TaxTMI Updates e-Newsletter
Sep 29,2026

Arrest in disregard of court-directed appearance - Personal liberty under Article 21 - Overreaching pending judicial proceedings

Interim validity of the petitioner's arrest after appearance before GST authorities pursuant to the Court's direction in pending proceedings - HELD THAT: - The Court had directed the petitioner to appear to test his bona fides and required the authorities to report the outcome on the next listed date. The arrest authorisation neither referred to that direction nor to the petitioner's appearance with records for the investigation. The routine grounds stated for arrest were prima facie misplaced in those circumstances. The discrepancy between the time stated in the summons and the later generation of its DIN also prima facie indicated manipulation. The detention and subsequent formal arrest were consequently held prima facie to violate Article 21 and to amount to an attempt to overreach the pending proceedings. [Paras 9, 10, 11, 12, 14]

The petitioner was directed to be released forthwith as an interim measure, subject to surrender of passport and travel-related conditions; the order was not an expression on the merits of the pending proceedings. The concerned officers were required to explain their conduct before any recommendation for disciplinary action.

Final Conclusion: Finding a prima facie violation of personal liberty and disregard of the pending judicial process, the Court granted interim release subject to conditions and called upon the concerned officers to explain their conduct.

Parallel GST proceedings - identity of subject matter - Writ jurisdiction - alternative statutory remedy and delay and laches

Writ jurisdiction - alternative statutory remedy and delay and laches - Exercise of writ jurisdiction against a GST adjudication order where the statutory appeal was not pursued within time and a rectification application remained pending - HELD THAT: - An efficacious statutory appeal was available against the adjudication order. The jurisdictional and factual objections to the demand could appropriately be examined in appellate proceedings; the petitioner allowed the appellate period to lapse and failed to furnish a satisfactory explanation for the delayed writ challenge. The filing and pendency of a rectification application neither obliterated the delay nor conferred a fresh or extended period to challenge the original order. [Paras 25, 26, 27, 46, 47]

The writ petition was not entertained owing to the unavailed alternative remedy and unexplained delay and laches.

Parallel GST proceedings-same subject matter - Applicability of the bar on parallel GST proceedings to a Section 73 demand for incorrect tax liability and inadmissible input tax credit, when the DGGI proceedings under Section 74 concerned alleged fraudulent input tax credit without actual supply - HELD THAT: - The statutory bar operates only where proceedings initiated by different GST authorities concern the same subject matter; a common assessee, overlapping period, common transactions, or a shared factual background is insufficient. The proceedings in question rested on materially different statutory bases, allegations and liabilities: the impugned proceedings concerned correct tax liability and admissibility of input tax credit, whereas the DGGI proceedings alleged fraudulent availment without actual supply. The deemed conclusion of the DGGI proceedings following payment by the principal noticee neither extinguished the independently determined liability nor retrospectively invalidated the other proceedings. Transfer of investigation in respect of one set of allegations could not exclude another proper officer's jurisdiction absent identity of subject matter. [Paras 42, 48, 49, 50, 51]

The bar against parallel proceedings was inapplicable, and the jurisdictional challenge was rejected for the purpose of exercising writ jurisdiction.

Penalty for same act or omission-prior penalty requirement - Applicability of the statutory bar against penalty for the same act or omission where the earlier DGGI proceedings against co-noticees were deemed concluded - HELD THAT: - The bar requires prior imposition of a penalty upon the person concerned for the same act or omission. The DGGI proceedings against the petitioner were deemed concluded consequent upon payment by the principal noticee, and no tax, interest or penalty had been imposed upon the petitioner in those proceedings. Mere inclusion as a co-noticee could not satisfy the statutory requirement. [Paras 43, 44, 45]

The statutory bar against penalty for the same act or omission could not be invoked.

Final Conclusion: The writ petition was dismissed, subject to the petitioner's right to pursue any remedy available in law against an order on the pending rectification application. The observations were confined to the exercise of writ jurisdiction and were not a final determination of issues arising in such proceedings.

Post-death GST proceedings against legal representative - Constitutional validity of estate-limited GST representative liability - Writ jurisdiction despite alternative statutory remedy - Lawful retention of cash deposited during GST investigation

Post-death determination of GST penalty - Legal representative's liability limited to deceased's estate - Section 93 of the CGST Act permits commencement, after a person's death, of proceedings to determine tax, interest or penalty attributable to that person's conduct through the legal representative - HELD THAT: - The expression permitting liability to be determined after death contains no qualification that a notice or adjudicatory proceeding must have been commenced during the deceased's lifetime. Section 93 supplies the statutory authority for post-death determination; investigation is distinct from adjudication. It is not an independent penal provision: the underlying contravention must still be established, and, where Section 93(1)(b) applies, recovery is confined to the deceased's estate to the extent it can meet the charge. [Paras 25, 26, 28, 31, 43]

The show cause notice was not without jurisdiction merely because it was issued after death; compliance with the conditions of Section 93(1)(b) and the merits of the alleged contravention were left open.

Constitutional validity of estate-limited representative liability - Effective opportunity of hearing in post-death adjudication - Section 93(1)(b) of the CGST Act is not violative of Article 14 merely because it permits determination of liability after the death of the person alleged to have committed the contravention - HELD THAT: - The provision preserves liabilities arising from the deceased's conduct while providing representation of the estate; it does not deem the legal representative to have committed the wrong. The limitation of payment to estate assets, the requirement of an effective hearing on the relied-upon material, and the availability of an appeal provide a rational and safeguarded procedure. The representative's inability to provide a personal account cannot be treated as an admission, although a particular adjudication may fail for want of evidence or a fair opportunity. [Paras 34, 35, 36, 37, 43]

The constitutional challenge to Section 93(1)(b) was rejected.

Writ jurisdiction despite alternative statutory remedy - Statutory appeal against GST adjudication order - Whether writ petition was maintainable for examination of the pure questions concerning the construction and constitutional validity of Section 93, while factual and merits challenges to the Order-in-Original were required to be pursued in statutory appeal? - HELD THAT: - Availability of an appellate remedy did not preclude examination of the pure questions of law and constitutional validity. However, questions concerning service of notice, proof of contravention, fulfilment of the conditions for representative liability, penalty computation and the inconsistent operative clauses required appellate examination rather than substitution of the statutory mechanism by writ jurisdiction. [Paras 18, 19, 44, 45, 46]

The remaining objections were left open for statutory appeal, which, if instituted within the period granted, was directed to be entertained and decided on merits without rejection on limitation.

Retention of cash deposited during GST investigation - Department's continued retention or appropriation of cash deposited during investigation required disclosure of a subsisting lawful basis and a reasoned determination after hearing the legal representative - HELD THAT: - A deposit stated to have been voluntarily made pending investigation, and placed in a fixed deposit, does not by itself establish a right to indefinite retention. As voluntariness and the effect of the inconsistent operative clauses were disputed, the Court did not determine entitlement on the facts. The Department was required to furnish a complete account, identify the precise legal authority and enforceable liability relied upon, and have the claim determined by the competent authority after hearing the Petitioner. [Paras 47, 48, 49, 50, 51]

Any balance for which no subsisting lawful basis for retention or appropriation is established must be released with the interest actually earned on the fixed deposit.

Final Conclusion: The challenge to the post-death initiation of proceedings and to the constitutional validity of Section 93(1)(b) was rejected. The remaining merits were relegated to statutory appeal, and directions were issued for disclosure and reasoned determination of the claim concerning the retained cash.

Communication of GST adjudication order - Validity of a GST adjudication order uploaded only under the 'Additional Notice and Orders' tab without separate intimation to the registered person - HELD THAT: - The Court found that a prima facie case was made out, noting that the adjudication order had been uploaded only under the said tab and no separate intimation had been given. Reconsideration of the reply on merits after affording an opportunity of hearing was therefore warranted. [Paras 5, 6]

The adjudication order was quashed, and the adjudicating authority was directed to reconsider the reply on merits, grant a hearing, and pass a fresh reasoned order in accordance with law.

Final Conclusion: The writ petition was disposed of by quashing the adjudication order and directing fresh adjudication after consideration of the reply and an opportunity of hearing.

Alternative statutory remedy - Disputed questions of fact in writ jurisdiction - Exercise of writ jurisdiction against a common GST adjudication order where a statutory appeal was available and the petitioners disputed consideration of their replies and their alleged role -

HELD THAT: - The precedent cited by the petitioners was distinguished as it concerned an individual assessee and not a common order involving more than 600 firms and individuals. Whether the petitioners' replies had been considered and the role attributable to them required examination of detailed and disputed facts, which could appropriately be undertaken by the Appellate Authority. An efficacious statutory appeal could not be bypassed in writ jurisdiction. [Paras 10, 11, 12, 14]

The writ petitions were declined and the petitioners were relegated to the statutory appellate remedy.

Final Conclusion: The Court declined to exercise writ jurisdiction in view of the available statutory appeal and the disputed factual questions requiring appellate examination.

Adjudication before scheduled personal hearing - Scope of delay-condonation application

Rejection of an application for condonation of delay in filing a revocation application for cancellation of registration before the scheduled personal hearing and by adjudicating the merits of the revocation application - HELD THAT: - The application was rejected before the date fixed for personal hearing. Further, an authority considering condonation of delay must confine its examination to the explanation and justification for the delay; it cannot decide the merits of the revocation application at that stage. The appellate authority likewise could not dismiss the matter on such merits. [Paras 8, 10]

The impugned notice and orders were quashed, with liberty to issue a fresh notice and decide the delay-condonation application afresh in accordance with law.

Final Conclusion: The writ petition was partly allowed and the matter was directed to be reconsidered after a fresh opportunity of hearing.

Natural justice in cancellation of GST registration - Input tax credit demand in GST registration-revocation proceedings

Opportunity to produce documentary evidence before cancellation of GST registration - Cancellation of GST registration despite the registrant's request for time to furnish documents supporting its transactions and input tax credit claim - HELD THAT: - The cancellation order itself recorded that time had been sought for production of relevant documentary evidence, yet the authority neither decided that request nor afforded the requested opportunity before cancelling the registration. The order was consequently passed without considering the material which the registrant sought to produce, in breach of the principles of natural justice. [Paras 12, 15]

The show cause notice and cancellation action were quashed, leaving the Department at liberty to commence fresh proceedings by an appropriate notice after affording due opportunity.

Impermissible amalgamation of registration-revocation and input tax credit proceedings - Demand of tax and penalty without show cause notice for input tax credit disallowance - Rejection of revocation of cancelled GST registration and appellate confirmation by requiring payment of tax, interest and penalty on allegations concerning input tax credit availed from suppliers not covered by the original show cause notice - HELD THAT: - The ground that purchases had been made from suppliers whose registrations were cancelled was not put to the registrant in the original show cause notice. Proceedings for revocation of registration cancellation could not be interjected with proceedings for determination of fraudulent input tax credit availment or suppression of facts; nor could payment of tax and penalty be required without a show cause notice proposing disallowance of input tax credit. The appellate authority could not cure the original denial of opportunity by introducing such matters at the appellate stage. [Paras 14, 15]

The rejection of revocation and the appellate order were quashed, with liberty to initiate fresh proceedings in accordance with law and the principles of natural justice.

Final Conclusion: The petition was allowed and the challenged show cause notice and orders were quashed. Fresh proceedings were permitted on an appropriate notice, with all contentions on merits left open.

Bar on overlapping Central and State GST proceedings for the same tax liability

Applicability of the statutory bar on overlapping Central and State GST proceedings to a consolidated demand covering periods already subjected to State proceedings - HELD THAT: - The bar applies where two departmental proceedings overlap in assessing or recovering the same tax liability arising from a particular contravention, though it does not apply to distinct infractions merely because the liability or deficiency is similar. The respondents admitted that the State proceedings covered FY 2017-18 and FY 2018-19, while the impugned consolidated demand also included those periods. Inclusion of the overlapping periods in the demand attracted the bar. [Paras 5, 7, 8]

The consolidated demand was quashed and the matter was remanded for a fresh order excluding FY 2017-18 and FY 2018-19.

Final Conclusion: The impugned order was quashed and the matter remanded for fresh determination after excluding the periods covered by overlapping State proceedings.

Opportunity of hearing in refund proceedings - Refund of accumulated input tax credit under inverted duty structure - violation of principles of natural justice - Validity of rejection of refund of accumulated input tax credit under inverted duty structure without effective service of the rectification notice and opportunity of hearing - HELD THAT: - The rectification notice issued in the refund adjudication proceedings could not be effectively served upon the petitioner and was returned undelivered. Adjudication despite the failure of service of that notice constituted a gross violation of the principles of natural justice. [Paras 7]

The refund rejection order was quashed and set aside, and the matter was remitted for fresh decision after granting an opportunity of hearing within twelve weeks; the merits were left open.

Final Conclusion: The petition was allowed to the extent of setting aside the refund rejection order for breach of natural justice and directing fresh adjudication after hearing the petitioner.

Erroneous refund of unutilised input tax credit - Inverted-duty refund formula - Finality of statutory refund order - Interest on erroneous refund - Retrospective operation of refund formula

Erroneous refund of unutilised input tax credit - Treatment of a monetary refund of accumulated input tax credit under the inverted-duty refund scheme as tax erroneously refunded under section 73 - HELD THAT: - Unutilised input tax credit, when converted into a monetary payment under the statutory refund mechanism, assumes the character of a refund. Where the payment exceeds entitlement under the governing refund formula, it is capable of falling within the expression "erroneously refunded"; the separate reference to wrongly availed or utilised input tax credit does not exclude such monetary refund from that limb. [Paras 45, 46, 47, 48]

The monetary refund was capable in law of being treated as an erroneous refund under section 73 notwithstanding that it originated from accumulated input tax credit.

Finality of statutory refund order - Recovery of erroneous refund under section 73 - Availability of recovery proceedings under section 73 where the refund sanction order had not been challenged through departmental appeal or revision - HELD THAT: - The refund sanction order was an adjudicatory order with legal efficacy, but the appellate and revisional provisions did not contain language making their prior invocation a condition precedent to the express erroneous-refund jurisdiction under section 73. The remedies operate in related but distinct fields: appeal or revision tests the legality or propriety of an order, whereas section 73 provides notice-and-adjudication machinery for recovery of an amount erroneously refunded. The conclusion was confined to the particular statutory and factual setting and does not authorise disregard of a subsisting appellate determination. [Paras 51, 52, 53, 54, 55]

Non-invocation of departmental appeal or revision did not, by itself, oust jurisdiction under section 73 in the present case.

Inverted-duty refund formula - Scope of appeal against erroneous-refund recovery - Survival of any claim to restoration of the principal inverted-duty refund computed under substituted Rule 89(5) - HELD THAT: - The substituted formula governed the refund claim and its validity and interpretation had been upheld by the Supreme Court in VKC Footsteps [2021 (9) TMI 626 - SUPREME COURT] The computation recording that no positive refund was admissible was neither specifically challenged nor displaced by an alternative computation. Since the principal had been repaid and the appeal quantified only the consequential interest as disputed, the Tribunal was not called upon to re-adjudicate the principal entitlement or direct restitution. [Paras 56, 57, 58]

No subsisting claim for restoration of the repaid principal refund survived in the appeal.

Interest on erroneous refund - Statutory closure of recovery proceedings - Statutory authority to levy interest on an erroneous refund and the effect of repayment of the principal alone - HELD THAT: - Section 73 repeatedly links recovery of an erroneous refund with interest payable under section 50, including at the stages of pre-notice payment, conclusion after notice and determination. Interest is therefore a statutory consequence and not an equitable or implied levy; it is not dependent on fraud, fault or the departmental error underlying the original sanction. Payment of the principal without the applicable interest did not satisfy the condition for statutory closure after notice. [Paras 63, 64, 65, 66, 67]

Sections 73 and 50, read together, authorised interest on the erroneous refund, and repayment of the principal alone did not conclude the proceedings.

Retrospective operation of refund formula - Interest computation under Rule 88B - Effect of the retrospective operation of substituted Rule 89(5), the later judicial validation of that rule and the subsequent insertion of Rule 88B on interest liability - HELD THAT: - The substituted refund formula had been made operative before the refund application and sanction. The subsequent Supreme Court ruling upheld the operation of the existing rule and did not create a new liability retrospectively.

The appellant’s further premise that interest is penal in nature also does not follow from Star India [2005 (3) TMI 10 - SUPREME COURT] Mahalakshmi Sugar Mills [1980 (4) TMI 1 - SUPREME COURT] draws the distinction between penalty for infringement and statutory interest which compensates for delayed payment. The two decisions operate on different questions and can be read harmoniously: Mahalakshmi Sugar Mills (supra) addresses the character of interest, whereas Star India (supra) addresses the temporal consequence where the underlying liability itself was subsequently created with retrospective effect. Here the governing Rule 89(5) had already been made operative from 01.07.2017 before both the refund application and the refund sanction. VKC Footsteps (Supra) upheld and declared the operation of that existing rule; it did not create, for the first time in 2021, the restriction on refund. The present interest demand therefore cannot be treated as a retrospective penalty merely because the validity and effect of Rule 89(5) were authoritatively settled later. [Paras 68, 69, 70]

The interest demand was not rendered impermissibly retrospective by the later judicial ruling or by the subsequent insertion of Rule 88B.

Period of interest on erroneous refund - Repayment through FORM GST DRC-03 - Computation of interest for the period during which the erroneous monetary refund remained with the appellant - HELD THAT: - Repayment through FORM GST DRC-03 during pending proceedings did not amount to an admission of every legal proposition, but it restored the principal while leaving the interest component for adjudication. The period of interest was determined by the undisputed dates of actual disbursement of the refund and repayment of the principal; no alternative rate or computation was established. [Paras 74, 75, 76, 77, 78]

The interest computation and the demand sustained on that basis called for no interference.

Final Conclusion: The appeal was dismissed and the order sustaining interest on the erroneous refund was affirmed. No claim for restitution of the repaid principal refund survived for determination.

External development charges - TDS as rent u/s 194I or 194C

HELD THAT:- There is gross delay of 328 days in filing this Special Leave Petition. The reasons assigned for condonation of delay are neither satisfactory nor sufficient in law so as to be condoned. Hence, the application seeking condonation of delay is dismissed.

Special Leave Petition also stands dismissed.

Ownership of the seized asset - Third-party claimant as person concerned under Section 132B - Benami proceedings conclusively established ownership of the seized cash - Release of seized cash u/s 132B - Explanation of nature and source of seized assets

Ownership of the seized asset/cash - Third-party claimant as person concerned u/s 132B - Entitlement of a claimant, whose ownership of cash seized from another person's premises was established in benami proceedings, to apply for release u/s 132B - HELD THAT: - The finding in the benami proceedings established the petitioner's ownership of the cash and negatived the Revenue's objection that a third-party claimant could not invoke Section 132B. The expression "person concerned" includes a person whose assets are seized during a search conducted in another person's case. Establishment of ownership, however, does not by itself warrant release while the source of the cash remains subject to examination. [Paras 7, 12]

The petitioner was held competent to seek release of the seized cash, but ownership alone was held insufficient to direct its release.

Release of seized cash under Section 132B - Explanation of nature and source of seized assets - Release of cash seized in a search where the claimant's application was made beyond the prescribed period and did not disclose the nature and source of its acquisition. - HELD THAT: - The first proviso to Section 132B(1)(i) requires a timely application explaining the nature and source of acquisition to the satisfaction of the Assessing Officer; a mere request for release is not sufficient. The petitioner neither applied within the stipulated period nor furnished the requisite explanation, and the establishment of ownership in benami proceedings could not substitute the statutory disclosure. In those circumstances, the Assessing Officer was not required to act upon or respond to the cryptic request, particularly when assessment proceedings concerning the source of the cash were pending or contemplated. [Paras 13, 20, 21]

The request for release of the seized cash was not accepted.

Final Conclusion: The petitioner's claim for immediate release of the seized cash was not accepted. The questions concerning the effect of the provisos to Section 132B(1)(i), including the consequence of expiry of 120 days, were referred for determination by a Larger Bench.

Reassessment of section 80JJAA deduction - change of opinion - absence of fresh tangible material

HELD THAT: - The deduction claim had been specifically examined during the original scrutiny assessment, for which the assessee furnished employee and cost details and supporting material; the claim was thereafter accepted. The reopening notice and order did not disclose any fresh or tangible material, distinct from material already examined, suggesting escapement of income. The reopening was therefore founded only on a change of opinion. [Paras 7, 8]

The notice under section 148 and the order under section 148A(d) were quashed and set aside.

Final Conclusion: The writ petition was allowed, and the reassessment proceedings founded on a change of opinion were quashed.

Reassessment notice - alleged fictitious loss and dividend from mutual fund investments in mutual funds - HELD THAT: - The petitioner was identically situated to the assessee in an earlier decision of the Court in PRANAV RAMESH PARIKH [2025 (4) TMI 336 - GUJARAT HIGH COURT] which had attained finality and had quashed materially similar reassessment action. The Revenue did not dispute the applicability of that decision. [Paras 10]

The order under Section 148A(d) and the notice under Section 148 were quashed and set aside.

Final Conclusion: The reassessment order and notice were quashed by following the final earlier decision of the Court on identical facts.

Condonation of delay in refund claims - Genuine hardship under section 119(2)(b) - Administrative orders confined to recorded reasons

Condonation of delay in filing a revised return claiming refund under CBDT Circular No. 9/2015 - application of the requirements of correctness, genuineness and genuine hardship - HELD THAT: - The power under section 119(2)(b) is a relaxation to avoid genuine hardship and requires the competent authority to determine whether the refund claim is correct and genuine and whether genuine hardship exists; it cannot be exercised routinely. The impugned order contained no independent finding on the correctness or genuineness of the claim, relied on irrelevant considerations concerning non-acceptance of a decision on merits and absence of an appellate order in the assessee's own case, and rejected hardship without reasons despite material relating to loss of employment and final decisions in similar cases. The department could not supplement the recorded reasons by contending before the Court that the delay had not been explained. Nor could the sufficient-cause test applicable to delayed appeals under the Limitation Act be imported into proceedings under section 119(2)(b), where a detailed explanation of delay is not a stand-alone precondition, subject to the prescribed six-year limit. [Paras 21, 22, 23, 24, 25]

The rejection of the condonation application was quashed and the matter remitted for a fresh, reasoned decision after hearing the petitioner; the merits of the exemption claim were left open.

Final Conclusion: The writ petition was allowed, the impugned refusal to condone delay was quashed, and the condonation application was remitted for fresh consideration in accordance with the statutory and circular requirements.

Income-tax reimbursement as tariff component - Adjudication by CERC - Specialised regulatory remedy before CERC - Adjudication of debit notes claiming reimbursement of income tax as a component of electricity tariff - HELD THAT: - Following the decision placed before it [2025 (4) TMI 2120 - MADRAS HIGH COURT] the Court held that the tariff-related income-tax claim, involving disputed questions requiring adjudication, must be raised before the CERC. The merits of the debit notes and the claimed liability were therefore not examined in writ jurisdiction. [Paras 5]

The generating company was directed to raise the dispute before the CERC, which was directed to decide it expeditiously after affording opportunity to all parties.

Final Conclusion: The writ petition was disposed of by relegating the tariff-related income-tax dispute to the CERC for adjudication.

Reassessment based on unverified Insight Portal information - Roving and fishing inquiry in reassessment

Validity of the reassessment notice and the order under section 148A(3) founded on unverified Insight Portal information allegedly linking the ceramic dealer with an Angadiya transaction - HELD THAT: - Neither the notice nor the order disclosed any transaction specifically connecting the petitioner with the alleged escaped income. The material relied upon was not supplied, the chart of alleged beneficiaries did not specify any transaction attributable to the petitioner, and the Assessing Officer made no effort to verify the genuineness of the information. Reassessment cannot be initiated as a roving and fishing inquiry merely on the basis of information available on the Insight Portal. [Paras 6, 7, 8]

The reassessment notice and the order under section 148A(3) were quashed and set aside.

Final Conclusion: The writ petition was allowed, as the reassessment proceedings rested on unverified information without any material demonstrating application of mind or a nexus with the petitioner.

Jurisdiction of Assessing Officer after statutory transfer of case - Validity of reassessment notice issued by transferor officer

HELD THAT: - A transfer order vests jurisdiction in the transferee Assessing Officer alone in respect of all pending, completed and future proceedings for every year covered by the transferred case. Jurisdiction is conferred by statute and statutory orders, not by entries in the PAN database; failure to migrate the PAN cannot preserve the transferor officer's jurisdiction. A notice under Section 148 issued by the jurisdictional Assessing Officer is a condition precedent to reassessment, and a notice issued by an officer lacking such jurisdiction is non-est.

This Court, in the case of Hynoup Food & Oil Industries Ltd. [2008 (7) TMI 192 - GUJARAT HIGH COURT] has held that where the notice under Section 148 of the Act is issued by an officer who did not have jurisdiction over the assessee, the notice and the consequent proceedings are without jurisdiction and cannot be sustained. We are in respectful agreement with the said view, which, in any case, follows from the plain language of Sections 2(7A), 127, 147 and 148 of the Act. [Paras 7, 8, 9, 10, 11]

The notice issued by the transferor officer for A.Y. 2012-13, and all consequential proceedings, were quashed as without jurisdiction.

Final Conclusion: The writ petition was allowed and the reassessment notice for A.Y. 2012-13, together with all consequential proceedings, was quashed for want of jurisdiction.

Consequential appeal-effect order - Passing of a consequential appeal-effect order following deletion of the negative working-capital adjustment in rectification proceedings

HELD THAT: - Since the rectification order directed deletion of the negative working-capital adjustment but no consequential order had yet been passed, the Tribunal confined itself to directing implementation of that order. The Assessing Officer was also required to consider the assessee's claim that its margin would then fall within the permissible range; a contrary conclusion could be reached only after affording a reasonable opportunity of hearing. [Paras 6, 7]

The Assessing Officer was directed to pass the appeal-effect order within 15 days, with liberty to the assessee to seek revival of the appeal if aggrieved by the consequential order.

Final Conclusion: The appeal was allowed in terms of the direction to give effect to the rectification order and consider the assessee's consequent arm's length range claim.

Fair market value of unquoted equity shares - DCF valuation under Rule 11UA - Assessee's choice of prescribed valuation method - Substitution of NAV method under Rule 11UA

Rejection of the Merchant Banker's DCF valuation of unquoted equity shares and substitution of the NAV method for making an addition under section 56(2)(viib) - HELD THAT: - Where the assessee has validly adopted the DCF method, one of the prescribed methods under Rule 11UA, the Assessing Officer may scrutinise the underlying assumptions but must undertake any corrective exercise within that methodology. Management projections and past losses may warrant examination of business assumptions, growth rates, discount factors, terminal value and market conditions; they do not, by themselves, justify abandoning DCF valuation for NAV valuation. No arithmetical error, internal inconsistency, factual inaccuracy, or material showing that the DCF inputs were contrary to contemporaneous material or industry norms was brought on record.

We find that an identical controversy was considered in DCIT v. Max Hospitals and Allied Services Limited [2025 (8) TMI 761 - ITAT MUMBAI] wherein the assessee adopted DCF method for valuation of shares and the Revenue questioned valuation on the ground that the projections were not commensurate with the actual or historical financial performance. The Coordinate Bench, after considering the provisions of section 56(2)(viib) read with Rule 11UA and the judicial precedents on the issue, held that where the assessee has adopted one of the prescribed methods, the valuation cannot be rejected merely because the Revenue considers the projections unrealistic or because subsequent results do not match the projections.

We also find force in the reliance placed on the decision of Vodafone M-Pesa Ltd.[2018 (3) TMI 530 - BOMBAY HIGH COURT] as hekd where the Ld. AO finds defects in the assumptions or inputs employed, the corrective exercise has to remain within the framework of the method validly opted for by the assessee. The Ld. AO cannot discard the DCF method and substitute the NAV method merely because he considers the projections unacceptable. [Paras 6]

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

Final Conclusion: The Revenue's appeal was dismissed. The deletion of the addition under section 56(2)(viib), founded on the assessee's DCF valuation, was affirmed.

Taxability of interest on enhanced compensation under section 28 of the Land Acquisition Act - Exemption of compulsory acquisition compensation for agricultural land

HELD THAT: - The Tribunal found that the receipt was interest on enhanced compensation awarded under section 28 of the Land Acquisition Act. Following the coordinate Bench decision on identical facts, it held that such interest forms part of the enhanced compensation, unlike interest for delayed payment under section 34, and is consequently not taxable as interest income. See GIRISH KUMAR [2022 (7) TMI 391 - ITAT DELHI] [Paras 8, 9]

The addition made in respect of the interest on enhanced compensation was deleted.

Final Conclusion: The appeal was allowed and the addition relating to interest received on enhanced compensation was deleted.

Unexplained cash credit - bank cash deposits during demonetisation - Higher tax rate for unexplained income under section 115BBE for A.Y. 2017-18

Unexplained cash credit-bank cash deposits during demonetisation - Addition of bank cash deposits during demonetisation as unexplained cash credit under section 68 - HELD THAT: - The addition was founded on an abnormal cash-deposit pattern, although the audited books had been accepted without any identified defect. The withdrawals and deposits were reflected in the bank records, and the cash deposit was explained by prior bank withdrawals and other explanations on record. [Paras 7]

The addition for unexplained cash credit was deleted.

Higher tax rate under section 115BBE for A.Y. 2017-18 - Applicability of the higher rate of tax under section 115BBE to the alleged unexplained bank cash deposit for A.Y. 2017-18 - HELD THAT: - The Tribunal applied the principle that the higher rate of tax with surcharge under section 115BBE was not applicable for A.Y. 2017-18. In the case of S.M.I.L.E. Microfinance Ltd. [2024 (11) TMI 1444 - MADRAS HIGH COURT] High Court held that the higher tax rate of 60% + surcharge is not applicable for A.Y. 2017-18. [Paras 7]

The challenge to application of the higher rate under section 115BBE was allowed.

Disallowance of penalty payment as business expenditure - HELD THAT: - This ground was considered jointly with the cash-deposit and section 115BBE grounds and was allowed; no independent reasoning was recorded. [Paras 7]

The disputed disallowance was deleted.

Final Conclusion: The appeal was partly allowed. The cash-deposit and connected disallowance and tax-rate grounds were allowed, while the ESI/PF ground was dismissed as not pressed.

Gross-profit addition on alleged bogus purchases - Estimation of gross-profit addition on alleged bogus purchases where the sales were accepted and the books of account were not rejected - HELD THAT: - The Tribunal noted that the sales had not been disputed and the books of account had not been rejected. Considering the estimate of gross profit at 12.5% excessive in the circumstances, it restricted the profit element liable to be added. [Paras 5]

The addition was restricted to 5% of the alleged purchases under the head business income.

Final Conclusion: The appeal was partly allowed by restricting the addition in respect of the alleged bogus purchases to the gross-profit element estimated at 5%.

Section 14A disallowance in absence of exempt income - Mechanical application of Rule 8D without recorded satisfaction

HELD THAT: - Disallowance under section 14A is attracted only where expenditure is incurred in relation to income not forming part of the total income. The investments held were not capable of yielding exempt income, and the expenditure debited to the profit and loss account related to taxable income. Further, Rule 8D had been invoked mechanically without recording the requisite satisfaction.

The issue in dispute is squarely covered by the decision of the Coordinate Bench in assessee’s own case [2025 (4) TMI 272 - ITAT DELHI] wherein, the Tribunal deleted the similar disallowance made u/s. 14A of the Act by observing that the AO failed to record satisfaction and applied Rule 8D of the rules in a mechanical manner. Paras 5]

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

Final Conclusion: The appeal was allowed and the section 14A disallowance sustained by the appellate authority was deleted.

Share premium taxation on equity shares and compulsorily convertible preference shares - discounted cash flow valuation - Unexplained expenditure - vendor-confirmation differences in recorded business expenses

Share premium taxation - discounted cash flow valuation of equity shares and compulsorily convertible preference shares - Addition for excess share premium on equity shares and compulsorily convertible preference shares - rejection of the discounted cash flow valuation in favour of net asset value valuation - HELD THAT: - The valuation certificate and report had been furnished during assessment proceedings and were founded on projected cash flows, business conditions and market analysis, while considering the convertible preference shares and employee stock options. A discounted cash flow valuation is inherently forward-looking; its reliability must be assessed as on the valuation date, and subsequent actual cash flows cannot, by themselves, render the projections unacceptable. The absence of positive profits or cash flows in the initial years of operations was likewise not a sole basis to reject the independent valuation. [Paras 11, 12]

The discounted cash flow method could not be rejected by substituting the net asset value method, and the addition under section 56(2)(viib) was deleted.

Unexplained expenditure - source of expenditure recorded in audited books - Addition as unexplained expenditure for differences between vendor confirmations and recorded advertising, marketing and cab expenses - HELD THAT: - Section 69C applies where the assessee offers no explanation regarding the source of expenditure. The transactions were recorded in the audited books, payments were made through banking channels, and there was no variation between the expenditure recorded and payments actually made; the expenditure was funded from business operations. A difference in vendor confirmations, in these circumstances, did not warrant invocation of section 69C. [Paras 18]

The addition under section 69C was deleted.

Challenge to initiation of penalties for under-reporting of income and alleged unexplained expenditure in the assessment appeal - HELD THAT: - Penalty proceedings are separate and distinct from assessment proceedings. [Paras 19]

The grounds challenging initiation of penalty proceedings were dismissed as premature.

Final Conclusion: The appeal was partly allowed: both additions were deleted, while the penalty-initiation grounds were dismissed as premature.

Clarificatory circular on duty-free inputs for captive manufacture of capital goods by 100% Export Oriented Unit

Continuance of seizure proceedings and the show-cause notice concerning duty-free inputs used for captive manufacture of capital goods by a 100% Export Oriented Unit after issuance of the clarificatory circular - HELD THAT: - The circular clarified that duty-free inputs common to finished goods and capital goods for use within the unit could be allowed, subject to accounting and bonding of the capital goods and liability upon clearance outside the unit, debonding or exit from the scheme.

Department did not dispute that the circular applied to the petitioner and failed to explain how the show-cause notice could survive despite its applicability. The Court therefore accepted that the circular had settled the controversy. [Paras 8, 9, 10]

The seizure memoranda and the show-cause notice were quashed; the deposits were directed to be refunded and the bank guarantee cancelled.

Final Conclusion: The writ petition was allowed on the admitted applicability of the clarificatory circular. The petitioner was left free to seek interest on the refunded amount from the authorities, to be decided in accordance with law.

Refund of customs duty under tariff rate quota for crude soybean oil imports

Entitlement to refund of excess customs duty paid on imported crude soybean oil under the applicable tariff rate quota - HELD THAT: - The claim was held to be squarely covered by the earlier decision in M/S. PITAMBER SOLVEX PRIVATE LIMITED [2025 (10) TMI 508 - DELHI HIGH COURT] concerning the petitioner involving the same product and period. The Delhi High Court relied on the decision rendered in the case of Ajanta Soya Ltd., [2024 (3) TMI 370 - DELHI HIGH COURT] and aforesaid judgment was challenged by the Revenue before the Hon’ble Supreme Court being which is dismissed by order [2024 (12) TMI 1637 - SC ORDER].

The Revenue did not dispute the settled legal position, under which the tariff rate quota benefit extended to the qualifying imports and consequential refund was admissible in accordance with law. [Paras 5, 7]

The refusal letter was quashed, and the Revenue was directed to process the refund in accordance with law within three months.

Final Conclusion: The writ petition was allowed. The challenged refusal of refund was quashed, with a direction to process the refund in accordance with law within three months.

SAFTA preferential duty exemption on Bangladesh-origin garments - Illegal detention of imported garments for unsubstantiated IPR and origin allegations - Enhancement of assessable value on unsupported market enquiry - Waiver of demurrage on illegally detained goods

SAFTA preferential duty exemption - certificates of origin - Detention of imported garments on unsubstantiated IPR allegations - Legality of detention of Bangladesh-origin garment consignments and entitlement to SAFTA preferential duty treatment where intellectual property infringement and the veracity of Certificates of Origin were alleged - HELD THAT: - The Port Assessment Group had verified and defaced the Certificates of Origin, linked them with the invoices and Bills of Entry, and completed assessment. Examination did not establish that the goods bore reputed brands, and no brand owner responded to the notices issued. Subsequent imports of similar garments from the same exporters were cleared with SAFTA benefit, while the Bangladesh authorities certified the disputed Certificates of Origin as correct. There was consequently no evidentiary basis either for the IPR allegation or for questioning the Certificates of Origin. [Paras 26, 31, 32, 33, 37]

The detention was held illegal, the provisional release orders were set aside, and release of the goods was directed against the already assessed Bills of Entry. The appellants were held eligible for SAFTA customs duty exemption.

Enhancement of assessable value on unsupported market enquiry - Redetermination of the value of the detained garment consignments on the basis of an undisclosed market enquiry - HELD THAT: - The enhanced value was unsupported by particulars of identical or similar consignments, the manner of the market enquiry, or the sources and persons from whom the alleged values were obtained. The valuation adopted in the provisional release orders therefore lacked documentary foundation; in any event, it could affect the imports only if SAFTA exemption were denied. [Paras 15, 37]

The enhanced value adopted by Customs was set aside.

Waiver of demurrage on illegally detained goods - Entitlement to waiver of demurrage, detention and allied charges on imported consignments illegally detained by Customs - HELD THAT: - Since Customs had no case for detaining the consignments, Regulation 6(1) of the Handling of Cargo in Customs Areas Regulations, 2009, which prohibits charging rent or demurrage on goods seized or detained by the proper officer, applied. The authorities cited on the subject were held squarely applicable. [Paras 34, 36, 37]

Revenue was directed to issue a complete waiver order for demurrage, detention and other charges in respect of the detained consignments.

Final Conclusion: The appeals were allowed. The provisional release orders and enhanced valuation were set aside, the goods were directed to be released on the assessed Bills of Entry with SAFTA benefit, and complete waiver of demurrage and allied charges was ordered.

Interest on delayed customs-duty refund - commencement from refund application

Commencement of interest on delayed customs-duty refund where the refund was allowed after appellate litigation - HELD THAT: - Section 27A makes interest payable where duty ordered to be refunded is not paid within three months of receipt of the refund application. Its Explanation only deems an appellate order granting refund to be an order under section 27(2); it does not postpone the date from which interest accrues. Since the respondent had filed its refund application before the litigation and the refund was made only thereafter, interest ran from expiry of three months after that application until payment.

In this case, admittedly, the application for refund was filed on 29.10.2018 and three months expired on 28.01.2019 and the refund has been granted to the assessee after long litigation on 16.09.2025, therefore, relying on the decision of Ranbaxy Laboratories’ case [2011 (10) TMI 16 - SUPREME COURT] we hold that the respondent is entitled for interest from 28.01.2019 till 16.09.2025. [Paras 7, 8, 9]

The respondent was entitled to interest from expiry of the three-month period after the refund application until the refund was paid.

Final Conclusion: Revenue's appeal was dismissed, and the respondent's entitlement to statutory interest on the delayed refund from expiry of three months after the refund application until payment was sustained.

Interest on refund of customs duty - Duty deposited during investigation - Entitlement to interest on refund of customs duty deposited during investigation, where the duty was not payable in the first place - HELD THAT: - Where the duty was not payable in the first place and its refund was consequently sanctioned, interest is compensatory for the period during which the amount remained with the authorities.

Following the High Court decision Paradeep Phosphates Ltd. [2026 (1) TMI 1393 - ORISSA HIGH COURT] relied upon, interest must run from the date of deposit until realisation of the refund. [Paras 9, 10]

The appellant was held entitled to interest from the date of payment of duty until its realisation.

Final Conclusion: Both appeals were disposed of by holding that interest on the refunded duty was payable from the date of its deposit until realisation.

Duty demands of import of ‘Dowtherm RP Heat Transfer Fluid’ / ‘Dowtherm A Heat Transfer Fluid’ thermic fluid - ‘capital goods’ - Status Holders Incentive Scrip customs-duty exemption - denying the exemption benefit under Notification No.104/2009-Customs dated 14.09.2009

Whether the impugned goods are chemicals classifiable under Chapter 29 and such chemicals cannot be treated as capital goods? - HELD THAT: - The identical definition of capital goods under the FTP and the exemption notification covers plant, machinery, equipment or accessories required directly or indirectly for manufacture and includes specified goods required for initial charge.

The thermic fluids were initially charged into the Continuous Polycondensation plant and continuously supplied the high-temperature heat at low pressure necessary for efficient polycondensation. Being essential to the functioning of the plant and the manufacture of polyester products, they were to be treated as part of the plant and as capital goods; their description as chemicals or as inputs under SION did not alter that functional character. [Paras 11, 12, 13]

The imported thermic fluids were held eligible for SHIS customs-duty exemption as capital goods; the demand-confirming order was set aside and the appeal was allowed.

Final Conclusion: The denial of SHIS exemption for the imported thermic fluids was set aside, and the appeal was allowed.

Offence covered under Section 447 - liability under Section 447 - bar on taking cognizance by the Special Court - cognizance on a private complaint - Special Court jurisdiction to try offences under the Companies Act and other offences - abuse of process

HELD THAT:- Since in the case in hand, complaints were filed by private individuals, we are of the view that the judgment under reference does not require any reconsideration.

The Review Petition is, accordingly, dismissed. Union of India shall be at liberty to invoke its powers under the second proviso of Section 212(6) of the Companies Act, 2013, and authorize any officer of the Central Government by a general or special order, in writing, to institute the complaint in addition to the Director, Serious Fraud Investigation Office (SFIO).

First-motion scrutiny of amalgamation schemes - Ante-dated appointed date in merger scheme - Dismissal at the first-motion stage of a listed-company merger scheme on grounds of an ante-dated appointed date, alleged delay in filing, and discrepancies in the accompanying financial documents

HELD THAT: - The first stage of an amalgamation scheme is principally for shareholders and creditors to consider the commercial proposal, and intervention at that stage is premature except on issues of public interest or legality.

A listed company cannot be blamed for time taken to obtain mandatory regulatory and stock-exchange observations before moving the first motion, unless delay is exclusively attributable to its failure or default. The requirement concerning a significantly ante-dated appointed date calls for justification and must be applied with due regard to the regulatory process applicable to listed entities; questions concerning delay or its effect on valuation may be considered at the second stage with the benefit of regulatory and tax-authority inputs. [Paras 5, 6]

The first-motion dismissal was held unsustainable and was set aside; the NCLT was directed to appoint the Chairman and Scrutinizers and fix the schedule for the meetings.

Final Conclusion: The appeal was allowed and the first-motion application was restored to the scheme process by setting aside the impugned dismissal and directing consequential steps for convening the meetings.

Fraud classification based on inconclusive forensic audit report - Validity of the show cause notice proposing fraud classification of the borrower's account when founded on the same inconclusive forensic audit report previously rejected in relation to the lead bank

HELD THAT: - The company having been placed in CIRP and liquidation, its erstwhile management had lost control of its affairs, while the relevant books and records stood seized. The audit report was prepared on limited lender-provided material and carried express qualifications as to the unavailability of complete records. The same report had already been held inconclusive in the proceedings concerning the lead bank's notice.

As the Union Bank notice rested on that very report, and no reason was shown for treating it differently, the filing of a reply by the borrower did not render the foundational defect immaterial. [Paras 17, 18, 19, 20, 21]

The impugned order, the show cause notice, and all consequential steps were set aside, without precluding fresh action founded on conclusive evidentiary material.

Final Conclusion: The appeal was allowed, and the impugned order, the fraud-classification show cause notice, and consequential action were set aside. The bank may proceed afresh only on conclusive material.

Employees' State Insurance contributions as trust funds - ESI contributions held in trust for employees - Exclusion of third-party assets from liquidation estate

Statutory ESI contributions, including contributions deducted from employees' wages, being treated under an approved resolution plan as ordinary Government or operational creditor dues rather than as trust funds excluded from the liquidation estate - HELD THAT: - ESI contributions payable by the employer and employees are held by the Corporate Debtor in trust for the statutory beneficiaries and do not beneficially belong to it. Filing the claim in Form B is procedural and neither alters that substantive character nor estops ESIC from asserting exclusion. The exclusion follows independently from the trust character of the contributions and consequently such amounts cannot form part of the liquidation estate or be subjected to distribution under the waterfall mechanism. [Paras 40, 41, 42, 43, 44]

The approval of the resolution plan was set aside to the extent it treated the ESI contributions as ordinary Government or operational creditor dues; the qualifying amount is to be determined from statutory records and dealt with as excluded amounts.

Final Conclusion: The appeal was allowed and the resolution plan approval was set aside to the extent it treated the ESI dues as ordinary Government or operational creditor dues. The qualifying ESI contributions are to be determined from statutory records and excluded from the Corporate Debtor's estate.

Adjournment of resolution-plan approval proceedings pending replacement of Resolution Professional

Propriety of refusing adjournment of the resolution-plan approval application pending consideration of an application for replacement of the Resolution Professional - HELD THAT: - The application for replacement of the Resolution Professional, on which the adjournment was founded, had already been withdrawn. Pending resolution-plan approval application had no bearing on that application; consequently, there was no ground to interfere with refusal of the adjournment. [Paras 8]

The dismissal of the adjournment application was sustained; however, the adverse remarks against counsel were directed not to be used to his prejudice.

Final Conclusion: The appeal was dismissed, with the limited direction that the adverse remarks against counsel shall not be used to his prejudice.

Liquidator's continuation of CIRP applications - Liquidator's recovery of liquidation-estate property from occupants - NCLT jurisdiction over insolvency-related possession disputes - IBC overriding effect over rent-control law

Liquidator's continuation of CIRP applications - Continuation by the Liquidator of an eviction application instituted by the Resolution Professional before liquidation - HELD THAT: - The character and object of the application, namely recovery and protection of the corporate debtor's assets, governed its maintainability and not merely the provisions under which it was originally filed. Upon liquidation, the Liquidator possessed pari materia powers and mandatory duties to take custody, control and protective measures concerning the corporate debtor's assets; discontinuance of the pending application would amount to breach of that duty. [Paras 7, 8, 9]

The liquidation did not render the eviction application infructuous, and the Liquidator was entitled to continue its prosecution.

Liquidator's recovery of liquidation-estate property from occupants - NCLT jurisdiction over insolvency-related possession disputes - IBC overriding effect over rent-control law - Recovery of the corporate debtor's properties from occupants claiming under unregistered long-term leases - NCLT jurisdiction and the effect of rent-control law - HELD THAT: - The subject properties formed part of the liquidation estate, and the Liquidator's claim for possession arose solely and causally from liquidation, thereby bringing the dispute within the NCLT's insolvency jurisdiction. The claimed fixed-term leases were unregistered and could not be received in evidence to prove their contents; further, the occupants were related parties and had not paid rent, and therefore did not stand as unrelated rent-paying tenants entitled to the protection asserted. The IBC is legislation on insolvency and liquidation, not landlord-tenant relations, and its incidental effect upon possession does not trench upon State legislative competence. To the extent the Rent Act would require recourse to the Rent Controller and obstruct the Liquidator's statutory duty to secure liquidation-estate assets, the inconsistency is resolved in favour of the IBC by its overriding provision. [Paras 17, 18, 19, 20, 21]

The Liquidator could seek recovery and eviction before the NCLT without recourse to the Rent Controller, and the eviction directions were upheld.

Final Conclusion: The appeals were dismissed, affirming the Liquidator's continuation of the eviction proceedings and recovery of the properties forming part of the liquidation estate.

Non-compliance with mandatory adjudication procedure of FEMA - Failure to consider applicable ECB/FCCB circulars

Mandatory two-stage adjudication procedure - Validity of FEMA adjudication conducted without following the prescribed procedure for forming and communicating the opinion to hold an inquiry before personal hearing - HELD THAT: - The Tribunal found that the prescribed adjudication procedure had not been followed. The failure to comply with that procedure struck at the root of the adjudication order. [Paras 56, 57]

The adjudication order was set aside and the matter remanded for fresh adjudication in accordance with law after affording opportunity to both sides.

Consideration of applicable ECB/FCCB eligibility circulars - Requirement to consider the earlier RBI circular concerning eligibility to raise external commercial borrowings while adjudicating the alleged FCCB contraventions - HELD THAT: - The Tribunal found that the impugned order did not address the applicability of the earlier circular relied upon by the appellant. That circular was required to be considered for proper adjudication, together with all other relevant circulars and material. [Paras 56, 57]

The matter was remanded for fresh adjudication after consideration of the relevant circulars and material.

Final Conclusion: The impugned order and the consequential penalties on the individual appellants were set aside, and the matters were remitted for fresh adjudication.

ECIR as internal departmental document - PMLA enquiry and information-sharing under Section 66(2) of the Prevention of Money Laundering Act, 2002 - Final absolution in scheduled offence - Statutory adjudication of seized property under the Prevention of Money Laundering Act - Inter-agency information sharing under the Prevention of Money Laundering Act

ECIR as internal departmental document - Final absolution in scheduled offence - Quashing of the ECIR following a first-instance acquittal in the scheduled coal-transportation offence - HELD THAT: - An ECIR is an internal and non-statutory departmental record which does not, by itself, initiate prosecution or entail penal consequences. The acquittal in the scheduled offence remained amenable to appellate challenge and therefore did not amount to final absolution; it also did not adjudicate the legitimacy of the separately seized assets. [Paras 97, 98, 107, 110, 145]

The ECIR was not liable to be quashed at this stage.

Alternative statutory remedy - Statutory adjudication of seized property - Writ interference with the pending statutory adjudication concerning seized cash and property documents - HELD THAT: - The Prevention of Money Laundering Act provides a specialised adjudicatory and appellate mechanism for retention and confiscation of property. As the petitioner had participated in that proceeding, and the source and character of the seized assets involved disputed financial facts requiring evidentiary evaluation, writ jurisdiction could not be used to conduct a parallel fact-finding exercise or bypass the statutory remedy. [Paras 102, 103, 104, 146, 147]

No writ direction for release of the seized assets or interruption of the statutory adjudication was warranted; the petitioner could pursue the available statutory remedies.

Inter-agency information sharing under the Prevention of Money Laundering Act - Exercise of the information-sharing power under section 66(2) of the Prevention of Money Laundering Act in respect of material discovered during inquiry - HELD THAT: - The Court held that the information-sharing function under Chapter X operates in a distinct sphere from the penal consequences under Chapter II. Where material gathered during inquiry indicates contravention of another law, it is required to be shared with the concerned agency; such action is not defeated merely because the existing scheduled-offence case has resulted in an acquittal, particularly where the material relied upon is distinct from that predicate case. [Paras 120, 122, 136, 137, 141]

The Directorate's sharing of material with other agencies under section 66(2) was not liable to be quashed at the threshold.

Final Conclusion: The writ petition was dismissed and the interim stay was vacated. The petitioner was left to pursue the statutory remedies before the Adjudicating Authority and other concerned authorities.

Attachment of pre-offence property as value of proceeds of crime - Attachment of Indian equivalent-value property for proceeds of crime held abroad - Continuing offence of money-laundering - Reasons to believe for provisional attachment - Appellate jurisdiction over merits of scheduled offence - Physical possession of attached property in exceptional circumstances

Attachment of pre-offence property as value of proceeds of crime - Attachment of residential properties acquired before the alleged criminal activity, including property standing in the spouse's name, as value of proceeds of crime - HELD THAT: - Where attachment is under the limb comprising the value of proceeds of crime, the time of acquisition of the alternate property and its acquisition from explained or untainted sources are immaterial. The material showed that the properties were funded, wholly or partly, by the accused person, while no independent untainted source in the spouse's hands was established. The statutory object permits attachment of such equivalent-value property notwithstanding that it stands in another person's name. [Paras 34, 37, 38, 39, 40]

The challenge to the attachment on the ground of prior acquisition, explained sources, or ownership in the spouse's name was rejected.

Continuing offence of money-laundering - Attachment of Indian equivalent-value property for proceeds of crime held abroad - Attachment of Indian properties of equivalent value where the alleged proceeds of crime were held abroad, notwithstanding the later amendment to the proceeds-of-crime definition and later scheduling of the predicate offences - HELD THAT: - Money-laundering is a continuing offence, and retrospectivity must be tested with reference to the acts constituting money-laundering, rather than the date of the scheduled offence. The alleged proceeds remained unrecovered abroad, while the attachment was made after the amendment was in force; independently, the existing value limb of the definition authorised attachment of property of equivalent value. The appellants' own position that the proceeds were abroad established their inaccessibility to the enforcement authority. [Paras 42, 43, 44, 45, 47]

The attachment of equivalent-value properties in India was held valid, and the objections based on retrospectivity and the overseas location of the proceeds were rejected.

Reasons to believe for provisional attachment - Validity of the provisional attachment on the allegation that reasons to believe were neither recorded nor communicated - HELD THAT: - The provisional attachment order itself recorded the material considered, the belief regarding money-laundering and the properties' equivalent value, and the apprehension that the properties could be transferred or dealt with so as to frustrate confiscation. The Tribunal held that there is no requirement for a further communication of recorded reasons beyond what the statutory provision contemplates. [Paras 50]

The provisional attachment was not invalid for want of recorded or separately communicated reasons to believe.

Appellate jurisdiction over merits of scheduled offence - Challenges to the allegations and merits of the scheduled offence in an appeal against attachment of property under the PMLA - HELD THAT: - The Tribunal held that it lacked jurisdiction to adjudicate the merits of the scheduled offence. For attachment proceedings, it was sufficient that the prosecution case in the scheduled offence was pending and the accused had not been finally absolved; a final discharge, acquittal, or quashing of that case would bring the money-laundering action and attachment to an end. [Paras 53]

The challenges directed to the merits of the scheduled offence were not entertained.

Physical possession of attached property in exceptional circumstances - Taking physical possession of the attached residential properties during pendency of the prosecution case - HELD THAT: - There was no material showing that physical possession had been taken. Applying the prevailing legal position in VIJAY MADANLAL CHOUDHARY & ORS. [2022 (7) TMI 1316 - SUPREME COURT (LB)], the Tribunal held that possession may be taken during the pending prosecution only in exceptional circumstances of the stipulated nature. [Paras 55]

The enforcement authority was directed not to take physical possession during pendency of the prosecution except in exceptional circumstances.

Final Conclusion: The appeals were dismissed and the confirmation of attachment was sustained. Physical possession of the attached properties shall not be taken during the pending prosecution except in exceptional circumstances.

Place of provision of foreign services under reverse charge - Specificity of show-cause notice - Extended limitation where disclosures are made in statutory returns - Demurrage charges as penal charges and not consideration for service

Place of provision of foreign services under reverse charge - Vague show-cause notice - Extended limitation where disclosures are made in statutory returns - Reverse-charge service tax on foreign services received in the shipping business, for which deductions were claimed under the performance-based, specified-services and goods-transportation place-of-provision rules - HELD THAT: - The show-cause notice merely assumed applicability of the default place-of-provision rule without stating why the deductions claimed under Rules 4, 9 and 10 of the POPS Rules were unavailable. The relevant returns, audit records and supporting documents were already before the Revenue; consequently, the burden to establish taxability and the inapplicability of the claimed deductions was not discharged. Such disclosures also precluded invocation of the extended period. The adjudicating authority had examined the relevant service categories and correctly allowed the deductions. [Paras 14, 15, 16, 17, 18]

The dropping of the reverse-charge service-tax demand was upheld and the Revenue's appeal was dismissed.

Demurrage charges as penal charges - Consideration for taxable service - Service tax under reverse charge on demurrage paid for delay in loading or discharge of cargo - HELD THAT: - Demurrage paid on account of delay in loading or discharging cargo is a penal charge and does not constitute consideration for any service received by the assessee. It therefore cannot form part of the taxable value of services received under reverse charge. [Paras 19, 20, 21, 22]

The demand on demurrage charges and the consequential penalty were set aside.

Final Conclusion: The Revenue's appeal was dismissed. The assessee's appeal was allowed, the demand on demurrage charges and consequential penalty were set aside, and the order dropping the remaining demand was affirmed.

Revenue-sharing arrangement and Business Support Service - Sales incentives and Advertisement Service

Revenue-sharing arrangement - Business Support Service - Taxability of License and Facility Charges received from the kitchen operator under the category of Business Support Service - HELD THAT: - The parties jointly operated the eatery on a principal-to-principal basis, with the appellant receiving a predetermined percentage of the kitchen operator's turnover. The arrangement was one of revenue sharing and not provision of infrastructural support or assistance to the latter's business; consequently, it contained no taxable service element. [Paras 7]

The service-tax demand under Business Support Service was set aside.

Sales incentives - Advertisement Service - Taxability of payouts received from distributors of alcoholic beverages under the category of Advertisement Service - HELD THAT: - The payouts, received in cash and stock, were sales incentives linked to the volume of goods sold under the relevant agreements. They were not consideration for sale of space or time for advertisement, and could not be treated as consideration for Advertisement Service. [Paras 8]

The service-tax demand under Advertisement Service was set aside.

Final Conclusion: The impugned order was set aside and the appeal allowed with consequential relief. As the service-tax demands did not survive, the associated interest and penalties were also set aside.

Service Tax exemption for road-construction services executed by sub-contractors - Extended period of limitation - wilful suppression and intent to evade - Duplication of Service Tax demand on identical receipts - Penalty for wilful suppression under Service Tax law - Strict-liability penalty for non-registration and non-filing of Service Tax returns

Extended period of limitation - wilful suppression and intent to evade - Invocation of the extended period for Service Tax on receipts from road-construction sub-contract works - HELD THAT: - The extended period requires fraud, collusion, wilful misstatement or suppression with intent to evade tax; non-payment or procedural non-compliance alone is insufficient. The receipts were reflected in statutory income-tax records, and the appellant produced contractual material supporting a bona fide claim that the works were exempt road-construction services.

In the case of Continental Foundation Joint Venture v. Commissioner of C.Ex. [2007 (8) TMI 11 - SUPREME COURT] the Hon’ble Apex Court observed that "suppression" requires a deliberate, positive act of concealment with mens rea / deliberate intention to withhold tax.

Absence of registration and returns, without cogent evidence of deliberate concealment or intent to evade, could not establish suppression. [Paras 13, 14, 15, 17, 18]

The extended period was unavailable, and the Service Tax demand for both periods was set aside as time-barred.

Service Tax exemption for road-construction services executed by sub-contractors - Eligibility of road-construction services executed as a sub-contractor for exemption under Notification No. 25/2012-ST - HELD THAT: - The work orders, extension and underlying agreement established that the services were in relation to construction of roads for use by the general public. Such road-construction services were exempt under Entry 13(a), and the corresponding services rendered by a sub-contractor were covered by Entry 29(h) of the notification. [Paras 20]

The Service Tax demand and consequential interest were independently held unsustainable on merits.

Duplication of Service Tax demand on identical receipts - Sustainability of a Service Tax demand for Financial Year 2016-17 when the same receipts had already been subjected to separate adjudication - HELD THAT: - A demand for the same tax period on identical taxable receipts cannot be recovered twice merely because separate departmental channels initiated proceedings. The parallel adjudication concerning the same receipts rendered the impugned demand duplicative. [Paras 19, 23]

The duplicated component of the demand for Financial Year 2016-17 was separately held unsustainable.

Penalty for wilful suppression under Service Tax law - Penalty under Section 78 for failure to obtain Service Tax registration and file ST-3 returns - HELD THAT: - The appellant's non-registration and non-filing proceeded from a bona fide understanding that the road-construction sub-contract services were exempt. As the receipts were disclosed in income-tax records and the appellant furnished contractual documents during the proceedings, no conscious design to suppress receipts or evade Service Tax was established. Penalty under Section 78 could not survive without the requisite intent to evade. [Paras 21]

The penalty under Section 78 was set aside.

Strict-liability penalty for non-registration and non-filing of Service Tax returns - Penalty under Section 77(1)(a) for failure to obtain Service Tax registration and file periodic ST-3 returns - HELD THAT: - The statutory obligations to obtain registration and file returns are strict-liability compliance requirements. A bona fide belief in exemption may negate deliberate suppression and intent to evade, but does not absolve the admitted defaults of non-registration and non-filing. [Paras 22]

The penalty under Section 77(1)(a) was affirmed.

Final Conclusion: The impugned order was modified by setting aside the Service Tax demand, interest and penalty for wilful suppression, while sustaining the penalty for failure to obtain registration and file statutory returns.

Extended limitation for service tax demand against a municipal corporation - Suppression and intent to evade tax

Invocation of the extended period for the Service Tax demand against a municipal corporation constituted under Article 243W of the Constitution - HELD THAT: - The Tribunal held that, as the appellant was a creature of the Constitution, fraud, collusion, wilful misstatement or suppression of facts with intent to evade tax could not be alleged against it. The essential elements for invoking the extended period were therefore absent. [Paras 11, 12]

The entire demand, having been raised by invoking the extended period, was barred by limitation; consequently, the demand and penalties were set aside.

Final Conclusion: The appeal was allowed with consequential relief, the Service Tax demand being wholly barred by limitation and no penalty being imposable.

Eligibility of CENVAT credit on scaffolding as capital goods - Recovery of alleged excess CENVAT credit caused by carry-forward balance in ST-3 returns

Eligibility of CENVAT credit on scaffolding made from tubes, pipes and fittings as capital goods under the CENVAT Credit Rules, 2004 - HELD THAT: - Scaffolding, once brought into existence, could not be treated as tubes, pipes or fittings thereof for coverage under the definition of capital goods. It was neither covered by the relevant clause nor by any other sub-clause of the definition. [Paras 5]

The denial of CENVAT credit on scaffolding was upheld.

Excess carry-forward of CENVAT credit in ST-3 returns - Recoverability of alleged excess CENVAT credit carried forward in ST-3 returns for 2016-17 - HELD THAT: - As both sides agreed to remand, the Tribunal did not adjudicate the correctness of the alleged excess carry-forward. The adjudicating authority was directed to consider the appellant's contention that errors in the returns had resulted in an incorrect carry-forward, with reference to the revised working and supporting records. [Paras 6]

The issue was remanded for fresh adjudication without a decision on merits.

Final Conclusion: The denial of CENVAT credit on scaffolding was sustained, while the issue of alleged excess carry-forward of credit was remanded for fresh consideration.

Valuation of taxable services - exclusion of free-of-cost materials supplied by service recipient - Gross value of taxable services

Inclusion of the value of materials supplied free of cost by the service recipient in the gross value of taxable services - HELD THAT: - Service tax is leviable on taxable services and, unless the Legislature specifically includes the value of particular goods or materials, their value cannot be added in arriving at the gross amount charged. The demand founded on inclusion of materials supplied free of cost by the service recipient was therefore unsustainable. Case followed M/S. BHAYANA BUILDERS (P) LTD. ETC. [2018 (2) TMI 1325 - SUPREME COURT]. [Paras 8, 9]

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

Final Conclusion: The appeal was allowed, as the value of free-of-cost materials supplied by the service recipient could not be included in the taxable value of the service.

Valuation of trading activity for CENVAT credit reversal - Prospective treatment of trading as an exempted service

Valuation of trading activity for CENVAT credit reversal - Reversal of CENVAT credit on common input services used in manufacture and trading - determination of the value of trading activity - HELD THAT: - For reversal under Rule 6(3A), the value of trading activity is the difference between the sale price and the cost of goods sold, or ten per cent of the cost of goods sold, whichever is higher; the entire trading sale value cannot be adopted. The appellant's computation of the credit attributable to common input services used for trading was held to be in accordance with this measure, and the requisite amount had already been reversed. [Paras 9, 11]

The further CENVAT demand founded on a contrary valuation methodology, together with consequential interest and penalties, was unsustainable.

Prospective treatment of trading as an exempted service - CENVAT credit attributable to trading activity before trading was included within exempted services - HELD THAT: - Trading was brought within the definition of exempted services only with effect from 01.04.2011. Consequently, reversal of CENVAT credit in respect of trading activity was not required for the period preceding that date. [Paras 10, 11]

The demand for reversal attributable to the period before 01.04.2011 was set aside.

Final Conclusion: The appeal was allowed and the impugned order confirming the CENVAT demands, interest and penalties was set aside. The Revenue's cross-objection was disposed of.

Classification of chewing gum as sweets and sweetmeats or residuary goods - Common parlance test

Classification of chewing gum between Entry 74A for sweets and sweetmeats and residuary Entry 87 of Schedule II to the Gujarat Value Added Tax Act, 2003 - HELD THAT: - Chewing gum does not fall within the literal description of sweets and sweetmeats.

Applying the common-parlance test and the binding Supreme Court ruling in Associated Distributors Ltd [2008 (5) TMI 394 - SUPREME COURT] that chewing gum or bubble gum is not an eatable item but is chewed and discarded, it cannot be regarded as sweetmeat. Its composition of gum base with sugar does not alter that conclusion. The commodity code assigned for e-services and earlier departmental treatment could not change the statutory classification. As no other specific entry covered chewing gum, it was taxable as unclassified goods under the residuary entry. [Paras 52, 53, 54, 55, 56]

Chewing gum was held taxable under residuary Entry 87; the Tribunal's contrary classification and its consequential deletion of interest and penalties were erroneous.

Final Conclusion: The appeal was allowed. Chewing gum was held taxable as unclassified goods under the residuary entry, and the Tribunal's consequential deletion of interest and penalties was held erroneous.

Availability of civil remedy and criminal liability - Registration of FIR for theft and criminal misappropriation

Registration of an FIR on allegations of theft and criminal misappropriation of scrap materials and unaccounted sale proceeds, notwithstanding the availability of a civil remedy for contractual breach - HELD THAT: - The availability of a civil remedy for breach of contract does not exclude criminal recourse where the complaint discloses commission of an offence. Although the preliminary report indicated that the sale was pursuant to contract, there was no material accounting for or showing delivery of the sale proceeds to the petitioners. The specific allegations of theft and criminal misappropriation, coupled with the absence of necessary accounts and co-operation, required investigation, interrogation and verification of relevant documents to ascertain the truth. [Paras 11, 12]

The orders refusing registration of an FIR were set aside, and registration and investigation were directed in accordance with law, with no coercive steps against the accused without leave of the Magistrate.

Final Conclusion: The orders declining registration of an FIR were set aside. The police were directed to register and investigate the complaint in accordance with law, subject to the stipulated protection against coercive action.

Delayed payment of auction consideration and confirmation of sale - Mandatory Rule 9 payment timeline - Validity of secured-asset auction sale -

Validity of the secured-asset auction sale where the successful bidder was permitted to deposit the sale consideration beyond the stipulated Rule 9 timeline - HELD THAT: - The payment requirements under Rule 9 are mandatory and non-compliance vitiates the sale. Even accepting that the sealed bid had been opened before the interim order, the Bank and the auction purchaser could not rely on that order to justify delayed payment while neither sought its modification nor obtained permission to depart from the statutory timeline.

There was no material showing compliance with the prescribed payment obligations or any legally sustainable basis for the delay; equitable considerations could not validate a sale conducted in breach of the Rule. [Paras 12, 14, 16, 17, 19]

The auction sale and the consequential sale certificate were declared vitiated; the Bank was directed to refund the auction purchaser's deposit with applicable interest, while retaining liberty to recover its dues in accordance with law.

Final Conclusion: The writ petitions were allowed and the auction transaction was invalidated for breach of the mandatory Rule 9 payment requirements. The Bank was required to refund the auction purchaser and was left free to pursue recovery in accordance with law.