TaxTMI Updates e-Newsletter
Nov 29,2025

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether, in view of Section 6(2)(b) of the Central Goods and Services Tax Act, 2017, initiation of proceedings by the State tax authority bars the Central tax authority from initiating parallel adjudicatory proceedings on the same subject-matter.

1.2 Whether the summons/notice earlier issued by the State authority prevails over the subsequent notice issued by the Central authority, and to what extent both authorities may continue inquiry or investigation without violating the prohibition against parallel proceedings.

1.3 What directions are required to ensure compliance by the authorities and the assessee with the legal position and guidelines laid down in the binding precedent governing Section 6(2)(b) CGST Act.

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Bar on parallel proceedings under Section 6(2)(b) CGST Act where one authority has already initiated proceedings on the same subject-matter

Legal framework

2.1.1 The Court noted that Section 6(2)(b) of the CGST Act prohibits initiation of any proceedings by one authority on the same subject-matter where such proceedings have already been initiated by another jurisdictional authority. The Court relied on the binding interpretation and guidelines laid down by the Supreme Court regarding (a) the meaning of "initiation of any proceedings"; (b) the meaning of "subject matter"; and (c) the interrelationship between Central and State GST authorities.

Interpretation and reasoning

2.1.2 The Court recorded that the Supreme Court has conclusively held: (i) Section 6(2)(b) bars initiation of proceedings on the same subject-matter; (ii) "initiation of any proceedings" refers to formal commencement of adjudicatory proceedings by issuance of a show cause notice and does not include steps such as summons, search or seizure; (iii) "subject matter" refers to tax liability, deficiency or obligation arising from a particular contravention; and (iv) where two proceedings seek to assess or recover identical or overlapping liability arising from the same contravention, the bar is attracted.

2.1.3 It was emphasized that while intelligence-based enforcement and investigative steps, including issuance of summons under Section 70, may be undertaken by either Central or State administration, parallel adjudicatory proceedings on the same subject-matter by both authorities are impermissible once one authority has first initiated such proceedings.

2.1.4 The Court further noted that the Supreme Court prescribed a twofold test to determine "same subject matter": (i) whether an authority has proceeded on an identical liability or alleged offence on the same facts; and (ii) whether the demand or relief sought is identical. When both conditions are satisfied, Section 6(2)(b) is immediately attracted.

2.1.5 Applying the above principles, the Court observed that in the present case summons/notice dated 29.06.2022 was issued by the State authority, and a subsequent summons/notice dated 29.07.2022 was issued by the Central authority under Section 74 of the CGST Act. The petitioner's contention was that these constituted parallel proceedings on the same subject-matter.

Conclusions

2.1.6 The Court held that, in view of the authoritative pronouncement of the Supreme Court, once one authority (Central or State) has initiated proceedings first in point of time, the other authority is barred from commencing parallel adjudicatory proceedings on the same subject-matter under Section 6(2)(b). However, legitimate investigative steps, such as issuance of summons under Section 70, may continue so long as they do not result in parallel adjudication.

2.1.7 The Court concluded that, in the circumstances of the case, there was no need for an independent or further adjudication on the legal issue beyond ensuring adherence to the law and guidelines laid down by the Supreme Court. The relief sought by way of outright quashing of the impugned notice was therefore not granted; instead, the matter was directed to be dealt with by the authorities strictly in accordance with the binding precedent.

2.2 Priority between State and Central GST actions and permissible scope of inquiry/investigation

Interpretation and reasoning

2.2.1 The core factual issue identified was whether the earlier summons/notice dated 29.06.2022 issued by the State authority should prevail over the subsequent notice dated 29.07.2022 issued by the Central authority under Section 74, and whether the latter is hit by the bar on parallel proceedings.

2.2.2 The Court noted that, under the law as clarified by the Supreme Court, when one authority has first initiated adjudicatory proceedings in respect of a particular subject-matter, any subsequent show cause notice or adjudicatory proceeding by the other authority in respect of the same liability and contravention must give way and cannot be sustained.

2.2.3 At the same time, the Court emphasized that both Central and State authorities are entitled to undertake and continue inquiry or investigation - including issuance of summons - until it is ascertained whether both are examining the identical liability and contravention, and whether a show cause notice has already been issued covering that liability.

2.2.4 The Court recorded the statement of counsel for State and Central authorities that they would abide by Section 6(2)(b) and by the principles and guidelines set out by the Supreme Court, and would maintain appropriate coordination to avoid parallel adjudicatory proceedings.

Conclusions

2.2.5 The Court did not make a factual determination as to which specific notice would ultimately prevail or whether the subject-matter was in fact identical; instead, it left those determinations to be made by the authorities themselves through mutual coordination, applying the tests and guidelines prescribed by the Supreme Court.

2.2.6 The Court directed both authorities to coordinate so that the assessee is not subjected to multiple adjudicatory processes on the same subject-matter, with any subsequent proceeding inconsistent with Section 6(2)(b) yielding to the proceeding first initiated.

2.3 Directions to parties and authorities to operationalize the Supreme Court guidelines

Interpretation and reasoning

2.3.1 The Court, instead of entering into an adjudication on facts or merits, chose to structure the relief in line with directions issued by other High Courts in similar matters, where assessees were directed to present their case before the authorities and the authorities were directed to proceed in accordance with the Supreme Court's conclusions and guidelines.

2.3.2 The Court considered it sufficient and appropriate to dispose of the petition by ensuring (i) full compliance by the assessee with summons/notices issued by both authorities, and (ii) inter-authority communication and coordination to verify overlap of inquiries and to avoid duplication, in terms of the Supreme Court's para 96 and 97 guidelines.

Conclusions

2.3.3 The Court directed the petitioner to appear before both Central and State authorities, file responses to the summons/notices, raise all contentions (including those based on Section 6(2)(b) and the Supreme Court judgment), and furnish all relevant documents by a specified date. The petitioner was mandated to comply with all lawful requisitions and to assist in inquiry/investigation.

2.3.4 The Court directed that, after receiving the petitioner's responses, the State authority shall communicate with the Central authority to verify the assessee's claim of overlapping inquiries, in accordance with the Supreme Court's guidelines, and that both authorities shall coordinate to ensure that the petitioner is not subjected to multiple adjudicatory processes on the same subject-matter.

2.3.5 It was further directed that, after such coordination, the competent adjudicatory authority shall proceed in accordance with law, including providing the petitioner an opportunity of being heard, and that any show cause notice issued in respect of a liability already covered by an existing show cause notice would be liable to be quashed in terms of the Supreme Court's ruling.

2.3.6 The Court expressly clarified that it was not expressing any opinion on the merits of the allegations or on the validity of the summons/notices, and that all rights and contentions of the parties remained open, to be considered by the authority dealing with the show cause notice in light of the binding Supreme Court decision.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether, in view of Section 6(2)(b) of the Central Goods and Services Tax Act, 2017, the issuance of a show cause notice under Section 74 by the Central tax authority, after prior action by the State tax authority on the same subject matter, amounts to impermissible parallel adjudicatory proceedings.

1.2 What directions should be issued to the taxpayer and the Central and State GST authorities to ensure compliance with Section 6(2)(b) of the CGST Act and the principles laid down in the decision of the Supreme Court in Armour Security (India) Ltd. regarding "initiation of proceedings", "same subject matter", and coordination between authorities.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Bar on parallel adjudicatory proceedings under Section 6(2)(b) CGST Act where both Central and State authorities act on the same subject matter

Legal framework (as discussed)

2.1 The Court proceeded on the basis of Section 6(2)(b) of the CGST Act, which bars the "initiation of any proceedings" on the "same subject matter" once proceedings have been initiated by either the Central or State tax administration.

2.2 The Court relied on and reproduced in extenso the conclusions and guidelines in paragraphs 96 and 97 of the Supreme Court judgment in Armour Security (India) Ltd., which, inter alia, held that:

(i) "Initiation of any proceedings" in Section 6(2)(b) refers to formal commencement of adjudicatory proceedings by issuance of a show cause notice, and not to summons, search, seizure, or other investigative steps;

(ii) "Subject matter" refers to the tax liability, deficiency or obligation arising from a particular contravention which the Department seeks to assess or recover;

(iii) Parallel adjudicatory proceedings on the same subject matter by the other authority, when one authority has already initiated adjudicatory proceedings, are barred;

(iv) Intelligence-based enforcement action may be initiated by either authority, and legitimate investigation (including summons) can continue until it is ascertained that both authorities are examining the identical liability/contravention or issuing overlapping show cause notices; and

(v) Any show cause notice in respect of a liability already covered by an existing show cause notice must be quashed.

Interpretation and reasoning

2.3 The Court noted the factual matrix that: (a) the State authority had issued multiple summons/notices dated 13.05.2022, 10.01.2023, 14.03.2023 and 16.03.2023, and an intimation in DRC-01A dated 01.04.2024 under Rule 142(1A); and (b) the Central authority had issued a summons/notice dated 09.05.2023 and a show cause notice dated 11.07.2024 under Section 74.

2.4 The core question identified was whether the summons issued by the State authority could be said to "prevail upon" the show cause notice issued by the Central authority so as to render the latter a barred "parallel proceeding" under Section 6(2)(b).

2.5 The Court observed that, in light of Armour Security (India) Ltd., the matter stood substantially covered and no fresh adjudication on the substantive interpretation of Section 6(2)(b) was required. The Supreme Court had already delineated: (i) what constitutes "initiation of proceedings"; (ii) how "same subject matter" is to be tested; and (iii) how potential overlaps and duplication between Central and State authorities are to be handled.

2.6 The Court recorded the stand of the Central and State authorities that they would abide by Section 6(2)(b) and the principles in paragraphs 96 and 97 of Armour Security (India) Ltd., and that they would maintain appropriate coordination to avoid parallel adjudicatory proceedings.

2.7 Having regard to the binding precedent and the authorities' undertaking, the Court considered it unnecessary, in this writ jurisdiction, to determine itself whether the impugned show cause notice was, in fact, a barred parallel proceeding on the same subject matter. Instead, it treated the controversy as one to be resolved administratively between the authorities in accordance with Armour Security (India) Ltd.

Conclusions

2.8 The Court declined to quash the impugned show cause notice or summons at this stage and refrained from pronouncing upon their validity or on whether Section 6(2)(b) was actually attracted in the facts.

2.9 It concluded that the controversy should be resolved by the Central and State authorities themselves, strictly following the legal position and guidelines laid down by the Supreme Court in Armour Security (India) Ltd., including determination of any overlap in "subject matter" and ensuring that the assessee is not subjected to multiple adjudicatory processes on the same subject matter.

2.10 The petitioner was left to raise all contentions under Section 6(2)(b) and Armour Security (India) Ltd. before the adjudicating authority, which would decide in accordance with law.

Issue 2 - Directions to taxpayer and authorities for coordination and conduct of proceedings in light of Armour Security (India) Ltd.

Legal framework (as discussed)

2.11 The Court expressly relied on paragraphs 96 and 97 of Armour Security (India) Ltd., which prescribe:

(i) that an assessee must comply with summons and show cause notices in the first instance;

(ii) that, upon learning of overlapping inquiries, the assessee must inform the second authority;

(iii) that authorities must inter-communicate to verify overlap and either continue distinct inquiries or designate one authority to proceed, sharing material as necessary; and

(iv) that courts may intervene under Article 226 where the guidelines are not followed.

Interpretation and reasoning

2.12 The Court noted that various High Courts had, post-Armour Security (India) Ltd., directed assessees to place their contentions and documents before the competent GST authorities, who were then to decide issues of overlap and bar under Section 6(2)(b) in light of Armour Security (India) Ltd.

2.13 Adopting the same approach, the Court considered that the appropriate course was not to undertake a merits adjudication in writ proceedings, but to channel the controversy into the statutorily competent authorities, with structured obligations of cooperation and coordination imposed on both the assessee and the tax administrations.

2.14 The Court emphasized that:

(i) the petitioner must fully cooperate with both the Central and State authorities by responding to summons and notices, furnishing documents, and raising legal objections, including those based on Section 6(2)(b) and Armour Security (India) Ltd.;

(ii) the State and Central authorities must then communicate with each other to verify the petitioner's claim of overlap in subject matter; and

(iii) the authorities must ensure that no multiple adjudicatory processes on the same subject matter are pursued, and that only the appropriate authority proceeds to adjudication, consistent with Armour Security (India) Ltd.

Conclusions

2.15 The Court disposed of the petition by issuing specific directions:

(a) The petitioner shall appear before the Central authority, file a response to the show cause notice under Section 74, and raise all contentions with supporting documents, in terms of Armour Security (India) Ltd., within the time stipulated.

(b) The petitioner shall comply with summons and intimation in DRC-01A under Rule 142(1A) issued by the State authority, respond to all lawful requisitions, and specifically inform the State authority of the issuance of the Central show cause notice, in terms of paragraph 97(a) & (b) of Armour Security (India) Ltd.

(c) Upon such intimation, the State authority shall communicate with the Central authority to verify the assessee's claim of overlapping inquiries, in terms of paragraph 97(c) of Armour Security (India) Ltd.

(d) The Central and State authorities shall coordinate so that the assessee is not subjected to multiple adjudicatory processes on the same subject matter and shall follow the verdict in Armour Security (India) Ltd. in deciding which authority proceeds with adjudication.

(e) The adjudicating authority, as so determined, shall thereafter proceed in accordance with law, including affording the petitioner an opportunity of being heard.

2.16 The Court expressly clarified that it had not expressed any opinion on the merits of the allegations, or on the validity of the show cause notice or the summons/notices, and that all rights and contentions of the parties, including those under Armour Security (India) Ltd., were left open to be urged before the competent authority.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether input tax credit on insurance premium paid for stock-in-trade and business premises could be denied by classifying it as motor vehicle insurance and invoking section 17(5) of the Central Goods and Services Tax Act, 2017.

1.2 Whether, despite expiry of the statutory period for appeal, the extraordinary writ jurisdiction could be invoked to set aside the demand and consequential bank attachment founded on a patently erroneous application of section 17(5) of the Central Goods and Services Tax Act, 2017.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Disallowance of input tax credit on insurance premium by invoking section 17(5) CGST Act

Legal framework

2.1 The Court referred to section 17(5) of the Central Goods and Services Tax Act, 2017, noting in particular that input tax credit is not available in respect of motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons, and associated ineligible supplies.

Interpretation and reasoning

2.2 The Court examined the insurance policies produced on record and found they were "standard fire and special peril policies" covering stock and premises of the petitioner for STFI cover and earthquake, with the description of property referring to "Electronic Goods Manufacturing/Assembly" and manufacturing equipment, and not to any motor vehicle.

2.3 It noted that the demand confirmed by the department was solely on the basis that the insurance premium was treated as motor vehicle insurance and therefore as ineligible ITC under section 17(5), while all other proposed demands in the show cause notice were dropped.

2.4 The Court reproduced the adjudicating authority's findings where, despite the petitioner's categorical stand that no ITC was claimed on motor vehicle insurance or airline travel, the authority concluded that an "ineligible ITC of Motor Vehicle Insurance" had been availed from United India Insurance Company Limited and proceeded to raise demand under section 17(5) with interest and penalty.

2.5 From this, the Court found that the respondent authority had not considered the actual insurance policies or their contents, and had wrongly treated the insurance as motor vehicle insurance, contrary to the factual record.

2.6 The Court held that section 17(5) applied only where the input tax credit was in respect of motor vehicles as contemplated therein, which was not the case on the undisputed facts; the disallowance was thus based on an incorrect factual assumption and a misapplication of the statute.

Conclusions

2.7 Input tax credit on the insurance premium for stock-in-trade and business premises was lawfully availed and did not fall within the ineligible category under section 17(5) of the Central Goods and Services Tax Act, 2017.

2.8 The finding that the petitioner had availed "ineligible ITC of Motor Vehicle Insurance" was contrary to the record and unsustainable in law, rendering the disallowance and resultant demand liable to be quashed.

Issue 2 - Maintainability of writ petition and validity of recovery/attachment actions after lapse of appellate limitation

Interpretation and reasoning

2.9 The Court recorded that the statutory remedy of appeal under section 107 of the Central Goods and Services Tax Act had become time-barred, as both the normal limitation period and the maximum condonable extended period had elapsed before the petitioner could file an appeal.

2.10 It took note of the petitioner's grievance that, subsequent to the order in Form DRC-07, coercive recovery was initiated by issuing communication under section 79(1)(c) of the Act to the petitioner's bank, resulting in attachment and withholding of the disputed amount from the petitioner's account, without affording further hearing or considering the clarification regarding the nature of insurance.

2.11 The Court also noted that the respondent State did not controvert that section 17(5)(b) had been wrongly invoked by treating the subject insurance as motor vehicle insurance, although the policies were admittedly for stock and premises.

2.12 Emphasizing that the only surviving addition in the impugned order was the disallowance of ITC on insurance premium and that all other proposed additions were dropped, the Court held that the order was passed on incorrect and contrary-to-record facts, and that in such "glaring facts" the respondent could not have assumed jurisdiction to disallow ITC on an insurance policy that did not relate to motor vehicles.

2.13 On this basis, the Court considered it appropriate to entertain the writ petition notwithstanding the lapse of the appellate limitation, as the impugned order and consequential recovery were founded on a patent factual and legal error affecting the very assumption of jurisdiction to invoke section 17(5).

Conclusions

2.14 The Court exercised its writ jurisdiction under Articles 226/227 of the Constitution to intervene despite the expiry of the appellate remedy, in view of the manifestly erroneous and jurisdictionally flawed disallowance of ITC and consequential coercive recovery.

2.15 The impugned order under section 73 and the consequential notice/communication to the bank for recovery and attachment were quashed and set aside, and the rule was made absolute to that extent, with no order as to costs.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether writ petitions under Article 226 challenging show cause notices on classification under the GST regime are maintainable in view of the doctrine of exhaustion of alternate statutory remedies.

1.2 Whether the impugned show cause notices can be held to be "wholly without jurisdiction" on the basis of (a) prior classification orders under the erstwhile Central Excise Act and under the GST Act, and (b) subsequent amendments to the Customs Tariff Act allegedly supporting the petitioners' classification.

1.3 Whether the present matters fall within the recognized exceptions where a High Court may interfere at the show cause notice stage, notwithstanding availability of statutory remedies.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Maintainability of writ petitions against show cause notices in presence of alternate remedies

Legal framework (as discussed)

2.1 The Court relied on established precedent governing interference under Article 226 at the show cause notice stage and the principle of exhaustion of alternate remedies, including Whirlpool Corporation v. Registrar of Trade Marks; Union of India v. Coastal Container Transporters Association; Special Director v. Mohd. Ghulam Ghouse; Mahanagar Telephone Nigam Ltd. v. Chairman, Central Board, Direct Taxes; Malladi Drugs and Pharma Ltd. v. Union of India; State of Maharashtra v. Greatship (India) Limited; United Bank of India v. Satyawati Tondon; and its own earlier decision in Oberoi Constructions Ltd. v. Union of India.

Interpretation and reasoning

2.2 The Court recorded that only show cause notices on classification had been issued and that the adjudicatory and appellate mechanisms under the taxing statute are available.

2.3 The Court emphasized that specialised adjudicating authorities are statutorily entrusted with assessment and classification, followed by tiers of appellate remedies, and that High Courts should not "short-circuit" this scheme by intervening at the notice stage.

2.4 Referring to the Supreme Court's disapproval in Union of India v. Coastal Container Transporters Association of quashing show cause notices on classification issues, the Court held that where there is neither lack of jurisdiction nor breach of natural justice, the assessee must respond to the notice and pursue statutory remedies.

2.5 Relying on Special Director v. Mohd. Ghulam Ghouse, the Court reiterated that writ petitions against show cause notices should not be entertained unless the notice is "totally non-est in the eyes of law" or there is "an absolute want of jurisdiction of the authority even to investigate the facts", and that all objections, including jurisdictional ones, can be urged before the issuing authority.

2.6 By reference to Mahanagar Telephone Nigam Ltd., Malladi Drugs and Pharma Ltd., and Greatship (India) Limited, the Court underscored that Article 226 is not intended to bypass statutory procedures and that revenue matters with available remedies do not constitute exceptional circumstances.

2.7 The Court further noted the Supreme Court's observation in United Bank of India v. Satyawati Tondon about the misuse of Article 226 primarily for interim relief and held that such practice must be discouraged.

2.8 The Court also adopted its prior reasoning in Oberoi Constructions Ltd. on the law of alternate remedies and held that those principles govern the present case.

Conclusions

2.9 The Court held that the writ petitions, being directed solely against show cause notices in a tax classification dispute, are not maintainable in view of adequate alternate statutory remedies.

2.10 The Court declined to entertain or continue the petitions and directed the petitioners to pursue their objections before the adjudicating authority and, if necessary, through the appellate hierarchy.

Issue 2: Alleged lack of jurisdiction of the authority issuing the show cause notices based on prior classification and statutory amendment

Interpretation and reasoning

2.11 The petitioners contended that earlier classification orders under the Central Excise Act, decisions of original and appellate authorities under the GST Act, and an amendment to the Customs Tariff Act supported their classification and rendered the present show cause notices "wholly without jurisdiction".

2.12 The Court found that the show cause notices had been issued by the "proper Adjudicating Authority", and therefore the proceeding could not be treated as "entirely without jurisdiction".

2.13 The Court observed that arguments based on prior classification orders necessarily require factual determination as to whether the goods presently in issue are identical or whether there are distinguishing features; such assessment is best undertaken by the adjudicating authority.

2.14 The Court held that all contentions based on prior decisions, prior classifications and tariff amendments constitute defences on merits, not grounds to invalidate the jurisdiction to issue a show cause notice.

Conclusions

2.15 The Court rejected the plea that the impugned show cause notices are "wholly without jurisdiction".

2.16 The Court held that the petitioners must raise all merits-based and jurisdictional contentions, including reliance on prior classification orders and statutory amendments, before the adjudicating authority in response to the show cause notices.

Issue 3: Applicability of exceptions permitting High Court interference at the notice stage notwithstanding alternate remedies

Legal framework (as discussed)

3.1 Referring to Whirlpool Corporation and Greatship (India) Limited, the Court reiterated the limited exceptions where Article 226 may be invoked despite alternate remedies-such as where there is a challenge to the vires of a statute, a complete lack of jurisdiction, or extraordinary situations involving intertwined public and private wrongs requiring prevention of public injury.

Interpretation and reasoning

3.2 The Court held that the present matters, being classification disputes requiring factual inquiry and expert evaluation, do not fall into the exceptional categories justifying departure from the rule of alternate remedies.

3.3 The Court specifically recorded that the case does not fall within the exceptions carved out in Whirlpool Corporation and that revenue matters with available statutory remedies, as clarified in Greatship (India) Limited, ordinarily do not qualify as such exceptional cases.

3.4 The Court noted that some investigation and examination of materials will be necessary to determine whether the authorities and amendments relied upon by the petitioners are applicable to the products in question, further reinforcing the need for adjudication in the statutory forum.

Conclusions

3.5 The Court concluded that no exceptional or extraordinary circumstances were established to warrant bypassing the statutory adjudication and appellate mechanisms.

3.6 The Court held that it would not circumvent or short-circuit the statutory remedies and therefore dismissed the petitions, leaving all questions of fact and law, including classification, open for decision by the adjudicating authority.

Overall Disposition and Directions (linked to issues above)

4.1 The Court dismissed the writ petitions without costs, solely on the ground of availability and adequacy of alternate remedies and absence of exceptional circumstances or total lack of jurisdiction.

4.2 The Court directed that the petitioners are at liberty to raise all permissible contentions, including those advanced in the petitions, in their replies to the show cause notices and before the adjudicating authority.

4.3 The Court recorded that if replies have already been filed, the adjudicating authority shall consider them, grant hearing, and pass appropriate orders in accordance with law.

4.4 The Court expressly clarified that it has not adjudicated any contention on merits and that all contentions of all parties are left open for determination by the adjudicating authority in the first instance.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether interest paid on account of delayed payment of Agricultural Income Tax is an allowable deduction under Section 37 of the Income Tax Act, 1961.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Deductibility under Section 37 of interest on delayed payment of Agricultural Income Tax

Legal framework

2.1 The Court examined Section 10(1) of the Income Tax Act, 1961, which excludes agricultural income from the computation of total income for income tax purposes.

2.2 The Court considered Section 37 of the Income Tax Act, 1961, which allows deduction of expenditure laid out or expended wholly and exclusively for the purposes of the business or profession, subject to statutory exclusions.

Interpretation and reasoning

2.3 It was undisputed that the disallowed interest pertained to delayed payment of Agricultural Income Tax (AIT) under the Kerala Agricultural Income Tax Act, 1991.

2.4 The Court held that since agricultural income is excluded from total income under Section 10(1), payment of AIT itself is not an allowable deduction under the Income Tax Act.

2.5 The Court reasoned that interest paid on delayed payment of AIT takes its colour from the tax on which it is levied; where the underlying tax is not an admissible deduction, interest on such tax also cannot be deductible.

2.6 On the scope of Section 37, the Court held that only expenditure incurred "for the purpose of the business or profession" qualifies for deduction. Delay in paying AIT cannot be treated as being in the business interest of the assessee, and therefore interest for such delay is not expenditure laid out wholly and exclusively for business purposes.

2.7 The Court, relying on the principle laid down by the Supreme Court in Bharat Commerce and Industries Ltd. v. Commissioner of Income-Tax, treated delayed payment of tax (there, income tax) as not constituting business expenditure deductible under Section 37, and extended that reasoning to the interest on delayed payment of AIT.

2.8 As to the argument that the interest under the AIT Act was "compensatory in nature" and therefore deductible, the Court held that the compensatory or penal character of interest was not determinative in the present context, because the fundamental bar was that AIT itself was not deductible and agricultural income was excluded from total income.

2.9 The Court distinguished the authorities cited by the assessee:

2.9.1 The decision in Pratibha Processors was held inapplicable, as it merely explained the concepts of tax, interest, and penalty and did not deal with deductibility of such interest under Section 37.

2.9.2 The decision in Mahalaxmi Sugar Mills Co. was distinguished on the basis that there the cess itself was an eligible deduction under the Income Tax Act, unlike AIT in the present case.

2.9.3 The decision in Consolidated Coffee Ltd. was found inapposite as it concerned characterization of interest under the Karnataka Agricultural Income Tax Act and not its deductibility under Section 37 of the Income Tax Act.

2.9.4 The decision in Prakash Cotton Mills Pvt. Ltd. was similarly distinguished because it related to interest on delayed payment of cess where such cess itself was an admissible deduction, which was not the situation with AIT.

Conclusions

2.10 Interest paid on delayed payment of Agricultural Income Tax is not an eligible deduction under Section 37 of the Income Tax Act, 1961.

2.11 Since Agricultural Income Tax itself is not deductible and arises in respect of income excluded under Section 10(1), interest on delayed payment of such tax cannot be said to be expenditure incurred for the purposes of business or profession within the meaning of Section 37.

2.12 The question of law was answered against the assessee and in favour of the revenue, and the disallowance of interest was upheld.

1. ISSUES PRESENTED AND CONSIDERED

(1) Whether the assessment order under section 143(3) read with section 144B was vitiated by violation of principles of natural justice due to inadequacy of time granted for response to the show cause notice.

(2) Whether denial of an effective personal hearing under section 144B(6)(viii) in the faceless assessment proceedings constituted a breach of statutory mandate and principles of natural justice.

(3) Consequentially, whether the assessment order, demand notice, penalty show cause notices, and penalty order under section 270A were liable to be quashed and the matter remanded for a de novo assessment with appropriate safeguards.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (1): Adequacy of time to respond to show cause notice and violation of principles of natural justice

Legal framework (as discussed)

The Court referred to section 143(3) read with section 144B of the Income-tax Act, 1961 and the internal Standard Operating Procedure (SOP) issued by the Revenue, particularly paragraph N.1.3, which stipulates that, to ensure adherence to principles of natural justice, a minimum of seven days' response time is to be granted, though curtailment is permissible having regard to the limitation date for completion of assessment.

Interpretation and reasoning

(a) The show cause notice was issued on 23.03.2024 (a Saturday) at 20:07 hours, calling upon the assessee to respond by 26.03.2024 at 11:15 hours.

(b) In the interregnum, 24.03.2024 was a Sunday and 25.03.2024 was a public holiday (Holi), resulting in no working day being made available to the assessee to prepare and file a reply.

(c) The Court held that granting time which did not even cover a single working day amounted, on its face, to "gross violation of principles of natural justice".

(d) While the SOP permitted curtailment of the minimum seven-day period in view of limitation, the Court emphasized that Respondent No. 1 had not provided any "good reason" for issuing the show cause notice at the "fag end" (seven days before limitation) and, further, for effectively denying even one working day for response.

(e) The Court found that the flexibility in the SOP could not justify such an extreme curtailment, absent a cogent explanation, and that the requirement of a reasonable opportunity was not satisfied.

Conclusions

The Court concluded that the time granted to reply to the show cause notice was inadequate and constituted a gross violation of principles of natural justice, thereby vitiating the assessment proceedings under section 143(3) read with section 144B.

Issue (2): Denial of effective personal hearing under section 144B(6)(viii)

Legal framework (as discussed)

The Court noted that, in terms of section 144B(6)(viii) of the Act, where a personal hearing is sought, it is mandatory to provide such personal hearing through video conferencing in faceless assessment proceedings.

Interpretation and reasoning

(a) The assessee had specifically requested a personal hearing. The record showed an email from Respondent No. 1 sent on 27.03.2024 at 11:30 AM, stating that a virtual hearing had been scheduled for the same day at 11:15 AM.

(b) The Court held that the notice for personal hearing was thus communicated after the time fixed for the hearing had already lapsed, which was objected to by the assessee in its reply dated 27.03.2024.

(c) The assessee produced screenshots showing that it had logged into the portal, but the meeting was not started by the host. The Court accepted that the assessee was not effectively granted a personal hearing.

(d) The Court further observed that even apart from the lapse in timing, issuing notice of hearing on the very same day, without any meaningful advance notice, did not constitute a reasonable or effective opportunity to be heard.

(e) In these circumstances, the Court rejected the Revenue's contention that the assessee had failed to attend the hearing, and held that the statutory mandate of providing a personal hearing under section 144B(6)(viii) had not been complied with.

Conclusions

The Court held that the assessee was denied a mandatory and effective personal hearing under section 144B(6)(viii), which further amounted to a violation of principles of natural justice and independently vitiated the assessment order.

Issue (3): Consequential validity of assessment, demand, penalty notices and penalty order; remand directions

Interpretation and reasoning

(a) Having found gross violation of principles of natural justice in the conduct of the assessment proceedings-both in terms of inadequate time for response and denial of effective personal hearing-the Court held that the assessment order under section 143(3) read with section 144B could not be sustained.

(b) The consequent demand notice under section 156 and show cause notices for penalty under section 274 read with section 270A, being founded on the vitiated assessment order, were also held liable to be quashed.

(c) The penalty order under section 270A dated 16.07.2024 and the corresponding demand notice, being consequential, were likewise set aside. The Court noted the grievance that the penalty order was passed despite an earlier stay, but the primary basis of quashing was the invalidity of the underlying assessment and breach of natural justice.

(d) The Court decided to remand the matter to the Assessing Officer for a de novo assessment, with specific directions to ensure due compliance with principles of natural justice and statutory requirements.

Conclusions and directions

(a) The assessment order under section 143(3) read with section 144B, the demand notice under section 156, the penalty show cause notices under section 274 read with section 270A, the penalty order under section 270A dated 16.07.2024, and the related demand notice were quashed and set aside.

(b) The matter was remanded to the Assessing Officer to consider the case afresh de novo, with the following mandated safeguards:

* A fresh show cause notice to be issued, clearly bringing out the proposed additions and disallowances.

* Reasonable opportunity of being heard to be granted, including sufficient time to file a reply; the reply to be filed within two weeks from the date of service of the fresh show cause notice.

* A personal hearing to be granted before passing the fresh assessment order; notice of personal hearing to be given at least five working days in advance.

* If any judicial decisions are to be relied upon by the Assessing Officer, the assessee is to be given adequate notice of not less than seven working days to meet and counter such decisions.

* The fresh assessment order to be a speaking order, dealing with all submissions of the assessee, and to be passed on or before 31.03.2026.

(c) The Court clarified that it had not expressed any opinion on the merits of the additions or disallowances made in the original assessment order, and that all rights and contentions of both parties on merits were kept open.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the writ petition under Article 226 challenging orders of the appellate authority under the Income Tax Act should be entertained in the presence of an equally efficacious alternate statutory remedy of appeal to the Income Tax Appellate Tribunal under section 253.

1.2 Whether the alleged "manifest error" in the interpretation of section 194B by the appellate authority justified bypassing the alternate remedy and warranted exercise of writ jurisdiction.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2 - Maintainability of writ petition in presence of alternate remedy under section 253 of the Income Tax Act; effect of alleged manifest error in interpretation of section 194B

(a) Legal framework (as discussed)

2.1 The Court referred to the statutory scheme under the Income Tax Act, noting that against the order of the Commissioner (Appeals), an appeal lies to the Income Tax Appellate Tribunal under section 253, which constitutes an equally efficacious alternate remedy.

2.2 The Court noted the consistent position of the Supreme Court deprecating the practice of High Courts entertaining writ petitions when an equally efficacious alternate remedy is available under the statute.

(b) Interpretation and reasoning

2.3 The Revenue raised a preliminary objection that the petitioner, having already availed the remedy before the Commissioner (Appeals) for the relevant assessment years, ought to pursue the further statutory remedy of appeal to the Tribunal instead of directly invoking writ jurisdiction.

2.4 The petitioner argued that there was a "manifest error" in the impugned orders on the ground that section 194B, as it stood for the relevant assessment years, contemplated deduction of tax at source only when the winnings from a particular game exceeded Rs. 10,000, and not on an aggregate basis; and that the concept of aggregation was introduced only with effect from 1 April 2023. On this basis, it was contended that the writ petition was maintainable despite the alternate remedy.

2.5 The Court recorded that the appellate orders for each assessment year were detailed orders passed after hearing the petitioner, and found no reason why the petitioner should not be relegated to the remedy of appeal to the Tribunal.

2.6 The Court noted that it was not even the petitioner's case that the alternate remedy under section 253 was not "equally efficacious," and reiterated the principle that, where such a remedy exists, the High Court would ordinarily decline to exercise writ jurisdiction.

2.7 The Court did not enter into the merits of the petitioner's contention on the correct interpretation of section 194B or the alleged manifest error, holding instead that these issues can and should be agitated before the Tribunal in the statutory appeal.

(c) Conclusions

2.8 The Court held that, in view of the equally efficacious alternate remedy of appeal to the Income Tax Appellate Tribunal under section 253 of the Income Tax Act, the writ petition was not to be entertained.

2.9 The petitioner was relegated to the alternate remedy, with a direction to file appeals before the Tribunal within four weeks; if filed within that period, the Tribunal was directed to entertain the appeals on merits without raising any issue of limitation.

2.10 The writ petition was dismissed with these directions, with no order as to costs.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether delay of 152 days in filing the appeals under Section 260A of the Income Tax Act, 1961 deserved condonation.

1.2 Whether the Tribunal's findings confirming additions on account of excess/unexplained cash deposits for the relevant assessment years raised any substantial question of law under Section 260A of the Income Tax Act, 1961.

1.3 Whether the assessee had satisfactorily established that the excess cash deposits in the bank accounts were sourced from opening cash balance and/or regular cash receipts of earlier and current financial years.

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Condonation of delay in filing the appeals

Legal framework (as discussed)

2.1.1 The appeals were accompanied by applications seeking condonation of delay of 152 days in filing.

Interpretation and reasoning

2.1.2 The Court proceeded on the reasons set out in the applications and did not indicate any dispute or contest on condonation.

Conclusions

2.1.3 The delay of 152 days in filing the appeals was condoned and the applications were disposed of.

2.2 Nature of Tribunal's findings on excess/unexplained cash deposits and maintainability under Section 260A

Legal framework (as discussed)

2.2.1 The appeals under Section 260A assailed a common order of the Tribunal which, in so far as relevant, allowed the Revenue's appeals by sustaining additions on account of excess cash deposits over and above recorded cash sales for the concerned assessment years.

2.2.2 The Tribunal had examined the explanation for excess cash deposits of Rs. 58,09,830/- for one assessment year and Rs. 1,97,45,038/- for the other, treating the matter as one of factual verification of source of cash in hand and its correlation with bank deposits and cash sales.

Interpretation and reasoning

2.2.3 The Tribunal recorded that when queried, the assessee's counsel claimed that the excess cash deposits were out of opening cash balance and regular cash receipts during the year; however, the Tribunal found that the assessee could not demonstrate from the assessment order, appellate order, or the paper book how the issue had been addressed before the lower authorities.

2.2.4 The Tribunal noted specific reference by the assessee to pages 36-37 of the paper book, but held that the assessee was unable to properly correlate entries of cash deposits in the bank with cash in hand or cash generated out of cash sales, and concluded that the differential cash remained unexplained.

2.2.5 For the subsequent assessment year, the Tribunal treated the issue of unexplained cash deposit as identical to the earlier year and, finding the facts similarly unclear, allowed the Revenue's appeal on the same reasoning.

2.2.6 Before the Court, the assessee again relied on pages 36-37 of the paper book, contending that the excess cash deposits were brought forward from earlier financial years. Upon scrutiny, the Court found that those pages did not depict the amounts in question as brought forward balances.

2.2.7 On a specific query by the Court as to whether any evidence had been produced to show that the disputed amounts were carried forward from the previous financial year, the answer was in the negative.

2.2.8 The Court held that the Tribunal's conclusions were premised on appreciation of evidence and factual non-clarity regarding source and correlation of cash deposits, and that the assessee had failed both before the Tribunal and before the Court to adduce or point out material correlating the cash deposits with cash in hand or earlier year balances.

2.2.9 The Court characterised the controversy as turning entirely on factual determination as to the source of cash and the sufficiency of explanation/evidence offered by the assessee.

Conclusions

2.2.10 The Court held that the proposed questions in the appeals related purely to questions of fact concerning explanation of excess cash deposits and appreciation of evidence by the Tribunal.

2.2.11 It was concluded that no substantial question of law arose for consideration under Section 260A of the Income Tax Act, 1961.

2.2.12 Consequently, the appeals under Section 260A were held to be not maintainable on the grounds urged and were dismissed.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the writ petition under Article 226 was maintainable against the reassessment order despite the availability of an appellate remedy, in view of alleged violation of principles of natural justice.

1.2 Whether the reassessment proceedings and the impugned assessment order, including addition of alleged unexplained cash credits and initiation of penalty under Section 271(1)(c), were vitiated for want of proper and effective service of notice under Section 148 of the Income Tax Act, 1961, particularly in the case of a non-resident assessee.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Maintainability of writ petition despite alternative remedy

Interpretation and reasoning: The Tribunal noted the contention of the revenue that a statutory appeal was available and hence the writ petition was not maintainable. It examined, however, the admitted factual position that the assessee had not been effectively served with notice under Section 148 and that the assessment was completed ex parte. The Court treated the alleged non-service of notice and consequent denial of opportunity of hearing as a violation of principles of natural justice going to the root of jurisdiction. In such circumstances, the existence of an alternative remedy was not considered a bar to the exercise of writ jurisdiction.

Conclusions: The writ petition was held to be maintainable, notwithstanding the availability of a statutory appeal, because the challenge was founded on lack of proper service of notice and consequent violation of principles of natural justice, rendering the assessment itself vulnerable.

Issue 2 - Validity of reassessment in absence of proper service of notice under Section 148 on a non-resident assessee

Legal framework: The Court referred to Sections 148 and 148(3) of the Income Tax Act, 1961, and held that reassessment proceedings initiated under Section 148 must be proceeded with only after proper service of notice and that no valid proceedings can be drawn without such service. The Court also relied on the judgment in Smt. S. Nachiar v. Income-tax Officer and the principles laid down therein, including the statement of law, following Y. Narayana Chetty v. ITO, that service of requisite notice on the assessee is a condition precedent to the validity of any reassessment and that proceedings pursuant to an invalid or unserved notice are void and inoperative.

Interpretation and reasoning:

(a) It was undisputed on the record, and admitted in the assessment order itself, that: (i) there was no response from the assessee to notices; (ii) the Inspector could not trace the assessee; and (iii) notice was ultimately served by affixture. All notices and correspondence were sent to an address that had been sold by the assessee in 2007 and at which he had not been residing thereafter.

(b) The Court found that the department itself, in its correspondence and draft orders, consistently recorded that the assessee was a non-resident Indian residing overseas and visiting India only occasionally. On these facts, it held that service by affixture at an old Indian address, without ensuring that the assessee actually had access to such notices, did not constitute effective or proper service.

(c) The contention of the revenue that notices were sent to the "known and registered address" and that it was the assessee's duty to intimate change of address was not accepted as sufficient to cure the defect, in view of the admitted non-traceability of the assessee at that address, his non-resident status, and the absence of proof of actual or constructive service.

(d) The Court considered that the admitted non-service of the statutory notice under Section 148 and the ex parte completion of assessment without affording a real and effective opportunity of hearing violated the principles of natural justice. The analogy and reasoning in Smt. S. Nachiar were held to apply squarely, as in both situations the notice contemplated under Section 148 was not effectively served and reassessment was completed ex parte.

(e) The Court noted that, as the assessment order itself was vitiated on this jurisdictional ground, the reliance by the revenue on other decisions was distinguishable on facts and did not advance the department's case.

Conclusions:

(i) Proper and effective service of notice under Section 148 is a condition precedent for valid initiation and completion of reassessment proceedings.

(ii) In the present case, notices issued at an old address already disposed of by the assessee, coupled with the assessee's non-resident status and admitted inability of the Inspector to trace him, meant that there was no valid service of notice under Section 148.

(iii) The reassessment order, including the addition of cash deposits as unexplained cash credits and the finding regarding liability to penalty under Section 271(1)(c), was vitiated for want of proper service and for breach of principles of natural justice.

(iv) The impugned assessment order was therefore quashed and the matter remitted to the Assessing Officer to pass a fresh assessment order after issuing notice in accordance with law and affording a fair and effective opportunity of hearing to the assessee, including an opportunity to substantiate his claim that the amounts credited in his Indian bank account were non-taxable.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the rejection of the assessee's application for condonation of delay in filing return for the relevant assessment year under Section 119(2)(b) of the Income-tax Act was legally sustainable.

1.2 What is the scope and application of the expressions "genuine hardship" and "sufficient/reasonable cause" in the context of condonation of delay in filing income-tax returns, particularly in light of CBDT circulars.

1.3 Whether the circumstances arising from repeated resignations and non-availability of key accounts personnel constituted a reasonable and sufficient cause warranting condonation of delay.

1.4 Whether the authority exercising power under Section 119(2)(b) is required to adopt a liberal and judicious approach while considering applications for condonation of delay and whether such approach was followed in the impugned order.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Sustainability of rejection of condonation under Section 119(2)(b)

Legal framework (as discussed): The Court proceeded on the basis of Section 119(2)(b) of the Income-tax Act, 1961, which empowers the competent income-tax authority to condone delay where it is satisfied that the assessee has suffered "genuine hardship". The Court also adverted to CBDT Circulars, particularly Circular No. 11/2024 and the extension Circular dated 26.10.2024, which guide the exercise of such power and delegate authority to specified officers to consider condonation applications.

Interpretation and reasoning: The Court noted that the petitioner had placed before the competent authority detailed material and an affidavit explaining the non-availability and frequent resignation of employees in the accounts department, with specific dates of joining and relieving. It held that the PCIT failed to appropriately appreciate the "genuine hardship" and the cause shown, and instead proceeded on a speculative assumption that if the books and audit report were complete, a physical audit report could have been filed with the jurisdictional Assessing Officer to establish hardship. The Court observed that such reasoning brushed aside the sworn factual assertions and did not address the real difficulty faced in preparing and filing the return in time. The Court emphasized that the petitioner did not stand to gain by delayed filing and that the explanation should have been tested pragmatically, not with a pedantic approach.

Conclusions: The Court concluded that the impugned order rejecting condonation of delay suffered from non-consideration and misappreciation of relevant material and failed to apply the statutory standard of "genuine hardship" as informed by CBDT circulars. The rejection of condonation under Section 119(2)(b) was held to be unsustainable and was set aside.

Issue 2: Meaning and application of "genuine hardship" / "sufficient or reasonable cause" under Section 119(2)(b) and CBDT circulars

Legal framework (as discussed): The Court referred to CBDT Circular No. 11/2024, which vests discretion in specified authorities to condone delay in cases involving refund claims and carry forward of losses, subject to specified conditions. It also noted that the circulars require a liberal approach where genuine hardship is demonstrated and cover pending applications for condonation. Prior case law (including decisions of this Court and other High Courts) was cited, where "genuine hardship" in Section 119(2)(b) had been considered and interpreted.

Interpretation and reasoning: The Court reiterated that "genuine hardship" is to be construed liberally and not in a narrow or technical sense. It endorsed the principle that an assessee does not stand to benefit by lodging a claim belatedly and that the power under Section 119(2)(b), as clarified by CBDT circulars, is to be exercised to mitigate real hardship where circumstances beyond the assessee's control have prevented timely compliance. The Court adopted the understanding that a "reasonable cause" is an event or circumstance beyond the taxpayer's control which, despite the exercise of ordinary business care and prudence, prevents timely filing. It observed that the statutory authorities, being empowered by CBDT circulars, must adopt a liberal and judicious approach in assessing such hardship.

Conclusions: The Court held that, on the legal standard of "genuine hardship" and "reasonable cause" as developed in precedent and CBDT circulars, the assessee's case fell within the ambit of Section 119(2)(b). The authority's narrow and speculative reasoning was inconsistent with the required liberal interpretation.

Issue 3: Whether frequent resignations and non-availability of accounts personnel constituted sufficient/reasonable cause for delay

Interpretation and reasoning: The Court examined the specific chronology of appointments and resignations of employees handling accounts and tax compliance, as furnished by the assessee and supported by an affidavit. It recorded that employees joined between 15.05.2023 and 09.01.2024 and left between 29.02.2024 and 07.11.2024, and held that it was "inconceivable" that a new incumbent, joining for a short span, could quickly acquaint himself with all nuances of the company's transactions, refund claims and loss positions for the relevant financial year. The Court reasoned that the sudden departure of employees possessing specialized knowledge in accounts and access to critical financial information disrupted normal operations, and that such disruption could prevent timely filing despite the exercise of ordinary business care and prudence. It found that these facts, asserted on affidavit, could not have been lightly brushed aside on a mere surmise that a physical audit report could have been filed if books were complete.

Conclusions: The Court held that the sequence of resignations and the resulting disruption in the accounts department constituted a reasonable and sufficient cause and "genuine hardship" for not filing the return within the stipulated/extended time. This was a circumstance beyond the assessee's control and fully justified condonation of delay.

Issue 4: Duty of the authority under Section 119(2)(b) to adopt liberal and judicious approach and scope of judicial review

Interpretation and reasoning: The Court emphasized that, by virtue of CBDT circulars, statutory authorities exercising powers under Section 119(2)(b) are required to adopt a liberal approach and judiciously consider the plight of the assessee, particularly where refund and carry forward of losses are at stake. The PCIT, being a senior officer, was expected to apply this standard and to consider the totality of circumstances, including that the assessee would suffer immeasurable loss if refund and carry forward of loss were denied. The Court, examining the impugned order, found that the authority failed to exercise discretion in accordance with these principles and ignored material that directly supported the claim of hardship. The judicial review was thus confined to assessing whether relevant considerations were properly weighed and whether the statutory discretion was exercised on correct principles.

Conclusions: The Court concluded that the authority had not exercised its discretion under Section 119(2)(b) in a liberal and judicious manner as mandated by CBDT circulars and binding legal principles. In exercise of its writ jurisdiction, the Court set aside the impugned order refusing condonation and directed the competent authority to treat the return and audit report for the relevant assessment year as filed within time and to grant all consequential reliefs, including consideration of refund and carry forward of loss in accordance with law.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the assessee established "sufficient cause" and "genuine hardship" so as to warrant condonation of nine months' delay in filing a revised return of income under Section 119(2)(b) of the Income Tax Act, 1961.

1.2 Whether circumstances such as initial erroneous filing of return (showing business loss as speculative loss), reliance on professional advice, non-resident status, and the Covid situation can constitute grounds for condonation under Section 119(2)(b) in light of CBDT Circular No. 11/2024.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Condonation of nine months' delay in filing revised return under Section 119(2)(b); relevance of erroneous initial return, professional advice, NRI status and Covid situation

Legal framework

2.1 The judgment proceeds on Section 119(2)(b) of the Income Tax Act, 1961, which empowers the Income Tax Authorities to condone delay in making claims for refund or carrying forward of loss where the assessee is prevented by "sufficient cause" and has suffered "genuine hardship".

2.2 The authority below relied on CBDT Circular No. 11/2024, particularly para 4(i), which guides that condonation discretion must be exercised judiciously, that delay should generally be due to reasons beyond the taxpayer's control, and that not every error or inadvertence qualifies as "genuine hardship".

Interpretation and reasoning

2.3 The Tribunal noted that the original return of income for AY 2021-22 was filed in time on 10.02.2022, while the time limit for filing a revised return extended till 31.03.2022. The same e-filing portal was available and accessible globally during both periods.

2.4 The claim that the assessee was a non-resident Indian, and therefore faced difficulty in timely filing the revised return, was rejected on the ground that the assessee had already used the same e-portal to file the original return from abroad, demonstrating that non-resident status did not impede access to the filing system.

2.5 The Court accepted the reasoning that "ignorance of law or dependence on an advisor" is generally not treated as "sufficient cause" under Section 119(2)(b), as stressed in the order of the Principal Commissioner and supported by CBDT Circular No. 11/2024.

2.6 The asserted necessity to correct the original return because business loss had been wrongly reported as speculative loss, and the fact that revised professional advice was later obtained, were not accepted as reasons beyond the assessee's reasonable control or as circumstances amounting to "genuine hardship".

2.7 The Court treated the nine months' delay in filing the revised return as excessive, holding that such a prolonged period could not be justified on the basis of discovery of an error and change of advice, particularly when the assessee had already demonstrated the ability to file electronically within the prescribed time for the original return.

2.8 The Court noted that the assessee was the President of a Trust running a hospital and therefore presumed to be conversant with legal and tax compliance obligations, including the manner of filing a correct return; it was held that it should not take nine months to notice and rectify such mistakes.

2.9 The explanation that the Covid situation contributed to the delay was not accepted, in the context of the long nine-month period and the demonstrated functioning of the e-filing system during the relevant time.

2.10 The Court endorsed the finding of the Principal Commissioner that the claim of "genuine hardship" was not established, and that the request appeared to be an afterthought for making a claim "not generally available" to the assessee, especially as the report of the concerned Commissioner (CIT(IT)-2) did not support the assessee's stand.

Conclusions

2.11 The Court held that neither "sufficient cause" for the delay nor "genuine hardship" within the meaning of Section 119(2)(b) and CBDT Circular No. 11/2024 was made out.

2.12 The rejection of the assessee's application for condonation of delay in filing the revised return for AY 2021-22 under Section 119(2)(b) was upheld as legally valid.

2.13 The writ petition challenging the order refusing condonation of delay was dismissed as being without merit.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether revenue authorities can decline to follow a binding decision of the jurisdictional Tribunal on the ground that it is "not acceptable" to the department and/or is under challenge in appeal.

1.2 Whether a judicial precedent of a superior authority applies only to parties to that decision, or whether it binds revenue authorities in respect of other assessees with identical facts.

1.3 Whether revision under Section 264 of the Income-tax Act, 1961 can be invoked in respect of an intimation under Section 143(1).

1.4 Whether revision under Section 264 can be refused solely on the ground that the assessee did not make the relevant claim in the original return of income or accepted the position in the return.

1.5 Whether principles of estoppel, acquiescence, or "acceptance" in the return can bar an assessee from seeking relief from a levy alleged to be contrary to law, in light of Article 265 of the Constitution.

1.6 Consequential issue: whether the impugned order under Section 264 rejecting revision on the above grounds is legally sustainable, and if not, the appropriate relief.

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Refusal to follow binding jurisdictional Tribunal decision because it is "not acceptable" and under appeal

Legal framework (as discussed)

2.1.1 The Court referred to the doctrine of binding precedent and judicial discipline, and relied on decisions emphasising that orders of appellate authorities/Tribunals bind subordinate authorities unless stayed or set aside (including the Supreme Court decision in Godrej Sara Lee Ltd. and a Division Bench decision in Samp Furniture Pvt. Ltd.).

Interpretation and reasoning

2.1.2 Respondent No. 2 refused to follow the jurisdictional Tribunal's decision on Section 115JC on the ground that it was "not acceptable" to the department and was under challenge before the High Court.

2.1.3 The Court held that such an approach is "unacceptable" and contrary to settled law. Filing of an appeal or non-acceptance by the department does not dilute the binding character of a precedent in the absence of a stay or reversal.

2.1.4 The Court emphasised that disregard of binding precedent, on the plea that it is not acceptable, leads to undue harassment of assessees and chaos in tax administration, and is inconsistent with the discipline required in following decisions of higher authorities.

Conclusions

2.1.5 The Court held that the revenue authorities were bound to follow the jurisdictional Tribunal's decision on Section 115JC unless it was stayed or set aside, and mere pendency of an appeal did not justify non-compliance.

2.1.6 The rejection of revision under Section 264 on the basis that the Tribunal's decision was "not acceptable" and under appeal was held to be legally unsustainable.

2.2 Applicability of a judicial precedent to non-parties with identical facts

Interpretation and reasoning

2.2.1 Respondent No. 2 took the position that the jurisdictional Tribunal's decision on Section 115JC would bind the department only in respect of the same assessee who was a party to that decision, and not in respect of the present assessee.

2.2.2 The Court rejected this approach and held that the doctrine of binding precedent does not depend on identity of parties. What is relevant is whether, in facts and in law, the case at hand falls within the ratio of the earlier decision.

2.2.3 Judicial discipline requires the authority to first examine whether the facts and legal issue are identical or distinguishable. If distinguishable, clear and cogent reasons must be recorded; if identical, the precedent must be followed.

2.2.4 In the impugned order, Respondent No. 2 did not assign any cogent reasons to distinguish the Tribunal decision, but dismissed its applicability solely on the ground that the assessee was not a party to that case, which the Court found impermissible.

Conclusions

2.2.5 The Court held that a jurisdictional Tribunal decision must be followed in all cases where facts and law are identical, regardless of whether the assessee was a party to that earlier case.

2.2.6 On remand, Respondent No. 2 is required to ascertain whether the facts of the present case are identical to those in the Tribunal's decision on Section 115JC, and, if so, to apply its ratio.

2.3 Amenability of an intimation under Section 143(1) to revision under Section 264

Legal framework (as discussed)

2.3.1 The subject matter of revision was an intimation under Section 143(1) which had accepted the returned income but sustained the tax computed under Section 115JC.

2.3.2 The Court referred to its decisions in Gopal Vazirani and Diwaker Tripathi holding that an intimation under Section 143(1) is amenable to the revisional jurisdiction under Section 264.

Interpretation and reasoning

2.3.3 The Court noted that Respondent No. 2 had taken a restrictive view of Section 264 in the context of an intimation under Section 143(1).

2.3.4 Relying on the above precedents, the Court held that the scope of Section 264 extends to correcting errors in an intimation under Section 143(1), and there is no statutory bar against such revision.

Conclusions

2.3.5 An intimation under Section 143(1) is revisable under Section 264.

2.3.6 The revision petition filed against the Section 143(1) intimation sustaining tax under Section 115JC was maintainable in law.

2.4 Power under Section 264 to grant relief in respect of claims not made in the return or allegedly "accepted" therein

Legal framework (as discussed)

2.4.1 The Court examined Section 264 in light of prior decisions, including Hapag Lloyd India (P.) Ltd. and Geekay Security Services (P.) Ltd., which held that Section 264 is not confined to errors of subordinate authorities and can also correct errors committed by the assessee.

Interpretation and reasoning

2.4.2 Respondent No. 2 had held that no relief can be granted under Section 264 for claims not made in the return and that the assessee had accepted the AMT computation in its return.

2.4.3 The Court noted that in the present case the AMT computation under Section 115JC was auto-populated by the ITR utility and unamendable; hence, it could not be treated as a conscious "acceptance" of liability by the assessee.

2.4.4 The Court held that Section 264 is wide enough to entertain and grant relief even on claims not made in the original return, and to correct mistakes by the assessee discovered after assessment/intimation, provided the application is within limitation.

2.4.5 The Court endorsed the view that there is nothing in Section 264 that restricts the Commissioner's power to give relief where the assessee has failed to claim a benefit earlier or has made an error in the return.

Conclusions

2.4.6 Section 264 covers within its ambit claims not made in the return of income and mistakes or omissions by the assessee.

2.4.7 The rejection of revision on the ground that the claim regarding inapplicability of Section 115JC was not made in the return or had been "accepted" in the return was held to be contrary to law.

2.5 Effect of estoppel, acquiescence, or mistaken payment of tax in light of Article 265

Legal framework (as discussed)

2.5.1 The Court relied on Article 265 of the Constitution ("no tax shall be levied or collected except by authority of law").

2.5.2 The Court referred to its decisions in Nirmala L. Mehta and Balmukund Acharya, which held that there is no estoppel against statute; acquiescence cannot validate a tax without authority of law; and authorities are duty-bound to ensure only legitimate tax is collected.

Interpretation and reasoning

2.5.3 The assessee contended that there is no estoppel against law and that automatic payment of AMT under Section 115JC due to ITR utility design cannot prevent subsequent assertion of the correct legal position.

2.5.4 The Court accepted this submission, holding that an assessee is not barred from revising its stand in law, even if it had earlier proceeded under a mistaken understanding, circumstantial pressure, or lack of proper advice.

2.5.5 The doctrine of estoppel cannot be invoked to sustain a levy not authorised by the Act; taxing statutes do not allow acquiescence or prior payment to deprive an assessee of relief to which it is legally entitled.

Conclusions

2.5.6 There can be no estoppel against statute in tax matters; Article 265 mandates that only tax authorised by law can be levied or collected.

2.5.7 The fact that the assessee paid AMT under Section 115JC as auto-computed in the return cannot, by itself, bar it from challenging that levy in revision if contrary to law.

2.6 Sustainability of the impugned Section 264 order and consequential directions

Interpretation and reasoning

2.6.1 The impugned revision order was based on (i) refusal to follow the jurisdictional Tribunal's decision on Section 115JC because it was not acceptable to the department and under appeal; (ii) the view that the precedent did not apply as the assessee was not a party; and (iii) the stance that claims not made in the return or accepted therein cannot be considered under Section 264.

2.6.2 The Court held each of these foundations to be contrary to the settled principles of binding precedent, scope of Section 264, and the constitutional mandate under Article 265.

2.6.3 The Court clarified that it was not adjudicating on the correctness of the jurisdictional Tribunal's interpretation of Section 115JC; its intervention was limited to enforcing judicial discipline and proper application of precedent by the revisional authority.

Conclusions

2.6.4 The impugned order under Section 264 was quashed and set aside.

2.6.5 The matter was remanded to Respondent No. 2 to pass a fresh order on the revision application within four weeks, specifically directing:

(a) Respondent No. 2 shall examine whether the relevant facts of the present case, with reference to applicability of Section 115JC, are identical to those in the jurisdictional Tribunal decision relied upon.

(b) If the facts are found to be identical, the ratio of that Tribunal decision must be followed.

2.6.6 The Court expressly stated that its order should not be construed as endorsing the view taken by the Tribunal on Section 115JC; its decision rests solely on the requirement of judicial discipline and adherence to binding precedent.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether, after approval of a resolution plan under Section 31 of the Insolvency and Bankruptcy Code, 2016, the income-tax authorities can issue and pursue notices under Sections 143(2) and 142(1) of the Income Tax Act, 1961 for a period prior to the date of approval of the resolution plan.

1.2 Whether income-tax scrutiny/assessment proceedings for an assessment year forming part of the pre-resolution period are maintainable when no claim for such year was lodged before the Resolution Professional during the Corporate Insolvency Resolution Process.

1.3 Whether, in light of binding precedents of the Supreme Court and earlier orders of the High Court in relation to the same corporate debtor, the impugned notices are without jurisdiction and liable to be quashed.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Effect of approved resolution plan on post-approval tax proceedings for pre-approval periods

Legal framework

2.1 The Court considered Section 31 of the Insolvency and Bankruptcy Code, 2016 regarding binding effect of an approved resolution plan on the corporate debtor and all stakeholders, including Central and State Governments and local authorities in respect of statutory dues. The Court relied on the law declared by the Supreme Court in Ghanshyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. and Vaibhav Goel & Anr. v. Deputy Commissioner of Income Tax & Anr.

Interpretation and reasoning

2.2 It was undisputed that: (a) Corporate Insolvency Resolution Process was initiated against the corporate debtor by order of the NCLT dated 31 May 2019; (b) that order stood restored by the Supreme Court on 1 August 2022; and (c) the NCLT approved the resolution plan of the successful resolution applicant on 26 April 2024.

2.3 The Court noted that once a resolution plan is approved under Section 31, it becomes binding on the corporate debtor and all stakeholders, including governmental authorities, and that the Supreme Court has categorically held that all claims not forming part of the approved resolution plan stand extinguished, and no person is entitled to initiate or continue proceedings in respect of such extinguished claims.

2.4 The Court accepted the petitioner's contention that under the approved resolution plan, any claim or liability pertaining to the period prior to 26 April 2024 stood extinguished or settled, and all proceedings, suits and claims relating to such prior period stood extinguished in terms of the plan.

2.5 The Court observed that the impugned notices under Sections 143(2) and 142(1) sought information and assessment for the period forming part of the financial year 2023-24, i.e. a period prior to the approval of the resolution plan on 26 April 2024, and therefore related to the pre-resolution period.

2.6 Applying Ghanshyam Mishra & Sons Pvt. Ltd., the Court held that any liability or proceeding arising out of or relating to a period prior to 26 April 2024 necessarily stood extinguished upon approval of the resolution plan, and that initiation or continuation of assessment proceedings for that period would be contrary to the binding effect of the resolution plan.

Conclusions

2.7 The Court concluded that, after approval of the resolution plan on 26 April 2024, the income-tax authorities could not validly issue or pursue notices under Sections 143(2) and 142(1) in respect of a period prior to that date, as such proceedings seek to enforce claims that stood extinguished by virtue of the approved resolution plan.

Issue 2: Maintainability of tax scrutiny for an assessment year where no claim was filed in CIRP

Legal framework

2.8 The Court referred to the list of operational creditors (Government dues) submitted by the Resolution Professional to the NCLT and to the principle laid down by the Supreme Court in Ghanshyam Mishra & Sons Pvt. Ltd. and Vaibhav Goel & Anr. regarding extinguishment of claims not lodged or not provided for in the approved resolution plan.

Interpretation and reasoning

2.9 It was noted that the respondents had submitted claims in respect of income-tax liability for A.Y. 2018-19 and A.Y. 2019-20 as part of the Government dues placed before the NCLT, but no claim was filed for the assessment year under consideration, A.Y. 2024-25.

2.10 The Court held that in the absence of any specific claim for A.Y. 2024-25 being lodged in the CIRP and provided for in the resolution plan, any subsequent issuance of notices under Sections 143(2) or 142(1) to scrutinize or assess income for a period forming part of the pre-resolution period is contrary to the law declared by the Supreme Court and inconsistent with the binding nature of the resolution plan.

Conclusions

2.11 The Court concluded that scrutiny or assessment proceedings for A.Y. 2024-25, in so far as they relate to the pre-resolution period and were not the subject of a claim in CIRP, are not maintainable and any such proceedings are without jurisdiction.

Issue 3: Effect of prior binding precedent and earlier orders in the same matter

Legal framework

2.12 The Court relied on earlier orders passed in the petitioner's own case for A.Y. 2020-21 and A.Y. 2021-22, where reassessment proceedings under Sections 148A(b), 148A(d), and 148 were quashed on the basis that the alleged tax liabilities pertained to a period prior to approval of the same resolution plan.

Interpretation and reasoning

2.13 The Court observed that in those earlier matters it had held that allowing the Department to pursue reassessment proceedings for periods prior to the approval of the resolution plan would defeat the object of the Insolvency and Bankruptcy Code, 2016, as the successful resolution applicant is entitled to revive the corporate debtor on a "clean slate" basis.

2.14 The Court held that the principle laid down in those earlier orders squarely applied to the present case, as the impugned notices similarly sought scrutiny for a period prior to approval of the resolution plan, and that the issue was no longer res integra.

Conclusions

2.15 The Court concluded that, in view of the binding Supreme Court decisions and its own prior orders concerning the same corporate debtor and the same resolution plan, the impugned notices were unsustainable in law and without jurisdiction.

Overall disposition

2.16 The Court held that the notices dated 24 June 2025 under Section 143(2) and 26 September 2025 under Section 142(1) of the Income Tax Act, 1961, and all consequential orders/notices, are liable to be quashed and set aside, and accordingly allowed the writ petition, with no order as to costs.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the assessments proposed under Section 153C for A.Y. 2014-15 to 2019-20 were barred by limitation under Section 153B(1), read with its third proviso and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.

1.2 Whether, in a case where the Assessing Officer of the searched person and the other person (third party) is the same, the second limb of clause (ii) of the third proviso to Section 153B(1) (relating to "handing over" of seized material under Section 153C) can extend the limitation period.

1.3 Whether transfer of records from the Investigation Wing to the common Assessing Officer, or the date of the satisfaction note, can be treated as the "handing over" contemplated by clause (ii) of the third proviso to Section 153B(1) for computing limitation.

1.4 Whether the interpretation adopted by the Madras High Court in treating the date of the satisfaction note as a deemed "handing over" date for limitation under Section 153B(1) should be followed.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Limitation for completion of assessments under Section 153C for the relevant assessment years

Legal framework

2.1 The Court considered Section 153C, which enables assessment of a person other than the searched person where seized material "belongs to" or "relates to" such other person.

2.2 The Court analysed Section 153B(1) and in particular its third proviso, clause (ii), applicable where the last authorisation for search was executed during the financial year commencing on or after 1 April 2019. Under this proviso: (i) the period of limitation in respect of search assessments is twelve months from the end of the financial year in which the last authorisation was executed; and (ii) in the case of "other person" under Section 153C, the limitation is the later of twelve months from the end of the financial year of the last authorisation, or twelve months from the end of the financial year in which the seized material is "handed over" under Section 153C to the Assessing Officer having jurisdiction over such other person.

2.3 The Court also took into account extensions of time under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and Notification No. S.O. 966(E) dated 27.02.2021.

Interpretation and reasoning

2.4 The search on the searched party took place on 21.08.2019. Since this was after 01.04.2019, the third proviso to Section 153B(1) applied. Under the first limb of clause (ii), the limitation period expired on 31.03.2021 (twelve months from the end of F.Y. 2019-20).

2.5 The Court noted that by virtue of TOLA and the above notification, this limitation stood extended up to 30.09.2021.

2.6 The Court recorded the petitioner's categorical statement, not disputed by the Revenue, that no assessment under Section 153C had been completed by 30.09.2021, and that show cause notices dated 11.03.2022 and 16.03.2022 were issued thereafter for completing the assessment.

Conclusions

2.7 As the assessments under Section 153C for A.Y. 2014-15 to 2019-20 were not completed on or before 30.09.2021, the Court held that the proceedings were barred by limitation and could not be validly continued thereafter.

Issue 2: Applicability of the second limb of clause (ii) of the third proviso to Section 153B(1) where the Assessing Officer is common

Legal framework

2.8 The Court examined the scheme of Section 153C and Section 153B(1), including the requirement under Section 153C that seized material "shall be handed over to the Assessing Officer having jurisdiction over such other person."

2.9 The Court relied on the judgment of the Supreme Court in Super Malls Pvt. Ltd. v. PCIT, which analysed Section 153C and the mechanism for recording satisfaction and transmission of seized material from the Assessing Officer of the searched person to the Assessing Officer of the other person.

Interpretation and reasoning

2.10 The Court derived from Super Malls Pvt. Ltd. that two scenarios exist: (i) where the Assessing Officer of the searched person and of the other person are different, and (ii) where they are the same.

2.11 In the first scenario, the Assessing Officer of the searched person must record satisfaction that seized documents belong to another person and then transmit such documents, together with the satisfaction note, to the Assessing Officer of the other person. The "handing over" in Section 153C and in the proviso to Section 153B(1) relates to this inter-officer transfer.

2.12 In the second scenario, where the Assessing Officer of the searched person and of the other person is the same, the Supreme Court has clarified that the second requirement of "transmitting the documents" does not arise, because there is no question of an Assessing Officer transmitting documents to himself. In that situation, there can be a single satisfaction note, but no transfer of records between officers.

2.13 Applying this interpretation, the Court held that in the present case the Assessing Officer of the searched party and the petitioner (third party) is one and the same (Central Circle 4(1), Mumbai). Therefore, there was no "handing over" of seized documents under Section 153C from one Assessing Officer to another.

2.14 Consequently, the second limb of clause (ii) of the third proviso to Section 153B(1)-which is premised on such a transfer to a different Assessing Officer-could not operate so as to afford an additional limitation period based on an alleged "handing over" date.

Conclusions

2.15 The Court held that where the Assessing Officer of the searched person and the "other person" under Section 153C is the same, the second limb of clause (ii) of the third proviso to Section 153B(1) is inapplicable, and limitation must be computed solely with reference to the first limb (twelve months from the end of the financial year in which the search took place, as extended by TOLA).

Issue 3: Whether transfer from the Investigation Wing or the date of the satisfaction note can be treated as "handing over" for limitation purposes

Interpretation and reasoning

2.16 The Revenue argued that seized documents relating to the petitioner were transferred by the Investigation Wing to the common Assessing Officer on 21.08.2020 and that the second limb of clause (ii) of the third proviso to Section 153B(1) should run from the end of the financial year containing that date, thereby extending limitation up to 31.03.2022.

2.17 The Court rejected this contention, holding that the statutory scheme contemplates "handing over" under Section 153C by the Assessing Officer of the searched person to the Assessing Officer of the other person, not a movement of records from the Investigation Wing to the Assessing Officer of the searched person.

2.18 The Court noted that there is no reference in the third proviso to Section 153B(1) to any transfer of records from the Investigation Wing; the time consumed by internal departmental processes, including the Investigation Wing's transfer to the Assessing Officer of the searched person, is subsumed within the first limb of clause (ii).

2.19 The Court observed that accepting the Revenue's interpretation would render the first limb of clause (ii) otiose, because in every case there is some gap between the date of search and the date on which the Investigation Wing transmits the records to the Assessing Officer. If limitation were always computed from the latter event, the first limb would never have practical application, which is impermissible in statutory interpretation.

2.20 The Court also considered the argument, based on a Madras High Court decision, that the date of the satisfaction note should be treated as a deemed "handing over" date. It held that there is no such stipulation in clause (ii) of the third proviso to Section 153B(1), and that importing such a fiction is unwarranted.

2.21 In any event, on the facts, the satisfaction note in the present case was undated, as admitted by the Revenue, making that doctrine inapplicable even on its own terms.

Conclusions

2.22 Transfer of records from the Investigation Wing to the Assessing Officer, or the date of a satisfaction note (particularly when undated), cannot be treated as the "handing over" contemplated by clause (ii) of the third proviso to Section 153B(1) for computation of limitation.

2.23 The only relevant "handing over" for the purposes of the second limb of the proviso is a transfer under Section 153C from the Assessing Officer of the searched person to a different Assessing Officer of the other person, which did not occur here.

Issue 4: Applicability of the Madras High Court decision on deemed "handing over" via satisfaction note

Legal framework and precedent considered

2.24 The Revenue relied on a decision of the Madras High Court which held that even when the Assessing Officer of the searched person and the other person is the same, the date of the satisfaction note should be treated as the deemed date of "handing over" for computing limitation under Section 153B(1), such that twelve months from the end of the financial year of that deemed "handing over" would govern.

Interpretation and reasoning

2.25 The Court held that this Madras decision was not applicable on facts because the satisfaction note in the present case was admittedly undated, preventing any identification of a deemed "handing over" date.

2.26 Independently of that factual distinction, the Court expressly declined to agree with the reasoning of the Madras High Court. It found no textual basis in clause (ii) of the third proviso to Section 153B(1)(b) for treating the date of the satisfaction note as a deemed date of "handing over."

2.27 The Court further observed that the Madras decision did not correctly read and apply the Supreme Court's decision in Super Malls Pvt. Ltd., which had categorically stated that where the Assessing Officer for the searched person and the other person is the same, there is no question of transmitting seized documents to oneself; hence the second requirement of transmission does not arise.

Conclusions

2.28 The Court held that the interpretation adopted by the Madras High Court regarding deemed "handing over" via the satisfaction note is not acceptable and cannot be applied in the present case.

2.29 The correct position, in line with Super Malls Pvt. Ltd., is that in cases where a common Assessing Officer exists for the searched and the other person, there is no "handing over" as envisaged by the second limb of clause (ii) of the third proviso, and limitation must be governed solely by the first limb, subject to statutory extensions.

Overall Disposition

2.30 On the basis of the above findings, the Court concluded that the proceedings under Section 153C for A.Y. 2014-15 to 2019-20 were time-barred, and accordingly quashed the notices issued under Section 153C and consequential proceedings, allowing the writ petition to that extent, without any order as to costs.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the assessee's application for condonation of delay in filing Form 10B under Section 119(2)(b) was liable to be rejected on the ground of delay in filing the condonation application itself, in light of CBDT Circular No. 16/2024.

1.2 Whether the statutory requirement of furnishing the audit report in Form 10B along with or before filing the return of income is procedural/directory so as to permit its belated filing, and whether the delay of 1128 days in filing Form 10B was condonable under Section 119(2)(b).

1.3 Whether the authority acting under Section 119(2)(b) erred in rejecting condonation by (a) disbelieving the explanation based on auditor's mistake/communication gap, (b) considering the exemption claim on merits and (c) applying a strict approach in favour of the Revenue instead of the "genuine hardship" standard.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Delay in filing condonation application and applicability of CBDT Circular No. 16/2024

Legal framework (as discussed)

2.1 The Court noted that the assessee's application for condonation of delay in filing Form 10B was made under Section 119(2)(b). CBDT Circular No. 16/2024 dated 18 November 2024 prescribes a period of three years within which such condonation applications should be filed.

Interpretation and reasoning

2.2 The Court recorded that the assessee, by additional affidavit, explained the delay in approaching the authority for condonation: it was following up with its Chartered Accountants whenever recovery notices were received and filed the condonation application upon their guidance.

2.3 The Court held that, at the relevant time when the assessee's application was made and disposed of, there was no statutory or circular-based mandate prescribing any specific limitation period for filing such condonation applications. Circular No. 16/2024 came into force subsequently.

2.4 The Court further observed that the impugned order did not reject the condonation application on the ground of delay in approaching the authority but only on the ground that the explanation for delay in filing Form 10B was not acceptable.

Conclusions

2.5 The Court accepted the explanation for the delay in filing the condonation application and held that there was no legal impediment, at the relevant time, requiring the application to be filed within a particular period. Circular No. 16/2024 had no adverse bearing on the assessee's application. The matter, therefore, had to be decided on the core issue of delay in filing Form 10B.

Issue 2 - Nature of requirement to file Form 10B with the return and condonability of delay in filing Form 10B

Legal framework (as discussed)

2.6 The dispute arose from denial of exemption under Section 11 on the ground that the audit report in Form 10B, though obtained on 30 September 2017, was not e-filed along with or before filing the return, as required by Section 12A(1)(b) read with the first proviso to Rule 12(2) of the Income-tax Rules.

2.7 The assessee invoked Section 119(2)(b) and CBDT Circular No. 10/2019 dated 22 May 2019 for condonation, asserting that the audit report had been obtained before filing the return and later furnished, and that the conditions of the Circular were met.

2.8 The Court considered the decisions of the Gujarat High Court in Sarvodaya Charitable Trust v. ITO (Exemptions), relying on CIT v. Gujarat Oil and Allied Industries Ltd., which held that the requirement of furnishing the audit report with the return is procedural and directory, and that substantial compliance suffices.

Interpretation and reasoning

2.9 The Court noted that the assessee had specifically contended before the authority that furnishing the audit report along with the return is a procedural requirement and that the report can be admitted even if filed subsequently. This contention was not dealt with in the impugned order.

2.10 Relying on Sarvodaya Charitable Trust and Gujarat Oil and Allied Industries Ltd., the Court treated the requirement to file the audit report along with the return as a procedural provision, directory in nature, where substantial compliance is adequate.

2.11 The Court accepted that the delay of 1128 days in uploading Form 10B arose due to miscommunication and misunderstanding between the former and new firms of Chartered Accountants, where the new firm believed it was only engaged for audit under the Bombay Public Trust Act, 1950 and not for tax compliances. The assessee, being a charitable institution, was entirely dependent on professionals for tax compliance.

2.12 The Court relied on the co-ordinate bench decision in Al Jamia Mohammediyah Education Society v. Commissioner of Income-tax (Exemptions), where similar delay in filing Form 10B attributable to the oversight of the Chartered Accountant was condoned as a human error, and noted that the Supreme Court had declined to interfere with that decision.

Conclusions

2.13 The Court held that the requirement of furnishing Form 10B along with or before the return is procedural/directory, not substantive, and that belated filing can be accepted where there is substantial compliance.

2.14 Considering the explanation based on professional error and dependence on Chartered Accountants, the Court held that the delay of 1128 days in filing Form 10B was condonable under Section 119(2)(b) and ought not to result in denial of exemption merely on that technical ground.

Issue 3 - Scope of discretion under Section 119(2)(b), "genuine hardship" and error in rejecting condonation by reference to merits and strict construction

Legal framework (as discussed)

2.15 Section 119(2)(b) empowers the Board or authorized authorities to condone delay and grant relief where adherence to the prescribed time limits would cause "genuine hardship" to the assessee.

2.16 The Court referred to its decision in Western Arch Developers v. Pr. Commissioner of Income-tax (Central), which held that the expression "genuine hardship" in Section 119(2)(b) is to be construed liberally and that condonation of delay only enables the matter to be decided on merits.

2.17 The Court also relied on its decision in St. Anne's Church v. Commissioner of Income-tax (Exemptions), where, in similar circumstances involving a charitable trust, delay in filing Form 10 was condoned, holding that refusal of condonation would impose grave hardship and that the trust should not be saddled with liability solely due to inadvertent error of the Chartered Accountant.

Interpretation and reasoning

2.18 The Court observed that the authority, in the impugned order, rejected the condonation application by (a) treating the explanation based on auditor miscommunication as unacceptable, (b) emphasizing that the assessee had not complied with provisions in preceding and succeeding assessment years, (c) noting absence of supporting documents, (d) referring to reminders and non-compliance, and (e) asserting that exemption provisions must be interpreted in favour of the Revenue.

2.19 The Court held that, at the stage of considering condonation under Section 119(2)(b), the authority was not called upon to decide the exemption claim on merits; its task was confined to considering whether the delay in filing Form 10B should be condoned.

2.20 The Court found that denial of exemption under Section 11 to a charitable educational institution running schools with around 5,000 students would cause "genuine hardship" and adversely affect its functioning. The very purpose of Section 119(2)(b) is to mitigate such hardship.

2.21 The Court reasoned that a liberal approach is mandated in construing "genuine hardship": if delay is condoned, the only consequence is that the claim is decided on merits after hearing both sides; whereas, refusal to condone, on a purely technical lapse, may visit the assessee with substantial and disproportionate tax burden.

2.22 Referring to St. Anne's Church and Al Jamia Mohammediyah Education Society, the Court reaffirmed that a charitable trust should not be foisted with heavy tax liability solely because of an inadvertent error or oversight of its Chartered Accountant.

Conclusions

2.23 The Court held that the authority under Section 119(2)(b) erred in (a) ignoring the procedural nature of the filing requirement, (b) failing to adopt the liberal "genuine hardship" standard, and (c) considering factors going to the merits of the exemption claim instead of focusing on condonation of delay.

2.24 It was concluded that refusing condonation in the facts of this case would result in genuine hardship to the assessee charitable institution, contrary to the object of Section 119(2)(b). The impugned order was therefore quashed and set aside, the delay of 1128 days in filing Form 10B was condoned, and the Revenue was directed to treat Form 10B as filed within time and process the return of income in accordance with law within three months from the date of uploading of the Court's order.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the interception, custody and subsequent seizure of the gold jewellery by the Income Tax Department were lawful, having regard to the manner and dates on which the search, custody, valuation and Panchanama were effected and recorded.

1.2 Whether the gold jewellery in question constituted stock-in-trade of the petitioners' business and, if so, whether seizure thereof was impermissible in view of the statutory restriction on seizure of stock-in-trade.

1.3 Whether the order refusing release of the seized gold jewellery and the Panchanama recording the alleged seizure were liable to be quashed, and whether a consequential direction for release of the jewellery should be issued.

1.4 Whether the relief granted in relation to seizure and release of jewellery precludes the Income Tax Department from initiating or pursuing assessment or other tax proceedings in accordance with law.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality of interception, custody and seizure; validity of Panchanama

Legal framework (as noticed in the judgment)

2.1 The Court referred to statements recorded under Section 131(1A) of the Income Tax Act and the proviso to Section 132(1)(B)(iii) in the context of seizure and custody of stock-in-trade.

Interpretation and reasoning

2.2 The record showed that the gold jewellery was intercepted on 12 May 2024 at Bhubaneshwar Airport and taken into the custody of the Income Tax Department on that date. This was corroborated by: (i) questions put to the petitioners' employee in the statement recorded on 16 May 2024 under Section 131(1A), expressly stating that gold of 7738.74 gms had been kept in the custody of the Department on 12 May 2024; and (ii) further questions admitting that gold was in the "custody of the department".

2.3 The valuation of the seized gold was carried out by the Department on 17 May 2024, as evidenced from the record, thereby further confirming that the Department had custody of the jewellery well before 1 June 2024.

2.4 Notwithstanding the above, the Panchanama recorded that the search commenced on 1 June 2024 at 6.15 p.m. and closed on the same date at 8.30 p.m., suggesting that the gold was seized only on 1 June 2024 in the office of the Income Tax Department. The Court held that this recording in the Panchanama was inconsistent with and contrary to the contemporaneous record of custody and valuation.

2.5 The additional affidavit filed by the Department pursuant to the Court's order attempted to explain the inconsistency on the basis that the jewellery was "discovered" on 12 May 2024 but not seized on that date. The Court found this explanation unsustainable and contrary to the record, given that custody and valuation had in fact taken place from 12 May 2024 and 17 May 2024 respectively.

2.6 In view of these contradictions, the Court held that no reliance could be placed on the Panchanama dated 1 June 2024, and that the Department's action in treating the seizure as having taken place on that date and in that manner was contrary to law.

Conclusions

2.7 The Court concluded that the seizure proceedings reflected in the Panchanama dated 1 June 2024 were vitiated by inconsistencies and were not legally sustainable. The Panchanama was therefore liable to be quashed.

Issue 2: Character of the gold jewellery as stock-in-trade and consequences for seizure

Legal framework (as noticed in the judgment)

2.8 The Court noted the petitioners' reliance on the proviso to Section 132(1)(B)(iii) of the Income Tax Act, under which stock-in-trade of a business is not to be seized and only an inventory can be prepared.

Interpretation and reasoning

2.9 The petitioners placed on record detailed explanations of their business modus operandi and documentation evidencing the movement of gold from Mumbai to Bhubaneshwar, sales made to named retail jewellers, and the balance stock being returned to Mumbai through courier. These were furnished through letters dated 10 July 2024 and 11 July 2024 with supporting documents.

2.10 The Court found from the evidence on record that the jewellery in question was indeed stock-in-trade of the petitioners' business. The documentary material and explanations furnished by the petitioners were accepted as ample evidence of the stock-in-trade character of the jewellery.

2.11 Once the jewellery was established as stock-in-trade, the Court held that the Department's action in seizing it, rather than merely preparing an inventory, was contrary to the statutory scheme as reflected in the proviso to Section 132(1)(B)(iii).

Conclusions

2.12 The gold jewellery seized by the Department constituted stock-in-trade of the petitioners. Seizure of such stock-in-trade was impermissible in law; only an inventory could have been made. The seizure was, therefore, unlawful.

Issue 3: Validity of the order refusing release and entitlement to release of jewellery

Interpretation and reasoning

2.13 The petitioners applied for release of the gold as stock-in-trade, but the concerned authority rejected the application on the ground that the seized gold was "unaccounted assets" emanating from the petitioner and not liable to be released.

2.14 In light of the findings that (i) the Panchanama and seizure proceedings were unreliable and contrary to the factual record, and (ii) the jewellery was proven stock-in-trade which could not lawfully be seized, the Court held that the rejection of the release application was unsustainable.

2.15 The entire action of the respondent authorities in retaining the jewellery as seized assets was found to be contrary to law, both procedurally (due to inconsistent and incorrect Panchanama and explanations) and substantively (due to impermissible seizure of stock-in-trade).

Conclusions

2.16 The order dated 14 March 2025 refusing release of the seized jewellery and the Panchanama dated 1 June 2024 were quashed.

2.17 The respondents were directed to forthwith release the seized gold jewellery of 7738.80 gms to the petitioner within two weeks from the date of uploading of the Court's order.

Issue 4: Effect of the order on future tax proceedings

Interpretation and reasoning

2.18 The Court clarified that quashing the seizure-related actions and directing release of the jewellery should not be understood as granting any "clean-chit" to the petitioners on the merits of tax liability.

2.19 The Court expressly preserved the liberty of the Income Tax Authorities to examine, if so advised, whether the gold or the related transactions ought to be brought to tax, and to proceed in that regard strictly in accordance with law.

Conclusions

2.20 The relief granted is confined to the illegality of seizure and retention of stock-in-trade and does not bar or limit the Department's power to initiate or continue assessment or other proceedings in accordance with the Income Tax Act.

Issues: Whether delivery order charges received in connection with cargo transportation by air in international traffic were taxable in India or fell within Article 8 of the India-UK Double Taxation Avoidance Agreement.

Analysis: Article 8 protects profits derived from the operation of aircraft in international traffic, and its extended definition includes transportation of persons, livestock, goods or mail, as well as any other activity directly connected with such transportation. The delivery order charges were held to be an integral part of the cargo transportation business and not a separate activity, because issuance and compliance with delivery orders were directly connected with the movement and delivery of goods or mail in international traffic. The reasoning was treated as consistent with the interpretation already adopted in an identical dispute under a similar treaty provision.

Conclusion: The delivery order charges were covered by Article 8(3) of the India-UK Double Taxation Avoidance Agreement and were not taxable in India; the issue was decided in favour of the assessee.

Ratio Decidendi: Receipts from an activity that is directly connected with the operation of aircraft in international traffic, and is integral to cargo transportation, fall within the treaty protection granted to profits from such operations.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether reassessment proceedings under section 147, initiated on the basis of reasons concerning the same expenses and profit estimation already examined and concluded in the original assessment under section 143(3) read with section 144, are valid in law.

1.2 Whether application of section 147 in the absence of any fresh tangible material, and only to revisit or review the earlier estimation of income (including prior application of section 44AD), is impermissible as a mere "change of opinion".

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Validity of reassessment under section 147 on the same issue of expenses and profit estimation earlier examined in regular assessment; impermissibility of review/change of opinion in absence of fresh material

Legal framework (as discussed)

2.1 The assessment was originally completed under section 143(3) read with section 144, where the Assessing Officer rejected the books and applied section 44AD, estimating net profit at 8% of gross receipts and making addition accordingly.

2.2 Reassessment was initiated under sections 147 and 148 on the ground that section 44AD had been wrongly applied and that full disallowance of expenses, allegedly unproved, ought to have been made in the original assessment.

2.3 The Court relied on the jurisdictional High Court decision holding that it is not permissible for an Assessing Officer to reopen an assessment on the basis of the very same material to take another view, and that reopening based purely on change of opinion is impermissible; further, the Assessing Officer must indicate which material facts were not fully and truly disclosed.

Interpretation and reasoning

2.4 The Court found that the same expenses and profit from civil construction business had been examined in the original assessment proceedings, wherein the Assessing Officer, after rejecting the books, consciously invoked section 44AD and estimated income at 8% of gross receipts.

2.5 The recorded reasons for reopening merely reiterated that: (i) section 44AD was inapplicable as turnover exceeded the statutory limit; and (ii) the expenditure remained unverified and should have been fully disallowed. The Court noted that these grounds arose from material already on record and considered during the original assessment.

2.6 In the reassessment, the Assessing Officer again treated the same expenses as improper and made a fresh disallowance by disallowing 25% of such expenses, effectively revisiting the same issue of estimation of profit and allowability of expenses already concluded earlier.

2.7 The Court held that no fresh tangible material was brought on record to justify reopening; the reasons only reflected a different view on how the same facts and material should have been treated in the original assessment.

2.8 Applying the binding jurisdictional High Court precedent, the Court held that an Assessing Officer cannot reopen an assessment merely to review or revise his own earlier view on the same material, and cannot invoke section 147 on a mere change of opinion; a generic assertion of failure to make full and true disclosure is insufficient without specifying which material facts were not disclosed.

Conclusions

2.9 The reassessment proceedings were held to be invalid as they were initiated on the same issues and material that had already been examined and concluded in the original assessment, without any fresh tangible material, amounting to an impermissible review/change of opinion.

2.10 The reassessment order passed under section 147 read with section 144B was quashed, and the assessee's appeal was allowed on this jurisdictional ground, rendering the reassessment additions unsustainable.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the Revenue was legally entitled, under the directions of the Supreme Court, to encash and retain the entire amount of the fixed deposit (including accrued interest) instead of limiting adjustment only to the quantified liability under the Settlement Commission order arising from the first show cause notice.

1.2 Whether the excess amount of the fixed deposit, over and above the quantified dues in the first show cause notice, became automatically refundable to the appellant on the date of encashment by the Revenue, without the need for a separate refund claim.

1.3 Whether interest is payable on the excess amount of the fixed deposit wrongfully retained by the Revenue, and if so, the period and rate at which such interest is to be computed.

1.4 Whether the Revenue was justified in clubbing the amount withdrawn from the fixed deposit relating to the first show cause notice with the deposits made in respect of the second show cause notice and adjusting the quantified liability of the first show cause notice out of that combined pool for refund purposes.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Scope of Revenue's entitlement under the Supreme Court's directions

Legal framework (as discussed)

2.1 The Court examined the Supreme Court's order which recorded that adjudication in respect of the first show cause notice stood completed by the Settlement Commission order dated 11.08.2010, that duty, interest, penalty etc. had been quantified, and that such quantified dues were to be deducted/adjusted from the amount lying in deposit, with the balance to be refunded to the appellant.

Interpretation and reasoning

2.2 The Court held that, pursuant to the Settlement Commission's order, the appellant's quantified liability in respect of the first show cause notice was Rs. 25,80,240/-, and that this was the only amount the Revenue was entitled to recover from the fixed deposit.

2.3 The Court interpreted the Supreme Court's directions as authorizing deduction/adjustment only towards the quantified duty, interest, penalty and other dues determined in the first show cause notice proceedings, and not as authorizing any adjustment towards liabilities arising out of any other proceedings or show cause notices.

2.4 It was found that as on 08.08.2019, the fixed deposit had grown to Rs. 60,75,515/-, and the Revenue could therefore lawfully appropriate only Rs. 25,80,240/- out of this amount in terms of the Settlement Commission order and the Supreme Court's directions.

Conclusions

2.5 The Court concluded that the Revenue had no authority, under the Supreme Court's order or otherwise, to encash and retain the entire fixed deposit amount of Rs. 60,75,515/- for purposes beyond satisfaction of the quantified liability of Rs. 25,80,240/- arising from the first show cause notice.

Issue 2: Automatic refund entitlement of excess fixed deposit amount and illegality of its retention

Interpretation and reasoning

2.6 The Court noted that, even if partial encashment was not practically feasible at the bank's end, once the entire fixed deposit of Rs. 60,75,515/- was encashed on 08.08.2019, the excess amount of Rs. 34,95,275/- (i.e. Rs. 60,75,515/- minus Rs. 25,80,240/-) should have been immediately refunded to the appellant in terms of paragraph 8 of the Supreme Court's order.

2.7 The Court held that this excess amount represented the balance of the fixed deposit which, by the explicit mandate of the Supreme Court, had to be refunded "forthwith" after adjustment of duty, interest, penalty and other quantified dues.

2.8 The Court reasoned that this refund arose directly under the Supreme Court's directions and the Settlement Commission's quantification, and therefore there was no necessity for the appellant to file a separate refund claim for Rs. 34,95,275/-.

2.9 The Court observed that by retaining this excess amount from 08.08.2019 to 29.05.2023, the Revenue had, without authority of law, deprived the appellant of funds which could otherwise have been deployed in commercial activities or to reduce borrowing costs.

Conclusions

2.10 The Court held that the excess fixed deposit amount of Rs. 34,95,275/- became legally refundable to the appellant on 08.08.2019 and that the Revenue's retention of this amount thereafter was without authority of law.

Issue 3: Clubbing of amounts relating to first and second show cause notices for refund and adjustment purposes

Interpretation and reasoning

2.11 The adjudicating authority had clubbed (a) Rs. 60,75,515/- transferred from the Supreme Court (relating to the first show cause notice) with (b) Rs. 95,21,901/- deposited in respect of the second show cause notice, and thereafter deducted Rs. 25,80,240/- (the Settlement Commission liability in the first proceedings) from the combined total to arrive at the net refundable amount.

2.12 The Court held that this method of clubbing was incorrect, as the refund arising from the second show cause notice was independent of, and not legally interlinked with, the refund mechanism and liability relating to the first show cause notice.

2.13 The Court reasoned that, as per the Settlement Commission's order dated 11.08.2010 read with the Supreme Court's order dated 07.11.2017, the refund of Rs. 34,95,275/- arising out of the first show cause notice proceedings became eligible in its own right when the fixed deposit was encashed on 08.08.2019 and could not be merged or set off against deposits or outcomes of the second show cause notice proceedings.

Conclusions

2.14 The Court concluded that clubbing the fixed deposit amount pertaining to the first show cause notice with the deposit made in the second show cause notice and then deducting Rs. 25,80,240/- from the combined figure was legally unsustainable; the two proceedings and their consequential refunds were to be treated independently.

Issue 4: Entitlement to, period of, and rate of interest on the illegally retained excess amount

Legal framework (as discussed)

2.15 The Court relied upon the principles laid down by the Supreme Court in Sandvik Asia Ltd. v. Commissioner of Income Tax, to the effect that where money lawfully due as refund has been unjustifiably withheld, the assessee is entitled to compensation by way of interest, and that the Department cannot discriminate by charging interest rigorously from assessees while avoiding payment of interest on delayed refunds.

2.16 The Court also referred to the prevailing dispensation in which courts and tribunals have been directing payment of interest at 6% per annum on pre-deposits and litigation-related deposits ordered to be refunded.

Interpretation and reasoning

2.17 The Court held that once the liability for the first show cause notice was finally determined by the Settlement Commission on 11.08.2010 and the Supreme Court had, on 07.11.2017, directed refund of the balance deposit after adjustment of quantified dues, the Revenue's obligation was confined to recovering Rs. 25,80,240/- and refunding the rest.

2.18 The Court found that the excess amount of Rs. 34,95,275/- became effectively refundable on the date the fixed deposit was encashed and the funds came under the control of the Revenue, i.e. 08.08.2019, and that any retention beyond that date, in the absence of statutory or judicial authority, amounted to unlawful withholding.

2.19 Applying the principle in Sandvik Asia, the Court treated the prolonged, unauthorized retention of the appellant's money as warranting compensatory interest for the full period during which the appellant was deprived of its funds despite having a lawful entitlement to refund.

2.20 The Court considered the general practice of awarding interest at 6% per annum on amounts ordered to be refunded following the conclusion of litigation, and found this rate appropriate for compensating the appellant in the present case.

Conclusions

2.21 The Court held that the Revenue is liable to pay interest at 6% per annum on the amount of Rs. 34,95,275/- for the period from 08.08.2019 (date of encashment and commencement of unauthorized retention) to 29.05.2023 (date of refund order).

2.22 The Court directed that such interest be calculated and paid to the appellant without requiring any further or special application, treating the entitlement as flowing directly from the present order.

2.23 The Court further directed that the said interest amount be granted within eight weeks from the date of receipt of the order, noting that the appellant had been deprived of its lawful refund for many years and that no interest had been paid for this long period apart from the limited sum of Rs. 55,635/- already sanctioned for a 26-day delay.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether reassessment of self-assessed Bills of Entry under Section 17 of the Customs Act can be sought more than four years after clearance of goods, solely to claim a lower rate of CVD based on an exemption notification and a subsequent Supreme Court decision.

1.2 Whether reassessment or amendment of Bills of Entry after clearance of goods is permissible under Sections 17 and 149 of the Customs Act in the absence of contemporaneous documentary evidence and any steps taken at the time of assessment, clearance, or immediately thereafter.

1.3 Whether a claim to benefit of an exemption notification and consequential refund of excess duty can be founded exclusively on (a) an alleged technical glitch in the customs EDI system and (b) judicial decisions rendered in other assessees' cases, including the decisions in SRF and Micromax.

1.4 Whether, in light of the law declared in ITC and Mafatlal, a concluded self-assessment can be reopened and refund granted on the basis of a decision rendered in another person's case, without the assessee having challenged or sought modification of its own assessments in time.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2 - Reassessment under Sections 17 and 149 after clearance and after long delay

Legal framework discussed

2.1 The Court examined Section 17(2), (3) and (4) of the Customs Act governing verification and reassessment of Bills of Entry, and the proviso to Section 149 governing amendment of Bills of Entry after clearance of goods. It noted that:

* Reassessment under Section 17 operates in the context of verification, examination or testing of goods.
* Under the proviso to Section 149, amendment of Bills of Entry or shipping bills after clearance for home consumption/export can be done only on the basis of documentary evidence in existence at the time of clearance.

Interpretation and reasoning

2.2 All 56 Bills of Entry were finally assessed and goods cleared by September 2015. The appellant first sought reassessment only by letter dated 23.12.2019, i.e., after more than four years, and only to secure the lower 1% CVD rate under the exemption notification in view of the later Supreme Court decision in SRF.

2.3 The Court recorded that the appellant had not, at any point:

* Claimed at the time of filing Bills of Entry that it had attempted to pay CVD at 1% and the system did not accept it;
* Paid duty under protest;
* Sought provisional assessment or any contemporaneous modification of the assessments; or
* Produced any documentary evidence showing an attempt to claim the exemption or a system-refusal at the time of original assessments.

2.4 The letter of the Principal Commissioner (Imports), New Delhi dated 20.10.2016, relied upon by the appellant, was closely examined. The Court held:

* The letter showed that system modification was required only for reassessment of Bills of Entry filed up to 16.07.2015.
* It also showed that, from 17.07.2015, suitable amendments were made in the customs EDI system.
* The reasons for such modification were linked to dismissal of the review petition in SRF on 15.07.2015, and did not establish any non-acceptance of lower CVD rate for the appellant's period in the manner alleged.

2.5 The Court noted the appellant's reliance on decisions emphasizing availability of reassessment and absence of an explicit time limit in Section 17(3)-(5), and on the plea that its application under Section 17 be treated as one under Section 149. However, it held that both provisions, read with their conditions, restrict post-clearance reassessment or amendment to cases where:

* It is anchored in verification/examination of goods (Section 17), or
* It is based on contemporaneous documentary evidence existing at the time of clearance (Section 149).

2.6 The Court found that:

* The appellant's request was made long after clearance, purely to obtain a refund benefit arising from a later judicial decision, and not due to any contemporaneous factual or documentary ground.
* No documentary evidence existing at the time of clearance was produced to satisfy the proviso to Section 149.
* The only purpose of reassessment was to create a refund entitlement, which is not a permissible basis for reopening concluded assessments under Sections 17 or 149.

Conclusions

2.7 The Court concluded that:

* Reassessment under Section 17, or amendment under Section 149, of the self-assessed Bills of Entry post-clearance and after more than four years was not legally maintainable in the facts.
* The application dated 23.12.2019 could not be treated as a valid request under either Section 17 or Section 149, there being no contemporaneous evidence or statutory ground permitting post-clearance reassessment/amendment.
* The rejection of reassessment by the authorities below was legally justified.

Issue 3 - Effect of alleged system glitch and reliance on Micromax and other case law

Interpretation and reasoning

3.1 The appellant contended that a technical glitch in the customs EDI system prevented payment of 1% CVD, relying on:

* The Principal Commissioner's letter dated 20.10.2016; and
* The decision of the High Court in Micromax, which noted such glitches and allowed refund without reassessment.

3.2 The Court found that:

* No specific evidence was produced that the appellant had in fact attempted to claim the 1% rate and was prevented by the system at the time of assessment.
* The Principal Commissioner's letter, on its own terms, only addressed the need for system modification for Bills of Entry up to 16.07.2015 and did not prove that, for the appellant's Bills of Entry, the system rejected any lawful claim.
* The appellant made no effort, contemporaneously, to bring any such alleged glitch to the department's notice or to seek provisional assessment, assessment under protest, or other remedial steps.

3.3 As to Micromax, the Court endorsed the adjudicating authority's detailed distinction, including that:

* In Micromax, the importer had informed the department during assessment to make changes in the EDI system, requested provisional release, and paid duty under protest.
* The importer in that case directly filed refund claims without reassessment, which were rejected on the ground that Bills of Entry had not been reassessed or appealed; the High Court then ordered processing of refund.
* None of those steps - contemporaneous protest, communication, provisional assessment, or immediate follow-up - were taken by the appellant in the present matter.

3.4 The Court further accepted the revenue's contention that, even apart from these factual distinctions, the approach in Micromax regarding refund without reassessment stands overtaken by the later binding law declared in ITC, which emphasizes that refund cannot operate to unsettle self-assessment without recourse to appropriate proceedings to modify such assessment.

Conclusions

3.5 The Court held that:

* The plea of a system glitch was unsubstantiated and an afterthought.
* The decision in Micromax was factually distinguishable and, in any event, could not override the binding principles subsequently affirmed in ITC.
* The alleged glitch and reliance on Micromax did not confer any right to belated reassessment or refund.

Issue 4 - Reliance on SRF, ITC and Mafatlal; refund based on decision in another's case

Legal framework discussed

4.1 The Court considered:

* The Supreme Court's clarification in ITC that orders of assessment or self-assessment must first be modified "under other relevant provisions of the Act" before any refund under Section 27 can be granted; refund proceedings cannot themselves function to set aside or modify assessment.
* The principle laid down in Mafatlal that a person cannot claim refund merely on the basis of a decision rendered in another person's case, nor treat such decision as discovery of a mistake of law enabling refund after assessments have become final.

Interpretation and reasoning

4.2 Applying ITC, the Court held that:

* Unless the appellant's self-assessment orders are modified in accordance with law through appropriate proceedings under the Customs Act, Section 27 cannot be invoked to obtain refund.
* The appellant's attempt to use reassessment (long after clearance) only as a mechanical step to generate refund, after SRF, is contrary to the scheme clarified in ITC.

4.3 Applying Mafatlal, the Court quoted and relied on the principle that:

* It is not open to any person to make a refund claim on the basis of a decision in another's case.
* Once an assessment has become final for that person, it cannot be reopened nor can refund be claimed on the ground of a decision subsequently rendered in another's case.
* Section 72 of the Contract Act and Section 17(1)(c) of the Limitation Act have no application to such refund claims.

4.4 The Court held that the appellant's case fell squarely within the bar articulated in Mafatlal because:

* The appellant had allowed its assessments to attain finality without challenge.
* It sought reassessment and refund solely on the strength of the decision in SRF and the subsequent recognition of system issues in another importer's case (Micromax).
* The right asserted was not based on any contemporaneous challenge or action in the appellant's own assessments.

Conclusions

4.5 The Court concluded that:

* The appellant could not reopen its concluded assessments or claim refund merely on the basis of the Supreme Court judgment in SRF or the High Court decision in Micromax.
* In view of ITC and Mafatlal, the claim to benefit of the exemption notification and consequential refund, without timely challenge or modification of the appellant's own assessments, was legally untenable.
* The denial of reassessment and consequential refund by the authorities below was in conformity with binding precedent.

4.6 On the totality of the reasoning under the above issues, the Court upheld and confirmed the order of the Commissioner (Appeals) and dismissed the appeal.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the benefit of preferential rate of duty under the relevant exemption notification could be denied by treating the Certificate of Origin as "unauthentic" solely on the basis of a general communication from investigative and FTA authorities, without specific verification of the particular certificate covering the impugned consignment.

1.2 Whether a demand of differential customs duty under Section 28 of the Customs Act, 1962 is legally sustainable where the Bill of Entry was self-assessed and had attained finality, without the Revenue having challenged or modified such self-assessment under the appropriate appellate or reassessment provisions.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Denial of preferential rate of duty on the basis of alleged non-authentic Certificate of Origin

(a) Legal framework (as discussed)

2.1 The Tribunal proceeded on the basis of the provisions for preferential duty benefit under Notification No. 53/2011-Cus. dated 01.07.2011, which requires a valid Certificate of Origin (COO) to claim concessional duty.

(b) Interpretation and reasoning

2.2 The Tribunal noted that the impugned consignment was covered by a specific Certificate of Origin identified by number and date. The subsequent letter dated 19.01.2023 from the Directorate of Revenue Intelligence, based on communications from the FTA Cell and foreign authorities, referred generally to several COOs being reported as "non-authentic" and included the name of the supplier in question.

2.3 The Tribunal held that, if the Department intended to contest past imports based on such general directions, it was necessary to undertake proper and specific verification in respect of the particular Certificate of Origin covering the consignment at issue. No such certificate-specific verification was shown to have been carried out.

2.4 The Tribunal held that the authenticity of the particular Certificate of Origin cannot be disbelieved or doubted merely on assumptions and presumptions drawn from a general communication, without direct verification of that specific certificate with the issuing authority.

(c) Conclusions

2.5 The Tribunal concluded that the denial of preferential rate of duty under Notification No. 53/2011-Cus. on the ground that the Certificate of Origin was "unauthenticated" was unsustainable, in the absence of concrete verification and evidence regarding the specific certificate covering the impugned Bill of Entry.

Issue 2: Sustainability of demand under Section 28 where self-assessment has attained finality

(a) Legal framework (as discussed)

2.6 The Tribunal considered the scheme of assessment under Section 17 of the Customs Act, 1962, including self-assessment under Section 17(1), and the recovery provision under Section 28 for duties not levied or short-levied.

2.7 The Tribunal relied on the decision of the Supreme Court in ITC Ltd. v. Commissioner of Central Excise, Kolkata-IV, wherein it was held that an order of assessment or self-assessment, if not challenged, cannot be indirectly modified through collateral proceedings, and any person aggrieved must seek modification by resorting to appeal under Section 128 or other relevant provisions.

2.8 The Tribunal also relied on its own earlier decision applying ITC Ltd., holding that a demand of differential duty cannot be sustained without first challenging or reopening the original assessment of the Bills of Entry.

(b) Interpretation and reasoning

2.9 It was recorded that the Bill of Entry for the impugned consignment had been self-assessed under Section 17(1) and was RMS facilitated; the assessment was not appealed or otherwise challenged by the Department and hence attained finality.

2.10 The Tribunal observed that, after almost four years, the Department issued a show cause notice under Section 28 alleging non-authenticity of the Certificate of Origin and demanding differential duty, interest and penalty, without first taking steps to modify or set aside the self-assessment through the appellate or reassessment mechanisms provided in the Act.

2.11 Applying the ratio of ITC Ltd., the Tribunal reasoned that once an assessment, including self-assessment, has become final, any attempt to recover differential duty presupposes that such assessment is first lawfully modified or set aside. Section 28 cannot be used as a mechanism to indirectly reopen a concluded assessment without such prior modification.

2.12 The Tribunal followed its earlier view that a demand of differential duty raised without challenging the original assessment of the Bill of Entry is not sustainable in law.

(c) Conclusions

2.13 The Tribunal held that the confirmed demand of Rs. 9,40,035/-, along with interest and penalty, raised under Section 28 in respect of a self-assessed Bill of Entry that had attained finality, was not legally sustainable, as the underlying assessment had not been appealed, modified or set aside in accordance with the statutory scheme.

2.14 On this ground also, the impugned order demanding differential duty, interest and penalty was set aside, and the appeal was allowed with consequential relief as per law.

Issues: (i) Whether the preferential customs duty benefit under Notification No. 46/2011-Cus. dated 01.06.2011 could be denied on the basis of a FTA Cell communication alleging inauthenticity of the Certificate of Origin, without furnishing the underlying verification report to the importer; (ii) Whether the demand raised in respect of the earlier self-assessed Bills of Entry, together with confiscation and redemption fine, was sustainable in the absence of a challenge to the original assessments and in the absence of availability of the goods.

Issue (i): Whether the preferential customs duty benefit under Notification No. 46/2011-Cus. dated 01.06.2011 could be denied on the basis of a FTA Cell communication alleging inauthenticity of the Certificate of Origin, without furnishing the underlying verification report to the importer.

Analysis: The denial of exemption rested entirely on the FTA Cell communication stating that the Certificate of Origin was inauthentic and referring to an enclosed verification report. The importer repeatedly sought that report, but it was not supplied. Without examining the verification report, the basis on which the issuing authority was said to have disowned the certificate could not be tested. Reliance only on the communication, without the underlying material, would amount to reliance on hearsay and would violate fair procedure.

Conclusion: The denial of the preferential duty benefit on this basis was not sustainable and was set aside in favour of the assessee.

Issue (ii): Whether the demand raised in respect of the earlier self-assessed Bills of Entry, together with confiscation and redemption fine, was sustainable in the absence of a challenge to the original assessments and in the absence of availability of the goods.

Analysis: The earlier consignments had been assessed on self-assessment basis under separate Bills of Entry and were not reopened through any appropriate proceeding against those assessments. The same alleged defect in the later certificate could not, by assumption, be extended to the earlier certificates without specific verification of each import. The demand was therefore unsupported. As to confiscation and redemption fine, the goods were not physically available with the Revenue when the action was taken, and the imposition of fine on that basis could not be sustained.

Conclusion: The demand, confiscation and redemption fine in respect of the earlier consignments were not legally sustainable and were set aside in favour of the assessee.

Final Conclusion: Both appeals were allowed, and the appellant was held entitled to consequential relief as permissible in law.

Ratio Decidendi: An exemption based on a Certificate of Origin cannot be denied on the basis of undisclosed adverse material, and a demand cannot be sustained against self-assessed imports without first adopting the legally appropriate proceedings to disturb the original assessment; confiscation and redemption fine are also unsustainable where the goods are not available.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the declared FOB/transaction value of the export garments could be rejected and re-determined under rule 6 of the Customs Valuation (Determination of Value of Export Goods) Rules, 2007.

1.2 Whether mis-declaration of fabric composition (100% cotton versus polyester-cotton blend) warranted change of serial numbers in the Drawback and ROSCTL Schedules and consequential re-determination of benefits.

1.3 Whether confiscation of the export goods under section 113 and imposition of redemption fine under section 125 were legally sustainable in the absence of a formal seizure under section 110, when the goods had been detained and allowed to be exported on execution of a bond.

1.4 Whether penalty under section 114AA was contingent upon confiscation under section 113 and whether, on facts, such penalty was sustainable.

1.5 Whether penalty under section 114(iii) could be imposed where the goods were held liable to confiscation under section 113 but were not actually confiscated.

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Rejection and re-determination of FOB/transaction value under the Valuation Rules

Legal framework

2.1.1 The Court examined section 14 of the Customs Act, 1962 and rules 3, 4, 5, 6 and 8 of the Customs Valuation (Determination of Value of Export Goods) Rules, 2007. It noted that: (a) the value of export goods is the "transaction value" (FOB value) unless rejected by the proper officer; (b) under rule 3(1), subject to rule 8, the value shall be the transaction value; (c) rules 4 to 6 are to be applied sequentially if the value cannot be determined under rule 3; and (d) rule 8 prescribes the mechanism and preconditions for rejection of the declared value on "reason to doubt" and "reasonable doubt" standards.

Interpretation and reasoning

2.1.2 The Court held that only the proper officer, not the exporter, can reject the transaction value, and that rejection under rule 8 is a mandatory two-stage process: (i) formation of "reason to doubt" and calling for further information; and (ii) after considering such information (or its absence), recording a continuing "reasonable doubt" before deeming the transaction value as not determined in accordance with rule 3(1) and then proceeding sequentially under rules 4 to 6.

2.1.3 In the present case, the initial doubt was only that the garments "appeared to be overvalued". The Court found no recorded "reasonable doubt" by the Joint Commissioner as required by rule 8. On the contrary, the supplier had confirmed the prices during investigation and, post-export, the full declared FOB value was realised from the overseas buyer as evidenced by Bank Realisation Certificates.

2.1.4 The Court rejected the departmental contention that BRCs and buyer's remittances could not be relied upon. It held that where price between buyer and seller is under scrutiny, the primary check is what was actually paid, and in exports, BRCs are the documentary reflection of such payment. The Department's approach of discarding invoices, remittances and BRCs in favour of subjective market enquiries and opinions of traders could not be accepted.

2.1.5 The Court further held that even assuming rejection under rule 8, the proper officer could not "jump" directly to rule 6. Rules 4 and 5 must be exhausted or reasons recorded why values under those rules could not be determined before resorting to rule 6. This sequential methodology had not been followed.

2.1.6 By reference to section 76(1)(b), the Court held that the statute itself contemplates that the export price (FOB value) may be significantly higher than the domestic market price, and in such cases the consequence is denial of drawback if the drawback amount exceeds the market price, not alteration of the transaction value between buyer and seller. It reiterated that drawback and ROSCTL are computed on FOB (transaction value), not on an officer-determined "assessable value" under the Valuation Rules, and that "no stranger to the contract can change the transaction value (FOB value) of the goods".

Conclusions

2.1.7 The Court held that the transaction value (declared FOB value) was not validly rejected under rule 8; consequently, re-determination of FOB value under rule 6 was unsustainable. It upheld the Commissioner (Appeals)'s setting aside of the re-determined FOB value.

2.2 Mis-declaration of fabric composition and re-determination of Drawback and ROSCTL

Interpretation and reasoning

2.2.1 The garments were declared as made of 100% cotton. CRCL testing established that the fabric was a polyester-cotton blend. The respondent had no objection to the CRCL report and there was no contrary test report on record.

2.2.2 The Joint Commissioner had, on this basis, changed the applicable serial numbers in the Drawback and ROSCTL Schedules and re-computed the admissible amounts, both: (i) on the basis of the altered fabric composition; and (ii) using his re-determined FOB value.

2.2.3 The Commissioner (Appeals), while setting aside the Joint Commissioner's order in toto, did not discuss or record any finding on the effect of the changed fabric composition on the applicable serial numbers under the Drawback and ROSCTL Schedules, which the Court held to be an error.

Conclusions

2.2.4 The Court held that the mis-declaration of fabric composition was undisputed; therefore, the correct serial numbers in the Drawback and ROSCTL Schedules, corresponding to polyester-cotton blend garments, must be applied. To that extent, re-determination of Drawback and ROSCTL by the Joint Commissioner was required to be restored, subject to the FOB value remaining as declared.

2.3 Confiscation under section 113 and redemption fine under section 125 in the absence of seizure

Legal framework

2.3.1 The Court examined sections 110, 110A, 113, 124, 125 and 126. It noted that section 110 deals with seizure; section 110A with provisional release of seized goods on bond; section 113 with liability of export goods to confiscation; section 124 with show cause notice procedure; section 125 with redemption fine "whenever confiscation is authorised"; and section 126 with vesting of property in Central Government on confiscation.

Interpretation and reasoning

2.3.2 The Commissioner (Appeals) had held that, as only a detention memo was issued and there was no seizure memo under section 110, confiscation under section 113 and consequential redemption fine were unsustainable because "confiscation cannot be an action independent of seizure".

2.3.3 The Court held that nothing in sections 113, 111 or 126 makes seizure a pre-requisite for confiscation. Seizure is merely the act of taking physical possession of goods believed liable to confiscation; confiscation is a legal consequence which vests property in the Government. The only requirement for actual confiscation is that the goods be available so that, under section 126(2), the adjudicating officer can "take and hold possession" of them. The wording of section 126(2) itself contemplates confiscation of goods that were not previously seized.

2.3.4 The Court accepted that, as a matter of practice and judicial interpretation, detention is treated akin to seizure for purposes of computing limitation under section 110(2), but clarified that this does not convert detention into a statutory condition precedent for confiscation under section 113.

2.3.5 In the case at hand, the goods were detained while in the customs area, then released and allowed to be exported on execution of a bond at the respondent's request. At the time of adjudication, the goods were no longer physically available in India.

2.3.6 The Court held that the export goods were liable to confiscation under section 113(i), (ia) and (ja) because: (i) they did not correspond in description (fabric composition) with the entries made (s.113(i)); (ii) they were entered for exportation under claim for drawback and did not correspond in material particulars relevant to fixation of drawback rate (s.113(ia)); and (iii) they were entered for export under claim of remission/refund (ROSCTL) and the mis-declaration rendered the claim wrongful (s.113(ja)).

2.3.7 However, since the goods had already been exported, the Court held that actual confiscation was not feasible. The Joint Commissioner erred by purporting to confiscate the goods and then "offering" the respondent an option to redeem on payment of redemption fine, as if the goods were still in his control, instead of treating them as merely "liable to confiscation" and then levying fine in lieu of confiscation in accordance with the bond conditions, if any.

2.3.8 The Court examined the bond executed for provisional release and noted that it did not contain a stipulation that, if the goods were held liable to confiscation, the exporter would pay redemption fine in lieu of confiscation. In the absence of such a condition, the bond could not serve as an undertaking to pay redemption fine.

2.3.9 Further, once the Joint Commissioner chose the statutory route under section 125(1) and merely granted an "option" to pay fine in lieu of confiscation, the respondent was legally entitled to decline that option; this structure could not be converted thereafter into a compulsory liability to pay fine.

Conclusions

2.3.10 The Court held: (i) seizure under section 110 is not a legal precondition for confiscation under section 113; (ii) in the present case, the export goods were liable to confiscation under section 113(i), (ia) and (ja), but were not actually available for confiscation as they had been exported; (iii) the Joint Commissioner erred in ordering confiscation with an option to redeem; and (iv) redemption fine could not be sustained because: (a) only an option had been granted, which the respondent was free not to exercise; and (b) the bond did not contain an undertaking to pay fine in lieu of confiscation. Consequently, redemption fine was not restored.

2.4 Penalty under section 114AA

Legal framework

2.4.1 The Court analysed section 114AA, which provides that any person who knowingly or intentionally makes, signs, uses, or causes to be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular in the transaction of any business for the purposes of the Act, shall be liable to a penalty not exceeding five times the value of the goods.

Interpretation and reasoning

2.4.2 The Commissioner (Appeals) had set aside the penalty under section 114AA on the premise that it was "contingent upon confiscation" of the goods. The Court held this view to be contrary to the explicit text of section 114AA, which contains no requirement that goods be confiscated or even liable to confiscation. The provision turns solely on the existence of a knowing or intentional false or incorrect declaration or document.

2.4.3 The Joint Commissioner had invoked section 114AA on the basis of alleged mis-declarations of both value and fabric composition. The Court, however, having upheld the declared FOB value, confined its examination to mis-declaration of fabric composition. It found that while the fabric was admittedly different from the declaration, the record did not clearly establish that the mis-declaration was "knowingly or intentionally" made.

Conclusions

2.4.4 The Court held that: (i) penalty under section 114AA is not dependent on confiscation under section 113; but (ii) in the facts of this case, the requisite mens rea (knowledge or intention) was not satisfactorily proved. On this limited factual ground, the penalty under section 114AA could not be restored. The setting aside of this penalty by the Commissioner (Appeals) was therefore upheld, though for reasons different from those stated in the impugned order.

2.5 Penalty under section 114(iii)

Legal framework

2.5.1 The Court considered section 114, particularly clause (iii), which provides that any person who, in relation to any goods, does or omits any act that would render such goods liable to confiscation under section 113, or abets such act or omission, shall be liable, in the case of "any other goods" (i.e., goods other than prohibited or dutiable goods), to a penalty not exceeding the value of the goods as declared or as determined under the Act, whichever is greater.

Interpretation and reasoning

2.5.2 The export garments were neither "prohibited" nor "dutiable" goods; therefore, section 114(iii) squarely applied. The Commissioner (Appeals) had not discussed this provision at all while setting aside the penalty.

2.5.3 The Court held that section 114(iii) does not require that the goods be actually confiscated; it is sufficient that the acts or omissions render the goods liable to confiscation under section 113. In this case, due to mis-declaration of the nature of the fabric, the goods were clearly held liable to confiscation under section 113(i), (ia) and (ja), satisfying the precondition for imposition of penalty under section 114(iii).

2.5.4 The declared FOB value of the goods across the four shipping bills was Rs. 10,88,05,179/-. The penalty imposed by the Joint Commissioner under section 114(iii) was Rs. 2,00,000/-, which the Court described as modest and far below the statutory ceiling (the value of the goods).

Conclusions

2.5.5 The Court concluded that the Commissioner (Appeals) erred in setting aside the penalty under section 114(iii) without discussion. Given that the respondent's acts rendered the export goods liable to confiscation under section 113, the penalty of Rs. 2,00,000/- under section 114(iii) imposed by the Joint Commissioner was legally sustainable and was restored.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether Customs authorities were justified in refusing post-export amendment of shipping bills to incorporate the declaration of intent to claim refund of service tax under Notification No. 52/2011-ST dated 30.12.2011.

1.2 Whether omission to make the required declaration in shipping bills under Notification No. 52/2011-ST is a mere procedural lapse curable through amendment under Section 149 of the Customs Act, 1962.

1.3 Whether reliance on a prior Tribunal decision involving conversion of shipping bills for drawback under Section 74 of the Customs Act was applicable to the present dispute regarding amendment for service tax refund purposes.

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Refusal of post-export amendment of shipping bills to include declaration for refund under Notification No. 52/2011-ST

Legal framework

2.1.1 The judgment considers the requirement under Notification No. 52/2011-ST dated 30.12.2011 that the exporter make a declaration in the shipping bill stating that refund of service tax on specified services is being claimed as a percentage of FOB value of exported goods and that no further refund for such services shall be claimed under the prescribed procedure in para 3 of the notification.

2.1.2 Section 149 of the Customs Act, 1962 as it stood during the relevant period is reproduced and examined. It empowers the proper officer, in his discretion, to authorize amendment of any document presented in the custom house, including shipping bills, even after export of goods, provided such amendment is based on documentary evidence in existence at the time the goods were exported.

Interpretation and reasoning

2.1.3 The Tribunal notes that the exporter failed to make the required declaration in the shipping bills at the time of export but subsequently sought amendment to declare the intention to claim refund of service tax under the notification.

2.1.4 It is observed that Notification No. 52/2011-ST was in existence at the time of filing of the shipping bills and export of motor cars, and thus constituted relevant documentary evidence existing at the material time for purposes of Section 149.

2.1.5 The Tribunal finds that Section 149 expressly permits amendment of shipping bills post-export, subject to the condition regarding contemporaneous documentary evidence, and vests discretion in the proper officer to allow such amendment.

2.1.6 The Tribunal holds that the rejection by the authorities was solely on the ground that the declaration was not made at the time of filing the shipping bills and that amendment cannot be allowed after completion of export, without addressing or applying the statutory discretion under Section 149 in light of existing documentary evidence.

2.1.7 The Tribunal notes that the authorities did not set out any reasons for refusing amendment under Section 149 despite the existence of the relevant notification and the undisputed fact of exports having been made.

2.1.8 The judgment also refers to the general policy of the Government of India not to export taxes and to promote exports, treating this policy consideration as supporting a liberal approach where only procedural non-compliance is involved and substantive conditions are met.

Conclusions

2.1.9 The Tribunal concludes that Customs authorities were not justified in rejecting the request for amendment of the shipping bills to incorporate the declaration for claiming refund under Notification No. 52/2011-ST.

2.1.10 The impugned order upholding such rejection is held to be unsustainable and is set aside, with the appeal allowed and consequential relief directed in accordance with law.

2.2 Nature of omission to declare intent to claim benefit under Notification No. 52/2011-ST and its curability under Section 149

Legal framework

2.2.1 The Tribunal analyses Section 149 of the Customs Act, 1962, emphasizing that amendment of a shipping bill after export is permissible if based on documentary evidence existing at the time of export.

Interpretation and reasoning

2.2.2 The Tribunal accepts the appellant's contention that failure to make the declaration in the shipping bill is a procedural lapse and not a substantive bar to entitlement, particularly when exports themselves are undisputed.

2.2.3 By referring to the decision of the High Court in a case concerning the Merchandise Exports from India Scheme, the Tribunal notes that similar non-declaration or inadvertent error (choosing "No" instead of "Yes" while filling shipping bills) was treated as a curable procedural mistake, and directions were issued to enable the exporter to obtain the intended incentive through amendment or issuance of a No Objection Certificate.

2.2.4 The Tribunal relies on the reasoning that an exporter should not suffer denial of benefits solely due to inadvertent procedural errors when the underlying eligibility and contemporaneous documentary basis exist.

2.2.5 It distinguishes the present situation as one involving only a request to amend shipping bills to enable refund of service tax on input services, without any change in the nature of exports or conversion from one export scheme to another.

Conclusions

2.2.6 The omission to make the declaration required under Notification No. 52/2011-ST is held to be a procedural irregularity that can be rectified by amendment of shipping bills under Section 149, based on notification and contemporaneous records existing at the time of export.

2.2.7 The Tribunal holds that such procedural lapse cannot, by itself, justify denial of the benefit of refund where substantive conditions are otherwise satisfied.

2.3 Applicability of prior Tribunal decision concerning conversion of shipping bills for drawback (Section 74) to present dispute on amendment for service tax refund

Legal framework

2.3.1 The Revenue relied on a Tribunal decision where an exporter had sought conversion of shipping bills from one scheme to another (NFEI Scheme to drawback scheme) and consequential duty drawback under Section 74 of the Customs Act, 1962 read with the Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995.

Interpretation and reasoning

2.3.2 The Tribunal notes that the earlier decision dealt with conversion of the nature of shipping bills and change of export scheme entitlement, governed by specific statutory and rule-based conditions for drawback.

2.3.3 In contrast, the Tribunal characterizes the present dispute as being on a "narrower compass," involving only the amendment of already-filed shipping bills to facilitate grant of refund of service tax on input services, without seeking conversion from one export incentive scheme to another.

2.3.4 On this basis, the Tribunal finds the factual and legal matrix of the cited decision distinguishable and not determinative of the present controversy.

Conclusions

2.3.5 The Tribunal holds that the prior decision relied on by the Revenue concerning conversion of shipping bills for drawback under Section 74 is inapplicable to the present case, and does not preclude allowing post-export amendment of shipping bills for claiming service tax refund under Notification No. 52/2011-ST.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the appellate order was vitiated as a non-speaking and non-reasoned order for failure to deal with the appellant's submissions and cited case law.

1.2 Whether the seized gas cylinders, originating from ships imported for breaking, were liable to confiscation under Sections 111(d) and 111(j) of the Customs Act, 1962, in view of applicable Gas Cylinder Rules and undertakings given by ship breakers.

1.3 Whether imposition of penalty on the appellant under Section 112(b) of the Customs Act, 1962 was justified consequent upon the finding of liability to confiscation under Section 111.

1.4 Whether the quantum of redemption fine imposed in lieu of confiscation of 449 gas cylinders was excessive and liable to further reduction.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Nature and sufficiency of the appellate order (alleged non-speaking order)

Interpretation and reasoning: The Tribunal examined the appellate order and noted that the Commissioner (Appeals) had referred to and relied upon the findings in the Order-in-Original, specifically noting (i) the appellant's statement under Section 108 of the Customs Act admitting purchase, source and price of the cylinders, (ii) the finding that such cylinders could not be imported without valid licence and were required to be destroyed/disposed of in accordance with Gas Cylinder Rules and related orders, and (iii) that the cylinders were illicitly removed from ship-breaking yards instead of being destroyed, thereby attracting confiscation under Sections 111(d) and 111(j). The Commissioner (Appeals) further recorded that an undertaking/declaration is required from every ship breaker as to the number of cylinders and an undertaking not to sell or reuse them and to destroy them following the prescribed procedure, and held that non-compliance rendered the goods liable to confiscation and penalty.

Conclusion: The Tribunal rejected the contention that the appellate order was non-speaking or non-reasoned, holding that the Commissioner (Appeals) had considered the relevant facts, legal provisions and findings of the adjudicating authority and had recorded reasons for upholding confiscation and penalty, with modification only of the redemption fine.

Issue 2 - Liability of gas cylinders to confiscation under Sections 111(d) and 111(j) of the Customs Act, 1962

Legal framework (as discussed): The Tribunal proceeded on the basis that: (i) gas cylinders imported along with ships for breaking are governed by the Gas Cylinder Rules and related notifications/orders, which require such cylinders to be scrapped/destroyed and not sold as such or used for refilling; (ii) ship breakers file undertakings with Customs and other authorities to that effect; and (iii) Sections 111(d) and 111(j) of the Customs Act provide for confiscation of goods imported in contravention of restrictions or in breach of conditions of permission for clearance.

Interpretation and reasoning: The Tribunal endorsed the findings that (a) the gas cylinders were "restricted for import" in terms of the Gas Cylinder Rules and therefore required to be destroyed and not sold as such; (b) ship breakers had given undertakings that the cylinders would not be sold or reused and would be destroyed as per prescribed procedure; (c) the seized cylinders were not destroyed but illicitly removed from the ship-breaking yards and sold, contrary to the conditions of import and undertakings; and (d) non-fulfilment of the conditions attached to import rendered the cylinders "prohibited" for the purpose of confiscation. By linking the illicit removal and sale of cylinders, contrary to the stipulated procedure and undertakings, to the statutory provisions, the Tribunal upheld the view that the requirements under Sections 111(d) (contravention of restriction/prohibition) and 111(j) (removal contrary to terms of permission) stood attracted.

The Tribunal did not accept the appellant's contention that the cylinders had no commercial value and therefore were not subject to any restriction or that clearance of the vessels with "out of charge" extinguished further liability. It also did not accept the analogy sought from prior Tribunal precedent regarding fuel in vessels, in view of the specific regulatory regime and undertakings applicable to gas cylinders and the clear obligation to destroy them.

Conclusion: The cylinders were held correctly liable to confiscation under Sections 111(d) and 111(j) of the Customs Act, 1962 due to breach of import-related conditions and non-compliance with the prescribed procedure for destruction, notwithstanding that they were obtained on breaking of ships.

Issue 3 - Justification for penalty under Section 112(b) of the Customs Act, 1962

Interpretation and reasoning: The Tribunal noted the finding that the appellant had admitted in his statement under Section 108 to purchasing cylinders from Alang ship-breaking yards and dealing in such cylinders. Once the goods were held liable to confiscation under Section 111(d) and 111(j), the legal consequence noted by the Tribunal was that penalty under Section 112(a)/(b) could be imposed on any person who, by his act or omission, renders the goods liable to confiscation or abets such act. The Commissioner (Appeals) had specifically affirmed that, in view of the established illicit removal and sale of cylinders contrary to undertakings and statutory rules, penalty under Section 112(b) was rightly imposed on the appellant for his role in dealing with such goods.

Conclusion: The imposition of penalty on the appellant under Section 112(b) was upheld as a lawful consequence of the established liability of the cylinders to confiscation under Section 111.

Issue 4 - Quantum of redemption fine in lieu of confiscation of 449 gas cylinders

Interpretation and reasoning: The Adjudicating Authority had imposed redemption fine of Rs. 3,00,000/- on 449 cylinders, which the Commissioner (Appeals) reduced to Rs. 1,40,000/- taking into account the appellant's circumstances. The Tribunal agreed with the conclusions on confiscation and penalty but considered the appellant's scale of operations, noting that he was engaged in a "very low profile business" operating on a "very thin margin of profit." On this basis, while affirming the legality of confiscation, the Tribunal considered further reduction of redemption fine to be warranted to render the punishment proportionate.

Conclusion: The Tribunal partly allowed the appeal by further reducing the redemption fine from Rs. 1,40,000/- to Rs. 40,000/- in respect of 449 gas cylinders, while maintaining the findings of confiscation and penalty in all other respects.

1. ISSUES PRESENTED AND CONSIDERED

(1) Whether the seizure of gold was founded on "reasonable belief" as required under Section 110(1) of the Customs Act, 1962.

(2) Whether the gold recovered was established to be of foreign origin and smuggled in contravention of the Customs Act, 1962 so as to be liable to confiscation under Section 111(b) and (d).

(3) Whether foreign markings and test results on part of the seized gold were sufficient to establish its smuggled nature and justify confiscation.

(4) Whether the onus under Section 123 of the Customs Act, 1962 validly shifted to the possessor to prove that the seized gold was not smuggled.

(5) Whether penalty under Section 112(b)(ii) of the Customs Act, 1962 was legally sustainable.

(6) Consequentially, where the gold has already been disposed of, whether the possessor is entitled to refund of its value with interest and on what basis.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (1) - Reasonable belief for seizure under Section 110(1)

Legal framework (as discussed): Section 110(1) permits seizure only if the proper officer has "reason to believe" that the goods are liable to confiscation. The Tribunal examined the contents of the panchnama and the nature of "intelligence" relied upon.

Interpretation and reasoning: The Tribunal noted that the alleged "specific intelligence" only named the person and broadly stated he would be carrying substantial gold smuggled from Bangladesh, without particulars such as age, address, manner of carriage, quantity, place and time of smuggling, or the identity of the smuggler. The panchnama did not record any concrete material establishing foreign origin prior to seizure; the certification of 24 carat foreign origin gold by the government valuer was not supported by disclosed basis and was not done in the presence of panch witnesses. The route or "root of import" was not investigated or established. The Tribunal found no cogent material recorded in the panchnama to show how "reasonable belief" was actually formed, and held that mere assertion in the panchnama that seizure was on reasonable belief is insufficient.

Conclusions: The pre-condition for seizure under Section 110(1) was not satisfied; there was no legally sustainable "reasonable belief" that the gold was liable to confiscation, rendering the seizure itself unsustainable.

Issue (2) - Proof of foreign origin and smuggled nature; liability to confiscation under Section 111(b), (d)

Legal framework (as discussed): Section 111(b) and (d) apply to goods imported contrary to prohibition or liable to confiscation as smuggled goods. For such confiscation, the foreign origin and smuggled character must be established by the department before adverse presumptions or burdens can operate.

Interpretation and reasoning: The Tribunal found that the department failed to establish foreign origin prior to seizure and did not investigate who imported the gold, when and where it entered India, or how it came into the appellant's possession. The place of seizure was a railway coach in Kolkata city, far from the Bangladesh border and not in a customs area; the person in possession had not been intercepted on arrival from abroad. The Tribunal emphasised that foreign markings alone and general suspicion are not enough to infer smuggling, particularly in a town seizure where gold with foreign markings is freely available in the domestic market. On facts, there was no evidence of actual illicit import or of any chain of smuggling, and no corroborative material beyond the officers' belief and an unsupported valuer's opinion.

Conclusions: The gold was not proved to be of foreign origin or smuggled in contravention of the Customs Act, 1962; consequently, it was not liable to confiscation under Section 111(b) and (d).

Issue (3) - Effect of foreign markings and partial purity testing

Interpretation and reasoning: The Tribunal held that foreign markings on gold biscuits, by themselves, do not prove foreign origin or smuggled nature, treating such markings as hearsay unless backed by independent evidence of their source and authenticity. The purity test from the Customs laboratory on five representative biscuits showed 99.7-99.8% purity, not 999.9 fineness typically associated with standard foreign-origin bullion; all 20 biscuits were never tested. The Tribunal found that (a) the test result for 5 biscuits could not automatically be extended to the remaining 15, and (b) even the tested purity did not, in law, suffice to establish foreign origin. It also stressed the town seizure context-Kolkata city railway station, far from an international border or port-making it unsafe to infer smuggling merely from markings and high purity.

Conclusions: Foreign markings and partial purity testing (99.7-99.8) were insufficient to establish smuggled nature of the gold; confiscation could not be sustained on this basis.

Issue (4) - Applicability of Section 123 and shifting of burden

Legal framework (as discussed): Section 123 places the burden of proving that specified goods (including gold) are not smuggled on the person from whose possession they are seized only where (i) the goods to which the section applies are seized, and (ii) the seizure is made "in the reasonable belief that they are smuggled goods". Judicial precedents discussed emphasise that before the burden shifts, the department must first establish foreign origin and a reasonable basis for treating the goods as smuggled.

Interpretation and reasoning: The Tribunal, having already held that reasonable belief was absent and that foreign origin was not established, reasoned that the foundational conditions for invoking Section 123 were not met. Without proof of foreign origin and a valid reasonable belief of smuggling at the time of seizure, the onus could not be shifted to the possessor to prove licit acquisition or non-smuggled character. Accordingly, the department remained responsible for proving smuggling and had failed to discharge that burden.

Conclusions: Section 123 was not attracted; the burden of proof did not shift to the appellant, and the department could not rely on Section 123 to sustain confiscation.

Issue (5) - Validity of penalty under Section 112(b)(ii)

Legal framework (as discussed): Section 112(b)(ii) penalises acts of dealing with goods liable to confiscation with knowledge or reason to believe they are liable to confiscation. Penalty presupposes that the goods are in fact liable to confiscation and that the person has abetted or dealt with such goods culpably.

Interpretation and reasoning: Since the Tribunal held that the gold was not shown to be of foreign origin or smuggled and that confiscation under Section 111(b), (d) was unsustainable, the foundational requirement for penalty-existence of goods liable to confiscation-failed. In the absence of cogent evidence of smuggling or abetment, the mental element required for Section 112(b) could not be inferred.

Conclusions: Penalty under Section 112(b)(ii) was not sustainable and was set aside.

Issue (6) - Consequential relief: refund of value and interest if gold disposed of

Legal framework (as discussed): CBIC Instructions No. 11/2022-Customs and No. 27/2021-Customs provide that where seized gold has been disposed of and an appellate authority orders its return, refund of the value at tariff value or average market price on the disposal date (as fixed by the Joint Pricing Committee) is to be granted. Judicial precedents of the Supreme Court and High Courts recognise that, where confiscation is found illegal and goods have been sold, the affected person is entitled to the money value of the goods plus interest.

Interpretation and reasoning: The Tribunal applied these instructions and case law to hold that, in view of the setting aside of confiscation and penalties, the appellant becomes entitled either to the physical return of the gold or, if already sold, to the value of the gold at the average market price as on the date of disposal, with interest from the date of disposal till refund. The Tribunal rejected any approach that would allow the department to benefit from its own wrongful confiscation and disposal.

Conclusions: The impugned order was set aside; the appeal was allowed with consequential relief. If the gold has been disposed of, the department must refund to the appellant the value of the seized gold at the average market price prevailing on the date of disposal, as approved by the Joint Pricing Committee, together with applicable interest from the date of disposal until the date of actual refund, in accordance with the cited CBIC Instructions.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether alleged "excess consumption" of duty-free brass scrap over the Final Wastage Norms / SION under Notification No. 52/2003-Cus and Notification No. 22/2003-CE renders the appellant liable to customs and excise duty, confiscation, redemption fine and penalties.

1.2 Whether slag, non-foundry scrap and other waste/scrap generated and cleared, allegedly in excess of norms, can be treated as clearance of duty-free raw material "as such" and subjected to customs duty demand under the original tariff classification.

1.3 How clause (3) of Notification No. 52/2003-Cus and the corresponding non-obstante clause in Notification No. 22/2003-CE are to be interpreted regarding exemption when duty-free inputs are fully used in manufacture but waste/scrap and segregation losses exceed prescribed norms.

1.4 Whether the departmental and appellate reliance on final wastage norms and contrary Tribunal decisions is sustainable in light of binding precedent of the jurisdictional High Court and later coordinate Bench decisions, and whether such contrary decisions are per incuriam.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Liability to duty, confiscation and penalty on alleged excess consumption of duty-free brass scrap over norms

Legal framework

2.1 The Tribunal examined Notification No. 52/2003-Cus dated 31.03.2003, in particular clause (3), reproduced and applied as interpreted by the jurisdictional High Court in Commissioner of Customs (Preventive) v. Monarch Overseas and by the Tribunal in Meridian Impex and Deep Recycling Industries and others. Notification No. 22/2003-CE dated 31.03.2003, containing a similar non-obstante clause (6), and proviso to condition 4(a) (2% waste where no SION) was also considered.

Interpretation and reasoning

2.2 The Tribunal noted that the entire quantity of duty-free brass scrap (imported and indigenous) was admittedly issued to and used in the manufacture of final products. The dispute concerned quantities worked out as "excess consumption" of raw material by applying: (i) Final Wastage Norms fixed by the Norms Committee for "Mixed Brass Scrap with impurities"; and (ii) a 2% waste ceiling where no SION existed, leading to demands on alleged excess consumption of specified MTs and consequential confiscation and penalties.

2.3 Relying on the detailed reasoning in Deep Recycling Industries and others, the Tribunal held that department's view-that any use of inputs beyond the norms attracts duty/penalty-is contrary to clause (3) of Notification No. 52/2003-Cus as construed by the jurisdictional High Court in Monarch Overseas and by the Tribunal in Meridian Impex. Those decisions hold that once imported/procured goods are used for manufacture of finished goods, the exemption covers such goods, and waste/scrap (even beyond norms) arising in the course of manufacture is also covered, provided that such waste/scrap, when cleared, suffers appropriate duty of excise and is not removed unauthorisedly.

2.4 The Tribunal endorsed the view that clause (3) is a non-obstante provision which extends the exemption to finished goods and services "including by-products, rejects, waste and scrap arising in the course of production, manufacture, processing or packaging," even if not exported, when sold in DTA as per FTP on payment of appropriate excise duty. Hence, invisible losses and higher wastage intrinsic to the particular industry fall within the ambit of the notification and cannot be treated as dutiable excess consumption of raw material so long as there is no diversion of duty-free inputs to DTA without permission.

2.5 The Tribunal recorded that there was no allegation or evidence of diversion of duty-free inputs as such into DTA; the dispute only related to the departmental calculation that certain quantities were "excess consumed" based on norms. It held that such a dispute is directly governed by clause (3) and the High Court's interpretation, which immunizes such use from customs duty demands, once the imported material is actually used in manufacture and resultant clearances of waste/scrap are duly duty-paid.

2.6 The Tribunal further noted that the department's method of deriving excess consumption by mechanically applying the Final Wastage Norms, including for periods and material categories (e.g. "Mixed Brass Scrap" vs "Mixed Brass Scrap with impurities") where such norms did not strictly apply, is inconsistent with the scheme of the notification as interpreted by the High Court and by Meridian Impex. Clause (3) takes precedence and is not controlled by the wastage norms when the foundational condition of use in manufacture is satisfied.

Conclusions

2.7 The Tribunal concluded that the demands of customs duty and central excise duty on alleged excess consumption of duty-free brass scrap, as also the related orders of confiscation, redemption fine and penalties, are contrary to Notification No. 52/2003-Cus, Notification No. 22/2003-CE and the binding interpretation in Monarch Overseas and Meridian Impex. The impugned duty demands, confiscation and penalties were therefore set aside.

Issue 2: Characterization and duty treatment of slag and non-foundry scrap generated in segregation/manufacture

Legal framework

2.8 The Tribunal considered the department's case that (i) slag cleared beyond Final Wastage Norms, and (ii) non-foundry scrap generated on segregation of mixed brass scrap, constituted clearance of duty-free raw material "as such" and thus attracted customs duty under the original classification. This was tested against clause (3) of Notification No. 52/2003-Cus and the High Court's reasoning in Monarch Overseas concerning "segregated waste" and "foundry scrap."

Interpretation and reasoning

2.9 The Tribunal noted that, factually, the mixed brass scrap imported duty-free was subjected to segregation, yielding foundry scrap (non-ferrous metals) and non-foundry scrap (iron, rubber, plastic, etc.). The non-foundry scrap was cleared on payment of appropriate duties under respective tariff headings after obtaining "Quantitative Clearance Permission" from the Development Commissioner. Slag and other waste generated in further manufacture were similarly cleared on payment of duty.

2.10 Following Monarch Overseas, the Tribunal held that segregated waste and scrap, including foundry scrap and slag arising in the course of production/manufacture of brass articles, fall squarely within the expression "by-products, rejects, waste and scrap arising in the course of production, manufacture, processing or packaging of such goods" in clause (3). The High Court had specifically held that such segregated waste, when cleared on payment of duty and in accordance with EXIM/FTP permissions, satisfies clause (3) and remains covered by the exemption on customs duty on inputs.

2.11 The Tribunal rejected the departmental characterisation of non-foundry scrap and slag as clearance of duty-free raw material as such, noting that the waste had arisen during and because of the process of segregation and manufacture and was not shown to be removal of unutilised raw material. The generation and clearance of such waste/scrap, duly duty-paid and authorised by the Development Commissioner, therefore could not be treated as misuse of the exemption or non-use for the intended purpose.

2.12 The Tribunal also observed that Notification No. 22/2003-CE contains a similar non-obstante clause and specific allowance for waste/scrap where SION are not notified, further reinforcing that waste/scrap generated in the manufacturing process is an accepted and exempted consequence of using duty-free inputs, subject only to payment of excise duty at the stage of clearance and compliance with FTP permissions.

Conclusions

2.13 The Tribunal held that slag and non-foundry scrap generated in the course of segregation and manufacture, and cleared on payment of applicable duty with due permission, cannot legally be treated as clearance of duty-free raw material as such. Corresponding customs duty demands based on such a theory, as well as related confiscation and penalties, are unsustainable and were set aside.

Issue 3: Effect of clause (3) of Notification No. 52/2003-Cus and parallel clause in Notification No. 22/2003-CE; treatment of contrary precedents

Legal framework

2.14 The Tribunal expressly relied on the binding ratio of the jurisdictional High Court in Monarch Overseas, which construed clause (3) of Notification No. 52/2003-Cus, and on the Tribunal's own decisions in Meridian Impex and Deep Recycling Industries and others. It also considered departmental reliance on earlier decisions including one in Amardeep Exports.

Interpretation and reasoning

2.15 Referring to Deep Recycling Industries and others, the Tribunal reiterated that earlier decisions relied upon by the department which had imposed duty/penalty for excess wastage without examining the scope of the non-obstante clause in Notification No. 52/2003-Cus were held to be per incuriam. Those decisions had failed to appreciate that clause (3) specifically extends the exemption to waste and scrap arising in the course of manufacture, even where such waste/scrap is not exported but sold in DTA against duty of excise.

2.16 The Tribunal emphasized that Monarch Overseas directly addressed the question whether clearance of scrap beyond the norms fixed by the Norms Committee, upon payment of excise duty, violated Notification No. 52/2003-Cus. The High Court held that such waste and scrap are also exempt from customs duty, provided clause (3) conditions are met. The Tribunal found that the factual matrix in the present matters-segregation and manufacture of brass goods, generation of waste/scrap, clearances on payment of excise duty with Development Commissioner's permission-was on all fours with Monarch Overseas and Meridian Impex.

2.17 The Tribunal noted that Notification No. 22/2003-CE, with its similar non-obstante clause and explicit recognition of permissible waste in absence of SION, must be read harmoniously with Notification No. 52/2003-Cus, reinforcing the same legal position: once inputs are used in manufacture and resultant waste/scrap is cleared on payment of excise duty per FTP and Development Commissioner's approvals, customs duty on the inputs cannot be demanded merely because wastage exceeded norms.

2.18 In light of this settled legal position, the Tribunal held that the conclusions of the adjudicating authority and the Commissioner (Appeals), which were based primarily on the Final Wastage Norms and ignored the overriding effect of clause (3) and the binding High Court judgment, are contrary to law.

Conclusions

2.19 The Tribunal concluded that: (i) clause (3) of Notification No. 52/2003-Cus and the analogous clause in Notification No. 22/2003-CE have overriding effect and fully cover the present fact situation; (ii) decisions not considering this non-obstante scheme are per incuriam and not to be followed; and (iii) applying the law as laid down in Monarch Overseas, Meridian Impex and Deep Recycling Industries and others, the customs and excise duty demands, confiscation orders, redemption fine and penalties in the impugned orders are unsustainable. The appeals were allowed and the impugned orders set aside.

Issues: Whether the time limit prescribed for completion of inquiry under the Customs Broker Licensing Regulations, 2018 was mandatory or directory, and whether the delay in completing the inquiry vitiated the revocation and penalty order.

Analysis: The inquiry report was furnished well beyond the prescribed period, and the impugned order did not record any finding that the delay was attributable to the customs broker. The delay was sought to be justified on administrative grounds, but no specific explanation showed why the inquiry could not have been concluded within the stipulated period after the hearing had ended. In determining whether a statutory time frame is mandatory or directory, the controlling consideration is the object of the regulation, the consequences of strict invalidation for minor delay, and the need to balance discipline in customs administration with fairness to the licence holder. Applying that test, the prescribed timeline was held to operate as a procedural discipline rather than an absolute bar, but non-compliance had to be justified by recorded reasons. Since no such justification existed, the belated inquiry could not sustain the adverse order.

Conclusion: The time limit was held to be directory in principle, but the unexplained delay in the present case was fatal to the proceedings, and the revocation and penalty order was set aside in favour of the appellant.

Ratio Decidendi: Where a statutory inquiry timeline is intended to regulate administrative discipline and no consequence of automatic invalidation is prescribed, the provision is directory; however, an unexplained and unjustified delay in completing the inquiry can still vitiate the resulting adverse order.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether 'glass vials', 'caps with rubber PTFE', 'magnetic caps' and 'silicon PTFE septa' imported for use with chromatographs are classifiable as "parts and accessories" under tariff heading 9027 and corresponding tariff item 9027 90 90.

1.2 Whether the imported goods, if not classifiable under heading 9027, are classifiable under their respective specific headings in Chapters 70, 39 and 73 of the First Schedule to the Customs Tariff Act, 1975, on the basis of their description and characteristics.

1.3 Whether restricted or exclusive use of the goods with chromatographs can, by itself, justify classification as "parts and accessories" under Chapter 90 in the absence of specific qualifying provisions.

1.4 Whether previous acceptance of the declared classification for similar imports bars or restricts reconsideration and reclassification by the customs authorities in the present case.

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Classification as "parts and accessories" under heading 9027 (tariff item 9027 90 90)

Legal framework

2.1.1 The Court considered Chapter 90, including Note 1(e), the structure of headings providing for "parts and accessories", the General Interpretative Rule 1 for the Import Tariff appended to the Customs Tariff Act, 1975, and the Explanatory Notes to the Harmonized System Nomenclature (HSN) relevant to heading 9027.

Interpretation and reasoning

2.1.2 It was common ground that the imported goods could be placed within descriptions elsewhere in the First Schedule (i.e. as glassware, plastic articles, metal articles) and that their inclusion under Chapter 90 was claimed solely on the basis of their use as "parts and accessories" of chromatographs.

2.1.3 The Court held that the expression "parts and accessories", though mentioned along with the primary articles in several chapters, must be construed harmoniously with the chapter notes and section notes and in accordance with Rule 1 of the General Interpretative Rules. It cannot be invoked to override specific tariff placements of goods by description or by their essential characteristics.

2.1.4 Referring to the HSN Explanatory Notes, the Court noted that "glass vials" may be classifiable along with chromatographs only where there is no specific placement for them elsewhere in the tariff. The presence of a specific heading for such glassware in Chapter 70 thus excludes them from being classified as parts under Chapter 90.

2.1.5 The Court emphasized that no evidence was produced to show that "glass vials" when imported by others are not classifiable under other specific headings. The appellant's claim rested solely on the activities and intended use by the importer, which was held to be insufficient to alter tariff classification.

2.1.6 The Court further held that the 'caps' (rubber, magnetic, with silicon) and 'silicone PTFE septa' are used merely as stoppers or closures on glass vials and do not, by their nature or characteristics, qualify as "parts and accessories" of chromatographs as intended by tariff item 9027 90 90.

Conclusions

2.1.7 The imported 'glass vials', 'caps with rubber PTFE', 'magnetic caps' and 'silicon PTFE septa' do not qualify for classification as "parts and accessories" of chromatographs under heading 9027 / tariff item 9027 90 90.

2.1.8 Consequently, the exemption under Notification No. 25/2005-Cus dated 1 March 2005 (Serial No. 32), which is contingent on such classification, is not available.

2.2 Classification under specific headings based on description and characteristics

Interpretation and reasoning

2.2.1 Applying Rule 1 of the General Interpretative Rules, the Court held that where goods have a specific placement by description or characteristics elsewhere in the tariff, that placement prevails over a general claim to be treated as "parts and accessories" by reason of use.

2.2.2 The Court accepted the reasoning that 'glass vials' are appropriately classifiable under tariff item 7010 90 90; 'caps rubber' and 'caps with silicon' as plastic articles under tariff item 3923 50 10; and 'magnetic caps' as metal fasteners under tariff item 7318 29 90, in view of their description and essential character.

Conclusions

2.2.3 The goods were correctly reclassified by the customs authorities under tariff items 7010 90 90, 3923 50 10 and 7318 29 90, as applicable, based on their description and characteristics rather than intended use with chromatographs.

2.3 Role of use or end-use in tariff classification

Interpretation and reasoning

2.3.1 The Court reiterated that usage or end-use is not, by itself, a criterion of classification unless the tariff descriptions within a chapter or the relevant section/chapter notes explicitly make use or end-use a qualifying factor.

2.3.2 In the present case, there was no qualifying provision in Chapter 90 or in the applicable headings to treat the impugned articles as "parts and accessories" solely on the basis of their restricted or exclusive use with chromatographs.

2.3.3 The Court therefore rejected the contention that the restricted use of the goods for chromatography sufficed for their inclusion in Chapter 90.

Conclusions

2.3.4 In the absence of explicit use-based qualifiers in the tariff or chapter notes, the impugned goods are to be classified according to their own description and essential characteristics, not on the basis of their use with chromatographs.

2.4 Effect of previous acceptances of declared classification

Interpretation and reasoning

2.4.1 The appellant argued that previous imports under the same declared tariff item had been accepted and that the classification could be altered only upon showing sufficient cause, allegedly absent in the impugned order.

2.4.2 The Court, by affirming the reclassification on the strength of the tariff structure, chapter notes, HSN Explanatory Notes and General Interpretative Rule 1, implicitly held that the existence of earlier acceptances does not prevent or bar the customs authorities from correctly classifying the goods when proper legal reasoning is applied.

Conclusions

2.4.3 Prior acceptance of the declared classification does not create a bar or estoppel against reclassification in accordance with law; the reclassification and denial of exemption were upheld.

2.4.4 The appeals were found to be without merit and were dismissed.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether 'LED rechargeable bulbs', 'LED chargeable searchlights' and 'LED chargeable bulbs' are classifiable under tariff heading 8513 as "portable electric lamps designed to function by their own source of energy" or under tariff heading 9405 as "lamps and lighting fittings including searchlights and spotlights", for the purposes of the Customs Tariff Act, 1975.

1.2 Whether the customs authorities discharged the burden of proof to justify reclassification of the imported goods from heading 8513 to heading 9405 (and consequentially to tariff items 9405 4010 and 9405 4090), in light of the legal principles governing classification and residuary entries.

1.3 Whether recourse to the General Rules for the Interpretation of the Import Tariff, particularly rule 3 and rule 3(c), and reliance on HSN Explanatory Notes to chapter 90 and heading 9405, was correctly applied by the customs authorities to support the reclassification.

1.4 Consequent upon the correct classification, whether the demand of differential duty and interest under section 28AA of the Customs Act, 1962 was sustainable.

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Classification of 'LED rechargeable bulbs' and 'LED chargeable searchlights' - headings 8513 vs 9405

Legal framework

2.1.1 The judgment considers tariff heading 8513 of the First Schedule to the Customs Tariff Act, 1975, which covers: "Portable electric lamps designed to function by their own source of energy (for example, dry batteries, accumulators, magnetos), other than lighting equipment of heading 8512."

2.1.2 It also considers tariff heading 9405, which covers: "Lamps and lighting fittings including searchlights and spotlights and parts thereof, not elsewhere specified or included; illuminated signs, illuminated name-plates and the like, having a permanently fixed light source, and parts thereof not elsewhere specified or included."

Interpretation and reasoning

2.1.3 The Court interprets the construction of heading 9405 as a residuary description in relation to lamps and lighting fittings, applicable only to the extent that the articles are "not elsewhere specified or included" in the Tariff.

2.1.4 It holds that, for goods to be classifiable under heading 9405, customs authorities must first establish that they are not covered by a more specific heading elsewhere in the Tariff.

2.1.5 As to the 'LED rechargeable bulbs' (also referred to as 'LED chargeable bulbs'), customs authorities relied on HSN Explanatory Notes in chapter 90 and on the notion of "fixed installation" and the finding that these articles would have to be connected to an appropriate fixture to operate as lamps.

2.1.6 The Court finds this interpretation incorrect in the context of heading 8513, noting that the product description clearly covers "portable electric lamps designed to function by their own source of energy."

2.1.7 The Court observes that the LED bulbs in question act as their own fixture, can perform their lighting function when connected to a socket and also when not connected, by drawing from stored charge, and thus are "functional lamps designed to draw from their own source of energy."

2.1.8 With respect to the 'searchlights', the Court notes they are "admittedly portable" and contain batteries emplaced therein, thereby conforming to the description under heading 8513 as portable electric lamps functioning by their own source of energy.

2.1.9 The Court notes that recourse to heading 9504 as a more specific entry was also attempted by customs authorities, and holds that such recourse is inconsistent with the General Rules for Interpretation of the Import Tariff because conformity with any substituted heading (such as 9504) must first be established before moving to specific tariff items within that heading.

Conclusions

2.1.10 The Court concludes that both the 'LED rechargeable bulbs' (including 'LED chargeable bulbs') and the 'LED chargeable searchlights' are classifiable under heading 8513 of the First Schedule to the Customs Tariff Act, 1975.

2.1.11 Consequently, as articles properly falling within heading 8513, they are excluded from the residuary description corresponding to heading 9405.

2.2 Burden of proof and applicability of residuary heading 9405

Legal framework

2.2.1 The Court relies on the principles laid down by the Supreme Court that: (i) classification of goods is a matter relating to chargeability and the burden of proof is squarely upon the Revenue when it seeks to classify goods under a heading different from that claimed by the assessee; and (ii) where the Revenue fails to lead proper evidence to support a claimed heading, the burden is not discharged.

2.2.2 The Court also proceeds on the basis that a heading formulated as "not elsewhere specified or included" has the character of a residuary entry, to be invoked only when the goods are not specifically covered elsewhere in the Tariff.

Interpretation and reasoning

2.2.3 Applying these principles, the Court notes that heading 9405 expressly covers lamps and lighting fittings "not elsewhere specified or included" and therefore cannot be invoked unless it is shown that the goods are not classifiable under a more specific heading such as 8513.

2.2.4 The Court finds that customs authorities, in attempting to shift classification from heading 8513 to heading 9405 (and related tariff items), did not discharge the burden of demonstrating that the goods did not fall within heading 8513.

2.2.5 The Court holds that merely invoking rule 3 of the General Rules for Interpretation and the "tie breaker" rule 3(c), without first establishing that heading 8513 does not apply, is insufficient to justify classification under heading 9405.

Conclusions

2.2.6 The Court concludes that the Revenue failed to establish that the impugned goods fall under heading 9405 or under any heading other than 8513.

2.2.7 As heading 8513 properly covers the goods, the residuary scope of heading 9405 cannot be invoked.

2.3 Correct application of General Rules for Interpretation and HSN Explanatory Notes

Legal framework

2.3.1 The customs authorities had relied on rule 3 and rule 3(c) of the General Rules for the Interpretation of the Import Tariff, as appended to the Customs Tariff Act, 1975, and on HSN Explanatory Notes, particularly in relation to chapter 90 and heading 9405.

Interpretation and reasoning

2.3.2 The Court notes that the lower authorities applied rule 3 on the premise that heading 9405 provided a more specific description for searchlights and that rule 3(c) could operate as a "tie breaker."

2.3.3 The Court holds that such recourse is improper when a specific and directly applicable heading (8513) is available which fully covers the goods as portable electric lamps designed to function by their own source of energy.

2.3.4 It holds that HSN Explanatory Notes emphasising "fixed installation" to justify classification under lamp fittings of another chapter cannot override or displace the clear and specific wording of heading 8513 in the Tariff, particularly where the products are portable and operate on their own stored energy.

2.3.5 The Court adds that recourse to another heading (such as 9504) as being allegedly more specific must itself comply with the interpretative rules, meaning that the goods must demonstrably conform to that heading before any tie-breaking rules are invoked.

Conclusions

2.3.6 The Court concludes that the customs authorities misapplied the General Rules for Interpretation and HSN Explanatory Notes in attempting to classify the subject goods under headings other than 8513.

2.3.7 Proper application of the interpretative rules leads to classification under heading 8513, with no occasion to resort to heading 9405 or to tie-breaker provisions.

2.4 Validity of differential duty and interest demand

Interpretation and reasoning

2.4.1 The demand of differential duty arose from the Revenue's reclassification of the imported goods from heading 8513 to headings 9405 4010 and 9405 4090, as against the importer's self-assessment under heading 8513 1010.

2.4.2 Having found that the declaration of the importer classifying the goods under heading 8513 is correct and that the reclassification to heading 9405 is unsustainable, the basis for charging differential duty and interest under section 28AA of the Customs Act, 1962 falls.

Conclusions

2.4.3 The Court holds that the recovery of differential duty is incorrect as the importer's declaration under heading 8513 is legally correct.

2.4.4 Consequently, the demand of interest under section 28AA of the Customs Act, 1962 is also unsustainable.

2.4.5 The impugned order confirming the reclassification and consequential demands is set aside, and the appeal is allowed.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the Adjudicating Authority, in an interlocutory application filed by certain members, was justified in directing that no adverse action be taken by the club against its members till disposal of the company petition by the Supreme Court.

1.2 Whether the Adjudicating Authority was justified in observing that, in case of non-compliance with specified clauses in running its administration, an administrator may be appointed to run the club till the matter is decided by the Supreme Court.

1.3 Effect of the earlier order directing the club to strictly adhere to its Articles of Association in disciplinary proceedings and the refusal of earlier prayers to restrain the club from taking action against specific members.

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Directions restraining adverse action against members pending Supreme Court proceedings

Legal framework (as discussed)

2.1.1 Proceedings under Sections 241 and 242 of the Companies Act, 2013 were initiated by four members before the Adjudicating Authority. In those proceedings, on an earlier interlocutory application, the Adjudicating Authority had, by order dated 30.09.2024, directed the club to strictly adhere to its Articles of Association when initiating, conducting and concluding disciplinary proceedings, and when suspending its members, and to review past disciplinary action on the touchstone of the Articles of Association.

2.1.2 The Supreme Court, by order dated 18.07.2025, directed that the Adjudicating Authority shall not proceed further with the company petition under Sections 241 and 242 till the next date of hearing.

Interpretation and reasoning

2.1.3 The Tribunal noted that by the earlier order dated 30.09.2024, the Adjudicating Authority had already declined the specific prayers of the concerned members to restrain the club from taking any action against them, while only directing adherence to the Articles of Association in disciplinary matters.

2.1.4 In this context, the impugned order dated 04.07.2025, particularly paragraph 24, directing that no adverse action be taken by the club against its members till the issue pending before the Supreme Court is decided, went beyond the scope of the earlier adjudication in the interlocutory applications of those members.

2.1.5 The Tribunal considered that only a show cause notice had been issued and disciplinary proceedings were not yet concluded, and that there was already an operative direction requiring strict adherence to the Articles of Association.

2.1.6 It was observed that, since the earlier order had refused the prayer to restrain the club from taking action against the specific members, there was no occasion for the Adjudicating Authority subsequently to restrain the club generally from taking any coercive or adverse action against members.

Conclusions

2.1.7 The direction in paragraph 24 of the impugned order, restraining the club from taking any adverse action against its members till the matter before the Supreme Court is decided, was held to be unwarranted and unsustainable in light of the earlier order dated 30.09.2024. The Tribunal ordered deletion of paragraph 24 from the impugned order.

2.2 Observation regarding possible appointment of an administrator

Interpretation and reasoning

2.2.1 Paragraph 25 of the impugned order stated that, in case of failure of the club to comply with certain clauses in running its administration, the Adjudicating Authority would not hesitate to appoint an administrator to run the affairs of the club till decision of the Supreme Court.

2.2.2 The Tribunal noted that this observation was made in the context of the same interlocutory application where the earlier reliefs had already been substantially addressed by the order dated 30.09.2024, and only adherence to the Articles of Association had been directed.

2.2.3 The Tribunal had, at the interim stage in the appeal, already stayed paragraph 25, considering that there was "no occasion" for such an observation in the facts of the case.

Conclusions

2.2.4 The Tribunal held that the observation and direction contained in paragraph 25 were unwarranted and directed that paragraph 25 of the impugned order be deleted.

2.3 Continuing obligation to adhere to Articles of Association

Interpretation and reasoning

2.3.1 The Tribunal reaffirmed that the earlier order dated 30.09.2024, directing the club to strictly adhere to its Articles of Association in initiating, conducting and concluding disciplinary proceedings against its members and in suspending members, was already in force.

2.3.2 The Tribunal accepted the submission that the club remains obliged to follow its Articles of Association in all disciplinary proceedings, including those concerning the concerned members, and observed that this obligation is adequately secured by the subsisting earlier order.

Conclusions

2.3.3 While deleting paragraphs 24 and 25 of the impugned order dated 04.07.2025, the Tribunal left untouched and operative the earlier direction dated 30.09.2024 requiring strict adherence to the Articles of Association. The appeal was disposed of accordingly by modifying the impugned order to the limited extent of deleting paragraphs 24 and 25.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the application seeking recall of the order refusing condonation of delay in filing the appeal was maintainable in view of the dismissal of the appeal by the Supreme Court without liberty.

1.2 Whether the grounds urged by the applicant, including alleged fraud in the corporate insolvency resolution process and exclusion of time under Section 14 of the Limitation Act, constituted legally permissible grounds for recall of the Tribunal's judgment rejecting condonation of delay.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Maintainability of recall application after dismissal of appeal by the Supreme Court

Interpretation and reasoning

2.1 The Tribunal noted that its earlier order dated 21.11.2024 refusing to condone delay in filing the appeal had been challenged before the Supreme Court, and those civil appeals were dismissed on 24.01.2025.

2.2 The Tribunal recorded the contention of the respondent that the Supreme Court had not granted any liberty to approach the Tribunal with a recall or review application, and that all relevant grounds including fraud and Section 14 of the Limitation Act had already been urged before the Supreme Court.

2.3 The Tribunal observed that the appeals before the Supreme Court stood dismissed and that no liberty had been granted by the Supreme Court to the applicant to again agitate those very grounds before the Tribunal.

Conclusions

2.4 The Tribunal held that, in the absence of any liberty from the Supreme Court and in view of the dismissal of the appeals, the reliefs sought in the recall application could not be granted.

Issue 2: Existence of legally permissible grounds for recall of the judgment rejecting condonation of delay

Legal framework

2.5 The Tribunal referred to the settled law governing recall of judgments as laid down by the Supreme Court in Greater Noida Industrial Development Authority v. Prabhjit Singh Soni & Anr., (2024) 6 SCC 767, and by the Tribunal in Union Bank of India v. Dinkar T. Venkatasubramanian & Ors., Company Appeal (AT) (Ins.) No. 729 of 2020, indicating that only limited and specific grounds are recognised for recall.

Interpretation and reasoning

2.6 The applicant contended that relevant grounds for condonation of delay, including exclusion of time under Section 14 of the Limitation Act and allegations of fraud, could not be raised earlier in the condonation application, and therefore the order dated 21.11.2024 required recall.

2.7 The respondent pointed out that these very grounds, namely benefit of Section 14 of the Limitation Act and fraud, had already been raised before the Supreme Court in the challenge to the Tribunal's order, as reflected in the questions of law formulated therein.

2.8 The Tribunal held that the present recall application did not fall within the recognised categories of grounds on which a judgment can be recalled. It found that the allegation of fraud was not directed against the Tribunal's order dated 21.11.2024 or the process of deciding the delay condonation application, but instead related to the alleged fraudulent nature of the corporate insolvency resolution process itself.

2.9 The Tribunal reasoned that the alleged fraudulent conduct of the corporate insolvency resolution process is not a matter that can be examined or adjudicated while deciding an application for condonation of delay, and therefore could not be a basis for recalling the order refusing condonation.

Conclusions

2.10 The Tribunal concluded that no acceptable or recognised ground for recall of the judgment dated 21.11.2024 was made out. The recall application was held to be devoid of merit and was dismissed.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether, in a dispute over movable assets lying in leased premises and in possession of the liquidator, the burden of proving ownership lay on the liquidator or on the lessor claiming third-party ownership.

1.2 Whether the lessor established ownership or superior rights over the disputed movable assets through the share purchase agreement, the unexecuted draft premise-use agreement, historical lists, and SAP records.

1.3 Whether the lessor's prolonged inaction and failure to object during CIRP and liquidation, despite public notices and inspections, constituted acquiescence and justified inclusion of the assets in the liquidation estate under the Insolvency and Bankruptcy Code.

1.4 Whether the auction sale of the assets and the consequent direction permitting the liquidator and successful auction purchaser to access the premises and remove all movable assets were legally sustainable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Burden of proof regarding ownership of movable assets in leased premises

Legal framework

2.1 The judgment considers Sections 18(1)(f), 34, 35 and 36 of the Insolvency and Bankruptcy Code, 2016, the IBBI (Liquidation Process) Regulations, 2016, and the general rules on burden of proof under the Bharatiya Sakshya Adhiniyam, 2023.

2.2 Section 18(1)(f) empowers the resolution professional to take control and custody of assets over which the corporate debtor has ownership rights. Sections 35(1)(b) and (c) mandate the liquidator to take into custody all assets of the corporate debtor and sell them. Section 36 provides that assets over which the corporate debtor has ownership rights form part of the liquidation estate, and third-party owned assets are to be excluded.

Interpretation and reasoning

2.3 The Court noted that the resolution professional, upon commencement of CIRP, took control and custody of assets at the leased premises under Section 18(1)(f), after preparing a detailed inventory of 1,874 items, countersigned by the ex-CEO of the corporate debtor, and after audit by statutory auditors.

2.4 The premises remained under lock and key with the liquidator during CIRP and liquidation. The Adjudicating Authority found, and the Court affirmed, that the liquidator had lawful and continuous possession and legal custody of the assets during the insolvency process.

2.5 The Court held that where movable property is in the lawful possession and custody of the liquidator as assets of the corporate debtor, and no contrary ownership is asserted in time, a presumption under Section 36 of the Code operates that such assets form part of the liquidation estate.

2.6 Applying general evidentiary principles under the Bharatiya Sakshya Adhiniyam, the Court held that the burden of proving ownership lies on the person asserting ownership contrary to the party in possession. Thus, once the liquidator is in possession claiming the assets of the corporate debtor, the burden to displace this presumption rests on the third party (here, the lessor) asserting a competing title.

2.7 The Court approved the Adjudicating Authority's reasoning that it was "misplaced" for the lessor to demand ownership proof from the liquidator instead of producing its own purchase memos, asset register, books of account or financial statements.

Conclusions

2.8 The burden of proving ownership over the disputed movable assets lay on the lessor (Appellant) and not on the liquidator. The liquidator was not required to further prove title in the face of mere assertions unaccompanied by cogent evidence from the lessor.

Issue 2 - Whether the lessor established ownership through SPA, Draft Agreement, lists and SAP records

Interpretation and reasoning

2.9 The Court examined the share purchase agreement dated 27.11.2017 and found that the Appellant was not a party or signatory to it. Any rights or claims based on that agreement properly lay with the signatory company (RCL), which is itself in liquidation. The liquidator of RCL had never raised any claim over the assets.

2.10 The Draft Agreement for premise use (relied on by the lessor to show installation of its own assets such as rack space, power, HVAC and other infrastructure) was found to be unsigned, undated, inchoate, and lacking an effective date. It was treated as a mere draft annexed to the SPA, evidencing only a contemplated service arrangement, not a concluded contract conferring title.

2.11 The Court held that neither the SPA nor the Draft Agreement expressly conferred ownership or title over specific movable assets in favour of the lessor, nor did they identify any item-wise list of such assets within the leased premises.

2.12 The Court noted that the list of assets relied upon by the lessor (purportedly as of 2017):

(a) did not specifically correlate to the assets lying inside the premises occupied by the corporate debtor,

(b) mixed items allegedly belonging to the lessor and to RCL,

(c) included assets of common use in common areas (e.g., roof installations) distinct from fixtures installed inside the leased premises by the corporate debtor, and

(d) was therefore incomplete and insufficient as a foundational basis to establish specific ownership.

2.13 On SAP records, the Court recorded the contention that they are internal, editable and self-generated documents. It further held that the SAP records were not placed before the Adjudicating Authority and that even before the Appellate Tribunal, the underlying invoices referred to in the SAP system, which could have substantiated ownership, were admittedly not filed.

2.14 Given (i) the lack of any executed agreement conferring specific asset-wise ownership, (ii) the absence of a clear, demarcated and substantiated list correlated to the disputed inventory, and (iii) the failure to produce purchase documents or financial statements evidencing ownership, the Court held that the Appellant had failed to discharge the burden of proof.

Conclusions

2.15 The lessor did not establish ownership or superior title to the movable assets lying in the leased premises. The SPA and unexecuted Draft Agreement did not confer enforceable rights over the disputed inventories, and the lists and SAP records filed were inadequate and unproven.

Issue 3 - Effect of the lessor's inaction and acquiescence during CIRP and liquidation

Legal framework

2.16 The Court considered the conduct of parties in the context of Sections 18, 35 and 36 of the Code, the time-bound nature of CIRP and liquidation, and the public auction process under the Liquidation Regulations.

Interpretation and reasoning

2.17 The corporate debtor entered CIRP on 26.02.2020. The resolution professional repeatedly visited the premises, took inventory and control, and conducted statutory audits. Emails were sent to RCL (a party to the SPA) in July 2020 seeking information; RCL's reply of 28.07.2020 did not raise any objection or conflicting claim of ownership over the assets.

2.18 During CIRP, no objection or competing ownership claim was raised by either RCL or the Appellant regarding assets lying in the leased premises.

2.19 Upon commencement of liquidation on 17.03.2023, the liquidator issued several public e-auction notices (June 2023, August 2023, September 2024 and October 2024) and repeatedly sought access to the premises for inspection and valuation. The Appellant was fully aware that inspections were being carried out for the purpose of auction.

2.20 The Court noted that the Appellant's first objection (July 2023) concerned non-payment of rent, not ownership. In IA No. 4065 of 2023, the Adjudicating Authority on 06.11.2023 directed that rent be paid on ALV basis and directed the Appellant to allow inspections. Even at this stage, the Appellant raised no dispute about ownership of the inventory.

2.21 In a separate application for recovery of outstanding rent and maintenance (IA No. 1342 of 2023), the Appellant itself pleaded that it had permitted inspections by potential bidders of "goods/assets of ITV lying in the building", again without asserting any contrary ownership.

2.22 The Court emphasised that:

(a) despite repeated communications from the liquidator in February and June 2024 requesting access for inspection and valuation, the Appellant did not seek joint inspection for ownership determination;

(b) the first demand for proof of ownership and claim that some assets belonged to the Appellant and RCL was raised only on 24.12.2024, after completion of the auction, issuance of the sale certificate (10.12.2024), and full payment by the successful auction purchaser; and

(c) the proposal for a joint inspection from the Appellant came as late as February 2025, long after the auction had concluded.

2.23 On these facts, the Court agreed with the Adjudicating Authority that the Appellant's prolonged silence and failure to object during both CIRP and most of the liquidation process amounted to tacit acquiescence to the treatment of the assets as belonging to the corporate debtor.

2.24 The Court held that once the inventory was found in the leased premises, in the possession of the resolution professional and then the liquidator, and no contrary claims were timely received, inclusion of the assets in the liquidation estate under Section 36 operated in favour of the liquidator.

Conclusions

2.25 The lessor's conduct during CIRP and liquidation-raising no timely ownership claim while being fully aware of inspections and auctions-constituted acquiescence. This justified treating the movable assets as part of the liquidation estate and placed the onus firmly on the lessor to prove any contrary entitlement, which it failed to do.

Issue 4 - Validity of auction sale and direction permitting removal of assets

Legal framework

2.26 The Court considered the objectives of the Code and the Liquidation Regulations, especially provisions requiring value maximisation, time-bound completion, and distribution of sale proceeds (including Regulation 42(2) of the Liquidation Regulations).

2.27 The Appellant relied on a precedent holding that a liquidator cannot confer a better title than the company itself had, and that sale of property with defective title may be voidable. The Court examined that proposition in context.

Interpretation and reasoning

2.28 The Court accepted the legal proposition that a liquidator cannot transfer better title than that of the corporate debtor and that buyers should be cautious about title. However, it distinguished the precedent relied on by the Appellant as involving assignment of a lease requiring statutory permission which was absent there; the factual matrix was held to be different from the present case.

2.29 Here, there was:

(a) no concrete evidence that the assets were not owned by the corporate debtor;

(b) continuous lawful custody and control by the resolution professional and liquidator;

(c) timely, public and multiple auction notices;

(d) completion of auction on "as is where is, as is what is and no recourse" basis, with the successful bidder paying the full consideration of Rs. 4.18 crore, and issuance of a sale certificate and possession memo specifying 1,874 units; and

(e) distribution of sale proceeds to stakeholders in terms of Regulation 42(2).

2.30 The Court noted that the Appellant had not challenged the conduct of the auction itself, the declaration of the highest bidder, or the fairness of the process. Its objection arose only after sale completion, focusing on ownership without supportive evidence.

2.31 Emphasising that liquidation is a time-bound process and that undue interference post-completion of auction and distribution of proceeds would derail the insolvency resolution framework, the Court held that there were no grounds to unsettle the sale or to deny access to the successful auction purchaser.

2.32 The Court endorsed the Adjudicating Authority's finding that insisting on proof of ownership from the liquidator and obstructing access without producing any credible contrary evidence amounted to unlawful obstruction of the liquidator's statutory duties.

Conclusions

2.33 The auction sale of the movable assets was valid and unimpeached. The liquidator lawfully sold assets forming part of the liquidation estate, and the proceeds were already distributed. The direction permitting the liquidator and successful auction purchaser to access the premises and remove all movable assets and restraining the lessor from causing obstruction was held to be correct. The appeal challenging that direction was dismissed as devoid of substance.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether, for the purpose of admission of a financial creditor's application, the "default" pleaded in Part IV is confined only to the first date of non-payment or extends to subsequent continuing defaults and recalled outstanding debt.

1.2 Whether the application under the relevant insolvency provision was liable to be rejected on the ground that, on the first date of default alone, the amount in default was below the statutory threshold, despite pleadings of subsequent instalment defaults and recall of the entire loan.

1.3 Whether absence of a formal amendment of the "date of default" in Part IV rendered the application non-maintainable, in light of prior appellate precedent relied upon by the appellant.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Scope of "default" pleaded in Part IV; computation vis-à-vis statutory threshold

Interpretation and reasoning

2.1 The Court examined column 2 of Part IV of the application, where it was specifically pleaded that: (i) default "occurred for the first time on 05.09.2024"; (ii) thereafter, the corporate debtor "again defaulted" in respect of instalments due in October and November; and (iii) the default was "still continuing".

2.2 The Court noted that the instalment due on 05.09.2024 was approximately Rs. 41 lakhs, which was an admitted fact. However, it held that the pleadings in Part IV clearly referred not only to that single instalment but to three consecutive instalments (September, October and November), taking the quantum of default above the statutory threshold.

2.3 The Court further relied on the statutory definition of "default" under the insolvency legislation, as recorded by the adjudicating authority, to hold that once there is a default in payment of any instalment, such default is in respect of the entire remaining debt. The definition does not make recall of the financial facility a condition precedent for recognizing default.

2.4 The Court took note of the recall notice issued in November 2024, by which the lender recalled the entire loan and claimed the full outstanding sum of approximately Rs. 19.23 crores (as of the date pleaded). It held that, by virtue of the recall, the entire loan amount became due and in default, which independently satisfied the threshold requirement on the date of filing of the application.

2.5 The Court rejected the appellant's contention that the adjudicating authority was bound to consider only the single instalment default of 05.09.2024 for threshold purposes. It emphasized that the application itself contained a "specific pleading" of three instalment defaults (September, October and November), together with a continuing default and recall of the entire outstanding debt.

Conclusions

2.6 Default was not confined to the first instalment due on 05.09.2024; the pleadings in Part IV encompassed multiple subsequent instalment defaults and a continuing default.

2.7 Even on a limited reading of Part IV to include only three instalments (September, October, November), the quantum of default exceeded the statutory threshold.

2.8 In any event, upon issuance of the recall notice, the entire outstanding loan became due and in default, and the total claimed amount at the time of filing clearly met the threshold requirement.

2.9 The application was rightly admitted as the requirements of "debt" and "default" above the threshold were satisfied.

Issue 3: Necessity of formal amendment of "date of default" in Part IV and applicability of prior precedent

Legal framework discussed

3.1 The Court referred to prior appellate authority where it was held that once a Section 7-type application is filed, the date of default stated in Part IV becomes binding and cannot be altered without a formal amendment. In that earlier case, the question pertained to resetting of limitation based on an arbitral award; the appellate forum held that limitation could not be extended without appropriate amendment to the pleadings.

3.2 The Court also cited Supreme Court guidance on the use of precedents, emphasizing that judicial observations are not to be read as statutory provisions and must be applied contextually, having regard to factual differences.

Interpretation and reasoning

3.3 The Court distinguished the earlier appellate decision relied on by the appellant on the ground that it concerned extension of limitation by treating an arbitral award as giving rise to a fresh cause of action, while the date of default originally pleaded remained unchanged. The principle there was that for resetting limitation, pleadings must be amended to change the date of default.

3.4 In the present matter, the controversy was not about limitation or changing the date of default, but about the extent and nature of the default already pleaded in Part IV-namely, whether it covered only the first instalment or also subsequent instalments and the recalled debt.

3.5 The Court observed that, unlike in the limitation context, there was no attempt here to substitute or alter the original date of first default. The application consistently pleaded that default first occurred on 05.09.2024 and continued for October and November instalments, culminating in recall of the entire loan.

3.6 Applying the Supreme Court's guidance on precedents, the Court held that the earlier appellate decision could not be transposed mechanically to the present facts, since it addressed a distinct legal issue (limitation) and different factual matrix.

Conclusions

3.7 No formal amendment of Part IV was required, as there was no change sought in the originally pleaded date of first default; the application already contained detailed and sufficient pleadings regarding continuing defaults and recall of the entire loan.

3.8 The precedent relied upon by the appellant, being confined to the question of limitation and amendment of the date of default for that purpose, did not assist the appellant in challenging the maintainability of the present application on threshold or default grounds.

3.9 The adjudicating authority committed no error in treating the pleaded continuing defaults and recalled outstanding amount as the operative default for purposes of admission, without insisting upon any further amendment.

3.10 Finding debt and default duly established above the statutory threshold, the Court declined to interfere with the order of admission and dismissed the appeal.

Issues: Whether an appeal under Section 19 of the Contempt of Courts Act, 1971 lies against an order dismissing a contempt petition, where no punishment for contempt has been imposed.

Analysis: Section 19 confers a right of appeal only from an order or decision passed in the exercise of jurisdiction to punish for contempt. The dismissal of a contempt petition on the ground that no deliberate or intentional disobedience was made out is not an order imposing punishment under Section 12 of the Contempt of Courts Act, 1971. The principle applied is that contempt proceedings are primarily between the court or tribunal and the alleged contemnor, and an appeal does not lie merely because contempt was declined or rejected. On a plain reading of the impugned orders, the challenge was only to the refusal to hold the respondents guilty of civil contempt, not to any punitive order.

Conclusion: The appeal was not maintainable under Section 19 of the Contempt of Courts Act, 1971, and the dismissal of the contempt petitions was upheld.

Ratio Decidendi: An appeal under Section 19 of the Contempt of Courts Act, 1971 lies only against an order imposing punishment for contempt, and not against an order refusing to initiate or sustain contempt proceedings.

Issues: Whether the Committee of Creditors' decision to initiate a process for price discovery and sale of the corporate debtor's investments was liable to be interfered with in view of Regulations 28 and 29 of the CIRP Regulations, 2016.

Analysis: Regulation 29 contemplates sale of unencumbered assets in accordance with the prescribed , and the Tribunal found that a process meant only for price discovery in respect of encumbered investments would not align with the object of maximising value. It was also held that the procedural requirement under Regulation 28 had been complied with, and that the investment in one asset was encumbered while the other was unencumbered. The order further recognised that sale of the encumbered investment could proceed only after removal of encumbrances, and that the process for the unencumbered asset could continue under Regulation 29, but not merely as a price discovery exercise divorced from the statutory framework.

Conclusion: The challenge to the impugned decision was rejected, and the Tribunal held that the statutory process under Regulation 29 could proceed after compliance with the conditions applicable to encumbered and unencumbered assets, as the case may be.

Final Conclusion: The appeal failed, and the impugned order was left undisturbed insofar as it permitted further action consistent with the CIRP Regulations.

Ratio Decidendi: A process under the CIRP Regulations for sale of assets must conform to the statutory distinction between encumbered and unencumbered assets, and a price-discovery exercise cannot override the requirements of Regulation 29 or the objective of value maximisation.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the impugned share purchase transactions constituted "fraudulent trading" or "wrongful trading" within the meaning of Section 66 of the Insolvency and Bankruptcy Code, 2016.

1.2 Whether the statutory ingredients of Section 66(2) - knowledge of inevitable insolvency and lack of due diligence in minimising potential loss to creditors - were established on the material relied upon, particularly the transaction audit report.

1.3 Whether a commercial investment decision by directors, which subsequently results in loss or reduced value, can by itself justify a direction to contribute to the assets of the corporate debtor under Section 66 of the Insolvency and Bankruptcy Code, 2016.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Characterisation of the impugned transactions under Section 66 of the Insolvency and Bankruptcy Code, 2016

Legal framework

2.1 The Court reproduced and analysed Section 66 of the Insolvency and Bankruptcy Code, 2016, emphasising:

(a) Under Section 66(1), liability arises if the business of the corporate debtor is carried on "with intent to defraud creditors" or "for any fraudulent purpose".

(b) Under Section 66(2), a director is liable to contribute if, before the insolvency commencement date: (i) the director knew or ought to have known that there was no reasonable prospect of avoiding the commencement of corporate insolvency resolution process; and (ii) such director did not exercise due diligence in minimising potential loss to creditors.

(c) The explanation deems due diligence to be exercised if such diligence was reasonably expected of a person carrying out the same functions.

2.2 The Court referred to prior appellate decisions interpreting Section 66, noting in particular:

(a) Fraudulent trading requires a "very high degree of proof" tied to fraudulent intent, to be established on a preponderance of probability with compelling material.

(b) Bona fide belief of directors that the company would recover from financial difficulty may negate fraudulent trading.

(c) "Dishonesty" is an essential ingredient of fraudulent trading and cannot be inferred lightly; the intent to defraud is to be judged by its effect.

(d) For Section 66(2), there must be proof that directors continued business despite knowing likely insolvency, and that they failed to exercise due diligence to minimise loss to creditors.

Interpretation and reasoning

2.3 The impugned transactions related to purchase of equity shares of two companies whose shares were not actively traded at the time of purchase, and which were acquired from one of the unsecured creditors.

2.4 The adjudicating authority had inferred fraud primarily because:

(a) The shares were non-traded/unlisted when purchased; and

(b) The application for commencement of CIRP was filed within seven months of these purchases; and

(c) It concluded that investment in non-traded shares created illiquidity and indicated lack of due diligence.

2.5 The Court examined the financial position and creditor structure as reflected in the minutes of the stakeholders' consultation committee. The total admitted unsecured financial debt was approximately Rs. 41 lakhs, out of which Rs. 15,27,161/- stood in the name of the same entity from whom the shares were purchased.

2.6 The Court noted that the share purchase transactions were done with one of the unsecured creditors, and only part consideration of Rs. 15 lakhs out of Rs. 28.50 lakhs was paid. It held that such a structure, involving a creditor as seller and partial payment, "excludes the possibility" of the transactions having been undertaken to the detriment of creditors as a class.

2.7 The Court further noted that the shares continued as assets of the corporate debtor, and that during CIRP/liquidation an offer of Rs. 15 lakhs was received for these shares. This indicated that:

(a) The investment remained an asset and was not rendered worthless; and

(b) At least the amount actually paid (Rs. 15 lakhs) could be substantially recovered, negating any clear loss to the corporate debtor on these transactions.

2.8 The Court emphasised that to brand the transactions as fraudulent under Section 66, it must be shown that:

(a) The business of the corporate debtor was carried on with intent to defraud creditors or for a fraudulent purpose; and

(b) Before the insolvency commencement date the directors knew or ought to have known that there was no reasonable prospect of avoiding CIRP; and

(c) They did not exercise due diligence in minimising potential loss to creditors.

2.9 On the facts, the Court found no direct evidence that, at the time of purchasing the shares, the directors knew that the commencement of CIRP was inevitable or that the transactions were structured to defeat creditors' interests. The proximity of the purchase dates to the CIRP filing, by itself, was held insufficient to infer fraudulent intent or knowledge.

Conclusions

2.10 The impugned share purchase transactions did not satisfy the legal requirements of "fraudulent trading" under Section 66(1) or "wrongful trading" under Section 66(2). The necessary elements of intent to defraud and knowledge of unavoidable insolvency, coupled with lack of due diligence, were not established.

Issue 2 - Standard of proof, role of the transaction audit report, and satisfaction of Section 66(2) requirements

Legal framework

2.11 Relying on prior appellate precedent, the Court reiterated:

(a) Fraudulent trading under Section 66 requires a high standard of proof, though on a civil standard of preponderance of probabilities.

(b) Material relied upon must be compelling enough to satisfy the adjudicatory conscience.

(c) Section 66(1) and Section 66(2) operate in distinct fields, and the specific ingredients of each must independently be pleaded and proved.

2.12 Under Section 66(2), both conditions in clauses (a) and (b) are conjunctive and must co-exist: knowledge (or deemed knowledge) of no reasonable prospect of avoiding CIRP, and failure to exercise due diligence in minimising potential loss to creditors.

Interpretation and reasoning

2.13 The adjudicating authority had principally relied upon the transaction audit report to infer absence of due diligence and to draw an adverse conclusion under Section 66.

2.14 The Court observed that the transaction audit report recorded, inter alia, that:

(a) The shares purchased were not actively traded, with last trade dates several years prior to purchase.

(b) No demat account was used, and no sale/purchase agreement or valuation report was furnished.

(c) These two scrips constituted the only stock-in-trade investments of the corporate debtor.

(d) No documented due diligence or valuation was carried out prior to investment.

2.15 The Court held that such observations, even if accepted, go only to the question of quality of commercial judgment or procedural diligence, but do not by themselves demonstrate:

(a) Fraudulent intent to defraud creditors; or

(b) Conscious knowledge that CIRP was unavoidable at the time of the transactions; or

(c) Any concrete, quantified loss to the creditors resulting from the transactions, particularly when the investment remained an asset capable of realisation.

2.16 The Court expressly held that:

(a) A transaction audit report is not a "conclusive piece of evidence"; and

(b) The adjudicating authority erred in treating the audit findings as sufficient, without examining the broader commercial context and without corroborative material establishing the core ingredients of Section 66.

2.17 The Court underscored that non-exercise or imperfect exercise of due diligence alone "may perhaps be not sufficient" to label a transaction as fraudulent under Section 66(2). The statutory scheme requires both knowledge of inevitable CIRP and lack of due diligence in minimising loss; absence of either is fatal to the claim.

2.18 Examining the surrounding circumstances, including:

(a) The limited overall unsecured debt (about Rs. 41 lakhs);

(b) The fact that the seller of the shares was itself an unsecured creditor of the corporate debtor;

(c) The partial payment of consideration (Rs. 15 lakhs paid out of Rs. 28.50 lakhs);

(d) The continuing value of the shares and the offer of Rs. 15 lakhs received during CIRP/liquidation;

the Court found that there was no demonstrable diversion or depletion of assets designed to prejudice creditors.

Conclusions

2.19 The material placed on record, including the transaction audit report, did not meet the high standard required to prove fraudulent or wrongful trading under Section 66.

2.20 The essential conjunctive requirements under Section 66(2)(a) and (b) - knowledge of no reasonable prospect of avoiding CIRP and failure to exercise due diligence in minimising creditor loss - were not established against the directors.

2.21 The adjudicating authority erred in relying solely and conclusively on the transaction audit report, without proper examination of commercial context and without additional substantive evidence of fraudulent intent or wrongful trading.

Issue 3 - Treatment of commercial decisions and business risk under Section 66

Interpretation and reasoning

2.22 The Court accepted that the corporate debtor was engaged in financial intermediation as its core business and that the impugned transactions were investment decisions taken in that context.

2.23 It noted the directors' explanation that the shares were purchased in the expectation that the companies would regularise compliances, be actively traded, and yield appreciation, and that there are instances of delisted companies being relisted and generating high returns.

2.24 The Court reiterated, in line with earlier appellate authority, that:

(a) Not every commercial decision resulting in loss is fraudulent;

(b) Business necessarily entails risk; and

(c) Each commercial transaction that leads to loss cannot automatically be labelled as fraudulent or as undertaken to deceive creditors.

2.25 It found that in the instant matter, the investment in shares:

(a) Remained on the balance sheet as the sole asset of the corporate debtor;

(b) Attracted an offer of Rs. 15 lakhs during CIRP/liquidation; and

(c) Therefore could not be said to have caused a loss to the corporate debtor or its creditors in the requisite sense under Section 66.

2.26 The Court considered the fact that had the directors' intent been to defraud, they might have structured the transaction differently (for example, by fully paying and siphoning out the full purchase value), whereas here only part payment was made and the asset remained with the corporate debtor.

Conclusions

2.27 A bona fide commercial decision involving investment risk, even if it results in loss or reduced value, does not by itself attract Section 66 in the absence of demonstrated fraudulent intent, knowledge of unavoidable insolvency, and lack of due diligence aimed at minimising loss.

2.28 The impugned investments were commercial decisions which, viewed in the "broad spectrum of commercial wisdom", could not be treated as fraudulent or wrongful trading so as to justify a contribution order under Section 66.

2.29 Consequently, the direction to contribute Rs. 28,50,000/- to the liquidation estate was unsustainable, and the impugned order was set aside.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether, in an appeal concerning waiver of pre-deposit under the Foreign Exchange Management Act, the condition imposed by the Appellate Tribunal directing deposit of 30% of the penalty in cash and furnishing bank guarantee for 70% was justified in light of the parameters of prima facie case and "undue hardship".

1.2 Whether interference by the High Court with the Appellate Tribunal's discretionary order on pre-deposit was warranted on the facts and in view of the legal principles governing pre-deposit and waiver under Section 19 of the Act.

1.3 Whether, having regard to the closure of the proprietary concern and the individual financial position of the appellants, modification of the pre-deposit condition was necessary to balance "undue hardship" to the appellants with safeguarding the interests of the Revenue.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2 - Justification for Tribunal's pre-deposit order and scope for interference

Legal framework (as discussed)

2.1 The Court considered Section 19 of the Foreign Exchange Management Act, 1999, in the context of waiver/dispensation of pre-deposit, and the jurisprudence on analogous provisions (e.g., Section 35-F of the Central Excise Act) dealing with mandatory pre-deposit and the concept of "undue hardship".

2.2 The Court referred to precedents emphasizing: (i) the legislative mandate of pre-deposit as a condition for availing appellate remedies; (ii) the twin considerations of "undue hardship" to the appellant and "safeguarding the interests of the Revenue"; and (iii) that "undue hardship" generally relates to economic hardship and must be established by material, not bare assertion.

Interpretation and reasoning

2.3 The Court noted that the Adjudicating Authority, after issuing show cause notice, granting opportunity of hearing, and relying on the statements of the authorized signatory and seized documents, had found contravention of Section 3(d) of the Act and imposed penalty of Rs.55,00,000/- each and confiscation of Rs.5,00,000/-. These findings formed the basis of the penalties which were the subject of the pre-deposit condition.

2.4 The Appellate Tribunal, while dealing with the stay/pre-deposit applications, expressly examined: (i) existence of a prima facie case - including doubts about reliance on photocopies of seized documents and about liability without arraying the concern itself - and (ii) the financial position of the appellants, noting from income tax returns that the business of the concern was closed in 2008, which would cause "great hardship" if full pre-deposit were insisted upon.

2.5 On that basis, the Tribunal held that there was a prima facie case and some financial hardship, but nonetheless directed each appellant to pay 30% of the penalty in cash and to furnish bank guarantee for the remaining 70% to obtain stay of recovery.

2.6 The Court accepted that the Tribunal had approached the matter on the correct broad parameters of prima facie case and undue hardship, but examined whether, in the peculiar factual matrix, the specific conditions imposed were proportionate and consistent with the concept of "undue hardship" and the object of safeguarding Revenue.

2.7 The Court observed that the proprietary concern, through which the impugned transactions had been carried on, had been closed in 2008, and that the Tribunal itself had recognized that this closure and the income tax material indicated hardship to the appellants if pre-deposit were insisted upon in a stringent form.

2.8 It reasoned that, when the proprietary concern is no longer functional and the penalties are sought to be recovered from the individuals in their personal capacities, insisting on substantial cash pre-deposit would "definitely cause undue hardship" to the appellants, though the interests of the Revenue still required protection against eventual non-recovery.

2.9 In applying the "undue hardship" test as elaborated in the cited judgments, the Court treated the severity of the economic burden in light of the closure of business and individual financial risk as outweighing the necessity of a substantial cash component, provided that an adequate security mechanism remained in place to protect the Revenue.

Conclusions

2.10 The Court held that, in the circumstances of the closure of the proprietary concern and the individual financial position of the appellants, the Tribunal's direction to pay 30% of the penalty in cash and furnish bank guarantee for 70% was unduly onerous and required modification.

2.11 Interference with the Tribunal's discretionary order on pre-deposit was therefore justified to the limited extent of recalibrating the balance between undue hardship and protection of Revenue, without disturbing the finding that a prima facie case existed or prejudging the merits of the appeals.

Issue 3 - Appropriate modification of pre-deposit conditions to balance undue hardship and protection of Revenue

Interpretation and reasoning

3.1 The Court considered that the appellants had been found, at the adjudicatory stage, to have contravened the Act, and that penalties of a significant quantum were imposed; thus, complete dispensation of security could compromise the interests of the Revenue should the appeals fail on merits.

3.2 Simultaneously, the Court gave decisive weight to: (i) the closure of M/s. Vasavi Impex in 2008; (ii) the Tribunal's own finding that insistence on pre-deposit, in the facts, would cause "great hardship"; and (iii) the principle that "undue hardship" imports a burden disproportionate to the nature of the requirement and not warranted by the circumstances.

3.3 Weighing these factors, the Court concluded that a solution which substantially reduced the immediate pecuniary outflow while maintaining an enforceable security for a part of the penalty would best serve both the appellants' interest in access to appellate remedy and the statutory requirement to safeguard Revenue.

Conclusions

3.4 The Court set aside the Tribunal's order to the extent it required 30% cash deposit and 70% bank guarantee, and substituted it with a direction that each appellant shall furnish a bank guarantee for 50% of the penalty amount, with complete waiver of deposit for the remaining 50%.

3.5 The Court directed that the bank guarantee for 50% of the penalty be furnished within one month from the date of receipt of the order, and ordered that recovery of the penalty against the appellants shall remain stayed till disposal of the appeals before the Appellate Tribunal.

3.6 The Court thus partially allowed the second appeals, confined to modification of pre-deposit conditions, without adjudicating upon the substantive findings of contravention or the merits of the appeals pending before the Appellate Tribunal.

Issues: (i) whether investigation by the Serious Fraud Investigation Office under the Companies Act, 2013 barred parallel proceedings under the Prevention of Money Laundering Act, 2002; (ii) whether a provisional attachment order under Section 5(1) of the Prevention of Money Laundering Act, 2002 required prior filing of a report under Section 173 of the Code of Criminal Procedure, 1973; (iii) whether the provisional attachment order was vitiated for want of reason to believe or for absence of a pre-attachment hearing; and (iv) whether the writ petitions should be entertained in view of the statutory remedy before the Appellate Tribunal.

Issue (i): whether investigation by the Serious Fraud Investigation Office under the Companies Act, 2013 barred parallel proceedings under the Prevention of Money Laundering Act, 2002

Analysis: Section 212(2) of the Companies Act, 2013 operates only in respect of offences under that Act. The statutory scheme does not create a bar against investigation under other enactments, and Section 212(17)(b) contemplates sharing of information with other investigating agencies under other laws. The two enactments address distinct wrongs and operate in separate fields.

Conclusion: The bar on parallel proceedings was not accepted and the contention failed.

Issue (ii): whether a provisional attachment order under Section 5(1) of the Prevention of Money Laundering Act, 2002 required prior filing of a report under Section 173 of the Code of Criminal Procedure, 1973

Analysis: The attachment power under Section 5(1) is conditioned by recorded reasons and material showing possession of proceeds of crime and likelihood of concealment or transfer. The first proviso is not to be read as making a charge-sheet under Section 173 of the Code of Criminal Procedure, 1973 an absolute precondition in every case. The statutory scheme permits provisional attachment on the basis of the material available to the authorised officer.

Conclusion: Prior filing of a report under Section 173 of the Code of Criminal Procedure, 1973 was not held to be a mandatory precondition in the manner urged by the petitioners.

Issue (iii): whether the provisional attachment order was vitiated for want of reason to believe or for absence of a pre-attachment hearing

Analysis: The expression reason to believe requires an objective, evidence-based satisfaction founded on tangible material. The record referred to the underlying FIR, the ECIR, seized documents, electronic material, and recorded statements, which furnished a rational basis for the belief that the properties were involved in money-laundering and that immediate attachment was warranted. The statute does not require a separate pre-attachment hearing before issuance of the provisional attachment order.

Conclusion: The provisional attachment order was not found to be invalid on the grounds of absence of reason to believe or want of pre-attachment hearing.

Issue (iv): whether the writ petitions should be entertained in view of the statutory remedy before the Appellate Tribunal

Analysis: The provisional attachment order had already been confirmed by the Adjudicating Authority, and the petitioners had availed the appellate remedy under the special statute. In such circumstances, judicial interference in writ jurisdiction was considered unwarranted, leaving the merits to be examined by the statutory appellate forum.

Conclusion: The writ petitions were not entertained on merits in view of the available statutory appellate remedy.

Final Conclusion: The challenge to the enforcement proceedings did not succeed, and the petitioners were left to pursue the remedy provided under the special statutory appellate mechanism.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the Appellate Tribunal under the Prevention of Money Laundering Act, 2002, exercising jurisdiction under Section 26, has the power to remand a matter to the Adjudicating Authority after setting aside an order confirming provisional attachment under Section 8.

1.2 Whether, upon such remand, adjudication proceedings and possible confirmation of provisional attachment can lawfully continue when the initial provisional attachment under Section 5(1) has, according to the appellants, lapsed by efflux of time.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Power of the Appellate Tribunal under Section 26(4) to remand

Legal framework

2.1 The Court set out Section 26 of the Prevention of Money Laundering Act, 2002, particularly Section 26(4), which provides that on receipt of an appeal, the Appellate Tribunal may, after hearing the parties, "pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against."

2.2 The Court examined analogous appellate provisions previously interpreted by the Supreme Court and High Courts, including Section 128(2) of the Customs Act, 1962; Section 254(1) and Section 251 of the Income Tax Act, 1961; and Section 52(3) of the Foreign Exchange Regulation Act, 1973.

Interpretation and reasoning

2.3 The Court held that the expression "may...pass such orders thereon as it thinks fit" in Section 26(4) is of the "widest amplitude" and must be read as vesting in the Appellate Tribunal all ancillary and consequential powers necessary to give effect to its appellate jurisdiction, including the power of remand as a concomitant of setting aside or annulling the order under appeal.

2.4 Relying on the Supreme Court's decision interpreting Section 128(2) of the Customs Act, the Court noted that an order of remand "necessarily annuls" the decision under appeal, and when the appellate authority is empowered both to annul and to pass such order as it deems fit, the power to remand is implicit in that grant.

2.5 The Court adopted the reasoning of a Division Bench of the Calcutta High Court interpreting Section 26(4) of the same Act, which held that the phrases "such orders as it thinks fit" and "setting aside" necessarily encompass the power to remand, especially where the impugned order is vitiated on account of breach of natural justice.

2.6 The Court also relied on the Supreme Court's interpretation of the words "as it thinks fit" in Section 254(1) of the Income Tax Act, which were held wide enough to include the power of remand, and on the Delhi High Court's view that the power to remand is an "important postulate" and "necessary concomitant" of appellate jurisdiction, required to render such jurisdiction effective and not illusory.

2.7 While accepting the general proposition that statutory tribunals are creatures of statute and lack inherent powers beyond those conferred by the statute, the Court found that the power of remand in this context is not an extraneous or inherent power but is embedded in, and flows directly from, the statutory power to set aside or annul an order coupled with the power to pass such orders as the Tribunal thinks fit.

2.8 The Court rejected the contention that recognising a power of remand would amount to adding words to Section 26(4), holding instead that such recognition is necessary to give full and practical effect to the express statutory language and to avoid a paradoxical outcome where an order is set aside on technical or procedural grounds, but the Tribunal is rendered powerless to direct fresh consideration.

2.9 The Court declined to follow the contrary view of the Division Bench of the Karnataka High Court, holding that it had not properly appreciated that an order of remand is an aspect of the power to annul and that remand is a necessary postulate of effective appellate jurisdiction; consequently, that decision was not treated as laying down good law on this point.

Conclusions

2.10 The Court concluded that the Appellate Tribunal under Section 26(4) of the Act has the jurisdiction to remand matters to the Adjudicating Authority as an incident of its power to set aside or annul orders under appeal.

2.11 The remand direction issued by the Appellate Tribunal, after setting aside the confirmation order for breach of natural justice (non-communication of "reasons to believe"), was within its statutory competence and legally valid.

Issue 2 - Effect of alleged lapse of provisional attachment under Section 5(1) on remand and further adjudication

Legal framework

2.12 The Court referred to Section 5(1) of the Act, under which a provisional attachment order remains in force for a period not exceeding 180 days, subject to specified exclusions, and to Section 8, which governs adjudication and confirmation of attachment by the Adjudicating Authority.

2.13 The Court relied on the Supreme Court's decision in Kaushalya Infrastructure Development Corporation Ltd. v. Union of India, which interpreted the scheme of Sections 5 and 8 and held that adjudication proceedings may continue notwithstanding the setting aside or expiry of provisional attachment.

Interpretation and reasoning

2.14 The appellants contended that even if a power of remand is assumed, the Adjudicating Authority cannot now confirm the provisional attachment because the original attachment order has lapsed by efflux of time under Section 5(1) and is non est.

2.15 The Court noted that in Kaushalya Infrastructure, the Supreme Court rejected a similar argument and held that the success of a party in proceedings challenging provisional attachment does not, by itself, nullify the pending adjudication; such adjudication may and must proceed to its logical conclusion.

2.16 Applying this reasoning, the Court held that the setting aside of the confirmation order by the Appellate Tribunal did not extinguish or nullify the adjudication proceedings under Section 8; rather, the remand only restored the proceedings to the position they occupied when the confirmation order was originally passed.

2.17 The Court observed that it was not asserted by the appellants that, on the date the Adjudicating Authority originally passed the confirmation order, the provisional attachment had already lapsed. Accordingly, there was no basis to contend that the confirmation could not have been validly made at that time.

2.18 The Court clarified that the Appellate Tribunal had set aside only the confirmation order and not the entire adjudication proceedings under Section 8. Consequently, on remand, the Adjudicating Authority resumes jurisdiction from the same stage, with the obligation to supply "reasons to believe" and afford a proper opportunity of hearing.

Conclusions

2.19 The Court held that the alleged lapse of the provisional attachment by efflux of time under Section 5(1) does not bar continuation or revival of adjudication proceedings upon remand, nor does it prevent the Adjudicating Authority from reconsidering confirmation of attachment.

2.20 The contention that the provisional attachment has outlived its life and cannot now be confirmed was rejected as devoid of substance.

2.21 Consequently, the order of the Appellate Tribunal setting aside the confirmation and remanding the matter to the Adjudicating Authority for de novo proceedings, with proper communication of "reasons to believe" and opportunity to reply, was upheld, and the appeals were dismissed.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether refund claims, otherwise fully admissible under Notification No. 20/2007-C.E., can be rejected solely on the ground that the assessee inadvertently mentioned Notification No. 56/2003-C.E. in the refund applications.

1.2 Whether, upon allowing such refund claims at the appellate stage, the assessee is entitled to interest on delayed refund, the applicable rate, and the period from which such interest is payable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Effect of wrong notification number in refund claim where substantive eligibility under correct notification is undisputed

Legal framework (as discussed)

2.1 The Tribunal examined the scope and conditions of Notification No. 56/2003-C.E. dated 25.06.2003 and Notification No. 20/2007-C.E. dated 25.04.2007, including their parallel provisions, the eligibility periods for units based on commencement of commercial production, and the common industrial policy background.

2.2 The Tribunal relied on its earlier Final Order No. 77613 of 2025 in the assessee's own case, which had already compared the two notifications in detail and held that they are substantively identical in conditions and benefits, differing only in the time window for eligible units.

2.3 The Tribunal referred to precedents, including the decisions in Share Medical Care v. Union of India, R.S. Infraprojects (P) Ltd., Packaging India (P) Ltd., and Tata Consulting Engineers, on the principle that benefits cannot be denied merely due to incorrect or omitted citation of a notification when substantive eligibility is satisfied.

Interpretation and reasoning

2.4 The Tribunal noted its prior finding that Notification No. 20/2007-C.E. was issued to continue the benefit earlier granted under Notification No. 56/2003-C.E., with the same scheme of exemption based on value addition and the same structure of conditions and tables; the only material distinction is the different period of commencement of commercial production for eligible units.

2.5 It was reiterated that both notifications were similarly amended in 2008 to curtail benefits, further evidencing that the legislative intent and nature of the benefits under both notifications are the same, and there is no revenue loss or adverse effect depending on which of the two is invoked by an otherwise eligible assessee.

2.6 The Tribunal recorded that the assessee had, in fact, complied with all the provisions of Notification No. 20/2007-C.E. for the relevant period, and the Revenue had not disputed this substantive eligibility. It also noted that from September 2015 onwards the assessee had correctly filed refunds under Notification No. 20/2007-C.E., and those claims had been sanctioned, demonstrating that eligibility to Notification No. 20/2007-C.E. for the broader period (December 2012 to January 2017) was not in dispute.

2.7 On these facts, the Tribunal characterized the mentioning of Notification No. 56/2003-C.E. instead of Notification No. 20/2007-C.E. in the refund applications as a mere "inadvertent" or "clerical and technical" error, which cannot, in law, disentitle the assessee from a benefit otherwise available under the correct notification.

2.8 By applying the ratio of Share Medical Care, the Tribunal held that even if an assessee does not initially claim benefit under the correct notification, it is not barred or estopped from claiming such benefit later, provided the conditions of that notification are satisfied. The focus must be on substantive eligibility, not on formal or technical lapses in description.

2.9 The Tribunal further relied on the line of authority (R.S. Infraprojects, Packaging India, Tata Consulting Engineers) holding that (a) rectification of the notification number in a claim is permissible where eligibility is undisputed; (b) a mistaken declaration under a wrong notification does not defeat entitlement under the correct one; and (c) a benefit cannot be refused merely because the supplier or claimant cited an incorrect notification if the use and eligibility conditions under the correct notification stand satisfied.

2.10 The Tribunal concluded that the present appeals were on all fours with its earlier final order in the assessee's own case, save that in the earlier matter the dispute concerned recovery of already-sanctioned refunds, whereas here the refunds were denied at the outset; in both situations, however, the Revenue's objection was confined to the wrong notification number and not to substantive ineligibility.

Conclusions

2.11 The Tribunal held that the wrong mention of Notification No. 56/2003-C.E. in the refund claims, when the assessee was substantively eligible and compliant under Notification No. 20/2007-C.E., cannot be a valid ground to reject the refund claims.

2.12 Following its own earlier Final Order No. 77613 of 2025 and the cited judicial precedents, the Tribunal set aside the impugned Order-in-Appeal and Orders-in-Original and allowed the refund claims with consequential relief.

Issue 2 - Entitlement to interest on delayed refund and directions for expeditious grant

Interpretation and reasoning

2.13 The Tribunal noted that the refund claims related to the period from February 2016 to January 2017 and that, despite prolonged litigation and successive rejections by the adjudicating authority and the appellate authority, the assessee secured relief only at the Tribunal stage.

2.14 Recognising that refunds were withheld beyond the statutorily reasonable period after filing of the claims, the Tribunal held that interest becomes payable on such delayed refunds after the expiry of three months from the original date of filing of the refund applications.

Conclusions

2.15 The Tribunal directed the adjudicating authority to grant the sanctioned refund amounts along with interest at the rate of 6%, such interest to be calculated from the date immediately after three months from the original date of filing of each refund claim until the date of actual payment.

2.16 Considering that the refunds pertain to 2016-2017, the Tribunal further directed the adjudicating authority to process the refund applications and release the refund amounts with interest expeditiously, within eight weeks from the date of receipt of the Tribunal's order.

Issues: Whether the initials "GIPL" embossed on the metal liners constituted a brand name or trade name so as to deny exemption under Notification No. 9/2003-CE.

Analysis: The goods were manufactured strictly as per the purchaser's specifications for supply to Indian Railways, were not meant for open market sale, and the marking was used only for identification, traceability, and rejection tracking. The railway clarification stated that no initial or trade mark of suppliers was approved. The mark did not establish a trade connection in the course of trade, and the absence of the alleged brand owner as a co-noticee further weakened the department's case. The cited decisions on brand name and identification marks supported the view that such markings, when used only for customer or regulatory identification, do not amount to a brand name.

Conclusion: The initials "GIPL" were not a brand or trade name, and the denial of exemption under Notification No. 9/2003-CE was not sustainable.

Issues: (i) Whether refund of duty paid on clearances made for a World Bank assisted project was admissible under Notification No. 108/95-C.E. dated 28.08.1995 despite delayed production of the prescribed certificate; (ii) Whether the refund was barred by unjust enrichment.

Issue (i): Whether refund of duty paid on clearances made for a World Bank assisted project was admissible under Notification No. 108/95-C.E. dated 28.08.1995 despite delayed production of the prescribed certificate.

Analysis: The clearances were not disputed to be for a project funded under World Bank loan assistance. The duty had been paid by the assessee only because the certificate required under the notification was produced belatedly. The requirement of prior production of the certificate was treated as a procedural condition that could not defeat the substantive exemption when the goods were otherwise covered by the notification and the duty had actually been borne by the assessee.

Conclusion: The refund was admissible and the denial of exemption was unsustainable.

Issue (ii): Whether the refund was barred by unjust enrichment.

Analysis: The evidence on record, including the buyer's letters and the ledger material, supported the finding that the duty incidence had not been passed on and that no reimbursement or CENVAT credit had been availed by the buyer. On that basis, there was no satisfactory material to invoke unjust enrichment against the assessee.

Conclusion: The bar of unjust enrichment did not apply.

Final Conclusion: The refund rejection was set aside and the assessee was held entitled to the consequential relief flowing from the allowed appeal.

Ratio Decidendi: A procedural delay in furnishing the certificate prescribed for a conditional exemption cannot by itself defeat the substantive refund or exemption claim where the goods are otherwise covered by the notification and the duty incidence has not been passed on.

Issues: Whether the criminal proceedings arising from alleged forged sales tax declaration forms could be quashed for petitioners who had resigned as directors before the alleged fraud, and whether the material disclosed a prima facie case against each petitioner.

Analysis: The record showed that petitioner no. 1 and petitioner no. 3 had resigned from the company long before the relevant assessment year and before the alleged preparation and use of the impugned declaration forms. Their resignations were supported by documents on record and were not effectively disputed. On those facts, their continuation in the prosecution was not justified. In contrast, no equally reliable material was produced to conclusively exclude petitioner no. 2 from responsibility, and his involvement could not be ruled out at the threshold. The Court therefore distinguished between the petitioners on the basis of their respective connection with the company at the relevant time.

Conclusion: The proceedings were quashed for petitioner no. 1 and petitioner no. 3, while they continued against petitioner no. 2.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the Court should interfere with the High Court's directions for issuance of C-Forms and F-Forms, when the Department has already complied with identical directions in the lead matter.

1.2 Whether substantial questions of law arising from the High Court's reasoning should be decided in this batch or kept open for consideration in an appropriate case.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Interference with High Court directions for issuance of C-Forms and F-Forms

Interpretation and reasoning

2.1 The Court noted that in the lead appeal, there had been compliance with the directions of the High Court, inasmuch as C-Forms were issued pursuant to indemnity bonds furnished by the assessees, and assessments were thereafter completed.

2.2 The Court further noted that the subsequent impugned orders of the High Court in the connected matters merely followed the order passed in the lead case.

2.3 The Court considered the submissions of the assessees that, in view of such compliance, there should be no interference in the other appeals and that the Department may similarly comply with the directions by issuing C-Forms and F-Forms subject to indemnity bonds.

2.4 The Court took into account that the Department itself had already complied with the High Court's directions in the lead appeal, and that, for some respondents, the Department had verified the inter-State nature of transactions and completed assessments for the relevant (pre-2016) years.

2.5 Although the Department argued that the other High Court orders were passed mechanically following the lead order and warranted detailed examination, the Court held that, in the circumstances, the Department "ought to comply" with the directions issued in the connected appeals as well.

Conclusions

2.6 The Court declined to interfere with the impugned High Court orders in the present batch of appeals.

2.7 The Court directed that the Department shall comply with the High Court's directions in the connected appeals also, including issuance of C-Forms and F-Forms, subject to conditions such as indemnity bonds as ordered by the High Court.

Issue 2: Determination of substantial questions of law

Interpretation and reasoning

2.8 The respondents requested that, considering the compliance in the lead matter and the age of the assessment years (prior to 2016), the Court should not reopen the correctness of the impugned orders, but leave any substantial legal issues to be agitated in other cases.

2.9 The Department's counsel indicated an intention to press substantial questions of law and sought detailed examination of both facts and law in the present batch.

2.10 Balancing these positions, and particularly in light of the Department's previous compliance and the completion of assessments in several cases, the Court considered it unnecessary to adjudicate the underlying questions of law in this batch.

Conclusions

2.11 The Court expressly kept open all substantial questions of law, if any, for consideration in an appropriate future case.

2.12 The appeals were disposed of without determining the correctness of the High Court's legal reasoning on the substantial questions, and all interim stay orders and pending applications, including for intervention/impleadment, were vacated and disposed of.

Issues: Whether refund of input tax credit on capital goods could be claimed under the Uttar Pradesh VAT regime after the GST transition, and whether the absence of TRAN-1 filing defeated the claim.

Analysis: The claim related to input tax credit on capital goods acquired in the relevant assessment year. Rule 24(a) contemplated availment of such credit in three equal instalments in the subsequent years. Once GST came into force from 01.07.2017, transitional claims were to be carried in the prescribed manner under the GST transition mechanism. No material was shown to establish filing of TRAN-1. The Court also found that the Uttar Pradesh VAT framework did not prescribe a refund of input tax credit earned on capital goods.

Conclusion: The refund claim was not maintainable and the challenge to the Tribunal's order failed.

Final Conclusion: The revision was rejected and the question of law was answered against the assessee.

Ratio Decidendi: Input tax credit on capital goods can be claimed only in the manner and to the extent permitted by the governing statutory regime, and where the VAT law does not provide for refund and the transitional GST claim is not duly carried forward, such refund cannot be granted.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether tax is leviable on parts replaced during the warranty and Annual Maintenance Contract (AMC) period, treating such replacements as "sales" under the Central Sales Tax law.

1.2 Whether, in assessing taxability of warranty replacements, it is legally relevant that no separate price is charged from customers or dealers and that the manufacturer asserts that no consideration or credit notes are passed for such parts.

1.3 Whether the Tribunal erred in its application of precedent by relying on a previous decision (including Mohd. Ekram Khan) and not accepting the assessee's reliance on the later decision in Tata Motors, and whether Tata Motors supports the assessee or the Revenue on the facts as found.

1.4 Whether the findings of fact recorded by the first appellate authority and affirmed by the Tribunal, particularly regarding recovery of consideration and the existence of AMC arrangements, could be reopened in revision in the absence of specific grounds and supporting material challenging such findings.

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Taxability of parts replaced during warranty/AMC period as "sale"

(a) Legal framework (as discussed)

2.1.1 The Court noted the first appellate authority's reliance on the statutory definition of "sale" under the Sale of Goods Act, namely, a contract whereby the seller transfers the property in goods to the buyer for a price.

(b) Interpretation and reasoning

2.1.2 The assessee contended that parts replaced during the warranty period were supplied free of cost; that no price was charged either from customers or dealers; that no credit notes were issued; and that only reimbursement towards manpower/technical services was made to dealers.

2.1.3 The first appellate authority, on examination of invoices and records, found that: (i) authorized dealers/service providers had responsibility for sale and warranty support; (ii) invoices for warranty replacements contained details of quantity and price and bore "Warranty Replacement" endorsement; (iii) parts were in some cases sent directly to customers, but consignment and liability for price rested with the service provider/authorized dealer; (iv) when the service provider replaced parts and repaired the machine during the warranty period, the value of parts and fitting charges were reimbursed to the service provider by the manufacturer through credit memo/cash; and (v) the manufacturer maintained a separate warranty provision account, from which the value of parts and service charges used in warranty were debited as "used during the year".

2.1.4 On these facts, the first appellate authority concluded that: (i) when the manufacturer transfers parts to the service provider with quantity and price indicated, ownership passes to the service provider for a definite value; (ii) the service provider then transfers ownership to the customer with a definite value; and (iii) although the customer is not directly charged, the consideration for the parts is realized by the service provider from the manufacturer, funded through the warranty provision. Thus, there is transfer of property in goods for a price, satisfying the definition of "sale".

2.1.5 The Tribunal accepted these factual findings and concurred that the replacement of parts under warranty/AMC, in this arrangement, amounted to taxable sales.

2.1.6 The High Court noted that the assessee did not bring on record any evidence to substantiate its assertion that parts were supplied free of cost and that no consideration, directly or indirectly, was received. It further noted that the first appellate authority found that the assessee had realized amounts from customers (through the structured dealer/service-provider mechanism) and had not furnished details of parts used against specific machinery supplied to specific customers.

2.1.7 The Court also recorded that both the first appellate authority and the Tribunal had found that, in addition to warranty, the assessee had entered into AMCs, indicating existence of consideration for parts and services, and this finding was never specifically challenged or controverted with material.

(c) Conclusions

2.1.8 On the unchallenged factual findings that: (i) property in parts was transferred at a definite price to dealers/service providers and ultimately to customers; (ii) consideration for parts was reimbursed by the manufacturer; and (iii) AMCs existed involving monetary consideration, the Court held that the transactions constituted "sale" of goods, attracting tax on the parts replaced during warranty/AMC.

2.1.9 The levy of tax on such replacement parts at the prescribed rate was upheld, and the challenge to taxability of warranty/AMC replacements was rejected.

2.2 Relevance of absence of direct charge/credit note and applicability of Tata Motors

(a) Legal framework (as discussed)

2.2.1 The assessee relied on a decision in Tata Motors to argue that where parts are supplied free of cost by the manufacturer during warranty and no consideration or credit note passes, such transactions do not constitute "sale".

2.2.2 The Revenue contended, and the Court accepted, that Tata Motors, properly understood, supports taxability where the factual matrix shows existence of consideration or financial adjustment for warranty parts.

(b) Interpretation and reasoning

2.2.3 The assessee argued that, following Tata Motors, the absence of any consideration and any credit notes meant that the replacement of parts could not be treated as sale.

2.2.4 The Court held that this argument was purely assertive and not supported by the record. The factual findings of the first appellate authority, not challenged before the Tribunal, clearly established that: (i) invoices bore prices; (ii) dealers bore liability for the parts and were reimbursed; and (iii) the manufacturer operated a systematic warranty provision account reflecting usage and reimbursement. These findings were treated as conclusive for the purpose of revision.

2.2.5 On these facts, the Court held that the case fell within the category where consideration, though not recovered directly from the customer at the point of warranty replacement, was nonetheless embedded and realized through the structured arrangement between manufacturer, dealer/service provider and customer.

2.2.6 The Court, therefore, distinguished the assessee's characterization of Tata Motors and held that the principle that "no sale occurs where there is no consideration and no credit note" did not apply because, on the established facts, consideration did pass. Accordingly, Tata Motors was found to support the Revenue's position.

(c) Conclusions

2.2.7 The Court concluded that mere assertion that no credit notes were issued and no consideration passed cannot override or displace unchallenged factual findings to the contrary.

2.2.8 Applying Tata Motors to the facts as found, the Court held that the warranty/AMC replacements were taxable sales and answered the legal question in favour of the Revenue and against the assessee.

2.3 Scope of revision and effect of failure to challenge findings of fact

(a) Interpretation and reasoning

2.3.1 The Court noted that the grounds of appeal before the Tribunal (annexed in the record) contained only general assertions that the first appellate authority had ignored the legal position and facts, and reproduced the reply to the show cause notice, without specifically assailing the detailed factual findings of the first appellate authority regarding: (i) pricing and invoicing of warranty parts; (ii) reimbursement mechanisms; (iii) realization of consideration; and (iv) the existence and nature of AMC arrangements.

2.3.2 The Court held that since these findings of fact were not specifically challenged before the Tribunal and no contrary material was brought on record, they attained finality. Arguments before the High Court could not be entertained to dispute those findings in the absence of cogent material and specific grounds taken at the earlier stages.

2.3.3 The Court emphasized that once the authorities below have recorded a finding that consideration has been charged and that AMCs were undertaken, such findings cannot be reopened in revision merely on the strength of bare assertions unsupported by evidence.

(b) Conclusions

2.3.4 The Court declined to interfere with the concurrent findings of fact of the first appellate authority and the Tribunal.

2.3.5 On this basis, the Court held that there was no ground to unsettle the conclusion that the impugned transactions were taxable sales, and the revisions were dismissed with the questions of law answered in favour of the Revenue.

Issues: Whether the contract for supply, installation and commissioning was a composite indivisible works contract, and whether the goods brought from outside the State and used in execution of that contract were entitled to deduction under the relevant trade tax provision.

Analysis: The contract was read as a whole and its substance showed an integrated arrangement for designing, manufacturing, inspection, testing, supply, installation and commissioning. The use of the word supply did not alter the essential character of the agreement, since supply of machinery was only an integral part of the overall works contract. The goods were brought from outside the State of Uttar Pradesh and consumed in execution of the works, which attracted the benefit contemplated by the statutory provision relied upon by the revisionist.

Conclusion: The contract was a composite indivisible works contract, and the assessee was entitled to the benefit of deduction under Section 3F(2)(b) of the U.P. Trade Tax Act.

Ratio Decidendi: For tax purposes, the true nature of a contract must be determined from the agreement as a whole, and where goods are imported from outside the State and consumed in execution of an indivisible works contract, the statutory deduction or exemption applicable to such works contracts cannot be denied merely because the agreement uses the word supply.

Issues: Whether the penalty imposed for bill trading and issuance of false tax invoices under Section 55(2) of the Andhra Pradesh Value Added Tax Act, 2005 was sustainable, and whether the claimed input tax credit under Section 31 of the Andhra Pradesh Value Added Tax Act, 2005 was justified.

Analysis: The record showed that the assessing authority verified the e-way bill data, obtained cross-check reports from the territorial officers, and found that a substantial portion of the sales transactions were not supported by genuine movement of goods. The movement details relating to the lorry used for transport were found inconsistent, and the sequence of alleged transport events was found improbable. On that basis, the transactions were treated as bogus, and the petitioner was found to have issued false invoices to enable purchasers to claim input tax credit. The petitioner did not furnish a satisfactory explanation before the authorities regarding the disputed transport particulars.

Conclusion: The penalty under Section 55(2) of the Andhra Pradesh Value Added Tax Act, 2005 was upheld, and the challenge to the finding of bill trading and bogus transactions failed.

Ratio Decidendi: When contemporaneous records, cross-verification reports, and transport data establish that invoices do not reflect actual movement of goods, the authorities may treat the transactions as bogus and sustain penalty for issuance of false invoices and accommodation of input tax credit claims.

Issues: (i) Whether the delayed show-cause notices and consequential orders under Section 77 of the Tripura Value Added Tax Act, 2004 could be sustained when proceedings were initiated many years after the alleged transactions. (ii) Whether the respondents were bound to refund the transporter's security deposit with interest after the coming into force of the Tripura State Goods and Services Tax Act, 2017.

Issue (i): Whether the delayed show-cause notices and consequential orders under Section 77 of the Tripura Value Added Tax Act, 2004 could be sustained when proceedings were initiated many years after the alleged transactions.

Analysis: Section 77 of the TVAT Act authorises penalty on a transporter, but the Act prescribes no express period of limitation for issuing notices under that provision. The Court held that where the statute is silent, the power must still be exercised within a reasonable time. The Court relied on the statutory scheme of the TVAT Act and Rules, including Section 33 and Rule 21(8), which reflect a five-year outer limit for assessment-related action and preservation of records. A transporter cannot be placed in a worse position than a dealer. The notices issued after a delay of more than five years, and in some instances after nine years, were held to be stale and unsustainable. The Court also found the action arbitrary and mala fide.

Conclusion: The delayed show-cause notices and the orders imposing tax and penalty were quashed as being illegal, without jurisdiction, arbitrary, and mala fide, and the finding was in favour of the assessee.

Issue (ii): Whether the respondents were bound to refund the transporter's security deposit with interest after the coming into force of the Tripura State Goods and Services Tax Act, 2017.

Analysis: The security deposit had been taken under the earlier VAT regime to secure transporter registration, but no corresponding requirement for such deposit under the GST regime was shown. The Court held that provisions dealing with refund of tax could not be used to deny refund of a security deposit. Since the statutory basis for retaining the deposit no longer survived under the GST regime, the respondents had no authority to continue to withhold the amount.

Conclusion: The respondents were directed to refund the security deposit with interest and costs, in favour of the assessee.

Final Conclusion: The writ petitions succeeded and the entire adverse action under the repealed VAT regime was set aside, with consequential restitution of the security deposit and related reliefs.

Ratio Decidendi: Where no express limitation is prescribed for penal action under a fiscal statute, the power must nevertheless be exercised within a reasonable time, and stale proceedings initiated after the preservation period contemplated by the statutory scheme are liable to be quashed.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether, upon remand by the first appellate authority, the Assessing Authority was required to verify the assessee's claim of payment of service tax on the entire gross receipts under the works contract and to determine the consequent liability, if any, to value added tax.

1.2 Whether the orders of the Assessing Authority, the first appellate authority and the Tribunal, which failed to deal with the assessee's contention regarding service tax having been paid on the entire contract value, are legal and sustainable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Scope of remand and obligation to verify payment of service tax and its consequence on VAT liability

Legal framework (as discussed):

2.1 The judgment proceeds on the basis of the contentions recorded by the first appellate authority, including the asserted legal principle that service tax and value added tax are mutually exclusive and that once the entire contract value has suffered service tax, the same cannot be subjected to VAT, and on the requirement that any fresh decision by the Assessing Authority be taken "in accordance with the provisions of law" under the Telangana Value Added Tax Act, 2005.

Interpretation and reasoning:

2.2 The Court noted that the first appellate authority, in its earlier order, had explicitly recorded the assessee's contention that (a) the contract was predominantly labour and service oriented, (b) the entire contract value had suffered service tax without abatement, and (c) in view of the principle that service tax and VAT are mutually exclusive, the same turnover should not again be subjected to VAT.

2.3 The Court observed that, notwithstanding these explicit observations, the first appellate authority remanded the matter to the Assessing Authority to verify the assessee's claim "with reference to the books of account and other relevant documentary evidence" and to pass such orders "as deemed fit in accordance with the provisions of law".

2.4 On a "plain reading" of the remand order, the Court held that the scope of the remand necessarily included verification of the factual assertion whether the assessee had paid service tax on the entire gross receipts from the contract and, depending on such verification, determination of the legal consequence on VAT liability.

2.5 The Court rejected the contention of the revenue that, since the remand order did not expressly direct verification of service tax payment, the Assessing Authority and appellate authorities were justified in confining themselves only to re-quantification of turnover. The Court reasoned that the remand direction to verify the assessee's claim with reference to books and documents, and to pass orders in accordance with law, implied an obligation to consider all material aspects raised, including payment of service tax and its effect on VAT exigibility.

2.6 The Court found that the Assessing Authority, in the order passed after remand, re-quantified VAT liability but did not examine or decide the issue of service tax having been paid on the entire gross receipts or the legal consequence thereof. Likewise, the first appellate authority and the Tribunal, in subsequent proceedings, confirmed the Assessing Authority's order without addressing this specific contention.

2.7 The Court held that such omission to consider the service tax aspect, despite it being a central ground raised and recognised in the earlier remand order, amounted to non-appreciation of a relevant factor and failure to exercise jurisdiction vested in the authorities.

Conclusions:

2.8 The Court concluded that the Assessing Authority, the first appellate authority, and the Tribunal erred in law in not verifying and deciding the assessee's claim that service tax had been paid on the entire gross receipts and in not determining the VAT liability, if any, in light of that fact.

2.9 The orders of the Assessing Authority, the first appellate authority, and the Tribunal were held to be not proper, legal, or justified in view of the observations and remand directions contained in the earlier order of the first appellate authority.

2.10 The Court set aside the orders of all three authorities and remanded the matter to the Assessing Authority only for the limited purpose of: (i) verifying, on the basis of records, whether service tax was paid on the entire gross receipts received from the contract; and (ii) determining, in the light of such verification, "what would be the consequence" and taking an appropriate decision strictly in accordance with the provisions of the Telangana Value Added Tax Act, 2005.

Issues: Whether the criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881 deserved to be quashed in view of the settlement reached between the parties through mediation.

Analysis: The settlement agreement dated 18.08.2025 was taken on record and the parties were directed to abide by its terms. In view of the settlement, the continuation of the criminal proceedings was no longer warranted.

Conclusion: The impugned order was set aside and the criminal proceedings arising out of S.T.C.No.62/2021 were quashed.