TaxTMI Updates e-Newsletter
Dec 16,2025

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether, for the purposes of the Insolvency and Bankruptcy Code, 2016, the effective date of approval of the resolution plan for the corporate debtor is 24 July 2019 or 4 September 2019.

1.2 Whether statutory tax demands for periods prior to the effective date of approval of the resolution plan could validly be raised against the corporate debtor after such approval, in light of the "clean slate" principle and binding effect of an approved resolution plan.

1.3 Consequentially, whether the impugned adjudication order raising demands for periods prior to the effective date of the resolution plan is liable to be set aside, with liberty to initiate fresh proceedings only for the post-approval period, and how limitation is to be computed for any such fresh proceedings.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Effective date of approval of the resolution plan (24 July 2019 vs 4 September 2019)

Legal framework (as discussed)

2.1 The Court referred to Section 31(1) of the Insolvency and Bankruptcy Code, 2016, which mandates that once the Adjudicating Authority is satisfied that the resolution plan meets the statutory requirements, it shall "by order approve the resolution plan", which upon such approval becomes binding on the corporate debtor and all specified stakeholders, including governmental authorities.

Interpretation and reasoning

2.2 The Court examined the NCLT order dated 24 July 2019 and noted that:

(a) The resolution plan was stated to be approved "with modifications" and was described as approved "subject to" submission of an additional affidavit accepting modifications and providing further information (paras 93, 97, 98).

(b) Critical aspects such as "exact source of funds" for the proposed investment amount and detailed break-up of CIRP cost, as well as remuneration of the monitoring agent, were specifically kept pending and directions were issued to bridge gaps in information and to file further details before the next listing (paras 95, 96, 97).

(c) The order itself fixed a subsequent date for filing the additional affidavit "regarding acceptance of the modifications in the Resolution Plan and submitting the other informations as per directions above".

2.3 The Court contrasted this with the subsequent NCLT order dated 4 September 2019, wherein it was recorded that every eventuality had been discussed in the approved resolution plan and, "in the circumstances, we hereby approve the resolution plan", directing immediate communication of the order to the Resolution Professional, Resolution Applicant, Corporate Debtor and IBBI.

2.4 The Court also relied on the view already taken by a Division Bench of another High Court, in proceedings concerning the same corporate debtor and the same resolution plan, which had treated 4 September 2019 as the date of approval of the resolution plan and applied the consequences under insolvency law on that basis.

2.5 While the respondent relied on the description of the 24 July 2019 order as an order under Section 31(1), IBBI website entries, and certain NCLAT orders that referred to 24 July 2019 as the approval date, the Court preferred to follow the substantive language of the NCLT orders themselves and the interpretation already adopted by coordinate Benches in matters involving the same parties and plan.

Conclusion

2.6 The Court held that the "final approval" of the resolution plan is to be taken as 4 September 2019, being the date on which the plan stood finally and unconditionally approved and the new management came into control of the company.

Issue 2 - Validity of post-resolution statutory tax demands for pre-approval periods in light of the "clean slate" effect of the resolution plan

Legal framework (as discussed)

2.7 The Court noted the binding effect of an approved resolution plan under Section 31(1) of the Insolvency and Bankruptcy Code, 2016, including upon governmental authorities to whom statutory dues are owed.

2.8 The Court cited the Supreme Court's enunciation that:

(a) Once a resolution plan is duly approved under Section 31(1), the claims provided in the plan stand frozen and are binding on all stakeholders, including Central and State Governments and local authorities.

(b) All claims not forming part of the approved resolution plan stand extinguished on the date of approval, and no person is entitled to initiate or continue proceedings in respect of such excluded claims.

(c) Statutory dues owed to governmental authorities, if not part of the resolution plan, stand extinguished and no proceedings in respect of such dues for the period prior to the date of approval can be continued.

2.9 The Court also referred to decisions of other High Courts dealing with the same corporate debtor, where:

(a) Composite tax demands covering periods both prior to and after the effective date of the resolution plan had been set aside; and

(b) Authorities were permitted to issue fresh notices only for the period after approval of the resolution plan, postulating that claims prior to that date stand governed and extinguished by the plan.

Interpretation and reasoning

2.10 The Court accepted the petitioner's contention that, since the takeover occurred pursuant to an approved resolution plan on a "going concern" and "clean slate basis", no fresh demand could be raised for any period prior to the effective date of approval of the resolution plan, as such claims had to be dealt with within the insolvency process and the plan.

2.11 Having determined that 4 September 2019 is the relevant approval date, the Court reasoned that:

(a) Any statutory dues relating to periods prior to 4 September 2019, if not incorporated in the resolution plan, stood extinguished on that date.

(b) Consistent with the binding precedents and coordinate High Court decisions involving the same company and plan, tax authorities cannot raise or continue demands for the pre-approval period after that date.

Conclusion

2.12 The Court concluded that no statutory tax demands could be validly raised or sustained for any period prior to 4 September 2019, those claims being governed by and subsumed in the approved resolution plan, with all non-included claims extinguished.

Issue 3 - Consequences for the impugned order, scope for fresh proceedings for post-approval period, and computation of limitation

Interpretation and reasoning

2.13 The impugned adjudication order raised demands for a period extending to years prior to the resolution plan's effective approval date. Given the finding that pre-4 September 2019 dues could not be the subject of fresh demands, the Court held that the impugned order, to the extent it covers periods prior to 4 September 2019, could not stand.

2.14 Following the approach of other High Courts in similar matters concerning the same petitioner, the Court considered it appropriate to permit the tax authorities to initiate fresh proceedings confined strictly to the period after 4 September 2019, to be adjudicated in accordance with law.

2.15 Since the pendency of the writ petition could affect the limitation period for issuance of a fresh show cause notice, the Court directed that the period during which the writ petition remained pending be excluded for the purpose of computing limitation.

2.16 To avoid future disputes on limitation, the Court specified that if any fresh show cause notice is issued by 15 February 2026, it shall be deemed to be within the period of limitation.

Conclusions

2.17 The impugned order raising demands for any period prior to 4 September 2019 was set aside.

2.18 The respondent authority was granted liberty to issue a fresh show cause notice for the period after 4 September 2019 only, and to decide such notice in accordance with law.

2.19 The period during which the writ petition remained pending stands excluded for limitation purposes, and any fresh show cause notice issued by 15 February 2026 shall be treated as issued within limitation.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether, after the 01.01.2022 amendments, proceedings under Section 129 of the CGST Act must be completed before invoking Section 130, or whether detention/seizure and confiscation remain independent and mutually exclusive regimes.

1.2 Effect of deletion of the non-obstante clause from Section 130 and retention in Section 129 - whether Section 129 overrides or renders Section 130 inapplicable in cases of goods and conveyance intercepted in transit.

1.3 Whether Section 67(6) of the CGST Act continues to permit provisional release of goods and/or conveyance once Section 129 has been amended and its linkage with Section 67(6) deleted.

1.4 Validity and applicability of Circular No. 41/15/2018-GST dated 13.04.2018 and the MOV procedure (including FORM GST MOV-10 & MOV-11) in the post-amendment regime, and the manner in which those forms may be used.

1.5 Scope and limits of the power to invoke Section 130 at the stage of interception in transit, including: (a) the requirement to establish "intent to evade payment of tax"; (b) reliance on minor/documentary discrepancies; and (c) the timeframe within which such opinion must be formed.

1.6 Whether "conveyance" is covered by the expression "goods" or "things" under Section 67(2) and Section 67(6), and the resulting impact on seizure and provisional release of conveyances vis-à-vis Sections 129 and 130.

1.7 Identification of the "proper officer" competent to exercise powers under Section 130 and issue FORM GST MOV-10/MOV-11, in light of Rule 138B of the CGST Rules and administrative orders.

1.8 Consequential relief and directions in respect of existing confiscation notices/orders (MOV-10/MOV-11) issued in the petitioners' cases.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2 - Relationship between Sections 129 and 130 post-amendment; effect of non-obstante clauses

Legal framework discussed

2.1 The Court examined amended Sections 129 and 130 of the CGST Act, the Finance Act, 2021, the Memorandum explaining the Finance Bill, 2021, and Minutes of the 39th GST Council Meeting, which expressly recorded the intention "to delink" proceedings under Section 129 from Section 130, and to delink both from Sections 73 and 74.

2.2 The Court relied upon the earlier Division Bench judgment in Synergy Fertichem Private Limited, which, on the pre-amendment text, had held that Sections 129 and 130 are independent and mutually exclusive, and that Section 130 is not dependent on Section 129(6), and can even be invoked at the threshold in appropriate cases.

Interpretation and reasoning

2.3 The legislative amendments (including deletion of the non-obstante clause from Section 130 and retention in Section 129) are understood as a formal "delinking" of the two provisions, not as making one subordinate to the other. Both provisions now operate independently within their respective fields.

2.4 Section 129 is a special, self-contained regime for detention, seizure and release of goods and conveyance in transit, with enhanced penalties and a recovery mechanism through sale/auction (Rule 144A, amended Rule 154). It applies where there is contravention in transit but no element of "intent to evade tax" is yet established.

2.5 Section 130, by contrast, is a confiscatory provision with grave consequences (vesting of title in Government) that is triggered where contraventions under clauses (i) to (v) are attended by "intent to evade payment of tax". It is not controlled by Section 129, and can be invoked both (a) after proceedings under Section 129, and (b) at the threshold in egregious cases, if requisite intent is made out.

2.6 The Court re-affirmed Synergy Fertichem that: (i) Section 130 is not dependent on Section 129 or its sub-sections; (ii) the power to confiscate does not arise only upon failure to pay penalty under Section 129; and (iii) even post-release under Section 129, authorities may initiate Section 130 proceedings if incriminating material later emerges.

2.7 On the non-obstante clause, the Court reiterated the settled principle that such clause gives overriding effect only in case of conflict. Since Sections 129 and 130 operate in different fields, there is no actual conflict. The presence of a non-obstante clause in Section 129, and its deletion from Section 130, does not bar or curtail the operation of Section 130 where "intent to evade tax" is established.

2.8 Section 129 "overrides" other provisions only to the extent of the detention/seizure/release mechanism in the absence of established intent to evade tax. Once elements of Section 130 are satisfied, confiscation can still be resorted to, even where goods were initially detained under Section 129.

Conclusions

2.9 Sections 129 and 130 remain independent, mutually exclusive provisions; Section 130 is not dependent on completion or failure of proceedings under Section 129.

2.10 The retention of the non-obstante clause in Section 129 and its deletion from Section 130 does not extinguish, subordinate or suspend the power of confiscation under Section 130 for goods or conveyance intercepted in transit.

2.11 Authorities are not required, as a matter of law, to complete the entire Section 129 process before invoking Section 130, provided the stringent conditions for invoking Section 130 (especially "intent to evade payment of tax") are met and properly recorded.

Issue 3 & 6 - Applicability of Section 67(6) after amendment; scope of "goods", "things" and "conveyance" under Sections 67, 129 and 130

Legal framework discussed

2.12 The Court analysed Sections 67(1), 67(2), 67(6), 129 (with the deletion of sub-section (2)), and the definitions of "goods" (Section 2(52)) and "conveyance" (Section 2(34)).

Interpretation and reasoning

2.13 Section 67(1) and (2) concern inspection, search and seizure at business premises, warehouses or other places, by a proper officer not below the rank of Joint Commissioner. Section 67(2) authorises seizure of goods and documents or books or "things" liable to confiscation, but does not itself confer confiscation power; confiscation is to be done under Section 130.

2.14 Applying noscitur a sociis, the word "things" in Section 67(2) is read in association with "documents or books", referring to articles or items found in premises, not to "conveyances". Hence, "conveyance" is not covered under "things" for Section 67(2) or 67(6).

2.15 Section 67(6) permits provisional release only of "goods so seized under sub-section (2)". With the deletion of Section 129(2), which earlier applied Section 67(6) mutatis mutandis to goods and conveyances detained in transit, the statutory link between Section 129 and Section 67(6) has been consciously removed.

2.16 Section 129 now independently regulates detention, seizure and release of both goods and conveyance in transit; the remedy of provisional release under Section 67(6) for goods or conveyance seized under Section 129 is no longer available.

2.17 "Conveyance" is separately defined and deliberately kept distinct from "goods" in Sections 129 and 130. It is therefore incorrect to treat conveyance as "goods" or as "things" under Section 67(2)/(6) for the purpose of seizure and provisional release in transit cases.

Conclusions

2.18 After the 01.01.2022 amendment and deletion of Section 129(2), Section 67(6) cannot be invoked for provisional release of goods or conveyance seized or detained under Section 129.

2.19 For transit-related seizure/detention, the only mechanism for release (including of conveyance) is that expressly provided under Section 129 and the applicable rules; Section 67(6) is confined to goods seized under Section 67(2) in premises-based search and seizure.

2.20 Conveyance seized in transit cannot be released under Section 67(6); its seizure/release/confiscation must follow Sections 129 and 130 only.

Issue 4 & 7 - Validity and use of Circular dated 13.04.2018, MOV-forms and identification of proper officer under Section 130 and Rule 138B

Legal framework discussed

2.21 The Court considered Circular No. 41/15/2018-GST dated 13.04.2018 (issued under Section 168), particularly paragraph 2(l); FORM GST MOV-10 and its text; Rule 138B and Rule 138C of the CGST Rules; and orders/circulars specifying the "proper officer" for Section 130.

Interpretation and reasoning

2.22 The Circular prescribes the procedural sequence of interception, inspection, detention, release and confiscation through MOV-forms (MOV-01 to MOV-11). Being issued under Section 168 to secure uniform implementation, it is valid unless it contradicts the statute. The Court found no such inconsistency; the Circular tracks and operationalises statutory provisions.

2.23 Paragraph 2(l) and FORM MOV-10 permit the proper officer, "where the proper officer is of the opinion that such movement of goods is being effected to evade payment of tax", to directly invoke Section 130 by issuing MOV-10, specifying tax, penalty and fine under Section 130 read with Section 122.

2.24 MOV-10 is thus permissible only where the officer forms a bona fide opinion, on concrete material, that movement is with intent to evade tax, not merely on minor or technical defects. It cannot be issued mechanically, nor used to bypass Section 129 in ordinary contravention cases lacking such intent.

2.25 Rule 138B authorises interception and physical verification of conveyance/e-way bills. Its proviso requires that where interception is based on specific information regarding evasion of tax, physical verification may be carried out by an officer only after obtaining approval of the Commissioner or authorised officer.

2.26 Administrative circulars designate the proper officer for exercising powers under Section 130(1)-(7) as Deputy/Assistant Commissioner (Central Tax) or Assistant Commissioner of State Tax. Therefore, MOV-10/MOV-11 must be issued by the properly empowered jurisdictional officer; confiscation orders by officers lacking such authority are without jurisdiction.

Conclusions

2.27 Circular dated 13.04.2018 and the MOV-form procedure, including MOV-10/MOV-11, are intra vires and remain applicable post-amendment, subject to being applied consistently with Sections 129 and 130.

2.28 MOV-10 (notice of confiscation) may be issued directly at the stage of detention/seizure only where the officer, based on facts and after necessary approval under Rule 138B (where required), forms a reasoned opinion that movement is with intent to evade tax.

2.29 Only officers notified as "proper officers" for Section 130 may issue MOV-10/MOV-11; any confiscation action taken under these forms by officers not so authorised is illegal and without authority.

Issue 5 - Conditions, limits and timing for invoking Section 130 at interception; "intent to evade" and use of document discrepancies/portal data

Legal framework discussed

2.30 The Court relied on Section 130(1) ("with intent to evade payment of tax"), Sections 68 and 129 (interception/detention in transit), Rules 138B and 138C, and the clarificatory Circular dated 14.09.2018 (CBEC/20/16/03/2017-GST) regarding minor errors in documents/e-way bills.

2.31 The Court also followed the reasoning of Synergy Fertichem on when Section 130 may be invoked at the threshold, including the need for a strong, good-faith case and the necessity of recording reasons.

Interpretation and reasoning

2.32 Detention, seizure and confiscation are distinct stages: (i) detention - temporary withholding pending verification; (ii) seizure - taking possession upon confirmation of irregularities/contraventions; (iii) confiscation - final, punitive stage, only when contraventions are established with intent to evade tax.

2.33 For goods in transit, the proper officer must, at the time of interception and within the time limits of Rule 138C (summary in 24 hours; final report in 3 days, extendable by another 3 days), decide whether there is prima facie "intent to evade tax". If such intent is not made out within this frame, the officer must proceed only under Section 129.

2.34 Confiscation is a measure of "last resort" with drastic consequences and cannot be founded on mere suspicion or ipse dixit. The opinion on "intent to evade tax" must arise from objective, concrete material such as forged/absent documents, fake registrations, clearly deceptive mismatch of goods or destination, etc., not from trivial discrepancies.

2.35 The Circular dated 14.09.2018 clarifies that proceedings under Section 129 should not be initiated for minor "first degree" errors (e.g. spelling mistakes in names, minor PIN code error not affecting validity, minor vehicle number mismatch, small HSN digit error where tax rate is correct). The Court extended this logic: such minor aberrations cannot justify seizure or confiscation.

2.36 Where contraventions are of a "second degree" i.e. there is violation of the Act/Rules but no clear nexus with deliberate tax evasion, the assessee must be confined to Section 129 proceedings - payment of tax and penalty as specified therein, with the matter concluding upon such payment or resulting in sale under Section 129(6) if payment is not made.

2.37 Only where contraventions are of the "highest degree" - such as absence of any valid documents, forged or fake documents, fake e-way bills, fake registration, complete mismatch/diversion of goods, or other egregious facts clearly evidencing intent to evade tax - may the officer resort to Section 130 and issue MOV-10.

2.38 The officer at interception cannot undertake detailed assessment or examination of portal data or third-party discrepancies (such as supplier's suppliers) to excavate possible tax evasion; such issues are for regular assessment or separate proceedings, not for confiscation action in transit.

2.39 The "intent to evade tax" must be attributable to the person/dealer directly or proximately linked to the contravention; the conduct of remote third parties cannot be treated as sufficient foundation for confiscation of goods in transit.

2.40 In line with Synergy Fertichem, where confiscation is proposed at the threshold, reasons for believing that intent to evade exists should be recorded and, consistent with Rule 138B's proviso, appropriate approvals must be obtained.

Conclusions

2.41 Section 130 may be invoked at the stage of interception only where a strong, fact-based case of "intent to evade payment of tax" is made out, supported by concrete incriminating material.

2.42 Minor/documentary discrepancies and first-degree errors as identified in the Circular dated 14.09.2018 cannot justify seizure or confiscation.

2.43 Where contravention is present but not demonstrably linked to evasion intent, proceedings must be confined to Section 129, not escalated to Section 130.

2.44 The opinion of "intent to evade" for goods in transit must ordinarily be formed within the time-frame prescribed under Rule 138C (maximum six days from interception); if not formed, the authorities are to proceed only under Section 129. Subsequent incriminating material, if discovered later, can nonetheless justify initiation of confiscation proceedings under Section 130.

2.45 Authorities cannot use third-party portal data or remote supplier discrepancies, without clear nexus, as the sole basis to confiscate goods in transit.

Issue 8 - Consequential directions and treatment of existing MOV-10/MOV-11 notices and confiscation orders

Interpretation and reasoning

2.46 The Court examined sample cases indicating that MOV-10 was sometimes issued immediately or soon after MOV-4/MOV-6/MOV-7, including instances where goods were released under MOV-6 and yet confiscation was initiated, and instances of time-line violations under Section 129(3). This revealed a pattern of mechanical or premature resort to Section 130 without a properly structured inquiry into evasion intent.

2.47 In light of the clarified legal position, a case-by-case re-examination of all outstanding MOV-10/MOV-11 notices and confiscation orders was considered necessary, rather than blanket quashing or upholding.

Conclusions / Directions

2.48 All notices under FORM GST MOV-10 and orders under FORM GST MOV-11 in the petitions are to be re-examined by the respondent authorities in light of the Court's observations on: (a) independence of Sections 129 and 130; (b) requirement of "intent to evade tax"; (c) limits from Circulars and Rules 138B/138C; and (d) competence of the issuing officer.

2.49 If upon such reconsideration the confiscation notice/order is found contrary to the principles and limits laid down in this judgment, it shall be withdrawn.

2.50 Where only Section 129 is attracted (no established intent to evade tax), the seized goods or conveyance shall be released in accordance with Section 129, and any continuing detention/confiscation solely under Section 130 shall not be sustained.

2.51 In matters where goods have already been released pending confiscation proceedings, such release shall remain subject to the final outcome of those proceedings, and any existing stay on confiscation shall continue until final orders are passed.

2.52 Where, after reconsideration, the authorities still find that confiscation under Section 130 is warranted, they shall defer taking confiscatory action for a period of two weeks to enable the affected parties to approach the Court, if so advised.

2.53 All necessary orders after reconsideration are to be passed within 12 weeks from receipt of the writ of the Court's order.

2.54 Given that confiscation is a harsh measure with significant impact on trade and finance, any future action by authorised officers in defiance of the principles and limits articulated in this judgment may expose such officers to contempt proceedings.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the challenge to a combined / composite demand-cum-show cause notice under Section 74 of the Central Goods and Services Tax Act, 2017, covering multiple tax periods and alleged to lack year-wise / item-wise break-up, raises a substantial legal issue warranting consideration.

1.2 Whether, in the presence of a prior reasoned interim order by a coordinate bench on the same legal issue and supportive decisions from other High Courts, interim protection from coercive recovery ought to be granted in the present and connected matters, despite a contrary view of another High Court.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Legality and justiciability of a combined / composite demand-cum-show cause notice under Section 74 CGST Act

Legal framework (as discussed)

2.1 The Court notices that the impugned combined demand-cum-show cause notices have been issued under Section 74 of the Central Goods and Services Tax Act, 2017 for multiple financial years, and that in an earlier writ petition on the same point, specific objections were raised to (i) issuance of a combined notice without disclosing year-wise / item-wise tax liability on various kinds of sales, and (ii) invocation of Section 74 itself.

2.2 The Court takes note that, in the earlier matter, while the authority cursorily stated that there was no legal infirmity in invoking Section 74, it did not advert to or deal with the specific objection relating to the impermissibility of issuing a composite notice.

2.3 The Court records that a Division Bench of another High Court (Kerala) has held that issuance of a composite notice could not have been the scheme of the statutory provisions, which are expected to adhere to principles of fairness in taxation, and that three other High Courts (Madras, Karnataka and Bombay) have taken a similar view favouring the assessee, while another High Court (Delhi) has taken a contrary view in favour of the revenue.

Interpretation and reasoning

2.4 The Court observes that the issue concerning validity of a combined / composite notice under Section 74, particularly one not disclosing year-wise / item-wise tax liability, is already engaging the attention of the Court in earlier writ petitions where a reasoned interim order has been passed, and is supported by multiple High Court decisions favouring the assessee.

2.5 The Court notes that no contrary order has been passed by any other bench of the same Court on this legal question and that, prima facie, the issue is "purely legal" and requires deeper consideration on merits.

Conclusions

2.6 The Court concludes that the legality of the impugned combined / composite demand-cum-show cause notice under Section 74, and allied objections to the mode and manner of initiation of proceedings, raise substantial legal issues that "require consideration", justifying admission and detailed hearing along with the previously instituted writ petitions.

Issue 2 - Grant of interim protection and application of rule of consistency

Interpretation and reasoning

2.7 The Court notes that in an earlier writ petition involving the same legal issue, a coordinate bench has already "entertained that writ petition and granted interim protection" by staying recovery pursuant to the order-in-original, after taking into account the Kerala High Court judgment and the nature of objections raised to the composite notice.

2.8 The Court further notes that in at least one other connected writ petition, interim stay of recovery pursuant to the order-in-original was also granted, and in the remaining connected matters, stay applications remain pending without any interim protection having been granted or rejected.

2.9 The Court observes that, on the same legal issue, three High Courts (Kerala, Madras, Karnataka, Bombay) have taken a view in favour of the assessee, whereas another High Court (Delhi) has taken a contrary view in favour of the revenue; nevertheless, within this Court, there exists already a reasoned interim order granting protection, and "no contrary order has been passed by any other bench."

2.10 Emphasising the "rule of consistency" as a means to ensure transparency in court proceedings, the Court holds that, so long as there is no contrary view within the same Court, it is appropriate and necessary to follow the earlier reasoned interim order on the same legal issue in similarly situated cases.

Conclusions

2.11 The Court holds that "matter requires consideration" and, having regard to (i) the prior reasoned interim order by a coordinate bench on the same issue, (ii) the supportive views of multiple other High Courts, and (iii) the need for consistency and transparency, a case for interim protection is made out in the present writ petition and the similar petitions listed.

2.12 The Court directs that all such matters be connected and listed together on a specified date in the "top ten" with a clear indication that, subject to time availability, further adjournment of hearing may not be granted.

2.13 The Court grants interim relief by directing that, till the next date of listing, "no coercive measures may be adopted against the petitioner pursuant to the impugned show cause notice," thereby staying coercive recovery steps in respect of the impugned proceedings under Section 74.

1. ISSUES PRESENTED AND CONSIDERED

(a) Whether a writ of mandamus can be issued directing State authorities/employer-agencies to reimburse or pay to the contractor the GST/VAT amounts and differential tax burden arising from transition from KVAT regime to GST regime in respect of works contracts.

(b) Whether the methodology and guidelines laid down by earlier decisions of the Court and Government Circulars dated 03.01.2020 and 14.12.2020 governing tax computation for pre-GST and post-GST portions of works contracts are applicable to the present case.

(c) Whether the existence of arbitration or other contractual dispute resolution clauses and other objections raised by the respondents preclude exercise of writ jurisdiction in directing tax reimbursement/differential tax adjustment.

(d) Whether the contractor can be permitted to file or revise GST returns without interest, penalty or limitation consequences and be protected from precipitative action by GST authorities pending implementation of the Court's directions on differential tax calculation and reimbursement.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Mandamus for reimbursement/payment of GST/VAT and differential tax burden

Interpretation and reasoning

The Court notes that the relief sought is "akin to" what has been decided in an earlier batch of writ petitions, where class-I contractors executing works contracts with State agencies were faced with additional tax burden due to the shift from KVAT and Service Tax to GST with effect from 01.07.2017. In that earlier case, after examining State Government Circulars dated 03.01.2020 and 14.12.2020 and judgments from other High Courts under similar factual situations, the Court held:

- Tax component in such contracts is an independent component; it is a statutory payment which the contractor does not retain as profit and which must ultimately be borne by the employer.

- Where works contracts were entered into during KVAT regime but executed partly or fully post-GST, or where tenders were invited under KVAT/old schedule of rates and finalized/paid under GST regime, the employer is required to determine the "differential tax burden" and reimburse/pay the contractor accordingly.

- Detailed directions were given to segregate pre-GST and post-GST works, assess under KVAT/COT/VAT for pre-GST, recompute GST liability for balance works after deducting embedded KVAT/Service Tax, factoring input tax credit, and then compute "tax difference" to be reimbursed or adjusted.

Subsequent co-ordinate Bench decisions, dealing with contractors seeking reimbursement of GST or refund of differential GST (difference between VAT and GST), have unreservedly followed the above view and either:

- Directed reimbursement of the quantified GST/differential GST amounts within specified time; or

- Directed consideration of representations and refund in accordance with the earlier directions and Government Circulars.

In the present case, the Court records that the controversy and the nature of contracts are identical, and that the earlier judgments have already addressed the same category of works contracts and tax transition impacts. The Court, therefore, finds it appropriate to "follow suit" and apply the same directions/guidelines to the petitioner's contracts.

Conclusions

- The State and Government agencies that have entered into works contracts with the petitioner are obliged to determine and bear the differential tax burden arising from the transition from KVAT/Service Tax to GST, in terms of the methodology earlier prescribed by the Court and in alignment with the Government Circulars.

- A mandamus is issued directing respondents to:

* Calculate works executed pre-GST (prior to 01.07.2017) and payments received; assess such payments under KVAT (COT or VAT, as applicable).

* Calculate balance works completed or to be completed post-01.07.2017; derive material/KVAT item rates; deduct KVAT and Service Tax components; add applicable GST; compute input tax credit and set it off against output GST.

* Compute "tax difference" for post-GST works separately, decide whether the agreement needs variation, and, if required, enter into supplementary agreements fixing GST-inclusive values.

* Where revised GST-inclusive work value for balance work exceeds the original agreement value, or where pre-GST works are paid post-GST, reimburse/pay the contractor the resulting differential tax amount.

(b) Applicability of Government Circulars and prior decisions on methodology

Legal framework discussed

The Court relies on the following, as already discussed and applied in earlier decisions:

- State Government Circular dated 03.01.2020 prescribing steps for distinguishing pre-GST and post-GST portions of works, removing KVAT/Service Tax components, applying GST, and adjusting input tax credit.

- State Government Circular dated 14.12.2020 clarifying that:

* Turnover relating to supplies before 01.07.2017 is taxable under earlier laws (KVAT, Service Tax), including uncertified work already executed.

* Only the portion executed after 01.07.2017 is liable under GST.

* Tax difference must be calculated for each work separately; departments must then decide whether to amend contract agreements.

- Judgments from other High Courts (Orissa, Madras, Gujarat) recognizing that GST regime change cannot unfairly burden the contractor; requiring recalculation of contract price/tax components, execution of supplementary agreements, and reimbursement/refund or recovery depending on comparative tax incidence pre- and post-GST.

Interpretation and reasoning

The Court notes that these Circulars and external precedents were examined in detail and expressly adopted in the earlier co-ordinate Bench judgment as providing a workable and equitable methodology for dealing with tax impact on pre-GST works contracts spilling over into the GST period. That methodology has since been consistently applied by subsequent Benches in multiple writ petitions involving the same issue.

In the present case, the Court observes that the factual matrix aligns with those earlier cases, including:

- Works contracts entered into under KVAT regime but executed and/or paid in the GST regime; and

- Contractors having discharged GST obligations while the contractual pricing or payments did not fully reflect the changed tax structure.

Given this identity of circumstances and the absence of any distinguishing features or challenge to the correctness of the earlier decisions or Circulars, the Court holds that the same methodology and guidelines govern the present dispute.

Conclusions

- The computation and adjustment of tax liabilities in the petitioner's case shall strictly follow the directions/guidelines set out earlier, which reproduce and give effect to the Government Circulars dated 03.01.2020 and 14.12.2020.

- Respondent departments/employers must apply this methodology to each contract, decide on modification of agreements, and execute supplementary agreements where necessary to reflect GST-inclusive values and differential tax reimbursement.

(c) Effect of arbitration clause and other objections on maintainability of writ

Interpretation and reasoning

The Court records that in a prior writ (referred to in the present order), similar contentions were raised by respondents, including:

- That the contracts contain dispute resolution/arbitration clauses, and, therefore, tax reimbursement or rate disputes must be referred to arbitration or other contractual mechanisms.

- Other objections touching on maintainability or the nature of contractual claims.

The Court notes that those contentions were already "taken note of and an order is passed" by the earlier co-ordinate Bench in Writ Petition No.9721 of 2019 and connected cases, and the same contentions, now "identical" in the present case, stand effectively addressed in that precedent. The Court chooses to follow that binding co-ordinate Bench view, which proceeded to issue mandamus and detailed directions despite the existence of arbitration and other contractual clauses, particularly because the issue centers on statutory tax liability and its proper allocation between contractor and employer under the changed tax regime.

Conclusions

- The presence of arbitration/dispute resolution clauses and other contractual objections does not bar the exercise of writ jurisdiction where the core question is allocation of statutory tax liability (VAT/GST) and the contractor's right to reimbursement/differential tax adjustment, governed by Government policy/circulars and prior judicial directions.

- The writ petition is maintainable and is disposed of on merits with detailed directions, without relegating the petitioner solely to contractual remedies.

- However, liberty is expressly reserved to the petitioner to challenge any subsequent orders/decisions of respondents/authorities and to take recourse to such other remedies as available in law.

(d) Permission to file/amend GST returns and protection from coercive action

Interpretation and reasoning

In the earlier batch decision, the Court had taken note that because of the pendency of writ petitions and interim orders, some contractors had not filed GST returns for the relevant period after 01.07.2017. Recognizing that the computation of differential tax and reimbursement under the prescribed methodology may necessitate fresh or corrected disclosures, the Court allowed filing of returns or amended returns without interest, penalty or limitation, and restrained GST authorities from taking precipitative action for a limited period.

In the present case, the Court finds the situation indistinguishable and expressly adopts the same protective directions, linking them to the recalculation exercise that respondents and the petitioner are directed to undertake.

Conclusions

- If the petitioner has not filed GST returns for the period after 01.07.2017, he is permitted to file returns/amended returns pursuant to calculation of differential tax as per the Court-directed procedure under GST regime, without insistence on interest, penalty or limitation.

- GST authorities are directed not to take precipitative action against the petitioner for a period of six months from the date of receipt of a copy of the order.

(e) Procedural directions: representations, consideration and timelines

Interpretation and reasoning

Following the earlier co-ordinate Bench, the Court structures the relief through a representation-and-consideration mechanism, rather than immediate quantification in the writ itself. The rationale is that:

- Determination of differential tax requires contract-wise and work-wise factual computation (segregation of pre- and post-GST work, KVAT/GST rates, ITC, etc.) which is best performed by the employer departments/agencies.

- Contractors must first place comprehensive particulars before the competent authorities; those authorities must then apply the Court's methodology and Government Circulars and pass appropriate orders within a fixed timeframe.

Conclusions

- The petitioner must submit comprehensive representations to the respective employer departments/respondents, covering all relevant contracts and works, within four weeks from receipt of the order.

- On receipt of such representations, the respective employers/respondents must consider and dispose of them, applying the directions/guidelines on differential tax computation, within eight weeks from submission.

- All contentions of both parties, beyond the issues decided and directions issued, are left open, preserving their rights in subsequent proceedings if any adverse orders are passed following this exercise.

Issues: (i) Whether an adjudication order passed in summary form without relevant facts, reasons, and hearing could be sustained in law; (ii) whether service of notices and orders through the "additional notices and orders" tab on the GST portal was proper and whether the consequential bank attachment could survive.

Issue (i): Whether an adjudication order passed in summary form without relevant facts, reasons, and hearing could be sustained in law.

Analysis: Section 75(6) of the WBGST Act, 2017 requires the proper officer to set out the relevant facts and the basis of the decision in the adjudication order. An order passed by a quasi-judicial authority must also be informed by reasons. Where the order communicated to the taxpayer remains in summary form, contains no factual particulars, and is passed without affording the required hearing under Section 75(4), the order violates the statutory mandate and the principles of natural justice. An order without reasons cannot withstand scrutiny under Article 226 of the Constitution of India, particularly when civil consequences follow.

Conclusion: The adjudication order was unsustainable and was set aside.

Issue (ii): Whether service of notices and orders through the "additional notices and orders" tab on the GST portal was proper and whether the consequential bank attachment could survive.

Analysis: Notice and order service through the "additional notices and orders" tab on the GST portal was treated as improper. Since the show cause notice lacked the factual and other details necessary for a meaningful reply, the proceedings could not be allowed to stand on that basis. The bank attachment was founded on the impugned adjudication order, and once that order failed, the attachment could not be retained.

Conclusion: The writ petition was entertained, the consequential bank attachment was lifted, and fresh proceedings were permitted from the stage of a detailed show cause notice.

Final Conclusion: The impugned tax adjudication was annulled for want of reasons and denial of hearing, consequential coercive action was withdrawn, and the matter was remitted for fresh adjudication in accordance with law.

Ratio Decidendi: A quasi-judicial tax adjudication must be a reasoned speaking order complying with the statutory requirement to record facts and the basis of decision and must be preceded by a fair opportunity of hearing; a summary, unreasoned order passed in breach of natural justice cannot be sustained, and consequential enforcement action based on it must also fall.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether proceedings for determination of tax liability under Section 73 of the Uttar Pradesh Goods and Services Tax Act, 2017 can validly be initiated and concluded in the name of a person who had died prior to issuance of the show cause notice.

1.2 Whether Section 93 of the Uttar Pradesh Goods and Services Tax Act, 2017 authorises determination of tax liability against a deceased person and recovery thereof from the legal representative without issuing notice to such legal representative.

1.3 Whether, in case of death of the proprietor, issuance of show cause notice and conduct of proceedings against the legal representative is a sine qua non for valid determination of tax, interest or penalty.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of proceedings under Section 73 initiated and concluded against a deceased person

Legal framework

2.1 The proceedings were initiated under Section 73 of the Uttar Pradesh Goods and Services Tax Act, 2017 by issuance of a show cause notice dated 30.11.2024, followed by a determination order dated 25.02.2025 raising demand against the deceased proprietor.

Interpretation and reasoning

2.2 It was undisputed that the proprietor had died on 26.04.2021 and that the show cause notice, reminders and determination of tax were all made subsequent to his death.

2.3 The Court noted that once it is known that the proprietor has died and the registration of the firm has been cancelled, there was no occasion for passing an order in the name of the deceased.

2.4 The Court treated proceedings conducted in the name of a deceased person, without addressing the legal representative, as fundamentally defective and not sustainable in law.

Conclusions

2.5 Proceedings for determination of tax liability under Section 73 cannot validly be initiated or concluded in the name of a person who was already dead at the time of issuance of the show cause notice.

2.6 The determination order passed against the deceased proprietor is void and cannot be sustained.

Issue 2: Scope and effect of Section 93 regarding liability of legal representatives and determination against a deceased person

Legal framework

2.7 Section 93 of the Uttar Pradesh Goods and Services Tax Act, 2017 was extracted and considered. It provides for "special provisions regarding liability to pay tax, interest or penalty in certain cases" where a person liable under the Act dies, and stipulates liability of the legal representative or other person either where the business is continued or where it is discontinued, "whether such tax, interest or penalty has been determined before his death but has remained unpaid or is determined after his death."

Interpretation and reasoning

2.8 The respondents invoked Section 93 to justify recovery from the legal representatives even where determination is made after the death of the proprietor.

2.9 The Court examined Section 93 and held that the provision only deals with the liability to pay tax, interest or penalty in cases where, after the death of the person, the business is either continued by the legal representative/other person or is discontinued, and the estate is made liable to the extent it can meet the charge.

2.10 The Court clarified that Section 93 does not address, nor does it authorise, the making of a determination itself against a dead person; it only regulates from whom and to what extent previously determined or subsequently determined dues may be recovered.

Conclusions

2.11 Section 93 cannot be construed to permit initiation or completion of adjudication and determination proceedings against a deceased person.

2.12 Section 93 only governs the liability and recovery from legal representatives or the estate; it does not validate determinations made in the name of a dead person.

Issue 3: Necessity of issuing show cause notice to legal representatives upon death of proprietor

Interpretation and reasoning

2.13 The Court observed that once the statute (Section 93) deals with the liability of a legal representative on account of death of the proprietor, it becomes a sine qua non that the legal representative must be issued a show cause notice.

2.14 It was held that only after issuing such notice and obtaining a response from the legal representative can any lawful determination of tax, interest or penalty be made.

2.15 In the present case, no show cause notice was issued to the legal representative; all steps, including determination, were taken in the name of the deceased.

Conclusions

2.16 Issuance of a show cause notice to the legal representative and affording an opportunity of response is mandatory for valid determination where the person originally liable has died.

2.17 Since the determination was made solely against the deceased without notice to the legal representative, the order dated 25.02.2025 is liable to be quashed.

2.18 The impugned order was set aside, with liberty to the authorities to initiate appropriate proceedings afresh in accordance with law, including by issuing proper notice to the legal representative if so advised.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the demand order passed under Section 74 of the Goods and Services Tax Act, 2017, by demanding tax, interest and penalty in excess of the amount specified in the show-cause notice, is contrary to Section 75(7) of the Act.

1.2 Whether the absence of a specified date of personal hearing in the show-cause notice, and the assessee's non-awareness of the uploaded notice, vitiated the proceedings on the ground of violation of principles of natural justice.

1.3 Consequentially, whether the appellate and original orders could be sustained.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Demand in excess of amount specified in show-cause notice under Section 75(7)

Legal framework

2.1 The Court referred to Section 75(7) of the Goods and Services Tax Act, 2017, which provides that the amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice and that no demand shall be confirmed on grounds other than those specified in the notice.

Interpretation and reasoning

2.2 The Court noted that the show-cause notice indicated a consolidated amount of Rs. 32,11,470/- representing tax, interest and penalty.

2.3 The Court further noted that the demand actually raised in the order under challenge, qua tax, interest and penalty, was Rs. 60,54,984/-.

2.4 The Court held that this enhancement of the aggregate demand in the order, beyond the amount specified in the show-cause notice, was ex facie contrary to Section 75(7) of the Act.

Conclusions

2.5 The Court concluded that the impugned demand order was unsustainable on account of violation of Section 75(7) of the Act.

Issue 2: Alleged violation of principles of natural justice regarding personal hearing

Interpretation and reasoning

2.6 The assessee contended that, while the show-cause notice and reminder fixed dates for filing reply, the column pertaining to the date of personal hearing mentioned "NA", which was alleged to be violative of principles of natural justice.

2.7 The Court observed that the assessee's own case was that it was unaware of the issuance of the show-cause notice as it had been uploaded under the "Additional Notices and Orders" tab and no response was filed.

2.8 In this backdrop, the Court held that, once the assessee claimed non-awareness of the notice itself, the indication of a date for filing reply and the marking of "NA" against the date of personal hearing would lose significance, and the notice could not be said to be vitiated on that ground alone.

Conclusions

2.9 The Court did not set aside the proceedings on the independent ground of denial of personal hearing arising from the contents of the show-cause notice, but directed a fresh opportunity of hearing in consequence of setting aside the demand order for violation of Section 75(7).

Issue 3: Sustainability of the appellate and original orders and consequential relief

Interpretation and reasoning

2.10 The appellate order had rejected the assessee's appeal on the ground of delay. The Court, having found the original demand order to be contrary to Section 75(7), examined the sustainability of both the orders.

2.11 Since the foundational demand order itself was held unsustainable, the appellate order upholding the same (by declining to entertain the appeal) could not stand.

Conclusions

2.12 The Court allowed the writ petition, quashed the demand order dated 11.02.2025 and the appellate order dated 13.10.2025, and remanded the matter to the original authority to permit the assessee to file a response to the show-cause notice and, after granting an opportunity of hearing, to pass a fresh order in accordance with law.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether service of the pre-show-cause notice in Form DRC-01A, the show-cause notice under Section 73 and the adjudication order by uploading them only under the "additional notices and orders" tab on the GST portal constituted proper and due communication to the assessee.

1.2 Whether passing an order under Section 73 without affording an opportunity of personal hearing, where an adverse decision was contemplated, violated Section 75(4) of the Act of 2017 and the principles of natural justice.

1.3 What consequential directions were warranted upon finding that the adjudication order was not duly communicated and was passed in breach of Section 75(4) and natural justice.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Validity of service by uploading notices and order only under "additional notices and orders" tab on GST portal

Legal framework (as discussed)

2.1 The proceedings arose under Section 73 of the WBGST/CGST Act, 2017. The Court referred to a coordinate Bench decision which, relying on a Division Bench decision, held that accessibility of a notice only under the "additional" tab on the GST portal, as opposed to the "normal" tab, does not constitute proper communication or uploading as contemplated under Section 73(1) read with the applicable Rules.

Interpretation and reasoning

2.2 It was undisputed that the pre-show-cause notice in Form DRC-01A, the show-cause notice under Section 73 and the adjudication order were all uploaded only under the "additional notices and orders" tab on the GST portal.

2.3 The petitioners asserted that they had no reason to access the said tab, remained unaware of the notices and the order, and came to know of the proceedings only upon recovery being effected from their electronic cash ledger after issuance of a recovery notice in Form DRC-13 to their bank.

2.4 The Court, following the reasoning in the coordinate Bench decision, held that uploading notices only under the "additional notices and orders" tab cannot be treated as due or proper communication/ service upon a person against whom an adverse decision is contemplated.

2.5 In the light of these facts and precedents, the Court held that it could not be said that the petitioners had due knowledge of the proceedings or the adjudication order at any time proximate to their issuance.

Conclusions

2.6 Service of the pre-show-cause notice, the show-cause notice under Section 73 and the adjudication order solely by uploading them under the "additional notices and orders" tab on the GST portal did not amount to proper or due service/communication in law.

2.7 The petitioners were prevented by sufficient cause from participating in the adjudication and from challenging the order in time, owing to such defective mode of service.

Issue 2 - Requirement of personal hearing under Section 75(4) and principles of natural justice

Legal framework (as discussed)

2.8 The Court reproduced and relied upon a coordinate Bench judgment which interpreted Section 75(4) of the Act of 2017. As there noted, Section 75(4) mandates that an opportunity of hearing shall be granted: (a) where a request in writing is received from the person chargeable with tax or penalty; or (b) where any adverse decision is contemplated against such person.

Interpretation and reasoning

2.9 The coordinate Bench had held that issuance of a show-cause notice under Section 73(1) clearly indicates that an adverse decision is contemplated, thereby triggering the statutory obligation on the Proper Officer to afford an opportunity of hearing before passing an order under Section 73(9).

2.10 The Court found the facts in the present case to be identical to those considered earlier: the show-cause notice contemplated an adverse decision, yet the adjudication order was passed without granting any opportunity of personal hearing to the petitioners.

2.11 The Court observed that the adjudication order was passed ex parte without hearing the petitioners, and this was directly contrary to the mandate of Section 75(4) and to the principles of natural justice.

Conclusions

2.12 Since the show-cause notice contemplated an adverse decision, the Proper Officer was under a statutory obligation under Section 75(4) to afford the petitioners an opportunity of hearing prior to passing the order under Section 73.

2.13 Failure to grant such hearing rendered the adjudication order violative of Section 75(4) and the principles of natural justice and therefore unsustainable.

Issue 3 - Consequential relief and directions

Interpretation and reasoning

2.14 The Court noted the combined effect of: (i) improper service of the show-cause notice and order by uploading under the "additional notices and orders" tab only; and (ii) absence of mandatory opportunity of hearing despite an adverse decision being contemplated.

2.15 Relying on the approach adopted in the coordinate Bench decision, the Court found no reason to depart from that view and considered it appropriate to set aside the impugned adjudication order while preserving the proceedings at the show-cause notice stage and granting a further opportunity to the petitioners.

Conclusions

2.16 The adjudication order dated April 24, 2024 was set aside on the dual grounds that it was neither appropriately served nor passed in accordance with Section 75(4) of the Act of 2017.

2.17 The petitioners were granted two weeks' time from the date of the order to file their reply to the show-cause notice dated December 19, 2023.

2.18 The adjudicating authority was directed to conclude the proceedings as early as possible, preferably within four weeks from the date of filing of the reply, without granting unnecessary adjournments.

2.19 No order as to costs was made.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether fixation of the same date for filing reply and for personal hearing in proceedings under section 73 of the GST Act, and passing of an ex parte order without effective hearing, violates the principles of natural justice.

1.2 Whether the appellate authority's dismissal of the appeal without recording independent reasons and without dealing with the grounds of appeal and written submissions violates the principles of natural justice.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of assessment order where reply due date and hearing date are identical and ex parte order is passed without effective hearing

Legal framework (as discussed)

2.1 The proceedings arose from a notice in ASMT-10 under Rule 99 of the CGST Rules and a subsequent notice under section 73 of the GST Act proposing demand of tax, interest under section 50 and penalty. The Court considered principles of natural justice in light of prior decisions and an Office Memo of the Commissioner of Commercial Tax dated 12.01.2024, explicitly stating that the date for submission of reply and date of personal hearing cannot be the same.

2.2 The Court referred to its own earlier decisions holding that an assessee is not required to request for personal hearing, and that it is mandatory for the Assessing Authority to afford such opportunity before passing an adverse order, with reference also made to decisions of the Supreme Court in Nelson Motis v. Union of India and State Bank of India v. Rajesh Agarwal & Others.

Interpretation and reasoning

2.3 The record showed that: (i) notice in ASMT-10 directed reply by 26.04.2023, which was not complied with; (ii) notice under section 73 dated 17.09.2023 fixed 10.10.2023 as the last date for filing reply and on the same date fixed personal hearing; (iii) a reminder dated 02.11.2023 again fixed a common date, 09.11.2023, both for filing reply and personal hearing; (iv) the petitioner submitted a reply seeking further time, but no further notice fixing any fresh date of hearing was issued and an ex parte order confirming tax, interest and penalty was passed on 29.12.2023.

2.4 The Court held that fixation of the date for submission of reply and the date of personal hearing on the same day is contrary to the Commissioner's Office Memo dated 12.01.2024 and is inconsistent with the requirements of affording a real and effective opportunity of hearing.

2.5 Applying the principle that an assessee need not specifically request a personal hearing and that the Assessing Authority is under a mandatory obligation to provide such hearing before passing an adverse order, the Court found that no meaningful opportunity of hearing had been afforded. The ex parte nature of the order, passed without fixing any further hearing date after the petitioner's reply seeking time, reinforced this conclusion.

Conclusions

2.6 The impugned assessment order passed under section 73, having been made by fixing the same date for reply and hearing and by passing an ex parte order without granting an effective opportunity of personal hearing, was held to be in violation of the principles of natural justice and unsustainable in law.

Issue 2: Validity of appellate order passed without recording reasons or dealing with grounds of appeal

Legal framework (as discussed)

2.7 The Court examined the requirement that an appellate authority pass a reasoned order, with reference to the judgment of the Supreme Court in Assistant Commissioner, Commercial Tax v. Shukla & Brothers, wherein it was specifically held that absence of reasons violates the principles of natural justice.

Interpretation and reasoning

2.8 The record disclosed that the first appellate authority dismissed the appeal against the assessment order without recording its own reasons and without considering or dealing with the specific grounds of appeal and the written submissions filed by the petitioner.

2.9 In light of the principle stated in Shukla & Brothers, the Court held that an order bereft of reasons and not reflecting consideration of the grounds urged cannot satisfy the requirement of a fair hearing and violates the principles of natural justice.

Conclusions

2.10 The appellate order, being non-speaking and unreasoned, and having failed to consider the grounds of appeal and written submissions, was held to be violative of the principles of natural justice and therefore unsustainable.

Overall disposition

2.11 In view of the above violations of natural justice at both the assessment and appellate stages, the Court quashed the impugned assessment and appellate orders.

2.12 The matter was remanded to the jurisdictional authority (Joint Commissioner, State Tax, Gautam Buddha Nagar) for fresh decision in accordance with law, after granting due and effective opportunity of hearing to all stakeholders.

Issues: Whether tax paid under the CGST and SGST heads, though intended for IGST, required reconsideration of the demand and appellate rejection, and whether any excess amount, if found due, was refundable.

Analysis: The petitioner asserted that the tax liability had been discharged under the wrong heads and that the amount paid under CGST and SGST ought to have been treated as payment towards IGST. The respondents fairly accepted that tax had been paid, though under an incorrect head. In these circumstances, the existing orders could not stand without examining the tax payment details afresh. The matter also attracted consideration of refund entitlement if the reconciled position showed excess payment.

Conclusion: The impugned orders were quashed and the authorities were directed to reconsider the matter afresh by taking the CGST and SGST payments into account towards IGST. Any refund found due was directed to be paid in terms of section 77 of the GST Act.

1. ISSUES PRESENTED AND CONSIDERED

(1) Whether a works contractor, executing contracts straddling the transition from the KVAT regime to the GST regime, is entitled to refund/reimbursement of the differential tax burden arising from the shift from VAT/service tax to GST.

(2) Whether the dispute regarding tax reimbursement under such works contracts can be resolved in writ jurisdiction by issuing directions/guidelines to State authorities and employer departments, instead of relegating the contractor to contractual or other remedies.

(3) What methodology is to be followed by State agencies/employers for determining the differential tax liability (pre-GST vs post-GST) and the consequent refund/reimbursement or recovery in works contracts entered into or executed partly before and partly after 01.07.2017.

(4) Whether the contractor is entitled to consequential reliefs relating to filing/regularisation of GST returns without interest, penalty or limitation, and interim protection from coercive action by GST authorities pending such reconciliation and reimbursement.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Entitlement to refund/reimbursement of differential GST on works contracts across KVAT-GST transition

Legal framework (as discussed)

(a) The Court relies on and follows earlier decisions of co-ordinate Benches which had examined: (i) State Government Circular dated 03.01.2020 (KUIDFC clarification) prescribing a method for segregating pre-GST and post-GST tax components in running bills of works; and (ii) Finance Department Circular dated 14.12.2020, clarifying that turnover relating to supply of goods/services before 01.07.2017 is to be taxed under the erstwhile KVAT Act and Service Tax Act, and that only supplies after 01.07.2017 are to be taxed under GST, with tax difference to be computed work-wise and contract-wise.

(b) The Court also refers to judgments of other High Courts (including those relating to GST neutralisation in works contracts and reworking contract terms to reflect tax changes) and to a Division Bench judgment holding that incidence of indirect tax is to be borne by the service recipient unless the contrary is proved, and that unforeseen changes in the tax regime (beyond mere rate changes) must be borne by the employer (service recipient).

Interpretation and reasoning

(c) The Court notes that an earlier co-ordinate Bench has already considered "every argument" of the respondents in an identical factual and legal context involving works contractors and the shift from KVAT to GST, and has issued detailed directions for calculation and reimbursement of differential tax.

(d) Relying on that reasoning (including reliance on the Government circulars and other High Court decisions), the Court reiterates that the tax component in such contracts is an independent statutory component, not a profit element for the contractor, and is to be borne by the employer/service recipient.

(e) The Court further relies on a co-ordinate Bench decision concerning post-GST tenders to reaffirm that where the contractor is statutorily obliged to pay GST, the employer department, being the service recipient, is under a "bounden duty" to reimburse the GST amount.

(f) The Court holds that the petitioner is "similarly circumstanced" to the contractors in the earlier batch of cases and is, therefore, entitled to the same mode of relief, particularly in light of the State circulars and the accepted principle that differential tax burden arising solely from regime change must be neutralised in favour of the contractor.

Conclusions

(g) The Court concludes that the contractor is entitled, in principle, to refund or reimbursement of the differential tax amount attributable to the transition from KVAT/service tax to GST, subject to calculation and verification as per the prescribed methodology.

(h) The Court directs that, wherever the revised GST-inclusive work value for the balance work (completed or to be completed post-GST) exceeds the original agreement work value, the employer must pay or reimburse the differential tax amount to the contractor; likewise, where payments for pre-GST completed works are made post-GST, the employer must pay or reimburse the differential tax amount.

Issue 2 - Maintainability of writ and scope of relief despite contractual and factual disputes

Interpretation and reasoning

(a) The respondents disputed the contractor's right to seek refund on the pleadings and contended about change in schedule of rates post-GST, but the Court notes that a co-ordinate Bench in substantially identical circumstances has already resolved such objections by providing a framework that does not dispense with verification but requires consideration of representations and factual computation of differential tax.

(b) The Court emphasises that the directions issued by the co-ordinate Bench (and now adopted) do not mechanically order payment without verification; instead, they require the departments to consider the contractor's representations, undertake calculations as per the circulars, and then decide whether and to what extent amounts are to be reimbursed or recovered.

(c) The Court notes that liberty is expressly reserved to the contractor to challenge any adverse decision taken by the employer or tax authorities in pursuance of these directions, thereby preserving other statutory or contractual remedies.

(d) Given that the earlier order was recalled only because respondents were not heard, and that they have now been heard, the Court finds no bar to granting similar relief under Article 226, as the primary direction is to apply the Government's own circulars and established methodology.

Conclusions

(e) The writ petition is held maintainable for issuance of mandamus-type directions to apply the State circulars and prescribed methodology for GST/VAT reconciliation.

(f) The Court disposes of the petition with structured directions to compute tax differences and to decide on reimbursement/recovery, leaving all contentions of both parties open and preserving the petitioner's right to challenge subsequent orders.

Issue 3 - Methodology for determining differential tax liability and contractual adjustment

Legal framework (as applied)

(a) The Court, following the earlier co-ordinate Bench and the Government circulars dated 03.01.2020 and 14.12.2020, adopts and reproduces a step-wise methodology to distinguish pre-GST and post-GST components in works contracts and to compute the tax difference.

(b) The Court also takes guidance from similar methodologies adopted by other High Courts and by governmental authorities in other jurisdictions (including the concept of "GST neutralisation" via supplementary agreements, contract-wise computation, and adjustment for input tax credit).

Interpretation and reasoning

(c) The Court treats the following tax-treatment principles as binding for State agencies/employers:

- Works executed and paid for before 01.07.2017 are to be assessed under the KVAT regime (COT or regular VAT, as applicable), inclusive of then-prevailing service tax where relevant.

- Only works executed after 01.07.2017 are liable under the GST Acts, with due consideration of input tax credit available to the contractor.

(d) For works that straddle the transition date, and for contracts entered in the KVAT regime but executed or paid under the GST regime, the Court holds that a differential-tax computation is necessary, based on: (i) segregating pre-GST and post-GST work; (ii) removing embedded KVAT/service tax from relevant cost components; (iii) applying applicable GST rates; and (iv) offsetting eligible input tax credit against output GST.

(e) The Court adopts the co-ordinate Bench's view that, based on such computation, the concerned department/authority must decide whether the agreement needs to be amended and must execute supplementary agreements where required, to reflect the revised GST-inclusive work value.

Conclusions

(f) The Court directs State and other Government agencies/employers who have entered into works contracts with the contractor to strictly follow these guidelines:

- Identify and calculate works executed pre-GST (prior to 01.07.2017) and payments received therefor.

- Assess such pre-GST works/payments under the KVAT regime (COT or VAT scheme, as applicable), including service tax where applicable.

- Identify and calculate the balance works completed or to be completed after 01.07.2017 under the original contract.

- Derive the value of materials and KVAT items for the balance works.

- Deduct KVAT and, where applicable, service tax from those materials/services.

- Add applicable GST on those items for the post-GST portion.

- Determine the input tax credit on materials and set it off against output GST, for contractors assessed under regular VAT earlier.

- Compute the "tax difference" for the post-GST balance works separately.

- Based on the computed tax difference, decide if the agreement requires modification and, where appropriate, execute a supplementary agreement fixing the revised GST-inclusive work value for the balance work.

- Where the revised GST-inclusive work value for the balance work is higher than the original agreement value, reimburse/pay the differential tax amount to the contractor; similarly, where pre-GST works are paid post-GST, reimburse/pay the differential tax amount.

(g) These directions are to be implemented contract-wise and work-wise, with full verification by the authorities, not as an automatic payment without scrutiny.

Issue 4 - Consequential reliefs: representations, GST returns, and interim protection

Interpretation and reasoning

(a) The Court, following the pattern of the earlier co-ordinate Bench order, structures the relief so that the actual quantification and payment/recovery are preceded by detailed representations and administrative scrutiny, thus ensuring proper application of the methodology and adherence to the circulars.

(b) Recognising that interim court orders may have impacted the contractor's filing of GST returns, the Court grants limited amnesty from interest, penalty, and limitation for filing or amending returns after reconciliation of differential tax.

(c) To prevent prejudice during the reconciliation and decision-making period, the Court grants temporary protection against coercive action by GST authorities.

Conclusions

(d) The contractor is directed to submit comprehensive representations to the respective employers/respondents within four weeks, irrespective of whether works were completed pre-GST or post-GST or whether payments were received or are yet to be received post-GST.

(e) The respective employers/respondents are directed to consider and dispose of such representations in light of the Court's directions/guidelines within eight weeks of submission.

(f) If the contractor has not filed GST returns during the period after 01.07.2017, he is permitted to file or amend such returns, pursuant to the computation of differential tax under the above procedure, without imposition of interest, penalty, or limitation.

(g) GST authorities are directed not to take precipitative action against the contractor for six months from receipt of a copy of the order.

(h) Liberty is reserved in favour of the contractor to challenge any order/decision passed by the respondents or authorities pursuant to this order and to pursue all other remedies available in law; all contentions of both parties are expressly kept open.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether services of collecting household data through mobile app for Functional Household Tap Connections under a State water distribution programme qualify as "pure services" exempt under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) as amended.

1.2 Whether any determination of classification and rate of tax is required if the exemption under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) is held applicable.

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Exemption as "pure services" under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate)

(a) Legal framework discussed

2.1.1 The Court refers to Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 (as amended), which exempts from GST "pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution".

2.1.2 The Court identifies three cumulative conditions for exemption under the said entry: (i) the supply must be "pure services", i.e., not a works contract or other composite supply involving any supply of goods; (ii) the services must be provided to the Central Government, State Government, Union territory, local authority or Governmental authority; and (iii) the services must be "by way of any activity in relation to" any function entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W.

2.1.3 The Court refers to the definitions and constitutional framework: the concept of "pure services" as understood from the notification; the statutory definition of "composite supply" in section 2(30) of the GST Act; and the constitutional allocation of functions to Panchayats and Municipalities under Articles 243G and 243W read with the Eleventh and Twelfth Schedules, specifically noting Eleventh Schedule entry 11 ("Drinking water") and Twelfth Schedule entry 5 ("Water supply for domestic, industrial and commercial purposes").

2.1.4 The Court also notes the policy context: the Jal Jeevan Mission (JJM) as a Central Government programme aimed at providing safe and adequate drinking water to rural households through Functional Household Tap Connections (FHTCs), implemented at the State level through the Public Health Engineering (PHE) Directorate; and the use of digital/GIS-based systems and surveys for monitoring piped water supply schemes and FHTCs.

(b) Interpretation and reasoning

2.1.5 On the second and third conditions, the Court finds that the services are provided to the State Government, represented by the PHE Directorate of the Government of West Bengal, thus satisfying the requirement that the recipient be Government or a specified authority.

2.1.6 The Court finds that the activities in question-collection of field-level data of Functional Household Tap Connections (FHTCs) through mobile app or hard copy, including geo-referencing, under a PHE Division-are directly in relation to supply of safe and reliable drinking water to rural households under piped water supply schemes as part of JJM. These activities are held to be in relation to the functions of "Drinking water" under Eleventh Schedule entry 11 to Article 243G and "Water supply for domestic, industrial and commercial purposes" under Twelfth Schedule entry 5 to Article 243W. Accordingly, the "in relation to" requirement vis-à-vis Panchayat/Municipality functions is held satisfied.

2.1.7 On the first condition, the Court examines whether the services constitute "pure services" or involve any works contract or composite supply with goods. It relies on the work order placed on record, which describes the scope as collection of FHTC field-level data via mobile app or hard copy, including geo-referencing and integration with digital management/asset systems.

2.1.8 The Court notes that the described activities pertain to data collection, use of software and applications, digital asset management, GIS/WebGIS-based mapping, and related data management and analysis. It finds no element of supply of goods and no indication of any works contract or naturally bundled supply of goods and services. It therefore concludes that the services under the work order do not represent any works contract or composite supply involving goods.

2.1.9 On this basis, the Court characterizes the impugned activities as "pure services" within the meaning of Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate).

(c) Conclusions

2.1.10 The Court holds that: (i) the applicant's activity of collecting household/FHTC data through mobile app or hard copy, including geo-referencing, under the PHE Directorate, involves no supply of goods and is a "pure service"; (ii) such services are provided to the State Government (PHE Directorate), a qualifying recipient; and (iii) the services are by way of activity in relation to functions of drinking water/water supply entrusted to Panchayats and Municipalities under Articles 243G and 243W. All conditions for exemption under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) are thereby satisfied.

2.1.11 The Court therefore answers in the affirmative that the services of collecting household data through mobile app for FHTC connections in relation to water distribution networks are classifiable under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) and are exempt from GST.

2.2 Necessity of determining classification and rate of tax in the alternative

(a) Interpretation and reasoning

2.2.1 The second question, concerning the appropriate classification and rate of tax if the exemption were not available, is taken up only contingently by the Court. The applicant had suggested classification under SAC 998314 with 18% GST if exemption was denied.

2.2.2 As the Court has already held that the services qualify for exemption under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate), it considers that the contingency underlying the second question does not arise.

(b) Conclusions

2.2.3 The Court declines to determine any alternative classification or rate of tax, holding that the second question "does not arise" in view of the affirmative ruling on exemption under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate).

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the services of (a) field level data validation of Functional Household Tap Connections and database preparation for Piped Water Supply Schemes, and (b) organizing orientation programmes and performance evaluation under the Jal Mitra / Jal Jeevan Mission framework, supplied to a State Government department, qualify as "pure services" exempt under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

1.2 Whether the services of collection of components of Piped Water Supply Schemes, land information of head work site area, GIS-based visualization and functionality assessment, supplied to a State Government department, qualify as "pure services" exempt under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

1.3 Whether any classification and rate determination is required in respect of the above services in the event the exemption under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) is not available.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Exemption for FHTC data validation and Jal Mitra orientation services under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate)

Legal framework

2.1 The judgment reproduces Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, which exempts: "Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution."

2.2 The Court sets out three cumulative conditions for applicability: (i) the service must be "pure services" (no works contract or composite supply involving goods), (ii) it must be provided to Central/State Government, Union Territory, local authority or Governmental authority, and (iii) it must be by way of any activity in relation to a function entrusted under Articles 243G (Eleventh Schedule) or 243W (Twelfth Schedule).

2.3 Articles 243G and 243W, together with the Eleventh and Twelfth Schedules, are reproduced and relied upon, with specific emphasis on: Eleventh Schedule entry 11 ("Drinking water") and Twelfth Schedule entry 5 ("Water supply for domestic, industrial and commercial purposes").

Interpretation and reasoning

2.4 The services examined under this issue are: (A) field level data validation of FHTCs (elimination of multiple entries, verification with electricity or other unique documents, and creation of an error-free database for different Piped Water Supply Schemes across several divisions), and (B) organizing orientation programmes for ISAs, DPMU and engineer officers on the Jal Mitra web and mobile application, along with evaluation of performance under support activities of Jal Jeevan Mission.

2.5 The Court notes that all these activities are undertaken for the Public Health Engineering Directorate of the State Government, which is responsible for rural and certain urban water supply and is implementing Jal Jeevan Mission to provide Functional Household Tap Connections and safe drinking water. Accordingly, condition (ii) of the notification (service to State Government / Governmental authority) is held to be satisfied.

2.6 On the nature of the activities, the Court finds they are integrally connected with the provision and monitoring of safe drinking water through Piped Water Supply Schemes and FHTCs, including data validation, GIS-based monitoring, digital asset management and capacity-building (orientation/training) of stakeholders under JJM/Jal Mitra. These are held to be activities "in relation to" the constitutional functions of drinking water and water supply, thus satisfying condition (iii) by reference to entry 11 of the Eleventh Schedule (Article 243G) and entry 5 of the Twelfth Schedule (Article 243W).

2.7 For the "pure services" requirement, the Court notes that the work orders relate to development and use of software and applications, data management, surveys and trainings, without any transfer or supply of goods. No element of works contract or composite supply involving goods is found in the scope of work. The services are therefore treated as pure services within the meaning of Sl. No. 3 of the notification.

Conclusions

2.8 The services of field level data validation of FHTCs and creation of an error-free database for Piped Water Supply Schemes, and the services of organizing orientation programmes and performance evaluation under Jal Mitra / Jal Jeevan Mission, when supplied to the Public Health Engineering Directorate of the State Government, are "pure services" provided to the State Government in relation to the functions of drinking water/water supply entrusted under Articles 243G and 243W. They qualify for exemption under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate), and no GST is payable.

Issue 2 - Exemption for survey, GIS visualization and functionality assessment services under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate)

Legal framework

2.9 The same Notification No. 12/2017-Central Tax (Rate), Sl. No. 3, and the same three cumulative conditions identified in paragraph 2.2 above are applied. Articles 243G and 243W with their Schedules are applied in the same manner, primarily by reference to "Drinking water" and "Water supply for domestic, industrial and commercial purposes".

Interpretation and reasoning

2.10 The Court identifies, on the basis of work orders now on record, the following relevant services: (C) digital structurisation of pipeline alignment and asset evaluation through survey and map preparation for a specific Piped Water Supply Scheme, and (D) capturing detailed field-level information of head work sites and pump houses, including images, operational status, designing and drawing of scheme-based maps visualizing key features related to drinking water supply, and measurement of head work site area using DGPS for identification of existing and vacant land area.

2.11 These services are found to be part of the same overall scheme of providing safe and reliable drinking water through PWSS under Jal Jeevan Mission, involving GIS tools, Web GIS, digital asset management, scheme mapping, and asset evaluation. They are therefore characterized as activities directly related to and facilitating the core drinking water and water supply functions entrusted to Panchayats and Municipalities; condition (iii) of Sl. No. 3 is thus held satisfied.

2.12 The services are all carried out for the Public Health Engineering Directorate of the State Government. Accordingly, condition (ii) (services provided to State Government / Governmental authority) is held to be fulfilled.

2.13 On the "pure services" requirement, the Court, after a detailed review of work orders C and D, concludes that the activities involve surveys, data capture, GIS-based mapping, digital structurisation, preparation of maps and representations, and functionality assessment, with no element of supply of goods or works contract. There is no composite supply involving goods. The services are thus held to be pure services for purposes of the notification.

Conclusions

2.14 The services involving collection of different components of Piped Water Supply Schemes, land information of head work site area, visualization of key features with functionality assessment, digital structurisation of pipeline alignment, and asset evaluation and mapping, when supplied to the Public Health Engineering Directorate of the State Government, are "pure services" provided to the State Government in relation to drinking water/water supply functions under Articles 243G and 243W. They qualify for exemption under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate), and no GST is payable.

Issue 3 - Necessity of classification and rate determination where exemption applies

Interpretation and reasoning

2.15 The questions seeking classification and rate of tax (Questions 3 and 4) are expressly posed as contingent on a negative answer to the exemption questions (Questions 1 and 2). Since the Court answers Questions 1 and 2 in the affirmative, holding the services exempt under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate), the contingency does not arise.

Conclusions

2.16 In view of the finding that all the relevant services are exempt as pure services under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate), no determination of alternate classification or applicable GST rate is required or made. The queries regarding classification and rate in the event of non-exemption "do not arise".

Issues: Whether the faceless assessment order and consequential demand and penalty proceedings were vitiated for want of adequate opportunity, non-consideration of the assessee's adjournment request and reply, and breach of Section 144B of the Income-tax Act, 1961 and the principles of natural justice.

Analysis: The final show cause notice granted less than the prescribed seven days under the assessment scheme, the adjournment request was not dealt with, and the assessee had in fact transmitted its objections by email before the assessment order was passed. The record therefore did not justify the finding that no reply had been furnished. Section 144B(1)(xv) required consideration of the assessee's reply and all material available with the assessment unit before finalising the assessment. On these facts, the assessment was passed without proper consideration of the assessee's response and without a fair opportunity of hearing, amounting to procedural unfairness and breach of natural justice.

Conclusion: The impugned assessment order and consequential proceedings could not be sustained and were set aside.

Final Conclusion: The matter was restored to the stage of the show cause notice for fresh consideration by the faceless assessing authority, with directions to reopen the portal, consider the existing and additional replies, and afford a hearing through video conferencing.

Ratio Decidendi: Under faceless assessment, failure to give adequate notice time, to consider an adjournment request, and to take into account a timely filed reply before passing the final assessment order vitiates the assessment for breach of Section 144B and the principles of natural justice.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the reassessment proceedings and notice under Section 148 for the relevant assessment year were vitiated on account of alleged contradictory or multiple 'reasons to believe' and vague/incorrect allegations in the notices under Section 148A(1).

1.2 Whether, after the amendment by Finance Act, 2022, the Assessing Officer was mandatorily required to conduct an inquiry under the erstwhile Section 148A(a) before issuing a notice under Section 148A(1), and whether failure to do so rendered the proceedings invalid.

1.3 Whether issuance of a second notice under Section 148A(1) without formally withdrawing the earlier notice under Section 148A(1) created a jurisdictional defect invalidating the subsequent order under Section 148A(3) and the notice under Section 148.

1.4 Whether any jurisdictional or inherent defect existed in the assumption of jurisdiction by the Assessing Officer to issue notice under Section 148(1) for the relevant assessment year.

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Alleged multiple / contradictory 'reasons to believe' and vagueness of allegations in notices under Section 148A(1)

(a) Legal framework (as discussed)

The Court considered the scheme of Sections 147, 148, and 148A, and applied the principle that reassessment must be founded on "reasons to believe" and that the allegations in a notice under Section 148A(b) must be sufficiently precise to afford a fair opportunity to the assessee, as recognised in the cited decision in Rajnish Puri. The Court also noted that, as per judicial precedents referred to by the Assessing Officer (including decisions holding that validity of reassessment is to be judged on originally recorded reasons), subsequent materials or communications can corroborate but not change or substitute the original reasons.

(b) Interpretation and reasoning

The Court distinguished the cited decision in Rajnish Puri on facts. In that case, the allegation in the notice and the information supplied were inconsistent ("fictitious Note" vs "fictitious long term capital gain"), leading Revenue itself to concede a remand. In the present matter, the Court found that:

* The facts and allegations in the notices and materials supplied were clearly stated and there was no ambiguity or contradiction of the kind that would prejudice the petitioner's ability to put forward a defence.

* The core foundation for reopening lay in intelligence received regarding transactions with dummy entities of a specified amount, and subsequent GST data analysis and bank record verification only corroborated and strengthened the initial information; they did not introduce new or inconsistent grounds.

* The contention that two different and inconsistent sets of "reasons to believe" had been furnished was rejected as both factually incorrect and legally misconceived; there was no change of opinion or substitution of reasons.

* Nothing was shown to the Court to indicate that the Assessing Officer had exceeded jurisdiction or that the notice suffered from any inherent legal defect on account of the manner in which "reasons to believe" were formulated or communicated.

(c) Conclusions

The Court held that the reassessment proceedings were not vitiated on the ground of multiple or contradictory "reasons to believe" or on the ground that the allegations in the notices were vague or imprecise. The assessee was not prejudiced in presenting his defence, and it was not a case of change of opinion.

2.2 Requirement of prior inquiry under Section 148A(a) post Finance Act, 2022

(a) Legal framework (as discussed)

The Court extracted and compared the pre-amendment and post-amendment text of Section 148A:

* Pre-amendment Section 148A(a) (requiring the Assessing Officer to "conduct any enquiry, if required, with the prior approval of specified authority" before issuing notice under Section 148).

* Amended Section 148A (effective 01.04.2022) titled "Procedure before issuance of notice under section 148", which now requires that where the Assessing Officer has information suggesting escapement of income, he shall, before issuing notice under Section 148, provide an opportunity of being heard by serving a show cause notice accompanied by such information.

(b) Interpretation and reasoning

The Court observed that after the Finance Act, 2022, the statutory text of Section 148A no longer contains clause (a) in the earlier form. The structure of the amended provision focuses on supplying information and granting an opportunity of being heard before issuance of a Section 148 notice, without mandating a prior independent inquiry of the type earlier contemplated under Section 148A(a).

On this basis, the Court held that the petitioner's argument, premised on a continuing obligation to conduct an inquiry under the old Section 148A(a), was misconceived because that clause no longer exists in the statute.

(c) Conclusions

The Court concluded that there was no statutory requirement, under the post-amendment Section 148A applicable to the case, for the Assessing Officer to conduct an inquiry under clause (a) prior to issuing notice under Section 148A(1). Accordingly, the contention that failure to conduct such prior inquiry rendered the notices and orders invalid was rejected.

2.3 Effect of issuing a second notice under Section 148A(1) without formal withdrawal of the earlier notice

(a) Legal framework (as discussed)

The Court examined the nature of a notice under Section 148A(1) as a show cause notice affording an opportunity of being heard before issuance of a notice under Section 148, and considered whether multiple such notices, without formal withdrawal of the first, affect jurisdiction or validity of the subsequent proceedings.

(b) Interpretation and reasoning

The Court noted that:

* Both the earlier notice dated 29.03.2025 and the subsequent notice dated 13.06.2025 were issued under Section 148A(1).

* The subsequent notice was issued with the "same contents" as the earlier one and again called upon the petitioner to show cause why a notice under Section 148 should not be issued and to submit reply and supporting documents.

* In such circumstances, the fresh notice effectively superseded the earlier notice; the earlier notice, by reason of the later notice on identical subject-matter and contents, became infructuous.

* No statutory requirement was shown that the Revenue must first formally withdraw the earlier Section 148A(1) notice as a condition precedent to issuing a fresh Section 148A(1) notice on the same material and contents.

(c) Conclusions

The Court held that the issuance of the second notice under Section 148A(1) without a prior formal withdrawal of the first did not create any jurisdictional defect. The earlier notice was rendered infructuous once the fresh notice with the same contents was issued. The challenge on this ground was rejected.

2.4 Existence of jurisdictional or inherent defect in assumption of jurisdiction under Section 148

(a) Legal framework (as discussed)

Within the overall scheme of Sections 147, 148, and 148A, the Court examined whether the conditions precedent to assumption of jurisdiction for reassessment (existence of information suggesting escapement of income; issuance of proper notice; opportunity of being heard) were satisfied, and whether any jurisdictional infirmity was demonstrated by the petitioner.

(b) Interpretation and reasoning

The Court found that:

* The Assessing Officer had information suggesting escapement of income, based on intelligence relating to transactions with dummy entities, supported by further analysis of bank and GST data.

* Notices under Section 148A(1) were issued and opportunity to respond, including with documents, was granted and availed by the petitioner.

* The order under Section 148A(3) dealt with the petitioner's replies and objections in detail and explained the factual basis for connecting the petitioner with the disputed entities and bank accounts, as well as the GST discrepancies allegedly indicating manipulation of invoice values.

* Allegations that someone else might have used the petitioner's email ID or address in bank accounts, or that GST jurisdiction lies with GST authorities, did not displace the statutory jurisdiction of the Income Tax Authority to act on information suggesting income escapement for income-tax purposes.

* The petitioner failed to demonstrate any legal bar, lack of authority, or inherent defect in the issuance of the notice under Section 148(1) by the Assessing Officer for the relevant assessment year.

(c) Conclusions

The Court held that no jurisdictional issue arose on the facts of the case. The Assessing Officer had the jurisdiction to issue notice under Section 148(1), and the statutory preconditions were met. Consequently, the writ petition lacked merit and was dismissed.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the disallowance of purchases from a specific supplier as "bogus purchases" under section 37(1) was justified on the basis of absence of transportation evidence and adverse findings in the supplier's assessment.

1.2 Whether the appellate authority was justified in deleting the addition by relying, inter alia, on GST investigation closure reports and other materials treated as additional evidence without complying with Rule 46A and without a detailed, reasoned (speaking) order as required by section 250(6).

1.3 Consequential treatment of the appeal and cross objection in light of additional evidence and incomplete factual verification regarding genuineness of purchases.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Disallowance of purchases from supplier as bogus under section 37(1)

(a) Interpretation and reasoning

2.1 The Assessing Officer disallowed 100% of purchases from the identified supplier on the basis that: (i) no transportation bills or related documentary proof were furnished either by the assessee or the supplier despite repeated opportunities; (ii) the supplier showed negligible expenses and abnormally low profit against very high turnover, with no freight/transportation cost recorded; (iii) physical verification indicated only two small, empty warehouses of about 250 sq. ft. each, inadequate for the reported turnover, and non-existence at the address on invoices; (iv) books of account of the supplier were rejected in its own assessment and its sales were held to be bogus; and (v) the pattern of low margins and low expenses across related entities suggested "paper circular transactions."

2.2 The Assessing Officer concluded that the alleged purchases from the supplier were bogus, holding that once the entire transaction is found bogus, full disallowance is warranted, referring to judicial precedent, and treated the amount as disallowable under section 37(1).

2.3 The appellate authority, by contrast, held that the purchases were genuine, principally on the grounds that: (i) the Assessing Officer had not established the classic elements of a bogus/paper purchase (fake invoicing, cheque rotation, cash withdrawal, and return of cash); (ii) there was no material to show circulation of cash or that the assessee had received cash back; (iii) the size and nature of the supplier's premises (small room with cartons) was not inconsistent with the nature of traded tools; (iv) a closure/intimation letter from GST authorities indicated that goods had actually been supplied by the said supplier; (v) the supplier's existence and continuing business relationship were not in doubt; (vi) the assessee's profit levels were at arm's length with comparable traders and manufacturers; and (vii) discrepancies and reconciliation gaps pointed out by the Assessing Officer were minuscule.

2.4 Before the Tribunal, the Departmental Representative emphasized the continued absence of transportation evidence, the supplier's minimal expenses and profits, and the adverse findings in the supplier's own assessment, and attacked the appellate order as non-speaking and contrary to section 250 and Rule 46A.

2.5 The assessee, before the Tribunal, relied on extensive documentary material (purchase orders, invoices, delivery challans with vehicle numbers and lorry receipt numbers, confirmations, ledgers, and bank statements) and further relied upon investigation and closure reports under GST law which, according to the assessee, accepted the purchases from the supplier as genuine. It was also asserted that all transportation-related documents are now available in a voluminous paper book.

2.6 The Tribunal noted that the Assessing Officer's conclusion of bogus purchases was largely driven by the absence of transportation evidence and adverse inferences drawn in the supplier's assessment. At the same time, the Tribunal observed that significant subsequent materials, including GST search, summons, panchanama and closure reports, as well as further transportation documents and other evidences, had not been before the Assessing Officer and had not been examined by him.

(b) Conclusions

2.7 The Tribunal did not affirm either the Assessing Officer's full disallowance or the appellate authority's deletion on merits. It held that, in light of additional evidences and factual aspects not examined by the Assessing Officer, the genuineness of the purchases from the supplier requires fresh factual verification.

2.8 The issue of genuineness or bogus nature of the purchases from the supplier was therefore remanded to the jurisdictional Assessing Officer for fresh examination, confined to this limited purpose, in accordance with law and after affording reasonable opportunity to the assessee.

Issue 2: Reliance on additional evidence by appellate authority and requirement of a speaking order

(a) Legal framework discussed

2.9 The Departmental Representative specifically invoked section 250(6), which mandates that the order of the appellate authority shall state the points for determination, the decision thereon, and the reasons for the decision. Rule 46A governing admission of additional evidence before the appellate authority was also relied upon, with emphasis that any additional evidence should be confronted to the Assessing Officer for comments.

2.10 Judicial precedents were cited (by the Departmental Representative) to underline that quasi-judicial orders must be reasoned, and that failure to pass a speaking order and to follow Rule 46A procedures vitiates the appellate order.

(b) Interpretation and reasoning

2.11 The appellate authority had relied, inter alia, on a closure/intimation letter of the CGST authorities and another closure report under GST law to conclude that the supplier existed and that goods were actually supplied.

2.12 The Departmental Representative contended that: (i) the closure/intimation letter dated 24.12.2021 was not on record before the Assessing Officer; (ii) it was not a formal "closure report" and, in any case, was limited in scope to mismatch of vehicle data; (iii) it was issued on the request of the assessee and did not disclose the full nature of proceedings; (iv) the other closure report dated 27.04.2023 pertained to suspicious input tax credit and did not name the supplier; and (v) both documents, being additional evidence, were required to be forwarded to the Assessing Officer under Rule 46A, which was not done.

2.13 The Tribunal noted, from the assessee's own submissions, that the GST search and closure letter were indeed subsequent and had not been placed before the Assessing Officer. The assessee fairly accepted that these materials had not been before the Assessing Officer and expressed no objection if the matter was remanded to him for verification, including verification of the GST enquiries and closure.

2.14 The Tribunal recorded that significant aspects relating to (i) GST search and summons, (ii) closure reports under GST law, and (iii) detailed transportation evidence and other documents in the extensive paper book, had all remained unexamined by the Assessing Officer.

(c) Conclusions

2.15 Implicitly accepting the Department's contention that such additional material had not been considered by the Assessing Officer and that proper procedural compliance had not been ensured, the Tribunal held it appropriate to restore the matter to the jurisdictional Assessing Officer for a limited, fresh examination.

2.16 The appellate authority's order deleting the addition was not sustained on the existing record; instead, the Tribunal directed a de novo consideration by the Assessing Officer on the genuineness of the purchases after examining all evidences, including the additional materials relied upon before the appellate authority and the Tribunal, in accordance with law.

Issue 3: Consequential orders in appeal and cross objection

(a) Interpretation and reasoning

2.17 In view of the remand of the core issue (genuineness of purchases from the supplier) to the jurisdictional Assessing Officer for limited verification and fresh decision, the Tribunal treated the Revenue's appeal and the assessee's cross objection as not requiring adjudication on merits at this stage.

(b) Conclusions

2.18 The Revenue's appeal was allowed for statistical purposes, with directions to the jurisdictional Assessing Officer to re-examine the genuineness of purchases from the supplier after considering all relevant, including additional, evidences and after granting reasonable opportunity to the assessee.

2.19 The assessee's cross objection, being dependent on the fate of the core issue remanded, was also treated as allowed for statistical purposes.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether addition under Section 69A on account of cash and jewellery found during search could be sustained in the hands of the assessed AOP.

1.2 Whether purchases from three specified suppliers could be treated as bogus and disallowed, including (i) M/s Vijay Iron Works, (ii) M/s Armstrong Wires and Engineering Pvt. Ltd., and (iii) M/s Kirti Enterprises.

1.3 Whether a blanket disallowance of expenses debited to the profit & loss account amounting to Rs. 29,86,27,579/- was sustainable.

1.4 Whether transfer pricing adjustment by determining the arm's length price of specified international transactions at nil and making an addition of Rs. 7,46,57,884/- was justified.

1.5 Whether interest charged under Sections 234A, 234B and 234C required separate adjudication.

1.6 Whether the findings and relief granted in one appeal would apply mutatis mutandis to the connected appeal.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Addition under Section 69A on cash and jewellery found during search

Legal framework (as discussed)

2.1 The Tribunal considered Section 69A, which applies where an assessee is "found to be the owner" of money, bullion, jewellery or other valuable article not recorded in the books of account and for which no satisfactory explanation is offered. The Tribunal also noted the presumption under Section 132(4A) that material found in possession or control of a person is presumed to belong to that person.

Interpretation and reasoning

2.2 It was undisputed that the assessed consortium was an AOP formed for executing Commonwealth Games contracts and that it is not a legal entity owning the various searched premises.

2.3 The seized cash and jewellery were found at several premises. On the material placed, the Tribunal noted that, except for one office premises, the addresses where cash/jewellery were found belonged to individuals or other entities (including one consortium member and other persons such as a director, family members and an associated firm), and not to the AOP itself.

2.4 The Tribunal recorded that the recovery and seizure were from premises not belonging to the AOP or its members (insofar as the impugned addition was made in the hands of the AOP), and that no specific material was shown to establish that the AOP was the owner of the seized cash and jewellery.

2.5 In this factual backdrop, the necessary pre-condition under Section 69A - that the assessee be "found to be the owner" of the seized assets - was held not to be satisfied in the case of the AOP.

Conclusions

2.6 The addition of Rs. 52,87,395/- under Section 69A in the hands of the AOP was held to be illegal and unsustainable and was set aside. The corresponding ground in the appeal was allowed.

Issue 2 - Alleged bogus purchases from Vijay Iron Works, Armstrong Wires & Engineering Pvt. Ltd., and Kirti Enterprises

Interpretation and reasoning

2.7 For purchases from M/s Vijay Iron Works and M/s Armstrong Wires & Engineering Pvt. Ltd., the Tribunal noted the undisputed position that all relevant claims had been considered in arbitral proceedings, and that actual payments were made through banking channels pursuant to the Arbitral Award.

2.8 In light of the existence of an arbitral adjudication and the fact of payments through proper banking channels, the Tribunal found the Assessing Officer's and DRP's conclusion branding the purchases as bogus to be unsustainable.

2.9 For purchases/advances relating to M/s Kirti Enterprises, the Tribunal recorded that advances to suppliers had been given in good faith in the course of business; on account of delay, such advances were written off. Treating these purchases/advances as bogus and disallowing the amount was held to be unjustified on the facts.

Conclusions

2.10 Additions on account of alleged bogus purchases from:
* M/s Vijay Iron Works (Rs. 1,16,52,984/-), and
* M/s Armstrong Wires & Engineering Pvt. Ltd. (Rs. 2,58,55,023/-),
were held to be unsustainable and were deleted.

2.11 The addition of Rs. 63,42,250/- in respect of M/s Kirti Enterprises, treated as bogus purchases/advance write-off, was also set aside. The corresponding grounds were allowed.

Issue 3 - Disallowance of Rs. 29,86,27,579/- being expenses debited to the profit & loss account

Interpretation and reasoning

2.12 The Tribunal noted that the impugned disallowance was a blanket disallowance of expenses, notwithstanding that:

* Payments were made through account-payee cheques; and
* Tax was deducted at source (TDS), as evidenced inter alia at page 392 of the paper book (Volume II).

2.13 It was further observed that the AOP's financial statements and return of income reflected the total contract receipts from Commonwealth Games and all related expenses incurred on behalf of the AOP, including expenses incurred through its members.

2.14 The Tribunal reiterated that, for contract work executed through the AOP, receipts and corresponding expenditure are to be assessed in the hands of the AOP, and that one of the consortium members (Deepali Designs and Exhibits Pvt. Ltd.) continued to be part of the AOP. On these facts, a blanket/arbitrary disallowance of properly vouched, TDS-compliant expenses was held to be unjustified.

Conclusions

2.15 The disallowance of Rs. 29,86,27,579/- was held to be arbitrary and illegal and was deleted. The corresponding ground was allowed.

Issue 4 - Transfer pricing adjustment: determination of ALP at nil and addition of Rs. 7,46,57,884/-

Legal framework (as discussed)

2.16 The Tribunal examined the treatment of international transactions under Chapter X, noting that the Transfer Pricing Officer had effectively determined the arm's length price at nil and the Assessing Officer and DRP had adopted that view, rejecting the assessee's transfer pricing documentation based on the Transactional Net Margin Method (TNMM) and adopting the CUP method.

Interpretation and reasoning

2.17 In the second round of proceedings, the original assessment had already been set aside, and all issues were left open for fresh adjudication, as clarified in a Miscellaneous Application order dated 11.01.2021. Despite this, the TPO and Assessing Officer largely reiterated their earlier reasoning and failed to freshly examine the international transactions.

2.18 The Tribunal noted that the DRP had accepted TNMM as the appropriate method in its directions, whereas the Assessing Officer applied the CUP method and determined the value of intra-group services at nil.

2.19 It was an undisputed factual position on record that services were actually rendered by PICO Hong Kong and that detailed TP documentation and supporting evidence had been filed, including the TP study report (pages 2272-2323) and event management documentation (page 2080 of the paper book). The TPO, however, held that no details were filed and applied the CUP method without any reliable comparable data.

2.20 The Tribunal found this approach contrary to the earlier remand directions and inconsistent with the record. The rejection of TNMM without cogent reasons and adoption of CUP with no proper comparables, coupled with an ALP determination of nil despite actual services, was held to be untenable.

Conclusions

2.21 The determination of the value of international transactions at nil and consequential transfer pricing addition of Rs. 7,46,57,884/- were set aside. The corresponding ground was allowed.

Issue 5 - Interest under Sections 234A, 234B and 234C

Interpretation and reasoning

2.22 The Tribunal held that the ground relating to interest was consequential in nature, dependent upon the outcome of the substantive additions and disallowances.

Conclusions

2.23 No separate adjudication was undertaken on interest; it was left to be recomputed, if necessary, in consequence of the Tribunal's substantive findings.

Issue 6 - Application of findings in one appeal to the connected appeal

Interpretation and reasoning

2.24 The Tribunal noted that the connected appeals involved common issues arising from the same assessment proceedings and transaction structure, including the status and membership of the AOP and the same additions/disallowances.

2.25 It was specifically recorded that the findings on grounds 1 to 8 in one appeal (relating to Section 69A, alleged bogus purchases, disallowance of expenses and transfer pricing adjustment) equally governed the corresponding grounds in the other appeal.

Conclusions

2.26 The Tribunal directed that its findings in ITA No. 412/Del/2022 apply mutatis mutandis to ITA No. 518/Del/2022. Both appeals were allowed on this basis.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the addition of Rs. 65,19,810/-, representing sundry debtors of earlier and current year treated as unexplained investment / fictitious debtors on the ground of non-genuine sales and sham business transactions, was sustainable in law and on facts.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Sustainability of addition of Rs. 65,19,810/- as unexplained investment based on alleged fictitious sundry debtors and non-genuine business

(a) Interpretation and reasoning

2.1 The Assessing Officer proceeded on the basis of findings recorded in the assessment for the immediately preceding assessment year that the assessee was merely a name lender, had not undertaken any real purchase/sale, and that sundry debtors of Rs. 26,05,460/- for that year were fictitious. On this premise, and by observing similar patterns of transactions and absence of what he considered commensurate business expenses, the AO held that current year sales were also not genuine and treated sundry debtors of the current year (Rs. 39,14,350/-) as fictitious. The entire aggregate of Rs. 65,19,810/- (earlier and current year sundry debtors) was added as unexplained investment.

2.2 The appellate authority agreed with the AO, observing that the very basic features of a commercial activity were allegedly missing, that the assessee failed to justify these aspects, and that transactions were, therefore, prima facie sham; the rejection of accounts was treated as implicit.

2.3 Before the Tribunal, the assessee produced and relied upon: (i) audited accounts, (ii) details of purchases and sales of equity shares and cotton knitted fabrics, (iii) supporting bills, (iv) details of expenses including freight and transportation charges, rent and other expenditure, and (v) details of office and godown-cum-office premises, to show actual business operations and to rebut the inference that no genuine business was carried on.

2.4 The assessee also highlighted that, as per its balance sheet, the trade receivables / sundry debtors as on 31.03.2015 were 'Nil', thereby disputing the premise that there existed outstanding sundry debtors at year end which could be added in the year under appeal.

2.5 The Tribunal noted that, on similar facts, in another case involving comparable allegations of bogus business and fictitious sundry debtors, a co-ordinate Bench had deleted additions made on identical reasoning, inter alia holding that: (i) sundry debtors not treated as bogus in the scrutiny assessment of an earlier year could not subsequently be treated as fictitious in a later year, (ii) no specific corroborative evidence of bogus transactions had been brought on record for the relevant year, (iii) once business transactions are branded as entirely non-genuine, consistent treatment cannot simultaneously accept them for making additions on account of purchases/sales or sundry debtors, and (iv) an amount pertaining to an earlier year, even if fictitious, cannot be brought to tax in a subsequent year merely by re-characterising it.

2.6 The Tribunal found the facts of the present case to be similar to those in the cited decision: the AO had proceeded on broad and generalized allegations about the non-genuineness of business, without specific corroborative evidence of bogus transactions in the relevant year; the assessee had filed documents evidencing business in shares and cotton fabrics; and the authorities below had not specifically controverted or commented on these evidences.

2.7 The Tribunal further took note of the factual position that trade receivables / sundry debtors as on 31.03.2015 were shown at 'Nil', which undermined the very foundation of the addition for the year under appeal, in so far as it was purportedly based on existing sundry debtors.

(b) Conclusions

2.8 The Tribunal held that, in the absence of specific and corroborated finding of bogus transactions in the relevant year, and having regard to the fact that no sundry debtors existed as at 31.03.2015, the addition of Rs. 65,19,810/- on account of sundry debtors treated as unexplained investment was not sustainable.

2.9 By following the ratio and reasoning of the co-ordinate Bench decision on materially identical facts, and considering the uncontroverted evidences produced by the assessee, the Tribunal deleted the entire addition of Rs. 65,19,810/- and allowed grounds 1 to 3 of the appeal.

2.10 In view of the deletion of the addition on merits, the ground challenging the validity of the assessment on the basis of expansion of the scope of limited scrutiny was treated as academic and expressly left open, without adjudication on merits.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether reassessment proceedings initiated beyond four years from the end of the relevant assessment year were valid in the absence of an allegation in the recorded reasons that income had escaped assessment due to the assessee's failure to disclose fully and truly all material facts as required under the proviso to section 147.

1.2 Whether the statutory approval for reopening the assessment under section 147, obtained on the basis of erroneous factual narration in the approval form (wrong clause of Explanation 2 cited and incorrect assumption that no prior assessment existed), rendered the reassessment proceedings invalid.

1.3 Consequentially, whether the additions on account of unexplained cash deposits in the bank accounts could survive once the reassessment itself was found to be without valid jurisdiction.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of reopening beyond four years without recording failure to disclose fully and truly all material facts

Legal framework (as discussed)

2.1 The Court examined section 147 along with its proviso. It noted that where an assessment has already been framed under section 143(3), no action can be taken after the expiry of four years from the end of the relevant assessment year unless income has escaped assessment by reason of the assessee's failure (i) to make a return under section 139 or in response to notices under sections 142(1) or 148, or (ii) to disclose fully and truly all material facts necessary for the assessment.

2.2 Reliance was placed on the decision of the jurisdictional High Court in "Duli Chand Singhania" holding that, in a case where assessment has been made under section 143(3) and reopening is sought after four years, two conditions must co-exist: (i) the Assessing Officer must have reason to believe that income has escaped assessment; and (ii) he must also have reason to believe that such escapement occurred by reason of the assessee's failure to file a return or to disclose fully and truly all material facts. The same principle was noted as followed by another High Court in "Seshasayee Paper & Board Ltd." with emphasis on the existence of "jurisdictional fact" being sine qua non to invoke the extended period.

Interpretation and reasoning

2.3 The Court recorded that regular assessments for the relevant years had already been completed under section 143(3) on 31-12-2009, after issuance of notices under section 142(1) and due consideration of replies.

2.4 The reopening was initiated on 12-03-2014, i.e., beyond four years. The reasons recorded referred to cash deposits based on AIR information, alleged non-consideration of capital gains from sale of land, and consequent inference that certain cash deposits remained unexplained.

2.5 On scrutiny of the recorded reasons, the Court found that nowhere did the Assessing Officer allege that income had escaped assessment because of the assessee's failure to disclose fully and truly all material facts necessary for the assessment. The reasons only indicated that a particular aspect (cash deposits / capital gains) was not examined during the original assessment.

2.6 Applying the law laid down in the cited decisions, the Court held that failure on the part of the assessee to fully and truly disclose all material particulars constitutes the "jurisdictional fact" for invoking the extended limitation under the proviso to section 147. Absence of a recorded finding or allegation to that effect meant that the jurisdictional requirement was not met.

Conclusions

2.7 The Court concluded that, since the original assessments were completed under section 143(3) and the reassessment notices were issued beyond four years without recording any failure of full and true disclosure by the assessees, the conditions prescribed by the proviso to section 147 were not satisfied. Consequently, the reassessment proceedings were held to be without jurisdiction on this ground.

Issue 2: Validity of approval for reopening obtained on erroneous factual basis

Legal framework (as discussed)

2.8 The Court referred to the requirement that the Assessing Officer must obtain sanction from the appropriate authority before issuing notice under section 148, and that such approval must be based on correct and complete material placed before the approving authority.

Interpretation and reasoning

2.9 The Court examined the approval form placed on record. In Column No. 7, the Assessing Officer stated that the case fell under section 147(b) and that the assessment was being made "for the first time".

2.10 The Court found this to be factually incorrect, as an assessment under section 143(3) had already been completed earlier. The case actually fell under Explanation 2 clause (c) to section 147 and not under clause (b); clause (b) applies only when no assessment has been made earlier.

2.11 According to the Court, these were "vital facts" which could materially affect the mind of the approving authority in deciding whether, and under which provision, to grant approval for reopening. Since approval was sought and granted on mis-stated facts, the Court held that the approval could not be regarded as a valid statutory sanction.

Conclusions

2.12 The Court held that, as the approval of the appropriate authority was obtained on erroneous and misleading factual premises, the reassessment could not be said to have been validly sanctioned. This defect independently vitiated the reopening.

Issue 3: Sustainability of additions once reassessment is invalid

Interpretation and reasoning

2.13 In both appeals, the additions represented cash deposits in bank accounts treated as income from undisclosed sources after rejecting the explanation of agricultural income and advances from sale of land.

2.14 Having held that the reassessment proceedings were vitiated in law due to (i) non-fulfilment of jurisdictional conditions under the proviso to section 147, and (ii) invalid approval based on wrong facts, the Court observed that any discussion on the merits of the additions would be merely academic.

Conclusions

2.15 The Court quashed the reassessment proceedings on legal grounds alone and, as a consequence, the additions on account of cash deposits could not survive. The appeals in both matters were allowed, with the same reasoning applied mutatis mutandis to the second assessee, whose facts and recorded reasons were found to be identical.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether rejection of books of account under section 145(3) was justified in view of defects in stock records, sales pattern, and gross profit rate.

1.2 Whether cash deposits of Rs. 59,90,000/- during the demonetisation period were rightly treated as unexplained cash credits under section 68.

1.3 Whether and to what extent the alleged opening stock, including purchases from a tainted supplier, could be treated as non-genuine and brought to tax, and the effect of the legal position that section 68 does not apply to opening stock.

1.4 Whether estimation of gross profit at 26.14% (same as preceding year) after rejection of books was legally sustainable.

1.5 Whether filing of VAT returns and acceptance of turnover in the books precluded the tax authorities from treating the cash deposits and related sales/purchases as non-genuine.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Rejection of books of account under section 145(3)

Legal framework (as discussed)

2.1 The Court noted the settled position, supported by precedents cited by the appellate authority (including Kachwala Gems v. JCIT and other High Court and Tribunal decisions), that books of account can be rejected under section 145(3) where stock registers are not maintained, quantitative records are unreliable, or accounts do not present a true and correct state of affairs.

Interpretation and reasoning

2.2 The Assessing Officer identified multiple discrepancies: absence of a quantitative stock register, unverifiable stock valuation, abnormal and sudden surge in cash sales during the demonetisation window, sales to about 60 customers in a short period with almost all invoices below Rs. 2,00,000/- and without identity details, and mismatch of gross profit rate with prior years.

2.3 These findings were affirmed by the appellate authority, which relied on judicial precedents to uphold that such defects justify rejection of books under section 145(3).

2.4 The Court observed that the assessee did not produce any fresh material to rebut the factual defects or to show that the accounts reflected a true and correct picture.

Conclusions

2.5 Rejection of the books of account under section 145(3) was held to be justified and stands confirmed.

Issue 2: Addition of Rs. 59,90,000/- as unexplained cash credits under section 68 in respect of demonetisation-period deposits

Legal framework (as discussed)

2.6 The Court proceeded on the basis that the onus under section 68 lies on the assessee to satisfactorily explain the nature and source of cash credits; failure to do so permits the addition as unexplained cash credit.

Interpretation and reasoning

2.7 The assessee claimed that cash deposits of Rs. 59,90,000/- comprised sale proceeds of gold jewellery, supported by sales bills, stock records and VAT returns, contending that invoices below Rs. 2,00,000/- did not require customer details.

2.8 The Assessing Officer had found the sale pattern inconsistent with past trading behaviour, noting a sudden spike in cash sales just prior to and during demonetisation, all to numerous small customers with no identification particulars, and linked these sales mainly to opening stock allegedly purchased from a single party without payment.

2.9 The Court considered the FIR against M/s Hari Darshan Jewellers, the main alleged supplier from whom about 70% of stock was claimed to have been purchased. The FIR recorded large-scale bank fraud, use of fabricated stock statements, diversion of funds, disappearance of stock, and absence of genuine business activity, with only about 25% of declared stock actually found.

2.10 The Court treated these FIR findings as corroborative evidence undermining the assessee's claim of genuine purchases and existent stock from this supplier, especially since no payment was made to the supplier during the year for the alleged bulk purchase.

2.11 On this material, the Court held that the assessee failed to establish that the stock actually existed, that purchases were genuine, or that the alleged jewellery sales took place as claimed; the explanation regarding the nature and source of the deposits was found unsatisfactory and implausible.

Conclusions

2.12 The cash deposits of Rs. 59,90,000/- were rightly treated as unexplained cash credits under section 68 and the addition was confirmed.

Issue 3: Treatment of opening stock and alleged non-genuine purchases, and applicability of section 68

Legal framework (as discussed)

2.13 The appellate authority had held, and the Court noted, that opening stock does not constitute a "credit" in the books so as to attract section 68, and further, that once books are rejected, additions cannot be made by relying upon figures in those very books (relying inter alia on Indwell Constructions).

Interpretation and reasoning

2.14 The Assessing Officer had treated a portion of opening stock (linked to the disputed purchases) as non-genuine and made an addition under section 68, reasoning that the opening stock was inflated to support the alleged cash sales.

2.15 The appellate authority deleted the specific addition under section 68 on the technical legal grounds that opening stock cannot be so taxed and that, post-rejection of books, such additions on book figures were impermissible.

2.16 The Court, while noting that the deletion of the specific stock addition had been granted, emphasised that the underlying factual findings remained: absence of reliable stock records, unverifiable purchases, and the tainted nature of the transactions with M/s Hari Darshan Jewellers as evidenced by the FIR.

2.17 The Court held that these defects continued to support the other additions (especially the section 68 addition for cash deposits) independently of the technical deletion of the opening stock addition.

Conclusions

2.18 The separate addition on opening stock stood deleted on legal/technical grounds by the appellate authority; the Court accepted that this deletion did not affect the sustainability of the remaining additions, since the genuineness of stock and purchases remained unproved and continued to justify the other additions.

Issue 4: Estimation of gross profit after rejection of books

Legal framework (as discussed)

2.19 The Court referred to the settled law (including CIT v. McMillan & Co. and CIT v. A. Krishnaswamy Mudaliar) that once books are rejected, the Assessing Officer is empowered to estimate profits on a reasonable basis having regard to past results and relevant material.

Interpretation and reasoning

2.20 Post-rejection of books, the Assessing Officer adopted the gross profit rate of 26.14% (as shown in the immediately preceding year) and, comparing it with the lower rate of 8.26% in the year under consideration, made an addition of Rs. 6,17,750/- on gross profit.

2.21 The appellate authority had upheld this estimation, holding that income had to be estimated on turnover, and the rate adopted was based on the assessee's own history.

2.22 The Court found that the assessee brought no cogent material to show that the GP rate of the preceding year could not reasonably be applied to this year or that the estimation was arbitrary or excessive.

Conclusions

2.23 The estimation of gross profit at 26.14% and the resultant addition of Rs. 6,17,750/- were held to be reasonable and were sustained.

Issue 5: Effect of VAT returns and acceptance of turnover on genuineness of transactions and cash deposits

Legal framework (as discussed)

2.24 The Court relied on the principle laid down in Durga Prasad More v. CIT that taxing authorities are entitled to look beyond documentary form and examine the real nature and substance of transactions, and are not bound to accept entries or returns at face value if surrounding circumstances indicate otherwise.

Interpretation and reasoning

2.25 The assessee argued that since VAT returns were filed, stock summaries were furnished, and the sales were reflected in turnover, the Department should not treat the cash deposits and related sales as non-genuine.

2.26 The Court held that mere reflection of figures in books or VAT returns does not establish genuineness where the underlying stock is unverifiable, purchases from the main supplier are themselves doubtful in light of an FIR indicating fabricated stock and absence of genuine business, and the sale pattern is abnormal and uncorroborated.

2.27 The Court viewed the cash deposits and alleged sales as part of a pattern of manipulation designed to justify large cash deposits during the demonetisation period, and thus not protected merely by their appearance in statutory returns.

Conclusions

2.28 Filing of VAT returns and recording of turnover in the books did not preclude the Department from treating the related cash deposits and transactions as non-genuine; these documents were insufficient to discharge the assessee's onus in the face of contrary evidence and circumstances.

2.29 On an overall appraisal, the Court held that the assessee failed to discharge the onus under the Act; all grounds challenging the additions and rejection of books were devoid of merit and were dismissed, and the appeal stood rejected.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether deduction under section 54B can be denied for non-deposit of unutilized capital gains in the Capital Gains Account Scheme when the assessee has purchased new agricultural land within the prescribed period and issued cheques for the entire consideration before the due date of filing the return, though such cheques were realized subsequently.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Deduction under section 54B vis-à-vis non-deposit in Capital Gains Account Scheme and timing of payment by cheque

(a) Legal framework (as discussed)

2.1 The Tribunal proceeded on section 54B(1) and 54B(2) of the Act, concerning: (i) reinvestment of capital gains in purchase of agricultural land within the statutory period, and (ii) requirement of depositing unutilized capital gains in the Capital Gains Account Scheme before the due date for filing the return under section 139(1), where such gains are not so utilized by that date.

(b) Interpretation and reasoning

2.2 The Tribunal recorded the following facts as undisputed: (i) the purchase deed for new agricultural land was executed on 14.08.2019; (ii) cheques for the entire purchase consideration were issued on the same date; and (iii) the assessee maintained adequate bank balance to honour the cheques. There was no dispute as to the assessee having reinvested the capital gains in eligible assets within the prescribed period.

2.3 The assessee's contention was that once cheques for the entire consideration were issued on the date of execution of the registered purchase deed and sufficient bank balance was maintained, the payment should be regarded as made on the date of issuance of the cheques, and deduction under section 54B could not be denied merely because the cheques were presented and realized after the due date of filing the return and the amount was not deposited into the Capital Gains Account Scheme.

2.4 The Department contended that non-deposit of the unutilized capital gains into the Capital Gains Account Scheme before the due date under section 139(1) is fatal to the claim in view of section 54B(2).

2.5 The Tribunal noted that the reinvestment of the capital gains into the specified asset within the prescribed time was not in dispute. Reference was made to several decisions of High Courts and Coordinate Benches interpreting similar exemption provisions in favour of allowing deduction where the substantive condition of reinvestment within the stipulated time was satisfied, notwithstanding procedural lapses in routing through the Capital Gains Account Scheme.

2.6 On this basis, the Tribunal treated the requirement of deposit into the Capital Gains Account Scheme as not overriding the fact that the capital gains had in substance been reinvested in eligible agricultural land within the statutory period and that the liability for payment had been effectively incurred and discharged through cheques issued contemporaneously with execution of the purchase deed and backed by adequate funds.

(c) Conclusions

2.7 The Tribunal held that, since the reinvestment of capital gains into the specified agricultural land within the prescribed time was not in dispute, deduction under section 54B could not be restricted merely on the ground that the unutilized amount was not deposited in the Capital Gains Account Scheme and that the cheques were realized after the due date of filing the return.

2.8 The disallowance of deduction under section 54B was set aside and the appeal of the assessee was allowed.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the cash deposits in the assessee's bank accounts during the relevant assessment year, including the demonetization period, were unexplained money liable to addition under Section 69A of the Income-tax Act or represented explained, recorded business receipts from petrol pump operations.

1.2 Consequent upon the characterization of such cash deposits, whether the deeming provisions of Section 69A and the special rate of tax under Section 115BBE were sustainable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Characterization of cash deposits as unexplained money under Section 69A or explained business receipts

Legal framework (as discussed)

2.1 The Assessing Officer invoked Section 69A treating unexplained cash deposits as "unexplained money" on the ground that the assessee had not produced books of account or evidence to justify substantial cash deposits, nor explained the source, identity of persons from whom cash was received, or supporting records. The addition was made under Section 69A and taxability fastened under Section 115BBE.

2.2 The first appellate authority upheld the Assessing Officer's action, reiterating that the burden to explain the nature and source of cash deposits remained unfulfilled and that the deposits were not demonstrated to fall under any head of income under Section 14.

Interpretation and reasoning

2.3 The Tribunal examined the documentary evidence placed before it, including:

(i) complete stock and quantitative records of petrol and diesel;

(ii) purchase invoices issued by oil companies;

(iii) VAT-wise sales registers and sales summaries showing cash and credit sales with applicable VAT;

(iv) stock valuation statements;

(v) daily cash sales records; and

(vi) corresponding bank transaction details and statements.

2.4 On evaluating these records, the Tribunal found that they collectively demonstrated that the assessee was regularly purchasing petrol and diesel, maintaining day-to-day stock registers, effecting sales, and depositing resultant cash collections into the bank accounts.

2.5 The Tribunal noted that the bank transaction statements matched the pattern of daily business collections and that the cash deposits were relatable to regular business receipts. The purchase registers and VAT statements evidenced substantial purchases of petrol and diesel running into several crores, consistent with the declared sales turnover.

2.6 The sales summaries, showing both cash and credit sales with VAT, together with stock details evidencing quantitative movement of stock, were found to corroborate that the assessee's business operations generated significant cash inflows which, when seen alongside the bank deposit records, satisfactorily explained the source of the cash deposits.

2.7 The Tribunal held that once the assessee had furnished complete and internally consistent stock records, sales registers, VAT returns, purchase invoices, stock valuation statements, and bank statements, these corroborative materials discharged the burden of proving the nature and source of the cash deposits.

2.8 It was further held that, in such circumstances, the presumption under Section 69A could not survive, as there was no basis to treat the deposits as "unexplained money" when they were directly attributable to accounted business receipts arising from declared sales.

Conclusions

2.9 The Tribunal concluded that the cash deposits in question formed part of the regular turnover of the assessee's petrol pump business and had been duly recorded in the books of account.

2.10 Consequently, the addition made under Section 69A treating the amount of Rs. 2,07,56,750/- as unexplained money was held to be unsustainable and was deleted.

Issue 2: Applicability of Section 115BBE to the cash deposits

Interpretation and reasoning

2.11 The original application of Section 115BBE by the lower authorities was premised on the characterization of the cash deposits as deemed income under Section 69A, not falling under any specific head of income under Section 14.

2.12 Having held that the cash deposits were explained and formed part of regular business receipts duly recorded in the books, the Tribunal implicitly held that the foundational requirement for invoking Section 69A, and thereby Section 115BBE, was not satisfied.

Conclusions

2.13 With the deletion of the addition under Section 69A on the ground that the deposits were explained business income, the consequential application of Section 115BBE also did not survive.

2.14 The appeal was allowed, and the entire addition of Rs. 2,07,56,750/- sustained by the first appellate authority stood deleted.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the Assessing Officer was justified in reallocating employee benefit expenses to the Guwahati undertaking (eligible under section 80-IE) on the basis of unit-wise sales instead of the assessee's division-wise allocation method.

1.2 Whether excise duty/GST refunds received in respect of the Guwahati undertaking constitute "income" under section 2(24)(xviii) and are mandatorily includible in "book profit" under section 115JB.

1.3 Whether estimated disallowance of a portion of channel partner/retail promotion expenses and conference-related expenses is warranted under section 37(1) read with Explanation 1, in light of the Medical Council Regulations and CBDT Circular No. 5/2012.

1.4 Whether, in computing book profit under section 115JB, long-term capital gains included in the profit and loss account are to be computed after allowing indexed cost of acquisition.

1.5 Whether an additional claim for deduction under section 80JJAA can be rejected solely on the technical ground of non-filing/revised filing of Form 10DA, and the scope of appellate powers to entertain such claims.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Allocation of employee benefit expenses to Guwahati Unit (section 80-IE)

Interpretation and reasoning

2.1 The Tribunal noted that the assessee, a multi-division pharmaceutical manufacturer, allocated employee benefit expenses to the Guwahati undertaking based on division-wise sales of the relevant Guwahati division to total division-wise sales.

2.2 This allocation was supported by: (i) audited financial statements; (ii) statutory auditor certificates certifying division-wise sales; (iii) sample appointment letters showing division-specific deployment; and (iv) workings prepared in line with Cost Accounting Standard CAS-7. Each division had separate brands, identifiable manpower, and distinct operations.

2.3 The Assessing Officer neither controverted the correctness of the division-wise sales bifurcation nor identified any specific defect or inconsistency in the assessee's methodology. He merely substituted a broader unit-wise sales ratio on the ground that such basis was used for other common expenses.

2.4 The Tribunal endorsed the CIT(A)'s finding that the assessee's method was more scientific, precise and rational than a generalized unit-wise allocation, being based on verifiable, audited data and aligned with recognised cost accounting principles.

2.5 It reiterated the settled principle that where an assessee adopts a more specific and scientific allocation method based on verifiable data, the Assessing Officer cannot arbitrarily substitute it with a more general method unless the assessee's method is shown to be factually incorrect, perverse, or contrary to law.

Conclusions

2.6 Reallocation of employee benefit expenses by the Assessing Officer in the ratio of unit-wise sales was held unsustainable. The deletion of the addition representing reallocation of employee benefit expenses to the Guwahati Unit was upheld for all years under appeal.

Issue 2 - Character of excise duty/GST refunds and their inclusion in book profit (sections 2(24)(xviii), 115JB)

Legal framework discussed

2.7 The Tribunal reproduced and relied upon section 2(24)(xviii), as amended by the Finance Act, 2015 with effect from 01.04.2016, which includes within "income" any assistance in the form of subsidy, grant, duty drawback, waiver, concession or reimbursement "by whatever name called" from Government or its agencies, except: (a) amounts reducing actual cost under section 43(1) Explanation 10, and (b) corpus grants to specified trusts/institutions.

2.8 It applied principles of strict construction of taxing statutes and exemptions, relying on Supreme Court decisions (including Tara Agencies, A.V. Fernandez, Orissa State Warehousing Corporation, and Novopan India Ltd.) that where statutory language is plain, no equity or intendment can be imported, and exclusions must be strictly confined to what is expressly provided.

Interpretation and reasoning

2.9 The Tribunal held that the excise duty refund clearly fell within the inclusive ambit of "assistance" described in section 2(24)(xviii) and did not qualify for either of the two statutory exclusions.

2.10 Applying the maxim expressio unius est exclusio alterius, it held that, once the statute explicitly sets out what is to be excluded, anything not so excluded must be treated as income. There was no interpretive scope to treat such refund as a non-income capital receipt post-amendment.

2.11 It rejected reliance on pre-amendment jurisprudence and on the decision of the Nagpur Bench in Economic Explosives Ltd., holding that judicial precedents cannot override clear statutory language and that the said decision was confined to its own facts and earlier legal position.

2.12 Having held the refund to be "income", the Tribunal further held that, since it formed part of net profit in the profit and loss account drawn under the Companies Act, it necessarily formed part of "book profit" under section 115JB unless specifically adjusted under Explanation 1 to that section, which contains no exclusion for such refunds.

Conclusions

2.13 Excise duty/GST refunds received in respect of the Guwahati undertaking constitute "income" under section 2(24)(xviii).

2.14 In absence of any specific exclusion in section 2(24)(xviii) or in Explanation 1 to section 115JB, such refunds must be included in the computation of book profit. The direction of the CIT(A) to exclude these amounts from book profit was reversed and the Assessing Officer's inclusion restored for all relevant years.

Issue 3 - Disallowance of channel partner/retail promotion expenses and conference-related expenses (section 37(1), Explanation 1)

Legal framework discussed

3.1 The Tribunal considered section 37(1) read with Explanation 1, CBDT Circular No. 5/2012, and the Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002, particularly as interpreted by the Supreme Court in Apex Laboratories (P.) Ltd.

Interpretation and reasoning

3.2 The Assessing Officer had disallowed 7.5% of channel partner/retail promotion expenses and 7.5% of conference-related expenses on the ground that part of these outlays represented benefits, freebies, or conference incentives provided to medical practitioners, which are prohibited under MCI Regulations and fall within Explanation 1 to section 37(1).

3.3 The Tribunal noted that in Apex Laboratories the Supreme Court held that expenditure incurred by pharmaceutical companies in providing gifts, travel facilities, hospitality or other benefits to doctors, being prohibited for the doctors under MCI Regulations, is equally non-deductible for the payer-company under Explanation 1 to section 37(1).

3.4 It also referred to coordinate bench decisions (Sunflower Pharmacy; Stemade Biotech (P.) Ltd.) reiterating that any financial inducements or benefits to medical practitioners-whether termed commission, incentives, referral fees or otherwise-are hit by Explanation 1 to section 37(1) read with the MCI Regulations and CBDT Circular No. 5/2012.

3.5 On facts, although the assessee produced bills and vouchers, it failed to demonstrate that the entire expenditure was directed exclusively to channel partners/retailers and that no portion benefitted medical practitioners. It also did not show that the 7.5% estimate was excessive, arbitrary or unreasonable.

Conclusions

3.6 In light of Apex Laboratories and other binding/coordinate decisions, and considering the assessee's failure to establish that no part of the impugned expenditure was in violation of MCI Regulations, the Tribunal upheld the estimated disallowance made by the Assessing Officer and confirmed by the CIT(A).

3.7 The assessee's challenge to these disallowances under section 37(1) was dismissed for all years where raised.

Issue 4 - Allowability of indexation while computing book profit under section 115JB on long-term capital gains

Legal framework discussed

4.1 The Tribunal examined section 115JB, particularly sub-section (5), in conjunction with sections 45 and 48 governing computation of capital gains, and considered judicial precedents including:

(i) Karnataka High Court in Best Trading and Agencies Ltd. v. DCIT; and

(ii) Bangalore ITAT in Karnataka State Industrial Infrastructure Development Corporation Ltd. v. DCIT.

Interpretation and reasoning

4.2 The assessee claimed that, for purposes of book profit where long-term capital gains are credited to the profit and loss account, the gains must be computed by substituting indexed cost of acquisition in place of cost of acquisition, as mandated by section 48.

4.3 The Tribunal noted that section 115JB(5) preserves the applicability of all other provisions of the Act unless expressly excluded, and that there is no specific clause in section 115JB denying indexation.

4.4 Relying on Best Trading and Agencies Ltd., the Tribunal held that: (a) the real income in respect of long-term capital gains is the difference between sale consideration and indexed cost of acquisition; (b) a general MAT provision cannot override specific computation provisions for capital gains; and (c) taxing gains without indexation would result in taxation of artificial, non-real income.

4.5 It further relied on Karnataka State Industrial Infrastructure Development Corporation Ltd. to hold that where long-term capital gains are exempt or specially computed elsewhere in the Act, such computation-necessarily incorporating indexation where statutorily provided-governs the amount forming part of book profit.

4.6 The contrary Kolkata ITAT decision in Splendour Villa Makers Pvt. Ltd., relied upon by the CIT(A), was held not preferable as it did not consider the binding High Court judgment in Best Trading and Agencies Ltd.; in absence of any contrary jurisdictional High Court ruling, the Karnataka High Court view was followed as a matter of judicial discipline.

Conclusions

4.7 Long-term capital gains included in the profit and loss account for purposes of section 115JB must be computed after allowing indexation of cost of acquisition as per section 48, in the absence of an express statutory bar.

4.8 The CIT(A)'s denial of indexation in computing book profit was reversed, and the Assessing Officer was directed to recompute book profit allowing indexed cost of acquisition for the relevant assessment years.

Issue 5 - Additional claim under section 80JJAA; effect of non-filing/revised filing of Form 10DA and powers of appellate authorities

Legal framework discussed

5.1 The Tribunal considered section 80JJAA, including the condition of minimum employment period (240 days) and the requirement of audit report in Form 10DA, along with judicial principles on additional claims and procedural defects, with reference to:

(i) Supreme Court in Goetze (India) Ltd. v. CIT;

(ii) Gujarat High Court and Tribunal decisions (including Sarvodaya Charitable Trust; Trust For Reaching The Unreached; Navbharat Charitable Trust) emphasizing that substantive exemption/deduction should not be denied for mere procedural lapses where conditions are otherwise satisfied.

Interpretation and reasoning

5.2 The assessee made an additional claim of deduction under section 80JJAA in respect of 234 employees hired in the earlier year but who completed the 240-day condition in the year under appeal, invoking the deeming fiction that such employees are treated as employed in the subsequent year.

5.3 The Assessing Officer rejected the claim invoking Goetze (India) Ltd. on the ground that no revised return was filed. The CIT(A) admitted the claim in principle but dismissed it on merits solely for want of a corresponding claim in Form 10DA.

5.4 The Tribunal clarified that Goetze (India) Ltd. restricts only the power of the Assessing Officer and does not curtail the powers of appellate authorities to entertain additional legal claims based on facts already on record.

5.5 Drawing from Gujarat High Court and Tribunal precedents on charitable trust audit-report defaults, the Tribunal held that procedural lapses (such as belated or non-filing of prescribed forms) should not, by themselves, defeat a substantive statutory deduction, where the underlying conditions are otherwise satisfied and can be verified.

5.6 It found the CIT(A)'s rejection of the section 80JJAA claim solely on the ground of non-filing of revised Form 10DA to be legally unsustainable, and held that the claim must be examined on merits, with verification of employees' eligibility, rather than dismissed on a technicality.

Conclusions

5.7 Appellate authorities can entertain additional claims for deduction under section 80JJAA even if not made in the return of income or not supported by a contemporaneous Form 10DA, provided relevant facts are on record.

5.8 Non-filing or non-revision of Form 10DA is not, by itself, a sufficient ground to deny an otherwise valid claim under section 80JJAA; the claim must be adjudicated on merits.

5.9 The issue relating to the additional deduction under section 80JJAA was remitted to the CIT(A) for fresh adjudication strictly on merits, after due verification and opportunity of hearing, and without dismissal merely on technical or procedural grounds. The ground was allowed for statistical purposes for the relevant years.

1. ISSUES PRESENTED AND CONSIDERED

1.1. Condonation of delay: Whether delay of four days in filing one Revenue appeal should be condoned on the basis of administrative reasons for obtaining approval.

1.2. Section 69A - seized paper showing "investments" (BSIPL/01): Whether figures noted in seized document BSIPL/01, described therein as "investments"/cash advanced through intermediaries, could be treated as unexplained money or undisclosed sales of the assessee and estimated profits added.

1.3. WhatsApp chats - evidentiary value and applicability of sections 69A and 292C: (i) Whether WhatsApp chats retrieved from mobile phones of directors/employees, allegedly evidencing cash transactions, by themselves justify addition as unexplained money under section 69A, or estimation of profit thereon; (ii) in whose hands presumption under section 292C can be drawn regarding such electronic material.

1.4. Bogus purchases and circular trading - estimation of profit: Where both purchases and corresponding sales are accepted as part of circular/bogus trading routed through entry operators solely to inflate turnover, and profit thereon is already offered to tax, whether any further disallowance/estimation (e.g. a fixed percentage of alleged bogus purchases) is warranted.

1.5. Section 68 - unsecured loans later repaid: Where unsecured loans were received through banking channels, supported by confirmations and financials, and subsequently repaid through banking channels (even prior to search), whether section 68 can be invoked to treat the loan amounts as unexplained cash credits, and whether related interest can be disallowed.

1.6. Internal cash transfers / "Suraj Transfer" ledger - AY 2023-24: Whether internal movements of cash between branch/chest accounts, recorded in books and reflected in the "Suraj Transfer" ledger, can be treated as unexplained money or be subjected to gross profit estimation.

1.7. Low tax-effect appeals by Revenue: Whether Revenue appeals with tax effect below the monetary limit prescribed in CBDT Instruction No. 9 of 2024 are maintainable when no exception to the Instruction applies.

2. ISSUE-WISE DETAILED ANALYSIS

2.1. Condonation of delay in filing Revenue appeal

Interpretation and reasoning

2.1.1. The Tribunal noted a four-day delay in filing one Revenue appeal. The delay was explained as arising from the time taken to obtain administrative approval from competent authorities. The assessee did not oppose condonation.

2.1.2. Considering the short duration of delay, the administrative reasons furnished, and the absence of opposition from the assessee, the Tribunal exercised its discretion to condone the delay.

Conclusions

2.1.3. Delay of four days in filing the Revenue appeal was condoned and the appeal was admitted for hearing.

2.2. Seized document BSIPL/01 - characterization of amounts as unexplained money or undisclosed sales (section 69A)

Legal framework as discussed

2.2.1. The Assessing Officer treated cash entries aggregating Rs. 2,87,50,000/-, recorded in seized material BSIPL/01 in the names of two individuals, as unexplained money under section 69A, on the footing that such cash receipts were not recorded in the assessee's books.

2.2.2. The first appellate authority re-characterized the same figures as unaccounted/suppressed business sales and applied the assessee's gross profit rate (7.84%) to estimate income embedded therein, partly sustaining the addition.

2.2.3. The Tribunal referred to judicial principles that (i) seized documents must be read as a whole and cannot be selectively interpreted or used to make further estimates without independent material, and (ii) cash loans/investments, in the absence of evidence to the contrary, cannot be straightforwardly treated as income.

Interpretation and reasoning

2.2.4. On examination of seized document BSIPL/01, the Tribunal found that the aggregate of the entries was explicitly described as "investments" made through intermediaries. There was no reference in the document to sales, turnover, or any income component of the assessee.

2.2.5. The Tribunal held that when a seized document itself identifies the nature of amounts as "investments", the revenue authorities cannot re-characterize the same as undisclosed sales or unexplained income without corroborative evidence. The document must be accepted as a whole; it is impermissible to pick and choose entries or to draw further estimates absent supporting material.

2.2.6. The Tribunal relied on precedent holding that (i) seized material should not be partially applied ignoring its clear tenor, and (ii) cash loans cannot be treated as income merely because they are recorded in seized papers.

Conclusions

2.2.7. The amounts of Rs. 83,00,000/- and Rs. 2,04,50,000/- reflected in seized document BSIPL/01 were held to be in the nature of investments/loans advanced through intermediaries, not assessee's undisclosed sales or unexplained money.

2.2.8. Section 69A was held inapplicable to these entries in the absence of evidence that the assessee owned unexplained cash or that these represented its unrecorded sales.

2.2.9. The approach of the first appellate authority in treating the figures as suppressed turnover and applying gross profit rate was rejected as being without evidentiary foundation.

2.2.10. The entire addition of Rs. 2,87,50,000/-, including the part sustained by the first appellate authority, was directed to be deleted.

2.3. WhatsApp chats - evidentiary status; section 69A; section 292C; profit estimation

Legal framework as discussed

2.3.1. The Assessing Officer relied on WhatsApp chats extracted from mobile phones of directors/employees, showing notional "cash" figures, to make additions under section 69A for various years on the footing that such chats evidenced unaccounted cash receipts.

2.3.2. In some years, the first appellate authority treated the aggregate chat figures as unaccounted turnover/suppressed transactions and applied a gross profit rate to estimate income.

2.3.3. The assessee invoked section 292C, submitting that any presumption regarding contents of a document or electronic record arises in the hands of the person from whose possession or control such material is found, and that even such presumption is rebuttable. Reliance was placed on judicial authority recognizing that mere loose papers or documents, unsupported by corroborative evidence and duly rebutted, cannot by themselves justify additions.

Interpretation and reasoning

2.3.4. The Tribunal noted that the only material relied upon by the Assessing Officer was the text of WhatsApp chats between a director and employees; no supporting evidence such as cash books, bank transactions, confirmations, or other seized documents substantiating actual cash movement was brought on record.

2.3.5. The Tribunal recorded that the chats did not even specify clearly whether the amounts mentioned were receipts or payments, or whether they related to the assessee or to personal/other entities' transactions.

2.3.6. It was held that section 69A contemplates ownership of unexplained money, bullion, jewellery or other valuable article; mere references in chats, without any seized cash or corroborative primary evidence, do not establish that the assessee possessed, received, or retained unexplained money.

2.3.7. As regards section 292C, the Tribunal accepted the assessee's contention that any statutory presumption concerning documents/electronic records arises in the case of the person from whose possession/control the material was found and, in any event, remains rebuttable. Given that the chats were on the device of a director of a group concern and there was no independent material linking the specific transactions to the assessee-company, no adverse presumption could be safely drawn against the assessee.

2.3.8. The Tribunal further held that once the basic premise for invoking section 69A failed (i.e. non-establishment of actual unexplained money in the hands of the assessee), the first appellate authority could not convert the same chat figures into alleged turnover and estimate profits by applying gross profit rate. There was no foundational fact of business receipts relatable to the assessee.

Conclusions

2.3.9. WhatsApp chats, standing alone and lacking corroboration, were held insufficient to justify additions under section 69A or to estimate business income by application of gross profit rate.

2.3.10. Presumption under section 292C regarding seized documents/electronic records was held to arise, if at all, in the hands of the person from whose custody the material is found, and is rebuttable upon explanation; no such presumption could be extended automatically to group entities without evidence.

2.3.11. All additions made or sustained on the basis of WhatsApp chats, whether as unexplained money under section 69A or as estimated profit on alleged suppressed turnover, were directed to be deleted in the assessee's appeals; corresponding Revenue grounds challenging reduction of such additions were dismissed.

2.4. Bogus purchases and circular trading - disallowance of purchases vs. profit already offered

Legal framework as discussed

2.4.1. The Assessing Officer, relying on search findings, investigation-wing reports and Insight portal information, treated large purchases from certain entities as bogus/accommodation entries. He proceeded to estimate income by disallowing 4% (or similar rates) of such purchases, following certain Tribunal decisions where only the profit element of non-genuine purchases was brought to tax.

2.4.2. The first appellate authority analysed those precedents and distinguished them, noting that in the cited decisions the sales were genuine, purchases were from the grey market, and the estimations were meant to bring to tax the extra profit saved by buying off-record at lower prices.

2.4.3. In the present matters, the entry operators, in sworn statements during search, admitted to engaging in circular trading, providing both purchase and sale entries via shell companies and LC/bank instruments merely to inflate gross turnover of beneficiaries, without real movement of goods.

2.4.4. The first appellate authority applied High Court and Tribunal decisions to hold that where both purchases and sales are fictitious and already reflected in the regular books, and the profit on such recorded turnover has been offered to tax, further disallowance of a percentage of purchases would amount to taxing notional income twice.

Interpretation and reasoning

2.4.5. The Tribunal noted, as a matter of fact, that both authorities below accepted that: (i) purchases and corresponding sales were routed through the same commission agents/entry operators; (ii) such transactions were circular entries used to inflate turnover; and (iii) the alleged purchases did not go into the manufacturing process and did not generate additional real profit for the assessee.

2.4.6. It was further recorded that the assessee had already declared profit on the book turnover including these circular transactions in its returned income. To the extent the same sales and purchases formed part of the trading account, disallowing a portion of purchases while keeping sales intact would artificially enlarge profit beyond what was actually earned.

2.4.7. The Tribunal endorsed the first appellate authority's reliance on binding High Court precedent holding that, if purported purchases are treated as bogus, the corresponding sales booked out of such purchases must logically also be excluded; otherwise, the resulting recomputation could produce an income figure lower than the returned income, which is impermissible.

2.4.8. In light of the entry operators' admission of circular trading and the fact that no separate profit element over and above book profit was shown to exist, the Tribunal held that there was no basis to sustain any disallowance or percentage addition on such purchases.

Conclusions

2.4.9. In cases where (i) purchases and sales are part of circular/bogus trading entries provided by entry operators solely to inflate turnover, (ii) such figures are already recorded in books, and (iii) the assessee has returned profit on the declared turnover, no further estimation or percentage disallowance of such purchases is warranted.

2.4.10. Additions made by applying a flat percentage (e.g. 4%) on alleged bogus purchases were deleted; appeals by Revenue challenging such deletion were dismissed for all relevant assessment years and group entities.

2.5. Section 68 - unsecured loans received and subsequently repaid; related interest

Legal framework as discussed

2.5.1. The Assessing Officer invoked section 68 to treat unsecured loans from various companies as unexplained cash credits, in some cases also disallowing interest paid thereon as relating to bogus loans. One factor relied upon was that certain lender entities were shown as "struck off" in ROC records in later years.

2.5.2. The assessee furnished confirmations, ledger accounts, income-tax acknowledgments, bank statements and explanations of sources of funds of the lenders, and demonstrated that the loans were received and subsequently repaid through banking channels, in some instances prior to the date of search.

2.5.3. The first appellate authority treated the loan transactions as normal business borrowings, holding that where the assessee has proved identity, creditworthiness and genuineness, and has repaid the loans through banking channels, it cannot be treated as beneficial owner of unexplained money for purposes of section 68.

2.5.4. The Tribunal referred to multiple High Court decisions holding that, where (i) the assessee furnishes primary evidence establishing the three ingredients under section 68, and (ii) the loans are later repaid through banking channels, the cash credits cannot be treated as unexplained; also, once repayment is established on the basis of documentary evidence, credit entries cannot be examined in isolation ignoring the corresponding debit entries.

Interpretation and reasoning

2.5.5. The Tribunal found that, in each disputed instance, the assessee had produced confirmations, bank statements showing receipt and repayment, and tax/financial records of the lenders; the Assessing Officer brought no cogent material to rebut these or to show that the assessee was the real beneficiary of unexplained funds.

2.5.6. The fact that a lending company was struck off in ROC records at a later stage was held insufficient, by itself, to negate the genuineness of loan transactions actually routed through banks and duly repaid.

2.5.7. Applying the cited High Court decisions, the Tribunal held that once repayment of the loans is established on the basis of documentary evidence, and no contrary evidence is produced, it cannot be said that the loan amounts represent unexplained cash credits of the assessee under section 68.

2.5.8. Since the principal loans themselves were held genuine and outside the ambit of section 68, the consequential disallowance of interest paid on such loans automatically failed.

Conclusions

2.5.9. Section 68 was held inapplicable where unsecured loans were (i) properly evidenced as to identity, creditworthiness and genuineness, and (ii) repaid through banking channels; such credits could not be treated as unexplained merely on suspicion or on the basis of subsequent status of the lender.

2.5.10. All additions under section 68 in respect of the disputed loans were deleted; related disallowances of interest were also deleted as purely consequential.

2.5.11. Revenue's grounds challenging deletion of such additions for all concerned years and entities were dismissed.

2.6. Internal cash movements and "Suraj Transfer" ledger - AY 2023-24

Interpretation and reasoning

2.6.1. For a later year, the Assessing Officer treated entries in a seized ledger styled "Suraj Transfer" showing internal cash transfers between locations/chest accounts (aggregating approximately Rs. 1.75 crore) as unexplained, and the first appellate authority applied the gross profit rate to a portion thereof.

2.6.2. The Tribunal recorded the factual position that the assessee's business operated across multiple states, that surplus cash from outlying locations was periodically transferred to central cash chests at Patna and Kolkata, and that such inter-location movements were duly recorded as internal transfers in the regular books.

2.6.3. On verification, the Tribunal found that the impugned ledger entries were fully reflected in the assessee's books of account as inter-branch/chest transfers and that there was no excess cash or unrecorded asset corresponding to the alleged unexplained amounts.

2.6.4. In these circumstances, treating internal, book-recorded transfers as unexplained money, or subjecting them to gross profit estimation, was held to be without basis.

Conclusions

2.6.5. Inter-location cash transfers duly recorded in books and reflected in the "Suraj Transfer" ledger do not constitute unexplained money or undisclosed sales.

2.6.6. The residual addition sustained by the first appellate authority on this account was directed to be deleted in full.

2.7. Low tax-effect Revenue appeals - maintainability in light of CBDT Instruction No. 9 of 2024

Legal framework as discussed

2.7.1. The Tribunal examined the monetary limit for filing appeals before the Tribunal as prescribed in CBDT Instruction No. 9 of 2024 dated 17.09.2024, which directs that appeals shall not be filed where the tax effect is below Rs. 60,00,000/-, except where specifically provided exceptions apply.

Interpretation and reasoning

2.7.2. In one Revenue appeal, the tax effect, computed in terms of relief granted by the first appellate authority, was found to be below Rs. 60 lakh. The Tribunal further recorded that the case did not fall within any of the enumerated exceptions to the Instruction.

2.7.3. In view of the binding nature of CBDT's litigation policy instructions on departmental authorities, the Tribunal held that such appeal was not maintainable.

Conclusions

2.7.4. The Revenue appeal with tax effect below the applicable monetary threshold, and not falling within the specified exceptions, was dismissed as not maintainable for want of tax effect.

2.8. Overall disposition linked to above issues

2.8.1. Additions based on seized "investment" papers (BSIPL/01) under section 69A were fully deleted.

2.8.2. All additions and GP-based estimations arising solely from WhatsApp chats were deleted.

2.8.3. All estimated additions on alleged bogus/circular purchases, where profit on recorded turnover was already offered, were deleted.

2.8.4. All additions under section 68 (and consequential interest disallowances) in respect of loans that were documented and repaid through banking channels were deleted.

2.8.5. Additions based on internal cash transfer ledger ("Suraj Transfer") were deleted.

2.8.6. Revenue appeals were dismissed either on merits, by application of the above principles, or on the ground of low tax effect under CBDT Instruction No. 9 of 2024; assessee appeals on the disputed issues were allowed.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether deposits, opening balances, maintenance charges and interest in HSBC Bank, Geneva, allegedly relatable to the assessee and his family, could be treated as unexplained money under section 69A on substantive or protective basis.

1.2 Whether BUP IDs and internal identifiers mentioned in the "Base Note" received from the French authorities under the Indo-France DTAA constituted separate foreign bank accounts / assets of the assessee for purposes of reassessment and addition under section 69A.

1.3 Whether the assessee's failure to sign a Consent Waiver Form in favour of HSBC Bank, Geneva justified or supported the additions made under section 69A.

1.4 Whether, in light of prior reassessment and taxation of the peak balance in customer profile No. 5091327690 in the hands of the deceased family member, further additions in the hands of the assessee on the same material were sustainable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Additions under section 69A based on HSBC Geneva "Base Note", BUP IDs and client profile

Legal framework (as discussed)

2.1 The Tribunal noted that the reassessments were initiated under section 147 on the basis of information received from the French Government under the Indo-France DTAA, relating to an account in the name of "Canbar Holdings Corporation" with HSBC Bank, Geneva, showing a peak balance of USD 55,44,646, and mentioning Client Profile No. 5091327690 and BUP IDs 5090260976 and 5090160983.

2.2 The Assessing Officer invoked section 69A to treat (a) alleged initial deposits of USD 1,00,000 for opening each account, (b) peak balance of USD 55,44,646, (c) annual maintenance charges of USD 300 per account, and (d) notional interest on USD 55,44,646, as unexplained money in the hands of the assessee.

Interpretation and reasoning

2.3 The Tribunal recorded that the client profile No. 5091327690 in the name of Canbar Holdings Corporation, showing the peak balance of USD 55,44,646, had already been voluntarily offered to tax as "income from other sources" in Assessment Year 2006-07 in the return of income filed by the legal heirs of the deceased family member, and accepted in reassessment under section 143(3) read with section 147.

2.4 The Tribunal noted that, for the subsequent reassessments of the assessee, his brother, and the deceased's estate, the Assessing Officer assumed, without clear evidence, that the deceased and his two sons were joint beneficial owners of the foreign account and, due to absence of clarity about exact shares, allocated 1/3rd of amounts substantively to each and the remaining 2/3rd protectively.

2.5 The assessee's stand, as recorded, was that:

(a) the so-called BUP IDs were internal customer identifiers / business partner identification numbers and not bank account numbers;

(b) there was one client profile (No. 5091327690) in the name of Canbar Holdings Corporation, and the income relating thereto had already been taxed in the hands of the deceased for A.Y. 2006-07;

(c) no independent evidence existed to show that BUP IDs 5090260976 and 5090160983 represented separate bank accounts or separate assets.

2.6 The Tribunal took note that the Assessing Officer's computation of "initial deposits" of USD 1,00,000 and annual maintenance charges of USD 300 was based only on assumed figures said to be available in the public domain, without any concrete bank records or transaction details.

2.7 The Tribunal relied heavily on the binding co-ordinate bench decisions in the connected cases of the deceased family member and the assessee's brother, where, on the same "Base Note", same client profile and same BUP IDs, it had been held that:

* BUP ID 5090260976 was a business partner identification number of Canbar Holdings Corporation linked to the client profile, and not a separate bank account;

* client profile No. 5091327690 represented the bank account already brought to tax in A.Y. 2006-07 in the hands of the deceased;

* similar BUP IDs starting with "5090..." in the "Base Note" functioned as customer relationship / internal identifiers, and customer profile numbers starting with "5091..." were separate from such identifiers;

* there was no material, beyond the "Base Note", to show existence of independent accounts corresponding to each BUP ID; and

* additions based on presumed opening deposits and maintenance charges, without evidence of actual deposits or debits, were made on surmises.

2.8 The Tribunal also noted that in the earlier decisions, the co-ordinate bench had distinguished the decision relied on by the Department (Renu T. Tharani) on the ground that, in that case, the assessee was clearly the beneficial owner of a large foreign deposit as per the base note and had not properly explained the material, whereas in the present group of cases:

* the peak balance in the relevant customer profile had already been subject to reassessment and tax in India; and

* the BUP IDs were found to be internal identifiers and not additional undisclosed accounts.

2.9 Applying these findings, the Tribunal held that, in the assessee's case, the factual matrix was identical to that already examined and decided in favour of the deceased's estate and the brother, and that judicial discipline required following those co-ordinate bench rulings.

Conclusions

2.10 The Tribunal concluded that BUP IDs mentioned in the "Base Note" did not represent separate bank accounts or separate foreign assets of the assessee, but were internal identifiers / customer relationship numbers, and there was only one relevant client profile (No. 5091327690) for Canbar Holdings Corporation.

2.11 It was held that the peak balance in customer profile No. 5091327690 had already been assessed and taxed in A.Y. 2006-07 in the hands of the deceased, and hence no further substantive or protective additions could be sustained in the hands of the assessee on the same material.

2.12 The Tribunal held that, in absence of any independent material, apart from the "Base Note", to establish fresh unexplained deposits, separate accounts, or undisclosed beneficial ownership of the assessee, the additions made under section 69A towards alleged initial deposit, peak balance, maintenance charges and interest were unsustainable.

2.13 The deletion of both substantive and protective additions by the appellate authority was affirmed, and all grounds of the Revenue on these aspects were dismissed.

Issue 3: Effect of non-furnishing of Consent Waiver Form

Interpretation and reasoning

3.1 The Department argued that the assessee did not sign the Consent Waiver Form, which was a mechanism to enable HSBC Bank, Geneva to send account statements to the assessee through the tax authorities, and that this non-cooperation justified drawing adverse inference.

3.2 The Tribunal noted that, notwithstanding the alleged non-furnishing of consent, the material available on record, including the "Base Note" and prior reassessment of the deceased's estate, and as examined by the co-ordinate benches in the connected cases, did not support the Revenue's stand that separate undisclosed accounts existed or that section 69A additions were warranted in the assessee's hands.

3.3 The Tribunal effectively treated the failure to give consent as insufficient, by itself, to overcome the absence of substantive evidence of undisclosed accounts or unexplained money, particularly in light of the binding factual findings in the connected cases.

Conclusions

3.4 The Tribunal held that the assessee's refusal or failure to provide a Consent Waiver Form could not, in the absence of corroborative material, justify additions under section 69A based purely on presumptions and internal identifiers in the "Base Note".

3.5 The non-signing of the Consent Waiver Form did not alter the legal and factual conclusions already reached regarding the nature of BUP IDs and prior taxation of the relevant foreign deposit, and therefore did not salvage the impugned additions.

Issue 4: Sustainability of repeated additions after prior taxation in hands of deceased

Interpretation and reasoning

4.1 The Tribunal recorded that the same peak balance of USD 55,44,646 in the Canbar Holdings Corporation account (client profile 5091327690) had been voluntarily offered and accepted as income from other sources in the reassessment of the deceased's estate for A.Y. 2006-07.

4.2 It noted that, despite such prior taxation, the Assessing Officer, in the subsequent reassessments for A.Ys. 2001-02 to 2006-07, again sought to tax alleged initial deposits, peak balance and interest by splitting them 1/3rd each between the deceased and the two sons, on substantive and protective basis, without pinpointing fresh or distinct unexplained sums or years.

4.3 The Tribunal followed the co-ordinate bench findings that once the client profile and its peak balance had been subjected to scrutiny and tax in the hands of the deceased, the same base material could not be used to sustain separate additions in the hands of the heirs on conjectural allocation of beneficial ownership.

Conclusions

4.4 The Tribunal held that, in view of the prior reassessment and taxation of the peak balance in the relevant client profile in the hands of the deceased, further additions in the hands of the assessee on the same foreign account were not sustainable.

4.5 The deletion of all such substantive and protective additions by the appellate authority was upheld, and the Revenue's appeals for all assessment years were dismissed, with the decision in the lead year applied mutatis mutandis to the remaining years.

Issues: (i) Whether, on the buyback of shares received through a restructuring, the assessee was entitled to adopt the cost of acquisition of the previous owner and claim indexation from the earlier period of holding, including fair market value as on 1.4.1981 where applicable; (ii) Whether the amalgamation and demerger arrangement satisfied the statutory conditions for tax neutrality so that the shares vested in the assessee with the benefit of the previous owner's holding period and cost.

Issue (i): Whether, on the buyback of shares received through a restructuring, the assessee was entitled to adopt the cost of acquisition of the previous owner and claim indexation from the earlier period of holding, including fair market value as on 1.4.1981 where applicable.

Analysis: The shares were received by the assessee pursuant to a court-approved restructuring implemented through amalgamation and demerger. The relevant capital gains framework required the cost in the hands of the previous owner to be substituted where the asset was acquired in the manner contemplated by the statute, and the period of holding was to include the holding of the previous owner. On that basis, indexation was to run from the date the previous owner first held the asset, and where the shares had been held before 1.4.1981, fair market value as on that date could be adopted for computation.

Conclusion: The assessee was entitled to compute capital gains by adopting the previous owner's cost and the corresponding indexed cost of acquisition.

Issue (ii): Whether the amalgamation and demerger arrangement satisfied the statutory conditions for tax neutrality so that the shares vested in the assessee with the benefit of the previous owner's holding period and cost.

Analysis: The restructuring was examined against the statutory conditions governing amalgamation and demerger, including transfer of properties and liabilities, issue of shares by the resulting company, shareholder continuity, book-value transfer, and carrying on of the undertaking on a going concern basis. The record showed compliance with those conditions, and the arrangement was treated as a tax-neutral corporate restructuring. The result was that the assessee stepped into the position of the previous owner for purposes of cost and holding period.

Conclusion: The conditions for tax-neutral amalgamation and demerger were satisfied.

Final Conclusion: The computation made by the assessee was upheld and the Revenue's challenge to the deletion of the assessed long-term capital gain failed.

Ratio Decidendi: Where shares are acquired through a tax-neutral amalgamation or demerger that satisfies the statutory conditions, the transferee takes the previous owner's cost and holding period for capital gains computation, with indexation flowing from the earlier holding and the relevant statutory base year where applicable.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the delay of one day in filing the appeal by the Revenue was liable to be condoned.

1.2 Whether the addition under section 69B read with section 115BBE on account of alleged "on-money" / unexplained investment in land could be sustained solely on the basis of loose sheets and note pads seized from a third party and statements recorded under section 132(4), subsequently retracted.

1.3 Whether loose sheets and private note books seized from a third party, not authored or signed by the assessee or the vendors, and unsupported by independent corroborative evidence, have sufficient evidentiary value to fasten tax liability on the assessee.

1.4 Whether failure of the Assessing Officer to undertake independent enquiry, including examination of vendors and reference to valuation machinery, vitiated the addition based on alleged on-money.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Condonation of delay of one day in filing the appeal

Interpretation and reasoning

2.1 The Tribunal noted a delay of one day in filing the Revenue's appeal. An affidavit was filed explaining that the delay was on account of scrutiny time-barring workload.

2.2 After considering the affidavit and hearing both parties, the Tribunal found that there was reasonable cause for not filing the appeal within the prescribed time.

Conclusion

2.3 In the interests of justice, the delay of one day was condoned and the Revenue's appeal was admitted.

Issue 2: Sustainability of addition under section 69B read with section 115BBE for alleged "on-money" based on seized loose sheets and statements of a third party

Legal framework (as discussed)

2.4 The assessment was framed under section 143(3) read with section 153C on the basis of documents seized during a search under section 132 in a third party's premises and statements recorded under section 132(4) and section 131(1). The AO invoked section 69B (unexplained investment) read with section 115BBE (rate of tax).

2.5 The assessee and CIT(A) relied on principles laid down inter alia in decisions including K.P. Varghese, P.V. Kalyanasundaram, Common Cause, CBI v. V.C. Shukla, Dhakeswari Cotton Mills and other High Court/Tribunal decisions on: (i) burden of proof on Revenue to establish understatement / on-money, (ii) weak evidentiary value of loose sheets/third-party diaries, (iii) need for corroborative evidence, and (iv) impermissibility of additions based on suspicion or mere private jottings.

Interpretation and reasoning

2.6 The alleged unexplained investment of Rs. 25,78,98,000/- was derived from loose sheets (ANN/KP/GS/LS/S, pages 23-26) and note pads (ANN/SJ/GS/B&D/S-2 & S-3) seized from the premises of a third party (a director of a searched company). The assessee's name, vendors' names, survey numbers, or property identifiers were not found on the loose sheets; no signatures or acknowledgment of either assessee or vendors appeared on them.

2.7 It was an admitted fact that: (i) the assessee purchased 13.85½ acres of land under a registered sale deed for Rs. 1,11,44,800/-, fully paid through banking channels; (ii) the seized loose sheets referred to 15 acres; and (iii) the loose sheets were said by the deponent to be in the handwriting of another person (a retired PWD engineer), who was never examined.

2.8 The Tribunal agreed with the CIT(A) that the impugned loose sheets and note pads are "dumb documents": they only contain dates, amounts, and brief notations ("Cash", "DD", abbreviations like "Guru", "Guru MTP Road", "Guru Cash (PWD)") without identifying payer, payee, property, or nature/purpose of transaction. Totals did not reconcile and the entries were incomplete.

2.9 A substantial portion (about 80%) of the alleged cash payments (entries 5 to 9 on page 23 aggregating Rs. 21.50 crores) were shown as dates after the date of registration of the property. The Tribunal concurred with CIT(A) that, on preponderance of probability, it is highly improbable in real estate transactions that such huge cash amounts would be paid long after registration, particularly when title had already transferred, rendering the entries unreliable for the assessee's transaction.

2.10 The Tribunal emphasized the discrepancy that the loose sheets mentioned 15 acres while the assessee's transaction was only for 13.85½ acres, casting further doubt on the linkage of the documents to the assessee's purchase.

2.11 The AO treated statements of the third party recorded u/s 132(4) on 11.03.2021 and 12.03.2021 as conclusive, wherein he linked the entries to the assessee's Tirupur land and admitted on-money payments. However:

  (a) The same third party stated in his 11.03.2021 statement that the handwriting in the loose sheets belonged to another person (retired PWD engineer), whose statement was never recorded.

  (b) In the subsequent statement u/s 131 on 19.07.2021, he categorically clarified that the entries in the notebooks were merely notings for his reference as a broker, that transactions did not pass through him, and that he neither received nor paid any cash; high-value entries were noted only for commission follow-up, not as cash movements.

  (c) He formally retracted the statements recorded u/s 132(4) by letter dated 01.11.2021 (filed on 09.11.2021), alleging irregularities during search, and the AO did not bring any material to discredit or independently investigate the retraction.

2.12 The assessee's own statement u/s 131 dated 29.07.2021 consistently denied payment of any on-money, denied knowledge of the seized loose sheets/notebooks, and denied any role of the said third party in the land purchase. The AO did not confront this denial with any independent evidence, nor did he examine the vendors of the property.

2.13 The Tribunal held that once the assessee denied the transaction and the alleged intermediary retracted his earlier incriminating statement, the burden shifted squarely on the AO to bring cogent corroborative evidence (such as banking trail, confirmations, statements of vendors, or other independent material) demonstrating actual payment of amounts over and above the registered consideration. No such evidence was produced.

2.14 The Tribunal noted that the presumption under sections 132(4A) and 292C, to the extent discussed at appellate stage, operates vis-à-vis the person from whose possession the documents are found and cannot, without more, be used against "any other person" for purposes of section 153C when the documents are neither authored by nor seized from such other person and contain no clear nexus to him.

2.15 The AO's reliance on general market value data from real estate websites to suggest a far higher fair market value (around Rs. 72.39 crores) was held to be conjectural in the absence of:

  (a) any reference to the departmental valuation cell,

  (b) any action or objection by the registering authority regarding undervaluation, and

  (c) any independent valuation or supporting evidence specific to the property.

2.16 Relying on judicial precedents, the Tribunal reiterated that:

  * Loose sheets/diaries seized from third-party premises, not forming part of regular books and not in the handwriting of the assessee, are inherently weak evidence and, absent corroboration, cannot support additions (Common Cause; CBI v. V.C. Shukla; Sant Lal; Sunil Kumar Sharma and several Tribunal decisions).

  * There must be "something more than bare suspicion" to make an addition; pure guesswork or reliance on unexplained jottings is impermissible (Dhakeswari Cotton Mills).

  * The burden to establish understatement of consideration/on-money remains on the Revenue (K.P. Varghese; P.V. Kalyanasundaram). Casting on the assessee the burden to prove the negative, i.e., that he did not pay any amount beyond recorded consideration, is legally untenable.

  * A retracted statement, without corroborative material and without proof that the retraction is motivated, cannot be treated as sole substantive evidence.

2.17 The Tribunal also relied on the jurisdictional High Court decision in P.V. Kalyanasundaram, where an addition based solely on the seller's statement admitting higher consideration was rejected because the AO failed to conduct independent enquiry or reference to the Valuation Officer. The facts were considered analogous, as here also the AO had not independently established higher consideration or actual cash movement.

Conclusions

2.18 The seized loose sheets and note pads, being unsigned, incomplete, not authored by the assessee or vendors, seized from a third party and unsupported by any independent evidence of money flow, were held to be "dumb documents" with no probative value against the assessee.

2.19 The statements of the third party recorded u/s 132(4), having been specifically retracted and uncorroborated, could not form the sole basis of addition, particularly in the absence of any enquiry with the alleged author of the loose sheets, with the vendors, or any proof of actual transfer of cash.

2.20 The AO failed to discharge the burden of proving that the assessee had paid any on-money over and above the registered sale consideration; the addition under section 69B read with section 115BBE was based on suspicion, surmises, and conjectures rather than on legally admissible and corroborated evidence.

2.21 The Tribunal affirmed the CIT(A)'s finding that the addition of Rs. 25,78,98,000/- as unexplained investment was unsustainable in law and on facts and therefore liable to be deleted.

Issue 3: Evidentiary value of third-party loose sheets / note books and requirement of corroboration and independent enquiry

Interpretation and reasoning

2.22 The Tribunal endorsed CIT(A)'s reasoning that:

  (a) The loose sheets and note books were seized from a third party and were neither written nor signed by the assessee or vendors.

  (b) The alleged author of the key loose sheets was admittedly another person (retired PWD engineer), who was never examined; hence authorship and authenticity remained unverified.

  (c) The AO ignored exculpatory statements of the third party under section 131 and of the assessee, and relied selectively on incriminating portions without completing the chain of evidence.

2.23 Drawing from multiple judicial precedents (including Sant Lal, Satyapal Wassan, Riveria Properties and other Tribunal decisions cited), the Tribunal reiterated that when a document is incomplete, lacks necessary details of year, ownership, nature, code for deciphering figures, or nexus to the assessee, it is incumbent on the AO to:

  * correlate it with other seized materials, regular books, bank/third-party records, and

  * record statements of concerned parties to fill gaps and validate inferences.

2.24 No such investigative steps were taken: there was no examination of vendors, no tracing of source or destination of alleged cash, no reference to the valuation cell, and no corroborative bank or documentary trail.

2.25 The Tribunal emphasized that, though strict rules of the Evidence Act do not apply, principles against making pure guesses and the requirement of "something more than bare suspicion" still govern income-tax assessments.

Conclusions

2.26 Loose sheets/diaries found at a third-party premises, not shown to be maintained in the regular course of business and not linked to the assessee by independent evidence, cannot be treated as substantive material to support additions.

2.27 Absent corroborative evidence and independent enquiry, such documents remain ineffective and unreliable; they must be treated as "dumb documents" and cannot validly found additions under section 69B.

2.28 Consequently, the Tribunal upheld the CIT(A)'s deletion of the addition and dismissed the Revenue's appeal in toto.

Issues: Whether interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation for compulsory acquisition of agricultural land is to be treated as part of compensation and exempt under section 10(37) of the Income-tax Act, 1961, or as taxable income from other sources.

Analysis: The binding jurisdictional precedent held that interest awarded under section 28 of the Land Acquisition Act, 1894 is not mere interest in the ordinary sense but an accretion to the value of the acquired land and part of the enhanced compensation. That view was applied as the governing law for the present assessment year. On that footing, the amount could not be brought to tax under section 56(2)(viii) read with section 145A(b) of the Income-tax Act, 1961 as income from other sources, and the addition made by the Assessing Officer was unsustainable.

Conclusion: The interest received under section 28 of the Land Acquisition Act, 1894 was held to be part of compensation and the assessee was entitled to exemption under section 10(37) of the Income-tax Act, 1961.

Ratio Decidendi: Interest awarded under section 28 of the Land Acquisition Act, 1894 on enhanced compensation is an accretion to compensation, not taxable interest income, and where the statutory conditions are satisfied it follows the tax treatment of the compensation itself.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether show cause notices and orders-in-original issued by officers of the Directorate of Revenue Intelligence could be invalidated on the ground that such officers were not "proper officers" under the Customs Act, 1962, in view of the earlier decision and subsequent review in the Canon India matter.

1.2 Whether there was non-service of the impugned show cause notice on the petitioner, so as to vitiate the proceedings and orders-in-original.

1.3 Consequentially, whether the writ petitions challenging the show cause notices and orders-in-original were maintainable, and what remedies were available to the petitioner, including in relation to limitation.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Jurisdiction of DRI officers as "proper officers" under the Customs Act, 1962

Legal framework (as discussed):

2.1 The petitions were founded on the earlier view in Canon India that DRI officers were not "proper officers" under the Customs Act, 1962, and that consequently show cause notices issued by them under Section 28 were without jurisdiction.

2.2 The Court took note of the subsequent review decision in the Canon India matter, wherein the Supreme Court held that officers of the Directorate of Revenue Intelligence and other similarly situated officers are "proper officers" for the purposes of Section 28 and are competent to issue show cause notices thereunder.

2.3 The Supreme Court further laid down specific directions regarding the manner in which pending challenges to show cause notices and orders-in-original, based solely on the want of jurisdiction of such officers, are to be dealt with by High Courts, this Court and CESTAT.

Interpretation and reasoning:

2.4 The Court noted that, in light of the Supreme Court's review decision, the foundational challenge in these writ petitions - that DRI officers lacked jurisdiction as "proper officers" to issue the impugned show cause notices - no longer survived.

2.5 The Court applied the binding directions issued by the Supreme Court governing pending writ petitions and challenges concerning Section 28 notices and orders passed by such officers.

Conclusions:

2.6 The Court held that, in view of the Supreme Court's review judgment, any challenge to the impugned show cause notices and orders-in-original on the ground that DRI officers were not "proper officers" could not be sustained, and that the writ petitions, to that extent, did not survive.

Issue 2 - Alleged non-service of the show cause notice

Interpretation and reasoning:

2.7 An additional issue was raised by the petitioner contending non-service of the show cause notice. The Court observed that this plea appeared to be an afterthought.

2.8 To examine this contention, the Court called for an affidavit from the Department. The affidavit stated that:

(a) The show cause notice dated 18.09.2019 and the corrigendum dated 18.11.2019 were dispatched to all noticees at their registered/last known addresses and were also displayed on the office notice board.

(b) An email dated 23.11.2019 was received from one of the co-noticees/directors referring specifically to the show cause notice and seeking release of seized items to an authorised representative.

(c) The authorised representative appeared on 27.11.2019, signed the acknowledgment for receipt of seized items and provided relevant email IDs.

(d) Personal hearing was granted to all noticees on 29.01.2020; their advocates (Vaidat Legal Services) addressed letters dated 09.01.2020 and 17.01.2020 requesting copies of relied upon documents and additional documents "enclosed to" and "required to prepare and present reply" to the show cause notice; the relied upon documents were emailed to the said advocates on 16.01.2020.

(e) The present writ petition itself had been filed through the same advocates who had previously sought relied upon documents before the adjudicating authority on behalf of the noticees.

2.9 On perusal of these facts stated on affidavit, the Court found that the conduct of the petitioner and co-noticees, including communications acknowledging the show cause notice, seeking release of goods, appearance before the authorities, and seeking relied upon documents, unequivocally demonstrated that they had knowledge of and access to the show cause notice.

Conclusions:

2.10 The Court was fully satisfied that service of the show cause notice had been duly effected.

2.11 The plea of non-service was held to be false and an afterthought, and was rejected.

Issue 3 - Maintainability of the writ petitions and availability of alternate remedies, including limitation

Interpretation and reasoning:

2.12 In view of the Supreme Court's review decision in Canon India affirming the competence of DRI officers as "proper officers", and the Court's finding that the show cause notice was duly served, the substantive basis for the writ petitions stood extinguished.

2.13 The Court followed the framework laid down by the Supreme Court for handling pending matters involving jurisdictional challenges to show cause notices and orders-in-original under Section 28, which contemplates adjudication by the proper officer and recourse to statutory appellate remedies, including before CESTAT.

Conclusions:

2.14 The Court held that the writ petitions no longer survived and disposed of them.

2.15 All remedies in respect of the impugned orders-in-original were expressly left open to the petitioner to be pursued in accordance with law before the appropriate forum.

2.16 The Court clarified that, for the period during which the present writ petitions remained pending before it, the petitioner may seek the benefit of Section 14 of the Limitation Act, 1963, in appropriate proceedings, in accordance with law.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the refusal by the revisional authority to entertain the claim for interest on delayed IGST refund, on the ground of lack of jurisdiction under Section 35EE of the Central Excise Act, 1944, justified relegating the matter to the appellate authorities under the GST Acts.

1.2 Whether, in the circumstances where the assessee had diligently pursued the remedy before authorities under the Customs Act, the appeal to be filed under the GST Acts on the issue of interest on delayed IGST refund should be examined without reference to limitation.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Proper appellate forum for interest on delayed IGST refund and effect of revisional authority's refusal under Section 35EE of the Central Excise Act, 1944

Interpretation and reasoning

2.1 The revisional authority proceeded on the basis that proceedings before it were in exercise of powers under Section 35EE of the Central Excise Act, 1944, and therefore had to be confined to the framework of that Act.

2.2 It was held by the revisional authority and noted by the Court that provisions of the CGST Act, 2017 were not exercisable in such revision proceedings, and consequently the revision applications, to the extent they related to interest on IGST refund, were not maintainable under Section 35EE.

2.3 The Court recorded that the objection as to maintainability and jurisdiction was raised for the first time at the revisional stage; no such objection had been raised earlier when the petitioner was pursuing the remedy before authorities constituted under the Customs Act.

2.4 The petitioner expressed readiness to approach the appellate authorities under the GST Acts, so that the jurisdictional objection would not persist, and sought consequential directions.

Conclusions

2.5 The Court accepted that the proper appellate forum for adjudication of the claim for interest on delayed IGST refund is under the GST Acts and not under Section 35EE of the Central Excise Act, 1944.

2.6 The Court permitted and directed that the petitioner may institute an appeal against the original common order, limited to the issue of interest on IGST refunds, before the appellate authorities constituted under the GST Acts.

Issue 2: Treatment of limitation for appeal under GST Acts where remedy was diligently pursued before Customs authorities

Interpretation and reasoning

2.7 The Court found that the petitioner had diligently and bona fide pursued the claim for interest on IGST refunds before authorities under the Customs Act, and that the jurisdictional objection was taken for the first time in the impugned revisional order.

2.8 In view of these peculiar facts, the Court considered reasonable the request that the time spent in pursuing the remedy before Customs authorities should not prejudice the petitioner on the ground of limitation when approaching the proper forum under GST.

Conclusions

2.9 The Court directed that if the petitioner files an appeal under the GST Act against the common order dated 01 December 2020, limited to the issue of interest on IGST refunds, within four weeks from the date of uploading of the Court's order, the GST appellate authority shall consider and dispose of such appeal on its own merits and in accordance with law, "without adverting to the issue of limitation".

2.10 All contentions of all parties on the merits of the claim for interest on delayed IGST refunds were expressly left open to be decided by the GST appellate authority in the first instance.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the clarification issued in the second CRCL reports, without drawing fresh samples or disclosing reasons, could be acted upon for treating the goods as "Gutka" and for consequential action including withholding IGST refunds.

1.2 Whether the inaction of the customs authorities in deciding the petitioners' representations for finalisation of shipping bills and release of bank guarantees was lawful, and what directions were warranted.

1.3 Whether, in the absence of any issued show cause notice, the customs authorities were required to adhere to a time-bound schedule for issuance and adjudication of such notice in relation to the concerned consignments.

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Effect of second CRCL reports and absence of reasons/fresh sampling

Interpretation and reasoning

2.1.1 The Court noted that initial CRCL test reports (first CRCL reports) dated 24.12.2024 and 27.12.2024 recorded the physical and chemical characteristics of the products and did not contain any adverse conclusion categorising the goods as "Gutka".

2.1.2 The Court further noted that, without drawing any fresh samples, the CRCL later issued "clarification" reports dated 10.11.2025 (second CRCL reports) opining that the tested samples had the characteristics of "Gutka", a chewing tobacco product as per IS 10335:2016, and that the samples were other than Pan Masala, Khaini and Surti, and not "food preparation" under Section 2.3.4 of the Food Safety and Standards (Prohibition and Restrictions on Sales) Regulations, 2011.

2.1.3 The Court observed that the circumstances necessitating issuance of the second CRCL reports were "completely unknown" and that these reports did not specify why they were issued or provide reasoning for altering the conclusion, apart from referring to an email of the Customs Department dated 07.11.2025.

2.1.4 While noting the petitioners' contention that the first CRCL reports were binding and that the second CRCL reports, being unreasoned and unsupported by fresh sampling, were untenable, the Court expressly refrained from adjudicating on the merits of this challenge in writ jurisdiction at this stage.

Conclusions

2.1.5 The Court did not decide the legality or evidentiary value of the second CRCL reports on merits; it left all rights and contentions of the parties open for appropriate proceedings, including any show cause notice and adjudication before the customs authorities.

2.2 Non-disposal of representations and release of bank guarantees

Interpretation and reasoning

2.2.1 The Court recorded that, at the time of provisional release of the goods, the petitioners had furnished bank guarantees and bonds, and that, after receipt of the first CRCL reports showing no objection, the petitioners had submitted several representations seeking finalisation of shipping bills and release of bank guarantees.

2.2.2 The Court found that these representations had neither been replied to nor decided by the Commissioner of Customs, despite the passage of time and despite the provisional nature of the release.

2.2.3 The Court held that the matter requires consideration by the Commissioner of Customs "in a holistic manner", including the effect of the first and second CRCL reports, and that the petitioners are entitled to a time-bound decision on their pending representations relating to release of bank guarantees.

Conclusions

2.2.4 The Court directed that all representations of the petitioners regarding release of bank guarantees be considered, and a decision on release of the bank guarantees be taken by the Commissioner of Customs on or before 28.02.2026.

2.2.5 The Court did not itself order release of the bank guarantees or finalisation of shipping bills, but confined itself to directing a prompt, reasoned administrative decision.

2.3 Necessity and timeline for issuance and adjudication of show cause notice

Interpretation and reasoning

2.3.1 The Court noted that no show cause notice (SCN) had been issued to the petitioners till the date of hearing, despite the existence of CRCL reports and the provisional nature of the release.

2.3.2 The Court considered that, if the Department intended to take any adverse action, an SCN ought to be issued expeditiously so that subsequent shipments of the petitioners are not "unnecessarily put on hold".

2.3.3 The Court therefore treated the matter as requiring time-bound initiation and completion of adjudicatory proceedings, to ensure certainty and avoid prolonged provisional status or indefinite administrative restraint, including on GST refunds.

Conclusions

2.3.4 The Court directed that, if any SCN is to be issued, it must be issued on or before 10.01.2026.

2.3.5 The Court further directed that any such SCN be adjudicated "simultaneously" with the petitioners' representations for release of bank guarantees, and that the adjudication be completed within the same outer limit of 28.02.2026.

2.3.6 The Court clarified that it has not examined the merits of any prospective SCN, and that all rights and contentions of both sides are preserved for such proceedings.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the prayer for restoration of the appeal before the appellate tribunal, after dismissal for non-compliance with pre-deposit, can be entertained afresh when the same relief has already been rejected by another High Court and the Supreme Court.

1.2 Whether, in view of the prior dismissal of a special leave petition by the Supreme Court arising from the same cause, the High Court ought to exercise its jurisdiction under Section 130 of the Customs Act, 1962 read with Article 226 of the Constitution to grant further relief to the appellant.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Maintainability of repeated request for restoration of appeal after dismissal for non-deposit of pre-deposit, in light of prior High Court and Supreme Court orders

Legal framework (as discussed)

2.1 The Court noted the statutory requirement of pre-deposit under Section 129E of the Customs Act, 1962 as considered earlier by the appellate tribunal and the Allahabad High Court.

2.2 The Court referred to the Allahabad High Court judgment which examined the tribunal's power to restore an appeal dismissed for non-deposit, with reference to the Division Bench decision of the Gujarat High Court in "Hussain Haji Harun alias Hussein Kabiju vs. Union of India and others", which held that the tribunal has jurisdiction to restore such appeals.

Interpretation and reasoning

2.3 The Court traced the chronology: seizure in 1991; adjudication and order-in-original in 1997; conditional stay by the tribunal in 1998 requiring pre-deposit of Rs. 5,00,000/-; extension of time granted by the Delhi High Court up to April 1999; failure of the appellant to make the pre-deposit; dismissal of the appeal by the tribunal on 16 August 1999; dismissal of the restoration application by the tribunal on 26 February 2007; dismissal of the challenge to that order by the Allahabad High Court in May 2007; and dismissal of the subsequent special leave petition by the Supreme Court in October 2007.

2.4 The Allahabad High Court had already considered and rejected the appellant's request for restoration after an eight-year delay from the expiry of time for pre-deposit. It accepted, on facts, that such belated restoration could not be entertained, distinguishing the Gujarat High Court precedent where restoration had been sought within a few months of dismissal.

2.5 The present appeal sought, in substance, the same relief: restoration of the appeal before the tribunal and acceptance of the pre-deposit belatedly, this time nearly 13 years after dismissal of the second SLP, despite the appellant having already pursued two rounds of litigation before High Courts and two before the Supreme Court.

2.6 The Court considered that the appellant had persistently defaulted in complying with the pre-deposit direction despite multiple opportunities and that the question of restoration, on the same facts and the same non-compliance, had attained finality through the Allahabad High Court judgment and the subsequent dismissal of the SLP by the Supreme Court.

Conclusions

2.7 The Court held that, in view of the earlier rejection of the very same prayer for restoration by the Allahabad High Court and its affirmation by the Supreme Court, the appellant could not seek a fresh round of relief before another High Court for essentially the same cause.

2.8 The Court concluded that the appeal seeking further extension/restoration before the tribunal was not entertainable at this stage.

Issue 2 - Effect of prior dismissal of special leave petition on the exercise of jurisdiction under Section 130 of the Customs Act and Article 226 of the Constitution

Interpretation and reasoning

2.9 The Court noted that the first special leave petition had been dismissed as withdrawn, while the second special leave petition against the Allahabad High Court's order was dismissed after being heard.

2.10 The Court initially considered, at a preliminary stage, the substantial value of the seized silver (claimed by the appellant to be more than Rs. 10 crores) and the fact that it remained undisposed of and in the custody of the Customs Department, and was at "first blush" inclined to consider the matter on that ground, noting that the appellant had never had an opportunity to argue the appeal on merits before the tribunal.

2.11 However, upon receiving instructions that the silver was still lying in the customs godown and upon revisiting the procedural history, the Court placed decisive weight on the fact that the second SLP had been entertained and dismissed by the Supreme Court, thereby affirming the Allahabad High Court's refusal to direct restoration.

2.12 The Court reasoned that, in light of the Supreme Court's dismissal of the SLP on the same underlying issue, it would not be appropriate to exercise its jurisdiction under Article 226 of the Constitution or Section 130 of the Customs Act to effectively reopen the same controversy.

Conclusions

2.13 The Court held that, because the Supreme Court had already dismissed the second SLP arising from the Allahabad High Court's refusal to permit restoration, the High Court would not exercise its writ or appellate jurisdiction to grant any further relief in respect of restoration of the tribunal appeal.

2.14 The Court disposed of the appeal and pending applications, while observing that if the appellant wished to approach the Supreme Court, they were free to do so in accordance with law.

Issues: (i) whether the imported product containing ethephon could be brought into India without registration under the Insecticides Act, 1968 or an import permit under the DGFT notification, and whether the goods were liable to confiscation under the Customs Act, 1962; (ii) whether the penalties imposed on the importer, its directors and the customs broker under the Customs Act, 1962 were justified.

Issue (i): whether the imported product containing ethephon could be brought into India without registration under the Insecticides Act, 1968 or an import permit under the DGFT notification, and whether the goods were liable to confiscation under the Customs Act, 1962.

Analysis: Ethephon was treated as a scheduled insecticide under the Insecticides Act, 1968. The statutory scheme, read with the exemption in Section 38(1)(b), did not displace the requirement of compliance where the import fell within the regulatory framework. The Court accepted that the goods were imported as an insecticide-related product and that, even on the appellants' own case of non-insecticidal use, the DGFT notification required an import permit from the competent registration authority. The failure to obtain the required permit meant that the import was contrary to the governing restrictions and the goods answered the description of prohibited goods for customs purposes.

Conclusion: The import was not exempt from regulatory control and the goods were rightly held liable to confiscation.

Issue (ii): whether the penalties imposed on the importer, its directors and the customs broker under the Customs Act, 1962 were justified.

Analysis: Once confiscability was established, the imposition of penalty on the persons involved followed from their role in the misdeclaration and in the import of goods without the required authorisation. The findings recorded knowledge of the restricted nature of the goods, deliberate misdescription as ethylene ripener, and active participation by the concerned persons, including the customs broker, who was held to have been aware of the restriction yet failed to act in accordance with the obligations of a customs broker. The challenge to the applicability of Section 114AA was rejected, as that provision was treated as extending to false declarations in import transactions as well.

Conclusion: The penalties on the importer, its directors and the customs broker were upheld.

Final Conclusion: The appeals failed in entirety and the confiscation and penal consequences imposed by the customs authorities were sustained.

Ratio Decidendi: Goods whose import is regulated under the applicable foreign trade and insecticide laws remain liable to customs confiscation when the mandatory condition of prior registration or import permit is not satisfied, and persons knowingly involved in misdeclaration or unpermitted import are liable to penalty.

Issues: Whether penalty imposed under Section 114A of the Customs Act, 1962 amounts to being "penalised for an offence" under Regulation 3(2)(c) of the Private Warehousing Licensing Regulations, 2016, so as to disentitle the applicant from a private warehouse licence under Section 58 of the Customs Act, 1962 and the permission for manufacture and other operations under Section 65 of the Customs Act, 1962.

Analysis: The licensing bar in Regulation 3(2) was read as a whole. Regulation 3(2)(b) covers conviction for an offence under any law, while Regulation 3(2)(c) uses the distinct expression "penalised for an offence" under the Customs Act, the Central Excise Act, 1944, or Chapter V of the Finance Act, 1994. The phrase could not be confined only to offences triable in criminal proceedings under Chapter XVI of the Customs Act, because that construction would make Regulation 3(2)(c) redundant in light of Regulation 3(2)(b). The Court relied on the scheme of the Customs Act, the distinction between conviction and penalty, and the principle that no statutory provision should be rendered otiose. It also held that penalty under Section 114A, being imposed for deliberate contravention with intent to evade duty, falls within the scope of being penalised for an offence for the purpose of Regulation 3(2)(c).

Conclusion: Penalty under Section 114A of the Customs Act, 1962 does attract Regulation 3(2)(c) of the Private Warehousing Licensing Regulations, 2016, and the applicant was not entitled to the licence or the associated permission.

Final Conclusion: The appeals failed, and the rejection of the application for private warehouse licence and manufacture-related permission was sustained.

Ratio Decidendi: In a licensing regime, where one clause bars persons convicted of an offence and another bars persons penalised for an offence, the latter must be given an independent meaning and may include civil customs penalties imposed for contravention under the Customs Act, 1962.

Issues: (i) Whether the importer satisfied the condition of producing documents evidencing payment of appropriate VAT/CST on sale of the imported goods, along with a Chartered Accountant's certificate, for refund under Notification No. 102/2007-Customs. (ii) Whether rejection of the Chartered Accountant's certificate for not being in the format prescribed in Public Notice No. 39/2011 was justified. (iii) Whether the refund claim in respect of four specified bills of entry was barred by limitation.

Issue (i): Whether the importer satisfied the condition of producing documents evidencing payment of appropriate VAT/CST on sale of the imported goods, along with a Chartered Accountant's certificate, for refund under Notification No. 102/2007-Customs.

Analysis: The refund notification required the importer to furnish documents evidencing payment of appropriate sales tax or value added tax on the sale of imported goods. The Board circular clarified that, where original challans are difficult to produce, copies of ST/VAT payment documents accompanied by a Chartered Accountant's certificate certifying the payment are sufficient to meet the notification requirement. Since the importer produced copies of VAT/CST payment documents and the certificate was based on verification of the relevant records, the prescribed condition stood satisfied.

Conclusion: The issue is decided in favour of the assessee.

Issue (ii): Whether rejection of the Chartered Accountant's certificate for not being in the format prescribed in Public Notice No. 39/2011 was justified.

Analysis: The public notice described the suggested formats for Chartered Accountant certification as indicative. No mandatory statutory format was prescribed in Notification No. 102/2007-Customs itself. A procedural format requirement cannot defeat the substantive refund entitlement where the underlying documents and certificate otherwise establish compliance with the notification and the unjust enrichment requirement.

Conclusion: The rejection of the certificate on format grounds was not justified and this issue is decided in favour of the assessee.

Issue (iii): Whether the refund claim in respect of four specified bills of entry was barred by limitation.

Analysis: The amended refund notification required the claim to be filed within one year from the date of payment of the additional duty. On the dates reflected in the record, the claims relating to the four specified bills of entry were lodged beyond the one-year period. The limitation requirement is mandatory and the claims could not be entertained.

Conclusion: The refund claim for the four specified bills of entry is barred by limitation and this issue is decided against the assessee.

Final Conclusion: The refund claim succeeds only to the extent of the bills of entry filed within the prescribed time, while the claims filed beyond the limitation period remain inadmissible. The order was therefore interfered with only for the eligible portion and sustained for the time-barred portion.

Ratio Decidendi: For refund under Notification No. 102/2007-Customs, copies of VAT/CST payment documents supported by a Chartered Accountant's certificate can satisfy the documentary requirement, and an indicative certificate format cannot be treated as mandatory; however, the statutory one-year limitation for filing the refund claim remains binding.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether violation of Regulation 10(a) of the Customs Brokers Licensing Regulations, 2018, relating to obtaining and producing authorization from the importer, was established against the customs broker.

1.2 Whether violations of Regulations 10(d) and 10(e) of the Customs Brokers Licensing Regulations, 2018, concerning advising the client to comply with law and exercising due diligence in information imparted to the client, were proved.

1.3 Whether violation of Regulation 10(n) of the Customs Brokers Licensing Regulations, 2018, relating to verification of IEC/GSTIN, identity and functioning of the client at the declared address, was established.

1.4 Whether the adjudicating authority could sustain findings of violation of the aforesaid regulations by relying on statements and materials not cited as relied-upon documents in the show cause notice.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Alleged violation of Regulation 10(a) CBLR, 2018

Legal framework

2.1 Regulation 10(a) obliges a customs broker to obtain an authorization from each client by whom he is employed and to produce such authorization whenever required by the Deputy Commissioner or Assistant Commissioner of Customs.

Interpretation and reasoning

2.2 The Tribunal noted that the show cause notice merely alleged contravention of Regulation 10(a) in general terms and did not specifically allege that the customs broker had failed to obtain authorization from the importer or, having obtained it, failed to produce it when called upon by the competent officer.

2.3 The impugned order nonetheless concluded that Regulation 10(a) was violated on the basis that: (a) no authorization was "miserably" produced; (b) the inquiry officer's observations about KYC lapses; (c) reference to an offence report which did not record any production of authorization; and (d) a statement recorded under section 108 of the Customs Act, 1962.

2.4 The Tribunal found that: (i) the statement under section 108 of the Customs Act was not a relied-upon document in the show cause notice forming the basis of these revocation proceedings and therefore could not be used against the noticee; and (ii) the offence report, even if silent on production of authorization, did not establish that the Deputy Commissioner or Assistant Commissioner demanded authorization and that the customs broker failed to produce it.

2.5 The Tribunal accepted that the customs broker had produced a written authorization from the importer, authorizing it to act as customs broker in respect of import consignments at the relevant port, and that the defence that the show cause notice contained no specific allegation of non-obtaining or non-production of authorization was raised before the Commissioner but ignored in the impugned order.

2.6 It was held that the impugned order could not go beyond the scope of the show cause notice to introduce or build a new factual foundation for a violation of Regulation 10(a), especially in the absence of any evidence showing either non-obtaining or non-production of authorization when required.

Conclusions

2.7 The finding that the customs broker violated Regulation 10(a) was held to be unsupported by the allegations in the show cause notice and by evidence, and therefore unsustainable.

Issue 2 - Alleged violations of Regulations 10(d) and 10(e) CBLR, 2018

Legal framework

2.8 Regulation 10(d) requires a customs broker to advise his client to comply with the provisions of the Customs Act, allied Acts, rules and regulations and, in case of non-compliance, to bring the matter to the notice of the Deputy/Assistant Commissioner of Customs.

2.9 Regulation 10(e) obliges the customs broker to exercise due diligence to ascertain the correctness of any information which he imparts to a client with reference to work related to clearance of cargo or baggage.

Interpretation and reasoning

2.10 The customs broker's case was that: (i) it was unaware of the mis-declaration or concealment of goods or of any BIS/policy violations; (ii) its role was confined to filing the bill of entry based on the declared documents, which on their face did not disclose any policy violation; and (iii) it had carried out due diligence by verifying IEC, GSTIN, PAN, Aadhaar and other particulars of the importer.

2.11 The Commissioner's finding of violation under Regulations 10(d) and 10(e) was primarily based on: (a) the inquiry officer's generic observation that the customs broker was negligent in verifying credentials and scrutinizing documents, and failed to inform Customs of violations; (b) reliance on statements recorded under section 108 of the Customs Act, 1962; and (c) the conclusion that the customs broker did not properly advise the importer regarding authenticity and truthfulness of documents and compliance with section 46(4) of the Customs Act.

2.12 The Tribunal held that nothing in the impugned order or on record established that the customs broker: (i) had failed to advise the importer to comply with customs and allied laws; or (ii) was aware of any non-compliance by the importer and deliberately failed to bring it to the attention of the Deputy/Assistant Commissioner as required by Regulation 10(d).

2.13 It was emphasized that even where an importer violates statutory provisions, such violation by itself does not prove that the customs broker neither advised compliance nor was ignorant of the violation. It is possible that the importer disregarded the broker's advice; such a possibility cannot be excluded in the absence of evidence.

2.14 As regards Regulation 10(e), the Tribunal observed that the provision addresses due diligence in ascertaining correctness of information imparted by the customs broker to its client. No material or finding demonstrated that the broker had supplied any incorrect information to the importer regarding clearance of cargo or any related matter.

2.15 The Tribunal further held that the impugned findings on Regulation 10(d) rested on statements recorded under section 108 of the Customs Act, 1962, which were not cited as relied-upon documents in the show cause notice for these proceedings. A document not relied upon in the show cause notice cannot be used to record adverse findings against the noticee.

Conclusions

2.16 The finding of violation of Regulation 10(d) was held to be unsustainable as there was no evidence that the customs broker failed to advise the importer to comply with law or knowingly failed to report any non-compliance to the proper officer.

2.17 The finding of violation of Regulation 10(e) was also held to be unsustainable, as there was no evidence that the customs broker imparted any incorrect information to the importer or failed in due diligence in relation to information provided to the client.

Issue 3 - Alleged violation of Regulation 10(n) CBLR, 2018

Legal framework

2.18 Regulation 10(n) mandates that a customs broker verify the antecedents, correctness of IEC number, GSTIN, identity of his client, and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information.

2.19 The Tribunal considered and applied the ratio of a High Court decision interpreting analogous obligations of customs house agents under earlier regulations, holding that a customs broker is not an inspector of the genuineness of its client's business but a processing agent of documents and that the issuance of an IEC by the competent authority carries a presumption of due verification by that authority.

Interpretation and reasoning

2.20 The customs broker contended that: (i) it had obtained and verified KYC documents including IEC, GST registration, Aadhaar, PAN, shop and establishment registration, and electricity bill; (ii) the show cause notice did not allege that IEC or GST registration was forged; (iii) KYC documents had been handed over during investigation and were on record; and (iv) Regulation 10(n) does not mandate physical verification of the importer's premises.

2.21 The Commissioner held that: (a) Regulation 10(n) is a fundamental obligation; (b) the offence report indicated that the importer's declared premises, when searched, was occupied by another person and a garments shop; (c) statements under section 108 of the Customs Act from the importer and the customs broker's G-card holder showed that the IEC was lent to a third party and that the customs broker, "in greed of business", accepted documents from the freight forwarder and verified only IEC/GSTIN online; and (d) KYC documents produced later were not time-sensitive and did not demonstrate that they were obtained prior to or at the time of import. On this basis, the Commissioner concluded that the customs broker had not properly verified identity and functioning of the client as required by Regulation 10(n).

2.22 The Tribunal noted that it was undisputed that: (i) the customs broker had verified IEC, GSTIN and other KYC documents; (ii) such documents were issued by DGFT, GST and other competent authorities; and (iii) the broker had not physically visited the importer's premises.

2.23 Relying on the High Court's reasoning in an analogous context, the Tribunal held that: (a) a customs broker is not required to conduct a background or physical verification of every client whose IEC has been issued by the competent authority; (b) grant of IEC/GST registration presupposes that the issuing authority has undertaken necessary checks, and the customs broker is entitled to rely on such official documents; and (c) it would be unduly onerous to require the broker to investigate whether the IEC-holder genuinely functions at the stated address, particularly where statutory documents and online verifications show consistency.

2.24 The Tribunal observed that, even accepting that the importer misused the IEC or that the premises were subsequently found occupied by others, any error or lapse in issuance or monitoring of IEC/GST registration would be attributable to the issuing authorities and not to the customs broker who proceeded on the strength of official documents and online verifications.

2.25 To the extent the Commissioner relied on statements under section 108 to infer a violation of Regulation 10(n), the Tribunal found that these statements, though referred to in the impugned order, were not relied upon as part of the show cause notice for the present proceedings. Consequently, they could not lawfully be used to support adverse findings against the customs broker.

Conclusions

2.26 The Tribunal held that the customs broker had fulfilled its obligation under Regulation 10(n) by verifying IEC, GSTIN, identity and address through KYC documents and online checks, and that Regulation 10(n) does not impose a mandatory requirement of physical verification of the client's premises.

2.27 The finding that Regulation 10(n) was violated was therefore held to be legally untenable and contrary to the settled interpretation of the scope of a customs broker's KYC obligations.

Issue 4 - Use of materials not relied upon in the show cause notice

Interpretation and reasoning

2.28 The Tribunal examined that several adverse findings in the impugned order, including alleged violations under Regulations 10(a), 10(d) and 10(n), were based on statements recorded under section 108 of the Customs Act and on inferences from an offence report, without those statements being expressly cited as relied-upon documents in the show cause notice initiating revocation proceedings.

2.29 It was held that the noticee must be put on clear notice of all documents and evidentiary materials relied upon in the show cause notice, and any document not so relied upon cannot be used to record adverse findings or to sustain penal or regulatory action, as this would offend principles of natural justice.

2.30 On this basis, the Tribunal rejected reliance on such undisclosed statements and held that the Commissioner could not use them to establish violations of the regulations.

Conclusions

2.31 Findings of violation of Regulations 10(a), 10(d) and 10(n) based on statements and materials not relied upon in the show cause notice were held vitiated, and could not sustain revocation, forfeiture or penalty.

Overall consequence

2.32 Since the alleged violations of Regulations 10(a), 10(d), 10(e) and 10(n) of the Customs Brokers Licensing Regulations, 2018 were not legally or factually established, the orders revoking the customs broker's licence, forfeiting its security deposit and imposing penalty were set aside, and the appeal was allowed with consequential relief.

Issues: Whether the refund claim of special additional duty of customs paid on imported goods could be denied on the ground of limitation by applying a date unrelated to the sale of the imported goods.

Analysis: The refund mechanism for special additional duty operates after clearance and sale of the imported goods, and the levy under section 3(5) of the Customs Tariff Act, 1975 is satisfied once the corresponding state tax burden is discharged. The order relied on the view that the limitation attached to the refund claim could not override the statutory scheme, and that the applicable date for refund purposes could not be imported from section 27 of the Customs Act, 1962 so as to defeat the refund entitlement. The reasoning accepted that the time limit in the notification could not be applied to deny eligibility where the substantive conditions for refund were otherwise met.

Conclusion: The limitation-based rejection of the refund claim was not sustainable, and the appellant was entitled to the refund.

Final Conclusion: The appeal succeeded and the order rejecting refund was set aside.

Ratio Decidendi: A refund condition or time limit that is not supported by the statutory levy scheme cannot be used to deny refund of special additional duty where the imported goods are sold and the refund conditions are otherwise satisfied.

Issues: (i) Whether the imported AC-DC power module and DC-DC converter power modules are classifiable under the First Schedule to the Customs Tariff Act, 1975 as static converters / rectifiers under headings 8504 40 29 and 8504 40 90; (ii) Whether such static converters, when used in the manufacture of telecommunication apparatus, are eligible for nil rate of Basic Customs Duty under serial no. 4 of Notification No.25/2005-Customs dated 01.03.2005.

Issue (i): Classification of the specified imported AC-DC and DC-DC power modules under the Customs Tariff Act, 1975.

Analysis: The goods were analysed against the terms of the headings, Section and Chapter notes and the HSN explanatory notes. Rule 1 of the General Rules for Interpretation directs classification by heading terms and notes. The technical specifications and functioning of the items show they convert electrical energy (AC to DC or DC to different DC voltages) and incorporate converting and auxiliary elements. The HSN explanatory notes for heading 8504 encompass rectifiers and direct current converters and state that auxiliary devices do not preclude classification as static converters. Note 2(a) to Section XVI directs that parts included in Chapter 84 or 85 be classified in their respective headings. Prior authorities and tariff structure support classification of such converters under heading 8504 40 and the relevant sub-items.

Conclusion: DPS-500AB-40A AC-DC power module is classifiable under tariff item 8504 40 29 as other rectifiers; the PKU4913D series and the other listed DC-DC converter power modules are classifiable under tariff item 8504 40 90 as other static converters.

Issue (ii): Applicability of serial no. 4 of Notification No.25/2005-Customs (01.03.2005) granting nil rate of Basic Customs Duty to static converters for automatic data processing machines and telecommunication apparatus.

Analysis: Serial no. 4 of Notification No.25/2005 applies to static converters classifiable under heading 8504 40 for automatic data processing machines and telecommunication apparatus (excluding cellular mobile phone converters). The imported modules are shown by technical datasheets and the applicant's declaration to be intended for integration into PCBAs of Wi-Fi receivers, transmitters, uplink cards and data-centre switches, i.e. telecommunication apparatus. Given their classification under heading 8504 40 and intended end-use in telecommunication equipment (other than cellular mobile phones), the statutory exemption condition is satisfied.

Conclusion: The specified AC-DC and DC-DC power modules, when used for manufacture of telecommunication apparatus other than cellular mobile phones, are eligible for nil rate of Basic Customs Duty under serial no. 4 of Notification No.25/2005-Customs dated 01.03.2005.

Final Conclusion: The imported AC-DC and DC-DC power modules are classifiable under tariff items 8504 40 29 and 8504 40 90 respectively, and are entitled to Basic Customs Duty exemption under serial no. 4 of Notification No.25/2005 when used in the manufacture of telecommunication apparatus other than cellular mobile phones.

Ratio Decidendi: Devices that convert AC to DC or convert DC to different DC voltages and incorporate converting elements and auxiliary components fall within heading 8504 40 as electrical static converters; where such static converters are classifiable under 8504 40 and are used in telecommunication apparatus (excluding cellular mobile phones), they qualify for nil Basic Customs Duty under serial no. 4 of Notification No.25/2005-Customs.

Issues: (i) Whether the product Flamberge is classifiable under CTH 3101 as a fertilizer or under CTH 3808 as a plant growth regulator; (ii) Whether registration or inclusion of the product under the Fertilizer (Inorganic, Organic or Mixed) (Control) Order, 1985 determines customs classification.

Issue (i): Whether the product Flamberge is classifiable under CTH 3101 as a fertilizer or under CTH 3808 as a plant growth regulator.

Analysis: The classification turned on the product's essential character and primary function. The product was found to contain amino acids and peptides as the active ingredients, with nitrogen present only in a minor proportion. On the material placed on record, the product was treated as functioning by stimulating physiological processes, improving nutrient uptake, stress tolerance, root development, flowering and fruiting, rather than by supplying essential plant nutrients in the manner of a fertilizer. The headings were compared and CTH 3808 was treated as the more specific entry for plant growth regulators.

Conclusion: The product is classifiable under CTH 3808, more specifically under CTI 38089340 as a plant growth regulator, and not under CTH 3101.

Issue (ii): Whether registration or inclusion of the product under the Fertilizer (Inorganic, Organic or Mixed) (Control) Order, 1985 determines customs classification.

Analysis: The regulatory status under the Fertilizer Control Order was held not to be decisive for customs classification. The governing test remained the Customs Tariff, the General Rules for Interpretation, the heading text and the relevant chapter notes. The product's inclusion in the FCO schedule therefore did not alter its classification under the tariff.

Conclusion: FCO registration or inclusion does not control customs classification, and the product is not classifiable as a fertilizer on that basis.

Final Conclusion: The product was held to fall under the tariff entry for plant growth regulators, and the advance ruling answered the classification question against the applicant.

Ratio Decidendi: For customs classification, the decisive test is the product's essential character and primary function under the tariff and interpretative rules, and not its regulatory description under the Fertilizer Control Order.

Issues: (i) Whether second-hand or used goods may be imported for refurbishment, re-processing, re-conditioning, re-designing, re-manufacturing, re-assembling, re-tooling, repair, software uploading, integration, testing and tooling validation; (ii) whether duty exemption under Notification No. 134/94-Customs dated 22.06.1994 can be claimed under the MOOWR scheme; (iii) what compliance is required for waste generated during the process; (iv) whether goods imported into a DTA unit for repair or refurbishment and not cleared for domestic consumption are exempt from duty; (v) whether import duty is payable on waste generated during the process; and (vi) how wastage or scrap value is to be determined.

Issue (i): Whether second-hand or used goods may be imported for refurbishment, re-processing, re-conditioning, re-designing, re-manufacturing, re-assembling, re-tooling, repair, software uploading, integration, testing and tooling validation.

Analysis: The applicable import policy permits second-hand goods for repair, refurbishing, reconditioning or re-engineering, and the exemption notification covers goods imported for repair, reconditioning, reengineering, testing, calibration or maintenance. The permissible activity must leave the goods as the same identifiable article, and the operations must not convert them into a new product with a different essential character. Manufacturing operations beyond that scope are not covered.

Conclusion: The import is permitted in principle, but only to the extent the goods remain identifiable and are not transformed into a new article; otherwise the claim fails.

Issue (ii): Whether duty exemption under Notification No. 134/94-Customs dated 22.06.1994 can be claimed under the MOOWR scheme.

Analysis: The exemption notification and the MOOWR regime operate in different fields. The notification grants duty exemption for specified repair-type activities subject to Section 65 compliance and re-export, whereas MOOWR is a duty deferment warehouse regime requiring separate warehouse licensing and permissions. The two benefits cannot be availed together for the same transaction.

Conclusion: The assessee may choose either the exemption notification route or the MOOWR route, but not both simultaneously.

Issue (iii): What compliance is required for waste generated during the process.

Analysis: Waste generated during refurbishment or related activities must be handled in accordance with the applicable environmental framework, including rules governing e-waste, battery waste, plastic waste and solid waste, along with any other applicable pollution-control requirements. Authorised disposal and proper record maintenance are required.

Conclusion: The assessee must comply with the applicable waste-management and environmental rules and ensure disposal through authorised channels.

Issue (iv): Whether goods imported into a DTA unit for repair or refurbishment and not cleared for domestic consumption are exempt from duty.

Analysis: Notification No. 134/94-Customs grants exemption to specified goods imported for repair, reconditioning, reengineering, testing, calibration or maintenance, provided the operations are carried out in accordance with Section 65 and the goods are re-exported within the stipulated period and not cleared for home consumption.

Conclusion: The goods are eligible for exemption, subject to the conditions in the notification.

Issue (v): Whether import duty is payable on waste generated during the process.

Analysis: Section 65 governs waste or refuse arising from operations on warehoused goods. If the resultant goods are exported, duty on the waste is remitted subject to destruction or duty payment on the waste itself; if cleared for home consumption, duty is charged on the quantity attributable to such waste.

Conclusion: Import duty is payable on the waste if it is not exported in the manner required.

Issue (vi): How wastage or scrap value is to be determined.

Analysis: The valuation or treatment of wastage and scrap follows the statutory framework under Section 65, which links duty treatment to whether the resultant goods are exported or cleared for home consumption and to the manner in which waste is disposed of.

Conclusion: The wastage or scrap value is to be determined under Section 65 of the Customs Act, 1962.

Final Conclusion: The ruling substantially accepts the import and exemption claims only within the limited repair or refurbishment framework, while rejecting any attempt to treat the activity as manufacturing or to combine the exemption notification with the MOOWR regime.

Ratio Decidendi: Goods imported for repair-related exemption must remain the same identifiable article and the activity must not result in a new product with a different essential character; repair exemption and MOOWR are distinct regimes and cannot be simultaneously invoked for the same import.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether "Temperature / Climatic Test Chambers" used for environmental simulation and durability testing of products are classifiable under Heading 9027, more specifically under Tariff Item 9027 89 90, as "instruments and apparatus for physical analysis - other", or under any other Heading of the Customs Tariff.

1.2 Whether the presence of additional features such as vibration testing in certain models of the Temperature Test Chambers alters their classification under Heading 9027.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Classification of Temperature / Climatic Test Chambers under Heading 9027

Legal framework

2.1 The Court referred to Rule 1 of the General Rules for Interpretation, holding that classification is to be determined according to the terms of the headings and relevant Section or Chapter Notes, and that titles are for ease of reference only.

2.2 Heading 9027 covers: "Instruments and apparatus for physical or chemical analysis (for example, polarimeters, refractometers, spectrometers, gas or smoke analysis apparatus); instruments and apparatus for measuring or checking viscosity, porosity, expansion, surface tension or the like; instruments and apparatus for measuring or checking quantities of heat, sound or light (including exposure meters); microtomes." Within this, Tariff Item 9027 89 90 is the residual sub-heading "Other".

2.3 The Court noted the General Note (I) to Chapter 90 in the HSN Explanatory Notes, which states that Chapter 90 covers a wide variety of high-precision instruments and apparatus, mainly for scientific, specialised technical or industrial purposes, including machines, instruments and appliances for testing materials.

Interpretation and reasoning

2.4 On the basis of the applicant's technical description, the Court found that Temperature Test Chambers are specialised equipment that artificially create and control environmental conditions (temperature, and in some models also humidity, vibration, pressure, light) in order to test the durability, performance and reliability of products, materials or components.

2.5 The Court observed that "physical analysis" involves examining or testing a substance, material, or product based on its physical properties, which can be observed, measured or tested without changing its chemical composition. Climatic / temperature chambers expose materials to controlled environmental stresses (heat, cold, moisture, etc.) to measure physical responses such as expansion, contraction, warping, cracking or loss of strength, without altering their chemical nature.

2.6 The Court held that the Temperature Test Chambers carry out testing using environmental simulation in a controlled thermal environment and, through data collected by various sensors (including high-precision psychrometric sensors) and processed via SIMPATI® software, generate graphical and statistical data to visualise temperature trends within the chamber and their impact on the specimen. The viewing window allows visual observation and analysis of the specimen's behaviour (e.g. expansion or contraction) at specific thermal levels. These features make the equipment an apparatus for physical analysis of durability, performance and reliability.

2.7 It was emphasised that Heading 9027 is not confined to small analytical instruments but extends to apparatus designed to analyse or measure the physical properties of materials or products, including machines and appliances for testing materials, as indicated by the HSN General Notes.

2.8 The Court attached weight to international interpretative materials relied on by the applicant, including EU Explanatory Notes and earlier Brussels Tariff Nomenclature and classification opinions, which recognise climatic testing cupboards/chambers and cabinets for testing behaviour of materials by reference to temperature and humidity as "instruments and apparatus for physical analysis" within Heading 9027. While treating EU materials as having only reference value, the Court found that they supported classification of climatic testing cupboards under Heading 9027.

2.9 The Court placed reliance on the decision of the Tribunal in "VDO India v. CC", which held that Climatic Test Cabinet Systems used to test the function of products during temperature variations are correctly classifiable under sub-heading 9027.80 as apparatus for physical analysis. It noted that the Tribunal rejected the argument that the goods must necessarily measure a parameter numerically to fall under Heading 9027 and recognised that the heading covers apparatus for physical analysis, including where behaviour is assessed visually.

2.10 Considering the technical functions of the goods, the wording of Heading 9027 and the explanatory materials, the Court concluded that the essential function of the Temperature Test Chambers is that of an instrument/apparatus for physical analysis, specifically testing material behaviour and product performance under controlled environmental conditions.

Conclusions

2.11 Applying GIR 1 and the HSN Explanatory Notes, the Court concluded that the subject goods, namely Temperature / Climatic Test Chambers, are squarely covered by Heading 9027 as "instruments and apparatus for physical or chemical analysis".

2.12 As there is no more specific sub-heading for such climatic / temperature test chambers within Heading 9027, they fall under the residual sub-heading 9027 89 and, more specifically, under Tariff Item 9027 89 90 ("Other") of the First Schedule to the Customs Tariff Act, 1975.

Issue 2 - Effect of additional features (e.g. vibration testing) on classification

Interpretation and reasoning

2.13 The Court noted that all models/series of the Temperature Test Chambers necessarily have temperature control and environmental simulation as their core function, used for physical analysis of specimens. Certain models additionally incorporate features such as vibration testing to ensure more precise environmental simulation for particular applications (e.g. automotive, aerospace components exposed to intense vibrational forces).

2.14 The Court held that, notwithstanding such additional features, the essential character and primary function of the equipment remain that of temperature / climatic testing and physical analysis of products under controlled conditions. The vibration or other ancillary features are only supplementary and do not change the nature of the apparatus as an instrument for physical analysis.

Conclusions

2.15 The Court concluded that the presence of additional features such as vibration testing does not affect or alter the classification of the Temperature Test Chambers; all the models covered by the application, with or without such additional features, are classifiable under Heading 9027, specifically under Tariff Item 9027 89 90 of the Customs Tariff.

Issues: (i) Whether goods supplied on lease from an FTWZ to DTA qualify for exemption from IGST under Sl. No. 557B of Notification No. 50/2017-Customs dated 30.06.2017; (ii) whether the exemption remains available where GST on the lease service is discharged by the lessor in India and not by the lessee; (iii) whether clause (i) of Condition 102, requiring the importer to execute a bond for payment of tax on the service, stands dispensed with in such a case.

Issue (i): Whether goods supplied on lease from an FTWZ to DTA qualify for exemption from IGST under Sl. No. 557B of Notification No. 50/2017-Customs dated 30.06.2017.

Analysis: Sl. No. 557B grants nil IGST on import of goods under a transaction covered by item 1(b) or 5(f) of Schedule II of the Central Goods and Services Tax Act, 2017, subject to Condition 102. A lease transaction transferring only the right to use goods, without transfer of title, falls within those entries. The goods were stored in an FTWZ, which is a Special Economic Zone, and removal from SEZ to DTA is treated as import into India for customs purposes. The ruling accepted that the physical location of the goods in FTWZ and the nature of the lease transaction bring the case within the exemption entry.

Conclusion: The exemption under Sl. No. 557B is available, subject to compliance with the applicable conditions.

Issue (ii): Whether the exemption remains available where GST on the lease service is discharged by the lessor in India and not by the lessee.

Analysis: Condition 102 contains a proviso for goods supplied by an SEZ Unit to DTA, under which the lessee is relieved from the undertaking to pay integrated tax on the service because the SEZ supplier is already liable to pay tax. The ruling treated the object of the notification as preventing double taxation and held that the fact that GST is paid by the lessor on forward charge does not defeat the exemption. The clarification concerning FTWZ transactions supported extending the benefit to the present arrangement.

Conclusion: The exemption remains available even though GST on the lease service is discharged by the lessor and not the lessee.

Issue (iii): Whether clause (i) of Condition 102, requiring the importer to execute a bond for payment of tax on the service, stands dispensed with in such a case.

Analysis: Since the lessor is liable to discharge GST on the lease service in India, insisting on a further bond from the lessee for the same tax would defeat the object of the exemption and lead to double taxation. The ruling therefore accepted that, in the present factual setting, the bond condition relating to payment of integrated tax on the service is not required, while the remaining safeguards under Condition 102 continue to apply.

Conclusion: Clause (i) of Condition 102 does not apply in the present case.

Final Conclusion: The ruling grants the requested customs exemption for the FTWZ-to-DTA lease transaction and clarifies that the remaining bond-related safeguards, excluding the service-tax undertaking, govern the availment of the benefit.

Ratio Decidendi: A lease of goods in which only the right to use goods is transferred, and which is effected from an FTWZ forming part of SEZ infrastructure to DTA, falls within Sl. No. 557B of Notification No. 50/2017-Customs when the transaction is covered by item 1(b) or 5(f) of Schedule II of the CGST Act and the exemption's anti-double-taxation purpose is otherwise satisfied.

Issues: (i) Whether, under Rule 3 of the SEBI Adjudication Rules, the Board had to record a prior opinion that there were grounds for adjudication before appointing an Adjudicating Officer; (ii) Whether a prior order under Regulation 14 of the PIT Regulations was a condition precedent to initiating proceedings under Chapter VI-A of the SEBI Act.

Issue (i): Whether, under Rule 3 of the SEBI Adjudication Rules, the Board had to record a prior opinion that there were grounds for adjudication before appointing an Adjudicating Officer.

Analysis: Rule 3 makes the Board's opinion the trigger for appointment of an Adjudicating Officer, but the appointment itself is only an administrative step that commences the inquiry process. The procedure under Rules 4 and 5 shows that the show cause notice, consideration of the response, and the decision whether a contravention exists and penalty is warranted occur later in the adjudicatory sequence. The prior requirement identified by the Single Judge was therefore founded on a misreading of the statutory scheme.

Conclusion: The prior recorded opinion was required only for the administrative decision to appoint the Adjudicating Officer, and the challenge to the appointment and show cause notice failed.

Issue (ii): Whether a prior order under Regulation 14 of the PIT Regulations was a condition precedent to initiating proceedings under Chapter VI-A of the SEBI Act.

Analysis: The PIT Regulations operate in addition to, and not in substitution of, the Board's independent power to proceed under Chapter VI-A. Regulation 14 does not require the Board to first exhaust or determine matters under the regulatory framework before invoking adjudication under the Act. The two remedies are distinct, and the adjudicatory mechanism under the Act is not dependent on a prior order under the Regulations.

Conclusion: No prior order under Regulation 14 was required before initiating Chapter VI-A proceedings, and this challenge failed.

Final Conclusion: The appeal by SEBI succeeded and the cross appeal was rejected, leaving the Single Judge's decision disturbed only to the extent of the appointment and show cause notice issue.

Ratio Decidendi: Where the statutory scheme provides a staged adjudicatory process, the authority's initial appointment of an adjudicating officer is an administrative act, while the determination of contravention and liability to penalty belongs to the inquiry stage; an independent regulatory remedy does not bar recourse to the Act's adjudication machinery unless the statute expressly makes it a precondition.

Issues: Whether proceedings initiated against a personal guarantor under the Insolvency and Bankruptcy Code, 2016 were required to be entertained by the National Company Law Tribunal and not the Debt Recovery Tribunal once a corporate insolvency resolution process had commenced against the principal borrower; and whether the order of the Debt Recovery Tribunal declaring an interim moratorium was without jurisdiction and liable to be set aside.

Analysis: The governing scheme of Section 60 of the Insolvency and Bankruptcy Code, 2016 gives the National Company Law Tribunal jurisdiction over insolvency resolution and liquidation concerning corporate persons, including personal guarantors. Where a corporate insolvency resolution process or liquidation is pending against the corporate debtor, an application relating to the insolvency resolution, liquidation, or bankruptcy of the personal guarantor must be filed before the same Tribunal. The statutory framework also provides for transfer of pending proceedings against the personal guarantor to that Tribunal and vests in it the powers of the Debt Recovery Tribunal for that purpose. In the present case, since proceedings against the principal borrower were already pending before the National Company Law Tribunal, the application against the personal guarantor could not validly continue before the Debt Recovery Tribunal. The order passed by the Debt Recovery Tribunal on the basis of such an application was therefore unsustainable.

Conclusion: The proceedings before the Debt Recovery Tribunal were held to be not maintainable, and the order dated 2 May 2022 was set aside for want of jurisdiction.

Final Conclusion: The petitions succeeded to the extent that the impugned Debt Recovery Tribunal order was annulled and the pending proceedings were directed to be transferred to the National Company Law Tribunal for further action in accordance with law.

Ratio Decidendi: Once a corporate insolvency resolution process is pending against the principal borrower, insolvency proceedings against its personal guarantor fall within the jurisdiction of the National Company Law Tribunal under Section 60 of the Insolvency and Bankruptcy Code, 2016, and any pending proceeding before the Debt Recovery Tribunal stands excluded or transferable accordingly.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the applicant could correct the nomenclature of the pending "review application" to a "recall application".

1.2 Whether any interim direction was required to restrain the adjudicating authority from proceeding with the application under Section 7 of the Insolvency and Bankruptcy Code pending disposal of the recall application.

1.3 Whether the alleged incorrect observations in the appellate judgment regarding limitation and Section 25(3) of the Indian Contract Act warranted recall of that judgment.

1.4 Whether a recall application before the Appellate Tribunal was maintainable after the applicant had already challenged the same appellate judgment before the Supreme Court and the civil appeal was dismissed as "not pressed".

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Nomenclature correction: review application to recall application

Interpretation and reasoning

2.1.1 The application had been titled as a "review application", but within its body, it was described and prayed for as a "recall application".

2.1.2 The Court noted this internal description and treated the substance and nature of the relief sought as determinative, rather than the mere title of the application.

Conclusions

2.1.3 The applicant was permitted to correct the nomenclature of the application and treat it as a recall application.

2.2 Need for interim restraint on the adjudicating authority in the Section 7 proceedings

Interpretation and reasoning

2.2.1 The applicant sought a direction to the adjudicating authority not to proceed with the Section 7 application during pendency of the recall application before the Appellate Tribunal.

2.2.2 The Court was informed that the Section 7 matter had already been adjourned by the adjudicating authority for the next day and that the recall application itself was being heard immediately.

2.2.3 In view of these facts, the Court considered that no effective purpose would be served by issuing any direction to restrain the adjudicating authority.

Conclusions

2.2.4 The request for a direction to the adjudicating authority not to proceed with the Section 7 application was declined as unnecessary.

2.3 Alleged incorrect observations on limitation and Section 25(3) of the Contract Act as ground for recall

Legal framework as discussed

2.3.1 The recall application was founded on the assertion that: (a) the appellate judgment had wrongly recorded, in paragraph 25, that a Supreme Court judgment held that Section 25(3) of the Contract Act enables a financial creditor to continue with the same pending Section 7 application, whereas, according to the applicant, the Supreme Court had held the opposite; and (b) paragraph 12 incorrectly stated that the Section 7 application was considered to be within limitation by the adjudicating authority.

Interpretation and reasoning

2.3.2 The Court examined paragraph 11 of its earlier judgment, where extracts from the adjudicating authority's order had been reproduced, and held that paragraph 12 must be read consequentially as a narration of those facts.

2.3.3 It was expressly noted that paragraph 12 did not contain any independent finding of the Appellate Tribunal; it was only a recital of facts, while the actual findings and reasoning began from paragraph 23 onwards.

2.3.4 The Court therefore held that the statements highlighted in paragraph 12 had no bearing on the final outcome of the appeal and could not be a basis to recall the judgment.

2.3.5 As to the contention regarding Section 25(3) of the Contract Act and the Supreme Court decision, the Court observed that, from paragraph 24 onwards of the earlier appellate judgment, emphasis had been laid on the conduct of the applicant, including: (a) the one-time settlement between the parties dated 20.12.2018, by which the entire amount was agreed to be paid by 31.12.2018; and (b) the earlier issuance of 10 cheques for Rs. 19,34,00,000/- in response to a recall notice, which were dishonoured.

2.3.6 The Court noted that these factual narrations in paragraph 24 of the earlier judgment were not disputed by either party during submissions.

2.3.7 The Court further recorded the respondent's contention that limitation had, in any event, been extended by the issuance of 10 cheques on 02.09.2016 within three years of the relevant period, and that the appeal had been decided essentially on the basis of the OTS and conduct of the parties, not on the contested interpretation of Section 25(3).

2.3.8 In this backdrop, the Court concluded that the alleged errors pointed out by the applicant did not vitiate the reasoning on which the appellate judgment was based and did not justify recall.

Conclusions

2.3.9 The Court held that the statements in paragraph 12 of the earlier judgment were merely narrative and had no impact on the decision, and that the judgment was substantially based on the parties' conduct, including the OTS and dishonoured cheques.

2.3.10 Alleged misstatements on limitation and Section 25(3) of the Contract Act did not constitute a valid ground for recalling the appellate judgment.

2.4 Maintainability of recall application after dismissal of Supreme Court appeal as "not pressed"

Interpretation and reasoning

2.4.1 It was undisputed that the applicant had already challenged the same appellate judgment before the Supreme Court by filing a civil appeal (registered upon diary number), and that the Supreme Court, after hearing learned senior counsel for both sides at length, recorded that the applicant's counsel, on instructions, did not press the appeal.

2.4.2 The Supreme Court accordingly dismissed the civil appeal as "not pressed". The relevant order of the Supreme Court was reproduced in full by the Court.

2.4.3 The Court inferred from this that the applicant had already invoked and exhausted the appellate remedy before the Supreme Court in respect of the same judgment.

2.4.4 The Court observed that, in the guise of a recall application, the applicant was effectively inviting the Appellate Tribunal to sit in appeal over its own final judgment, notwithstanding that the matter had already travelled to the Supreme Court and was argued at length before being dismissed as not pressed.

2.4.5 The Court considered such an attempt impermissible and beyond the legitimate scope of a recall jurisdiction.

Conclusions

2.4.6 In view of the prior proceedings and order of the Supreme Court, the recall application was held to be not maintainable as a means to re-open or re-argue the appellate judgment.

2.4.7 Finding no merit in the grounds urged and treating the application as an impermissible attempt to secure appellate review under the label of recall, the Court dismissed the recall application.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the appellant had locus standi as an "aggrieved person" to maintain an appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC) against an order admitting an application under Section 7.

1.2 Whether the order admitting the application under Section 7 of the IBC was valid in light of the evidence of debt, default, assignment of debt, acknowledgements, and limitation.

1.3 Whether the application under Section 7 was a malicious or fraudulent initiation of the corporate insolvency resolution process attracting Section 65 of the IBC, and the manner in which such allegations ought to be dealt with.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Locus standi of the appellant to maintain the appeal under Section 61 IBC

Legal framework (as discussed by the Court)

2.1 The Court referred to Sections 61 and 62 of the IBC and the phrase "any person aggrieved" used therein. It relied on the judgments of the Supreme Court in "GLAS Trust Company LLC v. BYJUS Raveenderan & Ors." and "Independent Sugar Corporation Ltd. v. Girish Shriram Juneja & Ors." which interpreted "any person aggrieved" under the IBC.

2.2 The Supreme Court held that the phrase "any person aggrieved" in Sections 61 and 62 IBC indicates that there is no rigid locus requirement, and that proceedings under the IBC, once CIRP is initiated, are in rem, involving all stakeholders. Any person who is affected by the order and whose interests are directly impacted may fall within this expression.

Interpretation and reasoning

2.3 The respondent objected to the appellant's locus on the basis that the appellant was neither a current shareholder nor a director of the corporate debtor at the time of filing of the Section 7 application, and that an appeal by a shareholder is not maintainable as per earlier decisions of the Appellate Tribunal.

2.4 The Court found it unnecessary, for purposes of this case, to go into the broader question whether an appeal can or cannot be maintained by a shareholder in the abstract. Instead, it examined the appellant's locus "dehors" (independent of) his claim as a shareholder.

2.5 The Court relied on two factual foundations to recognise locus:

(i) The adjudicating authority (NCLT) had permitted the appellant to participate in the Section 7 proceedings by filing a reply on behalf of the corporate debtor in his capacity as ex-director. This participation was expressly noticed in the NCLT order (para 17 of the impugned order).

(ii) The appellant had admittedly executed a Deed of Guarantee as personal guarantor securing the financial facilities extended to the corporate debtor by Indian Bank, those very facilities forming the basis of the Section 7 proceedings. The NCLT had also recorded this fact (para 10 of the impugned order).

2.6 Applying the Supreme Court's interpretation of "any person aggrieved", the Court held that a personal guarantor, whose financial exposure is directly impacted by initiation of CIRP and whose participation had been recognised by the adjudicating authority, falls within the expression "any person aggrieved" under Section 61.

Conclusions

2.7 The objection to locus standi was rejected.

2.8 The appellant, being a personal guarantor and having been permitted to participate before the adjudicating authority by filing a reply on behalf of the corporate debtor, was held competent to maintain the appeal under Section 61 IBC.

Issue 2: Validity of the admission of the application under Section 7 IBC (debt, default, assignment, and limitation)

Legal framework (as reflected in the judgment)

2.9 The Court proceeded on the settled parameters for admission of a Section 7 application: existence of a "financial debt", occurrence of "default", and the application being within limitation. It also noted the relevance of acknowledgements of debt for extending limitation and relied on the evidentiary value of NeSL records and corporate balance sheets.

Interpretation and reasoning

2.10 It was undisputed that the corporate debtor had availed financial facilities from Indian Bank, and that Indian Bank assigned its debt to the financial creditor through a Registered Deed of Assignment dated 13.07.2016. The assignment and corresponding modification of charge were produced before the adjudicating authority.

2.11 The corporate debtor had submitted an OTS proposal to the assignee financial creditor on 03.10.2016, which was accepted on 22.12.2016. Some payments were made under the OTS (last payment on 17.09.2018), but the instalment due on 10.01.2019 was not paid. The adjudicating authority treated 10.01.2019 as the date of default.

2.12 The Court noted that the OTS proposal itself amounted to a clear acknowledgment of the corporate debtor's liability. Subsequent acknowledgements were evidenced by:

(i) Acknowledgment of debt by letter dated 17.12.2020, as recorded by the adjudicating authority.

(ii) Admission and acknowledgment of liability in the audited balance sheet for F.Y. 2020-21.

(iii) Ledger confirmation by the corporate debtor, lastly on 01.04.2022.

2.13 An earlier Section 7 petition (CP(IB) 135 of 2023) had been dismissed for want of NeSL record (Form-D). The subsequent petition (filed on 16.05.2024) annexed the NeSL record of default showing a status of "Deemed to be Authenticated" and confirming the date of default as 10.01.2019. The Court treated the earlier dismissal as arising from a curable defect, which was duly rectified in the later filing.

2.14 In light of the above acknowledgements and the authenticated NeSL record, the adjudicating authority held that the application filed on 16.05.2024 was within limitation and that the financial creditor had successfully proved "debt" and "default".

2.15 The Court observed that acceptance of the loan and other facilities was not denied by the corporate debtor, and that the corporate debtor's own documents (OTS, balance sheet, ledger confirmation) supported the financial creditor's claim.

Conclusions

2.16 The existence of a financial debt, its valid assignment to the financial creditor, and the occurrence of default as on 10.01.2019 were established on the record.

2.17 Acknowledgements in the OTS proposal, balance sheet for F.Y. 2020-21, and ledger confirmations kept the claim within limitation on the date of filing of the Section 7 application on 16.05.2024.

2.18 The Court found no error in the adjudicating authority's conclusion that the requirements of Section 7 were fulfilled and upheld the order admitting the Section 7 application.

Issue 3: Allegations of malicious or fraudulent initiation of CIRP and the role of Section 65 IBC

Legal framework (as discussed by the Court)

2.19 The Court adverted to Section 65 of the IBC, which empowers the adjudicating authority to impose penalty where insolvency proceedings are initiated fraudulently or with malicious intent for purposes other than the resolution of insolvency.

2.20 The Court referred to the Appellate Tribunal's earlier decision in "Ashmeet Singh Bhatia v. Pragati Impex India (P) Ltd. & Anr." wherein it was held that:

(i) The adjudicating authority can exercise power under Section 65 upon being satisfied that proceedings are initiated fraudulently or with malicious intent.

(ii) While exercising jurisdiction under Section 65, the adjudicating authority can close the CIRP and pass all consequential orders.

(iii) The mere fact that a Section 7 application has been admitted does not denude the adjudicating authority of jurisdiction to examine a Section 65 application; such examination can occur even after admission.

Interpretation and reasoning

2.21 The appellant alleged that the Section 7 application was filed at the instance of the majority shareholder, that there had been round tripping of funds from the corporate debtor and group entities to purchase the debts from Indian Bank and SBI, and that the proceedings were malicious and not for resolution. It was also contended that the Section 7 proceedings were a counterblast to a pending oppression and mismanagement petition under Sections 241 and 242 of the Companies Act, 2013.

2.22 The appellant argued that these aspects had been pleaded in the reply before the adjudicating authority and in written submissions, including details of alleged round tripping, but were not adverted to by the adjudicating authority when admitting the Section 7 petition, and that the adjudicating authority ought to have invoked Section 65 and imposed penalty.

2.23 The respondent refuted the allegations of manipulation and round tripping and objected to reliance on documents brought on record only through an additional affidavit in appeal, which had not been before the adjudicating authority.

2.24 The Court expressly declined to adjudicate on the merits of the appellant's allegations that the Section 7 application was filed fraudulently or maliciously. It recorded that:

(i) Jurisdiction under Section 65 can be invoked by the adjudicating authority at any stage of the insolvency proceedings.

(ii) If the adjudicating authority is satisfied that the Section 7 application has been filed for a fraudulent or malicious purpose other than resolution, it may exercise power under Section 65 in accordance with law.

2.25 Instead of examining the factual matrix of alleged round tripping and mala fides at the appellate stage, the Court considered it appropriate, in the interest of justice, to grant liberty to the appellant to move an application under Section 65 before the adjudicating authority along with all relevant material.

Conclusions

2.26 The Court did not make any finding on whether the Section 7 application was, in fact, malicious or fraudulent.

2.27 It affirmed that the adjudicating authority retains jurisdiction under Section 65 even after admission of a Section 7 application to examine allegations of fraud or mala fides.

2.28 Liberty was granted to the appellant to file an application under Section 65 IBC before the adjudicating authority, to be decided on its own merits and in accordance with law, after giving opportunity to the concerned parties.

2.29 In the absence of any established ground to interfere with the admission of the Section 7 application, the appeal was dismissed, subject to the above liberty under Section 65.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the timelines and interest requirement under Schedule I, Rule 12 of the IBBI (Liquidation Process) Regulations, 2016 for payment of balance sale consideration are mandatory and attracted in this auction sale.

1.2 Whether the Adjudicating Authority had jurisdiction to extend the time for payment of balance sale consideration and, if so, what is the effect of such extension on the auction purchaser's liability to pay interest.

1.3 Whether the attachment of the auctioned land by the State Tax Department and the Liquidator's inability to immediately convey title/execute a sale deed could relieve the auction purchaser from (a) the obligation to adhere to the statutory payment schedule, and (b) liability for statutory interest.

1.4 Whether the doctrine of reciprocal promises under Section 51 of the Indian Contract Act, 1872 could be invoked by the auction purchaser to resist payment of interest on the balance sale consideration.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Mandatory nature and applicability of Schedule I, Rule 12 timelines and interest

Legal framework

2.1 The Court examined Schedule I, Clauses 12 and 13 of the IBBI (Liquidation Process) Regulations, 2016. Clause 12 mandates that the highest bidder must pay the balance sale consideration within ninety days or such period as mentioned in the auction notice, with the first proviso stipulating that payments after thirty days shall attract interest at 12% per annum, and the second proviso stipulating that the sale shall be cancelled if payment is not received within that period. Clause 13 contemplates completion of sale and execution of the sale certificate/deed "on payment of the full amount".

2.2 The Court relied on the decision in V.S. Palanivel v. Sri Lakshmi Hotels (P) Ltd., where it was held that Rule 12 of Schedule I is mandatory and that the consequence of non-payment within 90 days is cancellation of the sale.

Interpretation and reasoning

2.3 The Tender Document and Sale Confirmation Advice expressly incorporated the Liquidation Process Regulations, provided that the sale was on "as is where is, as is what is, whatever there is and non-recourse basis", and stipulated that (a) the balance amount must be paid within 30 days without interest; (b) the amount could be paid within 90 days with 12% interest after 30 days, in line with Regulation 33 and Schedule I; and (c) the transfer process is an independent process and shall not in any way affect the payment schedule.

2.4 The Court rejected the Adjudicating Authority's observation that the timeline for payment of sale price is only directory. Following V.S. Palanivel, it held that Rule 12 is mandatory: both (i) the outer limit of 90 days and (ii) the stipulation that payments made after 30 days shall attract 12% interest must be treated as mandatory.

2.5 The Court noted that the Sale Confirmation Advice was issued on 29.12.2022; the 30-day period expired on 28.01.2023. By that time only Rs. 20 crores had been paid and Rs. 305 crores remained as balance. Under Rule 12, payment of the balance after 30 days necessarily attracted 12% interest. The subsequent payment of Rs. 50 crores on 13.03.2023, though within 90 days, did not alter the statutory requirement of interest after the initial 30 days.

2.6 The Court further held, following V.S. Palanivel, that Rule 12 and Rule 13 are not interlinked; Rule 12 governs timelines and consequences for payment, while Rule 13 only prescribes the procedure for completion of sale after full payment. No adverse consequence is attached to non-compliance with Rule 13, whereas Rule 12 explicitly provides for cancellation for non-payment within time, reinforcing its mandatory character.

Conclusions

2.7 The statutory timelines under Schedule I, Rule 12 are mandatory. The auction purchaser was statutorily liable to pay 12% interest on the unpaid balance consideration after the expiry of 30 days from 29.12.2022.

2.8 The Adjudicating Authority's finding that the timelines were merely directory, and its consequent exoneration of the auction purchaser from interest on that basis, is unsustainable in law.

Issue 2 - Jurisdiction to extend time and impact on interest liability

Legal framework

2.9 The Court considered Section 35 of the Insolvency and Bankruptcy Code, 2016 (Liquidator's powers "subject to the directions of the Adjudicating Authority") and Rule 11 of the NCLT Rules, 2016 (inherent powers to make orders to meet the ends of justice). Relying on V.S. Palanivel and Arun Kumar Jagatramka v. Jindal Steel & Power Ltd., it noted that while the Liquidator cannot extend the Rule 12 timeline, the Adjudicating Authority can, in appropriate cases, extend time under its statutory and inherent powers.

Interpretation and reasoning

2.10 The Adjudicating Authority's order dated 15.06.2023 on IA/364(AHM)2023: (a) required the Liquidator to intimate the State Tax Department regarding its treatment as secured creditor; (b) directed the governing bidder to lift the attachment within 10 days of such intimation; (c) directed the Liquidator to intimate the successful bidder within 2 days of lifting of attachment; and (d) directed the successful bidder to pay the balance Rs. 255 crores within 5 days of such intimation. It expressly postponed consideration of prayer (b) for waiver of interest.

2.11 The Court held that this order effectively extended the time for payment of balance sale consideration, and such extension was granted by the Adjudicating Authority, not by the Liquidator. In light of V.S. Palanivel, the Adjudicating Authority was competent to grant such extension by exercising powers under Section 35 IBC read with Rule 11 NCLT Rules in appropriate circumstances.

2.12 The order dated 15.06.2023 was never challenged by any party and therefore attained finality. It was not a bare extension of timeline; it structured a sequence of steps linked to lifting of attachment before the obligation to pay the remaining amount arose.

2.13 The Court drew a temporal distinction: (a) the period from expiry of the initial 30 days (29.12.2022 + 30 days) up to 15.06.2023, when there was no protective order suspending the statutory obligation, and (b) the period after 15.06.2023, when the Adjudicating Authority's order was in force and temporarily relieved the auction purchaser from the obligation to pay until the specified preconditions were met.

Conclusions

2.14 The Adjudicating Authority validly exercised jurisdiction to extend the time for payment by its order dated 15.06.2023; that order, being unchallenged, binds the parties.

2.15 The auction purchaser remained liable to pay interest at 12% per annum on the unpaid balance consideration from the expiry of the 30-day period after 29.12.2022 until 15.06.2023.

2.16 For the period covered by the operative extension (post 15.06.2023), when the obligation to pay balance consideration stood deferred by order of the Adjudicating Authority, the auction purchaser cannot be saddled with interest; liability to pay interest for that extended period stands waived.

Issue 3 - Effect of State Tax attachment and Liquidator's inability to immediately convey title

Legal framework

2.17 The Court examined the Tender Document, including: (a) disclaimers that the information was not comprehensive and bidders must conduct independent due diligence; (b) stipulations that the land was to be sold on "as is where is", "as is what is", "whatever there is" and "no recourse" basis; (c) express advisory that bidders should verify revenue records, title, encumbrances, liens, statutory dues etc.; and (d) Clause 4.2(g), stating that the seller shall ensure transfer of title "as available", that the transfer process is an independent process, and that it shall not in any way affect the payment schedule under Clause 4.10, framed in accordance with Regulation 33 and Schedule I.

2.18 The Court relied on V.S. Palanivel, where it was held that an auction purchaser who participates in an auction conducted on "as is where is, as is what is, whatever there is" basis, with knowledge of an income tax attachment, cannot later contend that payment of balance consideration was contingent upon lifting of such attachment.

Interpretation and reasoning

2.19 The auction purchaser had raised queries in March 2023 about encroachment, State Tax attachment and revenue entries. The Liquidator, by letter dated 20.03.2023, reiterated that: (a) all documents had been shared earlier; (b) the sale was on "as is where is, as is what is, whatever there is and no recourse basis"; (c) Clause 4.2(g) clearly stipulated transfer as an independent process not affecting the payment schedule; and (d) though registration of sale deed was not possible until attachment was removed, the sale would stand confirmed once the sale certificate was issued against full payment and possession would be handed over.

2.20 The Court held that the Tender Document clearly allocated the risk of existing encumbrances, including statutory attachments, to the bidders. Payment timelines were expressly decoupled from completion of title-transfer formalities. Thus, the existence of State Tax attachment did not legally suspend or condition the obligation to pay under Schedule I, Rule 12.

2.21 Referring to V.S. Palanivel, the Court held that Rule 12 (timelines and interest/cancellation consequence) is not contingent on removal of encumbrances or completion of procedures under Rule 13. The inability to immediately execute a conveyance deed due to attachment does not negate or postpone the obligation to pay within the statutory schedule.

Conclusions

2.22 The attachment of the land by the State Tax Department and the Liquidator's temporary inability to execute a registered sale deed did not relieve the auction purchaser from complying with the statutory payment schedule under Schedule I, Rule 12.

2.23 The contention that no obligation to pay arose until lifting of the attachment was rejected in view of the auction's express "as is where is" terms and the clear separation between payment schedule and transfer process.

2.24 The Court held that the Adjudicating Authority erred in reasoning that because the Liquidator could not then convey title due to attachment, the purchaser could not be compelled to pay the balance or interest.

Issue 4 - Applicability of Section 51, Indian Contract Act, 1872 and reciprocal promises

Legal framework

2.25 The auction purchaser invoked Section 51 of the Indian Contract Act, 1872, arguing that, in the absence of performance of reciprocal promises by the promisee (Liquidator's ability to convey title free of attachment), the promisor (purchaser) was not bound to perform its obligation to pay. Reliance was placed on Nathulal v. Phoolchand, Sikkim Subba Associates v. State of Sikkim, and a Delhi High Court decision in I.C.M. Airport Technics v. International Airports Authority of India.

Interpretation and reasoning

2.26 The Court distinguished these precedents as arising from conventional contractual disputes (including those under the Arbitration Act, 1940) where contractual covenants and sequences of reciprocal obligations governed performance.

2.27 It held that the instant matter concerns sale of liquidation assets governed by the Insolvency and Bankruptcy Code, 2016 and the IBBI (Liquidation Process) Regulations, 2016. The payment obligations and timelines of an auction purchaser in liquidation are primarily statutory and regulatory in character, not purely contractual.

2.28 The Tender Document expressly subjected the sale to the provisions of the IBC and Liquidation Process Regulations, and clearly stipulated that the transfer process is independent and will not affect the payment schedule. Therefore, the premise that the Liquidator's ability to convey clear title was a reciprocal condition precedent to the purchaser's payment obligation was inconsistent with the governing statutory and tender terms.

Conclusions

2.29 Section 51 of the Indian Contract Act and the doctrine of reciprocal promises do not apply in the manner contended so as to suspend or negate the statutory obligation to pay balance consideration with interest under Schedule I, Rule 12.

2.30 The authorities cited on reciprocal promises and contractual sequencing do not assist the auction purchaser in the context of a liquidation sale conducted under the IBC framework and binding Tender Document clauses.

Overall determination on interest liability

2.31 The auction purchaser was liable to pay 12% interest on the balance sale consideration for the period starting after the expiry of 30 days from 29.12.2022 up to 15.06.2023, when the Adjudicating Authority first granted extension of time.

2.32 For the period during which the extension order dated 15.06.2023 operated, the obligation to pay balance consideration stood deferred by judicial order; consequently, interest for that extended period stands waived.

2.33 The direction of the Adjudicating Authority fully exonerating the auction purchaser from payment of interest on the balance consideration was set aside and substituted with a limited direction that the auction purchaser must pay 12% interest on the balance sale consideration for the period after 30 days from 29.12.2022 until 15.06.2023, to be paid within two weeks, while the remainder of the impugned order was left undisturbed.

Issues: (i) Whether the alleged contravention relating to overseas investment under the remittance scheme was made out. (ii) Whether the penalty imposed for holding foreign exchange abroad required interference on the ground of proportionality. (iii) Whether lending in foreign exchange to an overseas company without prior approval of the Reserve Bank of India was permissible.

Issue (i): Whether the alleged contravention relating to overseas investment under the remittance scheme was made out.

Analysis: The remittances were found to have been made within the permissible limit under the Liberalised Remittance Scheme and the subsequent investment in shares of an overseas company was treated as permissible under the relevant RBI circular. The record did not show breach of the FEMA framework on this count.

Conclusion: The alleged contravention was not sustained and was correctly dropped.

Issue (ii): Whether the penalty imposed for holding foreign exchange abroad required interference on the ground of proportionality.

Analysis: The foreign exchange remained held abroad without the requisite permission for a prolonged period. The penalty was imposed after considering the disclosure, later repatriation, and tax settlement, and was assessed at about ten per cent of the contravened amount. No perversity or illegality was found in the quantum.

Conclusion: The penalty did not call for interference and was upheld.

Issue (iii): Whether lending in foreign exchange to an overseas company without prior approval of the Reserve Bank of India was permissible.

Analysis: The claimed support from the Liberalised Remittance Scheme and permissive capital account transaction provisions was rejected. The specific regulatory prohibition on lending in foreign exchange to a foreign company without RBI approval was held to prevail, and the saving clause did not override that restriction.

Conclusion: The contravention was sustained and the penalty was upheld.

Final Conclusion: The common order of the Adjudicating Authority was affirmed in substance, with no ground made out for reduction or interference, and the cross-appeals failed.

Ratio Decidendi: A resident individual cannot rely on the Liberalised Remittance Scheme or general capital account permissions to justify lending in foreign exchange to a foreign company where the specific FEMA borrowing and lending regulation requires prior Reserve Bank approval.

Issues: (i) Whether a discharge certificate issued under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 barred the Revenue from issuing show cause notices demanding further interest for the same matter and period. (ii) Whether a declaration filed under the wrong category in the scheme could be corrected so that the declarant was not denied the scheme benefit.

Issue (i): Whether a discharge certificate issued under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 barred the Revenue from issuing show cause notices demanding further interest for the same matter and period.

Analysis: The amount of tax dues had been quantified before the cut-off date and the petitioner had thereafter paid the amount determined under the scheme. Once Form SVLDRS-4, the discharge certificate, was issued, the statutory scheme treated it as conclusive of the matter and the time period covered by the declaration. The scheme expressly provided that the declarant would not be liable to pay any further duty, interest or penalty in respect of the covered matter, and that the matter could not be reopened in other proceedings. The later notices demanding interest were therefore inconsistent with the finality attached to the discharge certificate and with the object of the scheme.

Conclusion: The subsequent show cause notices demanding interest for the covered period were unsustainable and were liable to be set aside.

Issue (ii): Whether a declaration filed under the wrong category in the scheme could be corrected so that the declarant was not denied the scheme benefit.

Analysis: The record showed that the petitioner had been eligible under the enquiry, investigation or audit category, and the quantification had already occurred before the statutory cut-off date. Filing the declaration under the arrears category was an inadvertent mistake and did not alter the underlying eligibility. The scheme and the relevant provision permitting rectification of clerical errors supported correction of such mistakes where the substantive entitlement was otherwise clear. Denial of relief merely because of the wrong category entry would defeat the beneficial object of the scheme.

Conclusion: The petitioner was entitled to have the declaration considered under the correct category, and the mistaken filing did not defeat the scheme benefit.

Final Conclusion: The petition succeeded, the scheme discharge was given full effect, and the Revenue was directed not to pursue further demand inconsistent with the settlement already concluded under the scheme.

Ratio Decidendi: A discharge certificate issued under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 is conclusive for the covered matter and period, and once issued it bars further duty, interest or penalty proceedings for that matter; an apparent clerical or categorisation error in the declaration cannot be used to defeat an otherwise vested statutory benefit under the scheme.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether incentives received from media houses on achievement of advertisement revenue targets are liable to service tax as "business auxiliary service" or as a "declared service" under Section 66E(e) of the Finance Act, 1994.

1.2 Whether, in light of the statement of the Respondent's Manager (Finance) regarding target-based incentive agreements with media houses, the incentives constitute consideration for an independent taxable service rendered to media houses.

1.3 Whether, in the presence of concurrent factual findings of the Adjudicating Authority and the Tribunal, any substantial question of law arises warranting interference under Section 35G of the Central Excise Act, 1944.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Taxability of incentives as "business auxiliary service" / "declared service" under Section 66E(e), and effect of target-based incentive agreements

Legal framework

2.1 The Court recorded that selling of space slots for advertisements in print media is non-taxable under Section 66D(g) of the Finance Act, 1994, while service tax is otherwise discharged on advertising services/broadcasting where applicable.

2.2 The Department alleged that incentives received for achieving targets constituted "business promotion" of media owners and were taxable as "business auxiliary service", and further as a "declared service" under Section 66E(e) ("agreeing to the obligation to refrain from an act, or to tolerate an act or situation, or to do an act").

2.3 The Court referred to Circular No. 214/1/2023-Service Tax dated 28.02.2023 clarifying that Section 66E(e) covers contractual arrangements where one party agrees, expressly or impliedly, to do or abstain from doing something, and the other agrees to pay consideration, with a necessary and sufficient nexus between such agreement and the consideration, and that the arrangement must be an independent contract in its own right.

2.4 The Court also relied on decisions interpreting Section 66E(e), including the view that a "service" requires an activity carried out by one person for another for consideration, and that "declared service" under Section 66E(e) must involve an agreement to refrain, tolerate, or do an act as a distinct obligation.

Interpretation and reasoning

2.5 The business model was found to be that of an advertising agency acting for its clients (advertisers), placing advertisements in print and electronic media, charging commission from clients, and already discharging service tax on such commission. Incentives from media houses were paid on achievement of turnover/volume targets.

2.6 Both the Adjudicating Authority and the Tribunal held that, in respect of incentives, no service was being rendered by the advertising agency to media houses; media houses were providing "space booking services" to the agency, and incentives/discounts were not consideration for any separate service to the media houses.

2.7 The Tribunal found that there was no agreement between the advertising agency and media houses under which the agency was obliged to meet any specific target or under which media houses were bound to provide incentives/discounts. The agency's clients were the advertisers; clients approved media plans; and the agency had no discretion to channel advertisements to particular media houses for the purpose of fulfilling any contractual obligation towards them.

2.8 The Department relied on the statement of the Manager (Finance) that the agency "had agreement with various print media and broadcasting media for achieving the revenue target" and, by signing "such agreements", abided by terms and conditions including revenue targets, and that incentives were received on fulfillment of such specified targets and were not passed on to advertisers.

2.9 The Court held that even assuming existence of such target-based incentive arrangements, achieving targets or revenue benchmarks formed part of the normal performance of advertising services already rendered on behalf of clients and did not amount to any "additional service" rendered to media houses.

2.10 The Court held that incentives paid by media houses for achieving business volume are not consideration for any independent activity of "business promotion" of media owners, but arise from the agency's own business operations and performance for its clients.

2.11 On the scope of Section 66E(e), the Court emphasized that:

(a) The provision has three components: (i) agreeing to refrain from an act, (ii) agreeing to tolerate an act or a situation, (iii) agreeing to do an act.

(b) All three limbs presuppose a contract where the service provider agrees to a specific obligation to do or abstain from doing something and receives consideration specifically for that obligation.

2.12 Applying the Circular and case law, the Court found no independent contractual arrangement under which the advertising agency expressly or impliedly agreed, in its own right, to refrain, tolerate, or do any act vis-à-vis media houses in consideration of incentives; the operative contracts with media houses were entered into for and on behalf of the agency's clients.

2.13 The Court noted that the agency was rendering services to its advertisers/clients, not to media houses, and that there was no separate obligation owed to the media houses beyond what was agreed by the clients. Thus, the necessary contractual nexus for "declared service" under Section 66E(e) was absent.

2.14 By analogy, the Court referred to the precedent holding that incentives or target-based payments to intermediaries (such as air travel agents for using central reservation systems) are not "business auxiliary service", and that incentives for achieving targets are not leviable to service tax where the intermediary is essentially promoting its own business or providing its classified main service.

Conclusions

2.15 Incentives received from media houses on achievement of advertisement revenue/volume targets do not constitute consideration for "business auxiliary service" rendered to media houses.

2.16 Such incentives also do not fall within "declared service" under Section 66E(e) of the Finance Act, 1994, as there is no independent contractual obligation by the advertising agency to refrain from an act, tolerate an act/situation, or do an act for the media houses for consideration.

2.17 No additional or separate service is rendered by the advertising agency to the media houses over and above the advertising services rendered to its clients; hence, the incentives are not susceptible to levy of service tax.

Issue 3: Existence of substantial question of law and interference with concurrent findings

Interpretation and reasoning

2.18 The Court noted that the Adjudicating Authority, by the Order-in-Original, had dropped the service tax demand on incentives, holding that no taxable service was rendered to media houses in respect of incentives, and that media houses themselves confirmed that the agency was not rendering any taxable service to them.

2.19 The Tribunal, as the final fact-finding authority, upheld the Order-in-Original, affirming that there was no agreement imposing an obligation on the agency towards media houses, nor an obligation on media houses to pay incentives, and that Section 66E(e) was inapplicable.

2.20 The Court held that these findings on the nature of the business relationship, absence of an independent contractual obligation, and characterization of incentives were concurrent and factual.

2.21 In view of the legal position applied to those established facts, the Court found no substantial question of law arising for consideration under Section 35G of the Central Excise Act, 1944.

Conclusions

2.22 The concurrent findings of the Adjudicating Authority and the Tribunal that incentives are not liable to service tax as "business auxiliary service" or under Section 66E(e) do not warrant interference in appeal.

2.23 No substantial question of law arises; the appeal is not maintainable and is liable to be dismissed.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the consideration retained by a hospital under revenue-sharing arrangements with independent doctors/consultants for treating OPD/IPD patients is liable to service tax under "Business Support Services" or constitutes exempt "Health Care Services".

1.2 Whether the extended period of limitation could be validly invoked for demand of service tax on such activities, and if not, whether any demand for the normal period can survive when the show cause notice is founded on the extended period.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Taxability of hospital's retained share as "Business Support Services" or exempt "Health Care Services"

(a) Legal framework (as discussed by the Tribunal)

2.1 The Tribunal referred to the statutory entry for "Business Support Services" which covers services "provided in relation to business or commerce", and to the distinction between "business" and "profession" as recognized in judicial precedents.

2.2 The Tribunal relied on the exemption for "health care services" provided by "clinical establishments" under the service tax law, particularly as analysed in earlier decisions. It adopted the definitions of "clinical establishment" and "health care services" as set out in Notification No. 25/2012-ST, namely:

2.2.1 "Clinical establishment" includes any hospital, nursing home, clinic, sanatorium or other institution offering services or facilities requiring diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy, or an entity established to carry out diagnostic or investigative services of diseases.

2.2.2 "Health care services" means any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicine, including transportation of patients to and from a clinical establishment, with specified exclusions for certain cosmetic or plastic surgery.

(b) Interpretation and reasoning

2.3 The Tribunal noted that the hospital was providing health services to patients on its own and through independent doctors/consultants engaged on a revenue-sharing basis. Under these arrangements, fees were collected from patients by the hospital and a percentage was shared with the doctors/consultants, with the hospital retaining the balance.

2.4 Following its earlier decision in a substantially identical matter, the Tribunal endorsed the reasoning that such revenue-sharing arrangements represent a joint, mutually beneficial arrangement between the hospital and doctors, with shared obligations, responsibilities, and benefits.

2.5 The Tribunal observed that the agreements/arrangements were primarily for providing medical consultation, procedures, and surgeries to patients, and did not specifically identify or quantify any distinct "infrastructural support" or business support element rendered by the hospital to the doctors.

2.6 It was held that the inference drawn by the Revenue-that the hospital's retained portion of patient charges constituted consideration for infrastructural or business support to doctors-was not supported by the terms of the arrangements and was only an assumption.

2.7 The Tribunal emphasized that hospitals are engaged in providing health care services and may do so either through employed doctors or through contractual arrangements with independent consultants. In both cases, the essential activity is the provision of health care services to patients by the clinical establishment.

2.8 The Tribunal adopted the reasoning that, in such arrangements, the hospital avails the professional services of doctors for providing health care to patients, collects charges from patients for such health care services, and shares those charges with the doctors. The amount retained by the hospital is still part of the consideration for the exempt health care services rendered to patients, not a separate consideration for providing business support to the doctors.

2.9 Referring to judicial analysis distinguishing "business" from "profession", the Tribunal held that doctors are engaged in a profession and not in "business or commerce"; accordingly, services provided to them cannot be regarded as "Business Support Services" "in relation to business or commerce".

2.10 The Tribunal further held that, under the exemption regime, clinical establishments providing health care services are exempt from service tax. To treat a part of the consideration received from patients for such health care services as taxable "Business Support Services" would effectively defeat the legislative intent and scope of the exemption granted to health care services.

2.11 The Tribunal found no legal or factual basis to treat the hospital's share of the patient charges as consideration for any taxable business support to the doctors, either prior to or after the introduction of the negative list, when health care services by clinical establishments were exempt.

(c) Conclusions

2.12 The Tribunal concluded that the services rendered by the hospital under the revenue-sharing arrangements with doctors/consultants are "Health Care Services" provided by a "clinical establishment" and are exempt from service tax.

2.13 The Tribunal held that no taxable "Business Support Services" are involved in such arrangements and that the hospital's retained portion of the charges collected from patients cannot be subjected to service tax under the category of "Business Support Services".

2.14 Consequently, the demand of service tax, interest and penalties confirmed under the impugned order on this ground was held to be unsustainable.

Issue 2: Validity of invoking the extended period of limitation and effect on demand for normal period

(a) Legal framework (as discussed by the Tribunal)

3.1 The Tribunal proceeded on the well-settled legal requirement that invocation of the extended period of limitation for service tax demands requires proof of elements such as fraud, suppression of facts or wilful misstatement with intent to evade tax.

3.2 The Tribunal relied on the ratio of a High Court decision (as endorsed by the Supreme Court in Alcobex Metals) holding that when a show cause notice is issued invoking the extended period and such invocation fails, the notice cannot be treated as within limitation even for the normal period in respect of the same transactions.

(b) Interpretation and reasoning

3.3 The Tribunal observed that the dispute in the present case pertained to the interpretation and classification of services rendered by hospitals under revenue-sharing arrangements with doctors, an issue that had arisen pan India and had been the subject of several decisions of the Tribunal and Courts in favour of hospitals.

3.4 In these circumstances, the Tribunal held that there was no basis to allege fraud, suppression of facts or wilful misstatement by the hospital so as to justify the invocation of the extended period of limitation.

3.5 The Tribunal specifically recorded that the department had not established any of the statutory ingredients required for invoking the extended period of limitation.

3.6 Referring to the High Court decision in Infinity Infotech Parks Ltd., the Tribunal held that where a show cause notice is issued covering a period only by resort to the extended limitation and the extended period is found to be not invocable, the notice cannot survive even for the normal period embedded within the same notice.

3.7 The Tribunal noted that the principle laid down is that once the very foundation of the notice-invocation of the extended period-fails, the demand for the normal period based on the same notice and same set of transactions is also rendered invalid.

(c) Conclusions

3.8 The Tribunal held that the extended period of limitation was not invocable in the facts of the case, as the dispute turned on interpretation and there was no suppression or intent to evade.

3.9 Applying the binding precedents, the Tribunal further held that once the invocation of the extended period fails, the demand for the normal period founded on the same show cause notices also cannot be sustained.

3.10 On this independent ground as well, the entire service tax demand, including interest and penalties, was held to be unsustainable.

3.11 Both appeals were allowed and the impugned order was set aside in toto.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether amounts received as "net incentive" and "support and other receipt" for advertising, promotion and marketing of beverages bearing the PEPSI brand are liable to service tax under "Business Auxiliary Service" under section 65(19)(ii) of the Finance Act, 1994.

1.2 Whether the judgment concerning availment of CENVAT credit on advertisement services in relation to aerated waters is applicable for determining liability under "Business Auxiliary Service" in the present case.

1.3 Whether promotion of a client's brand name/trademark, in the factual matrix of this case, is covered by the definition of "Business Auxiliary Service" prior to and after insertion of a specific taxable entry for brand promotion service.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Service tax liability on "net incentive" and "support and other receipt" under Business Auxiliary Service

Legal framework (as discussed)

2.1 The Tribunal, through the Larger Bench order referred to and relied on, examined section 65(19)(ii) of the Finance Act, 1994, defining "Business Auxiliary Service" as any service in relation to promotion or marketing of goods produced or provided by or belonging to the client.

Interpretation and reasoning

2.2 The client in the present arrangement is Pepsi Foods, which produces "concentrates", while the appellant manufactures "aerated water" using such concentrate as a raw material.

2.3 The definition of "Business Auxiliary Service" in section 65(19)(ii) does not employ the phrase "directly or indirectly", nor does it refer to promotion/marketing of inputs or raw materials used by the service provider. It contemplates promotion or marketing of goods produced or provided by or belonging to the client.

2.4 The promotion schemes and advertisements undertaken by the appellant related to aerated water and beverages manufactured by the appellant, and did not relate to "concentrates" manufactured by Pepsi Foods.

2.5 The departmental stand that advertisement of aerated water indirectly enhances the sale of concentrates, and therefore constitutes BAS rendered to Pepsi Foods, was held to be too farfetched and not supported by the language of section 65(19)(ii).

2.6 The Larger Bench, after reviewing similar bottler agreements and consistent Tribunal precedents (including Superior Drinks, Narmada Drinks, Brindavan Bottlers, Wave Beverages, Kandhari Beverages, Ludhiana Beverages and Beltek Canadian Water), found that receipt of incentives for advertising, promoting and marketing the brand did not amount to BAS provided to the concentrate manufacturer.

2.7 It was further held that the appellant undertook marketing and promotion essentially on its own account for its own products, with financial support from Pepsi Foods, and not as a service "for" Pepsi Foods in the sense required under BAS.

Conclusions

2.8 Amounts received as "net incentive" and "support and other receipt" for advertising, promotion and marketing of beverages bearing the PEPSI brand are not consideration for "Business Auxiliary Service" to Pepsi Foods under section 65(19)(ii).

2.9 The demand of service tax, interest and penalties on such receipts under BAS is unsustainable and liable to be set aside.

Issue 2 - Applicability of the judgment on input service credit (Coca Cola) to BAS liability

Legal framework (as discussed)

2.10 The Larger Bench examined rule 2(l) of the CENVAT Credit Rules, 2004, defining "input service", particularly clause 2(l)(ii), which covers services used directly or indirectly, in or in relation to manufacture of final products and includes "advertisement or sales promotion" and "activities relating to business".

2.11 The Bombay High Court in Coca Cola considered whether advertisement and sales promotion of aerated waters by a manufacturer of "concentrates" qualified as "input service" to allow CENVAT credit of service tax paid on such advertisement.

Interpretation and reasoning

2.12 The High Court's reasoning turned on the wide, inclusive definition of "input service", particularly the expressions "directly or indirectly" and "activities relating to business", enabling credit when advertisement of aerated water indirectly promoted the sale of concentrates.

2.13 By contrast, the definition of "Business Auxiliary Service" in section 65(19) contains no similar language ("directly or indirectly", "activities relating to business") and is more restrictive, requiring that the service be in relation to promotion or marketing of goods produced or provided by or belonging to the client.

2.14 The issue in Coca Cola concerned eligibility to CENVAT credit for the person incurring advertisement expense, not liability to pay service tax by treating another entity's promotional activity as BAS. Hence, the factual and legal contexts were distinct.

2.15 Several Tribunal decisions in analogous bottler cases had already distinguished Coca Cola in the BAS context, holding that its rationale, derived from the specific wording of rule 2(l), could not be extended to impose BAS liability.

Conclusions

2.16 The judgment relating to input service credit on advertisement in respect of aerated waters has no application to determine BAS liability in the present case.

2.17 The earlier Tribunal decision in favour of the appellant, holding that BAS demand is not sustainable, does not require reconsideration in light of Coca Cola.

Issue 3 - Coverage of brand/trademark promotion within BAS and effect of specific brand promotion entry

Legal framework (as discussed)

2.18 The Larger Bench noted that section 65(19) does not cover promotion of brand name or trademark of a client.

2.19 Brand promotion service was made taxable separately with effect from 01.07.2010 under section 65(105)(zzzzq) of the Finance Act.

2.20 Reference was made to the principle laid down by the Bombay High Court in Indian National Shipowners' Association that introduction of a new taxable entry, specifically covering certain services, presupposes that such services were not covered under earlier entries.

Interpretation and reasoning

2.21 The activities for which the appellant received incentives were found to be advertising, promoting and marketing the PEPSI trademark/brand name.

2.22 Since section 65(19) did not, by its text, encompass promotion of a client's brand name or trademark, such activities could not be brought within BAS merely because they might incidentally support the client's business.

2.23 The later specific entry taxing brand promotion indicated that, prior to its introduction, such services were not envisaged within existing categories like BAS, and the new entry was not a mere carve-out or clarification of BAS.

Conclusions

2.24 Promotion of the PEPSI brand name/trademark for which "net incentive" and "support and other receipt" were paid is not covered by the definition of BAS under section 65(19).

2.25 In light of the Larger Bench's analysis and the earlier final order in the appellant's own case, the impugned order confirming BAS demand is unsustainable and is set aside, and the appeal is allowed.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the job work / conversion activity undertaken for manufacture of medicaments for a principal, on raw materials supplied by the principal, amounts to "manufacture" under Section 2(f) of the Central Excise Act, 1944 and is consequently excluded from levy of service tax under Section 66D(f) of the Finance Act, 1994.

1.2 Whether the consideration received for such activity can be classified and taxed as "Business Auxiliary Service" or any other taxable service in the absence of a specific service identified in the show cause notice and order.

1.3 Whether the mere description of income as "service income" in audited financial statements and its non-reflection in ST-3 returns is sufficient to sustain a service tax demand, interest and penalty, when the underlying activity is alleged to be manufacture and already subjected to central excise duty.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Characterisation of job work / conversion activity as "manufacture" and impact of negative list

Legal framework

2.1 The Court noted that the activity in question involves manufacture of medicaments on behalf of a principal using raw materials supplied by the principal, with clearance of finished goods on payment of applicable central excise duty. Such processes fall within "manufacture" as defined in Section 2(f) of the Central Excise Act, 1944.

2.2 The Court referred to Section 66D(f) of the Finance Act, 1994, which places "any process amounting to manufacture or production of goods" in the negative list, thereby excluding it from the levy of service tax.

Interpretation and reasoning

2.3 It was found as a matter of fact that the appellant manufactures medicaments for the principal under a contractual arrangement, using inputs supplied by the principal, and clears the final products on payment of central excise duty. These facts were not in dispute and had been accepted earlier in an appellate order dropping a similar demand on the basis of the same agreement.

2.4 The Tribunal relied on its earlier decision in Pharmanza India Pvt. Ltd., where it was held that production of goods on behalf of a client, when such activity amounts to manufacture in terms of Section 2(f) of the Central Excise Act, is excluded from the ambit of service tax and cannot be taxed as "Business Auxiliary Service".

2.5 The Tribunal also referred to the decision in Midas Care Pharmaceuticals, reiterating that an activity amounting to manufacture under Section 2(f) cannot simultaneously be regarded and taxed as a service, and that this position is supported by the CBEC Circular F.No.249/1/2006-CX-4 dated 27.10.2008, which clarifies that no service tax is leviable on such manufacturing/job work activities.

2.6 On these authorities and admitted facts, the Court held that the appellant's activity is a process amounting to manufacture and squarely falls within the negative list entry under Section 66D(f), making it non-taxable under the service tax law.

Conclusions

2.7 The job work / conversion activity undertaken by the appellant for the principal constitutes "manufacture" under Section 2(f) of the Central Excise Act, 1944.

2.8 Being a process amounting to manufacture, it is expressly covered by Section 66D(f) of the Finance Act, 1994 and is not liable to service tax.

Issue 2 - Classification as "Business Auxiliary Service" or other taxable service

Legal framework

2.9 The Tribunal referred to the statutory definition of "business auxiliary service" in Section 65(19) of the Finance Act, 1994, particularly sub-clause (v) ("production of goods on behalf of the client"), and the exclusion therein of "any activity that amounts to 'manufacture' within the meaning of clause (f) of section 2 of the Central Excise Act, 1944".

Interpretation and reasoning

2.10 Drawing from Pharmanza India Pvt. Ltd., the Tribunal reaffirmed that only those production activities which do not amount to "manufacture" under Section 2(f) can be taxed as "production of goods on behalf of the client" under "Business Auxiliary Service". If the activity is manufacture, it is expressly carved out from the definition and cannot be subjected to service tax under that head.

2.11 It was observed that in the present matter, the demand was raised solely based on the accounting classification of the receipts as "service income" in the audited financial statements, without cogent examination of the nature of the underlying activity and without identifying any specific taxable service category properly applicable to the transaction.

2.12 The Tribunal noted that in view of the admitted facts of manufacture and excise payment, and in line with its earlier decisions and the CBEC circular, the manufacturing activity could not be re-characterised as a taxable service, whether under "Business Auxiliary Service" or any other service category.

Conclusions

2.13 The consideration received by the appellant for the manufacturing / job work activity cannot be classified as "Business Auxiliary Service" or any other taxable service.

2.14 The service tax demand premised on such classification is unsustainable in law.

Issue 3 - Effect of accounting description and alleged non-disclosure in ST-3 returns

Interpretation and reasoning

2.15 The demand was founded on the premise that income shown as "service income" in audited financials but not declared in ST-3 returns represented taxable service receipts suppressed with intent to evade tax.

2.16 The Tribunal held that the mere nomenclature "service income" in accounts, without regard to the true nature of the activity, cannot override the legal characterisation of the underlying transaction as manufacture, particularly when central excise duty is paid and the process meets the statutory definition in Section 2(f) of the Central Excise Act.

2.17 Since the core activity itself is not liable to service tax by virtue of its character as manufacture and its coverage under the negative list, no demand of service tax, interest or penalty can be sustained merely on the basis of mismatch between financial statements and ST-3 returns.

Conclusions

2.18 The description of receipts as "service income" in the balance sheet and their non-reflection in ST-3 returns, when the underlying activity is manufacture, does not justify levy of service tax.

2.19 The service tax demand of Rs. 6,11,53,520/-, along with interest and penalty, was set aside, and the appeal was allowed with consequential relief.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether construction services provided for individual residential houses for economically weaker section (EWS) and low-income group (LIG) under work orders of a housing board are exempt from service tax under the relevant exemption notification.

1.2 Whether refund of service tax, including both the portion paid by the contractors and the portion paid by the housing board under reverse charge mechanism but deducted from contractors' bills, is barred by the doctrine of unjust enrichment.

1.3 Whether the limitation prescribed under section 11B of the Central Excise Act, 1944 applies to refund of service tax paid by mistake on exempt construction services, and whether the amounts so paid constitute "tax" or "revenue deposit."

1.4 Whether the assessees are entitled to interest on the refunded amount and, if so, at what rate.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Taxability / Exemption of Construction of Individual Residential Houses

Legal framework

2.1 The Tribunal referred to prior decisions interpreting section 65(105)(zzzh), section 65(30a) and section 65(91a) of the Finance Act, 1994 relating to "construction of complex" and "residential complex," as well as the exemption under Notification No. 25/2012-ST dated 20.06.2012 exempting services by way of construction of a single residential unit otherwise than as a part of a residential complex.

2.2 Earlier decisions, including those cited from the order in S.P. Builders and related cases, held that:

(a) "Residential complex" means a complex comprising a building or buildings having more than 12 residential units (prior to 01.07.2012); and

(b) Independent residential houses/blocks having 12 or fewer units in a building are outside the scope of "residential complex" and hence not liable under "construction of complex" service; and post 01.07.2012, exemption applies for a single residential unit otherwise than as part of a residential complex.

Interpretation and reasoning

2.3 The Tribunal relied on its earlier final order in S.P. Builders, which had examined the same statutory definitions and held that construction of individual/independent residential houses, each being a separate residential unit and not constituting a "residential complex" as defined, is not exigible to service tax. That view was also supported by multiple precedents (Macro Marvel Projects, Lakhlan & Qureshi, Beriwal Constructions, Quality Builders, A.S. Sikarwar) and affirmed by higher courts.

2.4 It was noted that, post 01.07.2012, though "construction of complex" became a declared service, the exemption notification exempted construction of a single residential unit otherwise than as part of a residential complex. On identical facts in S.P. Builders, benefit of Notification No. 25/2012-ST had been extended.

2.5 In the present matters, the appellants had constructed individual residential houses for EWS/LIG for the housing board, and such activity matched the factual and legal scenario considered in S.P. Builders.

Conclusions

2.6 The services in question, being construction of individual/independent residential houses for EWS/LIG and not forming part of a taxable "residential complex," were exempt from service tax under Notification No. 25/2012-ST; hence, the tax collected on such services was not legally payable.

Issue 2: Unjust Enrichment and Eligibility to Refund of Both Portions of Tax

Legal framework

2.7 The Tribunal examined the principle that refund is barred where the incidence of tax has been passed on to another person (unjust enrichment). It referred to the decision of a High Court (Indian Farmers Fertilizers Coop. Ltd.) which held that refund can be claimed by a person who has borne the incidence of tax.

Interpretation and reasoning

2.8 As per the work orders, service tax liability was contractually to be borne by the contractors. Under the reverse charge mechanism, the housing board paid its portion of service tax but deducted that amount from the contractors' running bills.

2.9 The Tribunal found, on facts, that the entire service tax - both the portion directly deposited by the contractors and the portion deposited by the housing board under reverse charge - had in substance been borne by the appellants, because the housing board's share was recovered from the amounts payable to the contractors. A Chartered Accountant's certificate to this effect was placed on record.

2.10 The Tribunal distinguished the decision relied on by Revenue (Nahar Singh Contractor) on factual grounds: in that case, the refund claim was filed 5½ years after the Tribunal's order, the appellant failed to establish that the houses were not part of any apartment/township, and there was no evidence of non-passing on of the tax, leading to application of limitation and unjust enrichment. In the present appeals, refund claims were filed within five years, and sufficient evidence showed that the incidence of tax was borne by the appellants.

2.11 Relying on S.P. Builders and similar cases, the Tribunal reiterated that where the contract stipulates that service tax is to be borne by the contractor and the service recipient recovers even the reverse charge portion from the contractor, the incidence of the entire tax is on the contractor who is then entitled to refund.

Conclusions

2.12 The incidence of the entire service tax (both directly paid and reverse-charge portion) was borne by the appellants. The bar of unjust enrichment does not apply.

2.13 The appellants are entitled to refund of both portions of service tax - that paid directly by them and that paid by the housing board but deducted from their bills.

Issue 3: Applicability of Section 11B Limitation to Tax Paid by Mistake on Exempt Services

Legal framework

2.14 The Tribunal considered section 11B of the Central Excise Act, 1944, which prescribes a limitation period and procedure for refund of "duty of excise" (made applicable to service tax), and the judicial position as laid down by the Karnataka High Court in KVR Constructions, affirmed by the Supreme Court, and followed by another High Court (Tripura Cricket Association).

2.15 The Tribunal also relied on its own decisions, including Credible Engineering Construction, S.P. Builders, Meenu Builders, and Gajendra Singh Sankhla, where it had been held that payments made under a mistaken notion for amounts not legally exigible as tax are to be regarded as deposits, not as "duty/tax," and hence outside the purview of section 11B.

Interpretation and reasoning

2.16 Following KVR Constructions, the Tribunal noted that section 11B governs refund of "duty of excise" and not other amounts collected without authority of law. Where, due to exemption, the department had no authority to levy or collect service tax on the transaction, any amount paid under a mistaken belief cannot be treated as tax/duty for the purpose of section 11B.

2.17 The Tribunal reiterated that:

(a) If the services in question were exempt and not legally taxable, any amount paid as "service tax" thereon was not a duty/tax but a deposit.

(b) Mere payment by the assessee and acceptance by the department does not convert an otherwise non-exigible amount into lawful "tax."

(c) Consequently, the statutory limitation and procedural requirements under section 11B for refund of duty do not apply to such deposits.

2.18 In Meenu Builders and Gajendra Singh Sankhla, after analyzing KVR Constructions and distinguishing Mafatlal Industries and other authorities cited by Revenue, the Tribunal had held that where service tax was paid purely under mistake of law on exempt services, the payments are to be treated as revenue deposits, and limitation under section 11B and interest regime under section 11BB are inapplicable.

2.19 Applying the above reasoning, the Tribunal held in the present matters that the service tax had been paid by mistake on exempt construction services; thus, the payments were deposits and not service tax, and section 11B could not be invoked to reject the refund as time-barred.

Conclusions

2.20 The amounts paid as "service tax" on the exempt construction of individual EWS/LIG houses were not legally exigible and constitute deposits with the government, not tax.

2.21 The limitation provisions of section 11B of the Central Excise Act, 1944 do not apply to such deposits; accordingly, the refund claims are not barred by limitation on the basis of section 11B.

Issue 4: Entitlement to Interest on Refund and Applicable Rate

Legal framework

2.22 The Tribunal considered its prior decisions, including Meenu Builders, Gajendra Singh Sankhla, and Indus Towers Limited, which addressed interest on refunds in cases where tax was paid by mistake and section 11B/11BB was held inapplicable.

Interpretation and reasoning

2.23 In Meenu Builders and Gajendra Singh Sankhla, after holding that payments of service tax made under mistake of law on exempt services are outside section 11B, the Tribunal concluded that section 11BB (which governs interest on delayed refund of "duty") and Notification No. 67/2003-CE (NT) concerning the rate of interest under that regime do not apply.

2.24 In those cases, relying inter alia on Indus Towers Limited, the Tribunal granted interest at 12% per annum on delayed refunds where the department had retained amounts which were only deposits and not legally payable tax.

2.25 Applying the same reasoning, the Tribunal held in the present matters that, as section 11B and 11BB are inapplicable, interest must nevertheless be paid on delayed refund of deposits, and following the established precedent, the appropriate rate is 12% per annum.

Conclusions

2.26 The appellants are entitled to interest on the refunded amounts, as the sums were revenue deposits wrongly retained by the department.

2.27 Consistent with prior decisions (including Indus Towers Limited, Meenu Builders, and Gajendra Singh Sankhla), interest is payable at the rate of 12% per annum on the refunded amounts.

Overall Dispositive Conclusions

2.28 The construction of individual EWS/LIG residential houses under the housing board's work orders was exempt from service tax under the applicable notification; tax paid thereon was not legally due.

2.29 The entire incidence of the purported service tax, including the reverse-charge portion deposited by the housing board after deduction from the contractors' bills, was borne by the appellants; thus, refund is not hit by unjust enrichment.

2.30 The payments made were in the nature of deposits consequent to mistake of law, not "tax/duty," and section 11B limitation does not apply; the refund claims are therefore not time-barred under section 11B.

2.31 The appellants are entitled to refund of the full amount paid by them and by the service recipient (recovered from their bills), together with interest at 12% per annum; the impugned orders rejecting the refund claims are set aside with consequential relief.

Issues: Whether the demand of 6% of the value of electricity sold, generated from bagasse and other by-products, could be sustained under Rule 6(3)(i) of the CENVAT Credit Rules, 2004.

Analysis: The issue was treated as covered by an earlier Tribunal order holding that electricity generated from bagasse, a waste or by-product, could not be subjected to a demand of 6% under Rule 6(3)(i). On that basis, the impugned demand was found unsustainable.

Conclusion: The demand under Rule 6(3)(i) of the CENVAT Credit Rules, 2004 was held not sustainable, and the appeals were allowed in favour of the assessee.

Issues: Whether, on expiry of the arbitral mandate under Section 29A of the Arbitration and Conciliation Act, 1996, the Court was required to substitute the sole arbitrator instead of extending his mandate.

Analysis: Section 29A is a remedial provision designed to secure expeditious conclusion of arbitral proceedings. Once the statutory period for making the award expired, and no further extension had been obtained, the sole arbitrator could not continue and became functus officio. Section 29A(6) expressly empowers the Court, while extending time, to substitute one or all arbitrators, and the exercise of that power is not confined by the separate remedies available under Sections 14 and 15. The prior rejection of proceedings under Sections 14 and 15 did not preclude relief under Section 29A, because the mandate had not then terminated. In the facts, the High Court ought to have acted under Section 29A(6) rather than extend the mandate of an arbitrator whose authority had already ceased.

Conclusion: The request for substitution was warranted, and the High Court's order extending the mandate was unsustainable.

Ratio Decidendi: When the arbitral mandate has expired under Section 29A, the Court may substitute the arbitrator under Section 29A(6) to advance the statute's objective of timely completion of arbitration; continuation of an expired mandate is impermissible.

Issues: (i) Whether the municipal corporation had authority to levy and enhance licence fees for sky-signs, hoardings and advertisements under the municipal law framework; (ii) whether the levy was a tax or a regulatory fee; (iii) whether the Goods and Services Tax regime and deletion of Entry 55 from List II had extinguished the power to levy such fees; and (iv) whether the enhancement to Rs. 222 per sq. ft. per annum with ex post facto approval and retrospective effect was valid.

Issue (i): Whether the municipal corporation had authority to levy and enhance licence fees for sky-signs, hoardings and advertisements under the municipal law framework.

Analysis: Sections 244 and 245 regulate erection and control of sky-signs and advertisements, while Section 386(2) authorises a fee for every such licence or written permission at a rate fixed by the Commissioner with the sanction of the Corporation. The statutory scheme and the 2003 Rules contemplate licensing, renewal, inspection and ongoing supervision, and the municipal fund provisions also recognise fees as a source of municipal revenue. The power is therefore not confined to mere issuance of a paper permission, but extends to a structured licensing regime with fee fixation and enhancement.

Conclusion: The municipal corporation had authority to levy and enhance the licence fee.

Issue (ii): Whether the levy was a tax or a regulatory fee.

Analysis: The charge was held to be connected with regulation and control of the licensed activity, not a tax under the municipal taxing provisions. The absence of a strict quid pro quo did not convert the levy into a tax, because modern fee jurisprudence recognises that a regulatory fee requires only a broad correlation between the levy and the expenses and supervision involved in regulation. The Court treated the licensing charge as a regulatory measure supporting the municipal supervisory functions attached to sky-sign and hoarding permissions.

Conclusion: The levy was a regulatory fee and not a tax.

Issue (iii): Whether the Goods and Services Tax regime and deletion of Entry 55 from List II had extinguished the power to levy such fees.

Analysis: The Court held that the GST regime did not repeal Sections 244, 245 or 386(2), and the repeal provision in the GST legislation did not touch the municipal licensing provisions. Deletion of Entry 55, which concerned advertisement tax, did not eliminate the separate power to levy a regulatory licence fee under the municipal law. The relevant constitutional support was traced to Article 243X and the legislative fields in Entries 5 and 66 of List II, which remained available for municipal regulation and fees in respect of matters within the State List.

Conclusion: The GST regime and deletion of Entry 55 did not extinguish the power to levy the licence fee.

Issue (iv): Whether the enhancement to Rs. 222 per sq. ft. per annum with ex post facto approval and retrospective effect was valid.

Analysis: The Court read Section 386(2) as using the word "sanction" without the qualifiers "prior" or "previous", and held that the provision permits ratification by the Corporation, including ex post facto sanction, where the statutory context so warrants. The Commissioner had fixed the rate after the tender-based market response and the General Body later ratified that rate with effect from 1 April 2013. In the Court's view, the approval was not invalid merely because it operated retrospectively, and the rate was not shown to be so excessive or arbitrary as to warrant interference in writ jurisdiction.

Conclusion: The enhancement and its ex post facto ratification were held valid.

Final Conclusion: The challenge to the municipal levy failed in entirety, and the statutory licensing regime for sky-signs and hoardings was upheld as a valid regulatory framework permitting fee enhancement and Corporation ratification.

Ratio Decidendi: A municipal charge imposed for grant and renewal of sky-sign and hoarding permissions under a licensing regime is a regulatory fee, not a tax, and may be fixed by the Commissioner with the Corporation's sanction, including ex post facto ratification, where the statute does not insist on prior sanction and the levy bears a broad correlation to regulation and supervision.