TaxTMI Updates e-Newsletter
Dec 08,2025

Issues: (i) Whether the subject property qualified as a residential dwelling; (ii) Whether exemption under Entry 13 of Notification No. 9/2017-Integrated Tax (Rate) dated 28.06.2017 was available when the residential dwelling was leased to an aggregator which further sub-let it for hostel accommodation.

Issue (i): Whether the subject property qualified as a residential dwelling.

Analysis: The expression "residential dwelling" was not defined in the GST regime, so its meaning had to be gathered from common parlance and the accepted understanding of residential accommodation. The property was shown in revenue records as residential in nature, and long-term accommodation for students and working women was treated as use for residence rather than as temporary lodging akin to a hotel or guest house.

Conclusion: The subject property was held to be a residential dwelling.

Issue (ii): Whether exemption under Entry 13 of Notification No. 9/2017-Integrated Tax (Rate) dated 28.06.2017 was available when the residential dwelling was leased to an aggregator which further sub-let it for hostel accommodation.

Analysis: Entry 13 granted exemption to services by way of renting of residential dwelling for use as residence. The provision was held to be activity-specific and not person-specific. The condition was satisfied where the property was taken for residential use, and the notification did not add a further requirement that the immediate lessee must itself occupy the premises as a residence. A narrow construction would defeat the object of the exemption, which was to keep residential use outside the GST burden.

Conclusion: The exemption under Entry 13 was held to be available, and GST was not payable on the rent for the relevant period.

Final Conclusion: The appeals were rejected, and the High Court's view granting exemption was sustained.

Ratio Decidendi: Where a notification exempts renting of a residential dwelling for use as residence, the exemption turns on the character and use of the property and is not lost merely because the immediate lessee is an intermediary that sub-lets the premises for residential occupation.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether interest at 18% under clause (c) of sub-rule (3) of Rule 133 of the CGST Rules is leviable on the profiteered amount for the investigation period 15.11.2017 to 30.06.2019.

1.2 Whether penalty is imposable in respect of profiteering that occurred prior to insertion of the penalty provision in the CGST framework in 2020.

1.3 Determination of the quantum of profiteering and consequential direction regarding deposit of such amount.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Levy of interest at 18% under Rule 133(3)(c) of the CGST Rules

Legal framework

2.1 The Tribunal examined the Central Goods and Services Tax (Fourth Amendment) Rules, 2019, notified by Notification No. 31/2019-Central Tax dated 28.06.2019, issued under Section 164 of the CGST Act. Sub-rule (2) of Rule 1 of the said notification provides that, save as otherwise provided, the rules shall come into force on the date of their publication in the Official Gazette.

2.2 Rule 17 of the said Fourth Amendment Rules amended Rule 133(3)(c) of the CGST Rules by inserting the words "along with interest at the rate of eighteen percent from the date of collection of higher amount till the date of deposit of such amount".

2.3 The Tribunal also considered subsequent notification G.S.R. 927(E), which, in exercise of powers under rule 5 of the Fourth Amendment Rules, appointed 01.04.2020 as the date from which the provisions of the said rule would come into force.

2.4 The Tribunal referred to the Constitution Bench judgment in C.I.T. v. Vatika Township Pvt. Ltd., which lays down that, as a general rule, legislation affecting substantive rights or imposing new obligations or liabilities is presumed to be prospective unless the statute clearly provides, or by necessary implication intends, retrospective operation. It further notes that provisions that are onerous or impose new burdens are subject to the presumption against retrospectivity, whereas curative or purely clarificatory amendments may be retrospective.

Interpretation and reasoning

2.5 The Tribunal analysed whether the insertion of interest at 18% in Rule 133(3)(c) is clarificatory/curative (and thereby retrospective) or introduces a new, onerous liability (and thereby prospective in the absence of clear contrary intention).

2.6 Relying on the ratio of Vatika Township, the Tribunal held that legislation (including delegated legislation) which modifies accrued rights or imposes new duties or attaches a new disability must be construed prospectively unless the legislature has clearly expressed or necessarily implied a contrary intention, or the amendment is to cure an obvious omission or explain the former law.

2.7 The Tribunal characterised the interest provision in Rule 133(3)(c) as an onerous imposition on the assessee, introducing a new liability and not conferring any benefit. Consequently, the normal rule of presumption against retrospective operation applies.

2.8 The Tribunal examined the wording of Notification No. 31/2019-Central Tax, particularly the expression "to further amend" the CGST Rules, and held that grammatically and semantically the term "further" connotes addition or advancement, not application to the past. On this basis, it rejected the contention that the amendment is merely clarificatory or curative with retrospective effect.

2.9 The Tribunal thus concluded that there is no clear statutory indication or necessary implication that the amended clause (c) of sub-rule (3) of Rule 133 is to operate retrospectively from any date prior to its notified commencement (01.04.2020).

Conclusions

2.10 The Tribunal held that the investigation period (15.11.2017 to 30.06.2019) does not substantially fall within the period from which interest liability under the amended Rule 133(3)(c) is applicable.

2.11 Accordingly, the respondent is not liable to pay interest at 18% on the profiteered amount for the said investigation period, and no order for interest was passed.

Issue 2: Imposition of penalty for profiteering prior to insertion of penalty provision

Legal framework

2.12 The Tribunal noted that the statutory provision enabling imposition of penalty in such profiteering matters was inserted only in the year 2020, i.e., subsequent to the last date of the alleged profiteering (30.06.2019).

Interpretation and reasoning

2.13 The Tribunal proceeded on the admitted position that the acts of profiteering in the present case were completed before the penalty provision came into force.

2.14 Consistent with the general principle against retrospective imposition of penal consequences, the Tribunal accepted that the respondent's conduct, which predated the insertion of the penalty provision, could not be brought within its ambit.

Conclusions

2.15 The Tribunal held that the case does not fall within the scope of the subsequently inserted penalty provision.

2.16 No penalty was imposed on the respondent in respect of the profiteering determined for the period 15.11.2017 to 30.06.2019.

Issue 3: Determination and deposit of profiteered amount

Interpretation and reasoning

2.17 The Tribunal noted that the Director General of Anti-Profiteering initially determined profiteering at a higher figure, but as per the latest report dated 20.11.2025, the profiteered amount was quantified at Rs. 4,57,683/-.

2.18 It was recorded that the respondent, through written submissions, admitted the profiteered amount as determined in the latest report and confined its dispute to interest and penalty.

2.19 The Tribunal, therefore, accepted the DGAP's report to the extent of quantification of profiteering at Rs. 4,57,683/-, attributable to "faceless" recipients.

Conclusions

2.20 The Tribunal affirmed that the respondent had profiteered an amount of Rs. 4,57,683/- during the investigation period.

2.21 The respondent was directed to deposit the said amount into the Consumer Welfare Fund created by the Centre and the States, in equal proportion.

2.22 The concerned Commissioner was directed to submit a compliance report to the Tribunal within four months from receipt of the order.

Issues: (i) Whether the assessee constituted a service permanent establishment in India for the assessment years in question, including the correct computation of days under Article 5(6)(a) of the India-Singapore DTAA; (ii) Whether the assessee constituted a virtual service permanent establishment in India.

Issue (i): Whether the assessee constituted a service permanent establishment in India for the assessment years in question, including the correct computation of days under Article 5(6)(a) of the India-Singapore DTAA.

Analysis: Article 5(6) of the DTAA requires furnishing of services within India through employees or other personnel, and the threshold is met only if the activities continue within India for more than 90 days in the relevant fiscal year. The Court held that actual rendition of services in India, and not mere physical stay by employees, is the relevant test. On the facts, vacation days, business development days and common days were excluded from the total stay because no client services were rendered on those days, leaving service days below the treaty threshold for the year in which employees were present in India. For the year in which no employee was present in India, the threshold was not met at all.

Conclusion: No service permanent establishment existed in India, and the issue was answered in favour of the assessee.

Issue (ii): Whether the assessee constituted a virtual service permanent establishment in India.

Analysis: The Court held that the India-Singapore DTAA does not contain any concept of a virtual service permanent establishment. Treaty language must be given strict effect, and concepts not expressed in the DTAA cannot be read into it merely because of digitalisation or OECD policy developments. Domestic policy changes such as significant economic presence cannot override the treaty in the absence of amendment to the DTAA.

Conclusion: No virtual service permanent establishment could be inferred under the DTAA, and the issue was answered in favour of the assessee.

Final Conclusion: The revenue's questions of law were rejected, the Tribunal's view was upheld, and the assessee's receipts were held not taxable in India in the absence of a permanent establishment under the treaty.

Ratio Decidendi: For a service permanent establishment under Article 5(6) of the India-Singapore DTAA, services must actually be furnished within India through employees or other personnel, and a virtual service permanent establishment cannot be inferred unless the treaty expressly provides for it.

Issues: Whether the complaint and summoning order for failure to deposit deducted tax at source were liable to be quashed at the pre-trial stage on the basis of the petitioner's defence that he was not responsible for the default and that the tax was deposited belatedly.

Analysis: Inherent jurisdiction under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, read with Section 482 of the Code of Criminal Procedure, 1973, can be exercised at the threshold only where the accused produces material of sterling and unimpeachable quality that rules out the prosecution case. At the stage of cognizance and summoning, the Court is concerned only with whether the complaint discloses the prima facie ingredients of the offence, not with a detailed evaluation of evidence. The complaint and sanction record showed deduction of TDS and failure to deposit it within time, which were foundational facts not disputed. The rival pleas as to which director was responsible, and the plea of reasonable cause or financial difficulty, were disputed factual matters. The subsequent belated payment did not extinguish criminal liability. The presumption under Section 278E and the deeming provision under Section 278B could be rebutted only at trial.

Conclusion: The petitioner failed to show material of such unimpeachable character as would justify quashing; the disputed defences were held to be matters for trial, and the petition was rejected.

Ratio Decidendi: At the pre-trial quashing stage, criminal proceedings cannot be stifled unless the accused produces incontrovertible material that completely displaces the allegations; disputed questions of responsibility, culpability, and delayed compliance must be left to trial.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the Tribunal was justified in deleting the addition of a receipt treated as income under section 56 of the Income Tax Act, 1961.

1.2 Whether a gift can be validly made by one incorporated company to another, and consequently whether the deleted addition on that footing was justified.

1.3 Whether questions relating to taxability under section 28(iv) and inclusion of the receipt in book profits under section 115JB raised any substantial question of law.

1.4 Whether additional questions of law involving allegations of use of a shell company, lifting the corporate veil, application of the McDowell anti-avoidance principle, and reopening of individual assessments could be framed in an appeal under section 260A when no foundational facts for such questions were laid before the Tribunal.

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Deletion of addition under section 56 and validity of gift between incorporated companies

Interpretation and reasoning

2.1.1 The Court noted that the Tribunal had deleted the addition of Rs. 87,15,95,326/- following its own earlier decision in the assessee's case for a prior assessment year, where a similar receipt characterized by the Revenue as not being a permissible "gift" between companies had been treated as non-taxable.

2.1.2 The Revenue's proposed substantial questions of law A to D essentially challenged (i) the non-taxability of the receipt as income within section 2(24), and (ii) the Tribunal's acceptance of the transaction as a "gift" between companies, contending that a company cannot, in law, make a gift to another company.

2.1.3 The Court reformulated and admitted only two substantial questions of law: (A) whether the Tribunal was justified in law in deleting the addition of Rs. 87,15,95,326/-, and (B) whether the Tribunal was justified in deleting the addition without appreciating the Revenue's case that a gift cannot be made by an incorporated company, holding that the Revenue's original questions C and D were subsumed within these two.

Conclusions

2.1.4 The Appeal was admitted only on two substantial questions of law concerning (i) the justification of the deletion of the addition, and (ii) the legal possibility of a gift between incorporated companies. Questions C and D as framed by the Revenue were not separately entertained as they were covered by these two admitted questions.

2.2 Taxability under section 28(iv) and inclusion in book profit under section 115JB

Legal framework

2.2.1 The Court referred to section 28(iv) of the Income Tax Act, 1961, concerning taxation of benefits arising from business, and section 115JB regarding computation of book profit for minimum alternate tax.

2.2.2 The Court also referred to the Supreme Court decisions in CIT v. Mahindra and Mahindra Ltd. (404 ITR 1) and Apollo Tyres Ltd. v. CIT (255 ITR 273).

Interpretation and reasoning

2.2.3 With respect to the question whether the receipt was taxable under section 28(iv) (Revenue's question E), the Court observed that, in an earlier appeal involving the same assessee and similar issues, counsel for the Revenue had conceded that the issue stood concluded against the Revenue by the decision of the Supreme Court in Mahindra and Mahindra Ltd.; consequently, that question had not been entertained in the earlier appeal.

2.2.4 Applying the same reasoning, the Court held in the present matter that the issue raised in question E was squarely covered by Mahindra and Mahindra Ltd., did not give rise to any substantial question of law, and therefore could not be entertained.

2.2.5 As to the inclusion of the receipt in book profit under section 115JB (Revenue's question F), the Court noted that the same issue had been raised in the earlier appeal and that the Revenue had then fairly stated that it was concluded against the Revenue by the Supreme Court in Apollo Tyres Ltd. v. CIT. On that basis, the Court had refused to entertain the question in the earlier appeal.

2.2.6 The Court held that, in the present appeal as well, question F stood answered against the Revenue and in favour of the assessee by Apollo Tyres Ltd., and therefore did not give rise to any substantial question of law.

Conclusions

2.2.7 Questions relating to taxability of the receipt under section 28(iv) and to its inclusion in book profits under section 115JB did not give rise to any substantial question of law in view of binding Supreme Court precedents in Mahindra and Mahindra Ltd. and Apollo Tyres Ltd., and were therefore not entertained.

2.3 Competence to raise additional questions of law based on new factual foundations in an appeal under section 260A

Legal framework

2.3.1 The Court proceeded on the settled principle, as laid down in earlier decisions including CIT v. Tata Chemicals Ltd. (256 ITR 395) and CIT v. Smt. Lata Shantilal Shah (323 ITR 297), that a question which does not arise from the order of the Tribunal cannot be made the subject matter of an appeal under section 260A of the Income Tax Act.

2.3.2 The Court reiterated that the Tribunal is the last fact-finding authority and that substantial questions of law before the High Court must arise from the facts as found or placed before the Tribunal. If findings are contrary to the record, perversity may itself raise a substantial question of law, but new factual foundations cannot be introduced for the first time in a section 260A appeal.

Interpretation and reasoning

2.3.3 The Revenue sought to frame additional questions of law alleging, inter alia, that the assessee was a shell company and a mere vehicle for transferring money to its shareholders; that the so-called gifts were actually monies received by those shareholders; that the anti-avoidance principles in McDowell & Co. Ltd. v. Commercial Tax Officer (154 ITR 148) should apply; that the corporate veil should be lifted and the sums taxed in the hands of the individuals under section 56(2); and that individual assessments should be reopened under section 150.

2.3.4 The Court examined the orders of the Assessing Officer, the Commissioner (Appeals), and the Tribunal, and found that at no stage had the Revenue contended that the assessee was a shell company, that the amounts from Kardam Commercial Pvt. Ltd. were actually for the benefit of the shareholders, or that the arrangements constituted a device to evade tax.

2.3.5 On the contrary, the Court observed that the consistent stand of the Revenue throughout was that the money received by the assessee from Kardam Commercial Pvt. Ltd. was taxable in the hands of the assessee company itself on the ground that one company cannot give a gift to another, and therefore the receipts were income under section 56 in the hands of the assessee.

2.3.6 The Court held that permitting the additional questions would require bringing in new facts and laying a fresh factual foundation at the High Court stage, which is "wholly impermissible" in an appeal under section 260A, as such questions do not arise from the Tribunal's order and are not based on findings or material considered by the Tribunal.

Conclusions

2.3.7 The additional questions of law proposed by the Revenue, based on allegations of shell company, routing of funds to shareholders, application of McDowell, lifting the corporate veil, taxing shareholders under section 56(2), and reopening of individual assessments under section 150, were held not to arise from the Tribunal's order, lacked foundational facts before the Tribunal, and therefore could not be framed or entertained in the present appeal under section 260A.

2.3.8 The appeal was confined to the two substantial questions of law earlier formulated and admitted by the Court, and directions were issued to the Registry to communicate the order to the Tribunal to keep the records available.

1. ISSUES PRESENTED AND CONSIDERED

(1) Whether the amount represented by fixed deposits placed as margin/security for bank guarantees, which were subsequently invoked by the bank upon the account becoming NPA, could be treated as unexplained money taxable under section 69A of the Act.

(2) To what extent the interest income on such fixed deposits is liable to be assessed as income of the assessee, and what factual enquiry is required for proper determination.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (1): Taxability of fixed deposits given as margin/security and treated as unexplained money under section 69A

Interpretation and reasoning

The Tribunal noted that the assessee had obtained bank guarantees from a bank up to Rs. 4 crores against which it had provided fixed deposits as margin/security. These fixed deposits, along with accrued interest, were stated to have been given as security/guarantee to various institutions and were subsequently invoked and adjusted by the bank when the assessee's account was declared NPA and the premises were taken over under the SARFAESI Act.

The Tribunal recorded that the bank had not responded to repeated requests from the assessee for details, and that there was insufficient material on record regarding the factual particulars of the fixed deposits and their utilisation by the bank. In such circumstances, the Tribunal considered that an enquiry directly from the bank was necessary.

The Tribunal clarified that the principal amount of the fixed deposits, having been provided as security against bank guarantees, does not constitute taxable income if it is otherwise disclosed in the assessee's records, and should not be brought to tax as unexplained money under section 69A.

Conclusions

The principal amount of the fixed deposits furnished as margin/security for bank guarantees, if already disclosed, is not liable to be taxed as income and cannot be treated as unexplained money under section 69A. The assessment on this aspect was set aside for proper verification from the bank.

Issue (2): Assessment of interest income on the fixed deposits and need for further factual enquiry

Legal framework

The Tribunal proceeded on the basis of general principles of income-tax law governing taxability of interest income on fixed deposits, in the context of reassessment proceedings under sections 147, 148, 148A(d) of the Act, and the addition made by the Assessing Officer treating interest as income based on information such as Form 26AS and TDS details.

Interpretation and reasoning

The assessee's communication to the income tax authorities and to the bank, as extracted in the assessment order, showed that TDS had been deducted by the bank on interest credited on fixed deposits during the relevant assessment year. The assessee pleaded lack of records due to closure of business and NPA status, and asserted that the bank had invoked the guarantees and adjusted the fixed deposits and interest against outstanding dues.

The Tribunal observed that the bank had not furnished requisite information despite the assessee's requests and that a proper determination of the correct quantum and nature of interest income required direct information from the bank. The Tribunal found that the Assessing Officer must obtain all relevant details from the bank by issuing summons and then determine the taxable interest income based on such primary evidence.

The Tribunal explicitly stated that only the interest income on the fixed deposits is to be assessed as income, thereby distinguishing it from the principal amount of the fixed deposits furnished as security.

Conclusions

The matter relating to interest income on the fixed deposits was remitted to the Assessing Officer with directions to issue summons to the bank, call for complete details of the fixed deposits and interest, and thereafter re-assess the income in accordance with law, restricting the taxability to interest income alone and not the principal deposit amount used as security.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the land sold by the assessee constituted "rural agricultural land" not being a "capital asset" under section 2(14) of the Income-tax Act, 1961, or non-agricultural land liable to long term capital gains tax under section 112.

1.2 Whether, in the absence of compliance with statutory notices and supporting evidence from the assessee, the addition of the sale consideration as long term capital gain under section 112 was justified.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Character of land as "rural agricultural land" and justification of long term capital gain addition under section 112

Legal framework (as discussed)

2.1 The appeal turned on the applicability of section 2(14) of the Income-tax Act, 1961, defining "capital asset", and the assessee's plea that "rural agricultural land" is excluded from the definition and therefore exempt from capital gains. The Assessing Officer had brought the gain to tax as long term capital gain under section 112.

Interpretation and reasoning

2.2 The Tribunal noted that the assessee had not filed any return of income despite having sold immovable properties for a high consideration and had failed to respond to notices issued under sections 148 and 142(1). In the absence of any information or cooperation, the Assessing Officer treated the sale consideration (after minor variation) as long term capital gain taxable under section 112.

2.3 Before the first appellate authority, the assessee claimed that the land was rural agricultural land, but the appeal was dismissed on the ground that no authenticated, clear-cut evidence had been produced to support the agricultural character or rural nature of the land. On the contrary, documents on record were found to support that the lands were non-agricultural lands.

2.4 The first appellate authority further observed that there was no material proof that any agricultural activity had been conducted on the land after its purchase in 2008. The significant appreciation in value within about four years, culminating in a sale for Rs. 2,94,57,000/-, was considered inconsistent with the assertion that the land was being used for agricultural purposes.

2.5 The Tribunal observed that the Assessing Officer's determination was based on non-compliance with statutory notices, and that although "certain details" were later filed before the first appellate authority, these were found insufficient. The Tribunal found that no new or contrary material had been produced before it to dislodge the factual findings and inference drawn by the first appellate authority regarding the non-agricultural character of the land.

2.6 The Tribunal also took note that the first appellate authority had already directed the Assessing Officer to examine the purchase deed to ascertain the assessee's share and the corresponding cost for indexation and recomputation of capital gain, thereby ensuring appropriate computation within the framework of section 112.

Conclusions

2.7 The Tribunal held that the assessee had failed to discharge the burden of proving that the land sold was "rural agricultural land" excluded from the definition of "capital asset" under section 2(14).

2.8 In the absence of substantiating evidence and any contrary material, the Tribunal upheld the findings that the land was non-agricultural and thus a taxable capital asset.

2.9 The determination and taxation of the sale consideration as long term capital gain under section 112, subject to proper verification of cost and indexation as already directed by the first appellate authority, was confirmed.

2.10 All grounds raised by the assessee challenging the taxability of the gain were dismissed and the appeal was rejected.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the cash expenditure of Rs. 17,50,000/- incurred for furniture work in the residential house, paid in cash by the assessee's wife, could be treated in the hands of the assessee as unexplained expenditure under section 69C of the Income Tax Act, 1961.

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Unexplained expenditure under section 69C in respect of cash payment for furniture by assessee's wife

(a) Legal framework (as discussed)

2.1.1 The addition was made under section 69C of the Income Tax Act, 1961 treating the furniture expenditure as "unexplained expenditure" in the hands of the assessee.

(b) Interpretation and reasoning

2.1.2 The assessee explained that a residential property at Maruti Lifestyle, Raipur was purchased and that furniture for the said house was purchased by the assessee's wife from a concern at Raipur, for which the bill was originally Rs. 18,98,135/- and finally settled at Rs. 17,50,000/-, paid in cash by the assessee's wife.

2.1.3 Before the first appellate authority, the assessee produced documentary evidence including income tax returns from assessment years 2013-14 to 2020-21, computations of total income, and balance sheet of the wife, to establish the source of cash payments and her financial capacity.

2.1.4 The appellate authority recorded a clear finding that, based on the income tax returns and balance sheet, the assessee's wife had sufficient financial capacity to purchase the goods in cash and noted her total declared income for assessment years 2013-14 to 2017-18 as Rs. 22,18,330/-.

2.1.5 However, the appellate authority allowed relief only to the extent of Rs. 4,24,240/- by treating it as "cash in hand" available as per the balance sheet, and held the balance amount of Rs. 14,73,895/- as unexplained expenditure.

2.1.6 The Tribunal examined the balance sheet as on 31.03.2017, wherein the capital account of the assessee's wife stood at Rs. 59,84,811/-, the specific head "Furniture at Raipur" reflected an amount of Rs. 17,50,000/-, and "cash in hand" was shown separately at Rs. 4,24,240/-.

2.1.7 The Tribunal held that the appellate authority had misread and misinterpreted the balance sheet by treating "cash in hand" of Rs. 4,24,240/- as the only amount available with the wife, ignoring that the capital account and the asset entry "Furniture at Raipur" itself reflected the impugned expenditure.

2.1.8 The Tribunal noted that the balance sheet and financial statements had been filed before the Department, remained undisputed, and that the appellate authority had in principle accepted the sufficient fund position and creditworthiness of the assessee's wife to incur the expenditure.

2.1.9 The Revenue could not produce any contrary evidence to dispute the correctness of the balance sheet or the financial capacity of the assessee's wife.

(c) Conclusions

2.1.10 It was held that, in view of the capital position and balance sheet of the assessee's wife as on 31.03.2017 showing sufficient means and the specific entry of furniture at Rs. 17,50,000/-, the expenditure on furniture stood explained and could not be treated as unexplained expenditure under section 69C in the hands of the assessee.

2.1.11 The addition of Rs. 14,73,895/- made under section 69C was found to be misplaced, arbitrary and bad in law, the appellate order on this point was set aside, and the Assessing Officer was directed to delete the entire addition from the hands of the assessee.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the cash deposits during the demonetization period, treated as unexplained money and added under section 69A of the Income-tax Act, 1961, were rightly brought to tax in the hands of the assessee.

1.2 Whether the Assessing Officer and the first appellate authority discharged their quasi-judicial duty to conduct proper enquiry and apply independent mind, particularly in light of section 250(4) and (6) of the Act and the principles of natural justice, after the assessee furnished an explanation and supporting evidence.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of addition under section 69A for cash deposits during demonetization

Interpretation and reasoning

2.1 The Tribunal noted that the assessee is a practicing advocate in Income Tax and GST, whose professional income has been accepted by the Department. The case was selected for limited scrutiny for verification of cash deposits during the demonetization period.

2.2 The Assessing Officer treated cash deposits of Rs. 4,49,000/-, comprising deposits in current and savings accounts in old denomination notes, as unexplained money under section 69A on the ground that the assessee did not furnish acceptable explanation regarding the source.

2.3 The assessee explained that the cash belonged to his clients, mostly petty traders from rural areas not conversant with online banking, who paid him in cash for the limited purpose of depositing in his bank account so that he could, through net banking, pay their GST challans and other government taxes and meet compliances on their behalf. The assessee asserted that such mode of operation is a common and regular practice in the field of GST.

2.4 The assessee further contended that he had uploaded more than 100 challans to substantiate that the deposits related to payments made for and on behalf of his clients, and that these evidences were summarily ignored by the authorities. The Tribunal recorded that the orders of the Assessing Officer and the first appellate authority were silent on any enquiry or verification regarding these challans or the factual claim that the deposits represented clients' monies.

2.5 The Tribunal emphasized that while the primary onus to explain the source of cash is on the assessee, in the present case the assessee had discharged this onus by furnishing a plausible explanation supported by evidence. Thereafter, it was incumbent upon the Department to verify the correctness of this claim and, if not satisfied, to bring on record material showing that the deposits actually represented unexplained money of the assessee.

2.6 The Tribunal observed that the Department did not bring any material to show existence of any undisclosed source of income of the assessee for making such deposits, nor did it rebut or negate the customary practice explained by the assessee of collecting cash from clients and using his account for online tax payments.

2.7 In the absence of any contrary evidence or factual finding demonstrating that the cash deposits belonged to the assessee and remained unexplained, the Tribunal held that the addition under section 69A was arbitrary, misplaced and unsupported by inquiry or evidence.

Conclusions

2.8 The cash deposits were satisfactorily explained as belonging to clients and used for payment of their taxes; the Department failed to conduct verification or bring contrary evidence. The addition under section 69A was held to be bad in law and was deleted.

Issue 2: Failure of quasi-judicial authorities to conduct enquiry and apply mind; compliance with section 250(4) & (6) and principles of natural justice

Legal framework (as discussed)

2.9 The Tribunal referred to the obligation of the first appellate authority under section 250(4) and (6) of the Income-tax Act to make or cause to be made further enquiry where necessary and to dispose of the appeal by a speaking order with reasons, reflecting independent application of mind.

Interpretation and reasoning

2.10 The Tribunal found that the Assessing Officer summarily dismissed the assessee's detailed explanation and supporting challans without any specific enquiry or reasoning, and without using the available departmental machinery to verify the factual assertions.

2.11 The Tribunal held that the first appellate authority merely upheld the assessment order "even without independent application of mind and enquiry" as mandated under section 250(4) and (6). The order did not show that any verification was undertaken of the challans or the assessee's claim regarding the nature of the deposits and the customary practice in GST work.

2.12 The Tribunal reasoned that once the assessee produced an explanation with supporting evidence, the authorities could not, in a quasi-judicial capacity, shift the entire burden back to the assessee and make additions without any effort to verify the explanation or to gather contrary material. Such a "blindfolded" approach and summary rejection of submissions and evidence was characterized as arbitrary and in violation of the principles of natural justice.

Conclusions

2.13 The Tribunal held that both the Assessing Officer and the first appellate authority failed in their duty to conduct proper enquiry and to pass reasoned orders based on independent application of mind, as required under section 250(4) and (6) and by the principles of natural justice. On this ground also, the addition made under section 69A was quashed.

2.14 The order of the first appellate authority was set aside and the Assessing Officer was directed to give appeal effect by deleting the addition from the assessee's income.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the addition under section 68 of the Income Tax Act, 1961, in respect of an unsecured loan of Rs. 1.62 crore taken for purchase of immovable property, was justified when the assessee had explained the source and source of source of the credit.

1.2 Whether, for assessment years prior to 01.04.2023, section 68 required the assessee to explain the source of the source of unsecured loans not being share capital, share premium or like funds.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Addition under section 68 in respect of unsecured loan and requirement to explain source of source (pre-01.04.2023)

Legal framework (as discussed)

2.1 The Tribunal considered section 68 of the Act as applicable to the relevant assessment year, and the judicial interpretation that, prior to its amendment by the Finance Act, 2022 (effective from 01.04.2023), the section did not cast an obligation on the assessee to explain the source of the source of funds, except in cases of share capital, share premium and similar nature receipts. Reliance was placed on the judgment of the Delhi High Court holding that the 2022 amendment enlarged the onus and was necessary to expressly bring within section 68 the requirement to explain source of source for sums other than such share-related receipts.

2.2 The Tribunal also referred to its own earlier decision following the aforesaid Delhi High Court view, where it was held that unsecured loans (not being in the nature of share capital/share premium) for pre-01.04.2023 years were not covered by the extended obligation to prove source of source, and that the assessee's burden under section 68 in such cases was confined to proving identity, creditworthiness of the creditor and genuineness of the transaction.

Interpretation and reasoning

2.3 The Tribunal noted that the assessee had purchased land for Rs. 1.62 crore and explained that the amount represented an interest-free unsecured loan from one creditor. That creditor, in response to a notice under section 133(6), confirmed the loan and furnished his bank statement. The creditor's bank statement showed receipt of the same amount as loan from his wife, who in turn had borrowed an identical amount from the very persons who were the vendors of the land.

2.4 The Assessing Officer treated the series of transactions as accommodation entries, disbelieved the loan, and invoked section 68 on the basis that the assessee was the ultimate beneficiary of layered transactions and that his explanation was not satisfactory. The first appellate authority applied the Supreme Court decision concerning share capital and upheld the addition.

2.5 The Tribunal observed that it was undisputed that: (i) the assessee had disclosed the loan of Rs. 1.62 crore from the named creditor; (ii) the creditor had responded directly to the Assessing Officer, confirmed the loan, and produced his bank statement; (iii) the flow of funds from the creditor's wife and further from the land vendors was on record; and (iv) a similar loan and acquisition of the other 50 per cent share in the same property by the assessee's brother had been accepted without any addition or remedial action under sections 147 or 263.

2.6 Applying the Delhi High Court's interpretation of section 68 and the coordinate bench decision, the Tribunal held that, for the relevant year, section 68 did not require the assessee to prove the source of the source of an unsecured loan, which was not in the nature of share capital or share premium. In any event, on the facts, the assessee had not only established the immediate source (the creditor) but also the source of source (creditor's wife and further lenders, being the land vendors).

2.7 The Tribunal distinguished the Supreme Court decision relied upon by the appellate authority, noting that it related to share capital/share premium, whereas the present case involved an unsecured loan. It therefore held that the ratio of that judgment was not directly applicable to the facts at hand.

2.8 The Tribunal concluded that the assessee had discharged the onus under section 68 by establishing: (i) the identity of the creditor; (ii) the creditor's creditworthiness through bank records and confirmation; and (iii) the genuineness of the loan transaction as evidenced by banking channels and confirmations. No contrary material was brought on record to negate these ingredients.

Conclusions

2.9 For assessment years prior to 01.04.2023, in relation to unsecured loans not being share capital/share premium or amounts of like nature, section 68 did not mandate that the assessee prove the source of the source of the credit; the obligation was confined to establishing identity, creditworthiness, and genuineness of the transaction.

2.10 On the facts, the assessee satisfactorily explained the unsecured loan of Rs. 1.62 crore by proving the identity and creditworthiness of the creditor and the genuineness of the transaction, and in fact also demonstrated the source of the source. The conditions for invoking section 68 were not met.

2.11 The addition of Rs. 1.62 crore made under section 68 was unsustainable and was directed to be deleted. The assessee's appeal was allowed.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Eligibility of deduction under section 80P(2)(d) of the Income-tax Act, 1961 on interest and dividend income earned from investments made with a co-operative bank, where such bank is itself a co-operative society.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Deduction under section 80P(2)(d) on interest/dividend from co-operative bank

Legal framework (as discussed)

2.1 Section 80P(2)(d) provides deduction in respect of income by way of interest or dividends derived by a co-operative society from its investments with any other co-operative society.

2.2 The lower authorities relied on judicial precedents including Totagars' Co-operative Sale Society Ltd. and other decisions to deny deduction, holding that interest from co-operative banks is not eligible under section 80P(2)(d).

Interpretation and reasoning

2.3 The Tribunal recorded that the interest and dividend income in question (Rs. 1,84,177) was earned from Surat District Co-operative Bank Ltd., which is a co-operative society registered under the Gujarat Co-operative Societies Act, 1961; this fact was not in dispute.

2.4 The Tribunal considered the decisions of the jurisdictional High Court, particularly the ruling in Ashwinkumar Arban Co-operative Society Ltd., wherein it was held that deduction under section 80P(2)(d) is available to co-operative societies on income earned as interest on investments made with a co-operative bank, which in turn is a co-operative society.

2.5 The Tribunal noted that in Ashwinkumar Arban Co-operative Society Ltd., the jurisdictional High Court had examined and distinguished the Supreme Court decision in Totagars' Co-operative Sale Society Ltd., and held that section 80P(2)(d) applies where the investment is with a co-operative bank that is itself a co-operative society.

2.6 The Tribunal further referred to the subsequent jurisdictional High Court decision in Rajkot Lodhika Sahakari Kharid Vechan Sangh Ltd., which followed Ashwinkumar Arban Co-operative Society Ltd. and reiterated that a co-operative bank is a co-operative society and that interest earned therefrom qualifies for deduction under section 80P(2)(d).

2.7 In light of the binding nature of the jurisdictional High Court decisions, the Tribunal preferred these over contrary views taken in other decisions relied on by the lower authorities.

Conclusions

2.8 The Tribunal held that Surat District Co-operative Bank Ltd. being a co-operative society, the interest and dividend income earned by the assessee co-operative society from its investments with this bank falls within the scope of section 80P(2)(d).

2.9 The disallowance of deduction under section 80P(2)(d) by the Assessing Officer, as confirmed by the appellate authority, was set aside, and the assessee's claim for deduction on the sum of Rs. 1,84,177 was allowed.

2.10 The appeal was allowed, with the grounds of the assessee being accepted in full.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether disallowance of sales commission paid to relatives of directors, including female family members, was justified on grounds of alleged non-rendering of services, absence of specific order-wise details, and decrease in turnover.

1.2 Whether amounts debited as "gratuity" and shown as provision for gratuity in the financial statements were allowable as deduction in the absence of contribution to an approved gratuity fund under section 36(1)(v) of the Income-tax Act.

1.3 Whether notional disallowance of interest on advances/loans given to a director for personal purposes was sustainable where the assessee had sufficient interest-free funds available.

1.4 Whether the conclusions on the above issues for one assessment year should be followed in the immediately succeeding assessment year where facts and circumstances were identical.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Disallowance of sales commission paid to relatives of directors

Interpretation and reasoning

2.1 The Tribunal noted that commission aggregating to the disputed amounts was paid to six family members of the directors, all of whom were shown to be associated with the business and holding relevant educational qualifications (engineering, management, science, arts) and having continued association with the company over several years.

2.2 The Tribunal held that mere relationship with directors does not lead to the conclusion that no services were rendered. It found that the lower authorities proceeded largely on assumptions, including the view that female relatives could not be involved in sales of industrial pumps, without examining their educational credentials, roles, or years of association with the company.

2.3 The Tribunal accepted that sales commission need not always be correlatable with specific individual sales invoices or with an increase in turnover; it can legitimately be paid for broader functions such as customer service, development and maintenance of customer relationships, and attending to complaints, even in a period of reduced turnover.

2.4 While recognising that deduction of tax at source and offer of income to tax by recipients are not by themselves conclusive of genuine services, the Tribunal considered, in this case, the combination of educational qualifications, experience, continued association and business needs as sufficient to establish that the expenditure was "wholly and exclusively" for business purposes and not unreasonable.

2.5 The Tribunal also took note that in a subsequent assessment year on identical facts, the Assessing Officer had allowed 90% of such commission and disallowed only 10%, indicating acceptance in principle of the genuineness of the commission payments without any change in facts.

Conclusions

2.6 The Tribunal held that the disallowance of commission paid to the six family members was based on conjectures and stereotypes rather than evidence and that the payments were allowable business expenditure. The entire disallowance of sales commission in both assessment years was directed to be deleted.

Issue 2: Deductibility of gratuity amount debited in accounts

Legal framework

2.7 The Tribunal applied section 36(1)(v) of the Income-tax Act, which permits deduction of any sum paid by the assessee as an employer by way of contribution towards an approved gratuity fund created for the exclusive benefit of employees.

Interpretation and reasoning

2.8 The assessee contended that the disputed amounts did not represent a mere provision, but actual liabilities to employees arising out of disputes, part of which was settled and paid in the subsequent year, with only the balance outstanding.

2.9 On examining the annual accounts, the Tribunal found that the same amounts were reflected (i) as "gratuity" debited in the profit and loss account and (ii) as an increase in "provision for employees' benefit - gratuity fund" under short-term provisions. The opening and closing balances in the gratuity provision account matched exactly with the increment represented by the disputed figure.

2.10 Based on this accounting treatment, the Tribunal concluded that the relevant sums constituted a provision for gratuity and not actual payment to an approved gratuity fund.

2.11 Since no approved gratuity fund had been created and no contribution had been made to such a fund, the conditions of section 36(1)(v) were held to be not satisfied.

Conclusions

2.12 The Tribunal upheld the disallowance of the entire gratuity amounts for both assessment years, treating them as provisions not eligible for deduction under section 36(1)(v).

Issue 3: Disallowance of interest on advances/loans to director

Interpretation and reasoning

2.13 The Assessing Officer had computed notional interest at 12% on advances/loans given to a director for personal purposes and disallowed the same as relatable to non-business use of borrowed funds. The first appellate authority restricted the disallowance by limiting the principal and period considered.

2.14 The assessee demonstrated that it possessed interest-free funds of approximately Rs. 57 lakhs, which exceeded the interest-free advances made to the director. The Tribunal accepted this factual position.

2.15 The Tribunal applied the settled principle that, where mixed funds exist and interest-free funds are sufficient to cover interest-free advances, it is to be presumed that such advances have been made out of interest-free funds; consequently, no disallowance of interest on borrowed funds is warranted.

Conclusions

2.16 The Tribunal held that no part of the interest expenditure could be disallowed on account of the loan/advance to the director in either assessment year and directed deletion of the entire notional interest disallowance.

Issue 4: Application of findings across assessment years with identical facts

Interpretation and reasoning

2.17 For the subsequent assessment year, the Tribunal examined the nature of the disallowances relating to commission, gratuity, and interest and found them to be factually and legally identical to those adjudicated in the earlier assessment year.

2.18 The Tribunal therefore applied mutatis mutandis its reasoning and conclusions on each issue from the earlier year to the corresponding grounds in the subsequent year.

Conclusions

2.19 For the subsequent year, the Tribunal deleted the commission and interest disallowances and confirmed the gratuity disallowance, thereby partly allowing the appeal in line with its decision for the earlier year.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the addition under Section 68 of the Income-tax Act in respect of share capital and share premium received from eight subscriber companies was sustainable where the assessee had furnished documentary evidences but some subscribers did not comply with summons under Sections 131/133(6).

1.2 Whether the addition under Section 68 of the Income-tax Act in respect of unsecured loans obtained from five creditors was justified where the assessee had furnished evidences and the loans stood repaid in subsequent years.

1.3 Whether, for the assessment year prior to AY 2013-14, the assessee was required to establish "source of source" in relation to share capital and share premium under Section 68.

1.4 Effect of non-compliance or partial compliance by share subscribers and loan creditors with summons/notices under Sections 131/133(6) on the assessee's discharge of onus under Section 68.

1.5 Consequence of non-pressing of the assessee's cross-objection at the time of hearing.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 3: Addition under Section 68 in respect of share capital/share premium; requirement of proving "source of source" prior to AY 2013-14

Legal framework (as discussed):

2.1 The Tribunal proceeded on Section 68 of the Income-tax Act relating to unexplained cash credits, and on judicial precedents holding that, prior to the amendment operative from AY 2013-14, an assessee was not required to prove the "source of source" in respect of share capital/share premium.

Interpretation and reasoning:

2.2 The Assessing Officer treated share capital/share premium of Rs. 2,25,00,000/- received from eight companies as unexplained cash credits on the grounds that: (i) some summons under Section 131 and notices under Section 133(6) were not complied with; (ii) the investor companies were allegedly shell entities with meagre income; and (iii) the sums represented the assessee's own unaccounted money routed back.

2.3 The assessee had, however, furnished before the Assessing Officer and in appellate proceedings the full set of documents for each subscriber, including names, addresses, PAN, audited financial statements, bank statements and documents evidencing payment through banking channels.

2.4 The Commissioner (Appeals), after detailed subscriber-wise examination, found that the identity and basic credentials of each shareholder were established and that the Assessing Officer's conclusion of shell entities was not supported by the material on record. The Commissioner (Appeals) also relied on authorities holding that "source of source" need not be established for years prior to AY 2013-14.

2.5 The Tribunal noted that there was at least part compliance to notices/summons by subscribers and that the assessee had discharged its primary onus by filing complete evidences. It held that mere non-compliance with summons by some subscribers and the fact that they had meagre income could not, by itself, justify the addition when documentary evidence had been produced by the assessee.

2.6 The Tribunal approved the reasoning of the Commissioner (Appeals), including reliance on binding and persuasive precedents, that for the assessment year in question, the assessee was not obliged to prove the funds' origin in the hands of the subscribers ("source of source") once identity, basic creditworthiness, and genuineness of the share capital transactions stood evidenced.

Conclusions:

2.7 The assessee had satisfactorily discharged its onus under Section 68 in respect of share capital/share premium by furnishing necessary evidences regarding identity of subscribers, banking trail, and transaction details.

2.8 Non-response or limited response by some subscribers to summons under Sections 131/133(6), and the level of their declared income, did not justify treating the receipts as unexplained where documentary evidences remained unrebutted.

2.9 For assessment years prior to AY 2013-14, the assessee was not required to prove "source of source" in relation to share capital/share premium, and the contrary approach of the Assessing Officer was unsustainable.

2.10 The deletion of the addition of Rs. 2,25,00,000/- on account of share capital/share premium by the Commissioner (Appeals) was upheld.

Issue 2 & 4: Addition under Section 68 in respect of unsecured loans and impact of repayment and summons compliance

Legal framework (as discussed):

2.11 The Tribunal proceeded on Section 68 requirements-identity of creditor, creditworthiness, and genuineness of transaction-and considered judicial precedents holding that where evidences are furnished, inquiries responded to, and loans are repaid through banking channels, additions under Section 68 are not justified.

Interpretation and reasoning:

2.12 The Assessing Officer added unsecured loans of Rs. 7,10,00,000/- from five creditors as unexplained, principally on the grounds of non-compliance with summons and characterisation of lenders as shell entities.

2.13 The assessee had filed ledger accounts, confirmations, PAN, bank statements, audited accounts and other supporting documents of each loan creditor before the Assessing Officer and Commissioner (Appeals). Notices under Section 133(6) had elicited at least part compliance.

2.14 The Commissioner (Appeals) recorded a clear factual finding that the loans in question had been repaid in subsequent years through account payee cheques, thereby evidencing closure and settlement of the loan accounts.

2.15 The Tribunal noted that the Commissioner (Appeals) had relied on multiple High Court decisions holding that, where (i) the assessee has produced documentary evidence establishing identity of creditors, creditworthiness and genuineness of transactions; (ii) the revenue's case of accommodation entries is based only on presumptions; and (iii) the loans have been fully repaid through banking channels in subsequent years, additions under Section 68 are not warranted.

2.16 The Tribunal endorsed the proposition that once repayment of the very loans in question has been established on the basis of documentary evidence, the credit entries cannot be viewed in isolation by ignoring the corresponding debit (repayment) entries, even if the repayments occur in later years.

2.17 It held that the Department's allegation of accommodation entries lacked supporting factual material and remained purely presumptive in the face of the evidences produced.

Conclusions:

2.18 The assessee had satisfied the requirements of Section 68 in respect of unsecured loans by establishing identity of creditors, their participation in the transactions through banking channels, and repayment of loans in subsequent years.

2.19 Mere non-compliance or partial compliance with summons by some creditors, without disproving the documentation or repayment evidence, could not, by itself, sustain an addition under Section 68.

2.20 The factual finding of complete or substantial repayment of the loans in subsequent years, coupled with documentary support, negated the inference of unexplained cash credits.

2.21 The deletion of the addition of Rs. 7,10,00,000/- on account of unsecured loans by the Commissioner (Appeals) was upheld, and the revenue's challenge on this issue was dismissed.

Issue 5: Effect of non-pressing of cross-objection

Interpretation and reasoning:

2.22 At the time of hearing, the assessee did not press its cross-objection.

Conclusions:

2.23 The cross-objection filed by the assessee was dismissed as not pressed.

2.24 Consequently, both the revenue's appeal and the assessee's cross-objection stood dismissed, thereby affirming the appellate order in toto.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether notice issued under section 153A of the Income-tax Act to an assessee who was in judicial custody, without following the mode of service prescribed for persons confined in prison, constituted valid service so as to confer jurisdiction for assessment.

1.2 Whether the approval granted under section 153D of the Income-tax Act was vitiated for being mechanical and treated as a mere administrative formality, particularly when granted for multiple assessees and years in one day, and whether such approval requires independent judicial application of mind.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of service of notice under section 153A on assessee in judicial custody

Legal framework

2.1 The Court noted that section 131 of the Income-tax Act vests tax authorities with powers of a Civil Court in respect of summons, and section 282(b) provides that service of a notice, summons, requisition, order or any other communication under the Act may be made by delivering or transmitting a copy thereof to the person named in such manner as provided under the Code of Civil Procedure, 1908.

2.2 Order V Rule 24 of the Code of Civil Procedure, 1908, stipulates that when a defendant is confined in a prison, the summons should be delivered or sent to the officer in charge of the prison, who is then responsible for serving the summons on the defendant.

2.3 The Court relied on a decision of a High Court holding that where information is received that an assessee to whom notice has to be served is in judicial custody, an appropriate order should be passed requiring service of notice through the Superintendent of the concerned jail, and that mere appearance of staff or other persons cannot substitute such service.

Interpretation and reasoning

2.4 It was undisputed that at the time when notice under section 153A was issued and purportedly served, the assessee was in judicial custody and that the Assessing Officer had been informed of this position by the assessee's spouse.

2.5 The Court held that, in view of section 282(b), service of notice in such a situation must conform to the procedure prescribed under the Code of Civil Procedure for persons confined in prison, i.e., by service through the officer in charge of the prison under Order V Rule 24.

2.6 The contention of the Revenue that there is no specific procedure in the Income-tax Act requiring compliance with Order V Rule 24, and that representation by the assessee's wife cured any defect, was rejected in light of the statutory reference in section 282(b) to the Code of Civil Procedure and the strict interpretation of service provisions adopted by the referenced High Court.

2.7 The Court emphasized that a person in judicial custody is deprived of many constitutional rights and that tax authorities, once informed of such custody, are legally obliged to ensure proper service through the Superintendent of the jail. Failure to do so is a fatal defect and cannot be cured by the mere participation or representation of relatives or others.

Conclusions

2.8 The Court held that notice under section 153A was not validly served on the assessee while in judicial custody, as the mandated mode of service via the prison authorities was not followed.

2.9 Consequently, the assumption of jurisdiction under section 153A was invalid, and the entire assessment proceedings were liable to be quashed. Ground No. 2 was sustained.

Issue 2: Validity and nature of approval under section 153D and requirement of application of mind

Legal framework

2.10 The Court noted that, in search cases, where the Assessing Officer is below the rank of Joint Commissioner, section 153D requires that no order of assessment or reassessment under sections 153A or 153C shall be passed by such Assessing Officer except with the prior approval of the Joint Commissioner/Addl. Commissioner.

2.11 It was observed that the approving authority is required, in law, to consider all search material including incriminating material, seized documents, appraisal report, enquiries made by the Investigation Wing, enquiries made by the Assessing Officer, and the replies of the assessee, and, after due application of mind, to grant approval to the draft assessment order.

2.12 The Court referred to a High Court judgment which held that different income-tax authorities under section 116 are distinct and must exercise their powers independently; that consultation by the Assessing Officer with superior officers in the course of quasi-judicial functions may vitiate the independent exercise of discretion; and that an order passed under the influence or directions of superior officers is vitiated.

2.13 The Court also relied on a Third Member decision of the Tribunal holding that approval under section 153D is not a mere administrative approval; it can be examined for want of application of mind; and if found mechanical, it cannot be sustained in law.

Interpretation and reasoning

2.14 The First Appellate Authority had treated it as a standard practice that the Addl. CIT remained associated with the Assessing Officer throughout the assessment process, including approving the draft questionnaire, and concluded that approval under section 153D given on a single day in multiple cases did not indicate non-application of mind.

2.15 The Court disagreed with the approach that continuous association of the approving authority with the assessment process converts approval under section 153D into a mere administrative or supervisory formality. It held that such reasoning undermines the legislative purpose of requiring a distinct and independent approval at the stage of the draft assessment order.

2.16 On facts, the Court noted that the draft assessment order was prepared on 28.12.2018; approval under section 153D was granted on 29.12.2018; and the final assessment order was also passed on 29.12.2018. The approval letter showed that approval was granted in 23 cases, including multiple assessment years, on the same day.

2.17 The Court held that it was practically impossible to properly examine 23 draft assessment orders in a single day so as to ensure meaningful scrutiny of search materials, seized documents, appraisal reports, and assessment records for each case. The only way to justify such approval would be to treat it as an empty formality, which is contrary to the statutory scheme.

2.18 The Court emphasized that the purpose of section 153D is twofold: (i) to protect the assessee against undue or irrelevant additions and disallowances by ensuring that a senior officer independently reviews whether proper enquiries and investigations have been conducted on relevant material; and (ii) to safeguard the interest of the Revenue by ensuring the assessment is properly framed on the basis of available material.

2.19 The Court stressed that the word "each" in sections 153A and 153D must be given effective meaning, mandating case-wise, year-wise independent consideration by the approving authority, and that "approval" requires cognizance of the whole assessment record and independent application of mind.

2.20 The Revenue's reliance on a Coordinate Bench decision treating approval under section 153D as administrative was rejected. The Court held that such view was rendered in ignorance of the binding High Court judgment and the binding Third Member decision and, therefore, was per incuriam and could not be relied upon to dilute the quasi-judicial nature of section 153D approval.

2.21 The Court further observed that the very casualness in assumption of jurisdiction under section 153A (invalid service on a person in judicial custody) reflected on how casually the approval under section 153D was also granted.

Conclusions

2.22 The Court held that approval under section 153D is not a mere administrative formality but a substantive safeguard requiring independent judicial application of mind by the approving authority to each case and each assessment year.

2.23 In the present case, the approval under section 153D, having been granted for multiple assessees and multiple years on a single day, without demonstrable independent consideration of each draft order and search material, was held to be not in accordance with law and hence vitiated.

2.24 Ground No. 3 was sustained, and, as a consequence of allowing both Ground Nos. 2 and 3, the assessments stood quashed and the assessee's appeals were allowed.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether cash deposits of Rs. 12,00,000/- in a joint bank account could be treated as unexplained investment under section 69 in the hands of the assessee.

1.2 Whether the assessee's explanation that the deposits represented agricultural receipts belonging to her daughter, supported by uncontroverted affidavits, was sufficient to discharge the onus and exclude the application of section 69.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Addition under section 69 on account of cash deposits in a joint bank account; effect of agricultural income explanation and uncontroverted affidavits

Legal framework (as discussed)

2.1 The Tribunal proceeded on the legal requirements of section 69 of the Income-tax Act, 1961, namely that the provision is a deeming fiction applicable where an "investment" is found to be that of the assessee and the assessee offers no satisfactory explanation about its nature and source.

2.2 The Tribunal relied upon the principle laid down by the Supreme Court in CIT v. Daulat Ram Rawatmull that ownership of money cannot be presumed on suspicion or conjecture and that the burden is on the Revenue to establish that the money belongs to the assessee before applying the deeming provision.

2.3 The Tribunal also reiterated the settled principle that "suspicion, however strong, cannot take the place of proof" and recognised that an uncontroverted affidavit carries evidentiary value and cannot be brushed aside without cross-examination or contrary material.

Interpretation and reasoning

2.4 The Tribunal noted as undisputed that the assessee owned agricultural land, supported by registered ownership documents and revenue records (jamabandi/fard), and that both the Assessing Officer and the first appellate authority had accepted such ownership.

2.5 The controversy was confined to the nature and ownership of cash deposits of Rs. 12,00,000/- in a joint bank account held by the assessee and her daughter, and whether these deposits constituted unexplained investment of the assessee.

2.6 The assessee's consistent explanation was that the deposits belonged to her daughter, who managed and cultivated the agricultural land, and that the cash represented agricultural receipts arising through a third party (Sh. Gurjit Singh) who cultivated the land on a hire-purchase basis and paid Rs. 12,00,000/- in cash from sale proceeds.

2.7 The Tribunal particularly examined the affidavits of (i) the daughter, affirming that she alone operated the bank account and that the deposits were her own funds from agricultural activities, and (ii) Sh. Gurjit Singh, affirming that he had taken the land on hire-purchase, cultivated it, and paid Rs. 12,00,000/- in cash to the daughter out of crop sale proceeds.

2.8 It was emphasised that these affidavits were never rebutted or discredited by the Department-no cross-examination was conducted and no contrary evidence was brought on record. The Tribunal held that, in such circumstances, the affidavits possess evidentiary value and cannot be rejected merely on surmise.

2.9 The Tribunal observed that the first appellate authority, despite accepting ownership of agricultural land and even recognising the plausibility of agricultural operations by granting estimated relief of Rs. 1,00,000/-, had rejected the assessee's fuller explanation mainly due to non-production of mandi receipts, sale bills, or formal lease documentation.

2.10 The Tribunal held that once ownership of agricultural land and the possibility of agricultural operations were accepted, the explanation could not be discarded solely for want of mandi receipts, particularly in the context of small-village, cash-based agricultural transactions where formal documentation is often absent.

2.11 On the scope of section 69, the Tribunal reasoned that the deeming fiction applies only if the investment is shown to belong to the assessee and its source is unexplained. In the present case, the assessee had positively identified the source and owner of the deposits as another identifiable person (the daughter, receiving funds from Sh. Gurjit Singh), and this explanation was not disproved by the Revenue.

2.12 Applying the ratio of Daulat Ram Rawatmull, the Tribunal held that the Revenue could not presume that the money belonged to the assessee merely on suspicion arising from the fact that the bank account was joint, when the assessee's explanation and supporting affidavits remained unrebutted.

2.13 The Tribunal therefore concluded that the foundational requirement for invoking section 69-establishing that the deposits constituted unexplained investment of the assessee-was not satisfied. The addition was found to rest on presumptions and not on positive, cogent material linking the assessee to the cash as her own unexplained investment.

Conclusions

2.14 The Tribunal held that, in view of the uncontroverted affidavits, accepted ownership of agricultural land, plausibility of agricultural operations, and lack of any contrary evidence, the Department failed to discharge its burden of proving that the deposits represented unexplained investments of the assessee.

2.15 It was held that mere non-production of mandi receipts or formal sale/lease documents could not, in the facts, outweigh the evidentiary value of unrebutted affidavits and the accepted factual substratum.

2.16 The Tribunal concluded that the conditions for application of section 69 were not met and that the addition sustained by the first appellate authority was based on suspicion rather than proof.

2.17 The order of the first appellate authority sustaining the addition of Rs. 11,00,000/- under section 69 was set aside, and the Assessing Officer was directed to delete the entire addition. The appeal of the assessee was allowed.

1. ISSUES PRESENTED AND CONSIDERED

(1) Whether, prima facie, the initiation of proceedings to finalize provisional assessments of Bills of Entry after a delay of about 12-15 years is impermissible as being beyond a reasonable period, warranting ad-interim restraint on further action under the impugned show cause notice.

(2) Whether the Petitioner has established a sufficient prima facie case, balance of convenience, and likelihood of irreparable prejudice to justify ad-interim relief restraining the authorities from proceeding further pursuant to the impugned show cause notice.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (1): Delay in finalisation of provisional assessment and reasonable period

Interpretation and reasoning

(a) The show cause notice seeks to finalize provisional assessments for Bills of Entry dated between August 2010 and September 2013, proposing re-classification and recovery of differential duty with interest under Section 18 of the Customs Act, 1962.

(b) The Court noted that the Jharkhand High Court, in a considered decision, after examining various circulars, held that provisional assessments of Bills of Entry "ought to be finalized within a reasonable period," and that such reasonable period would be "approximately 5 years."

(c) The Court recorded that in the present matter there is a delay of approximately 12 to 15 years in seeking to finalize the provisional assessments, which is substantially beyond the period considered reasonable by the Jharkhand High Court.

(d) The Court also found force, at least prima facie, in the contention that requiring the Petitioner, after 15 years, to furnish proof of end use of the imported goods by its customers would be practically impossible.

Conclusions

(e) The Court, on a prima facie assessment, accepted that there is considerable delay in finalizing the provisional assessments and that such delay, coupled with the impracticability of furnishing end-use proof after 15 years, supports the Petitioner's challenge for the purpose of interim relief.

Issue (2): Existence of prima facie case, balance of convenience, and grant of ad-interim relief

Interpretation and reasoning

(a) Taking into account the Jharkhand High Court's view on the requirement to finalize provisional assessments within a reasonable period (approximately 5 years) and the factual delay of about 12-15 years in the present case, the Court held that there is "considerable force" in the submissions advanced on behalf of the Petitioner.

(b) The Court also accepted, prima facie, that the requirement to now produce end-use evidence for imports made 12-15 years earlier would impose an onerous and practically impossible burden on the Petitioner.

(c) On these considerations, the Court held that the Petitioner has made out a "strong prima facie case" for grant of ad-interim relief and further held that, in the facts of the case, the "balance of convenience lies in favour of the Petitioner."

Conclusions

(d) The Court granted ad-interim relief in terms of the Petitioner's prayer restraining the authorities from taking any steps or proceedings pursuant to and in furtherance of the impugned show cause notice, including finalisation of the assessment of the Bills of Entry listed therein.

(e) The ad-interim relief is directed to operate until further orders, with timelines fixed for filing affidavit-in-reply and affidavit-in-rejoinder and the matter directed to be listed on a specified future date.

Issues: Whether imported alloy tool steel lacking BIS marking at the time of arrival became liable to confiscation under section 111(d) of the Customs Act, 1962, despite the goods being covered by BIS registration, conforming to the prescribed standard, and having the mark affixed before clearance under customs supervision.

Analysis: The foreign supplier held a valid BIS licence for the goods and the test certificate showed conformity with the prescribed standard. The omission of the BIS mark was treated as a curable defect, not a substantive breach, because the required mark was affixed before clearance under customs supervision. Section 2(33) of the Customs Act, 1962 excludes goods from the definition of prohibited goods once the conditions for permitted import are complied with. The object of the BIS requirement was satisfied, and no mala fides or non-conformity of the goods was established. The defect was therefore one of form rather than substance, and the authorities' reliance on confiscation was unsustainable.

Conclusion: Confiscation under section 111(d) of the Customs Act, 1962 was not justified and the relief against the impugned order was warranted in favour of the assessee.

Final Conclusion: The appeal succeeded because the import conditions stood complied with upon affixation of the BIS mark before clearance, and the goods could not be treated as liable to confiscation on the facts found.

Ratio Decidendi: Where imported goods conform to the prescribed standard and the statutory marking requirement is cured before clearance under customs supervision, omission of the mark at the time of arrival does not render the goods prohibited or justify confiscation.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the imported multimedia speakers with additional functions (USB/SD/MMC/FM/Bluetooth etc.) are classifiable under Customs Tariff Heading 8518 or under 8519/8527/85279100.

1.2 Consequent upon the correct classification, whether assessment on MRP/RSP basis, re-assessment of CVD, confiscation of goods, and imposition of interest and penalties on the appellants are legally sustainable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Classification of multimedia speakers

Legal framework (as discussed)

2.1 The dispute turned on the proper classification of multimedia speakers with in-built features such as USB/SD/MMC playback, FM radio, Bluetooth, remote control and amplifier, between CTH 8518 (loudspeakers/audio frequency apparatus) and CTH 8519/8527/85279100 (sound recording or reproducing apparatus / radio-broadcast receivers, attracting CVD on RSP basis).

2.2 The Court considered binding and persuasive precedents on identical goods, including earlier decisions of the Tribunal and their affirmation by higher courts, holding such products classifiable under CTH 8518.

Interpretation and reasoning

2.3 The Court noted that the impugned goods were described and imported as "Multimedia Speakers/Computer Speakers", comprising sub-woofer and satellite speakers with in-built amplifier and capability to reproduce sound over a wide frequency range, often with multiple drivers and remote-control operation.

2.4 The Court observed that the issue of classification of multimedia speakers with ancillary features (USB/SD card/MMC playback and/or FM radio, Bluetooth, etc.) has already been examined "in extenso" in prior decisions, where rival headings 8518 and 8527/8519 had been considered and rejected in favour of 8518.

2.5 The Court relied on earlier Tribunal rulings, including Logic India Trading Company, ONKYO SIGHT & SOUND INDIA PVT. LTD., and multiple decisions in the case of Jupiter group and Santosh Radio Products, wherein similar multimedia speakers/audio systems with additional playback and radio functions were consistently held classifiable under CTH 8518, and not under 8527/8519/85279100.

2.6 It was specifically noted that the matter had been examined by various Benches and affirmed by the Hon'ble Apex Court and High Courts, rendering the classification dispute no longer "res integra".

2.7 Following these precedents, the Court found that the essential character of the imported goods remained that of multimedia speakers/audio-frequency amplifying and reproducing equipment under CTH 8518, and that the added features did not justify reclassification as radio receivers or sound recording/reproducing apparatus under 8519/8527/85279100.

Conclusions

2.8 The Court held that the appellant-company had correctly classified the imported multimedia speakers under CTH 8518.

2.9 The reclassification of the goods by the Revenue under CTH 85279100 (or 8519/8527) was found to be unsustainable and was set aside.

Issue 2 - Validity of MRP-based assessment, re-assessment, confiscation, interest and penalties

Interpretation and reasoning

2.10 The Court observed that MRP/RSP-based CVD assessment and the entire re-assessment were premised on the Revenue's reclassification of the goods under headings that attract RSP-based levy (CTH 8519/8527/85279100).

2.11 Having held that the correct classification is under CTH 8518, the Court held that "MRP based price is not applicable" for such goods, thereby nullifying the foundation for the alleged suppression/misdeclaration of RSP/MRP and the consequential re-determination of CVD.

2.12 Since the reclassification and MRP-based re-assessment were set aside, the consequential actions-confiscation of goods under Section 111(d) and 111(m) of the Customs Act, 1962, demand of differential duty/CVD with interest, and penalties under Sections 114A, 114AA and 112(a)-could not be sustained.

Conclusions

2.13 MRP/RSP-based assessment of CVD on the impugned goods was held inapplicable in view of their correct classification under CTH 8518.

2.14 The re-assessment of CVD, confiscation orders, and all consequential demands of duty and interest were set aside.

2.15 Penalties imposed on the appellant-company and its director under Sections 114A, 114AA and 112(a) of the Customs Act, 1962 were also set aside.

2.16 The impugned appellate order was quashed, and the appeals were allowed with consequential relief as per law.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Applicability of exemption from additional customs duty (CVD) under Notification No. 30/2004-CE, as amended by Notifications No. 34/2015-CE and 37/2015-CE, to imports of raw silk fabric.

1.2 Effect of the judgments of the Supreme Court (including SRF Ltd. and AIDEK Tourism Services Pvt. Ltd.) and subsequent High Court and Tribunal decisions on the levy of CVD on such imports.

1.3 Whether the post-2015 amendments to Notification No. 30/2004-CE (by Notifications No. 34/2015-CE and 37/2015-CE) alter the legal position regarding exemption of imported goods where conditions attached to the notification cannot, in law or in fact, be fulfilled by the importer.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Applicability of exemption under Notification No. 30/2004-CE (as amended) to imported raw silk fabric and levy of CVD

(a) Legal framework (as discussed)

2.1 The dispute turns on the interpretation and application of Notification No. 30/2004-CE dated 09.07.2004 granting exemption from excise duty, as amended by Notification No. 34/2015-CE dated 17.07.2015 and Notification No. 37/2015-CE dated 21.07.2015, read with Section 3 of the Customs Tariff Act concerning additional duty of customs (CVD).

2.2 The Court notes that Notification No. 34/2015-CE introduced a condition relating to payment of duty on inputs and non-availment of CENVAT credit by the manufacturer, and Notification No. 37/2015-CE clarified/relaxed that nil payment of duty on inputs would also qualify as "payment of duty".

(b) Interpretation and reasoning

2.3 The imports in question were self-assessed by the importer at NIL CVD on the basis that the goods were exempt from excise duty under Notification No. 30/2004-CE as amended by Notifications No. 34/2015-CE and 37/2015-CE.

2.4 The Tribunal relies on the Supreme Court's decision in SRF Ltd., wherein it was held that conditions in an exemption notification which imported goods are inherently incapable of meeting cannot be imposed on the importer, with the result that such conditions are treated as deemed satisfied for purposes of exemption from additional duty of customs.

2.5 The Tribunal refers to prior decisions where it was held that if the inputs contained in the imported commodity are not chargeable to duty of excise in India, there is no question of an Indian manufacturer availing CENVAT credit and consequently no basis for levy of CVD on the imported commodity. The Revenue did not contend that any input used in the imported fabric fell outside the tariff headings covered by the table to Notification No. 30/2004-CE.

2.6 The Tribunal notes a consistent line of decisions, including earlier Tribunal decisions dismissing Revenue appeals on the same issue, which have attained finality and been affirmed by the Supreme Court, thereby settling the matter in favour of the assessee.

(c) Conclusions

2.7 The importer is entitled to exemption from levy of additional customs duty (CVD) on the imported raw silk fabric under Notification No. 30/2004-CE as amended, treating the conditions which cannot be complied with by the importer as deemed satisfied in line with SRF Ltd.

2.8 The self-assessment at NIL CVD on the imported goods is in accordance with law, and the benefit of CVD exemption is to be extended to the importer.

Issue 2: Effect of Supreme Court and other judicial precedents, and of 2015 amendments to Notification No. 30/2004-CE, on the levy of CVD

(a) Legal framework (as discussed)

2.9 The Tribunal discusses the Supreme Court's decisions in SRF Ltd., AIDEK Tourism Services Pvt. Ltd., and the Constitution Bench decision in Thermax Pvt. Ltd., as well as subsequent Supreme Court decisions including Motiram Tolaram, Lohia Sheet Products, Malwa Industries Ltd., and J.K. Synthetics, all interpreting Section 3 of the Customs Tariff Act and the nature of CVD.

2.10 The Tribunal considers the Madras High Court judgment in HLG Trading Co., which dealt with Notification No. 30/2004-CE and the vires of its amendments, and notes that this view was later overruled by the Supreme Court in an appeal arising from Prashray Overseas Pvt. Ltd., thereby restoring the Tribunal's earlier position.

(b) Interpretation and reasoning

2.11 The Tribunal observes that in appeals filed by the Revenue on the subject issue before the Supreme Court, the appeals were only admitted without grant of stay or issuance of notice, and there was no contrary pronouncement altering the legal position established in SRF Ltd. and related cases.

2.12 It is held that there is no change in the purport and scope of Notification No. 30/2004-CE or in the ratio of the Supreme Court's judgment in SRF Ltd. by reason of the 2015 amendments via Notifications No. 34/2015-CE and 37/2015-CE; the Supreme Court subsequently reaffirmed the SRF Ltd. judgment even after these amendments.

2.13 The Tribunal notes that Notification No. 34/2015-CE introduces a condition regarding payment of duty on inputs and non-availment of CENVAT, and Notification No. 37/2015-CE clarifies that nil duty payment on inputs qualifies as duty payment, but concludes that these amendments do not in any manner restrict or curtail the sweep of the SRF Ltd. decision.

2.14 Relying on AIDEK Tourism Services Pvt. Ltd. and the earlier Constitution Bench decision in Thermax Pvt. Ltd., the Tribunal emphasises that for the purposes of levy under Section 3 of the Customs Tariff Act, actual manufacture of a like article in India is not required; it is to be deemed that the imported article is manufactured in India, and the rate and extent of excise duty that would apply to a domestic manufacturer of a like article, including any exemptions, must be applied to determine CVD.

2.15 The Supreme Court's consistent view, as recapitulated by the Tribunal, is that the rate of CVD can only be that which an Indian manufacturer of a like article would pay under the Central Excise Act, including entitlement to any concessional, reduced, or NIL rate of duty under applicable exemption notifications.

2.16 The Commissioner (Appeals), whose order is under challenge by the Revenue, had correctly applied the SRF Ltd. and AIDEK Tourism line of authorities, holding that the amended Notifications No. 34/2015-CE and 37/2015-CE do not negate the principle that conditions impossible of compliance for importers cannot be enforced against them, and that such conditions stand deemed satisfied.

(c) Conclusions

2.17 The legal position emerging from SRF Ltd., AIDEK Tourism Services Pvt. Ltd., Thermax Pvt. Ltd., and subsequent Supreme Court decisions remains fully applicable after the 2015 amendments to Notification No. 30/2004-CE.

2.18 Importers are to be treated as deemed manufacturers for purposes of Section 3 of the Customs Tariff Act and are entitled to the same exemptions and concessional rates of excise duty (including NIL rate) as would apply to an Indian manufacturer of a like article under Notification No. 30/2004-CE as amended.

2.19 The 2015 amendments to Notification No. 30/2004-CE (by Notifications No. 34/2015-CE and 37/2015-CE) do not affect the entitlement of importers to exemption from CVD where the conditions imposed by the notification are incapable of being fulfilled by importers, and such conditions cannot be thrust upon them.

2.20 The Tribunal finds no reason to interfere with the orders of the Commissioner (Appeals) granting the benefit of CVD exemption; the Revenue's appeals are dismissed.

Issues: Whether the order taking cognizance and issuing summons against the petitioners, who were nominee non-executive directors, called for interference in exercise of inherent jurisdiction under Section 482 of the Code of Criminal Procedure, 1973.

Analysis: The petition challenged the summoning order on the grounds that the petitioners had been exonerated by other investigating agencies, were not in charge of the day-to-day affairs of the company, and that the special court had acted mechanically. The Court held that the stage of taking cognizance requires only a prima facie judicial satisfaction on the basis of the complaint and material placed before the court, and not a detailed evaluation of the merits or of disputed factual questions. It further held that exoneration by one investigating agency does not bind another agency or the court, particularly where the complaint under the Companies Act was founded on an independent SFIO investigation. The Court also noted that the question whether the petitioners were actually liable as non-executive or nominee directors, including in the light of Section 149(12) of the Companies Act, 2013, was a matter for trial and not for interference at the cognizance stage.

Conclusion: No ground for interference was made out. The summoning order was sustained and the challenge under Section 482 of the Code of Criminal Procedure, 1973 failed.

Final Conclusion: The petitioners were left to raise their defences before the trial court at the appropriate stage, and the proceedings against them were permitted to continue.

Ratio Decidendi: At the stage of cognizance and summons, the court is concerned only with whether the materials disclose a prima facie case, and it should not undertake a roving inquiry into disputed facts or treat exoneration by another agency as determinative.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the findings of violation of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, including Principles (1) and (4), and corresponding provisions under the SEBI (LODR) Regulations, 2015, in relation to non-disclosure and selective disclosure of unpublished price sensitive information, were justified.

1.2 Whether the appeal raised any substantial question of law warranting interference with the concurrent factual findings of the Adjudicating Officer and the Securities Appellate Tribunal regarding insider trading-related disclosure obligations.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Justification of SEBI's findings of violation of disclosure-related obligations under the 2015 Regulations and LODR Regulations

Legal framework (as discussed)

2.1 The Court referred to the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, in particular Principles (1) and (4), and to Sections 30(10) and 30(11) of the SEBI (LODR) Regulations, 2015.

2.2 Principle (1) stipulates prompt public disclosure of unpublished price sensitive information that would impact price discovery as soon as credible and concrete information comes into being, so as to make it generally available.

2.3 Principle (4) mandates prompt dissemination of unpublished price sensitive information that has been selectively disclosed, to make the same generally available.

Interpretation and reasoning

2.4 The Court noted that negotiations between the concerned entities had reached the stage of a non-binding term sheet dated 04.03.2020, preceded by confidentiality and non-disclosure arrangements.

2.5 It was noticed that, during ongoing negotiations, a news article dated 24.03.2020 in international media, followed by other media reports, disclosed that a preliminary deal for acquisition of a significant stake was close to being signed.

2.6 The Court examined SEBI's conclusion that there existed a statutory duty to disclose unpublished or selectively published price sensitive information so as to make it generally available, coupled with an embargo against insider trading, and found no infirmity in that conclusion.

2.7 The Court particularly relied on the uncontroverted factual scenario that, following publication of the news articles on 24-25.03.2020, the price of the relevant scrip rose by almost 15% on 25.03.2020 as against the previous day's closing price, whereas following the formal corporate announcement on 22.04.2020, the price rise was about 10%, which was comparatively lower.

2.8 On this basis, the Court accepted SEBI's and the Tribunal's inference that the information in question was price sensitive and that the regulatory obligation to ensure prompt and general availability of such information had been attracted and violated.

Conclusions

2.9 The Court held that the findings of SEBI and the Tribunal regarding violation of Principles (1) and (4) of the 2015 Regulations read with the relevant LODR provisions were justified on the facts.

2.10 No ground was made out to interfere with the imposition of monetary penalty as upheld by the Tribunal.

Issue 2 - Existence of any substantial question of law warranting interference

Interpretation and reasoning

2.11 The Court observed that the issues dealt with by SEBI and the Tribunal were substantially questions of fact, turning on appreciation of the factual matrix, including the stage of negotiations, the timing and content of media reports, and the market price movement.

2.12 The Court held that such factual determinations did not give rise to any substantial question of law requiring detailed examination or warranting interference in appellate jurisdiction.

Conclusions

2.13 The Court declined to reappreciate the concurrent factual findings of SEBI and the Tribunal.

2.14 The appeal was dismissed, and the penalty imposed for the insider trading-related disclosure violation stood affirmed; all pending applications were disposed of.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether applications under Section 95 of the Insolvency and Bankruptcy Code filed on 17.08.2022 against personal guarantors were barred by limitation, having regard to the initial date of default on 10.10.2017 and the Covid-19 limitation exclusion orders of the Supreme Court.

1.2 Whether the Supreme Court's suo motu orders in W.P. (C) No. 3 of 2020, as clarified on 10.01.2022, confer only a uniform 90-day period from 01.03.2022 in all cases where limitation would have expired between 15.03.2020 and 28.02.2022, or whether the balance actual period of limitation survives where it exceeds 90 days.

1.3 Whether, after applying the exclusion of time directed in the Supreme Court's Covid-19 orders, the present proceedings under the Insolvency and Bankruptcy Code (including initiation of PIRP/CIRP founded on Section 95 applications) were within limitation and liable to be entertained by the Adjudicating Authority.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Computation of limitation for Section 95 proceedings in light of Supreme Court's Covid-19 limitation orders

Legal framework (as discussed)

2.1 The Court referred to the orders passed by the Supreme Court in suo motu W.P. (C) No. 3 of 2020, particularly the order dated 10.01.2022 in M.A. No. 21 of 2022, which directed that:

(a) The period from 15.03.2020 till 28.02.2022 shall stand excluded for purposes of limitation under all general or special laws in respect of all judicial or quasi-judicial proceedings.

(b) The balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022.

(c) In cases where limitation would have expired between 15.03.2020 and 28.02.2022, all persons shall have a limitation period of 90 days from 01.03.2022, and where the actual balance period of limitation remaining from 01.03.2022 is greater than 90 days, that longer period shall apply.

2.2 The Court also relied on:

(i) The decision in Prakash Corporates v. Dee Vee Projects Ltd., wherein the Supreme Court treated the "eclipsed" Covid period as a period of exclusion analogous to Sections 12 to 15 of the Limitation Act, 1963, clarifying that such excluded period is not attributable to indolence of the litigant and results in enlargement of time over and above the prescribed period.

(ii) The decision in IL & FS Financial Services Ltd. v. Adhunik Meghalaya Steels Pvt. Ltd., where the Supreme Court held that under sub-para 1 of para 5 of the order dated 10.01.2022, the entire period from 15.03.2020 to 28.02.2022 stands excluded and limitation, reckoning from an acknowledged starting point, commences on 01.03.2022 and continues thereafter for the full statutory period.

Interpretation and reasoning

2.3 On facts, the date of default was 10.10.2017. In the ordinary course, the period of limitation of three years would have expired on 10.10.2020. As of 15.03.2020, the appellant still had 208 days of limitation remaining.

2.4 The Adjudicating Authority acknowledged the Supreme Court's suo motu orders but construed them to mean that, since the limitation would have expired between 15.03.2020 and 28.02.2022, only a fixed 90-day period from 01.03.2022 was available. On that basis, it held that the appellant was required to file on or before 30.05.2022, and hence the filing on 17.08.2022 was time-barred.

2.5 The Court rejected this approach, accepting the appellant's contention that, in terms of the Supreme Court's order dated 10.01.2022, the correct construction is:

(a) The entire period from 15.03.2020 to 28.02.2022 is to be excluded from computation of limitation.

(b) Where, as on 15.03.2020, a balance period of limitation remained which, when counted from 01.03.2022, exceeds 90 days, the actual remaining period applies, and not the minimum of 90 days.

2.6 Applying this interpretation, the Court held that:

(a) As on 15.03.2020, there were 208 days of limitation remaining for the appellant.

(b) By reason of the Covid exclusion order, this 208-day balance was to be reckoned afresh from 01.03.2022.

(c) Counting 208 days from 01.03.2022, the limitation would expire only on 25.09.2022.

(d) The petitions for initiating PIRP/CIRP based on Section 95 proceedings were in fact filed on 17.08.2022, which fell well within this extended period expiring on 25.09.2022.

2.7 The Court drew support from Prakash Corporates that the excluded Covid period operates like statutory exclusion under Sections 12-15 of the Limitation Act, whereby the prescribed period is effectively enlarged by removing from computation the excluded interval. It further relied on IL & FS Financial Services Ltd. to affirm that limitation, after exclusion of 15.03.2020 to 28.02.2022, begins afresh from 01.03.2022 for the entire balance period available under general law.

Conclusions

2.8 The Court concluded that the Adjudicating Authority erred in applying a rigid 90-day period from 01.03.2022 without considering that the balance limitation as on 15.03.2020 exceeded 90 days.

2.9 Correct application of the Supreme Court's Covid limitation orders required exclusion of the entire period from 15.03.2020 to 28.02.2022, with the consequence that the appellant's balance 208 days of limitation had to be counted from 01.03.2022, making the outer limit 25.09.2022.

2.10 Since the applications were filed on 17.08.2022, they were within the period of limitation and not time-barred.

2.11 The orders of the Adjudicating Authority dismissing the Section 95 applications as barred by limitation were set aside. The matters were remanded to the Adjudicating Authority with a direction to admit the CIRP on record and to proceed in accordance with law.

Issues: (i) Whether the statements retracted by the appellant and co-noticee could be relied upon for sustaining the findings of contravention when supported by independent corroborative material. (ii) Whether the penalty imposed on the appellant required reduction on the facts and circumstances of the case.

Issue (i): Whether the statements retracted by the appellant and co-noticee could be relied upon for sustaining the findings of contravention when supported by independent corroborative material.

Analysis: A retracted statement is not automatically excluded from consideration. It may be acted upon if the authority applies its mind to the retraction and if the statement is shown to be voluntary and is corroborated by independent and cogent evidence. The Tribunal found that the adjudicating authority had considered the retractions with reasons, and that the record contained corroborating material, including seized documents, cash recovery, evidence of travel expenses being funded, interception of foreign currency, and other connected statements pointing to the appellant's involvement.

Conclusion: The retracted statements were not rendered inadmissible merely by retraction, and the findings of contravention were sustained against the appellant.

Issue (ii): Whether the penalty imposed on the appellant required reduction on the facts and circumstances of the case.

Analysis: While upholding the substance of the adjudication, the Tribunal took note of the appellant's age, the amount already seized and adjusted, and the sum earlier deposited pursuant to the prior proceedings. In these circumstances, the Tribunal held that the ends of justice would be met by reducing the monetary penalty to a lower figure and directing adjustment of the amounts already available with the department.

Conclusion: The penalty was reduced to Rs. 9,00,000/- with adjustment of the amounts already deposited and seized.

Final Conclusion: The appeal succeeded only to the extent of reduction of penalty, while the finding of liability under the foreign exchange law was maintained.

Ratio Decidendi: A retracted statement may be relied upon when it is found to be voluntary and is materially corroborated by independent evidence; however, the quantum of penalty may still be moderated on equitable considerations without disturbing the substantive finding of contravention.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether consideration received under Memoranda of Understanding for setting up, staffing, training, monitoring and managing eye hospitals under collaborative arrangements is liable to service tax under the categories of (a) Management or Business Consultancy Service, (b) Manpower Recruitment or Supply Agency Service, and (c) Commercial Training or Coaching Service for the period 2008-09 to 2011-12.

1.2 Whether, in light of the nature of the arrangements and receipts, the classification principles under section 65A of the Finance Act, 1994 require treatment of the activities as a composite/integrated service of healthcare clinical management outside the levy of service tax.

1.3 Consequent upon the answer on merits, whether the extended period of limitation and penalties under sections 77 and 78 of the Finance Act, 1994 are sustainable (considered only to the extent rendered necessary by the finding on taxability).

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2 - Taxability and classification of consideration received under MOUs with other hospitals

Legal framework (as discussed)

2.1 The judgment considers the pre-negative-list "positive list" regime under the Finance Act, 1994 and the classification rule in section 65A, particularly section 65A(2)(b) relating to composite services to be classified according to the service which gives them their essential character.

2.2 The Court examines the CBEC Education Guide dated 20.06.2012 (issued for the post-01.07.2012 negative list regime) and holds it to be only an explanatory guidance document, not a statutory notification, circular or instruction, and therefore not binding. It is found inapplicable to the earlier positive-list period in issue.

2.3 Reliance is placed on CBEC Circular No. 109/03/2009-ST dated 23.02.2009, para 2.2, explaining that where parties share revenue on a principal-to-principal basis (illustrated therein by theatre-distributor revenue sharing), no taxable service is rendered by one to the other.

Interpretation and reasoning

2.4 The Court finds, on examination of the MOUs and Profit & Loss accounts, that the arrangements between the appellant hospital (a charitable trust) and the other hospitals/trusts are collaborative healthcare ventures on a principal-to-principal basis, with revenue sharing out of patient receipts and joint involvement in running clinical establishments.

2.5 The MOUs show that the appellant provides medical know-how, clinical supervision, standard operating procedures, administrative practices, deputation of doctors and staff, assistance in recruitment, sourcing of equipment, consumables, and training of personnel, while the partner hospitals provide infrastructure and funds. Day-to-day administration is to be carried out by committees in which the appellant is represented, indicating joint management of clinical establishments.

2.6 The consideration, described in the agreements and accounts as "royalty", "management fee", and reimbursements, is found on facts to represent:

(a) A fixed percentage of revenue from patients (3.5% or 5%),

(b) Training fees for doctors and other staff, and

(c) Reimbursements, or direct payments, of salaries, travelling and related outstation allowances for deputed staff.

2.7 The Court notes there is no stipulation of separate "service charges" for consultancy or manpower supply; remuneration is linked to hospital revenue and/or actual costs, and there is no material showing any profit-oriented consultancy mark-up or independent commercial consideration for distinct services.

2.8 Applying section 65A(2)(b), the Court treats the activities as composite services consisting of several elements (know-how, management inputs, deputation of staff, training etc.), to be classified according to the dominant/essential character. On the facts, the dominant character is held to be healthcare clinical management and integrated delivery of healthcare services through charitable clinical establishments.

2.9 The Court reasons that, in substance, the activity is that of hospitals/charitable trusts jointly providing healthcare to patients; the revenue-sharing and cost recovery mechanisms between joint venture partners do not convert this integrated healthcare activity into taxable "Management or Business Consultancy Service" or "Business Support Service".

2.10 As regards "Manpower Recruitment or Supply Agency Service", the Court finds that:

(a) Staff deputed to the MOU hospitals largely remained on the appellant's rolls,

(b) Salary reimbursements were at actual cost with no demonstrated mark-up, and

(c) The department has not produced any manpower supply contracts or invoices showing a profit element or independent manpower supply arrangement.

On these facts, deputation and reimbursement are held not to be taxable manpower recruitment/supply services.

2.11 On "Commercial Training or Coaching Service", the Court notes that the appellant and MOU hospitals are trusts/charitable institutions providing free eye care to a segment of patients and that training is imparted in the context of these collaborative healthcare institutions. The training fees and training activities are found to be part of the integrated clinical delivery system, not a standalone, profit-oriented commercial coaching activity or commercial coaching centre.

2.12 While the lower authorities had rejected the appellant's plea by treating the receipts as consideration for distinct taxable services, the Court holds that the correct legal approach is to view the arrangement as a composite healthcare management activity. The revenue's attempt to artificially trisect the arrangement into separate taxable services (management consultancy, manpower supply, commercial training) is rejected as inconsistent with section 65A(2)(b) and with the principal-to-principal/revenue-sharing nature of the relationship.

2.13 The Court also notes that the principle in CBEC Circular No. 109/03/2009-ST, that revenue-sharing arrangements on a principal-to-principal basis do not constitute provision of service by one to another, applies by analogy to these MOUs, reinforcing the conclusion that no taxable service is rendered inter se.

Conclusions

2.14 Receipts described as "royalty" or "management fee" under the MOUs are held to be revenue-sharing or cost-sharing arrangements integrally connected with collaborative provision of healthcare; they do not constitute consideration for a separate taxable Management or Business Consultancy Service or Business Support Service.

2.15 Reimbursement of salaries and related allowances for deputed staff, where employees continue on the appellant's rolls and reimbursements are at actual cost, is held not to amount to Manpower Recruitment or Supply Agency Service.

2.16 Training fees and training activities for medical and non-medical personnel, in the context of charitable clinical establishments providing free care to part of their patients, are held not to constitute "Commercial Training or Coaching Service" but to form part of integrated clinical delivery.

2.17 Applying section 65A(2)(b), the composite activity is classified as healthcare clinical management/integrated healthcare delivery, outside the scope of taxable services under the positive-list regime for the period in dispute. Consequently, the demand of service tax on the alleged three categories of services, along with interest and penalties, is held unsustainable and set aside in toto.

Issue 3 - Limitation and penalties

Interpretation and reasoning

2.18 In view of the finding that the activities do not amount to taxable services and that no service tax is payable on merits, the Court considers that examination of limitation (including the extended period) and the propriety of penalties under sections 77 and 78 is rendered academic.

Conclusions

2.19 As the entire demand fails on merits, the Court holds that there is no necessity to adjudicate on limitation or penalties; the demand of tax, interest and penalties is set aside and the appeal allowed with consequential relief.

1. ISSUES PRESENTED AND CONSIDERED

(1) Whether the invocation of the extended period of limitation for demand of service tax on renting of immovable property service was legally sustainable on the facts and circumstances of the case.

(2) Consequent upon the finding on limitation, whether the impugned demand of service tax with interest and penalty could be sustained in law.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (1): Legality of invoking the extended period of limitation

Interpretation and reasoning: The Court noted that the period of dispute was from 2007-08 to 2010-11 (up to September 2010), while the show cause notice was issued on 25.05.2011. It found that, as early as 2009, the Department was aware of the facts relating to payment, non-payment and short payment of service tax by the assessee, including through internal audit conducted in October 2009 and through correspondence between the assessee and departmental authorities concerning the levy of service tax on renting of immovable property service in light of the Delhi High Court decision in "Home Solutions". The Court held that this contemporaneous correspondence showed that the Department had been "kept in the loop" regarding the assessee's stand and the factual position, and that if at all the Department intended to raise a demand, it should have issued a show cause notice at that time. In the absence of any material establishing fraud, wilful misstatement, suppression of facts or similar conduct on the part of the assessee, the preconditions for invoking the extended period of limitation were held not to be satisfied.

Conclusions: The Court concluded that the show cause notice dated 25.05.2011 was barred by limitation and that the extended period of limitation could not be invoked in the facts of the case.

Issue (2): Sustainability of the demand of service tax, interest and penalty

Interpretation and reasoning: Having held that the show cause notice itself was time-barred and that the extended period was wrongly invoked, the Court held that the substantive demand of service tax, along with interest and penalty, which had been confirmed by the lower authorities, could not be sustained. In view of the finding on limitation, the Court considered it unnecessary to go into the further arguments on the merits, including the assessee's contentions regarding deduction of various taxes from the taxable value and the applicability of section 73(3).

Conclusions: The Court set aside the impugned order which had upheld the demand, and allowed the appeal on the ground of limitation, with consequential reliefs as per law.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the services provided to a Krishi Upaj Mandi Samiti / Rajya Krishi Utpadan Mandi Parishad during FY 2016-17 were exempt from service tax under Sl. No. 12(e) and 13(a) of Notification No. 25/2012-ST.

1.2 Whether a Krishi Upaj Mandi Samiti qualifies as a "governmental authority" within the meaning of Notification No. 25/2012-ST (as amended) read with Article 243W and the Twelfth Schedule to the Constitution.

1.3 Whether construction of roads within a mandi premises, not accessible to the general public, qualifies for exemption under Sl. No. 13(a) of Notification No. 25/2012-ST as "a road ... for use by general public".

1.4 What principles of interpretation apply to exemption notifications in fiscal statutes, and on whom lies the burden to establish eligibility to exemption.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Exemption for services to Krishi Upaj Mandi Samiti / "Governmental Authority" status

Legal framework (as discussed)

2.1 The Court considered Sl. No. 12(e) of Notification No. 25/2012-ST, which exempts specified services "provided to the Government, a local authority or a governmental authority" by way of construction, etc., of pipeline, conduit or plant for water supply, water treatment, or sewerage treatment or disposal.

2.2 Clause 2(s) of Notification No. 25/2012-ST, as originally issued and as amended by Notification No. 02/2014-ST dated 30.06.2014, defining "governmental authority," was reproduced. As amended, it reads in substance that "governmental authority" means an authority, board or body:

(i) set up by an Act of Parliament or State Legislature, or established by Government,

(ii) with 90% or more participation by way of equity or control,

(iii) to carry out any function entrusted to a municipality under Article 243W of the Constitution.

2.3 Article 243W of the Constitution and the Twelfth Schedule (listing municipal functions) were set out in full to examine whether the activities of Krishi Upaj Mandi Samiti fall within any such functions.

2.4 The Court referred extensively to the Supreme Court decision in Krishi Upaj Mandi Samiti, which distinguished between mandatory statutory functions and non-statutory/commercial activities for purposes of levy of service tax, and to later decisions following it, including on the strict scope of exemptions.

2.5 The Court also relied on the Constitution Bench decision in Dilip Kumar & Company on strict interpretation of exemption notifications and the burden on the assessee to prove applicability.

Interpretation and reasoning

2.6 The Court accepted that a Krishi Upaj Mandi Samiti is a statutory authority constituted under a State Act and may undertake certain commercial activities. However, for that body to qualify as a "governmental authority" under Notification No. 25/2012-ST, all the following cumulative conditions must be satisfied:

- It must be set up by an Act of Parliament/State Legislature or established by Government;

- It must have 90% or more participation by way of equity or control by Government; and

- It must be set up to carry out any function entrusted to a municipality under Article 243W.

2.7 After reproducing Article 243W and the entire Twelfth Schedule, the Court found itself "not in position to conclude" that the activities undertaken by Krishi Upaj Mandi Samiti fall under any of the functions enumerated therein. Accordingly, even though the body is constituted under a State Act, it does not satisfy the requirement of being established to carry out municipal functions under Article 243W.

2.8 In light of the Supreme Court ruling in Krishi Upaj Mandi Samiti, the Court emphasized that statutory bodies performing non-mandatory or commercial activities are not, by that fact alone, exempt from service tax; only activities strictly falling within the scope of the exemption (mandatory statutory functions, statutory fees, etc.) can qualify.

2.9 Applying the ratio of Dilip Kumar & Company, the Court held that exemption notifications must be strictly construed and no addition or expansion of the language is permissible. The assessee must strictly prove that it falls within the exemption; in case of ambiguity, the benefit goes to the Revenue and not to the assessee.

2.10 On facts, the impugned order had already examined the specific works contract services and concluded that exemption under Sl. Nos. 12(e) and 13(a) was not available. The Court found no material to dislodge that finding and no basis to extend the definition of "governmental authority" to the Mandi Samiti/Parishad.

Conclusions

2.11 Krishi Upaj Mandi Samiti / Rajya Krishi Utpadan Mandi Parishad does not qualify as a "governmental authority" under Notification No. 25/2012-ST as amended, read with Article 243W and the Twelfth Schedule.

2.12 The services in question provided to the said body do not fall within the exemption at Sl. No. 12(e) of Notification No. 25/2012-ST.

2.13 The assessee failed to discharge the burden of proving eligibility to exemption; strict interpretation leads to denial of claimed exemption on these services.

Issue 3: Exemption for roads not used by "general public" under Sl. No. 13(a)

Legal framework (as discussed)

3.1 Sl. No. 13(a) of Notification No. 25/2012-ST exempts services provided by way of construction, etc., of "a road, bridge, tunnel, or terminal for road transportation for use by general public."

3.2 The Court considered the factual finding in the impugned order that the roads constructed by the assessee were within the gated boundary of the mandi premises and not for general public use.

3.3 The Court relied on the decision of the Delhi Bench of the Tribunal in Warsi Buildcon, which interpreted Sl. No. 13(a) and the concept of "for use by general public," and noted the CBEC Master Circular (D.O.F. No. 334/1/2012-TRU dated 16.03.2012) clarifying that only roads for general public use are exempt; roads in factories or residential complexes are taxable.

Interpretation and reasoning

3.4 The impugned order recorded a clear factual finding that the roads were constructed "within the gated boundary wall of Mandi Sthal and are not used by general public." The Court noted that nothing contrary to this finding was on record.

3.5 Following Warsi Buildcon, the Court endorsed the distinction between:

- Roads, bridges, tunnels or terminals forming part of common infrastructure for use by the general public; and

- Roads constructed within specific premises (e.g., townships, residential complexes, or similar private/limited-access areas) for use of occupants or a limited class of users, which are not for "general public."

3.6 The definition of "general public" as a body of people at large with a public or impersonal character supports restricting the exemption to truly public-use infrastructure. Construction of internal roads for limited or restricted users cannot be treated as being "for use by general public" within the meaning of Sl. No. 13(a).

3.7 Applying strict interpretation of exemption provisions, the Court held that the utility criterion-general public versus limited/private users-is decisive, and there is no scope to expand the exemption to internal mandi roads.

Conclusions

3.8 Roads constructed within the gated mandi premises, not meant for and not used by the general public, do not qualify for exemption under Sl. No. 13(a) of Notification No. 25/2012-ST.

3.9 The service tax demand on construction of such roads is valid; exemption under Sl. No. 13(a) is not available.

Issue 4: Principles governing interpretation of exemption notifications and their application

Legal framework (as discussed)

4.1 The Court referred in detail to the Supreme Court decisions in:

- Krishi Upaj Mandi Samiti, emphasizing that exemption circulars and notifications must be read as per their plain language, distinguishing statutory functions from discretionary/commercial activities;

- Dilip Kumar & Company, which laid down that exemption notifications are to be strictly construed, the burden is on the assessee, and ambiguity in exemption provisions is resolved in favour of the Revenue.

4.2 The Court also noted subsequent judicial affirmations (including Tata Power Delhi Distribution Ltd. and other Supreme Court and High Court decisions) that:

- Exemption notifications cannot be liberally construed;

- Conditions in the notification must be strictly fulfilled; and

- Activities of statutory bodies are taxable unless demonstrably and strictly covered by the exemption.

Interpretation and reasoning

4.3 The Court applied these principles to hold:

- The language of Notification No. 25/2012-ST and its definition of "governmental authority" cannot be expanded by implication or equitable considerations;

- The distinction between statutory/mandatory functions and discretionary/commercial activities is crucial; discretionary or revenue-earning activities of statutory bodies are not automatically exempt;

- Placement of certain activities of market committees in the negative list from 01.07.2012, as noted in the Supreme Court judgment, supports the view that earlier circulars did not grant broad exemptions.

4.4 The Court rejected any argument that general public character or public purpose of the body, by itself, suffices to claim exemption; the precise conditions of the notification must be demonstrably met.

Conclusions

4.5 Exemption notifications in service tax law must be applied strictly according to their text; equitable or purposive enlargement is impermissible where the language is clear.

4.6 The assessee bears the burden to prove that its services and the recipient fall squarely within the exemption conditions; failure to do so results in denial of exemption and sustenance of tax liability.

4.7 Applying these interpretative principles, the Court upheld the impugned order denying exemption under Sl. Nos. 12(e) and 13(a) of Notification No. 25/2012-ST, confirming service tax demand (with interest) and the mandatory penalty under Section 78, and dismissing the appeal.

1. ISSUES PRESENTED AND CONSIDERED

(1) Whether taxable services provided to a unit in a Special Economic Zone for authorised operations are exempt from service tax notwithstanding non-compliance with the procedural and documentary conditions prescribed in Notification No. 17/2011-ST, as amended.

(2) Whether the Appellate Tribunal can entertain additional written submissions filed by the appellant after conclusion of hearing and pronouncement of the order, in view of the doctrine of functus officio.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (1): Exemption for services provided to SEZ units despite non-compliance with Notification No. 17/2011-ST conditions

Legal framework (as discussed)

(a) Section 26(1)(e) of the Special Economic Zones Act, 2005 granting exemption from service tax on taxable services provided to a Developer or Unit to carry on authorised operations in a Special Economic Zone, subject to sub-section (2).

(b) Section 26(2) of the Special Economic Zones Act, 2005 empowering the Central Government to prescribe, by Rules under the SEZ Act, the manner and the terms and conditions subject to which such exemptions are to be granted.

(c) Section 51 of the Special Economic Zones Act, 2005 providing that the provisions of the SEZ Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

(d) Notification No. 17/2011-ST dated 01.03.2011 (as amended) issued under Section 93 of the Finance Act, 1994, prescribing an exemption mechanism and procedural conditions (Forms A-1, A-2, A-3 etc.) for services received by SEZ units/developers, including a refund route and conditions for availing upfront exemption.

(e) The impugned order's reliance on general principles of burden of proof for exemption claims, with reference to decisions emphasising strict compliance with exemption conditions.

(f) Judicial precedents discussed and relied upon by the Tribunal, including:

- Decisions holding that Section 26 read with Section 51 of the SEZ Act, 2005 overrides inconsistent conditions imposed under the Finance Act, 1994 and notifications issued thereunder, and that procedural lapses (non-filing of prescribed forms, non-fulfilment of notification conditions) cannot defeat substantive SEZ exemption where services are for authorised operations of SEZ units/developers.

- Judgments affirming that, due to Section 51, the charging provisions for service tax under the Finance Act, 1994 cannot operate to levy service tax on services covered by Section 26 SEZ exemption, and that exemption notifications under the Finance Act become redundant or merely duplicative in such context.

Interpretation and reasoning

(a) The Commissioner (Appeals) had treated the exemption as conditional strictly upon compliance with Notification No. 17/2011-ST procedures and documentation, holding that in absence of Forms A-1/A-2, reconciliation and supporting evidence, exemption could not be granted, and placing the full burden on the assessee to strictly prove eligibility.

(b) The Tribunal examined its own prior decisions and higher judicial authority on the interaction between the SEZ Act and the Finance Act, 1994, highlighting that:

- The SEZ Act is a special, later, and self-contained legislation for SEZs, with Section 51 conferring overriding effect over inconsistent provisions of other laws.

- Section 26(1)(e) directly grants exemption from service tax on taxable services provided to SEZ Developers/Units for authorised operations, and the "terms and conditions" referred to in Section 26(2) must be prescribed only by Rules made under the SEZ Act (as per the definition of "prescribed" in Section 2(w) of the SEZ Act), not by notifications under the Finance Act, 1994.

- Once the manner and conditions for SEZ exemptions are prescribed in Rules framed under the SEZ Act (such as the SEZ Rules), the field is fully occupied, and conditions in notifications issued under the Finance Act cannot curtail or override the substantive exemption under Section 26.

- Notifications under Section 93 of the Finance Act, 1994 are of general application to taxable services, whereas Section 26 of the SEZ Act is a special provision specifically for SEZ Developers/Units; by virtue of Section 51, the special SEZ provisions prevail.

(c) The Tribunal followed judicial findings that:

- Exemptions under Section 26 SEZ Act are not dependent on additional or inconsistent conditions in service tax notifications (e.g., filing Forms A-1/A-2) when such conditions are not mandated by the SEZ Act/SEZ Rules.

- Denial of SEZ exemption cannot be based merely on non-compliance with procedural requirements in Finance Act notifications where the substantive conditions of Section 26 and SEZ Rules are satisfied, and where the services are to SEZ units/developers for authorised operations.

- In view of Section 51, the charging provisions for service tax under the Finance Act, 1994 stand overridden, to the extent of services covered by Section 26 SEZ exemption, and hence the existence or non-fulfilment of conditions in Finance Act exemption notifications is legally inconsequential for such SEZ supplies.

(d) Applying the above principles, the Tribunal held that the lower authorities erred in treating non-compliance with the procedures and documentary conditions of Notification No. 17/2011-ST as fatal to the claim of exemption for services provided to an SEZ unit.

(e) The Tribunal, consistent with its prior decisions (including one of the same Bench) and in line with binding higher court precedents, concluded that the demand of service tax, interest and penalties on the services provided to the SEZ unit could not be sustained on merits solely for alleged non-fulfilment of notification procedures.

Conclusions

(a) Services provided by the appellant to the SEZ unit for authorised operations are covered by the exemption under Section 26 of the SEZ Act, 2005, which has overriding effect by virtue of Section 51 of the SEZ Act.

(b) Procedural lapses or non-compliance with conditions in Notification No. 17/2011-ST (including absence of prescribed forms and documentary evidences as required by that notification) cannot, by themselves, be a valid ground to deny the SEZ exemption when the services are to an SEZ unit for authorised operations.

(c) The confirmation of service tax demand, interest and penalties by the lower authorities, based on non-compliance with Notification No. 17/2011-ST and alleged failure to prove exemption, is unsustainable on merits and stands set aside.

(d) Having allowed the appeal on merits, the Tribunal expressly declined to record any finding on limitation or the validity of invoking the extended period.

Issue (2): Competence of the Tribunal to consider additional submissions after pronouncement - functus officio

Legal framework (as applied)

The Tribunal proceeded on the general principle of functus officio - that upon pronouncement of its order after hearing is concluded, the adjudicating body becomes functus officio and cannot entertain further submissions or reopen the decided matter.

Interpretation and reasoning

(a) After conclusion of the hearing and pronouncement of the order in open court on 01.12.2025, the appellant/appellant's counsel attempted to file additional written submissions via e-mail dated 03.12.2025.

(b) The Tribunal held that once the order had been pronounced on conclusion of hearing, it became functus officio and no longer had authority to consider or take on record any further submissions in relation to the decided appeal.

Conclusions

(a) Additional written submissions filed by the appellant after conclusion of hearing and pronouncement of order cannot be taken on record by the Tribunal.

(b) Such post-pronouncement submissions were summarily dismissed as not maintainable in view of the Tribunal being functus officio.

1. ISSUES PRESENTED AND CONSIDERED

(1) Whether CENVAT credit availed on inputs, capital goods and input services in the capacity of a manufacturer, maintained in a common CENVAT account, can be validly utilized for discharge of service tax liability on taxable output services.

(2) Whether any statutory bar, restriction, or requirement of specific nexus between input services and output services exists so as to prohibit such cross-utilization of CENVAT credit.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (1) & (2): Cross-utilization of CENVAT credit between manufacturing and output services; requirement of nexus

Legal framework

(a) The Court referred to Rule 3(1) of the CENVAT Credit Rules, which permits a "manufacturer or producer of final products or a provider of output service" to take credit of specified duties/taxes including excise duty and service tax and treats them as part of a common "Cenvat credit" pool.

(b) The Court took note of the judicial interpretation in earlier decisions, particularly the ruling holding that cross-utilization of credit on inputs and input services is not ruled out or barred, in the absence of a specific restrictive provision, and that Rule 7 relating to distribution of input service credit by an input service distributor is the only relevant restrictive framework.

Interpretation and reasoning

(c) The Court noted that the appellant is both a manufacturer of excisable goods and a provider of taxable output services, and that it availed CENVAT credit on inputs, capital goods and input services, maintaining a single/common CENVAT account/register.

(d) It was observed that such common pool of credit was utilized for payment of both: (i) central excise duty on clearance of finished goods, and (ii) service tax on taxable output services.

(e) Relying on the earlier decision in the appellant's own case and on binding/highly persuasive precedents, the Court adopted the view that the scheme of Rule 3(1) allows cross-utilization of credit between goods and services, and that there is no express prohibition or embargo in the CENVAT Credit Rules on using credit taken as a manufacturer for payment of service tax on output services.

(f) The Court endorsed the reasoning that any administrative difficulty in scrutiny and verification of accounts does not amount to a legal bar to cross-utilization, particularly where departmental circulars themselves guide officers on such cross-utilization.

(g) The Court accepted the principle that, in the absence of a specific restrictive provision governing cross-utilization of credit, and where credit is taken and utilized from a common pool for both excise duty and service tax, denial of such utilization on the ground of lack of nexus between input services and output services is unsustainable.

Conclusions

(h) The Court held that CENVAT credit validly availed on inputs, capital goods and input services in the common CENVAT register could be utilized for payment of service tax on output services, and that such cross-utilization is legally permissible.

(i) The allegation that there must be a distinct "nexus or integral connection" between the particular input services and the specific output service, as a condition to utilize credit for service tax payment, was rejected in the absence of an express statutory restriction.

(j) Consequently, the disallowance of CENVAT credit of Rs. 1,77,70,613/-, the corresponding demand of service tax, interest, and the penalty imposed under Section 78 of the Finance Act, 1994 read with Rule 15(3) of the CENVAT Credit Rules, 2004 were set aside in toto.

(k) The appeal was allowed and the appellant was held entitled to consequential relief in accordance with law.

1. ISSUES PRESENTED AND CONSIDERED

(1) Whether the invocation of the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994, for demand of service tax for 2016-17 was valid in the facts of the case.

(2) Whether the ingredients of "fraud, collusion, wilful misstatement, suppression of facts or contravention with intent to evade payment of service tax" were either properly alleged in the show cause notice or established in the orders, so as to sustain the extended period, interest and penalties under Sections 75, 78 and 70 of the Finance Act, 1994.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (1) & (2): Validity of invocation of extended period of limitation under Section 73(1) proviso; requirement of suppression / intent to evade; effect on demand, interest and penalties

Legal framework (as discussed)

(a) Section 73(1) of the Finance Act, 1994, prescribing the normal limitation period for issuance of show cause notice where service tax has not been levied/paid or has been short-levied/short-paid.

(b) Proviso to Section 73(1) of the Finance Act, 1994, permitting extension of the limitation period to five years where non-payment/short payment of service tax is "by reason of fraud, collusion, wilful misstatement, suppression of facts or contravention of any provisions of the Act or rules with intent to evade payment of service tax".

(c) Discussion by the adjudicating authority and the first appellate authority on the text and scope of the proviso, and their conclusion that non-declaration in ST-3 returns constituted suppression of facts justifying extended period.

(d) Reliance placed by the Tribunal on the principles laid down by the Supreme Court in Uniworth Textiles Ltd. regarding: (i) the meaning of "wilful"; (ii) burden on the Revenue to prove mala fide conduct; and (iii) need for specific and explicit averments in the show cause notice when invoking an extended limitation provision.

Interpretation and reasoning

(i) The Tribunal noted that the demand for 2016-17 (ultimately confined by the appellate authority to October 2016-March 2017) was raised through a show cause notice dated 21.04.2022, i.e. beyond the normal limitation period, and was sustainable only if the extended period under the proviso to Section 73(1) was validly invoked.

(ii) The first appellate authority had treated non-declaration of the full taxable value in ST-3 returns, later surfaced from income-tax/TDS data, as a "clear and deliberate act of suppression of facts" with intent to evade payment of tax, and on that basis upheld invocation of the extended period, while dropping the demand for April-September 2016 as time-barred even under the extended period.

(iii) The Tribunal examined the show cause notice, the order-in-original, and the order-in-appeal, to identify whether there were concrete allegations and findings of "deliberate suppression" or "wilful" conduct with intent to evade. It found that:

    (a) The show cause notice merely asserted that the appellant had "suppressed the fact of not paying Service Tax...with intent to evade", in general terms, by relying on the fact that the discrepancy was detected from data shared by the Income Tax Department.

    (b) The order-in-original reproduced the statutory language of the proviso to Section 73(1) and stated, in a general way, that extended period was correctly invoked, but did not record specific, case-based reasoning or evidence to establish fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade.

    (c) There was no discussion establishing any deliberate act of concealment or mens rea; no concrete material was cited to show that the appellant intended to evade tax, beyond the mere non-reflection of income in ST-3 returns.

(iv) The Tribunal recorded the undisputed factual position that:

    (a) The appellant was receiving commission from airlines on sale of tickets.

    (b) Part of such commission was shared with sub-agents; service tax was paid only on the portion retained by the appellant.

    (c) The authorities below themselves noted that the appellant had paid service tax through challans, inter alia in July 2016 and April 2017; these payments were appropriated against the demand.

    (d) The value shown in ST-3 returns was not treated as a relied-upon document in the proceedings, and there was no clear analysis correlating returns and payments.

(v) On these facts, the Tribunal inferred that the appellant was acting under a bona fide belief that service tax was payable only on the portion of commission retained by it, not on the entire amount received and then partly passed on to sub-agents. The consistent discharge of service tax on the retained portion, through declared challans, supported the inference of bona fides and negated a presumption of deliberate tax evasion.

(vi) Applying the ratio of Uniworth Textiles Ltd., the Tribunal emphasized:

    (a) The expression "wilful" implies a specific intent to do what the law forbids or to omit what the law requires; mere error, misunderstanding or wrong interpretation does not suffice.

    (b) The burden to prove mala fide conduct and the circumstances justifying extended period lies on the Revenue; serious allegations such as fraud, collusion, wilful misstatement or suppression demand proof of a high order.

    (c) The show cause notice must contain specific and explicit averments indicating which precise ground in the proviso (fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade) is alleged, and the factual basis for such allegation, to enable the assessee to meet the case.

(vii) On examining the record against these standards, the Tribunal held that:

    (a) The show cause notice and orders were couched in general statutory language, without concrete, case-specific particulars or evidence of wilful misstatement, active concealment or intent to evade.

    (b) The conduct of paying service tax on the retained portion of commission and filing returns, coupled with absence of clear findings of deliberate evasion, is more consistent with a bona fide misappreciation of tax liability than with fraud or suppression.

    (c) Mere difference between income-tax data/TDS records and ST-3 declarations, by itself, without proof of deliberate concealment and intent, is insufficient to lawfully invoke the extended period.

(viii) Consequently, the foundational requirement for the exercise of extended limitation under the proviso to Section 73(1) was held to be absent. The Tribunal therefore found "no merits in invocation of extended period of limitation for making this demand".

Conclusions

(a) The extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994, was not validly invoked, as neither the show cause notice nor the adjudication and appellate orders contained specific, substantiated allegations or findings of fraud, wilful misstatement, suppression of facts, or contravention with intent to evade payment of service tax.

(b) The appellant's payment of service tax on the retained portion of commission and the bona fide belief regarding the taxable value, as discerned from the record, negate any inference of deliberate suppression or intent to evade, and therefore disentitle the Revenue from resorting to the extended limitation period.

(c) In the absence of a valid invocation of extended limitation, the demand of service tax for the period in dispute, issued through show cause notice dated 21.04.2022, is barred by limitation.

(d) As the entire demand is unsustainable on the ground of limitation, the consequential levy of interest under Section 75 and penalties under Sections 78 and 70 of the Finance Act, 1994, also cannot survive.

(e) Without entering into the merits of taxability or valuation, the Tribunal set aside the demand, interest and penalties, and allowed the appeal on the short ground of limitation alone.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether penalties imposed on co-noticees under Rule 26 of the Central Excise Rules, 2002 can be sustained when the demand of duty and penalties against the main noticee, arising from the same show cause notice and Order-in-Original, have already been set aside by the Tribunal.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Sustainability of penalties on co-noticees after setting aside duty demand and penalties against main noticee

Legal framework (as discussed)

2.1 The penalties in question were imposed on co-noticees under Rule 26 of the Central Excise Rules, 2002 read with Section 174 of the Central Goods and Services Tax Act, 2017, pursuant to a common show cause notice and common Order-in-Original by which duty demand and penalties had been confirmed against the main noticee.

Interpretation and reasoning

2.2 The Tribunal notes that by the same Order-in-Original, central excise duty demand and associated penalties had been confirmed against the main noticee and another individual, and that those appeals had already been decided by the Tribunal vide a prior Final Order.

2.3 In the earlier Final Order, the Tribunal held that the Revenue had failed to establish on facts the manufacture of "Ready Mix Concrete (RMC)" by the main noticee, noting in particular: absence of inspection at the site; the assessee's registration under service tax and payment of service tax on job charges; the nature of invoices issued separately for material supply and job work; and the conclusion that what was produced and supplied was "concrete mix" which is not dutiable. It also held that, in view of the assessee's disclosures and service tax registration, the extended period of limitation under Section 11A(4) of the Central Excise Act, 1944 was not invocable.

2.4 On that basis, in the earlier Final Order the Tribunal set aside the entire duty demand and penalties against the main noticee and the other individual noticee.

2.5 Referring to this earlier adjudication, the Tribunal holds that once the foundational demand of duty and penalties against the main noticee arising from the same facts and show cause notice has been set aside, there remains no basis to sustain derivative or consequential penalties upon co-noticees.

2.6 The Tribunal applies the settled principle that where the demand of duty is set aside, penalties on co-noticees, which are premised upon that very demand and alleged contravention, cannot be sustained.

Conclusions

2.7 As the Order-in-Original confirming duty and penalties on the main noticee has been set aside by the Tribunal in the connected appeals, the penalties imposed on the present appellants as co-noticees under Rule 26 of the Central Excise Rules, 2002 cannot be upheld.

2.8 The impugned order is held to be unsustainable insofar as it relates to the present appellants, and the appeals are allowed, setting aside the penalties imposed on them.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether service tax paid on lease premium for land taken for setting up a cement packing plant qualifies as "input service" under Rule 2(l) of the CENVAT Credit Rules, 2004 post 01.04.2011.

1.2 Whether input services used prior to commencement of commercial production (including services relating to taking land on lease, procurement of machinery and setting up of plant) are eligible for CENVAT credit.

1.3 Whether CENVAT credit distributed by an Input Service Distributor (ISD) to the manufacturing unit can be denied and recovered at the recipient unit, and whether the marketing-related services in question qualify as input services.

1.4 Whether event management services used for business meetings and promotional events qualify as input services after the 2011 amendment to Rule 2(l) of the CENVAT Credit Rules, 2004.

1.5 Whether repainting work services fall within the exclusion relating to construction/works contract under Rule 2(l) of the CENVAT Credit Rules, 2004.

1.6 Whether invocation of the extended period of limitation and imposition of penalty were justified in the facts of the case.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Eligibility of CENVAT credit on lease premium for land used for setting up cement packing plant

Legal framework (as discussed)

2.1 The Tribunal examined Rule 2(l) of the CENVAT Credit Rules, 2004, particularly the scope of the "means" part ("in or in relation to manufacture... whether directly or indirectly") and the effect of the 01.04.2011 amendment which deleted "setting up" from the inclusive part but did not alter the main/"means" clause.

2.2 The Tribunal relied upon its earlier decision in M/s Shell India Pvt. Ltd., as affirmed by the High Court and with SLP dismissed by the Supreme Court, wherein it was held that deletion of "setting up" from the inclusive part does not exclude services used for setting up from the main part of the definition if they are used in or in relation to manufacture/output service and are not specifically excluded.

Interpretation and reasoning

2.3 The Tribunal held that services used for obtaining land on lease for setting up a factory are directly in relation to manufacture because, without such land, no factory can be set up and no manufacture can take place.

2.4 It reiterated that, post-2011, services that are used directly or indirectly "in or in relation to manufacture" continue to be covered by the main part of Rule 2(l), unless specifically excluded, and that the removal of "setting up" from the inclusive part does not affect this position.

2.5 Following Shell India and other Tribunal precedents (including Kellogs India, Pepsico India Holdings, and Sri Chamundeshwari Sugars) on similar facts, the Tribunal found that lease premium for land taken for setting up the factory is an eligible input service.

Conclusions

2.6 The Tribunal concluded that lease premium for land used for setting up the cement packing plant qualifies as "input service" under Rule 2(l) and that CENVAT credit on the corresponding service tax is admissible. The demand on this ground is unsustainable.

Issue 2: Eligibility of CENVAT credit on services used prior to commencement of commercial production (Rs. 36,97,114)

Legal framework (as discussed)

2.7 The Tribunal considered Rule 2(l) of the CENVAT Credit Rules, 2004 and the judicial view that services having nexus with future manufacturing activity qualify as input services even if used prior to commencement of commercial production.

Interpretation and reasoning

2.8 The services in question related to: (i) taking land on lease, (ii) procurement of machinery, and (iii) setting up of plant, all prior to commencement of manufacture.

2.9 The Tribunal accepted that, without these very services, the appellant could not undertake the manufacturing process and that they therefore have a direct nexus with the manufacturing activity.

2.10 It followed the reasoning in cited precedents (including decisions such as Tata Motors Ltd. and Shree Cement Ltd.) that there is no bar on availing CENVAT credit on input services received prior to commencement of commercial production, so long as there is a clear nexus with the intended manufacture.

Conclusions

2.11 The Tribunal held that the services received prior to commencement of production, being indispensable and directly related to the forthcoming manufacturing operations, qualify as input services. The disallowance of CENVAT credit of Rs. 36,97,114/- on this ground is not sustainable.

Issue 3: CENVAT credit distributed by ISD and its denial/recovery at recipient unit (Rs. 1,21,727)

Legal framework (as discussed)

2.12 The Tribunal considered the scheme of CENVAT credit for Input Service Distributor under Rule 7 of the CENVAT Credit Rules, 2004 and the principle that a recipient unit merely utilizes credit distributed by ISD, whereas the availment and incidence of tax are at the ISD level.

2.13 The Tribunal relied on the decision in M/s Metro Shoes Pvt. Ltd., which held that the assessee-recipient is not required, under the framework of Rules, to verify the eligibility or source of credit distributed by the ISD and that any dispute on admissibility must be addressed at the ISD level.

Interpretation and reasoning

2.14 The services in question were marketing-related services availed by regional marketing offices (Hyderabad, Bangalore, Chennai) for marketing of final products, on which service tax was paid and credit taken by the ISD at Bangalore, which then distributed the credit to the appellant.

2.15 The Tribunal found that: (i) the ISD had undisputedly borne the incidence of tax; (ii) the services were used for marketing of the final product, which is an activity in relation to manufacture; and (iii) under the CENVAT scheme, wrongful availment, if any, must be examined at the ISD level, not at the recipient unit which merely utilizes distributed credit.

Conclusions

2.16 The Tribunal held that CENVAT credit of Rs. 1,21,727/- distributed by the ISD could not be denied or recovered from the recipient unit and that the marketing services qualify as input services. The demand on this count is unsustainable.

Issue 4: Eligibility of CENVAT credit on event management / business meeting services (Rs. 90,716)

Legal framework (as discussed)

2.17 The Tribunal again applied Rule 2(l) of the CENVAT Credit Rules, 2004 post-2011 and examined whether event management services used for business meetings and promotional events are "in relation to" manufacture or provision of output activity.

2.18 The Tribunal relied on decisions such as Arris Group India Pvt. Ltd. and Honda Motorcycle and Scooter India Pvt. Ltd., which recognized event management services used for client/employee events and inaugural/promotional functions as eligible input services where they are linked to business, advertisement or promotion.

Interpretation and reasoning

2.19 The disputed amount of Rs. 90,716/- related to service tax paid on event management services provided by M/s Bigtree Advertising and Media Communications Pvt. Ltd. for business meetings held at the appellant's plant and for events aimed at marketing and promoting the appellant's cement products.

2.20 The Tribunal found these services to be inextricably linked and having direct nexus with the manufacturing and sale/marketing of the appellant's products, thus falling within the ambit of input service.

Conclusions

2.21 The Tribunal held that event management and business meeting services used for marketing, promotion and business discussions constitute input services and that CENVAT credit of Rs. 90,716/- is admissible. The denial of credit on the ground of "function/entertainment charges" is unsustainable.

Issue 5: CENVAT credit on repainting work vis-à-vis works contract/construction exclusion (Rs. 1,34,123)

Legal framework (as discussed)

2.22 The Tribunal considered the exclusion in Rule 2(l) of the CENVAT Credit Rules, 2004 for services in the nature of works contract or construction of building or civil structure, or construction of structure for support of capital goods.

Interpretation and reasoning

2.23 The services under dispute were repainting work services. The Department treated them as works contract/construction services falling within the exclusion.

2.24 The Tribunal held that the exclusion under Rule 2(l) is confined to specific types of works contract or construction activities, namely construction of building or civil structure and construction of support structures for capital goods.

2.25 The Tribunal found that the repainting work in question was a works service contract but did not amount to construction of a new building or civil structure, nor construction of support structures for capital goods, and hence does not fall within the excluded category.

Conclusions

2.26 The Tribunal concluded that repainting services are not covered by the works contract/construction exclusion and therefore qualify as input services. Disallowance of CENVAT credit of Rs. 1,34,123/- on this basis is untenable.

Issue 6: Validity of invoking extended period of limitation and imposition of penalty

Legal framework (as discussed)

2.27 The Tribunal considered the conditions for invoking the extended period under Section 11A of the Central Excise Act, 1944 read with Rule 14 of the CENVAT Credit Rules, 2004, namely the presence of suppression of facts, willful misstatement or intent to evade duty.

Interpretation and reasoning

2.28 It was noted that a departmental audit had been conducted at the corporate office for an earlier period (July 2012 to September 2014), resulting in an Order-in-Original dated 31.03.2016 with penalty, but no objection was then raised on the type of ineligible CENVAT credits now alleged.

2.29 The Tribunal observed that the current allegations are based entirely on documents maintained by the appellant and that the department was already in a position to examine these issues during the earlier audit.

2.30 In these circumstances, the Tribunal held that there was no basis to allege suppression or mala fide intent, and hence no justification for invoking the extended period of limitation.

Conclusions

2.31 The Tribunal held that invocation of the extended period of limitation and consequent penalties are unsustainable. The entire demand raised by invoking the extended period, along with penalties, is liable to be set aside.

Overall disposition

2.32 On cumulatively accepting the appellant's entitlement to CENVAT credit on all disputed heads and holding that extended limitation and penalties were wrongly invoked, the Tribunal set aside the impugned order in toto and allowed the appeal with consequential relief in accordance with law.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether CENVAT credit of service tax paid on transportation of goods by rail, availed on the basis of railway receipts and STTG Certificates for the period prior to 27.08.2014, is admissible under Rule 9 of the CENVAT Credit Rules, 2004.

1.2 Whether insertion of clause (fa) in Rule 9(1) of the CENVAT Credit Rules, 2004, with effect from 27.08.2014, excludes railway receipts and pre-27.08.2014 STTG Certificates as valid documents for availing CENVAT credit for the earlier period.

1.3 Whether interest and penalty are sustainable when CENVAT credit has been availed on railway receipts/STTG Certificates containing all particulars prescribed under Rule 9(1) of the CENVAT Credit Rules, 2004.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Admissibility of CENVAT credit on the basis of railway receipts and STTG Certificates prior to 27.08.2014; effect of insertion of Rule 9(1)(fa)

Legal framework (as discussed)

2.1 The Court noted that Rule 9(1) of the CENVAT Credit Rules, 2004 prescribes the documents on the basis of which CENVAT credit may be taken. By Notification No. 26/2014-CE(NT) dated 27.08.2014, clause (fa) was inserted in Rule 9(1), prescribing "a Service Tax Certificate for Transportation of goods by Rail (STTG Certificate) issued by the Indian Railways, along with the photocopies of the railway receipts mentioned in the STTG certificate" as a specified document.

2.2 The Court referred to the reasoning of the Tribunal in an earlier decision (JSW Steel) that Rule 9 regulates the nature of documents, is subservient to Rule 3 regarding admissibility of credit, and that Rule 9(2) read with Rule 4A of the Service Tax Rules permits acceptance of any document containing the prescribed particulars as a proper duty-paying document.

Interpretation and reasoning

2.3 The Court held that insertion of clause (fa) by Notification No. 26/2014-CE(NT) did not have retrospective effect and operated prospectively from 27.08.2014, but such insertion only prescribed an additional specified document; it did not render railway receipts or pre-27.08.2014 STTG Certificates invalid for availing credit.

2.4 It was observed that the appellant had availed CENVAT credit on transportation of goods by Indian Railways on the basis of railway receipts and STTG Certificates, which contained all relevant factual details required under Rule 9(1) of the CENVAT Credit Rules, 2004.

2.5 Relying on the earlier Tribunal decision (JSW Steel) and its own subsequent decision (Jai Balaji Industries), the Court accepted that: (i) Rule 9 only prescribes forms of documents and cannot, by itself, determine substantive eligibility where the conditions of Rule 3 are satisfied; (ii) where the duty/tax payment, genuineness of the document, and receipt of input services are not in dispute, credit cannot be denied merely on technical objections as to the nature of the document; and (iii) documents like railway receipts and STTG Certificates, containing all particulars prescribed under Rule 9(1), are to be treated as valid duty-paying documents even for the period prior to 27.08.2014.

2.6 The Court emphasized that even after introduction of clause (fa), railway receipts containing all relevant details continued to be valid documents for availment of CENVAT credit, and STTG Certificates issued prior to 27.08.2014 also remained valid for this purpose because they contained all prescribed particulars.

Conclusions

2.7 The Court concluded that CENVAT credit of Rs. 49,16,972/-, availed on the basis of railway receipts and STTG Certificates for the period prior to 27.08.2014, was correctly taken and is admissible to the appellant.

2.8 The disallowance of CENVAT credit based on the ground that STTG Certificates were prescribed as eligible documents only from 27.08.2014 was held to be unsustainable, and the denial of credit in the impugned order was set aside.

Issue 3: Sustainability of interest and penalty

Interpretation and reasoning

3.1 Having held that the appellant was entitled to the CENVAT credit on the basis of railway receipts and STTG Certificates, the Court found that there was no irregularity or illegality in the availment of such credit.

3.2 Since the basic demand of CENVAT credit itself was unsustainable, there was no question of any liability to pay interest on such credit, nor any occasion to impose penalty.

Conclusions

3.3 The demand of interest confirmed in the impugned order was set aside.

3.4 The penalty imposed on the appellant in the impugned order was also set aside.

3.5 The appeal was allowed with consequential relief as per law.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether a demand of central excise duty alleging clandestine manufacture and clearance can be sustained solely on the basis of electricity consumption without corroborative evidence.

1.2 Whether, in the absence of statutory norms and unit-specific investigation for electricity consumption, theoretical/arithmetic calculations of production based on power usage can validly form the basis of excise demand.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Sustainability of excise demand based solely on electricity consumption

Interpretation and reasoning

2.1 The Tribunal noted that the show cause notice and the impugned demand were founded exclusively on the alleged excess consumption of electricity in the induction furnace, applying assumed units of power per metric tonne of ingots and inferring suppressed production on that sole basis.

2.2 The Tribunal held that, for alleging clandestine manufacture and clearance, the burden lies on the Department to adduce corroborative evidence covering, inter alia, purchase of additional raw materials, actual manufacture of finished goods, dispatch and movement of finished goods, details of alleged buyers and vendors, and financial flow (including cash transactions) connected with such alleged clearances.

2.3 It was observed that while the Department is not required to establish every single detail with mathematical precision, it must at least produce "proper corroborative evidence" to support the allegation of clandestine production; mere reliance on electricity consumption, in isolation, is insufficient.

2.4 The Tribunal emphasized that in the present case no corroborative evidence of excess procurement of inputs, conversion into finished products, or clearance of such goods was produced; the demand rested entirely on electricity consumption and a theoretical production formula.

2.5 The Tribunal referred to and relied upon judicial precedents where it has been held that electricity consumption alone cannot be treated as substantive evidence of clandestine production, including decisions holding that excess or abnormal power consumption is, at best, a corroborative factor and not an independent foundation for duty demand.

2.6 The Tribunal noted that High Court decisions, as discussed in the order, have consistently affirmed that mere excess electricity consumption, without supporting evidence regarding raw materials, manufacture, and clearances, does not raise a presumption of duty evasion, and that such view has been left undisturbed by the Supreme Court.

Conclusions

2.7 The Tribunal concluded that a central excise demand cannot be sustained solely on the basis of electricity consumption data, in the absence of corroborative evidence of clandestine manufacture and removal.

2.8 As the Department had relied only on electricity consumption, with no independent or supporting material, the demand was held to be unsustainable in law and liable to be set aside.

Issue 2: Validity of theoretical production calculations and absence of statutory norms/unit-specific investigation

Legal framework (as discussed)

2.9 The Tribunal took note of the legal position, as discussed in earlier judicial pronouncements, that norms of electricity consumption for determining production under central excise cannot be arbitrarily assumed and that, where specific rules contemplate fixation of norms, the competent authority is required to prescribe and notify such norms and investigate deviations taking into account factors such as type and quality of inputs, labour, material, power conditions, and plant-specific variables.

Interpretation and reasoning

2.10 The Tribunal observed that production capacity in induction furnaces depends on several variables, including product mix, quality of scrap, quality and efficiency of power, and other operational conditions; hence, a universal or uniformly applicable standard of electricity consumption per metric tonne cannot be mechanically adopted.

2.11 It was noted that there was no experiment or study conducted in the appellants' own factory to devise unit-specific norms of electricity consumption for producing one metric tonne of steel ingots, and no statutory norm was shown to have been fixed or notified for the appellants' unit.

2.12 The Tribunal referred to judicial findings that electricity consumption varies from heat to heat, day to day, and even within the same day, and therefore an "imaginary" or theoretical production figure based solely on a standard unit-consumption ratio, without factory-specific investigation, cannot validly determine excise liability.

2.13 The Tribunal also noted that reliance on general or theoretical reports on electricity consumption (such as the report commonly attributed to a technical expert) has been judicially criticized, and that such material, without corroboration and unit-specific verification, does not constitute substantive evidence of suppressed production.

Conclusions

2.14 The Tribunal held that, in the absence of prescribed statutory norms and without any experiment or unit-specific investigation in the appellants' factory, the theoretical/arithmetic calculation of production based on assumed electricity consumption per metric tonne could not form a valid legal basis for raising duty demand.

2.15 It was concluded that the methodology adopted by the Department-deriving alleged excess production solely from power consumption figures and presumed norms-was contrary to the settled legal position and unsustainable.

Overall Disposition

2.16 Applying the above reasoning, and following the ratio of the cited High Court decisions, the Tribunal set aside the impugned order and allowed the appeals with consequential relief in accordance with law.

Issues: Whether the product "Nescafe Premix" was classifiable under Entry C-II-3 of Schedule C Part II of the Bombay Sales Tax Act, 1959 as "coffee" or "instant coffee", or under Entry C-II-18(2) as powders from which non-alcoholic beverages are prepared.

Analysis: The product was used by adding hot water to prepare the final drink, and its contents included soluble coffee powder along with sucrose, milk powder, and maltodextrin. The percentage of coffee was not ative for classification. For tax classification, the article had to be understood in common parlance or commercial sense, not by a scientific or technical analysis of ingredients. On that test, the product was understood as coffee or instant coffee. Entry C-II-3 was a specific entry covering coffee and instant coffee, while Entry C-II-18(2) was a general entry for powders from which non-alcoholic beverages are prepared. A specific entry prevails over a general one where the goods fit the specific description.

Conclusion: The product was correctly classifiable under Entry C-II-3 and not under Entry C-II-18(2), and the reference was answered in favour of the assessee.

Issues: (i) whether the bail granted to the accused should be cancelled; (ii) whether the condition restricting the accused to the city of Kolkata after release on bail should be modified; (iii) whether delay in presenting the modification application should be condoned.

Issue (i): whether the bail granted to the accused should be cancelled.

Analysis: Cancellation of bail requires a demonstrated breach of bail conditions or circumstances showing that continued liberty would imperil the trial. The application was founded mainly on apprehensions of influence over witnesses and alleged hostility in the prosecution evidence, but no conclusive material established that the accused had breached the terms of bail or that cancellation had become necessary at the then stage of trial. The Court also noted the progress already made in the trial.

Conclusion: The prayer for cancellation of bail was rejected.

Issue (ii): whether the condition restricting the accused to the city of Kolkata after release on bail should be modified.

Analysis: A condition imposed while granting bail can be altered only on a substantial change in circumstances or where the restraint is shown to be unjustified. The Court held that the restrictive condition was part of the careful balance struck while enlarging the accused on bail, and no significant fresh circumstance had been shown to justify relaxation. The Court also accepted that the condition continued to serve the concern of witness protection and the integrity of the trial.

Conclusion: The prayer for modification of the bail condition was rejected.

Issue (iii): whether delay in presenting the modification application should be condoned.

Analysis: The delay related only to the presentation of the modification application and no prejudice was shown from condoning it.

Conclusion: The delay was condoned.

Final Conclusion: The criminal applications were finally disposed of by declining cancellation of bail and refusal to relax the bail restraint, while granting condonation of delay in the modification matter and leaving the trial court free to proceed in accordance with law.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether 18% GST is applicable on the services forming the subject-matter of the tender and, if so, how that affects bid evaluation.

1.2 Whether the tendering authority violated the tender conditions, particularly Annexure 9, Clause 6 and the "Method of Tender Evaluation and Price Comparison", by treating the successful bidder's quoted price as inclusive of GST and accepting an indemnity bond.

1.3 Whether the tender process and award decision were arbitrary, unfair, mala fide or otherwise vitiated, warranting interference in judicial review despite the limited scope of intervention in tender matters.

1.4 Whether, assuming infirmities in the tender process, the Court ought to set aside the award considering the stage of contract performance and public interest.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Applicability of 18% GST on the tendered services and its relevance

Interpretation and reasoning

2.1 The Court noted that the tendering authority sought a specific clarification from the GST Department by letter dated 21.03.2025 on applicability of GST to the services in question.

2.2 The GST Department, by letter dated 25.03.2025, clarified that under Notification No. 11/2017 (Central Tax Rate) dated 28.06.2017, 18% GST is chargeable on "Human Health & Social Care Services".

2.3 The Court held that the services under the tender, being NAT testing and related services, fall within "Human Health and Social Care Services" and therefore attract GST at 18%.

2.4 The contrary position urged on the basis of Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017 was not examined substantively, as the Court relied on the contemporaneous departmental clarification from the GST authority and was not called upon to adjudicate upon the correctness of that notification or the clarification itself.

Conclusions

2.5 The Court concluded that 18% GST is applicable to the services forming the subject of the tender, and answered the issue of chargeability of GST in the affirmative.

Issue 2 - Whether the tendering authority violated tender conditions by treating the successful bidder's price as inclusive of GST and accepting an indemnity bond

Legal framework discussed

2.6 Annexure 9 (Price Bid) required bidders to indicate: (a) "Rate per reportable test (without GST)" (Column D), (b) "% GST" (Column E), (c) "Final reportable test (including GST) in Rs." (Column F), and (d) "Total amount during contract (including GST)" (Column G = C × F). The note specified that L1 would be selected on the basis of the grand total of Column G.

2.7 Clause II (Taxes & Duties) of the tender provided that prices "shall be inclusive of all taxes & duties leviable including GST and Entry tax etc. and the Purchaser shall not be liable for the same" [sub-clause (ii)], and that if tax rates change during performance, an equitable adjustment to the contract price would be made [sub-clause (iv)].

2.8 Clause IV(xvi) (Price Negotiation) of the General Terms and Conditions permitted negotiations with the lowest quoted technically qualified bidder (L1) in exceptional circumstances, with prior approval of the competent authority.

Interpretation and reasoning

2.9 The Court accepted that Annexure 9 is an integral and relevant part of the tender, and that all fields (including indication of GST) are material for price comparison.

2.10 It was undisputed that the successful bidder did not specify, in Annexure 9, whether Rs. 945/- CPRT was with or without GST, and indicated 0% GST, whereas the other bidder quoted CPRT, GST at 18% and the corresponding total.

2.11 The Court observed that at the time of tender issuance, the tendering authority itself was evidently uncertain about the GST position, which led to divergent stands by the two bidders on applicability of GST and to the subsequent reference to the GST Department.

2.12 On harmonising Annexure 9 with Clause II, the Court held that while Annexure 9 requires separate disclosure of CPRT without and with GST, Clause II(ii) clearly mandates that quoted prices are to be "inclusive of all taxes & duties including GST" and that the purchaser has no liability for such taxes.

2.13 The Court reasoned that Clause II(ii) must be given its plain and natural meaning; otherwise, it would be rendered otiose. Reading the tender conditions harmoniously, the Court held that the tendering authority was entitled to treat quoted prices as inclusive of GST and to evaluate bids on that basis.

2.14 In this light, the tendering authority's decision to treat the successful bidder's quoted CPRT of Rs. 945/- as inclusive of GST at 18% and to protect itself by obtaining an indemnity bond was considered to be within the contractual framework and commercial discretion of the authority.

2.15 The Court recognised that the indemnity bond was likely sought to safeguard the purchaser in view of Clause II and the GST clarification, and held that calling for such a bond did not, by itself, render the process arbitrary or perverse.

Conclusions

2.16 The Court held that, although Annexure 9 required explicit indication of GST, the overriding stipulation in Clause II(ii) permitting consideration of prices inclusive of GST justified the tendering authority's approach.

2.17 The award of the contract to the successful bidder on the footing that its quoted price was inclusive of 18% GST, coupled with an indemnity bond, was not found to be in violation of the tender conditions so as to warrant judicial interference.

Issue 3 - Alleged arbitrariness/unfairness in the tender process and scope of judicial review

Legal framework discussed

2.18 The Court referred to principles laid down in decisions on judicial review of tenders, including that: (a) tender processes are primarily commercial decisions of the State; (b) interference is limited to cases of arbitrariness, irrationality, mala fides, bias or violation of mandatory norms; and (c) there is no absolute obligation to accept the lowest bid, provided the decision is fair and reasonable.

2.19 The Court reiterated the tests from prior judgments that judicial review is confined to examining whether the process adopted or decision made is mala fide, intended to favour someone, or so arbitrary and irrational that no responsible authority could have reached it, and whether public interest is adversely affected.

Interpretation and reasoning

2.20 The Court noted the existence of multiple committees (pre-bid clarification, prequalification, technical evaluation, and price bid evaluation) as indicative of an institutional process, but did not treat this alone as conclusively negating arbitrariness.

2.21 The Court accepted that once the GST Department clarified that 18% GST was applicable, the tendering authority knew that both bidders would be subject to GST at the same rate. In such circumstances, fairness required that both bidders be treated even-handedly, including in any further clarification or price negotiation.

2.22 The Court held that the tendering authority, after receiving the GST clarification, ought to have called both bidders for further clarification or negotiations, especially in view of Clause IV(xvi) providing for negotiations with the L1 bidder in exceptional circumstances. Restricting the indemnity arrangement to only one bidder without extending a comparable opportunity to the other was viewed as falling short of ideal fairness and transparency.

2.23 The Court regarded Annexure 9 as materially relevant, and noted as a "disturbing feature" that the successful bidder had not clearly stated whether its quote was inclusive of GST, yet its bid was regularised through the indemnity mechanism without parallel engagement with the other bidder.

2.24 The Court also took serious note of the incorrect instructions furnished to the Court earlier, where it was represented that services at both hospitals had commenced on 30.03.2025, while the record showed that installation and commencement at one hospital occurred only at the end of April 2025. The Court characterised this as falling within the doctrine of "suppressio veri suggestio falsi" and expressly deprecated such conduct, though it stopped short of initiating contempt proceedings.

2.25 At the same time, the Court found no conclusive material to hold that the process was tainted by mala fides or that the decision to award the contract to the successful bidder was so irrational or arbitrary as to be unsustainable in law.

Conclusions

2.26 The Court held that while the tendering authority's conduct displayed procedural lapses and lack of ideal fairness (particularly in not engaging both bidders equally post-GST clarification and in furnishing incorrect instructions to the Court), these did not cumulatively establish mala fides, bias, or such arbitrariness as would vitiate the entire tender process under the limited scope of judicial review.

2.27 Consequently, the tender award was not set aside on grounds of arbitrariness or unfairness, though the Court admonished the authority's conduct and emphasised the binding necessity of fairness and transparency in public tenders.

Issue 4 - Whether the contract should be quashed despite identified infirmities, in light of public interest and stage of performance

Interpretation and reasoning

2.28 The Court was informed that the contract period was one year, that services under the tender had been performed by the successful bidder since April 2025, and that the contract was due to end around March-April 2026.

2.29 The Court recognised that setting aside the award at that stage would cause significant disruption to ongoing NAT testing services in public hospitals and adversely affect public interest, which is of paramount importance in matters involving essential health services.

2.30 The Court also considered that the price difference between the two bidders was marginal in overall terms and that there was no challenge to the technical capability or performance standards of the successful bidder.

Conclusions

2.31 Weighing the identified procedural shortcomings against the advanced stage of contract performance and the potential disruption to public health services, the Court declined to interdict the contract.

2.32 The writ petition was dismissed, without costs, and the contract in favour of the successful bidder was allowed to continue until its natural expiry, with the Court's admonition to the tendering authority to adhere strictly to fairness, transparency and accuracy in future tender processes.