an equity share are distinct events; compulsory future conversion does not alter the character of the instrument issued on the date of receipt. Regulatory or insolvency characterisation of convertible instruments cannot enlarge the charging language of the Income-tax Act. Since the FCCDs had not matured or converted during the relevant year, the valuation comparison undertaken by the Assessing Officer was consequently academic.

Useful guidance is also available from the decision of Rankin Infrastructure (P.) Ltd. [2022 (6) TMI 291 - ITAT MUMBAI] wherein convertible debentures had been issued in an earlier year and were subsequently converted into preference shares. It was held that section 56(2)(viib) of the Act requires the receipt of consideration and issue of shares to occur in the manner contemplated by the provision and that conversion of debentures into shares without fresh receipt of consideration could not by itself attract section 56(2)(viib) of the Act. This reasoning reinforces the distinction between the original issue of a convertible debenture and the subsequent issue of shares upon its conversion [Paras 7]

Consideration received on issue of the unconverted FCCDs was outside the scope of section 56(2)(viib); the addition was deleted.

Final Conclusion: The appeal was allowed. The addition under section 56(2)(viib) in respect of the FCCD issue was deleted.

Concurrent findings of fact in customs appeal - Confiscation of goods imported through fictitious firms without importer-exporter code

Concurrent findings of fact in customs appeal - Confiscation of goods imported through fictitious firms without importer-exporter code - Challenge to confiscation, refusal of re-shipment and penalty in respect of goods consigned to fictitious importing firms without importer-exporter code. - HELD THAT: - The concurrent factual findings established that the appellant had transferred title to the goods and was not their owner, and that the goods had been sent to fictitious firms without proper banking channels. The findings further established a systematic fraud and illegal importation, warranting confiscation and penalty. Such concurrent findings did not give rise to a substantial question of law. [Paras 5, 6]

The confiscation and penalty, as upheld by the Tribunal, were sustained and the appeal was dismissed.

Final Conclusion: No substantial question of law arose from the concurrent factual findings regarding the appellant's lack of title and the illegal importation through fictitious firms. The appeal was dismissed.

Food safety testing of imported food consignments - Examination of roasted areca nuts - consignment imported by the petitioner under Bill of Entry No.2610412

Examination of the imported areca nuts for their nature, composition, roasting, moisture content and fitness for human consumption - HELD THAT: - The proposed examination concerned matters relating to the nature and composition of the food product, whether the areca nuts were roasted, their moisture content and fitness for human consumption. Such matters required examination by the competent food safety authority in accordance with the applicable statutory procedure. [Paras 8, 9, 10]

Representative samples were directed to be forwarded to the jurisdictional Food Safety Authority for examination of the specified parameters; Customs authorities were not precluded from sending samples to SIIB and taking further action in accordance with law on the competent authority's report and other available material.

Final Conclusion: The writ petition was disposed of with a direction for food safety examination of the imported consignment, while preserving the Customs authorities' power to pursue further action in accordance with law.

Prospective operation of customs notification amendments - Provisional release of imported highly specialised equipment

Whether the customs authorities could rely on an exemption-notification amendment that commenced after the bills of lading to decline consideration of provisional release of the imported goods? - HELD THAT: - An amendment to a statutory notification operates prospectively unless it expressly provides otherwise. Since the Bills of Lading were issued before the amendment came into force, the amendment could not govern the imports or be invoked to refuse consideration of provisional release. The earlier common order [2025 (7) TMI 1350 - MADRAS HIGH COURT] concerning provisional release of similar goods was followed, no distinguishing feature having been shown. [Paras 6, 7]

The customs authorities were directed to consider the request for provisional release under the Customs Act, impose lawful conditions if necessary, and release the goods upon compliance with those conditions, subject to the adjudication proceedings.

Final Conclusion: The writ petition was disposed of by directing consideration of provisional release without applying the subsequently effective notification amendment to the subject imports. Release, if granted on compliance with the conditions imposed, remains subject to adjudication on merits.

Prospective operation of customs exemption notification - Provisional release of imported goods

Consideration of provisional release of imported secondhand highly specialised digital multifunction print and copying machines-applicability of an exemption amendment that came into force after the respective Bills of Lading - HELD THAT: - In the absence of an express provision giving retrospective effect, a statutory notification operates prospectively and cannot govern imports covered by Bills of Lading issued before its commencement. The earlier common order [2025 (7) TMI 1350 - MADRAS HIGH COURT] concerning provisional release of similar goods was followed, no distinguishing feature having been shown.. [Paras 6, 7]

The respondents were directed to consider the request for provisional release in accordance with law, impose appropriate conditions, and release the goods provisionally upon compliance, subject to the outcome of adjudication proceedings.

Final Conclusion: The writ petition was disposed of with directions to consider and, upon compliance with lawful conditions, provisionally release the imported goods, without prejudice to adjudication on merits.

Prospective operation of customs notification amendments - Provisional release of imported goods used digital multifunction print, copying and scanning machines

Consideration of provisional release of imported used digital multifunction print, copying and scanning machines where the Bill of Lading pre-dated the effective date of the amended notification - HELD THAT: - In the absence of an express retrospective clause, the amendment operated prospectively and could not be invoked to reject or decline consideration of provisional release where the shipment, evidenced by the Bill of Lading, preceded its commencement. The applicable rate of duty was nevertheless directed to be determined independently in accordance with Section 15 of the Customs Act. [Paras 5, 7, 8]

The customs authorities were directed to consider the request for provisional release on lawful conditions and, upon compliance, release the goods provisionally, subject to the outcome of adjudication proceedings.

Final Conclusion: The writ petition was disposed of by directing consideration and conditional provisional release of the imported goods. The adjudicating authority was left to decide the adjudication proceedings and applicable duty independently in accordance with law.

Bar on show cause notice after payment of duty and interest - Extended limitation for wilful misstatement or suppression - Alternative remedy and writ jurisdiction

Bar on show cause notice after payment of duty and interest - Extended limitation for wilful misstatement or suppression - Validity of subsequent proceedings for differential IGST on imported motor-vehicle parts after payment of the differential duty and interest pursuant to audit objection - HELD THAT: - The Court held that, after the importer paid the differential duty with interest and the Department accepted the payment, Section 28(2) precluded issuance of a further show cause notice concerning that duty, interest or consequential penalty. The notice was also beyond the period applicable under Section 28(1). Invocation of the extended period under Section 28(4) was unavailable, since the notice contained no specific allegation of collusion, wilful misstatement or suppression of material facts; a plea raised for the first time in the counter affidavit could not supplement the notice. [Paras 11, 12, 13, 14, 15]

The subsequent proceedings under Section 28 were without statutory authority and barred by limitation.

Alternative remedy and writ jurisdiction - Maintainability of the writ petition despite the statutory appellate remedy against the customs order - HELD THAT: - The existence of an appellate remedy was not an absolute bar to writ jurisdiction where the impugned proceedings were ex facie without jurisdiction or barred by limitation. As the subsequent proceedings were initiated despite prior payment of the differential duty and interest, the Court found exercise of jurisdiction under Article 226 justified. [Paras 16]

The objection based on availability of an appeal was rejected.

Final Conclusion: The writ petition was allowed and the impugned customs order was set aside.

Adjudication beyond show cause notice - Authorised courier's KYC verification and outsourcing of consignment pick-up - Penalty for knowingly facilitating export of prohibited goods

Adjudication beyond show cause notice - Material facts and particulars - Sustainability of findings treating the authorised courier as consignor/exporter, alleging failure to obtain consignor authorisation, and attributing knowing participation in attempted export of prohibited goods when those allegations were absent from the show cause notice - HELD THAT: - A show cause notice must disclose the essential factual and legal foundation of the proposed liability so as to enable the noticee to defend itself. While particulars and supporting evidence may be developed during adjudication, a material fact constituting the foundation of the charge cannot be introduced for the first time in the adjudication order. The notice proceeded only on alleged unauthorised outsourcing and deficient KYC compliance by the authorised courier; the additional findings rested on distinct factual and legal foundations. [Paras 6]

The findings founded on alleged violations not alleged in the notice, treatment of the appellant as consignor/exporter, and attribution of knowledge or conscious participation were held unsustainable.

Authorised courier's KYC verification - Outsourcing of courier functions - Contravention of the authorised courier's obligations by obtaining one identity document from the consignor and arranging physical pick-up of the export consignment through intermediaries without prior permission - HELD THAT: - The applicable regulation required verification through reliable, independent and authentic material, but did not mandate two identity documents. In the absence of evidence that the consignor's identity or address could not be verified from the genuine driving licence, failure to collect a second document did not establish a regulatory breach. Further, the prohibition on outsourcing extended only to functions required or permitted under the Regulations; physical collection or pick-up of consignments was not an assessment or clearance function. Installation of the appellant's software at an intermediary's premises did not establish outsourcing of a regulatory function. [Paras 7]

The findings of contravention based on non-collection of a second identity document and outsourcing of physical pick-up were set aside.

Penalty for knowingly facilitating export of prohibited goods - Knowledge or intent in false declaration - Liability of the authorised courier to penalties for an export consignment containing pseudoephedrine hydrochloride concealed in garments - HELD THAT: - Mere filing of a courier declaration on the consignor's information and subsequent discovery of ingeniously concealed prohibited goods did not establish a knowing false declaration. There was no cogent evidence that the appellant knew of, participated in, or facilitated the misdeclaration or concealment. Receipt of the consignment through an intermediary and installation of the appellant's software did not, by themselves, prove knowledge, control, or breach of a specific regulatory obligation. The requisite act or omission for penalty for improper export, and the knowledge or intent required for use of a materially false declaration, were not established. [Paras 8]

The penalties imposed for attempted export of prohibited goods and use of a false or incorrect declaration were held unsustainable.

Final Conclusion: The impugned order, insofar as it concerned the appellant, was set aside. The appeal was disposed of with consequential relief in accordance with law.

Limitation of departmental appeal after recall from call book - Special additional duty refund on imported plastic granules

Limitation of departmental appeal after recall from call book - Limitation of the Department's appeal against the refund sanction after its recall from the call book - HELD THAT: - The relevant date for limitation was the date on which the Department originally filed its appeal, and not the date on which the appeal was assigned a fresh number after recall from the call book. Renumbering of an appeal already instituted within time does not render it a fresh appeal filed on the date of renumbering. [Paras 7, 8]

The Department's appeal could not be held barred by limitation.

Special additional duty refund on imported plastic granules - Correlation of imported goods with subsequent sales - Consignment-agent sales - Entitlement to SAD refund on imported plastic granules sold under invoices bearing a generic description and through consignment agents - HELD THAT: - A generic description of the goods as plastic granules in sale invoices, without positive material establishing that goods other than those imported were sold, does not disprove correlation with the imported grades. The original authority had verified the Bills of Entry, sale invoices, reconciliation, payment of VAT/CST and the Chartered Accountant's certificate. Sales through consignment agents are not an independent ground to deny refund where the prescribed documentary correlation is available and no specific defect in payment of tax, identity of goods, or the certificate is established. Material drawn from Wikipedia could not, by itself, displace the contemporaneous import and sale documents and the Chartered Accountant's certification. [Paras 19, 22, 23, 24, 25]

The appellant had substantively complied with the notification conditions; the refund sanction was restored and the impugned appellate order and consequential recovery were set aside.

Final Conclusion: The Department's appeal was held to be within limitation, but its challenge to the SAD refund failed on merits. The impugned appellate order was set aside and the original refund sanction was restored.

Penalty on Customs Broker for attempted export of prohibited red sanders - KYC verification lapse and statutory nexus with confiscation - Residuary penalty for identifiable statutory contravention

Customs Broker's KYC verification lapse - Act, omission or abetment rendering goods liable to confiscation - Liability of a Customs Broker to penalty for inadequate KYC/antecedent verification in an attempted export of prohibited red sanders - HELD THAT: - Penalty under Section 114(i) requires proof of an identifiable act, omission or abetment attributable to the Customs Broker which rendered the goods liable to confiscation. A regulatory deficiency in verification, without evidence of knowledge, collusion, participation in substitution of the goods, control over the container, or knowing filing of false documents, does not establish the requisite statutory nexus. The appellant had obtained authorisation and verified the exporter's IEC, while no material connected it with the subsequent substitution of red sanders. [Paras 12, 13, 14, 16, 17]

The alleged KYC/antecedent-verification deficiency was insufficient to attract penalty under Section 114(i).

Residuary penalty under Section 117 - Identifiable contravention of statutory obligation - Sustainability of residuary penalty for the alleged verification lapse of the Customs Broker - HELD THAT: - Section 117 cannot be invoked unless an identifiable contravention of the Customs Act or failure to comply with a statutory obligation attracting that penalty is established. Once the alleged omission was found inadequate to attract Section 114(i), it could not, without an independently established contravention, sustain penalty under the residuary provision. [Paras 15, 17]

No independent contravention having been established, Section 117 could not sustain the penalty.

Final Conclusion: The penalty imposed on the Customs Broker was set aside, as the alleged verification deficiency had no proven nexus with the attempted export of prohibited red sanders and no independent statutory contravention was established.

Classification of automotive temperature sensors as thermistors - Classification of exhaust-gas analysis sensors - Classification of brake-pedal sensor assembly - Classification of specialised automotive sensor retainer - Classification of Hall-effect wheel-speed sensor - Reclassification in duty-recovery proceedings without duty demand - Revenue neutrality of differential IGST - Extended period for misclassification - Interest on import IGST in absence of statutory machinery

Classification of automotive temperature sensors as thermistors - Specific tariff entry over residuary heading - Classification of Exhaust Gas Temperature, Water Temperature and Inlet Air Temperature Sensors as thermistors under CTI 8533 4030 or as residual measuring instruments under CTI 9031 8000 - HELD THAT: - Classification must depend on the objective characteristics and function of the complete article as imported. Housing, connectors, wiring and protective components do not by themselves convert a thermistor into a thermometer or other measuring instrument. As Revenue did not establish by technical evidence that the imported assemblies independently converted or calibrated resistance signals into temperature values, the sensors merely transmitted temperature-dependent signals for subsequent processing by the ECU. The specific entry for thermistors consequently prevailed over the residual heading. [Paras 5, 6]

The declared classification of the three temperature sensors under CTI 8533 4030 was allowed and their classification under CTI 9031 8000 was set aside.

Classification of exhaust-gas analysis sensors - Specific tariff entry over residuary heading - Classification of Oxygen, Air-Fuel Ratio and Nitrogen Oxide Sensors as gas-analysis apparatus under CTI 9027 1000 or under CTI 9031 8000 - HELD THAT: - The sensors use zirconia-based electrochemical cells to determine concentrations of identified constituents in exhaust gas. Their transmission of electrical signals to the ECU and their installation in motor vehicles do not alter their intrinsic analytical function. Since gas-analysis apparatus are specifically covered by Heading 9027, the residuary Heading 9031 could not be preferred. [Paras 7, 8]

Oxygen, Air-Fuel Ratio and Nitrogen Oxide Sensors were held classifiable under CTI 9027 1000.

Classification of brake-pedal sensor assembly - Exclusion of Chapter 90 instruments from motor-vehicle parts - Classification of Sensor Assy Brake Pedal as a measuring or checking instrument under CTI 9031 8000 or as a brake part under CTI 8708 3000 - HELD THAT: - The assembly detects pedal position and movement and generates a corresponding electrical signal, while the ECU or brake-control module subsequently applies that information for vehicle functions. The sensor neither applies braking force nor automatically regulates the braking system. In the absence of a more specific Chapter 90 heading, it was a measuring or checking instrument; as an article of Chapter 90, it stood excluded from vehicle parts under Note 2(g) to Section XVII. [Paras 9]

The declared classification under CTI 9031 8000 was accepted and classification under CTI 8708 3000 was rejected.

Classification of specialised automotive sensor retainer - Motor-vehicle parts and accessories - Classification of Retainer Ultrasonic Sensor as an automotive part or accessory under CTI 8708 9900 or as an article of plastic under CTI 3926 9099 - HELD THAT: - The article was a specially moulded plastic retainer fixed inside a vehicle bumper to hold an ultrasonic sensor in its required position. Revenue did not establish that it was a general-purpose or interchangeable mounting excluded by Note 2(b) to Section XVII. Being suitable solely or principally for motor vehicles and not more specifically covered elsewhere, it fell under Heading 8708 and was excluded from Heading 3926 by Note 2(t) to Chapter 39. [Paras 10]

Retainer Ultrasonic Sensor was held classifiable under CTI 8708 9900 and its classification under CTI 3926 9099 was set aside.

Classification of Hall-effect wheel-speed sensor - Electrical apparatus having individual functions - Classification of Sensor Speed under CTI 8543 7099 or as a measuring instrument under CTI 9031 8000 - HELD THAT: - The Hall-effect sensor detects magnetic-field variations from the rotating encoder and converts them into a digital pulse signal. It does not itself calculate, indicate or display wheel speed; measurement occurs only after the ECU processes the signal. The imported article was therefore an electrical apparatus having the individual function of detecting magnetic-field variation and generating a corresponding signal, and not a measuring instrument of Heading 9031. [Paras 11]

The appellant's classification of Sensor Speed under CTI 8543 7099 was accepted.

Reclassification in duty-recovery proceedings without duty demand - Finality of customs assessment - Validity of reclassification of 36 sensors in proceedings under Section 28 where no differential duty was proposed or recovered - HELD THAT: - Classification forms an integral part of assessment, and a nil-duty assessment is also an assessment. Section 28 is a mechanism for determining and recovering duty not levied, short-levied, unpaid or erroneously refunded; it does not independently authorise alteration of a completed assessment merely to change classification where no duty liability is proposed. After completion of assessment and clearance of the goods, the proper officer cannot alter the assessment without specific statutory authority. [Paras 12]

The reclassification of the 36 sensors was set aside, without precluding examination of their classification in subsequent Bills of Entry in accordance with law.

Alternative preferential tariff benefit - Revenue neutrality - Entitlement to alternative FTA notification benefits for reclassified automotive sensors and the consequential plea of revenue neutrality. - HELD THAT: - Revenue neutrality based on an alternate exemption requires proof that the exemption and its conditions applied to the goods at the relevant time; a hypothetical claim is insufficient. An otherwise available exemption cannot be denied merely because it was not claimed initially, absent fraud or other disentitling circumstances. As the foundational facts concerning eligibility under the alternative FTA notifications had not been examined by the original authority, the Tribunal could not determine them for the first time. [Paras 13]

The claim for alternative FTA benefits in respect of Sensor Ultrasonic, Sensor Height Control, Sensor Light Control and Cable Sub-Assy Spiral W/Sensor, along with the consequential plea of revenue neutrality, was remanded to the original authority for fresh consideration.

Revenue neutrality of differential IGST - Input tax credit - Differential IGST demand on Cover for Rain Sensor and Holder Battery Current Sensor where the corresponding tax was claimed to be available as input tax credit - HELD THAT: - Revenue neutrality does not by itself extinguish substantive duty liability and ordinarily requires proof. However, in the peculiar circumstances and having regard to the minimal tax involved, the Tribunal accepted the appellant's plea without remanding the matter. [Paras 14]

The differential IGST demand on the two items was set aside.

Extended period for misclassification - Wilful misstatement or suppression with intent to evade duty - Invocation of the extended period for differential duty on Sensor Assy Accelerator Pedal, Sensor Clamp Skid Control, Plate Crank Angle Sensor and Sensor Knock - HELD THAT: - Under self-assessment, the importer is obligated to make a correct declaration, and repeated adoption of different classifications may warrant scrutiny. Nevertheless, mere wrong classification or breach of that obligation does not establish the positive act of collusion, wilful misstatement or suppression with intent to evade duty required for the extended period. The changing classification pattern and the appellant's AEO Tier-3 status, without cogent evidence of deliberate suppression or misstatement, were insufficient. [Paras 15]

The extended-period demand on the four items was held barred by limitation, while any demand within the normal period remained governed by the impugned order.

Interest on import IGST in absence of statutory machinery - Levy of interest on differential IGST for imports preceding incorporation of interest provisions in the Customs Tariff Act - HELD THAT: - Interest may be recovered only where the statute specifically authorises it. Before the substitution of Section 3(12), the Customs Tariff Act did not incorporate the Customs Act provisions concerning interest for IGST. The subsequent express incorporation of interest could operate only prospectively and could not support interest on the imports in question. [Paras 17]

No interest was payable on the differential IGST demand.

Final Conclusion: The impugned order was modified by allowing the declared classifications of the nine sensors, setting aside reclassification without duty demand, the extended-period demands, confiscation, fine, penalties and IGST interest. The alternative FTA-benefit claim was remanded for fresh determination, while consequential relief was made available in accordance with law.

Penalty on Customs Broker for undervaluation of imported engines - Proportionality of penalty - Quantum of penalty imposed on the Customs Broker for facilitating undervaluation of imported premium-brand engines

HELD THAT: - Though the declared value was substantially below the actual value and warranted penalty, the inquiry findings in the licensing proceedings showed that the Customs Broker had sought first check of the consignment, thereby bringing the matter to the department's notice. Having regard to that bona fide conduct, the finding that the Customs Broker could not be held wholly responsible for the undervaluation, and the penalty already imposed in the licensing proceedings, the penalty under the Customs Act was found excessive. [Paras 4]

The penalty was reduced and the appeal was partly allowed.

Final Conclusion: The penalty on the Customs Broker for the undervaluation of imported engines was held to be excessive in the circumstances and was reduced. The appeal was partly allowed.

Classification of imported Naphtha and Natural Gasoline Liquid - Admissibility of WhatsApp chat evidence in customs proceedings

Classification of imported Naphtha and Natural Gasoline Liquid - Most akin test - Burden of proof for reclassification - Classification of the imported petroleum product declared as Full Range Naphtha under CTH 27101229, as against Natural Gasoline Liquid under CTH 27101290 - HELD THAT: - Where the Department seeks to alter the self-assessed classification, it bears the burden of establishing the proposed classification on reliable evidence. The specialised laboratories had tested substantially more relevant parameters than the departmental laboratories and positively concluded that the samples were Naphtha or Light Naphtha. The objection that the reference made to the Indian Institute of Petroleum described the samples as Naphtha was rejected, since its conclusion rested on elaborate testing. The departmental reports did not establish, through vital tests, that the goods were most akin to Natural Gasoline Liquid. Further, Natural Gasoline Liquid was found to be a species within the generic description of Naphtha. [Paras 114, 115, 118, 119, 120]

The declared classification as Naphtha under CTH 27101229 could not be disturbed; the contrary findings in the impugned order were not sustained.

Admissibility of WhatsApp chat evidence in customs proceedings - Electronic evidence certificate - Reliance on WhatsApp chats, digital material and uncorroborated statements to establish misdeclaration of the country of origin and other particulars of the imported goods - HELD THAT: - Electronic material retrieved from mobile phones is admissible only upon fulfilment of the statutory conditions governing computer print-outs. The Department neither produced the prescribed certificate nor established compliance through admissible statements. The adverse statements were also not subjected to examination and cross-examination. The adjudication consequently rested on untested facts, unproven documents and uncorroborated electronic evidence; nor was any benefit from the alleged change in origin demonstrated. [Paras 120]

The electronic and statement-based material could not sustain the adverse findings founded upon the alleged misdeclaration.

Final Conclusion: The impugned classification and the consequential findings founded upon it were not sustained. The appeals were held allowable.

Extinguishment of statutory dues under approved resolution plan - Statutory customs dues under approved resolution plan -

Whether customs-duty appeal proceedings may continue after approval of the corporate debtor's resolution plan under the insolvency law? - HELD THAT: - As decided in Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd [2021 (4) TMI 613 - SUPREME COURT] once the Resolution Plan is approved by the Adjudicating Authority under Section 31 (1) of Insolvency and Bankruptcy Code 2016 (IBC), then “no person will be entitled to initiate or continue any proceedings in respect to a claim which is not part of the resolution plan’’. We make it clear that neither side has informed us as to whether or not the statutory dues owed to the Central Government, under contest in this appeal before us, are part of the said resolution plan or not.

All the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants their approval under Section 31 could be continued, to our mind, it is clear that, in any event, the present proceedings in this appeal cannot be continued before us. [Paras 7]

The appeal was disposed of as incapable of continuation.

Final Conclusion: The appeal was disposed of because, following approval of the resolution plan, the statutory dues were either governed by the plan or stood extinguished if not included therein.

Buyback escrow - release not bar to PFUTP proceedings - Fraud under PFUTP Regulations - proof on balance of probabilities - Failure to adjudicate material evidence

Buyback escrow - release not bar to PFUTP proceedings - Departmental file notings - non-binding character - Release of the cash escrow under the exceptions to Regulation 15B(8) of the Buyback Regulations does not preclude an independent inquiry or finding of fraud under the PFUTP Regulations - HELD THAT: - Regulation 15B(8) concerns only the consequence of non-compliance with the minimum buyback utilisation requirement, namely forfeiture or release of the escrow. Its exceptions neither define fraud nor constitute an adjudication that fraudulent conduct is absent. Internal departmental notings are only opinions for administrative consideration and acquire no binding legal effect unless they culminate in, and are communicated as, a final decision of the competent authority. [Paras 34, 35, 36, 52, 57]

The release of escrow did not create immunity from proceedings for fraud under the PFUTP Regulations.

Fraud under PFUTP Regulations - proof on balance of probabilities - Failure to adjudicate material trading-data discrepancies - allegation that the buyback announcement was fraudulent could not be finally determined without adjudicating disputed historical trading data and the contradiction between the investigation reports - HELD THAT: - Fraud cannot rest on allegation, conjecture or suspicion; it must be established on a balance of probabilities from the totality of objective and corroborative circumstances. Where the allegation is that the company deliberately structured trading without intending to complete the buyback, the trading pattern must be examined with contemporaneous instructions, communications, records and other attributable conduct. The appellate tribunal erroneously treated the escrow inquiry as bearing on fraud and did not determine the alleged discrepancies in the exchange data or the inconsistency between the investigation reports concerning market impact. [Paras 52, 54, 55, 56, 58]

The question of fraud was remanded without adjudication on merits for fresh determination after scrutiny of the trading data, the investigative inconsistency and any corroborative material.

Final Conclusion: The appeals were partly allowed. The matter was remanded to SAT for fresh adjudication of the fraud allegation alone, subject to the legal principles and directions laid down.

Disgorgement - due diligence and negligence of an exchange in verifying vendor licences - absence of fraud/inducement under the PFUTP framework and Section 12A of the SEBI Act - equal, unrestricted, transparent and fair access to co location facilities - P2P connectivity falls outside the exchange trading path and does not per se confer latency advantage - SEBI's remedial powers under Sections 11 and 11B (including disgorgement as per Explanation to Section 11B) - liability and debarment of senior management versus penal/remedial measures - proportionality of remedial measures (remedial v. punitive/debarment)

HELD THAT:- The civil appeals between the Securities and Exchange Board of India and the National Stock Exchange were disposed of in terms of the settlement, with questions of law kept open.

Continuation of writ challenge to forensic audit reports after commencement of corporate insolvency resolution process - Impleadment of suspended directors affected by forensic audit reports - Transposition of corporate debtor in pending writ proceedings

HELD THAT: - Upon commencement of CIRP, management of the company vested in the Resolution Professional, who declined to pursue the writ petition. Since the forensic audit reports under challenge also affected the rights of the suspended directors, their addition was necessary for an effective adjudication and to avoid multiplicity of proceedings. The proposed amendment merely brought subsequent CIRP events on record and did not alter the nature or character of the writ petition. As the company could not continue as petitioner without the Resolution Professional pursuing the proceedings, it was required to be transposed as a respondent. [Paras 23, 29, 35, 36, 38]

The suspended directors were added as petitioners, the consequential amendment was permitted, and the company was transposed from petitioner to respondent.

Final Conclusion: The applications for impleadment, amendment and transposition were allowed, enabling the writ challenge to proceed through the added petitioners while retaining the company as a respondent represented through the Resolution Professional.

Jurisdiction over personal guarantor insolvency during corporate debtor's CIRP - Inter-Bench transfer under Rule 16(d) of the NCLT Rules

Personal guarantor insolvency jurisdiction under Section 60(2) of the Insolvency and Bankruptcy Code - Jurisdiction over a personal guarantor's insolvency application where the corporate debtor's CIRP was pending before another Bench - HELD THAT: - Section 60(2), by its mandatory language and non-obstante clause, overrides the territorial criterion under Section 60(1) where CIRP or liquidation of the corporate debtor is pending. The personal guarantor's insolvency application must then be filed before the same Bench to secure consolidation, consistency and avoidance of conflicting proceedings. [Paras 15, 18, 19]

The proceedings initiated against the personal guarantor before the New Delhi Bench were without jurisdiction and were quashed, with liberty to institute proceedings before the Bench having appropriate jurisdiction.

Inter-territorial transfer of personal guarantor insolvency proceedings - Power of the President under Rule 16(d) of the NCLT Rules to transfer personal guarantor proceedings to the Bench where the corporate debtor's CIRP was pending - HELD THAT: - A combined reading of Section 60 of the Code, Rule 16(d) and the definition of "Bench" under Rule 2(7) shows that the President may transfer a case from one Bench to another when circumstances warrant. That power is not confined to Benches within the same territorial location, particularly where transfer is required to give effect to the mandatory command of Section 60(2). [Paras 21, 22, 24, 25]

The restrictive interpretation of Rule 16(d) as permitting only intra-territorial transfers was rejected, and the order dismissing the transfer application was set aside.

Final Conclusion: The impugned order dismissing the transfer application was set aside and the personal guarantor proceedings instituted before the Bench lacking jurisdiction were quashed. Liberty was reserved to institute proceedings before the competent Bench in accordance with law.

Pre-existing dispute in operational-debt insolvency proceedings

Maintainability of the operational creditor's application for initiation of corporate insolvency resolution process where the corporate debtor had disputed the underlying transactions before receipt of the demand notice - HELD THAT: - The record of the Information Utility marked the debt as disputed, and the corporate debtor's legal notice and fraud-related complaints preceded the demand notice. The dispute concerned the genuineness of the purchase orders, supplies and related transactions and entailed disputed questions requiring detailed trial. A Section 9 proceeding could not be used to adjudicate such a dispute, which was neither spurious nor illusory. [Paras 16, 17]

The rejection of the Section 9 application was sustained and the appeal was dismissed.

Final Conclusion: The appeal was dismissed, the pre-existing dispute being unsuitable for determination in corporate insolvency resolution proceedings.

CENVAT credit on invoices lacking service tax registration number - Non-consideration of relevant precedents

Denial of CENVAT credit solely because the service-provider invoices did not reflect a service tax registration number, without considering earlier Tribunal decisions on such invoices - HELD THAT: - We find that the Tribunal, whilst coming to this conclusion, has not taken into consideration the earlier decisions of the Tribunal in the case of Imagination Technologies India Pvt. Ltd. [2011 (4) TMI 406 - CESTAT, MUMBAI] as well as in the case of Secure Meters Ltd. [2010 (1) TMI 284 - CESTAT, NEW DELHI]. After referring to these decisions, if the Tribunal found that the facts in the present case were distinguishable from the said decisions, it could have rendered a finding accordingly. This is completely absent in the impugned order. Hence, we find substance in the argument canvassed on behalf of the Appellant that the matter should be remanded to the CESTAT for a de novo consideration on the issue of whether CENVAT credit could have been denied to the Appellant merely because the Service Tax Registration Number did not appear or reflect in the invoices of the service provider. [Paras 6]

The impugned order was set aside to this extent and the matter was remanded to the Tribunal for de novo consideration of the entitlement to CENVAT credit.

Final Conclusion: The appeal was disposed of by remanding the CENVAT credit issue for de novo consideration. The Tribunal was directed to consider any timely application for additional evidence on its own merits and in accordance with law.

CENVAT credit on recovery and collection agent services - Extended limitation for ineligible CENVAT credit

CENVAT credit on recovery and collection agent services - Input service for lending activity - Eligibility of CENVAT credit of service tax paid on commission to recovery or collection agents engaged by an NBFC for recovery of defaulted instalments and enforcement of hypothecated vehicles - HELD THAT: - Lending is a continuing commercial activity and is not exhausted upon disbursement of the loan. Recovery of the amount lent, including enforcement of the security upon default, is an inherent and inseparable incident of extending credit; treating it as a discrete subsequent activity would artificially fragment the lending business. The recovery or collection agent's service was therefore used for providing the output service of lending within the means clause of the definition of input service.

This view finds support in Bajaj Finance Ltd. [2017 (11) TMI 658 - CESTAT MUMBAI] where, on facts stated to be materially identical to those before us, the Tribunal held that the service of lending is not limited to disbursement of the loan but extends to, and includes, recovery of the amount lent, this being one of the vital parts of the overall lending activity, and that the recovery agent's service accordingly falls within the “means” clause of Rule 2(l). We find that the same view was reiterated for a subsequent period in the same appellant's case; that the Delhi Bench of this Tribunal, in Commissioner, CGST, Jaipur v. Bharti Hexacom India Ltd. [2023 (5) TMI 520 - CESTAT NEW DELHI] applied like reasoning to a telecom service provider's collection agents; and that this Tribunal itself, in Cholamandalam Investment & Finance Company Ltd. [2026 (3) TMI 1070 - CESTAT CHENNAI] on facts of an NBFC engaging recovery agents closely paralleling the present case, has categorically taken the same view.

Judicial discipline requires a coordinate Bench of this Tribunal to follow an earlier decision on identical facts unless persuaded that it warrants reconsideration by a Larger Bench; no such case has been made out before us, nor do we ourselves see reason to take a different view. We would only add that the circumstance that the Revenue did not carry the decision in Bajaj Finance (2018) in further appeal, reportedly on account of the monetary limit prescribed for filing appeals, does not detract from its precedential value or its binding character on subordinate authorities so long as it has not been set aside by a competent superior forum; a decision of this Tribunal does not lose its character as a precedent merely because it went unchallenged for reasons unconnected with its correctness.

We are accordingly of the view that the service of the recovery/collection agents engaged by the appellant, for recovery of instalments in default and enforcement of the security furnished by way of hypothecation of the financed vehicle, is a service used by the appellant “for providing” its output service of lending, within the “means” clause of Rule 2(l) of the CCR [Paras 25, 26, 27, 28, 29]

The credit availed on service tax paid on commission to recovery or collection agents was admissible as credit on an eligible input service.

Extended limitation for ineligible CENVAT credit - Penalty for alleged ineligible CENVAT credit - HELD THAT: - Invocation of the extended period requires a positive act of concealment or deliberate withholding of information with intent to evade tax; mere omission or an interpretation of law which is not accepted does not meet that threshold. The absence of a service-wise break-up in the prescribed return format, coupled with a genuine and arguable interpretational dispute on eligibility of the credit, did not establish suppression or intent to evade. Since the credit was eligible and suppression was not established, the basis for penalties also failed. [Paras 32, 33, 34]

The extended period was not validly invokable and the demand beyond the normal period was time-barred; the penalties imposed were unsustainable.

Final Conclusion: The impugned orders were set aside and the appeals were allowed, with consequential relief, if any, in accordance with law.

Service tax on construction of residential complexes prior to 01.07.2010

HELD THAT: - Following the settled position adopted in the respondent's earlier case [2025 (6) TMI 1670 - CESTAT BANGALORE] Tribunal held that construction of residential complexes undertaken before 01.07.2010 was not liable to service tax, whether the arrangement was a service simpliciter or a composite works contract. [Paras 6, 7]

The orders setting aside the service-tax demand for the relevant period were upheld.

Final Conclusion: The Revenue's appeals were dismissed, and the setting aside of the service-tax demand on construction of residential complexes for the period prior to 01.07.2010 was sustained.

Excess CENVAT credit - reconciliation of opening balance and import-service credit - CENVAT credit on input services used for output services - Inclusion of reimbursable expenses in taxable value - Service-tax demand based on financial statements and ST-3 returns - Penalty for delayed service-tax payment on services to SEZ units - Extended limitation where returns were filed and audits conducted

Excess CENVAT credit - reconciliation of opening balance and import-service credit - Excess availment of CENVAT credit arising from non-consideration of the opening balance, credit on tax paid for import of services, and the credit reflected in the ST-3 return - HELD THAT: - The opening credit balance was not considered in the impugned order. Evidence of service tax paid on import of services and the appellant's explanation concerning the credit recorded for February 2011 also required verification. The alleged excess credit could therefore not be sustained without reconciling the figures against the evidence produced. [Paras 19, 20, 25]

The matter was remanded for verification and for confirmation, if any, of excess CENVAT credit for the normal period only.

CENVAT credit on input services used for output services - Eligibility of CENVAT credit on professional charges, housekeeping and security, car hire, membership services, repair and maintenance, general insurance, and health check-up services - HELD THAT: - The services denied as input services were substantially covered by the decisions relied upon by the appellant. General insurance and health check-up expenses incurred for employees were eligible only for the period before 01.04.2011. [Paras 21, 25]

Credit on the other disputed input services was held admissible, while the credit relating to general insurance and health check-up before 01.04.2011 was allowed.

CENVAT credit on overseas group-booking expenses - Eligibility of CENVAT credit on group booking at Singapore claimed as expenditure for business-promotion activities - HELD THAT: - The appellant asserted that the booking of meeting facilities and accommodation for meetings with clients formed part of its promotional activity, but no supporting evidence was available on record. Verification was necessary to determine whether the expenditure formed part of business promotion. [Paras 21, 25]

The claim was remanded for fresh verification upon production of supporting evidence by the appellant.

Inclusion of reimbursable expenses in taxable value - Service-tax liability on reimbursable travel, conveyance, boarding and lodging expenses received from clients - HELD THAT: - For the period in dispute, reimbursable expenses were excludible from service-tax liability. [Paras 22]

The demand on reimbursable expenses was held unsustainable.

Service-tax demand based on financial statements and ST-3 returns - Service-tax demand founded solely on the difference between turnover reported in financial statements and that reported in ST-3 returns - HELD THAT: - The financial statements recorded turnover on accrual basis, whereas service-tax returns for the relevant period reflected receipts. The figures operated on different bases and were inherently incomparable; in the absence of classification of the services represented by the differential amount, a mere comparison could not sustain the demand. [Paras 22, 25]

The demand based on the difference between the financial statements and ST-3 returns was set aside.

Penalty for delayed service-tax payment on services to SEZ units - Penalty for delayed payment of service tax on management consultancy services supplied to an SEZ unit under a bona fide belief of exemption - HELD THAT: - The appellant had accepted the tax liability and paid tax with interest before issuance of the show-cause notice after the service recipient failed to furnish the requisite documents. This constituted reasonable cause for the failure to make timely payment. [Paras 23, 25]

The service-tax liability and appropriation of tax with interest were upheld, but the penalty was set aside by invoking Section 80 of the Finance Act, 1994.

Extended limitation where returns were filed and audits conducted - Invocation of the extended period of limitation and consequential penalties where the appellant had regularly filed ST-3 returns and was subject to audit - HELD THAT: - Regular filing of returns and prior audits established departmental awareness of the appellant's activities. Further, most demands were held unsustainable and the excess-credit issue required verification. The extended period could not therefore be invoked. [Paras 24, 25]

The demands raised by invoking the extended period of limitation and the penalties were set aside.

Final Conclusion: The appeal was partly allowed. The SEZ service-tax liability with interest was sustained, while the impugned demands and penalties were otherwise set aside or remanded for limited verification of excess CENVAT credit and overseas group-booking expenses.

Mutatis mutandis application of customs-exemption conditions to domestic supplies under International Competitive Bidding - Consequential excise duty, interest and penalty

Excise exemption for domestic supplies under International Competitive Bidding - Mutatis mutandis customs-notification conditions - Entitlement to central excise exemption for Alternators supplied to an eligible petroleum exploration project under International Competitive Bidding, despite alleged non-compliance with procedural conditions of the corresponding customs notification. - HELD THAT: - The expression mutatis mutandis in the excise exemption condition imports only such customs-notification conditions as are capable of application to domestic clearances; import-specific procedural requirements cannot be mechanically imposed on a domestic manufacturer. The Project Authority Certificate, undisputed project eligibility and end use established satisfaction of the substantive exemption requirements. Denial solely on procedural requirements framed for imports would defeat the intended parity between imported and indigenous goods supplied under International Competitive Bidding. [Paras 13, 14, 15, 16, 17]

The appellant was entitled to the excise exemption, and its denial by mechanically applying import-related customs procedures was unsustainable.

Consequential duty, interest and penalty following invalid exemption denial - Penalty for exemption claimed on disclosed clearances - Survival of the consequential duty demand, interest and penalties after the exemption denial was held unsustainable. - HELD THAT: - Payment under protest could not validate an otherwise invalid demand. Interest is compensatory and presupposes a legally recoverable principal duty liability. Further, the clearances were made openly after prior intimation and production of the Project Authority Certificate; there was no allegation of suppression or clandestine removal, and the dispute was interpretational. [Paras 21, 22, 23, 25]

The duty demand, consequential interest and penalties were set aside.

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

CENVAT credit on duty paid by a separate legal entity - Separate juristic personality of subsidiary company - Recovery of inadmissible CENVAT credit with interest and penalty

CENVAT credit on capital goods imported by a separate legal entity - Separate corporate personality - Entitlement of a cement manufacturer to avail CENVAT credit of CVD paid on capital goods imported and owned by its separately incorporated captive power subsidiary. - HELD THAT: - CENVAT credit is a statutory concession available only to the manufacturer or other person fulfilling the conditions prescribed under the Rules. The captive power arrangement, exclusive use of the generated electricity in manufacture of dutiable products, and the appellant's majority shareholding could not efface the subsidiary's separate juristic identity. Since the appellant neither imported the capital goods nor acquired them through a statutorily recognised arrangement, the credit entitlement did not accrue to it. The earlier customs proceedings and decisions concerning integrated manufacturing operations were distinguishable, as they did not permit cross-entity transfer of statutory credit. [Paras 20, 21, 22, 23, 24]

CENVAT credit of the CVD paid by the separately incorporated importer was inadmissible to the appellant.

Recovery of inadmissible CENVAT credit - Interest and penalty for irregular CENVAT credit - Sustainability of recovery, interest and equal penalty consequent upon availment of inadmissible CENVAT credit on capital goods imported by another company. - HELD THAT: - Once the credit was held inadmissible, its recovery was the statutory consequence. Revenue neutrality and equitable considerations could not validate a credit not conferred by statute. Statutory interest followed as a compensatory consequence, and the Tribunal found no infirmity in the equal penalty imposed for availment of credit on goods imported by an independent corporate entity without statutory authority. [Paras 28, 29, 30]

The demand, applicable interest and equal penalty were upheld.

Final Conclusion: The appeal was dismissed. The disallowance and recovery of CENVAT credit, together with applicable interest and equal penalty, were sustained.

Interest on delayed refund under Section 11BB - Duty paid under protest - Electronic refund application as statutory refund claim

Statutory interest on delayed refund - Limitation and laches - Entitlement to statutory interest on delayed refund was not defeated by the assessee's subsequent request for interest, failure to appeal against the refund orders, or alleged delay and laches. - HELD THAT: - Interest under Section 11BB is a self-executing statutory obligation arising automatically where refund is delayed beyond the prescribed period. The subsequent letter seeking interest was merely a reminder of that obligation and did not institute a fresh, time-barred claim. Since the refund orders contained no finding on interest, the assessee was not required to challenge them or file cross-objections; the Limitation Act and the doctrine of laches, applicable to discretionary remedies or suits, could not defeat the statutory entitlement. [Paras 13]

The rejection of the interest claim on the ground of limitation, delay and laches was set aside.

Duty paid under protest - Departmental acquiescence - The central excise duty payments and contemporaneous electronic refund claims were payments under protest made with the Department's knowledge, and not voluntary payments made at the assessee's peril. - HELD THAT: - The interim order restrained the Department from demanding duty but did not prohibit the assessee from independently paying duty under protest, a course contemplated by the second proviso to Section 11B(1). The Department accepted the registration, protest payments and electronic claims for years without objection, and thereafter processed and sanctioned the refund. It could not rely on its own failure to object to characterise the payments as wrongful or voluntary. [Paras 15, 16]

The Original Authority's contrary finding was set aside.

Electronic refund application - Relevant date for refund limitation - Computation of interest on delayed refund - Electronic refund claims filed contemporaneously with protest payments constituted applications under Section 11B(1) for computing interest under Section 11BB, rather than the later physical claim in Form R. - HELD THAT: - The proviso to Section 11B(1) protects refund claims arising from duty paid under protest notwithstanding pendency of the underlying dispute. The definition of 'relevant date' in the Explanation to Section 11B governs only the limitation for filing a refund application and does not postpone the commencement of interest under Section 11BB, which runs from receipt of the application. The electronic claims, having been received without objection or deficiency memo, were complete applications from their respective dates; the later physical filing was only a reiteration for processing. The contrary approach applicable to an unascertained excess payment following reassessment was held inapplicable, since the refunded amounts had been claimed from the outset and required only verification after the legal dispute was resolved. [Paras 21, 22, 23, 24, 25]

The assessee was held entitled to interest from expiry of three months after receipt of each electronic claim until actual refund sanction; the matter was remitted solely for verification of the claim-receipt dates and quantification of interest.

Final Conclusion: The appeals were allowed. The impugned appellate orders were set aside, and the refund sanctioning authority was directed to quantify and sanction statutory interest after verifying the dates of receipt of the electronic refund claims.

Settlement of disputed tax liability under Section 24-B of the M.P. VAT Act - Maintainability of settlement application for entry-tax liability - Hardship as a condition for tax settlement

HELD THAT:- No error not to speak of any error of law could be said to have been committed by the High Court in passing the impugned order(s).[2025 (8) TMI 1865 - MADHYA PRADESH HIGH COURT]

In the aforesaid, the Special Leave Petitions are dismissed.

Extinguishment of statutory tax dues under approved resolution plan - Refund of statutory appellate pre-deposit after extinguishment of tax demand

Extinguishment of statutory tax dues under approved resolution plan - Continuation of tax recovery proceedings - Continuation of MVAT recovery proceedings for tax dues pertaining to the period preceding approval of the clean-slate Resolution Plan - HELD THAT: - Approval of a Resolution Plan under Section 31 of the IBC binds all stakeholders, including statutory authorities. Claims and statutory dues not forming part of the approved plan stand extinguished, and no proceedings for such pre-approval dues can thereafter be initiated or continued. As the plan was approved on a clean-slate basis, the appellate authority lacked jurisdiction to confirm the assessment and direct recovery of the tax dues. [Paras 11, 12, 13]

The impugned appellate order confirming the assessment and directing recovery, along with consequential proceedings, was set aside.

Refund of statutory appellate pre-deposit after extinguishment of tax demand - Entitlement to refund of the statutory pre-deposit made for pursuing the MVAT appeal after the underlying tax demand stood extinguished under the approved Resolution Plan - HELD THAT: - The statutory pre-deposit formed part of the overall tax demand settled under the Resolution Plan. Retention of that amount in addition to the sum allocated to the tax department in full settlement of its dues would be contrary to law once all proceedings against the petitioner stood abated.

The issue is no more res integra and is covered by the decision of the Hon'ble Supreme Court in Ruchi Soya Industries Limited and others [2022 (3) TMI 60 - SUPREME COURT] and the judgment of this Court in Dalmia Cement (Bharat) Ltd. and another [2023 (8) TMI 1139 - BOMBAY HIGH COURT] wherein this Court set aside the impugned order and directed refund of the amount of pre-deposit with applicable interest.[Paras 16]

The respondents were directed to refund the statutory pre-deposit with applicable interest.

Final Conclusion: The writ petition was allowed. The appellate order and consequential recovery proceedings were set aside, and refund of the statutory pre-deposit with applicable interest was directed.

Refund of excess penalty in prescribed form - Interest on delayed refund attributable to dealer

Prescribed authority for refund of excess penalty - validity of the refund application for excess penalty filed before the Joint Commissioner of State Tax instead of the redesignated Additional Commissioner of State Tax - HELD THAT: - Rule 43(1) designated the Joint Commissioner as the refund authority where the refund exceeded the prescribed threshold. Although the corresponding officer was redesignated as Additional Commissioner of State Tax under the BGST Act, the application filed before the Joint Commissioner of State Tax could have been forwarded to the Additional Commissioner. The technical objection to the application on that ground was therefore rejected. [Paras 10, 11, 12]

The petitioner was directed to submit a fresh Form A-VIII application before the Additional Commissioner of State Tax, who was directed to process the refund within the stipulated period.

Form A-VIII for refund of excess penalty - Interest on delayed refund - entitlement to refund of excess penalty and interest where the refund application was defective and the defects remained unrectified - HELD THAT: - A harmonious reading of the statutory provisions, Rule 43 and Form A-VIII established that refund of excess tax as well as penalty must be sought in the prescribed form; interest does not accrue automatically upon expiry of sixty days from communication of the appellate order. As the application was defective and the petitioner failed to rectify the defects despite direction, the delay was attributable to the petitioner and was liable to be excluded while determining interest. [Paras 13, 14, 15, 16, 18]

No refund or interest was presently payable on the defective application; upon a fresh compliant application, refund was directed within ten days, failing which interest at 6% per annum was made payable for the delay.

Final Conclusion: The writ application was disposed of with directions for submission of a fresh refund application before the Additional Commissioner of State Tax and its expeditious processing. Interest was held not to arise automatically where the delay in refund was attributable to the petitioner.

Statutory bar on appeal against order setting aside assessment for fresh assessment - Fresh assessment of transit-sale exemption claim

Whether the composite appellate order reopening all assessment issues for fresh consideration constituted an order setting aside the assessment and directing a fresh assessment within the third proviso to Section 58(1)(b) of the Tamil Nadu Value Added Tax Act, 2006? - HELD THAT: - The substance of the appellate order, and not the absence of express words setting aside the assessment, determines its character. As the Appellate Authority reopened all issues, permitted production of documents and directed the Assessing Officer to consider the matter afresh, the assessment stood set aside for fresh assessment. The order consequently attracted the statutory embargo on an appeal to the Appellate Tribunal. The earlier decision relied on by the assessee concerned an assessment substantially confirmed on merits with remand confined to a limited aspect and was inapplicable. The fresh assessment must nevertheless be undertaken independently on the materials produced, without prejudice from observations of the Appellate Authority or the Tribunal. [Paras 11, 12, 13, 14]

The Tribunal rightly declined to entertain the appeal; the assessee was directed to pursue its claim before the Assessing Officer in the fresh assessment.

Final Conclusion: The Tax Case Revision was disposed of, affirming the statutory bar against the appeal and directing fresh assessment. The connected writ petitions were dismissed.

Statutory machinery under Section 47-A of the Stamp Act - Judicial discipline - reference to larger Bench - Undervaluation of instruments under Section 47-A of the Stamp Act

Whether the power under Section 47-A of the Indian Stamp Act, 1899 can be invoked only upon material indicating wilful undervaluation with fraudulent intent to evade stamp duty; and whether the prior decisions imposing that requirement state the correct law? - HELD THAT: - The Court noted that the plain language of Section 47-A requires the registering authority to have reason to believe that the market value or consideration has not been truly set forth, and does not expressly require proof of a culpable mindset. It expressed serious doubt regarding the view in V.N. Devadoss [2009 (5) TMI 967 - SUPREME COURT] followed in Registrar of Assurances v. ASL Vyapar (P) Ltd. [2022 (11) TMI 1385 - SUPREME COURT] that wilful undervaluation with fraudulent intention is the basis for exercise of the power. However, since that view emanated from a larger Bench, judicial discipline precluded its reconsideration by the present Bench; the questions were therefore referred for consideration by a Bench of appropriate strength. [Paras 16, 17, 21, 24]

The questions concerning the correct interpretation of Section 47-A and the correctness of the stated precedents were referred to a larger Bench.

Final Conclusion: The appeal was not finally decided. The questions concerning the jurisdictional threshold for a reference under Section 47-A of the Stamp Act were referred to a larger Bench.

Supersession of board of multi-State co-operative bank - Applicability of Banking Regulation Act to multi-State co-operative banks - Extension of supersession beyond board tenure - Consultation before supersession of co-operative bank board

Power of the RBI to supersede the BoD of a multi-State co-operative bank under Section 36AAA(1) of the Banking Regulation Act, 1949 - Six-month limit on supersession - Applicability of Banking Regulation Act to multi-State co-operative banks - RBI's power to supersede the Board of a multi-State co-operative bank under Section 36AAA(1) of the Banking Regulation Act is not confined by the six-month limit in Article 243ZL(1) of the Constitution - HELD THAT: - The third proviso to Article 243ZL(1), by providing that the Banking Regulation Act shall also apply to co-operative societies carrying on banking business, is an additive and substantive provision incorporating that Act into the constitutional scheme for multi-State co-operative banks. The express exclusion of multi-State co-operative societies from the fourth proviso reinforces that they fall within the ambit of the third proviso. Section 36AAA therefore operates according to its own terms, permitting supersession and extension up to the aggregate statutory limit, consistently with the object of depositor protection and banking regulation. [Paras 28, 29, 32, 33, 34]

The six-month constitutional ceiling does not circumscribe the RBI's power under Section 36AAA(1) in respect of a multi-State co-operative bank.

Extension of supersession beyond board tenure - Reconstitution of board of multi-State co-operative bank - Whether an order superseding the Board of a multi-State co-operative bank may be extended after expiry of the elected Board's original tenure? - HELD THAT: - Upon supersession, the Board ceases to exist and its powers vest in the Administrator. Section 36AAA(1) expressly permits extension of supersession from time to time, subject to the aggregate outer limit of five years, while Section 36AAA(7) requires the Administrator to call a general meeting for electing new directors on or before expiry of the supersession period specified by the RBI. The tenure of the erstwhile Board is consequently immaterial once supersession was validly ordered during that tenure. [Paras 36, 37, 38]

The extensions of supersession beyond the original tenure of the Board were permissible, subject to the aggregate five-year limit.

Consultation before supersession of co-operative bank board - whether consultation requirement in the proviso to Section 36AAA(1) does not apply to supersession of the Board of a multi-State co-operative bank? - HELD THAT: - The proviso confines consultation to a co-operative bank registered with the Registrar of Co-operative Societies of a State. A multi-State co-operative bank does not fall within that category. [Paras 39]

Non-consultation did not invalidate the supersession orders.

Final Conclusion: The appeals were dismissed. The Court upheld the applicability of Section 36AAA of the Banking Regulation Act to the multi-State co-operative bank and sustained the continuance of supersession.

Repayment of amount released pending appeal upon acquittal - Refund of the amount released to the complainant under Section 148 of the Negotiable Instruments Act following acquittal of the accused in appeal - HELD THAT: - The proviso to Section 148(3) mandatorily requires the complainant to repay the amount released during pendency of the appeal, with the prescribed interest, when the appellant is acquitted. The complainant's undertaking to repay the amount subject to disposal of the appeal reinforced that statutory obligation. Though the refund direction ought to have been made by the appellate court, that defect did not warrant interference, particularly when the complainant had ultimately deposited the amount pursuant to the Court's directions. [Paras 12, 13, 17]

The petition was dismissed and the accused were permitted to withdraw the amount deposited by the complainant.

Final Conclusion: The complainant was bound to repay the amount released pending appeal after the accused were acquitted; no interference with the refund direction was warranted.

Rebuttal of statutory presumption of legally enforceable debt in cheque dishonour proceedings - Financial capacity to advance alleged cash loan - Adverse inference from non-examination of material witness - Proof of legally enforceable debt for alleged cash loan - Withholding of material eyewitness

Conviction for cheque dishonour despite rebuttal of the presumption of legally enforceable debt arising from an alleged cash loan transaction - HELD THAT: - Although admission of signature raised the initial statutory presumption, that presumption was rebuttable on a preponderance of probabilities. The defence established a probable absence of any loan transaction through the complainant's failure to prove financial capacity or any financial trail for the alleged cash advance, coupled with the non-examination of the cited eyewitness to the loan and delivery of the cheque.

The lower courts mechanically applied the presumption, failed to draw the warranted adverse inference from withholding the material witness, and improperly treated the accused's statement as curing deficiencies in the complainant's proof. [Paras 17, 19, 20, 21, 22]

The statutory presumption stood rebutted and the concurrent findings of conviction were held perverse for misapplication of the burden of proof.

Final Conclusion: The revision was allowed, the concurrent conviction was set aside, and the petitioner was acquitted of the offence under section 138 of the Negotiable Instruments Act.

MSME framework challenge to SARFAESI measures - Constructive res judicata - Henderson Principle applicability

Maintainability of a second writ petition challenging SARFAESI measures on the basis of the MSME rehabilitation framework after omission of that ground in the earlier writ petition - HELD THAT: - The objection that the secured creditor had initiated SARFAESI proceedings without following the MSME framework and RBI guidelines was available when the earlier writ petition challenged the demand notice and the measures taken by the secured creditor. The appellants had neither sought rehabilitation under the framework nor raised that objection in the earlier proceedings. The subsequent auction notice was consequential to the prior SARFAESI measures, and no independent breach of the prescribed auction procedure was established.

Applying the Henderson Principle, the Court held that all grounds properly arising from the same cause of action ought to have been raised in the first writ petition; their omission barred a subsequent writ challenge and amounted to reopening concluded litigation. [Paras 17, 18, 20, 23, 24]

The second writ challenge was not entertainable, and the appeal was dismissed; the merits of any challenge before the Tribunal were left open.

Final Conclusion: The writ appeal was dismissed. The observations were confined to the present writ challenge and were not to influence the Tribunal's decision on merits if the appellants invoke the statutory remedy.

Reference to arbitration upon failure of mediation - Failure of mediation in a supplier's claim for unpaid sale consideration cannot result in dismissal of the reference under the Micro, Small and Medium Enterprises Development Act, 2006

HELD THAT: - The statutory scheme makes the unsuccessful termination of mediation the event triggering the Council's obligation either to take up the dispute for arbitration itself or to refer it to an appropriate arbitral institution or centre. Dismissal of the reference, coupled only with a direction to furnish names of arbitrators, did not constitute compliance with that mandatory requirement. [Paras 9, 12, 13, 14]

The dismissal of the reference was set aside to the necessary extent, and the Council was directed to proceed with arbitration itself or make an effective reference to an appropriate arbitration centre or institution for adjudication on merits.

Final Conclusion: The writ petition was disposed of with a direction to initiate arbitration in accordance with the statutory mechanism within the stipulated period.