TaxTMI Updates e-Newsletter
Sep 23,2026

Opportunity to reply to show-cause notice - Personal hearing in GST adjudication

Validity of the GST adjudication order where the show-cause notice was served on the additional notices portal and the assessee did not effectively receive an opportunity to reply or place supporting documents - HELD THAT: - As the show-cause notice was served on the additional notices portal and the notice did not specify a personal-hearing date, the Court found that the petitioners could have overlooked the notice and thereby lost the opportunity to answer it. The order in original had consequently been made without considering their contentions and supporting documents. [Paras 6]

The appellate order rejecting condonation and the order in original were set aside. The authorities were directed to receive the reply and supporting documents, hear the petitioners on merits, and not reject their contentions on limitation.

Final Conclusion: The writ petition was disposed of by restoring the adjudication for a merits hearing after affording the petitioners an opportunity to reply and be heard, without treating limitation as a ground to reject their case.

Successive writ petition after withdrawal without liberty - Maintainability of a successive writ petition challenging the same GST adjudication order after withdrawal of an earlier writ petition without liberty to institute a fresh petition - HELD THAT: - The public-policy principle underlying Order XXIII Rule 1 of the Code of Civil Procedure applies to writ proceedings: withdrawal of a writ petition without liberty to file afresh amounts to abandonment of the remedy under Article 226 in respect of the same cause of action, though it does not operate as res judicata. The earlier writ petition had been withdrawn without such liberty, and the subsequent petitions sought, in substance, identical relief against the same adjudication order. The Court also noted the unavailed statutory appellate remedy and the absence of any explanation for the delayed invocation of writ jurisdiction. A mere change of grounds could not sustain a fresh writ petition seeking the same relief. [Paras 9, 10]

The successive writ petition was dismissed as not maintainable.

Final Conclusion: The writ petition challenging the same adjudication order was dismissed as a non-maintainable successive petition. Pending interlocutory applications were also disposed of.

Acquiescence to tax demand u/s 74 - Voluntary payment of admitted tax liability - Consequential liability to interest and penalty

Liability to interest and penalty following voluntary payment of tax under an unchallenged show-cause notice alleging fraudulent transactions - HELD THAT: - The voluntary payment of the tax demanded, without objection to the allegations or invocation of section 74, constituted acquiescence to the show-cause notice. Its allegations and findings consequently stood admitted, and no further finding on fraud was required. The subsequent proceedings concerned only computation of interest and penalty; payment of tax did not permit the assessee to resile from the consequential liability. There was no violation of section 74(5). [Paras 9, 10, 11]

The demand of interest and penalty was sustained and the writ petition was dismissed.

Final Conclusion: Having voluntarily paid the tax without disputing the show-cause notice, the assessee remained liable for consequential interest and penalty. The writ petition was dismissed.

Bail in CGST prosecution - Pre-trial detention - non-punitive character - Presumption of innocence and speedy trial - Delay in trial - nature of offence, evidence, complicity of the accused

Grant of bail to an accused facing alleged offences under section 132(1)(a), (b) and (i) of the CGST Act arising from the supply of areca nuts - HELD THAT: - Pre-conviction detention is not punitive; its purpose is to secure the accused's presence at trial. Though the prosecution was independent of assessment proceedings, no exceptional circumstance, criminal antecedent, risk of absconding, witness intimidation or evidence tampering was shown.

It is settled principle of law that the object of bail is to secure the attendance of accused at the trial. No material particulars or circumstances suggestive of the applicant fleeing from justice or thwarting the course of justice or creating other troubles in the shape of repeating offences or intimidating witnesses and the like have been shown. Further the trial is by Magistrate and maximum punishment for offence is five years and applicant is in jail since 1.2.2026.

The applicant had been in custody, the investigation was complete and complaint filed, the case was triable by a Magistrate with a maximum sentence of five years, and the trial was unlikely to conclude within a reasonable time. The undisputed parity with co-accused already enlarged on bail also supported release. [Paras 13, 15, 16, 17, 18]

Bail was granted subject to conditions intended to secure the applicant's attendance and protect the integrity of the trial.

Final Conclusion: The bail application was allowed, the Court finding no exceptional circumstance warranting continued pre-trial custody.

Tax Evasion - Alleged re-use of e-way bill-evidentiary burden - Detention of goods on suspicion of tax evasion -

Detention and tax/penalty for alleged re-use of e-way bills in the transportation of pan masala and tobacco, founded on toll-plaza movement records and photographs - HELD THAT: - The Tribunal held that re-use of an e-way bill and intention to evade tax must be established by cogent evidence; suspicion or inference from vehicle movement cannot substitute proof. The goods were accompanied by invoices/e-invoices and e-way bills, with no discrepancy in their description, quantity, value or ownership. No independent evidence established that the same goods had completed an earlier journey or been delivered, and the revenue did not verify the appellant's material that the earlier trip involved delivery of cotton cuttings. The alleged contravention and re-use of the e-way bill were therefore not proved. [Paras 6]

The detention-based tax and penalty could not be sustained; the appeal was allowed, the appellate order was set aside, and deposited amounts were directed to be refunded in accordance with law.

Final Conclusion: The appeal was allowed, the appellate order sustaining the detention-based tax and penalty was set aside, and the amounts deposited were directed to be refunded in accordance with law.

Alternative statutory remedy under the GST appellate framework - violation of principles of natural justice - Maintainability of the writ petition challenging penalty proceedings and the appellate order when an appeal to the GST Tribunal was available - HELD THAT: - Interim order. Notice issued; the petitioner was permitted to file an appeal before the GSTAT without pre-deposit, subject to the outcome of the petition.

Notice as allegedly served by uploading it on common portal

Contention of the petitioner(s) that the High Court of Madras as well as Delhi High Court have viewed service of notice by uploading on portal as incomplete particularly where the relevant information may be referable to two tabs, namely, "View Additional Notices/Orders", and "View Notices and Orders". It is the case of the petitioner(s) that his case is squarely covered by the decisions of the Madras High Court as well as Delhi High Court.

HELD THAT:- Issue notice, returnable in four weeks.

Coercive recovery during GST search proceedings - GST investigation guidelines

Interim safeguards during an ongoing GST inspection/search where the assessee alleged pressure to discharge liability - HELD THAT: - Having regard to the applicable investigation guidelines and the rival contentions concerning alleged pressure for payment during the inspection/search, the Court considered it necessary to protect the assessee's ordinary business operations pending return of notice. [Paras 7]

The assessee was permitted to carry on its normal business activities, and the authorities were directed not to take coercive steps for discharge of liability during the inspection/search and to adhere to the investigation guidelines until the returnable date.

Final Conclusion: Notice was issued. Pending further consideration, the Court granted interim protection against coercive recovery during the ongoing inspection/search while requiring adherence to the applicable investigation guidelines.

Bail registered for the offence punishable u/ss 132(1)(b), (c), (f) & (I) punishable u/ss 132(1)(i) of the Central Goods & Services Tax, 2017.

HELD THAT:- This Court is inclined to enlarge the petitioner on bail. The above named petitioner is directed to be enlarged on bail on furnishing bail bond of Rs. 10,000/- with two sureties of the like amount each to the satisfaction of the learned Additional Chief Judicial Magistrate-II-cum-Special Judge Economic Offence, Patna in connection with Complaint Case.

Effect of appellate decision on precedent relied upon - Consideration of unadjudicated grounds of challenge

Restoration of the challenge to the GST show-cause notice where the precedent forming the sole basis for allowing the writ petition no longer supported that result and other grounds remained unconsidered - HELD THAT: - The writ petition had been allowed solely on the basis of an earlier decision, but the appeal against that decision had been allowed. The foundation of the impugned order therefore no longer survived. Since other substantial grounds raised against the show-cause notice had not been considered, the writ petition required restoration for their adjudication. See M/S. PRAMUR HOMES AND SHELTERS [2025 (12) TMI 1188 - KARNATAKA HIGH COURT] [Paras 3, 4, 5]

The appeal was allowed, the impugned order was set aside, and the writ petition was restored before the Single Judge for consideration of the remaining grounds.

Final Conclusion: The appeal was allowed and the order allowing the writ petition solely on the earlier precedent was set aside. The writ petition was restored for consideration of the other grounds of challenge.

Effect of omission of Rule 96(10) of the CGST Rules without a saving clause - Refund of IGST paid on export of services -

Continuation of refund proceedings under omitted Rule 96(10) of the CGST Rules in respect of IGST paid on export of services - HELD THAT: - The omission of Rule 96(10), without a saving or sunset clause, brought pending proceedings under that rule to an end. The recommendation that the omission should operate prospectively was advisory and did not bind the rule-making authority. [Paras 5, 6]

The direction to grant the claimed refund was sustained and the Revenue's appeal was dismissed.

Final Conclusion: The Court upheld the grant of refund, holding that omitted Rule 96(10), having no saving or sunset clause, could not govern pending proceedings.

Classification of cinematographic-film copyright licensing - GST regularisation on an "as is where is" basis - Writ jurisdiction despite alternative statutory remedy

Writ jurisdiction despite alternative statutory remedy - Jurisdictional error in tax classification - Maintainability of the writ petitions challenging GST classification orders despite the statutory appellate remedy - HELD THAT: - Availability of an alternative remedy did not bar writ jurisdiction where the impugned classification rested on an apparent error of law going to jurisdiction and involved no disputed question of fact. The Tribunal was not functional when the petitions were instituted; although it became functional later, the jurisdictional errors warranted exercise of writ jurisdiction. [Paras 26, 27, 54]

The writ petitions were entertained notwithstanding the alternative statutory remedy.

Classification of cinematographic-film copyright licensing - Information technology software - Classification of licensing by the original copyright holder of cinematographic films as intellectual-property rights in goods other than information technology software - HELD THAT: - A cinematographic film is a passive audiovisual work and does not satisfy the definition of information technology software, which requires material capable of manipulation or interactivity by a computer or similar device. The classification scheme separately covers licensing of computer software and databases under SAC 997331 and licensing of rights to broadcast and show original films under SAC 997332. The mode of delivery, whether by hard disk or electronic transmission, cannot alter the essential character of the supply. The alleged employee statement merely concerned transmission and, being unsupported by technical material and not furnished to the petitioner, could not establish supply of software. The orders also could not be supplemented by the new OIDAR case advanced through affidavit, and the Aspect Theory was inapplicable to classification of a single supply under the statute. [Paras 49, 50, 51, 52, 53]

Licensing of copyright in cinematographic films was classifiable under the entry applicable to intellectual-property rights in goods other than information technology software, and the contrary classification and demand were erroneous.

GST regularisation on an "as is where is" basis - Licensing of theatrical rights in cinematographic films - Availability of "as is where is" GST regularisation for producer-to-distributor licensing of theatrical rights in cinematographic films - HELD THAT: - The circulars recognised the pre-1st October 2021 overlap between the competing entries and regularised payment at 12% under Heading 9973 on an "as is where is" basis. Their benefit could not be confined to downstream distributor-exhibitor transactions, since the acknowledged ambiguity in licensing theatrical rights permeated the entire chain and classification could not change merely because the license was onwardly granted by a distributor. [Paras 45, 46]

The benefit of regularisation could not be selectively withheld from the producer's upstream licensing transaction.

Final Conclusion: The writ petitions were allowed in terms of prayer clause (a), without costs, as the demands rested on an erroneous classification and the regularisation benefit could not be confined to downstream transactions.

Anti-profiteering - excess GST realisation from affordable apartment buyers

Treatment of alleged excess GST collected from purchasers of affordable apartments as profiteering under section 171 of the CGST Act, 2017 - HELD THAT: - From the Hon’ble High Court of Delhi in Reckitt Benckiser India Pvt. Ltd. Vs. Union of India [2024 (1) TMI 1248 - DELHI HIGH COURT] it is apparent that the provision of anti-profiteering contained under Section 171 of the CGST Act, 2017 are in the interest of public at large. It is a welfare legislation objected to ensure that the recipient should receive the benefit of reduction in rate of tax or ITC by way of commensurate reduction in prices.

The project commenced and the flats were booked after the introduction of GST; consequently, the agreed price inherently factored the benefit of the applicable GST rates. No pre-GST CENVAT credit was available for comparison with post-GST input tax credit. The DGAP's computation, however, treated differential GST realisation as a saving, notwithstanding the Respondent's assertion that it had discharged GST at a higher rate while recovering a lesser amount from home buyers. Excess realisation of GST has no relevance to computation of profiteering under section 171. [Paras 31, 32, 33, 35, 36]

The alleged excess GST realisation could not be treated as savings or profiteering; the DGAP report was rejected, and the issue of excess GST recovery lay outside the Tribunal's jurisdiction.

Final Conclusion: The DGAP report was rejected because its determination of profiteering was founded on excess GST realisation rather than a benefit required to be passed on under section 171. The excessive GST realised was directed to be refunded to the applicant in accordance with law.

Anti-profiteering - Pass-through of GST rate reduction on cinema admission tickets - Deposit of profiteered amount where recipients are unidentifiable - Prospective operation of anti-profiteering penalty

Pass-through of GST rate reduction on cinema admission tickets - State-regulated maximum cinema ticket prices - Obligation to pass on the GST rate reduction on cinema admission tickets by commensurate reduction in price despite State-regulated maximum ticket prices - HELD THAT: - Section 171 required the benefit of the GST rate reduction to be passed on through a commensurate reduction in ticket prices. The State regime fixed only the maximum permissible ticket price and did not prevent a reduction. The Respondent admitted retaining the same cum-tax ticket prices after increasing the base price, produced no cogent evidence justifying that increase, and did not dispute the DGAP methodology or computation. Cost and market-related components were immaterial to the inquiry whether the tax benefit had been passed on. [Paras 52, 53, 54, 55, 56]

The Respondent was held to have contravened Section 171 by failing to pass on the benefit of the reduced GST rate, and the DGAP reports were accepted.

Deposit of profiteered amount where recipients are unidentifiable - Disposition of the profiteered amount where the recipients of cinema admission services were unidentifiable - HELD THAT: - As the recipients of the services could not be identified, the case was held to fall within Rule 133(3)(c) of the CGST Rules. [Paras 57, 63]

The Respondent was directed to deposit the profiteered amount with interest in equal shares in the Central Consumer Welfare Fund and the Telangana State Consumer Welfare Fund.

Prospective operation of anti-profiteering penalty - Levy of anti-profiteering penalty for conduct preceding the effective date of the penalty provision - HELD THAT: - The penalty provision came into force after the entire period under investigation. It could not therefore be applied retrospectively to the Respondent's conduct. [Paras 57, 63]

No penalty was leviable upon the Respondent.

Final Conclusion: The DGAP reports were accepted and the Respondent's objections were rejected. The profiteered amount was directed to be deposited with interest in the designated Consumer Welfare Funds, while no penalty was imposed.

Anti-profiteering - commensurate price reduction on GST-rate reduction for cinema admission tickets - Passing on the benefit of GST-rate reduction on cinema admission tickets by commensurate reduction in prices

Reduction of the GST rate on “Services by way of admission to exhibition of cinematograph films” vide said Notification - HELD THAT: - Section 171 mandates that the benefit of a tax-rate reduction be passed to recipients through a commensurate reduction in prices. The inquiry is confined to whether that benefit was passed on; a supplier's freedom to fix prices and commercial factors affecting ticket pricing cannot defeat that statutory obligation. The Respondent produced no cogent evidence to justify the increased base prices and did not dispute the methodology or computation adopted by the DGAP, thereby failing to discharge the onus of showing that the benefit had been passed to viewers. [Paras 27, 28, 30, 31, 32]

The Respondent was held to have contravened Section 171 by not passing on the GST-rate reduction through commensurate reduction of first-class and second-class cinema-ticket prices; the DGAP report was accepted and the objections were rejected.

Final Conclusion: The Tribunal accepted the DGAP report and held that the Respondent had contravened Section 171 of the CGST Act. The Respondent was directed to deposit the determined profiteered amount with applicable interest in the consumer welfare funds, without imposition of penalty.

Reassessment proceedings - Disclosure of underlying information - Validity of the order u/s 148A(3) and the consequential reassessment notice where the information underlying discrepancies in foreign-remittance figures had not been furnished to the assessee

HELD THAT: - The Court found that the confusion concerning reconciliation of the figures available on the Risk Management Strategy portal with those considered in the earlier assessment and the payee's order arose from non-supply of the relevant details with the notice and the limited inquiry undertaken while deciding the objections. It expressly refrained from recording any finding on the correctness or legality of initiation of the reassessment proceedings. [Paras 10, 11, 12, 15]

The order under Section 148A(3) and the consequential notice under Section 148 were set aside, and the matter was restored to the notice stage for supply of the information, a further reply, personal hearing and a fresh order in accordance with law.

Final Conclusion: The petition was disposed of by restoring the reassessment proceedings to the notice stage, without adjudicating the merits or legality of their initiation.

TP Adjustment - Turnover filter in transfer-pricing comparability analysis - Functional comparability of software-product companies and captive software developers - Scope of remand in transfer-pricing adjustment

Turnover filter in transfer-pricing comparability analysis - Application of a turnover filter for selecting comparables for software-development services under the Transactional Net Margin Method - HELD THAT: - this Court in SAP Labs India Private Limited [2026 (9) TMI 711 - KARNATAKA HIGH COURT] Court held that there was no prescribed turnover filter. However, fixing a turnover limit of ₹200 crores could not be considered arbitrary, as it was based on a rational and logical basis.The entire exercise of finding a comparable is to identify entities as similar as possible to the assessee on the basis of their functional profile, assets, and risks. In this regard, the size of the company is material, and a wide difference in turnover would also affect their transaction pricing

Though no turnover filter is prescribed, a turnover ceiling founded on a rational and logical basis is not arbitrary. Comparability requires entities that are as similar as possible in their functional profile, assets and risks; the size of the enterprise and a substantial disparity in turnover can affect transaction pricing. [Paras 15, 16]

The turnover filter applied by the Tribunal was sustained, and no substantial question of law arose.

Functional comparability of software-product company with captive software developer - Exclusion of Bodhtree as a comparable to a captive software-development service provider on account of its software-product development activities - HELD THAT: - Bodhtree was engaged in software-product development, whereas the assessee developed software only for its associated enterprise and neither owned intellectual property nor developed or marketed software products. Its functional profile was therefore not comparable to that of a pure captive software-development company. [Paras 21]

Bodhtree could not be retained as a comparable, and the question raised did not give rise to a substantial question of law.

Scope of remand in transfer-pricing adjustment - Whether remand for reconsideration of transfer-pricing adjustments following exclusion of selected comparables required a complete fresh arm's-length-price exercise? - HELD THAT: - The final set of comparables had already been determined, and the remand was confined to reconsideration in light of the Tribunal's observations concerning exclusions. There was no basis to require the arm's-length-price exercise to be conducted afresh. [Paras 22, 23]

The remand was limited in scope, and no substantial question of law arose.

Final Conclusion: The Revenue's appeal was dismissed, as no substantial question of law arose on any of the surviving transfer-pricing questions.

Transfer pricing - Preference for internal comparables based on audited segmental accounts

Use of internal comparables for determining the arm's length price under TNMM where segmental financials for AE and non-AE transactions were derived from audited accounts - HELD THAT: - Comparable transactions with non-AE entities are to be preferred over external comparables unless found unsuitable. The chartered accountant's certificate not only confirmed the mathematical accuracy of the segmental figures but also certified that allocation was on a generally accepted rational basis. The TPO's conclusion that segmental data had not been maintained was erroneous, as the segmental financials were extracted from audited accounts. The ITAT's factual acceptance of the internal comparables was founded on material on record and was not perverse. [Paras 16, 18, 19]

No substantial question of law arose from the ITAT's acceptance of internal comparables and deletion of the transfer-pricing adjustment.

Final Conclusion: The Revenue's appeal was dismissed, as the ITAT's factual findings supporting use of internal comparables disclosed no perversity or substantial question of law.

Reassessment based on third-party search - Transitional saving of pre-amendment reassessment provisions - Saving of pre-amendment reassessment procedur

Validity of direct notice under section 148 for AY 2021-22, without a prior notice u/s 148A(b), where the information related to the assessee was obtained in a third-party search conducted during the transitional period - HELD THAT: - Section 152(3) preserves the provisions governing reassessment as they stood before the Finance (No. 2) Act, 2024 where the relevant search was initiated between 1 April 2021 and 1 September 2024. Since the third-party search was conducted within that period, the omission of Explanation 2 to section 148 did not affect its applicability. The Assessing Officer was consequently entitled to issue the notice under section 148 directly, without first proceeding under section 148A(b). [Paras 11]

The jurisdictional challenge to the reassessment notice and consequential assessment order was rejected.

Final Conclusion: The writ petition was dismissed. The petitioner may pursue the statutory appeal on the merits of the additions within one month without limitation objection, but cannot re-agitate the jurisdictional issue decided against her.

Objectivity in reassessment proceedings - Certainty and finality of assessment proceedings

Interim protection against reassessment proceedings concerning receipts from domain-name registration services - HELD THAT: - The Court found that the Assessing Officer was proceeding with an over-zealous, revenue-driven approach, disregarding objectivity and the basic tenets of certainty and finality in tax assessment proceedings. [Paras 11, 12]

Further proceedings pursuant to the reassessment notice were stayed until the next hearing.

Final Conclusion: At the interim stage, the reassessment proceedings were stayed pending further hearing.

Questions of law not arising from impugned order - Scope of appeal against miscellaneous application order

Maintainability of the Revenue's appeal against the Tribunal's order in the miscellaneous application when the proposed questions challenged an unamended finding in the original appellate order - HELD THAT: - The miscellaneous application order modified the terms of remand but did not alter the Tribunal's finding that, where the software transaction between the assessee and its Indian subsidiary had been accepted as a sale and purchase transaction and subjected to arm's length price determination, the question of treating the subsidiary as a dependent agent permanent establishment did not arise. Since the proposed questions assailed that unaltered finding, they did not arise from the impugned miscellaneous application order. [Paras 12, 13, 14]

The appeal was dismissed; the Revenue was, however, not precluded from challenging the original Tribunal order in accordance with law.

Final Conclusion: The Revenue's appeal was dismissed because its proposed questions did not arise from the impugned order in the miscellaneous application. The Revenue's remedy to assail the original Tribunal order in accordance with law was left open.

TP Adjustment - selection of MAM - Arm's length price for product replacement services - TNMM versus RPM - Transfer pricing comparability analysis - Five per cent tolerance range for arm's length price determination

Arm's length price for product replacement services - Transactional Net Margin Method versus Resale Price Method - Selection of the most appropriate method for determining the arm's length price of product replacement services supplied at nil sale price to the associated enterprise's customers - HELD THAT: - The selection of method depended on the assessee's functional profile. The Tribunal's finding that the assessee was a service provider and custodian of the imported spares, rather than a trader, was not perverse: it neither fixed the resale price nor selected customers, supplied the parts at nil sale price, and assumed no attendant risks. On that accepted profile, RPM was not an appropriate method. [Paras 23, 24, 25]

The Tribunal's direction to recompute the arm's length price under TNMM was sustained, and no substantial question of law arose.

Transfer pricing comparability analysis - Challenge to the Tribunal's acceptance and rejection of comparables for benchmarking product replacement services - HELD THAT: - The question concerning the comparables selected for determining the arm's length price was held governed by Sap Labs India Pvt. Ltd.[2026 (9) TMI 711 - KARNATAKA HIGH COURT]. [Paras 26]

No substantial question of law arose on the comparability issue.

Consideration of the five per cent range under the erstwhile proviso to section 92C(2) while recomputing the arm's length price - HELD THAT: - The Tribunal had directed consideration of the benefit in accordance with judicial precedents. The manner of applying the tolerance range was held no longer res integra and governed by Sap Labs India Pvt. Ltd [2026 (9) TMI 711 - KARNATAKA HIGH COURT] . [Paras 27]

The Tribunal's direction to consider the benefit was not interfered with, and no substantial question of law arose.

Final Conclusion: The appeal was dismissed, as no substantial question of law arose.

Rejection of transfer pricing study on modification of comparability filters - Interest on delayed associated-enterprise receivables and working capital adjustment

Rejection of transfer pricing study on modification of comparability filters - Determination of arm's-length price for software development services - Validity of rejecting the transfer pricing study for software development services merely because certain comparability filters required modification - HELD THAT: - The Transfer Pricing Officer had not disputed the assessee's functions, assets and risks, contractual terms, tested-party selection, databases or search keywords. Where the objection was confined to modification of certain filters, the study could not be rejected on the ground that the data used for arm's-length-price computation was unreliable or incorrect. The appropriate course was to apply the modified filters to the identified database, examine the accept/reject matrix and determine the arm's-length price on that basis, subject to exclusion of functionally unsuitable comparables. [Paras 17, 18, 19, 20, 21]

The rejection of the transfer pricing study was held inappropriate; the arm's-length price for the software development segment was remanded for fresh determination on the modified-filter database.

Interest on delayed associated-enterprise receivables - Working capital adjustment - TP adjustment for delayed receivables from an associated enterprise where the software development segment was being remanded for determination of arm's-length price - HELD THAT: - Interest on outstanding receivables is a separate international transaction where it is not aggregated with margins determined under the transactional net margin method after allowing working capital adjustment. Outstanding payables and receivables with associated enterprises do not correlate and cannot be set off. Since the arm's-length price of the software development segment was restored for fresh determination, the applicability of the receivables adjustment in the light of working capital adjustment required reconsideration. [Paras 24]

The issue of interest on delayed receivables was restored to the Assessing Officer for fresh consideration along with the determination of the arm's-length price of the software development segment.

Final Conclusion: The appeal was partly allowed for statistical purposes. The transfer-pricing determination for software development services and the consequential delayed-receivables adjustment were restored for fresh consideration, while the remaining unadjudicated transfer-pricing grounds were dismissed and the penalty-initiation ground was treated as premature.

TP Adjustment - interest on compulsorily convertible debentures pending actual conversion - delayed associated-enterprise receivables and commercial uniformity

Transfer-pricing disallowance of interest on the portion of compulsorily convertible debentures presented as equity in the financial statements, though the debentures remained outstanding - HELD THAT: - Ind AS-mandated reclassification of a compound financial instrument for financial-statement disclosure does not alter the character of subsisting compulsorily convertible debentures as debt. Interest on such debentures cannot be disallowed merely because a component is presented as equity; however, the position depends on whether there was an actual conversion or redemption during the relevant year. [Paras 10]

The issue was remitted to the AO/TPO for verification of actual conversion or redemption; if there was none and the treatment was only an Ind AS reclassification, the interest paid on the debentures shall be allowed.

Delayed associated-enterprise receivables and commercial uniformity - TP adjustment of notional interest on overdue receivables from associated enterprises where similar delayed receivables from non-associated customers carried no interest - HELD THAT: - Where the associated-enterprise and non-associated-enterprise transactions were similar and the assessee consistently did not charge interest on delayed collections from either class of customers, commercial uniformity precluded imputation of notional interest solely on associated-enterprise receivables. [Paras 15]

The adjustment for interest on overdue associated-enterprise receivables was deleted.

Final Conclusion: The appeal was allowed. The CCD-interest issue was remitted for verification consistent with the principle that subsisting CCDs retain their debt character, while the adjustment for interest on overdue associated-enterprise receivables was deleted.

Unexplained money - demonetization-period cash deposits - Business receipts from admitted source

Validity of the addition as unexplained money in respect of demonetization-period cash deposits in the bank accounts of a puffed-rice trader, when other credits in the same accounts were accepted as business turnover - HELD THAT: - The deeming fiction for unexplained money requires the Revenue to establish its statutory ingredients. Where the assessee's business and the use of the bank accounts for business receipts were accepted, cash deposits in those accounts could not be selectively characterised as unexplained merely because they were made during the demonetization period.

Revenue produced no positive material showing that the deposits arose from an independent undisclosed source, nor any abnormality or disproportionality vis-a -vis the admitted business.

Gross business receipts cannot be taxed in their entirety as unexplained money when only the profit embedded in business turnover is assessable, absent material establishing a distinct unexplained source. [Paras 27, 28, 29, 30, 31]

The separate addition as unexplained money was deleted, while the business income determined by the Commissioner (Appeals) was left undisturbed.

Final Conclusion: The appeal was allowed by deleting the addition for the demonetization-period cash deposits, which were held to form part of business receipts in the absence of material establishing an independent unexplained source.

Unexplained cash deposits in bank account - Cash deposits explained by prior withdrawals

HELD THAT: - The cash-flow statement showed that certain deposits were supported by equivalent prior withdrawals. However, the interim cash deposits and agricultural expenditure affecting the available cash balance were not satisfactorily explained. The addition was therefore confined to the unexplained balance.

We restrict the addition of Rs. 13.10 lakhs instead of the addition of Rs. 21.71 lakhs and the assessee will get a consequential relief.[Paras 5, 7]

The addition was restricted to the portion of cash deposits not satisfactorily explained, with consequential relief.

Final Conclusion: The appeal was partly allowed and the addition was confined to the unexplained portion of the cash deposits.

TP Adjustment - comparability - Reliability of BPO segmental margins under TNMM - Segmental comparability of IT-enabled services

Comparable selection - Reliability of BPO segmental margins under TNMM - Allocation of common operating expenses - Exclusion of Datamatics Financial Services Ltd.'s BPO segment as a comparable under TNMM despite the segmental information having been obtained under section 133(6) - HELD THAT: - The power to obtain information from a proposed comparable establishes the source of the data, but does not establish the correctness or reliability of the comparable's allocation of common expenses. Under TNMM, where OP/OC is the profit level indicator, omission of operating expenditure attributable to the BPO segment understates its cost and correspondingly overstates its margin. As material entity-level expenses had not been allocated to the BPO segment and no verifiable allocation basis was shown, the segmental margin could not serve as a reliable uncontrolled benchmark. [Paras 29, 30, 31, 32, 33]

The exclusion of Datamatics Financial Services Ltd. from the final set of comparables was upheld and the Revenue's grounds were dismissed.

Segmental comparability of IT-enabled services - Inclusion of Accentia Technologies Ltd.'s medical transcription, billing, coding and related IT-enabled service segments as comparables notwithstanding its separate software development activity - HELD THAT: - Comparability under TNMM must be examined with reference to the segment whose financial results are used for benchmarking. The presence of a functionally different activity at the entity level does not render the company incomparable where that activity is separately identified and excluded from the segmental comparison. Since the software development segment was excluded and the assessee failed to establish that the retained segments included software development activity or were otherwise functionally dissimilar, no interference was warranted. The broader objections were also general and did not identify any other comparable for inclusion or exclusion. [Paras 41, 42, 43, 44, 45]

The inclusion of Accentia Technologies Ltd. was sustained, and no relief was granted on the general objections concerning comparables.

Final Conclusion: The Revenue's appeal and the assessee's cross-objections were dismissed.

Taxability of unrealised mark-to-market gain on forward exchange contracts - Recognition of foreign exchange differences u/s 43AA read with ICDS VI

Taxability of unrealised mark-to-market gain recognised in the books under AS-11 on forward exchange contracts, where ICDS VI requires recognition on settlement - HELD THAT: - Section 43AA requires foreign exchange gains or losses to be computed in accordance with the notified ICDS, rather than solely by the accounting treatment in the financial statements. ICDS VI distinguishes specified forward exchange contracts from contracts subject to year-end recognition and requires the exchange difference on the excluded contracts to be recognised on settlement. As the finding that the contracts fell within that category remained unrebutted, book recognition of the unrealised gain under AS-11 could not determine its taxability. [Paras 8, 9, 10]

The deletion of the addition towards unrealised mark-to-market gain was upheld for AY 2022-23 and AY 2023-24.

Final Conclusion: The Revenue's appeals were dismissed. Unrealised mark-to-market gain on the specified forward exchange contracts was taxable only on settlement in accordance with section 43AA read with ICDS VI.

Ex parte appellate order - Principles of natural justice denied - Ex parte confirmation of the unexplained cash-deposit addition and the related concealment penalty without a further opportunity to substantiate the case - HELD THAT: - The Tribunal held that non-compliance with notices may have reasons which cannot be ruled out. Having regard to the circumstances and the principles of natural justice, the assessee was entitled to one further opportunity to produce evidence and information in support of the challenge to the addition; the same course was held applicable to the penalty appeal. [Paras 6, 8]

The appellate orders were set aside and the matters remitted for fresh adjudication after affording adequate opportunity of hearing; the assessee was directed to cooperate in the proceedings.

Final Conclusion: Both appeals were allowed for statistical purposes, with the disputed addition and related penalty remitted for fresh appellate adjudication.

Unexplained investment u/s 69 - Partners' capital contribution - Addition as unexplained investment in respect of immovable properties recorded in the firm's books and funded through partners' capital contributions

HELD THAT: - Section 69 applies only to investments not recorded in the assessee's books of account. The immovable properties and the corresponding partners' capital contributions were recorded in the regular books, which were produced and neither found defective nor rejected. The identifiable partners' capital accounts, returns and balance sheets were furnished; therefore, any doubt concerning a partner's financial capacity was required to be examined in that partner's assessment and could not render the firm's recorded investment unexplained under section 69. The decision concerning unexplained cash credits was inapplicable because its statutory requirements differed from those governing recorded investments under section 69.

The reliance placed by the Revenue on the decision of NRA Iron & Steel (P.) Ltd. [2019 (3) TMI 323 - SUPREME COURT] is misplaced and principles laid down in PCIT vs. Vaishnodevi Refoils & Solvex [2018 (7) TMI 651 - SC ORDER] support the assessee's case. [Paras 7]

The addition under section 69 was deleted as unsustainable in fact and law.

Final Conclusion: The appeal was allowed and the addition for unexplained investment was deleted. The challenge to reassessment was left unadjudicated as academic.

Effect of approved insolvency resolution plan on customs recovery

Sustainability of customs demand or recovery against the corporate debtor after approval of its insolvency resolution plan - HELD THAT: - The Resolution Plan having been approved by the National Company Law Tribunal, no demand or recovery could be sustained against the appellant. [Paras 9]

The appeal was disposed of on the basis that the demand or recovery was not sustainable against the appellant.

Final Conclusion: In view of the approved Resolution Plan, no customs demand or recovery was sustainable against the appellant, and the appeal was disposed of.

Re-determination of customs value following misdeclaration - Redemption fine on goods permitted only for re-export - Penalty for misdeclaration of prohibited imported goods - Penalty for false or incorrect information in business transactions

Re-determination of customs value following misdeclaration - Re-determination of the value of undeclared used printers and accessories following misdeclaration - HELD THAT: - The admitted misdeclaration of the imported goods justified re-determination of their value. [Paras 5]

The re-determined value was upheld.

Redemption fine on goods permitted only for re-export - Imposition of redemption fine on misdeclared prohibited goods permitted only for re-export - HELD THAT: - The statutory scheme does not permit conditional redemption requiring re-export. Where the goods were not allowed clearance for home consumption and were permitted only for re-export, imposition of redemption fine was unjustified. [Paras 6, 7]

The redemption fine was set aside.

Penalty for misdeclaration of prohibited imported goods - Penalty under Section 112(a)(i) for misdeclaration of prohibited imported goods - HELD THAT: - The admitted misdeclaration warranted penalty; however, as the goods were not allowed to be redeemed, the penalty was reduced having regard to the value of the goods. [Paras 7]

The penalty under Section 112(a)(i) was sustained at a reduced quantum.

Penalty for false or incorrect information in business transactions - Penalty under Section 114AA for furnishing false or incorrect information in an import transaction - HELD THAT: - Section 114AA applies to all business transactions involving false or incorrect information and is not confined to cases of fraudulent exports. [Paras 7]

The penalty under Section 114AA was upheld.

Final Conclusion: The appeal was partly allowed: the redemption fine was deleted, while the penalties for misdeclaration and false information were sustained, the former at a reduced quantum.

Costs on restoration of struck-off company - Proportionality of costs under Rule 87A

Quantum of costs imposed on restoration of the struck-off company under Rule 87A - HELD THAT: - While the company's persistent non-filing of financial statements and returns was a serious lapse for which ignorance of law afforded no defence, Rule 87A(4)(c) requires the costs imposed on restoration to bear a rational correlation with the costs actually occasioned by the appeal or application. As such costs carry a penal consequence, their quantification requires a determination founded on proportionality. The impugned cost disclosed neither a rational basis nor a computation of the actual costs incurred. [Paras 10, 15]

The cost was reduced from Rs. 10,00,000 to Rs. 5,00,000.

Final Conclusion: The appeal was partly allowed by reducing the costs payable upon restoration of the company to Rs. 5,00,000.

Appellate interference with discretionary interim orders - Vacation of interim status quo order before original forum

Maintainability of an appeal against an interim status quo order in winding-up proceedings without first seeking its vacation or modification before the Tribunal that made it - HELD THAT: - An interim status quo order, being a discretionary measure to preserve the subject matter pending adjudication, ought ordinarily to be challenged first before the forum granting it by seeking vacation or modification. The appellant bypassed that recourse. The intricate factual disputes, including disputed share transfers, required preservation of the subject matter; further, the record did not prima facie establish that the company was carrying on business activity. No ground for appellate interference with the protective interim order was made out. [Paras 26, 27, 29, 30, 31]

The status quo order was affirmed, the appellate interim arrangement for safeguarding the company's funds was continued pending decision of the company petition, and the appeal was dismissed.

Final Conclusion: The appeal against the interim status quo order was dismissed. The protective interim arrangements were continued pending adjudication of the company petition, which was directed to be expedited.

Retroactive exclusion of interim moratorium for personal guarantors - Written and reasoned interim orders in securitisation proceedings - Natural justice for auction purchasers - Oral directions by adjudicatory tribunals

Retroactive application of Section 96(4) of the Insolvency and Bankruptcy Code - Interim moratorium for personal guarantors - Vested rights in procedural protections - Applicability of Section 96(4) of the Insolvency and Bankruptcy Code to pending applications for insolvency resolution of personal guarantors to corporate debtors - HELD THAT: - The process between filing of an application and its admission or rejection was held to be procedural. The interim moratorium operating during that transitory stage does not confer an absolute or indefeasible vested right upon the debtor. The amendment was introduced to remedy misuse of the pre-admission protection and, applying the mischief rule, the expression "is filed" was held to include applications pending when the amendment came into force.

It is relevant to note here that the Supreme Court, in the cases of Ellora Paper Mills Limited Vs. State of M.P [2022 (1) TMI 1513 - SUPREME COUR]; TRF Limited [2017 (7) TMI 1288 - SUPREME COUR] and Perkins Eastm [2019 (11) TMI 1154 - SUPREME COUR] repeatedly held that the amended Section 12(5) of the Arbitration Act, concerning the eligibility of the arbitrators, applied to pending proceedings also. This concerned the question of unilateral appointment of arbitrators/arbitral tribunal by a party, that vitiated the arbitration proceedings itself.

We have applied our mind to the subject provision and we have come to the considered conclusion that the said provision added by way of amendment must operate retroactively and hence, not only to applications/proceedings initiated on and from 26.05.2026, but also to pending proceedings.

The whole purpose of introducing the amendment to address the mischief noted hereinabove must be satisfied in the fullest by applying the same to the pending proceedings also, in larger public interest. This is quite apart from the fact that the respondents do not have a ‘vested right’ under Section 96 of the IBC during the procedural realm between Sections 94 to 99 thereof, and they cannot claim that the amendment should apply only prospectively.

Sub-section (4) of Section 96 of the IBC added by way of amendment with effect from 26.05.2026, applies retroactively and hence, even to pending proceedings. Although it operates from the said date in futuro, its effect is equally on proceedings pending on the said date under Sections 94 and/or 95 of the IBC.

In the light of the conclusion rendered hereinabove, we are in agreement with the findings rendered in the judgment in the case of Tata Capital Financial Services Limited Vs. Neel Motors LLP and others [2026 (9) TMI 301 - BOMBAY HIGH COUR] and order of IDBI Trusteeship Services Limited vs. Manish Jain & Ors. [2026 (8) TMI 1315 - DELHI HIGH COUR] (supra).[Paras 47, 54, 57, 62, 64]

Section 96(4), effective from 26.05.2026, applies retroactively to pending applications under Sections 94 and 95, and the interim moratorium in respect of personal guarantors to corporate debtors ceased to operate from that date.

Written reasons for interim restoration of possession - Oral directions by adjudicatory tribunals - Writ jurisdiction over jurisdictionally defective tribunal orders - Restoration of possession of a secured asset by an interim order founded on alleged oral directions of the Debts Recovery Tribunal - HELD THAT: - Oral directions are not contemplated in proceedings before a court or tribunal. Any ad-interim restraint required a contemporaneous written order recording at least a prima facie case, balance of convenience and irreparable loss. As no such restraint or satisfaction was recorded, and the Tribunal itself recognised that restoration could not ordinarily be ordered at the interim stage, its direction for restoration of possession was unsustainable. A writ could be entertained notwithstanding an alternative remedy where the tribunal order was contrary to settled law. [Paras 97, 98, 99, 100, 101]

The order directing interim restoration of possession was set aside, and the borrowers were directed to hand over possession of the secured asset to the secured creditor.

Reasoned interim relief in securitisation proceedings - Natural justice for auction purchasers - Ad-interim restraint on acceptance of auction consideration and issuance of sale certificates for secured assets without hearing the auction purchasers - HELD THAT: - The restraint orders had drastic consequences for the secured creditor and auction purchasers, who had not been heard. They contained no discussion of the prima facie case, balance of convenience or irreparable loss required for ad-interim relief and therefore violated principles of natural justice. [Paras 111]

The orders restraining completion of the auction sales and issuance of sale certificates were quashed.

Final Conclusion: Section 96(4) of the Insolvency and Bankruptcy Code was held retroactively applicable to pending insolvency applications involving personal guarantors to corporate debtors. The writ petitions were allowed, with the impugned interim restraints and restoration order being set aside where they could not be sustained.

Post-admission settlement and withdrawal of corporate insolvency resolution process - Statutory bar on withdrawal before constitution of committee of creditors

Whether, in view of the settlement having been arrived at after admission of the Section 9 application and commencement of CIRP, this Appellate Tribunal can, in exercise of its jurisdiction under Rule 11 of the NCLAT Rules, 2016, itself set aside the admission order and bring the CIRP to an end? - HELD THAT: - The amended statutory scheme provides the mechanism for withdrawal of an admitted insolvency application and expressly restricts withdrawal before constitution of the Committee of Creditors and after invitation of resolution plans.

A consensual post-admission settlement, the operational creditor's consent, and non-constitution of the Committee of Creditors do not permit the settlement by itself to efface the admission order or enable the Appellate Tribunal to bypass that mechanism. [Paras 24, 25, 26, 27, 28]

The settlement was taken on record only to enable the Interim Resolution Professional to seek appropriate orders before the Adjudicating Authority under section 12A; the prayer for direct relief under Rule 11 was declined.

Final Conclusion: The appeal and the Rule 11 application were disposed of without adjudicating the challenge to the admission order on merits. The parties and the Interim Resolution Professional were left to pursue the statutory process for withdrawal before the Adjudicating Authority.

Maintainability of Writ jurisdiction despite alternate statutory remedy - Prospective operation of foreign-exchange seizure power - Seizure for suspected foreign-exchange contravention - Recorded reasons and reason to believe - No-objection certificate for overseas investment - Reasoned administrative decision-making

Alternative remedy and writ jurisdiction - Jurisdictional challenge to seizure power - Maintainability of the writ petitions despite the statutory mechanism under the foreign-exchange law - HELD THAT: - Availability of an alternate remedy is a rule of discretion and not an absolute bar to writ jurisdiction. The challenge to the seizure order raised threshold questions concerning the statutory power to invoke the seizure provision and the legality of the decision-making process, distinct from the factual sufficiency of material establishing the alleged contravention. The challenge to the refusal of the no-objection certificate was also maintainable because it alleged failure of fair administrative decision-making and no appellate remedy was available.

In Radha Krishan Industries [2021 (4) TMI 837 - SUPREME COURT] Hon’ble Supreme Court has considered the scope of this rule in paragraphs 27 and 28. In paragraph 27.3, the Hon’ble Supreme Court has recognised, among other circumstances, cases involving breach of natural justice and cases where the proceedings are wholly without jurisdiction as exceptions to the rule of alternate remedy.[Paras 13]

Both writ petitions were held maintainable; however, the seizure petition was maintainable only to examine the statutory power and legality of the decision-making process, while merits requiring factual appraisal were left to the statutory authority.

Prospective operation of foreign-exchange seizure power - Subsequent acts under a continuing arrangement - Applicability of the seizure provision to a funding arrangement initiated before its commencement but followed by subsequent payments - HELD THAT: - The seizure provision, being substantive, cannot retrospectively apply to transactions completed before it came into force merely because their consequences continued. However, actual payments made after its commencement are subsequent acts, not merely the subsistence of an earlier liability. Such later acts, when alleged to form part of the arrangement under investigation, may be considered for exercising the seizure power; whether they constitute a substantive contravention remains for statutory determination. [Paras 14]

The challenge based solely on retrospective application failed, since the Enforcement Directorate relied upon actual subsequent payments made after the seizure provision had come into force.

Jurisdictional foundation for seizure of equivalent assets - Substance of connected financial transactions - Suspected holding of foreign exchange outside India - Whether the connected foreign borrowings, rupee-denominated debentures, acquisition of the Indian operating company and later repayments furnished a jurisdictional foundation to examine a suspected contravention? - HELD THAT: - Connected transactions undertaken through related entities within a short period could not be artificially viewed as isolated borrowings, investments or share acquisitions. The immediate onward transfer of the debenture proceeds, the financial position of the acquiring entity, the creation of a substantial liability in India, the subsequent amalgamation and discharge of that liability from the Indian business resources supplied material to examine the arrangement as a whole. The rupee denomination of the debentures, the foreign portfolio investor status of the subscriber and formal regulatory features of individual steps were relevant but not conclusive at the threshold. The Court did not finally determine the alleged contravention. [Paras 15]

The material disclosed sufficient jurisdictional facts to invoke the seizure process and examine the transactions under the foreign-exchange law, subject to final consideration by the Competent Authority.

Recorded reasons and reason to believe - Supplementation of statutory orders - Continuation of seizure of business premises - Whether the seizure order could be sustained on its recorded reasons and whether delay or seizure of the head-office premises invalidated the action? - HELD THAT: - A statutory seizure order must stand on reasons recorded when power is exercised and cannot be supported by an entirely new foundation subsequently. The seizure order, however, already recorded the alleged circular movement of funds, return of funds to the original lender, the asserted absence of genuine capital infusion, the relationship between entities and the connected debenture transaction. Charts used in the proceedings merely depicted those recorded transactions and did not add a new allegation. The elapsed time did not, at the threshold, invalidate the action in view of the complexity and continuing payments, though delay, cooperation and absence of asset dissipation remained relevant to continuation of seizure. Seizure of the head-office premises secured the property but did not by itself prohibit lawful business operations therefrom. [Paras 16]

The recorded material was sufficient for the Authorised Officer to form a preliminary reason to believe; confirmation and continuation of seizure were left to the Competent Authority. The petitioner may lawfully use the seized premises for business but may not create third-party rights or deal with the property inconsistently with the seizure.

Regulatory approvals and independent foreign-exchange inquiry - Effect of tax proceedings in foreign-exchange action - Effect of regulatory communications, tax assessments and related judicial decisions upon the foreign-exchange seizure proceedings - HELD THAT: - The regulatory and tax history was relevant but did not foreclose examination under the foreign-exchange law. The communications of the regulatory authorities addressed particular requirements concerning the debenture instrument and did not establish that the entire connected movement of funds had been examined and approved. Likewise, the tax proceedings determined questions arising under the income-tax law concerning foreign entities and did not decide whether the overall arrangement involving the Indian company attracted the foreign-exchange prohibition. Those materials must nevertheless be fairly considered by the Competent Authority. [Paras 17]

The earlier regulatory and tax proceedings did not invalidate the seizure action, but their effect and the petitioner's explanation must be considered in the statutory proceedings.

No-objection certificate for overseas investment - Reasoned administrative decisions - Nexus between investigation and proposed investment - Validity of refusal of a no-objection certificate for investment in a wholly owned global treasury entity while an investigation was pending - HELD THAT: - Mere pendency of an investigation cannot automatically justify refusal, since the rule itself provides a mechanism for persons under investigation to seek a no-objection certificate. Refusal must rest on relevant, rational and disclosed reasons showing a nexus between the investigation and the proposed investment. Although the proposed investment in an entity intended to finance overseas group entities was not wholly unrelated to the subject of investigation, the rejection communication disclosed no reason or nexus. Reasons subsequently advanced, including a later seizure order, could not retrospectively validate the earlier rejection. A timely but unreasoned response did not, however, result in a deemed no-objection. [Paras 18, 19]

The rejection was set aside and remitted for fresh, time-bound consideration through a reasoned decision communicating the substance of the grounds, subject to lawful protection of sensitive material; no direction was issued to grant the no-objection certificate or permit the investment before fresh consideration.

Final Conclusion: The challenge to the seizure order was dismissed, subject to statutory consideration of confirmation and continuation of the seizure, while lawful use of the seized business premises was preserved. The unreasoned refusal of the no-objection certificate was set aside and remitted for fresh, reasoned consideration; no opinion was expressed on the merits of the investigation or entitlement to the proposed investment.

Works contract service - composite construction contracts not taxable as commercial or industrial construction service - Penalty for service tax on goods transport agency services under reverse charge

Classification of composite construction contracts as works contract service - Commercial or industrial construction service - Service-taxability of composite construction contracts executed with materials under the head of Commercial or Industrial Construction Service - HELD THAT: - Applying CCE Vs Larsen & Toubro Ltd [2015 (8) TMI 749 - SUPREME COURT] the Tribunal held that a contract involving both services and materials is a distinct works contract and cannot be subjected to service tax under a service category applicable to services simpliciter. Such contracts were not taxable before 01.06.2007 and, thereafter, could be taxed only as Works Contract Service if covered by its definition. [Paras 7]

The demand confirmed under Commercial or Industrial Construction Service, with consequential interest and penalties, was set aside.

Penalty on goods transport agency services under reverse charge - Penalty imposed for service tax payable on Goods Transport Agency services under reverse charge - HELD THAT: - The Tribunal invoked section 80 in relation to the penalty imposed under section 76. [Paras 8]

The service-tax demand on Goods Transport Agency services under reverse charge was upheld, but the penalty was set aside.

Final Conclusion: The appeal was partly allowed. The demand under Commercial or Industrial Construction Service and consequential liabilities were set aside, while the admitted demand on Goods Transport Agency services under reverse charge was sustained without penalty.

Service-tax valuation of commercial or industrial construction service-free supplies by service recipient

Inclusion of steel and cement supplied free of cost by the service recipient in the gross value of commercial or industrial construction service for denial of the notified abatement - HELD THAT: - Whether the cost of materials supplied free of cost will form part of the gross value for determination of service tax liability, which stands settled in the case of CST Vs. Bhayana Builders (P) Ltd [2018 (2) TMI 1325 - SUPREME COURT] held that Service tax is leviable on taxable services, and the value of goods or materials cannot be added to the gross amount charged unless specifically included by the Legislature. Materials supplied free of cost by the service recipient could not, therefore, be included in valuing the construction service. [Paras 8, 9]

The denial of abatement and the resulting demand were set aside; the appeal was allowed with consequential relief in accordance with law.

Final Conclusion: The impugned order was set aside because the value of materials supplied free of cost by the service recipient could not be included in the taxable value of the construction service. The appeal was allowed with consequential relief in accordance with law.

MVAT assessment and recovery of tax dues - Clean-slate effect of an approved insolvency resolution plan on MVAT dues - Refund of MVAT appellate pre-deposit after full settlement of tax dues

Continuation of MVAT appellate assessment and tax-recovery proceedings after approval of a clean-slate resolution plan settling the tax department's dues - HELD THAT: - Approval of the resolution plan under Section 31 of the IBC bound the tax authorities. Claims not forming part of the plan stood extinguished, and fresh or pending proceedings for pre-approval statutory dues could not be continued. The appellate authority, therefore, lacked jurisdiction to confirm the assessment and direct recovery of the tax dues.

Relevant is a decision of this Court, in Murli Industries Ltd. [2021 (12) TMI 1182 - BOMBAY HIGH COURT] wherein it held that the aim and object of IBC is to revive the Corporate Debtor by putting quietus to the claims against it. Providing certainty to the resolution applicant of ‘no’ claims in future against the Corporate Debtor appears to be the essence of the resolution. [Paras 11, 13, 14]

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

Refund of statutory MVAT pre-deposit after settlement and extinguishment of the underlying tax demands under the resolution plan - HELD THAT: - The statutory pre-deposit formed part of the overall tax demands settled under the approved plan. As the plan provided for full settlement of the department's dues, retention of the pre-deposit in excess of the approved settlement was impermissible. [Paras 16]

Refund of the statutory pre-deposit with applicable interest was directed.

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