TaxTMI Updates e-Newsletter
Dec 19,2025

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether summons issued under Section 70 of the Central Goods and Services Tax Act, 2017, in the course of investigation, are liable to be quashed on the ground that they are allegedly mala fide, premature, or in violation of internal circulars/guidelines (including absence of DIN/seal).

1.2 Whether issuance of summons under Section 70 of the Central Goods and Services Tax Act, 2017 amounts to initiation of "proceedings" against the noticee or is merely a step in an "inquiry" for information gathering.

1.3 Whether, at the stage of issuance of summons and pending investigation, the Court should grant protection against coercive action including arrest, or order release of seized goods/documents.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Validity of summons issued under Section 70 CGST Act, 2017 (including alleged violation of circulars/guidelines, absence of DIN/seal, and allegation of mala fides)

Legal framework (as discussed)

2.1 Section 70 CGST Act, 2017 empowers the proper officer to summon any person whose attendance is considered necessary to give evidence or to produce a document or any other thing in any inquiry, in the same manner as provided in the case of a civil court under the Code of Civil Procedure, 1908. Under Section 70(2), such inquiry is deemed to be a "judicial proceeding" within the meaning of Sections 193 and 228 of the Penal Code, 1860.

Interpretation and reasoning

2.2 The Court noted that the purpose of a summons under Section 70 is to secure attendance for giving evidence or producing documents/other things and is an instrumentality of inquiry.

2.3 Relying on the decision in Armour Security India Limited and its affirmation by the Supreme Court, the Court treated a summons as a "precursor" to possible proceedings and an information-gathering tool, distinct from assessment or adjudicatory steps under Sections 73/74 of the CGST Act.

2.4 The Court further relied on Kuppan Gounder P.G. Natarajan to emphasise that courts should not ordinarily restrain authorities from conducting investigation or proceedings at the stage of summons, as summons only provide an opportunity to the noticee to submit documents and statements, and entertaining writ petitions at such a "budding stage" would paralyse statutory proceedings.

2.5 As to the complaint that one summon was handwritten, without DIN and seal, and contrary to departmental circulars, the Court accepted the Respondent's explanation that due to technical reasons DIN could not be generated at that time and that this fact was endorsed on the summon itself and acknowledged by the Petitioner. The Court did not treat such defects as rendering the summons void or non est, particularly in the context that the summons formed part of an ongoing investigation and were issued to ensure compliance with procedures relating to seized goods.

2.6 Allegations of "tax terrorism", mala fide and ill-motive in issuance of summons and conduct of search/seizure were not accepted at this stage. The Court viewed the department's actions as part of an ongoing investigation into alleged clandestine trading and evasion, supported by search, seizure and recovery of goods and records, and requiring further inquiry and confrontation of evidence.

Conclusions

2.7 Summons issued under Section 70 CGST Act, 2017 in the course of investigation are valid instruments of inquiry and are not liable to be set aside merely on alleged procedural irregularities (such as absence of DIN/seal in one summon) or on the allegation of mala fides, particularly when such summons serve the purpose of seeking information and ensuring proper handling of seized goods.

2.8 The Court declined to quash or set aside the impugned summons under Section 70 CGST Act, 2017.

Issue 2 - Whether issuance of summons under Section 70 constitutes initiation of "proceedings" against the noticee

Legal framework (as discussed)

2.9 Section 70 CGST Act deals with "Power to summon persons to give evidence and produce documents".

2.10 The Court considered the interpretation of "inquiry" in Section 70, as discussed in G.K. Trading Company and Armour Security (High Court and Supreme Court), and its distinction from "proceedings" under the CGST Act.

Interpretation and reasoning

2.11 Referring to G.K. Trading Company, the Court noted that the word "inquiry" in Section 70 has a special connotation: it is a specific process to summon persons for giving evidence or producing documents, and cannot be intermixed with statutory steps that may precede or follow such inquiry. "Inquiry" in Section 70 is not synonymous with "proceedings" under Section 6(2)(b) or other provisions of the CGST framework.

2.12 Relying on Armour Security (as upheld by the Supreme Court), the Court underscored that:

- A summons is not the culmination of an investigation but merely a step in its course, intended for information-gathering regarding possible contraventions of law.

- At the stage of issuing summons, the Department is yet to determine whether any proceedings for recovery or assessment should be initiated, and such inquiry does not constitute "proceedings" under the CGST Act.

- The "initiation of any proceedings" under the CGST Act refers specifically to issuance of a show cause notice or other statutory initiation steps, not the mere issuance of a summons.

2.13 The Court concluded that, even where search under Section 67 precedes the summons, the subsequent issuance of summons remains an evidence-gathering step; any further statutory proceedings must be separately and definitively initiated (e.g. by notice under Section 74).

Conclusions

2.14 Issuance of summons under Section 70 CGST Act is an element of "inquiry" for gathering information and does not, by itself, amount to initiation of "proceedings" against the Petitioners under the CGST Act.

2.15 The challenge to summons on the footing that they represent improper or barred "proceedings" was rejected.

Issue 3 - Entitlement to protection against coercive action/arrest and for release of seized goods/documents at the summons stage

Legal framework (as discussed)

2.16 Section 69 CGST Act (power to arrest) and Section 132 CGST Act (offences and classification as cognizable/non-bailable) were adverted to, particularly in the context of the Petitioners' contention that no assessment/liability had been crystallised and that alleged tax evasion had not crossed the statutory threshold.

2.17 The Court referred to Jatin Gupta, which dealt with safeguards under Section 69 CGST Act, noting that before arrest the Commissioner must have "reasons to believe" that an offence under Section 132 has been committed and that the authorised officer must inform the person of grounds of arrest.

Interpretation and reasoning

2.18 The Court observed that, in the present matter, only summons had been issued to the Petitioners and investigations were ongoing. No arrest had yet taken place, and no show cause notice or final determination of liability had been made against them.

2.19 In view of the statutory safeguards embedded in Section 69, the Court held that a mere apprehension of arrest at the investigation stage, consequent upon summons, is insufficient to invoke the extraordinary writ jurisdiction to pre-emptively bar coercive action.

2.20 The Court treated the writ petitions, in substance, as premature attempts to secure anticipatory protection and to interfere with an ongoing investigation premised on search, seizure and alleged clandestine activities, without the investigation having run its course or the statutory machinery having been invoked in full.

2.21 As to the prayer for release of seized goods and documents, the Court noted that the summons themselves were issued, inter alia, to ensure compliance with statutory procedures regarding the seized goods. Interference at this stage would disrupt the statutory process and was therefore not warranted.

Conclusions

2.22 The Court declined to grant any blanket protection against coercive action (including arrest) at the stage of issuance of summons and ongoing investigation, holding the writ petitions to be premature.

2.23 The Court also declined to direct release of seized goods/documents at this stage, leaving such matters to be dealt with in accordance with the CGST Act and procedures during or after completion of the inquiry.

2.24 The writ petitions were dismissed as lacking merit and as premature, with liberty to the Petitioners to approach the appropriate forum at the appropriate stage in accordance with law.

Issues: Whether the 2nd respondent should be directed to consider the petitioner's representation for payment of the GST difference arising from the alleged short levy in work contract bills.

Analysis: The dispute concerned the GST rate applied to construction work contracts and the petitioner's claim that the procuring entity had to bear the tax difference in view of the applicable governmental and departmental instructions. The Court noted that similar matters had been dealt with by earlier orders and, in the present case, found it to require the 2nd respondent to examine the representation on its own merits in the light of the relevant Government orders and after giving the petitioner a reasonable opportunity.

Conclusion: The 2nd respondent was directed to consider and decide the petitioner's representation in accordance with law within the stipulated time. The petitioner obtained only a limited procedural relief and no substantive adjudication on the GST liability claim.

Final Conclusion: The writ petition was disposed of with a direction for fresh consideration of the petitioner's demand for GST differential payment.

Ratio Decidendi: Where the entitlement dispute turns on governmental GST-related instructions and the representation has not been decided, the appropriate course is to direct consideration on merits after affording reasonable opportunity.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether an adjudication order under Section 73 of the GST Act, based on mistaken identity and erroneous factual assumption regarding receipt of consideration for works contract, is legally sustainable.

1.2 Whether consequent recovery proceedings founded on such erroneous adjudication order can be allowed to continue.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Sustainability of adjudication under Section 73 of the GST Act when based on mistaken facts and incorrect GSTIN

Legal framework (as discussed)

2.1 The adjudication proceedings were initiated and concluded under Section 73 of the Odisha Goods and Services Tax Act, 2017 / Central Goods and Services Tax Act, 2017 on the basis of alleged mismatch in figures disclosed in GSTR-2A and GSTR-3B returns for the tax period December 2018, leading to a demand order dated 27.07.2021.

Interpretation and reasoning

2.2 The Court noted that the foundation of the adjudication was an assumption that the petitioner, identified by GSTIN 21BBPPR1202L1ZR in the name of "Subrat Rout", had received payments towards works executed for the office of the Superintending Engineer, Mahanadi North Division, Jagatpur, during the relevant tax period.

2.3 The petitioner asserted that he had not executed the works in question and had not received any payment for the alleged contracts, and that the adjudication proceedings were initiated and completed without his knowledge, particularly after cancellation of his GST registration.

2.4 The Court took note of a representation by the petitioner to the Superintending Engineer and the subsequent letter dated 11.04.2025 from the Superintending Engineer to the CT & GST authorities, expressly acknowledging that:

(a) The actual payments were made to "Sri Subrat Kumar Rout" holding PAN AWWPR3325B and GSTIN 21AWWPR3325B1ZN.

(b) No payments were made to the petitioner, holding GSTIN 21BBPPR1202L1ZR.

(c) During return filing, the petitioner's GSTIN was inadvertently entered instead of the GSTIN of "Sri Subrat Kumar Rout", amounting to a clerical error in furnishing TDS details.

2.5 The Department, through written instructions placed before the Court, accepted the factual error and confirmed that:

(a) The two works bills with total taxable value of Rs. 15,83,500/- were paid to "Sri Subrat Kumar Rout" and not to the petitioner.

(b) Cross-verification of bank account details established that the petitioner had not received the payments referred to in the show cause notice.

2.6 On this admitted factual matrix, the Court held that the adjudication process under Section 73 had been initiated and culminated against the wrong person, namely, "Subrat Rout" (the petitioner), instead of the actual contractor "Subrat Kumar Rout".

2.7 The Court emphasized that where the very basis of the proceedings-receipt of consideration for specified works contracts by the noticee-is factually incorrect and stands disproved by the records and departmental admission, the adjudication cannot be sustained in law.

Conclusions

2.8 The Court concluded that the adjudication order dated 27.07.2021 passed under Section 73 of the GST Act, founded on mistaken identity and erroneous factual assumption of receipt of payment by the petitioner, is unsustainable.

2.9 Accordingly, the order dated 27.07.2021 passed under Section 73 in connection with show cause notice dated 30.04.2021 pertaining to tax period December 2018 was quashed.

Issue 2: Validity of recovery proceedings premised on the erroneous adjudication order

Interpretation and reasoning

3.1 The recovery proceedings were initiated through a notice for recovery dated 29.03.2025, which the petitioner received and which first brought to his notice the existence of the adjudication order and demand.

3.2 The Court recognized that the recovery proceedings were entirely dependent on, and derivative of, the adjudication order passed under Section 73. There was no independent factual or legal basis for recovery apart from that order.

3.3 Since the Department itself admitted that no payment was made to the petitioner and that the GSTIN included in the returns and TDS details was wrongly entered, the Court accepted that the foundation for the demand and consequent recovery was factually untenable.

3.4 Once the Court found that the adjudication order itself could not stand due to mistake of fact and wrong identity, it followed that any recovery action based on such order would also be without authority and liable to be struck down.

Conclusions

3.5 By quashing the adjudication order dated 27.07.2021 and the underlying show cause notice dated 30.04.2021, the Court effectively rendered the recovery proceedings unsustainable.

3.6 The writ petition was allowed, and all pending interlocutory applications were disposed of, with the result that the impugned demand and consequential recovery steps against the petitioner stand annulled.

1. ISSUES PRESENTED AND CONSIDERED

1) Whether, having regard to the nature of the alleged CGST offences, maximum punishment, stage of investigation, and the absence of material showing risk of tampering or non-cooperation, the petitioner was entitled to regular bail.

2) Whether allegations concerning violation of fundamental rights in connection with arrest/detention (including the asserted detention beyond 24 hours before production) and non-service of written grounds of arrest materially supported grant of bail.

3) Whether the petitioner's medical condition and the fact of interim bail on medical grounds, without misuse, were relevant factors warranting continuation/grant of bail.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to regular bail in the CGST prosecution considering nature of offence, punishment, and status of investigation

Legal framework (as discussed by the Court): The Court treated the governing considerations for bail as including: the offence being triable by a Judicial Magistrate; maximum punishment up to five years; the prosecution being substantially documentary/electronic in nature; and standard bail factors such as likelihood of absconding, tampering with evidence, or influencing witnesses. The Court also noted the constitutional dimension of bail principles, including presumption of innocence and that bail is the general rule, as well as the right to speedy trial under Article 21.

Interpretation and reasoning: Applying these considerations to the facts, the Court found cumulatively that (i) the case is triable by a Judicial Magistrate and carries a maximum sentence of five years; (ii) investigation was already complete and nothing remained to be recovered from the petitioner; (iii) the trial was not likely to conclude in the near future; and (iv) continued judicial custody would not serve a useful purpose. Crucially, the Court recorded that there was nothing on record indicating that, if released, the petitioner would tamper with evidence, influence witnesses, or fail to participate/cooperate in trial. The Court therefore treated the usual preventive justifications for pre-trial custody as not being established on the record before it.

Conclusion: Regular bail was warranted on the cumulative assessment of (a) limited maximum sentence, (b) completion of investigation with no further recoveries, (c) anticipated delay in trial, (d) lack of material showing tampering/absconding risk, and (e) lack of purpose in continued custody.

Issue 2: Effect of allegations of illegality in arrest/detention and service of grounds of arrest on bail

Legal framework (as discussed by the Court): The Court considered that where fundamental rights under Articles 21 and 22 are violated in the course of arrest or post-arrest, such violation vitiates arrest and obligates the bail court to release the accused. The Court also treated as relevant the requirement that grounds of arrest be furnished in writing to enable the arrestee to contest the arrest and seek bail, in consonance with Article 22(1).

Interpretation and reasoning: The Court did not render a definitive factual finding on the disputed allegations of illegal search, detention, or non-service of grounds (which were denied by the respondent). However, it treated as material that there were very serious allegations regarding the period of detention before the petitioner was produced before the Magistrate. This factor was expressly included by the Court among the decisive circumstances supporting bail, alongside other established factors (completion of investigation, absence of tampering risk, etc.). The Court thus considered the asserted fundamental-rights concerns as an additional weighty consideration in favour of bail, without deciding the merits of the prosecution case.

Conclusion: The Court treated the serious allegations concerning detention/production and arrest-related safeguards as a significant factor supporting release on bail, while granting bail without commenting on the merits of the case.

Issue 3: Relevance of medical condition and interim bail without misuse

Legal framework (as discussed by the Court): The Court considered health and custody-related medical exigencies as relevant to bail assessment, especially where custody had led to hospitalisation and interim bail had already been granted on medical grounds. The Court also factored the absence of misuse of interim bail as relevant to the assessment of future compliance.

Interpretation and reasoning: The Court noted that the petitioner had been suffering from serious ailment, had to be shifted to hospital during custody, and had already been granted interim bail on medical grounds. It also accepted as a relevant circumstance that there was no allegation that interim bail had been misused. These facts reinforced the Court's view that continued incarceration was unnecessary and that the petitioner could be managed through conditions ensuring presence and non-interference.

Conclusion: The petitioner's medical condition, coupled with hospitalisation during custody and non-misuse of interim bail, supported grant of regular bail as part of the overall cumulative assessment.

Final determination and operative bail conditions (material to decision)

The Court allowed the bail petition and ordered release on bail on personal bond and surety to the satisfaction of the trial court, subject to conditions: (i) no inducement/threat/promise to persons acquainted with facts; (ii) furnishing and updating address; (iii) submission of a security bond equal to the amount claimed as tax and penalty, to be available for realisation if found guilty; and (iv) not leaving India without prior permission. Violation of conditions would expose the bail to cancellation.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the petitioner, accused of offences under Section 132(1)(b) & (c) read with Sections 132(1)(i) and 135(5) of the Central Goods and Services Tax Act, 2017, is entitled to bail pending trial.

1.2 In assessing entitlement to bail, how far do factors such as the nature of the economic offence, maximum prescribed punishment, stage of investigation, alleged violations of Articles 21 and 22 of the Constitution, and the right to speedy trial influence the exercise of discretion.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to bail in prosecution under Section 132 CGST Act

Legal framework (as discussed)

2.1 The Court considered the offence provisions under Section 132(1)(b) & (c) read with Section 132(1)(i) and 135(5) of the CGST Act, noting that the maximum punishment is imprisonment up to five years and that the case is triable by a Court of Judicial Magistrate.

2.2 The Court referred to constitutional guarantees under Articles 21 and 22 regarding personal liberty, production before a Magistrate within 24 hours of arrest, and communication of grounds of arrest.

2.3 The Court relied upon principles laid down by the Supreme Court in multiple decisions on bail, including that: (i) grant of bail is the general rule and jail an exception; (ii) seriousness of an economic offence alone cannot be the sole ground to deny bail; (iii) right to speedy trial is part of Article 21; and (iv) violation of Articles 21 and 22 while arresting or after arrest vitiates arrest and mandates grant of bail.

Interpretation and reasoning

2.4 The Court noted the prosecution allegations of large-scale tax evasion through fake/bogus firms, goods-less invoices and fraudulent availment of Input Tax Credit, causing loss to the State exchequer of approximately Rs. 30.21 crores/32.01 crores.

2.5 The petitioner asserted innocence, challenged the legality of searches, disputed ownership of the raided premises and the status of the alleged "Manager", alleged illegal detention beyond 24 hours before being produced before the Magistrate, and complained of non-service of written grounds of arrest and absence of pre-search notice under the CGST Act.

2.6 The respondent controverted all allegations, maintained that searches, seizure and arrest were legal, and emphasised the magnitude and gravity of the economic offence and the Supreme Court's observations that economic offences constitute a "class apart" requiring a different and stricter approach to bail.

2.7 The Court surveyed precedent relating to bail in CGST and economic offence matters, particularly:

* Observations that in offences under Section 132 CGST Act, with maximum sentence of five years, documentary evidence, no antecedents, and charge-sheet filed, bail should normally be granted by trial courts unless extraordinary circumstances exist.

* Rulings that in CGST prosecutions the evidence is primarily documentary/electronic and the likelihood of tampering or influencing witnesses is comparatively low.

* Principles that severity of economic offence or quantum of alleged evasion, even when very high, does not by itself justify prolonged pre-trial incarceration where investigation is complete, trial is likely to be protracted, and statutory maximum sentence is limited.

2.8 The Court distinguished or held inapplicable those authorities where bail was denied or cancelled in economic offence cases on facts involving multiple charge-sheets, deep-rooted conspiracies, or different statutory regimes such as the Prevention of Money Laundering Act, where bail parameters are distinct.

2.9 The Court reiterated settled factors governing bail, including: nature of accusation; nature of supporting evidence; severity of possible punishment; character and peculiar circumstances of the accused; reasonable possibility of presence at trial; apprehension of tampering with witnesses; and larger public interest.

2.10 Applying these principles, the Court specifically recorded that:

* The offences are triable by a Judicial Magistrate and carry a maximum punishment of five years' imprisonment.

* Investigation is complete and nothing is left to be recovered from the possession of the petitioner.

* There are "very serious allegations" regarding the period of detention before production before the Magistrate, implicating rights under Articles 21 and 22, though the Court did not finally adjudicate those allegations on merits at this stage.

* The trial is not likely to be completed in the near future.

* Continued detention of the petitioner in judicial custody is not likely to serve any further purpose.

* There is nothing on record to show that, if released on bail, the petitioner is likely to tamper with evidence or influence witnesses.

* There is nothing on record to suggest that, if released on bail, the petitioner will not participate or cooperate in the trial.

2.11 The Court emphasised the fundamental postulate of presumption of innocence and the principle that bail is the rule, incarceration the exception, as well as the right to speedy trial as an integral facet of Article 21, warning against undertrial custody extending for long durations in cases where maximum sentence is relatively limited.

Conclusions

2.12 Weighing the nature of the alleged economic offence against the maximum punishment, the completion of investigation, the largely documentary character of evidence, the likely delay in conclusion of trial, the absence of material indicating risk of absconding or tampering, and the serious constitutional issues raised regarding detention and arrest, the Court held that the balance favoured grant of bail.

2.13 The petition was allowed and the petitioner was directed to be released on bail on furnishing personal bond and surety bonds to the satisfaction of the trial Court, subject to stringent conditions, including:

* Non-inducement/non-threat to any person acquainted with the facts of the case.

* Furnishing and updating address before the trial Court till conclusion of trial.

* Submission of a security bond equal to the amount claimed as tax and penalty, to be utilizable towards realization of dues if the petitioner is found guilty at the conclusion of trial.

* Restriction on leaving India without prior permission of the trial Court.

2.14 The Court clarified that any violation of the imposed conditions would be viewed seriously and could lead to cancellation of bail, and that all observations made were confined to the adjudication of the bail petition and would not affect the merits of the trial.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the tax authorities, after approval of a resolution plan under the Insolvency and Bankruptcy Code, 2016, can raise fresh demands for statutory dues pertaining to periods prior to such approval.

1.2 Whether the participation of the tax department in the corporate insolvency resolution process and crystallisation of its claim in the resolution plan bars further or additional demands for the same pre-resolution periods.

1.3 Whether the characterization of the impugned orders as merely "crystallizing" amounts, without commencement of recovery steps, affects their legality post-approval of a resolution plan.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Post-approval demands for pre-resolution period statutory dues; effect of participation and crystallisation of tax claims in the resolution plan

(a) Legal framework as discussed

2.1 The Court considered the scheme of the Insolvency and Bankruptcy Code, 2016, particularly Section 31, in light of the resolution plan approved by the adjudicating authority (NCLT). The relevant NCLT order expressly recorded that the approved resolution plan is binding on the corporate debtor, its employees, shareholders, creditors and, specifically, the Central Government, any State Government or any local authority to whom statutory dues are owed, as well as the successful resolution applicant and other stakeholders.

2.2 The Court applied the principles laid down by the Supreme Court in:

(i) The decision holding that once a resolution plan is duly approved under Section 31(1) of the IBC, (a) the claims as provided in the resolution plan stand frozen; (b) the resolution plan is binding on all stakeholders including governmental authorities; (c) all claims not part of the resolution plan stand extinguished; and (d) no person is entitled to initiate or continue any proceedings in respect of a claim not forming part of the resolution plan, including statutory dues for the period prior to approval.

(ii) The decision clarifying that statutory authorities have limited jurisdiction to determine and assess the quantum of operational debt so as to lodge their claims under the IBC waterfall, but cannot execute or recover such claims beyond the framework of the IBC and the approved plan.

(b) Interpretation and reasoning

2.3 The Court noted that the corporate debtor had undergone a corporate insolvency resolution process before the NCLT; an interim resolution professional and then a resolution professional were appointed; claims were invited; and the tax department participated by filing its claims during the CIRP. The tax department's claim was thereafter crystallised to a specific amount and formed part of the resolution process.

2.4 The NCLT approved the resolution plan on 11 June 2024, and the new management took over pursuant to that order. The NCLT order made the resolution plan binding on all creditors, including governmental authorities to whom statutory dues were owed.

2.5 The Court interpreted the Supreme Court's pronouncements to mean that, upon the approval of the resolution plan under Section 31:

* All claims included in the plan stand frozen, and no new or additional claims for the same pre-approval period can be raised outside the plan.

* All claims not forming part of the resolution plan, including statutory dues for the period prior to the approval, stand extinguished and cannot be pursued by way of fresh proceedings.

2.6 The Court held that allowing the tax department, which had already participated in the insolvency proceedings and filed its claims, to issue further demands for the same pre-resolution periods after the resolution plan's approval would be contrary to the finality mandated by the IBC. The insolvency process must reach a definitive conclusion, and the new management cannot be burdened with liabilities that are not provided for in the approved plan.

2.7 The Court further observed that, in light of the Supreme Court's clarification, authorities under other statutes may determine and assess the quantum of operational debt only for the purpose of staking their claim under the IBC, but they cannot travel beyond the confines of the IBC scheme and the approved resolution plan to raise additional enforceable demands for past periods.

(c) Conclusions

2.8 The Court concluded that no demand can be raised by the tax department after the approval of the resolution plan in respect of periods prior to the date of such approval.

2.9 Since the tax department had already participated in the CIRP and its claim was crystallised within the resolution plan framework, it was barred from raising further demands in relation to the same pre-approval periods.

2.10 Consequently, the impugned orders seeking recovery for the financial years prior to 11 June 2024, together with consequential demands, were held to be not legally tenable and were set aside.

Issue 3: Effect of describing impugned orders as merely "crystallizing" amounts without recovery steps

(a) Interpretation and reasoning

3.1 The tax department argued that the impugned orders only sought to "crystallize" the amounts and that no recovery action had been initiated. The Court, however, treated the orders as demands raised for liabilities pertaining to pre-resolution periods, issued after the approval of the resolution plan.

3.2 In view of the binding and extinguishing effect of an approved resolution plan under the IBC, as interpreted in the above Supreme Court decisions, the Court held that the characterisation of the impugned orders as mere crystallisation did not alter their substantive legal effect of asserting fresh or additional claims outside the resolution plan.

(b) Conclusions

3.3 The Court held that even if no recovery steps had yet been taken, the issuance of orders-in-original and consequential demands for pre-approval periods, post-approval of the resolution plan, was impermissible. The orders themselves were unsustainable and were therefore quashed, without examining the merits of the underlying assessments or quantification.

Issues: Whether the impugned GST assessment order and consequential demand summary should be interfered with and the matter remitted for fresh consideration subject to pre-deposit, and whether the bank attachment could be lifted on compliance.

Analysis: The writ petition was entertained notwithstanding expiry of the appellate limitation under Section 107, and the Court adopted the course followed in similar matters of remitting the case for fresh adjudication on terms. To balance the interests of the assessee and the revenue, the petitioner was required to deposit 25% of the disputed tax in cash within the stipulated time and to file a reply with supporting documents treating the impugned order as an addendum to the show cause notice. On such compliance, the respondent was directed to pass a fresh order on merits in accordance with law, and the bank attachment was to stand vacated automatically. In default, recovery could proceed as if the writ petition had been dismissed in limine.

Conclusion: The matter was remitted for fresh adjudication subject to payment of 25% of the disputed tax and filing of a reply, with consequential lifting of bank attachment on compliance.

Final Conclusion: The writ petition was not finally decided on the tax liability, but was disposed of by granting conditional remand and consequential interim relief tied to compliance.

Ratio Decidendi: In cases where the statutory appeal period has expired, the Court may remit the matter for fresh consideration on equitable terms, including a pre-deposit, so as to balance the rights of the assessee and the revenue.

Issues: Whether the assessment order under Section 73 of the Tamil Nadu Goods and Services Tax Act, 2017 required interference for non-consideration of the petitioner's reply, and whether the matter should be remitted for fresh adjudication.

Analysis: The petitioner's reply to the show cause notice was not considered before passing the impugned order. In view of that procedural lapse, the assessment was not sustained on merits and the matter was sent back for fresh consideration. The Court also directed a pre-deposit of 50% of the disputed tax, with any amount already recovered to be adjusted towards the pre-deposit, and required the petitioner to cooperate in the de novo proceedings.

Conclusion: The matter was remanded for fresh orders on merits, subject to compliance with the directed pre-deposit and participation in the proceedings.

Final Conclusion: The impugned order was set aside to the extent necessary and the dispute was restored to the assessing authority for de novo consideration, with interim protection linked to compliance.

Ratio Decidendi: An assessment order that is passed without considering the assessee's reply to the show cause notice warrants remand for fresh decision on merits.

Issues: (i) Whether the impugned GST order should be set aside and the matter remitted for fresh adjudication despite expiry of the statutory appeal period. (ii) Whether the bank account attachment should be vacated on compliance with the directions imposed by the Court.

Issue (i): Whether the impugned GST order should be set aside and the matter remitted for fresh adjudication despite expiry of the statutory appeal period.

Analysis: The petitioner had not replied to the show cause notice or attended the personal hearings, and the statutory appeal remedy had also become time-barred. To balance the interests of the assessee and the Revenue, the Court directed remand for fresh consideration, while requiring the petitioner to file a reply and make a cash deposit of 50% of the disputed tax within the stipulated period.

Conclusion: The matter was remitted to the respondent for passing a fresh order on compliance with the specified conditions.

Issue (ii): Whether the bank account attachment should be vacated on compliance with the directions imposed by the Court.

Analysis: The directions tied vacating the attachment to timely compliance with the pre-deposit and filing of reply, and made clear that the attachment would not continue once the stipulated conditions were satisfied and no other arrears remained.

Conclusion: The bank attachment was directed to stand automatically vacated upon compliance with the conditions.

Final Conclusion: The writ petition was disposed of by granting conditional relief to the petitioner in the form of remand and consequential lifting of attachment upon compliance, while preserving the respondent's right to proceed in accordance with law in case of default.

Ratio Decidendi: Where a taxpayer has not participated in the adjudication and the statutory appeal remedy is time-barred, the Court may grant conditional remand with pre-deposit safeguards to balance the interests of the assessee and the Revenue.

Issues: Whether the impugned assessment order confirming tax, interest and penalties for the tax period 2019-2020 could be sustained when there appeared to be an overlapping demand with a later assessment order, and whether the matter required fresh consideration.

Analysis: The impugned demand was based on non-response to the show cause notice, while a later assessment order concerning the same tax period and identical issues had dropped the demand. On a prima facie view, the confirmed demand in the impugned order overlapped with the demand dealt with in the later order. In view of this overlap, the petitioner was directed to file a reply treating the impugned order as an addendum, and the respondent was required to reconsider the matter on merits.

Conclusion: The matter was remitted to the respondent for passing a fresh order on merits, and the impugned order was not finally upheld.

Issues: Whether the writ petition should be disposed of by remitting the GST demand to the respondent for fresh consideration, subject to pre-deposit and filing of a reply.

Analysis: The writ petition was entertained despite the expiry of the statutory appeal period, and the matter was sent back for a fresh order on merits. The petitioner was directed to make a pre-deposit of 25% of the disputed tax within 30 days, with a reduced deposit of 15% if the amount stated to have been deposited earlier had already been adjusted towards the liability. The petitioner was also required to file a reply to the show-cause notice with supporting documents, whereupon the respondent was to pass a fresh order in accordance with law. Upon compliance, the bank attachment was to stand automatically vacated.

Outcome: The matter was remitted to the respondent for fresh adjudication on conditions, with consequential directions regarding pre-deposit, reply, and lifting of bank attachment on compliance.

Issues: Whether the impugned GST order should be interfered with in writ jurisdiction where the statutory appeal under Section 107 had become time-barred, and whether the matter should be remitted for fresh adjudication subject to a pre-deposit condition.

Analysis: The writ was entertained at the admission stage after noting that the appeal period had expired and that the petitioner had not availed the opportunity of personal hearing in response to the show cause notice. To balance the interests of both sides, the order under challenge was not finally sustained or annulled on merits; instead, the matter was sent back for a fresh decision with a condition of depositing 50% of the disputed tax in cash within the stipulated time, along with a reply and supporting documents. On compliance, the bank attachment was directed to stand vacated and the respondent was to decide the matter afresh on merits.

Conclusion: The writ petition was disposed of by remanding the matter to the assessing authority with a conditional pre-deposit and liberty to proceed in accordance with law upon non-compliance.

Final Conclusion: The petitioner obtained limited relief by way of remand for fresh adjudication, but only upon compliance with the specified deposit and reply requirements.

Ratio Decidendi: In writ jurisdiction, where the statutory appellate remedy has become time-barred and the assessee had not availed the opportunity of hearing, the Court may remit the matter for fresh consideration subject to a reasonable pre-deposit to balance the interests of the assessee and the revenue.

1. ISSUES PRESENTED AND CONSIDERED

(i) Whether, when the statutory second appellate remedy exists but the Appellate Tribunal is not constituted/functional and the filing timelines have been extended by notification and administratively structured by advisory, the tax authorities may lawfully initiate or continue recovery of the disputed demand before expiry of the permitted appeal-filing period.

(ii) Whether interim protection against recovery should be granted on the condition of the taxpayer completing the statutory pre-deposit contemplated for stay of recovery during pendency of the second appeal.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Recoveries during the extended/structured period for filing second appeal when Tribunal is not functional

Legal framework (as discussed by the Court): The Court noted that the statutory right to file a second appeal is provided under Section 112 of the applicable GST enactment, but the Tribunal was not available due to non-constitution/non-functionality. The Court further relied on (a) a governmental notification extending the time up to which appeals may be filed before the Appellate Tribunal for orders communicated within the specified period, and (b) an administrative user advisory prescribing a staggered e-filing window and stating that filing would in any event be available up to the notified outer date.

Interpretation and reasoning: The Court treated the inability to approach the Tribunal as not attributable to the taxpayer. It reasoned that once the statute provides an appellate right, the State must make that remedy meaningfully available before initiating coercive recoveries. In light of the notification extending the appeal-filing timeline and the advisory operationalising filing windows, the Court expressed serious doubt that the administration could proceed to recover the disputed tax during the period in which the second appeal could still be filed. Allowing recovery in such circumstances would be contrary to the statutory scheme, inequitable and plainly unfair, and would also offend the constitutional scheme as articulated by the Court.

Conclusion: The Court ordered that, subject to satisfaction of the pre-deposit condition addressed separately, no further recoveries shall be made pursuant to the disputed adjudication demand until the relevant timeline, and bank garnishee proceedings shall remain in abeyance. The Court also directed the State to obtain and disclose its stand on recoveries and expected issuance of administrative instructions consistent with the notification and advisory; if a contrary stand is taken, reasons were required to be placed on record.

Issue (ii): Conditional interim protection based on completion of statutory pre-deposit for stay during second appeal

Legal framework (as discussed by the Court): The Court noted the statutory pre-deposit requirement under Section 112(8) for obtaining the benefit of protection against recovery during pendency of a second appeal.

Interpretation and reasoning: The Court recorded that the taxpayer had already deposited a substantial part of the required amount but had not yet deposited the full sum contemplated for availing statutory protection. Balancing the taxpayer's inability to access a functional Tribunal with the statutory pre-deposit scheme, the Court granted protection against further recovery, while conditioning that protection upon deposit of the remaining balance within the outer limit linked to the appeal-filing timeline or earlier upon actual filing.

Conclusion: Interim restraint on further recoveries (including keeping bank garnishee proceedings in abeyance) was granted subject to deposit of the balance pre-deposit amount by the earlier of (a) the date of filing the second appeal, or (b) the specified outer date aligned with the extended filing period.

1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the Court should entertain the petitions despite availability of an alternate statutory remedy, given that the GST Tribunal was not operational in the circumstances.

(ii) Whether the impugned orders rejecting the refund claim and upholding such rejection should be set aside and the matter remanded for fresh adjudication because the authorities had not considered the impact of a subsequent binding decision holding that omission of Rule 96(10) was without any saving for pending proceedings, and because related questions (including Rule 86(4B) retrospectivity and other objections) required reconsideration.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Entertaining the petitions notwithstanding alternate remedy

Legal framework (as discussed by the Court): The Court considered the objection that an alternate remedy lay before the GST Tribunal.

Interpretation and reasoning: The Court noted that, as of the date of decision, the GST Tribunal was not operational. In these "peculiar facts" and considering the nature of the order proposed (setting aside and remanding), relegating the petitioner to the alternate remedy would serve no useful purpose.

Conclusion: The Court proceeded to entertain the petitions and did not dismiss them on the ground of alternate remedy.

Issue (ii): Setting aside the impugned orders and remand for fresh decision in light of subsequent decision concerning Rule 96(10) and to reconsider connected contentions

Legal framework (as discussed by the Court): The dispute involved allegations that the petitioner had breached Rule 96(10) of the CGST Rules, 2017, and the impugned orders also addressed Rule 86(4B), holding that it could not be given retrospective effect. The Court also noted a subsequent decision of the same Court holding that Rule 96(10) was omitted without any saving provision for pending proceedings.

Interpretation and reasoning: The Court observed that the petitioner had been called upon to return refunded amounts inter alia on the basis of an alleged breach of Rule 96(10), and that Rule 86(4B) issues were also involved. Since the adjudicating and appellate authorities did not have the benefit of the later decision regarding the omission of Rule 96(10), that decision would have "some impact on the issues raised." At the present stage, the Court declined to make observations on the merits or on the precise effect of that later decision, but held that the interests of justice required that the impugned orders be set aside and the matter remanded so the refund application and show cause notice could be decided afresh after examining that impact. The Court further directed that the authority must hear parties, consider written submissions, and also consider all other contentions, including objections regarding retrospectivity and the bar (if any) on filing two refund claims.

Conclusions: The Court quashed and set aside the impugned orders and remanded the matter to the adjudicating authority to decide afresh the refund application and show cause notice, after considering the impact of the later decision and all other contentions. The authority was directed to complete the exercise expeditiously and in any event within six months from uploading of the order, after granting hearing and considering written submissions.

1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the cancellation of GST registration based solely on the field inspection/Field Visit Report was sustainable in law when the report was not supported by a valid on-spot panchnama-type record, independent witnesses, or signatures of the person found at the premises.

(ii) Whether the respondents' actions-issuing cancellation on the premise that no business was functioning at the declared premises, while simultaneously initiating and proceeding with assessment/demand for earlier financial years on the premise that taxable business activity existed-were legally sustainable due to internal inconsistency.

(iii) Whether the cancellation order and the appellate dismissal (on limitation/non-appearance) could be sustained where the record disclosed non-consideration and non-disclosure of the fate of the revocation application, and the respondents' reply was silent on what was done with that application.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Sustainability of cancellation founded on the field inspection/Field Visit Report

Legal framework (as discussed): The Court examined the Department's reliance on a field inspection conducted on 11.08.2023 and the computer-generated Field Visit Report in Form GST REG-30 as the sole basis for proposing and effecting cancellation on the allegation that business was non-functional at the declared premises.

Interpretation and reasoning: The Court found that the inspection record relied upon was only a computer-generated report and that no contemporaneous spot report "prepared by hand on the spot like Panchanama" was produced. The inspection was carried out by a single Inspector without any panch witness. The Court treated the presence of two independent witnesses and the preparation of a proper panchnama as essential to accept such an inspection record as valid. Additionally, the Court noted that even the signature of the petitioner's son (who was stated to have been found at the premises) was not obtained on the inspection document. On these deficiencies, the Court declined to accept the inspection record as a sufficient legal foundation for cancellation.

Conclusion: The cancellation action, being grounded on an inspection record lacking the above safeguards and documentation, was held unsustainable, contributing to setting aside the show-cause notice/cancellation and consequent actions.

Issue (ii): Internal inconsistency between "no business" cancellation premise and "business activity exists" assessment premise

Legal framework (as discussed): The Court considered that, after cancellation, notices and proceedings under section 63 were initiated for assessment of tax for financial years 2019-20, 2021-22 and 2022-23, relying on portal data (GSTR-2A/2B) indicating sales, ITC availed, and resulting tax liability.

Interpretation and reasoning: The Court held that the Department's two central allegations could not logically co-exist: (a) that on inspection the business was not functioning/no stock existed and the registration was procured/continued by fraud or suppression; and (b) that for three financial years there were sales reflected in GSTR-2B/2A leading to tax liability, interest, and penalty. The Court reasoned that "there cannot be tax liabilities without doing the business for three financial years," and therefore proceeding to assess tax liabilities for those years on the premise of business activity undermined the cancellation premise of non-operation/non-existence. This contradiction vitiated the Department's overall action chain (show-cause notice, cancellation, and appellate dismissal).

Conclusion: Because the foundational allegations were mutually inconsistent, the Court held the show-cause notice, cancellation of registration, and dismissal of appeal to be unsustainable and set them aside.

Issue (iii): Effect of non-disposal/non-disclosure regarding revocation application and sustainability of appellate dismissal

Legal framework (as discussed): The Court considered that an application for revocation of cancellation was filed, and observed the respondents' reply and record regarding what action was taken on that application.

Interpretation and reasoning: The Court accepted that a revocation application had been submitted and recorded that, according to the petitioner, no order had been passed on it. The Court specifically noted that the respondents' reply was "silent" and did not disclose what happened to the revocation application. In this context, the Court treated the continuing non-disposal/non-disclosure as material, and held that the cancellation-related actions could not stand. Further, the appeal had been dismissed on limitation/non-appearance; however, given that the Court found the underlying cancellation process and the Department's action sequence unsustainable on merits (including the contradictory premises and defective inspection foundation), the Court set aside the dismissal of appeal as part of the overall invalid action chain.

Conclusion: The cancellation order and the appellate dismissal were set aside; the petitioner's GST registration was restored.

Limited treatment of subsequent assessment orders

The Court declined to examine the validity of the final assessment orders dated 11.06.2025 under section 63 because they were appealable, the petitioner had an alternative statutory remedy by appeal, and those orders were not challenged by amendment in the petition. The Court left the petitioner to pursue appeals against those orders before the appropriate appellate authority.

Outcome: Delay condonation was rejected and the special leave petitions were dismissed on the ground of delay.

Outcome: The application for condonation of delay was rejected and the special leave petition was dismissed on the ground of delay.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the issues concerning exclusion of specific comparables selected for determining the arm's length price in the assessee's ITeS/BPO and software development segments gave rise to any substantial question of law in view of existing binding precedent.

1.2 Whether foreign exchange fluctuation gain/loss in the context of international transactions is to be treated as operating or non-operating revenue/cost for transfer pricing analysis.

1.3 Whether, in light of a substantial delay of 1265 days in re-filing, interference with the order of the Tribunal was warranted.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Exclusion of comparables and existence of substantial question of law

Interpretation and reasoning

2.1 The Revenue had challenged the Tribunal's exclusion of multiple comparables (in both ITeS and software/IT services segments) on grounds such as significant brand value, extraordinary events (including amalgamation), functional profile differences (including product-based vs. service-based operations, R&D and engineering services), absence of segmental data, and significant related party transactions.

2.2 The Court recorded the Revenue's own fair concession that, save for the question concerning foreign exchange fluctuation (Question 2.2), all proposed questions of law (relating to the exclusion of specific comparables) stood covered against the Revenue and in favour of the assessee by earlier decisions of the Court in respect of the same assessee and other assessees for the same assessment year and on identical comparability questions.

2.3 The Court noted the detailed chart produced, demonstrating that each challenged exclusion of a comparable had already been adjudicated upon in prior binding decisions of the Court for the same assessment year and fact situation, where entities with significant brand value, extraordinary events, different functional profiles, absence of segmental data, or high related party transactions were held to be not comparable to routine captive service providers.

Conclusions

2.4 In view of consistent existing precedent and the Revenue's concession, the Court held that no substantial question of law arose from the Tribunal's exclusion of the impugned comparables, and therefore declined to interfere with the Tribunal's findings on comparability.

Issue 2 - Treatment of foreign exchange fluctuation as operating or non-operating for transfer pricing

Legal framework (as discussed)

2.5 The Court referred to its prior decision in Pr. Commissioner of Income Tax Delhi-I v. Ameriprise India Pvt. Ltd., where it had considered whether foreign exchange gain/loss should be regarded as operating revenue/cost in transfer pricing analysis of international transactions.

Interpretation and reasoning

2.6 The Court noted that the surviving issue (Question 2.2) related to the treatment of foreign exchange fluctuation as operating cost/revenue. It was submitted on behalf of the assessee that even the Transfer Pricing Officer had, in substance, treated such fluctuation as operating in nature.

2.7 The Court extracted and relied upon the reasoning in the Ameriprise decision, where:

(a) The foreign exchange gain/loss was found to arise from trading items emanating from international transactions.

(b) Such gain/loss, being directly linked to the trading items and forming part of the pricing mechanism (including under a cost-plus arrangement), was held to be operating in nature.

(c) The Tribunal in that case was upheld in treating foreign exchange loss as operating cost, and the Court held that no substantial question of law arose.

2.8 Applying the same rationale, the Court held that, for parity of reasons with Ameriprise, the question of treating foreign exchange fluctuation as non-operating did not arise for consideration in the present appeal.

Conclusions

2.9 The Court concluded that foreign exchange fluctuation gains/losses, when directly arising from international trading/service transactions and forming part of the pricing construct, are to be treated as operating revenue/cost for transfer pricing purposes, and consequently no substantial question of law was made out on Question 2.2.

Issue 3 - Effect of delay in re-filing the appeal

Interpretation and reasoning

2.10 The Court recorded that there was a delay of 1265 days in re-filing the appeal.

2.11 Independently of the merits (where no substantial question of law was found to arise), the Court considered this delay as an additional reason not to interfere with the order of the Tribunal.

Conclusions

2.12 The Court held that, in view of (i) absence of any substantial question of law on the transfer pricing issues and (ii) the inordinate delay of 1265 days in re-filing, the appeal did not warrant interference and was liable to be dismissed.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the reopening of assessment under Section 147 of the Income Tax Act for the relevant assessment year, on the ground of excess deduction under Section 80HHC, was invalid as being based on a mere change of opinion.

1.2 Whether, in the facts of a scrutiny assessment under Section 143(3) that is wholly silent regarding a particular claim (here, deduction under Section 80HHC), a presumption of prior consideration and formation of opinion arises so as to bar reassessment on that issue.

1.3 Whether Explanation 2(c)(iii) to Section 147 applied to justify the assumption of jurisdiction for reassessment on the ground that the assessee had been granted "excessive relief" under the Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Validity of reopening under Section 147 and allegation of change of opinion; presumption of prior consideration in a silent scrutiny order

Legal framework (as discussed by the Court)

2.1 The Court proceeded on the basis of Section 147 of the Income Tax Act, 1961, which empowers reassessment where the Assessing Officer has "reason to believe" that income chargeable to tax has escaped assessment, subject to Sections 148 to 153.

2.2 The Court referred to the general presumption, in the context of assessments under Section 143(3), that official acts are regularly performed and that issues arising from the return are presumed to have been considered, with reference to the principle that judicial and official acts are presumed to have been regularly performed.

Interpretation and reasoning

2.3 The original assessment under Section 143(3) was admittedly a scrutiny assessment, but the assessment order was "wholly silent" regarding the assessee's claim for deduction under Section 80HHC. The order contained no discussion, computation, or even reference to Section 80HHC.

2.4 The assessment order also did not indicate any issuance of notice under Section 143(2) or any questionnaire under Section 142(1) specifically raising or examining the Section 80HHC claim, nor any discussion with the assessee on that aspect. The Court found "no such correspondence" or indication of enquiry in the assessment order.

2.5 The Court accepted that, generally, in a scrutiny assessment, there can be a presumption that issues arising from the return of income have been considered by the Assessing Officer. However, it held that this presumption operates "if supported by some evidence of discussion" on those issues, such as references in the order or in notices under Sections 143(2) or 142(1).

2.6 In the present case, because the assessment order was "singularly silent" on Section 80HHC and did not even mention the claim in the body of the order or in the computation, the Court held that there was no material basis to presume that the Assessing Officer had applied his mind to, or formed any opinion on, the deduction under Section 80HHC.

2.7 The Court reasoned that, had the Assessing Officer at least mentioned or partially dealt with the Section 80HHC claim, such mention might have supported a presumption that it was considered, even if briefly. In the complete absence of any reference, the Court concluded that there was no formed opinion on the issue at the original assessment stage.

2.8 Consequently, the Court rejected the assessee's contention that the reopening was merely based on a "change of opinion", because the necessary pre-condition for a change of opinion - an earlier formed opinion - was not established on the record.

2.9 The Court also noted that, in the appellate proceedings before the first appellate authority, the assessee had not raised any ground regarding non-furnishing of reasons for reopening, and held that it was "too late in the day" for the assessee to rely on that ground at this stage. The only ground consistently pursued in appeals related to assumption of jurisdiction under Section 147 and eligibility for the Section 80HHC relief.

2.10 The Court distinguished the decisions cited by the assessee (including those where reassessment was invalidated as based on change of opinion) on the factual basis that, in those cases, the original assessments were preceded by specific notices and detailed correspondence on the very issues later sought to be reopened. Those materials showed application of mind and formation of opinion in the original assessments, unlike the present case where no such prior discussion or enquiry was found.

Conclusions

2.11 The Court held that the original assessment order did not show any consideration or formation of opinion regarding the deduction under Section 80HHC.

2.12 Accordingly, the reassessment could not be characterised as a reopening based on change of opinion, and the assessee's argument that the reassessment was bad in law on that ground was rejected.

2.13 The assumption of jurisdiction under Section 147 was upheld, and the substantial question of law, framed as to whether the reopening was invalid as a change of opinion, was answered against the assessee.

Issue 3: Applicability of Explanation 2(c)(iii) to Section 147 and justification of jurisdiction on ground of "excessive relief"

Legal framework (as discussed by the Court)

2.14 The Court reproduced and relied upon Explanation 2 to Section 147, particularly clause (c), which deems certain situations to be cases where income chargeable to tax has escaped assessment, including:

(i) under-assessment of income;

(ii) assessment at too low a rate;

(iii) income made the subject of "excessive relief" under the Act; and

(iv) computation of excessive loss or allowance.

Interpretation and reasoning

2.15 The reasons recorded for reopening, as extracted in the first appellate order and noted by the Court, showed that the Assessing Officer had examined the computation of deduction under Section 80HHC and concluded that the assessee had omitted to factor in a negative figure arising from one component of the statutory formula. This led to a conclusion that the assessee had claimed "excess deduction" under Section 80HHC to a quantified extent.

2.16 The Court noted that, although an assessment under Section 143(3) had been completed earlier, the computation of income had, by then, resulted in the assessee being given a deduction under Section 80HHC that, on the Department's subsequent working, clearly constituted "excessive relief" under the Act.

2.17 The Court emphasised that the computation in the reassessment order, with respect to the quantum of deduction under Section 80HHC, had attained finality, as the assessee had not succeeded in getting the merits of the computation examined in appeal, and the only surviving question was the legality of the assumption of jurisdiction.

2.18 On these facts, the Court held that the case squarely fell within Explanation 2(c)(iii) to Section 147 - namely, a situation where income had been made the subject of "excessive relief" under the Act - which is expressly deemed to be a case of income escaping assessment.

Conclusions

2.19 The Court concluded that, in light of Explanation 2(c)(iii), the grant of excessive relief by way of deduction under Section 80HHC constituted a statutorily recognised ground for treating the case as one where income had escaped assessment.

2.20 Therefore, the issuance of notice under Section 148 and the consequent assumption of jurisdiction under Section 147 were valid and justified in law.

2.21 On this basis, the substantial question of law was answered in favour of the Revenue, and the appeal was dismissed, affirming the reassessment and the concurrent findings of the lower authorities on jurisdiction.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether a draft assessment order issued under Section 144C(1) of the Income-tax Act, 1961, in the name of an amalgamating company which had ceased to exist on account of amalgamation, is void ab initio.

1.2 Consequentially, whether the Revenue may initiate assessment proceedings against the amalgamated (successor) company, subject to law.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of draft assessment order issued in the name of a non-existent amalgamating company

Legal framework (as discussed):

2.1 The Court referred to Section 144C(1) of the Income-tax Act, 1961 governing draft assessment orders, read with the principles laid down by the Supreme Court in the context of Section 143(2), Section 170 (succession to business otherwise than on death), and Section 292B.

2.2 The Court extracted and relied upon the decision of the Supreme Court in Principal Commissioner of Income Tax v. Maruti Suzuki India Ltd., wherein it was held that (i) a notice under Section 143(2) issued to a non-existent amalgamating company and an assessment order passed against such a company constitute a "substantive illegality" not curable under Section 292B; (ii) upon amalgamation, the amalgamating entity ceases to exist; (iii) jurisdictional notices must be correctly issued in the name of the successor entity; and (iv) participation in the proceedings by the successor cannot operate as an estoppel against law.

Interpretation and reasoning:

2.3 It was undisputed before the Court that the concerned company, in whose name the impugned draft assessment order was issued, had amalgamated with another company with effect from 01.04.2021 and had ceased to exist thereafter.

2.4 The draft assessment order dated 05.03.2025 for AY 2022-23 was issued under Section 144C(1) in the name of the amalgamating company and on its PAN, despite the amalgamation having taken effect much earlier.

2.5 The Court applied the ratio of Maruti Suzuki India Ltd., holding that assessment proceedings cannot be initiated or continued against a non-existent amalgamating company, and that such initiation/continuation is a substantive illegality and not a curable procedural defect.

2.6 The Court also noted that counsel for the Revenue was unable to show anything contrary to the position of law relied upon by the petitioner.

Conclusions:

2.7 The draft assessment order dated 05.03.2025 issued under Section 144C(1) for AY 2022-23 in the name of the amalgamating company, which had stood amalgamated with effect from 01.04.2021, is invalid and is set aside as void ab initio.

Issue 2: Liberty to initiate proceedings against the amalgamated (successor) company

Interpretation and reasoning:

2.8 Having set aside the draft assessment order on the ground that it was issued in the name of a non-existent entity, the Court considered the appropriate consequential order regarding assessment of the successor company.

Conclusions:

2.9 The Court granted liberty to the Revenue to initiate proceedings against the amalgamated company, M/s SMS India Pvt. Ltd., if permissible in law.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether a subsequent judgment of the Supreme Court, rendered after the original order of the Tribunal, can constitute a "mistake apparent from the record" so as to justify rectification under Section 254(2) of the Income-tax Act, 1961.

1.2 What is the scope and limitation of the Tribunal's rectification jurisdiction under Section 254(2) of the Income-tax Act, 1961, particularly vis-à-vis change in law or subsequent judicial precedents.

1.3 Consequentially, whether the rectification order passed by the Tribunal under Section 254(2) sustaining the disallowance of employees' contribution to PF/ESI was valid, and what relief, if any, should be granted.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Subsequent Supreme Court judgment as "mistake apparent from the record" and scope of Section 254(2)

Legal framework (as discussed by the Court)

2.1 The Court noted that Section 254(2) empowers the Tribunal to rectify any "mistake apparent from the record" in its order. This jurisdiction is limited and akin to, though more restricted than, the jurisdiction of a Civil Court under Order XLVII Rule 1 of the Code of Civil Procedure to correct mistakes apparent on the face of the record.

2.2 The Court referred to and relied upon a prior Division Bench decision which had examined Section 254(2) in the context of the same Supreme Court judgment in Checkmate Services (P.) Ltd., and which in turn had discussed: (i) the principle that change in law or subsequent decisions/judgments of a coordinate or larger Bench cannot, by themselves, be grounds for review as laid down by the Constitution Bench in Beghar Foundation; and (ii) the reiteration of this principle by the Supreme Court in Sanjay Kumar Agrawal v. State Tax Officer (1) and Another.

Interpretation and reasoning

2.3 The Court found as an admitted position that, on the date of the Tribunal's original order (4 August 2022), the Tribunal had followed the then prevailing law as declared by the jurisdictional High Court in Ghatge Patil Transports Ltd., which itself followed the Supreme Court's decision in Alom Extrusions Ltd. Under that legal position, deduction for employees' share of PF/ESI was allowable if deposited before the due date of filing the return under Section 139(1).

2.4 The Supreme Court's decision in Checkmate Services (P.) Ltd., which overruled the earlier proposition in Ghatge Patil Transports Ltd. and held that employees' contributions are deductible under Section 36(1)(va) only if deposited within the time prescribed under the respective statutes, was rendered on 12 October 2022, i.e., after the Tribunal's original order.

2.5 The Tribunal, in allowing the Revenue's rectification application and sustaining the disallowance, had relied solely on this subsequent judgment in Checkmate Services (P.) Ltd. as the basis for invoking Section 254(2).

2.6 The Court held that a subsequent change in the legal position by a later judgment, which did not exist when the original order was passed, cannot be treated as a "mistake apparent from the record." The Tribunal cannot be said to have overlooked or failed to follow a Supreme Court or High Court decision that was not in existence at the time of its original decision.

2.7 Applying the ratio of the earlier Division Bench decision (involving the same Checkmate Services (P.) Ltd. judgment), and following the principles laid down in Beghar Foundation and Sanjay Kumar Agrawal, the Court reiterated that:

(a) Change in law or subsequent judicial decisions by themselves cannot be grounds for review; and

(b) The rectification jurisdiction under Section 254(2) is even more restricted than review jurisdiction under Order XLVII Rule 1 CPC and cannot be used to reopen or revisit decisions based solely on subsequent changes in the law.

2.8 The Court also noted its agreement with a Tribunal decision in ANI Integrated Services Ltd., which had rejected similar miscellaneous applications by the Revenue seeking rectification under Section 254(2) on the basis of Checkmate Services (P.) Ltd., applying the same principles on the limited scope of rectification jurisdiction.

2.9 The Court further observed that its view is consistent with other Bench decisions which have quashed rectification orders under Section 254(2) passed in an identical factual and legal backdrop (including decisions subsequently following the same Division Bench ruling).

Conclusions on Issues 1 & 2

2.10 A subsequent Supreme Court judgment rendered after the Tribunal's original order does not constitute a "mistake apparent from the record" and cannot be a valid ground for exercising jurisdiction under Section 254(2) of the Income-tax Act, 1961.

2.11 The Tribunal's rectification jurisdiction under Section 254(2) is narrow and cannot be equated with a power to review its own order on account of subsequent change in law or later judicial pronouncements. Such later decisions cannot, by themselves, justify rectification.

2.12 On the date of the original order (4 August 2022), the Tribunal had correctly applied the then prevailing legal position; hence, there was no mistake apparent from the record, and the Tribunal lacked jurisdiction to entertain and allow the rectification application filed by the Revenue.

Issue 3: Validity of the rectification order and consequential relief

Interpretation and reasoning

3.1 Since the only ground for rectification was the subsequent judgment in Checkmate Services (P.) Ltd., and such subsequent decision could not constitute a "mistake apparent from the record," the Tribunal's order passed under Section 254(2) sustaining the disallowance of employees' contribution to PF/ESI was held to be without jurisdiction and legally unsustainable.

3.2 The Court therefore considered that the appropriate relief was to quash and set aside the impugned rectification order and restore the Tribunal's original order allowing the deduction, which had been passed in accordance with the law then prevailing.

3.3 At the same time, the Court clarified that by setting aside the rectification order and restoring the original order, the Revenue is not precluded from availing any statutory remedy of appeal under Section 260A of the Income-tax Act against the original Tribunal order, if otherwise permissible in law.

Conclusions on Issue 3

3.4 The rectification order passed by the Tribunal under Section 254(2), based solely on the subsequent Supreme Court decision in Checkmate Services (P.) Ltd., is invalid and is quashed and set aside.

3.5 The original order of the Tribunal dated 4 August 2022, granting deduction for employees' contribution to PF/ESI as per the law then prevailing, is restored.

3.6 The Revenue retains liberty, if otherwise entitled in law, to challenge the restored original Tribunal order by way of an appeal under Section 260A of the Income-tax Act, 1961.

1. ISSUES PRESENTED AND CONSIDERED

(1) Whether, on the facts and on the face of the return of income, a claim for deduction under Section 10B of the Income Tax Act, 1961 was made by the assessee in the relevant assessment year.

(2) Whether the disallowance of deduction under Section 10B and the consequent tax computation made in the intimation under Section 143(1) were legally sustainable, having regard to (a) the scope of "prima facie adjustments" under Section 143(1), and (b) the subsequent regular assessment under Section 143(3).

(3) Whether the rectification order purportedly passed under Section 154 on 20.07.2015, but communicated only on 28.01.2022, was valid and effective in law, including with reference to limitation under Section 154(7) and the requirements of Section 154(6).

(4) Consequent to the above, whether any outstanding demand for the relevant assessment year legally subsisted and whether the adjustment of refunds relating to subsequent assessment years against such demand was lawful, and if not, whether the assessee was entitled to refund with interest.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (1): Existence of a claim for deduction under Section 10B in the return of income

Interpretation and reasoning

(a) The Court examined the return of income for the relevant assessment year and found that in "Schedule BP" the profit of Rs. 7,43,13,330/- (Sr. No. 34) was computed, and at Sr. No. 35(iii) of Schedule BP a specific claim for deduction of this profit amount (Rs. 7,43,13,330/-) under Section 10B was made.

(b) The same claim was also specifically reflected at "Sr. No. a" of Schedule 10B of the return. Further, the tax liability in the ITR was computed and paid under Section 115JB (MAT), and no tax was levied under the regular provisions, consistent with the claim of deduction under Section 10B.

(c) The Court noted that although the ITR-V acknowledgement and the ITR utility showed the "total/aggregate income" as Rs. 7,43,13,330/-, this was inconsistent with the explicit claim of deduction in the schedules, and appeared to be an inherent error or glitch in the e-filing/utility, not attributable to the assessee.

(d) The Court also noted contradictions in the Revenue's pleadings: in one affidavit it was admitted that the assessee had claimed the deduction in the relevant schedules, whereas in the additional affidavit it was asserted that no such claim was made. The Court rejected the latter assertion as contrary to the record.

Conclusions

(e) The Court held that the assessee had in fact duly claimed deduction under Section 10B in the return of income, both in Schedule BP and Schedule 10B, and that the contrary stand of the Revenue was untenable.

Issue (2): Validity of the disallowance under Section 143(1) and effect of the regular assessment under Section 143(3)

Legal framework (as discussed)

(a) The Court proceeded on the settled position that under Section 143(1) only "prima facie adjustments" are permissible, and debatable issues or matters requiring deeper factual and legal examination cannot be adjusted at that stage.

(b) The Court referred to the principle (including as recognized in Bajaj Auto Finance Ltd. v. CIT) that debatable or complex issues fall outside the scope of Section 143(1).

Interpretation and reasoning

(c) The intimation under Section 143(1) computed total income at Rs. 7,43,13,330/- and computed tax under the regular provisions, without allowing the Section 10B deduction, thereby raising a demand. The assessee promptly filed rectification applications under Section 154 against this intimation, which, as admitted by the Revenue, were never disposed of.

(d) Subsequently, a regular assessment was conducted under Section 143(3). In those proceedings, the assessee furnished the details of export invoices and Foreign Inward Remittance Certificates to support its claim under Section 10B. The assessment order made no disallowance or adverse inference on Section 10B; in paragraph 5 the total/returned income was shown as Rs. 7,43,13,330/-, but the tax liability was computed exclusively under Section 115JB, resulting in a NIL demand. The Court held that this necessarily implied acceptance of the Section 10B deduction under the regular provisions.

(e) The Court further noted that the subsequent internal Revenue Audit Objection (stating that deduction under Section 10B was "excess" by a specified amount) was itself premised on the fact that the assessment order under Section 143(3) had allowed the deduction under Section 10B. This supported the finding that the Assessing Officer had, in the regular assessment, examined and allowed the deduction.

(f) The Court held that once the Assessing Officer, in the regular assessment, had scrutinized the factual and legal aspects of Section 10B and allowed the deduction, the earlier intimation under Section 143(1) disallowing the deduction could not survive independently. The order under Section 143(3), passed subsequently on the same issue, superseded and absorbed the intimation; the intimation merged into the assessment order.

(g) The Court also held that the question of allowability and quantum of deduction under Section 10B, involving realization of export proceeds, RBI circulars extending the realization period to twelve months, and examination of supporting documents, was a debatable and fact-intensive issue. It therefore could not validly be dealt with as a "prima facie adjustment" under Section 143(1).

Conclusions

(h) The Court concluded that:

* The disallowance of deduction under Section 10B in the intimation under Section 143(1) was beyond the permissible scope of prima facie adjustment.

* The subsequent assessment under Section 143(3), after examining and accepting the deduction under Section 10B and levying tax only under Section 115JB, superseded and absorbed the earlier intimation.

* The impugned adjustment in the intimation under Section 143(1) disallowing the Section 10B deduction could not stand in law and was required to be quashed.

Issue (3): Validity and effectiveness of the rectification order under Section 154 dated 20.07.2015

Legal framework (as discussed)

(a) Section 154(7) requires that a rectification order be passed within four years from the end of the financial year in which the order sought to be amended was passed.

(b) Section 154(6) contemplates service of a notice of demand following rectification, as a precondition to recovery.

Interpretation and reasoning

(c) On the basis of the Revenue's own affidavit, the Court recorded that an order under Section 154, disallowing alleged excess deduction under Section 10B, was prepared on 20.07.2015 but was not communicated to the assessee at that time. It was only annexed and communicated along with a DIN communication on 28.01.2022.

(d) The Court found that almost immediately after 20.07.2015, the Assessing Officer changed his view and, by letter dated 23.07.2015, reported to the Revenue Audit that the claim under Section 10B was correctly allowed (in view of the RBI circular extending the realization period to twelve months) and requested withdrawal of the audit objection. The Principal Commissioner of Income Tax later endorsed this view, and the audit objection was closed.

(e) The Court held that, once the Assessing Officer and the Principal Commissioner had themselves accepted the correctness of the Section 10B deduction and sought withdrawal of the audit objection, it was not open to the Revenue to subsequently contend that the rectification proceedings were based on an incorrect premise or that no claim under Section 10B existed. The Revenue could not, at this stage, invalidate or disown its own earlier statutory steps and internal conclusions.

(f) The Court also noted anomalies and lack of clarity around the alleged rectification order of 20.07.2015: it did not surface or form part of the record in the contemporaneous audit-related correspondence; it was never communicated until 28.01.2022; and, by the Revenue's own stand in the affidavit-in-reply, it had become "redundant" owing to the subsequent change of view in favour of the assessee.

(g) Independently of these factual anomalies, the Court held that if the order is treated as passed/communicated only on 28.01.2022, it is barred by limitation under Section 154(7). Further, without proper service and a consequential notice of demand, no recovery could be made under Section 154(6).

Conclusions

(h) The Court held that:

* The alleged rectification order under Section 154 dated 20.07.2015, communicated on 28.01.2022, was in any event redundant as per the Revenue's own admission, in light of the subsequent acceptance of the assessee's Section 10B claim.

* Even otherwise, the order was barred by limitation under Sections 154(7) and violative of Section 154(6), and hence null, void and of no legal effect.

Issue (4): Subsistence of demand and legality of adjustment of subsequent refunds; entitlement to refund with interest

Interpretation and reasoning

(a) The Court found that after the regular assessment under Section 143(3), tax liability had been computed only under Section 115JB, resulting in a NIL demand. There was no addition or disallowance affecting the Section 10B deduction in that order.

(b) Since the intimation under Section 143(1) was held to be unsustainable (for containing an impermissible prima facie adjustment) and, in any case, to have merged into the subsequent assessment under Section 143(3), the demand generated by that intimation could not validly subsist.

(c) The Court further held that the rectification order under Section 154 could not revive or sustain any demand, being redundant, time-barred and void.

(d) Notwithstanding the above, the Revenue had treated a demand for the relevant assessment year as outstanding and adjusted refunds due for subsequent assessment years (AYs 2016-17, 2018-19 and 2019-20) against such alleged demand. This was done despite the assessee's repeated requests for disposal of its rectification applications against the original intimation.

(e) The Court noted that, given the admitted factual position that (i) the assessee had claimed Section 10B deduction, (ii) the deduction had been examined and accepted in regular assessment, and (iii) the Revenue had itself negated the audit objection and accepted the correctness of the deduction, there was no legal basis to sustain any outstanding demand for the relevant assessment year.

(f) The Court also observed that, in these circumstances, no useful purpose would be served by directing a belated disposal of the rectification applications, as the substantive relief sought therein stood effectively accepted in the assessment and audit proceedings and, by the Court's findings, the intimation-based disallowance could not survive.

Conclusions

(g) The Court held that no valid outstanding demand existed for the relevant assessment year. The adjustment of refunds for AYs 2016-17, 2018-19 and 2019-20 against such alleged demand was unsustainable.

(h) The Court quashed the impugned adjustment (disallowance of Section 10B) in the intimation under Section 143(1), declared the rectification order under Section 154 to be null and void, and directed that the amounts adjusted from the assessee's later-year refunds be repaid to the assessee with applicable interest, within a specified period.

Issues: (i) Whether reassessment notices issued to a person treated as agent of a non-resident were barred by limitation under the special time limit applicable to such cases. (ii) Whether assessments framed treating the assessee as agent were invalid when no notice and order under the statutory provision governing treatment as agent had been issued for the relevant assessment years.

Issue (i): Whether reassessment notices issued to a person treated as agent of a non-resident were barred by limitation under the special time limit applicable to such cases.

Analysis: The special limitation rule for a person treated as the agent of a non-resident applies where reassessment is proposed in that capacity. The notices for the relevant years were issued beyond two years from the end of the assessment years concerned. Since the admitted facts showed expiry of the prescribed period, the general limitation argument could not prevail over the specific statutory restriction.

Conclusion: The reassessment notices for the affected assessment years were time barred and the issue was decided against the Revenue.

Issue (ii): Whether assessments framed treating the assessee as agent were invalid when no notice and order under the statutory provision governing treatment as agent had been issued for the relevant assessment years.

Analysis: The statutory scheme requires that a person cannot be treated as an agent of a non-resident without an opportunity of being heard on liability to be so treated. The provision governing representative assessee status was held to be analogous to the earlier provision under the 1922 Act, under which the Supreme Court had held that status must first be fixed before assessment is framed. As no notice or order treating the assessee as agent had been issued for the later assessment years, the procedural safeguard built into the statute was not complied with.

Conclusion: The assessments made without prior notice and determination of agent status were invalid and the issue was decided against the Revenue.

Final Conclusion: The statutory preconditions for reassessment and for treating the assessee as a representative assessee were not satisfied, so the assessments could not be sustained.

Ratio Decidendi: Where a statute requires prior notice and opportunity of hearing before a person can be treated as agent of a non-resident, assessment in that capacity cannot be made unless that statutory precondition is first fulfilled, and the special reassessment limitation applicable to such agents must be strictly observed.

1. ISSUES PRESENTED AND CONSIDERED

(i) Whether, for a film distribution business claiming deduction/expenditure governed by Rule 9B, the maintenance of books of account and crediting of realisations therein under Rule 9B(5) is a mandatory pre-condition for allowance of deduction and computation of income.

(ii) Whether, in the admitted absence of books of account, the assessee can nonetheless secure allowance of the claimed expenditure/loss on the basis of alternative evidence (including bank statements and vouchers), and whether such material can substitute the statutory requirement of books under Rule 9B(5).

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Mandatory nature of Rule 9B(5) requirement of books of account

Legal framework (as discussed by the Court): The Court examined Rule 9B(5) of the Income Tax Rules, 1962, which conditions allowance of deduction in respect of distribution rights expenditure upon crediting the relevant realisations/amounts "in the books of account maintained" by the film distributor in the year in which deduction is admissible.

Interpretation and reasoning: The Court held that Rule 9B(5) is "categoric" that computation of income for a film distribution company, for purposes of the deduction under Rule 9B, must be based on its books of account. The conditions in Rule 9B(5)(a), including sub-clauses (i)-(iii), were treated as governed by the requirement that the relevant amounts be credited in the books of account maintained by the assessee. On this reading, maintenance of books is not a dispensable procedural formality but a substantive statutory condition attached to admissibility of the deduction.

Conclusion: The Court conclusively decided that compliance with Rule 9B(5)-including maintenance of books of account and requisite crediting therein-is mandatory, and without such books the deduction/expenditure governed by Rule 9B cannot be allowed.

Issue (ii): Whether bank statements/other evidence can substitute for books and justify allowance of loss/expenditure

Legal framework (as discussed by the Court): The Court applied the same Rule 9B(5) condition to the assessee's claim that, despite absence of books, bank statements and other supporting documents should suffice to compute income and allow the loss/expenditure.

Interpretation and reasoning: The Court rejected the contention that alternative evidence could replace the statutory requirement. It reasoned that where the assessee has admittedly not maintained books of account, "there is no question of proceeding on the basis of other evidences" for computation of income under Rule 9B. The Court drew a clear distinction between (a) evidence that may supplement computation based on books, and (b) evidence being used to substitute the books "in full." The latter was held impermissible because Rule 9B(5) expressly ties admissibility of deduction to crediting realisations in the books of account maintained. Consequently, allowance of the claimed loss/expenditure was denied notwithstanding production of bank statements and basic documents/vouchers.

Conclusion: The Court held that, in the absence of maintained books of account, bank statements and other documents cannot substitute for books to satisfy Rule 9B(5), and the loss/expenditure claimed was not allowable. The Tribunal's view treating Rule 9B as mandatory and restoring total disallowance was upheld; the questions were answered in favour of the Revenue.

1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the appellate direction to allow full credit of tax deducted at source (TDS) as reflected in Form 26AS, but only after verification under section 199 read with Rule 37BA, warranted interference in appeal.

(ii) Whether any sustainable grievance survived to the Revenue when the first appellate authority merely restored the matter to the assessing authority for due verification before granting TDS credit.

(iii) Whether cross-objections, expressly stated to be "not pressed", required any adjudication on merits.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i) & (ii): Interference with direction to allow TDS credit as per Form 26AS subject to verification

Legal framework (as discussed by the Tribunal): The Court considered the first appellate authority's direction requiring verification of TDS credit and correlation of the income with gross receipts in accordance with section 199 read with Rule 37BA, while dealing with restriction of TDS credit made in an intimation under section 143(1).

Interpretation and reasoning: The Court noted that the first appellate authority held the restriction of TDS credit in the intimation under section 143(1) to be erroneous and not sustainable. However, the appellate relief was not unconditional: the matter was restored to the assessing authority with a direction to allow full TDS credit reflected in Form 26AS only after due verification of "proper TDS" and whether the income related to the gross receipt was in accordance with section 199 read with Rule 37BA. The Court treated this as a remand for verification rather than a final grant without checks, and therefore found that the Revenue, in substance, retained the opportunity to verify and apply the statutory conditions before allowing credit.

Conclusions: Since the first appellate authority directed verification by the assessing authority before allowing credit, the Court held that the Revenue "should not have any grievance" and found no merit in the grounds seeking to set aside the appellate order. The Revenue's appeals for all relevant years, raising identical grounds, were dismissed on the same reasoning.

Issue (iii): Cross-objections not pressed

Interpretation and reasoning: The Court recorded that the cross-objections were expressly not pressed by the assessee and that the departmental representative had no objection to such withdrawal.

Conclusions: The cross-objections were dismissed as "not pressed", without adjudication on merits.

1. ISSUES PRESENTED AND CONSIDERED

(i) Whether interest disallowance under section 14A, computed under Rule 8D on the premise that borrowed funds financed exempt-income-yielding investments, was justified when the assessee had interest-free funds exceeding such investments and the Assessing Officer made no specific finding of diversion of interest-bearing funds.

(ii) Whether the Rule 8D component for indirect administrative expenditure at 0.5% of average investments was liable to be interfered with on the facts decided by the Court.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Interest disallowance under section 14A / Rule 8D-presumption where interest-free funds exceed exempt investments

Legal framework: The Court examined section 14A and the application of Rule 8D in the context of disallowing interest expenditure allegedly attributable to earning exempt income. The Court applied the principle that where sufficient interest-free funds are available, a presumption arises that investments yielding exempt income are made out of such interest-free funds.

Interpretation and reasoning: The Court considered the financial statements and found that interest-free funds (paid-up capital and reserves/other funds) were approximately Rs. 20.30 crore as on 31/03/2013 and increased to about Rs. 22.07 crore as on 31/03/2014. Against this, investments (other than interbank deposits) were about Rs. 3.33 crore as on 31/03/2013 and Rs. 5.27 crore as on 31/03/2014. The Court further noted the absence of any specific observation by the Assessing Officer that interest-bearing funds were actually applied for making investments that fetched exempt income. In these circumstances, the Court held that the presumption operated in favour of the assessee that such investments were made out of interest-free funds, rendering the interest disallowance unjustified.

Conclusions: The interest disallowance of Rs. 28,78,790/- under section 14A was held to be uncalled for and was deleted; the appellate finding sustaining it was set aside to that extent.

Issue (ii): 0.5% average investment disallowance under Rule 8D-sustainability

Interpretation and reasoning: The Court recorded that, apart from the interest component, the Assessing Officer had computed a further disallowance at 0.5% of average investments (quantified at Rs. 2,87,590/-). The Court's interference was confined to the interest component based on availability of interest-free funds and lack of a finding of diversion of borrowed funds; no basis was found in the decided reasoning to disturb the remaining Rule 8D disallowance.

Conclusions: The remaining disallowance under section 14A of Rs. 2,87,590/- was sustained, and relief was granted only to the extent of deleting the interest disallowance.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the delay of 319 days in filing the appeal before the Tribunal demonstrated "sufficient cause" so as to warrant condonation and admission of the appeal.

1.2 Whether an ad hoc addition of 1% of closing stock/work-in-progress, made without rejection of books of account and without a rational basis, is legally sustainable where the assessee has furnished detailed supporting records for valuation.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Condonation of 319 days' delay in filing appeal

Legal framework (as discussed by the Tribunal)

2.1 The Tribunal proceeded on the principle that delay in filing an appeal may be condoned where "sufficient cause" is shown and where the delay is not deliberate, mala fide or attributable to negligence. The Tribunal considered the assessee's sworn affidavit explaining the reasons for delay and noted that these reasons were advanced in the context of the liberal construction of "sufficient cause" developed in judicial precedents.

Interpretation and essential reasoning

2.2 The Tribunal noted the assessee's specific assertions: lack of sufficient knowledge of taxation matters; unawareness of the appellate order for some time; absence of staff to handle tax-related compliance; and subsequent appointment of a new consultant who then took steps to file the appeal. The assessee averred that the delay was wholly unintentional and beyond his control.

2.3 The Tribunal recorded that it had heard both parties on the condonation application and that the departmental representative did not raise any strong objection to condonation of delay.

2.4 On appraisal of the affidavit and surrounding circumstances, the Tribunal found that the assessee was prevented by "genuine reasons" from filing the appeal within the prescribed time and that there was no indication of mala fides or deliberate inaction.

Conclusions

2.5 The Tribunal held that "sufficient cause" was made out, condoned the 319 days' delay in filing the appeal, and admitted the appeal for adjudication on merits.

Issue 2: Legality of ad hoc 1% addition to closing stock/work-in-progress

Legal framework (as discussed by the Tribunal)

2.6 The Tribunal proceeded on settled principles that: (i) additions to income must have a rational and objective basis; (ii) ad hoc estimations without supporting material or reasoning are not sustainable; and (iii) where the books of account are not rejected, the valuation of closing stock/work-in-progress disclosed therein cannot be arbitrarily disturbed without cogent grounds.

Interpretation and essential reasoning

2.7 The Tribunal summarised the factual matrix: the assessee, engaged in civil contract work for various public bodies, had ongoing projects spanning multiple years. As on the relevant year-end, closing work-in-progress was recorded and the assessee had furnished job-wise details and running bills to the assessing authority.

2.8 The Tribunal noted that, during assessment, the assessee had submitted complete details relating to closing work-in-progress, including running bills for work executed, which were raised and received in the first quarter of the subsequent financial year. These bills were prepared by the concerned departments and corresponded to the work done up to the year-end.

2.9 The Tribunal further noted that the assessee had produced bank statements for the first quarter of the subsequent year, demonstrating that payments relating to purchases and work reflected in closing work-in-progress were actually received. This material was before the assessing authority and went directly to the support of the valuation adopted by the assessee.

2.10 Despite these details, the assessing authority estimated an addition to income equal to 1% of the figure of closing stock, which was upheld by the first appellate authority on the reasoning that the assessee had not furnished explanatory working of closing stock valuation based on quantitative details and rates, and that the valuation could not be conclusively relied upon. The first appellate authority accepted the assessing authority's view that there was "revenue leakage" and that 1% was an appropriate ad hoc figure.

2.11 The Tribunal expressly recorded that the assessing authority had not rejected the assessee's books of account. Notwithstanding this, the authority proceeded to estimate closing stock at 1% over and above the disclosed figure.

2.12 Evaluating this approach, the Tribunal held that the estimation of closing stock at 1% lacked any rational or objective basis. It found that the assessee's closing work-in-progress was supported by contemporaneous documentary material - running bills and subsequent bank receipts - and no defect in the books of account or in the basic correctness of the closing stock figure had been established.

2.13 The Tribunal characterised the 1% enhancement of closing stock/work-in-progress as arbitrary and devoid of any justifiable foundation, observing that in the absence of rejection of books and in the face of documentary support, such an ad hoc addition could not be sustained in law.

Conclusions

2.14 The Tribunal concluded that the 1% addition to closing stock/work-in-progress amounting to Rs. 5,67,458/-, as sustained by the first appellate authority, was arbitrary, without rational basis, and legally unsustainable.

2.15 The Tribunal set aside the impugned appellate order to the extent it upheld this addition and directed deletion of the entire addition made on account of 1% enhancement of closing stock/work-in-progress.

2.16 Consequently, the appeal was allowed on merits, with the questioned addition fully deleted.

Issues: Whether interest received on compensation or enhanced compensation from land acquisition is taxable as income from other sources in the year of receipt and whether the exemption under section 10(37) applies to the interest component.

Analysis: The issue was held to be covered by the Coordinate Bench decision in Ajay Kumar. The reasoning adopted was that, after insertion of section 56(2)(viii) and section 145B(1), interest on compensation or enhanced compensation is taxable as income from other sources in the year of receipt. The exemption available for compensation on agricultural land under section 10(37) was not extended to the interest component. The assessee did not show any distinguishing facts or contrary legal position warranting departure from the settled view. The question of TDS credit was also treated as dependent on the corresponding income being offered to tax.

Conclusion: The interest component was held taxable and the addition was sustained against the assessee.

Final Conclusion: The appeal failed because the interest received on compensation was treated as taxable receipt under the amended income-tax regime and the order of the lower authority was affirmed.

Ratio Decidendi: Interest on compensation or enhanced compensation is taxable as income from other sources in the year of receipt under section 56(2)(viii) read with section 145B(1), and the exemption applicable to compensation does not automatically extend to the interest component.

Issues: Taxability of interest on enhanced compensation received on compulsory acquisition of agricultural land, and the availability of exemption under Section 10(37) of the Income-tax Act, 1961.

Analysis: The appeal turned on whether the interest component on enhanced compensation falls within the charging framework for interest income introduced by Section 56(2)(viii) of the Income-tax Act, 1961, together with the receipt-based rule in Section 145B(1). The assessee relied on earlier authorities to contend that interest under Section 28 of the Land Acquisition Act forms part of compensation, but the Tribunal followed the coordinate bench decision in Ajay Kumar, which had already held that such interest is taxable as income from other sources in the year of receipt. The Tribunal also accepted that the exemption under Section 10(37) does not extend to the interest component and that the claim for TDS credit cannot be separated from the corresponding taxable receipt.

Conclusion: The interest on enhanced compensation was held taxable, the exemption claim was rejected, and the addition sustained by the lower authorities was upheld.

Issues: (i) Whether the variable licence fee paid under the 1999 telecom policy and the spectrum usage charges were to be treated as capital expenditure amortisable under section 35ABB or as revenue expenditure deductible under section 37(1); (ii) Whether the subscriber verification penalty was hit by the bar in Explanation 1 to section 37(1); (iii) Whether the discount on prepaid coupons given to distributors attracted section 194H and consequential disallowance under section 40(a)(ia).

Issue (i): Whether the variable licence fee paid under the 1999 telecom policy and the spectrum usage charges were to be treated as capital expenditure amortisable under section 35ABB or as revenue expenditure deductible under section 37(1).

Analysis: The variable annual licence fee paid under the 1999 policy was held to be part of the consideration for the right to establish, maintain and operate the telecom business and, following the binding ruling of the Supreme Court, could not be bifurcated into capital and revenue components merely because the payment mode changed. It was therefore required to be amortised under section 35ABB. The spectrum usage charges stood on a different footing. They were not the subject matter of the Supreme Court ruling on licence fee, and the Tribunal followed the later decisions recognising such charges as revenue in nature, including the position accepted in the assessee's subsequent assessments and comparable tribunal and High Court rulings.

Conclusion: The variable licence fee was held to be capital in nature and amortisable under section 35ABB, while spectrum usage charges were held to be allowable as revenue expenditure; the issue was partly decided in favour of the Revenue and partly in favour of the Assessee.

Issue (ii): Whether the subscriber verification penalty was hit by the bar in Explanation 1 to section 37(1).

Analysis: The penalty was paid for violation of KYC and subscriber verification norms under the licence framework. The Tribunal treated it as a contractual/commercial levy arising from breach of licence conditions and not as an expenditure incurred for an offence or for a purpose prohibited by law. Since no criminal liability or prosecution was shown, Explanation 1 to section 37(1) was not attracted.

Conclusion: The subscriber verification penalty was held to be allowable as a business expenditure and the disallowance was rejected.

Issue (iii): Whether the discount on prepaid coupons given to distributors attracted section 194H and consequential disallowance under section 40(a)(ia).

Analysis: The Tribunal followed the Supreme Court's treatment of the distributor arrangement as one of independent purchase and resale rather than agency. On that basis, the discount allowed to distributors was not commission within the meaning of section 194H, and no obligation to deduct tax at source arose. Consequently, section 40(a)(ia) could not be invoked.

Conclusion: The discount on prepaid coupons was held not to attract section 194H, and the corresponding disallowance under section 40(a)(ia) was deleted.

Final Conclusion: The appeals succeeded only in part, with the licence fee component decided against the assessee, while the spectrum usage charges, subscriber verification penalty, and distributor discount issues were decided in the assessee's favour.

1. ISSUES PRESENTED AND CONSIDERED

(i) Whether adjudication pursuant to the SCN was barred under Section 28(9) of the Customs Act, 1962 on the ground that the order was not passed within one year and the extension, if any, was not communicated to the noticee.

(ii) Whether non-communication of an extension granted under Section 28(9) is a fatal defect requiring the Court to interdict adjudication and/or set aside the adjudication outcome.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i) & (ii): Effect of non-communication of extension under Section 28(9) on validity of adjudication

Legal framework (as discussed by the Court): The Court examined Section 28(9) of the Customs Act, 1962, including its proviso permitting an officer senior in rank to extend the adjudication period, and contrasted it with Section 110(2), which expressly requires that the person from whom goods were seized be informed before expiry of the period if extension is granted.

Interpretation and reasoning: The Court found that the statutory schemes of Section 28(9) and Section 110(2) are not identical. While Section 110(2) contains an explicit stipulation to "inform the person" before expiry of the specified period when extending time, Section 28(9) contains no such stipulation mandating communication of the extension order to the noticee. On that construction, the Court held that absence of intimation/communication of the extension order does not, by itself, invalidate the continuation or completion of adjudication under Section 28(9). The Court also noted, as a matter of fairness and administrative propriety, that the Department "ought to intimate" any extension, but treated non-intimation as non-fatal because the statute does not mandate it.

Conclusions: The Court concluded that the petitioner failed to establish a ground for interference on the basis of non-communication of the extension. Since communication is not mandated by Section 28(9), adjudication was not vitiated merely because the extension order was allegedly not intimated. Consequently, no writ interference was warranted, especially where an appealable adjudication order had been passed and the petitioner had not substantively contested the SCN on merits before the adjudicating authority.

Relief and directions flowing from the conclusions: The Court declined to interdict the adjudication and held that the adjudication order is appealable. It permitted filing of an appeal within one month, directing that if filed within that period it shall not be treated as time-barred and shall be decided on merits; all rights and contentions were left open.

Issues: (i) Whether the respondents satisfied the conditions for exemption from customs duty under the EXIM Policy and the connected exemption notification, including the minimum value addition requirement; (ii) Whether the imported goods and the respondents' conduct attracted confiscation and penalty for breach of licence conditions and misrepresentation.

Issue (i): Whether the respondents satisfied the conditions for exemption from customs duty under the EXIM Policy and the connected exemption notification, including the minimum value addition requirement.

Analysis: The exemption was available only if the imported materials were subjected to genuine processing or manufacture resulting in at least 33% value addition and an increase in the intrinsic value of the exported product. On the record, the actual value addition was only 5.18%, and the increase in FOB value was found to be paper value driven by the rupee-rouble arrangement rather than any real enhancement of the product. The conditions of the exemption were therefore not met.

Conclusion: The issue is answered against the respondents. They were not entitled to exemption from customs duty.

Issue (ii): Whether the imported goods and the respondents' conduct attracted confiscation and penalty for breach of licence conditions and misrepresentation.

Analysis: The respondents had obtained the advance licence on declarations that did not reflect the actual position, and the goods imported were found to have been cleared and exported without satisfying the declared manufacturing and value-addition requirements. In fiscal exemption matters, the beneficiary must strictly comply with every condition, and failure to do so renders the benefit unavailable. The non-compliance also brought the goods within the confiscatory provisions and justified the levy of penalty.

Conclusion: The issue is answered in favour of the Revenue. Confiscation and penalty were sustainable.

Final Conclusion: The Tribunal's order granting relief to the respondents could not be sustained, and the customs adjudication based on breach of exemption conditions and misrepresentation stood restored in substance.

Ratio Decidendi: A party claiming exemption from customs duty must strictly prove fulfilment of every prescribed condition, and where the stipulated value addition is not achieved in substance, the exemption fails and the goods become liable to confiscation and penalty for breach of the licence and notification conditions.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether clause (ii) of Condition No. 6 in Notification No. 50/2023-Customs applies to exporters who do not export goods under irrevocable Letters of Credit, and whether non-fulfilment of such clause disentitles them from exemption despite fulfilment of clause (i).

1.2 Whether clauses (i) and (ii) of Condition No. 6 must be mandatorily satisfied conjunctively for availing NIL export duty under serial No. 2B of Notification No. 55/2022-Customs as amended.

1.3 Whether denial of the exemption in such circumstances results in unconstitutional discrimination and unreasonable restriction under Articles 14 and 19(1)(g) of the Constitution, and how the exemption notification should be interpreted to avoid constitutional infirmity.

1.4 Whether the petitioner, having paid export duty under protest, is entitled to refund with interest upon being held eligible for exemption.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Applicability of clause (ii) of Condition No. 6 and conjunctive satisfaction of sub-conditions

Legal framework

2.1 Export duty at 20% on parboiled rice (CTH 1006 30 10) was imposed under Section 8(1) of the Customs Tariff Act, 1975 by Notification dated 25.08.2023 (Sl. No. 6C in Second Schedule).

2.2 By Notification No. 50/2023-Customs dated 25.08.2023, issued under Section 25(1) of the Customs Act, 1962, Notification No. 55/2022-Customs was amended to insert serial Nos. 2A and 2B granting NIL rate of duty for parboiled rice:

(a) Serial No. 2A - NIL rate subject to Condition No. 5 (rate to come into force from 16.10.2023);

(b) Serial No. 2B - NIL rate subject to Condition No. 6, operative between 25.08.2023 and 15.10.2023.

2.3 Condition No. 6 requires that:

(i) goods meant for export shall have entered the customs station for exportation on or before 25.08.2023 and "an order permitting clearance has not been issued"; and

(ii) goods meant for export "shall be backed by irrevocable Letter(s) of Credit" opened before 25.08.2023, with the message exchange/swift date before 25.08.2023 and authentication by the recipient bank.

Interpretation and reasoning

2.4 The Court records that export through irrevocable LoC is neither compulsory nor statutorily mandated; multiple other modes of export realisation (open account, documentary collection, wire transfer, cash-upon-delivery, etc.) are lawful and recognised. This is not disputed by the respondents.

2.5 On the text of clause (ii), the Court notes that it is "clearly predicated on the existence of an irrevocable LoC" and "presupposes a factual situation where an LoC exists". Where no LoC exists, "the question of compliance with such a condition does not arise".

2.6 The Court holds that the law does not compel an exporter to "first create an LoC merely to satisfy a condition meant to regulate those who already operate under that mechanism". To insist that non-LoC exporters must retrospectively have an LoC opened before 25.08.2023 would amount to rewriting the notification and offend the maxim lex non cogit ad impossibilia.

2.7 On the respondents' contention that the use of "and" between clauses (i) and (ii) makes both conjunctively mandatory, the Court finds this "over-simplistic and legally untenable". While accepting that exemption notifications must be strictly construed, the Court emphasises that conditions must be read contextually and purposively, not mechanically, and that "strict interpretation does not mean mechanical interpretation divorced from legislative intent".

2.8 Referring to the decision in Mangalore Chemicals and Fertilizers Ltd., the Court reiterates that not all conditions in an exemption notification are of equal weight; purely technical conditions should not defeat substantive entitlement. The Court treats clause (ii), in the context of non-LoC exporters who have already realised export proceeds, as a technical condition whose non-fulfilment cannot negate substantive eligibility once the underlying object of the exemption is satisfied.

2.9 The Court further holds that the purpose of Condition No. 6 is to protect exporters whose transactions were already irrevocably committed before the sudden levy of export duty on 25.08.2023-

(a) clause (i) deals with physical commitment (goods having entered the customs station before 25.08.2023, without let export order);

(b) clause (ii) deals with financial commitment (LoCs opened before 25.08.2023).

2.10 Where an exporter, though not using LoC, has demonstrably entered goods into the customs station before 25.08.2023 and has actually realised export proceeds through other lawful means, the substantive object of the exemption (pre-levy commitment and realisation of proceeds) is fulfilled. Denial of exemption in such a case would "elevate form over substance", which the Court finds impermissible in fiscal jurisprudence.

Conclusions on Issues 1 & 2

2.11 Clause (ii) of Condition No. 6 is applicable only to those exporters whose exports are backed by irrevocable Letters of Credit; it is inapplicable to exporters who do not transact through LoC.

2.12 In the case of non-LoC exporters, non-fulfilment of clause (ii) does not disentitle them from exemption under serial No. 2B if clause (i) is fulfilled and export proceeds are realised through other legitimate modes.

2.13 The petitioner, having satisfied clause (i) of Condition No. 6 and realised export proceeds, is entitled to NIL export duty under Notification No. 50/2023-Customs notwithstanding the absence of an LoC.

Issue 3: Constitutional considerations and interpretative approach

Interpretation and reasoning

2.14 The Court notes that the respondents' interpretation, which would deny exemption solely on the ground that exports were not backed by LoC, creates an unreasonable and hostile classification between:

(a) exporters using LoCs; and

(b) exporters using other lawful modes of payment,

even though both are similarly situated with regard to the object of the exemption, namely, realisation of export proceeds for exports committed prior to levy.

2.15 Such a classification, lacking intelligible differentia and rational nexus with the stated object, is held to be contrary to Article 14.

2.16 The Court further holds that "indirectly compelling exporters to adopt a particular mode of trade by attaching fiscal consequences" amounts to an unreasonable restriction on the freedom to carry on trade and business under Article 19(1)(g), since LoC is not mandated by law and other modes are lawful and effective.

2.17 It is also noted that the LoC-based condition operated only in a short interregnum (25.08.2023 to 15.10.2023), after which the exemption was made unconditional. This supports reading the condition as situational/protective, not punitive or exclusionary, and reinforces the need to adopt an interpretation that avoids constitutional doubts where a constitutionally compliant construction is reasonably available.

Conclusion on Issue 3

2.18 To avoid unconstitutional discrimination and unreasonable restriction, Condition No. 6 is interpreted so that clause (ii) applies only to LoC-based transactions; non-LoC exporters who otherwise fulfil clause (i) and have realised export proceeds cannot be denied the benefit of exemption on the sole ground of absence of LoC.

2.19 In view of this interpretative conclusion, the Court, having granted relief on this basis, leaves open the wider challenge to the validity of clause (ii) itself and does not adjudicate prayer seeking quashing of that clause.

Issue 4: Entitlement to refund of export duty with interest

Interpretation and reasoning

2.20 It is undisputed that the petitioner paid export duty at 20% under protest for the consignments in question.

2.21 Having found that the petitioner is legally entitled to exemption (NIL duty) under Notification No. 50/2023-Customs, the levy and collection of export duty in this case is without authority under the applicable exemption.

Conclusions on Issue 4

2.22 The petitioner is entitled to refund of the export duty of Rs. 2,01,28,295/- already deposited under protest.

2.23 The respondents are directed to refund the said amount along with interest in accordance with law within eight weeks from receipt of a certified copy of the judgment.

1. ISSUES PRESENTED AND CONSIDERED

(i) Whether seizure of Indian currency by Customs under Section 110 of the Customs Act, 1962 is governed by Section 110(1) and 110(2) relating to "goods" or by Section 110(3) relating to "documents and things".

(ii) Whether, upon failure to issue a show cause notice within the period prescribed under Section 110(2), the Customs Department is legally bound to return the seized currency.

(iii) Whether the petitioner, in whose financial records the seized currency is reflected, is entitled to reclaim the currency even though it was physically seized from the petitioner's father.

2. ISSUE-WISE DETAILED ANALYSIS

(i) Characterisation of seized currency under Section 110: "goods" vs. "things"

Interpretation and reasoning: The Court analysed the scheme of Section 110 and the distinction between sub-sections (2) and (3). Section 110(2) is linked to seizure of "goods" under Section 110(1) and prescribes a mandatory time limit for issuance of show cause notice, failing which the goods must be returned. Section 110(3) pertains to seizure of "documents or things" useful or relevant to any proceeding and carries no such time limit.

The Court held that Customs can exercise powers only in relation to violations arising out of exports or imports and only within the framework of the Customs Act. It was undisputed that the seizure in this case was made under Section 110 of the Act. The Court referred to the statutory definition of "goods" which expressly includes "currency". On that basis, the Court concluded that whenever currency is seized by Customs in exercise of powers under Section 110, such currency necessarily falls within "goods" seized under Section 110(1), and not as "things" under Section 110(3).

The Court rejected the respondent's argument that Section 110(1) applies only where currency is intercepted during physical carriage by a passenger across borders and that in other situations it should be treated as "things" under Section 110(3). The Court held that the place or manner of seizure (from a passenger, or from premises such as those of Mittalal) is immaterial; once the Customs Department purports to act under Section 110 and the subject of seizure is currency, it is to be treated as "goods" for the purpose of Section 110(1) and consequently Section 110(2).

Conclusion: The seizure of the Indian currency in this case is governed by Section 110(1) and Section 110(2) as seizure of "goods", and cannot be justified under Section 110(3) as seizure of "things". Section 110(2) is therefore attracted in full.

(ii) Effect of non-issuance of show cause notice within time under Section 110(2)

Legal framework (as applied by the Court): Section 110(2) mandates that where goods are seized under Section 110(1) and no notice under Section 124(a) is issued within six months from seizure, the goods shall be returned to the person from whose possession they were seized, subject to a permissible extension of up to another six months by the Principal Commissioner/Commissioner with reasons recorded and prior intimation to such person.

Interpretation and reasoning: The Court noted the admitted facts: (a) no show cause notice was issued to either the petitioner or Mittalal within the statutory period after seizure of the currency; (b) there was no order extending the period under Section 110(2); and (c) no criminal complaint had been filed by Customs against the petitioner or Mittalal, although action had been taken only against a Customs appraiser in a related bribery matter.

Having already held that the seized currency falls under "goods" governed by Section 110(1) and (2), the Court held that strict compliance with Section 110(2) was mandatory. Since no show cause notice was issued within the prescribed period and no valid extension was granted, the statutory consequence necessarily followed: the seized goods (currency) must be returned to the person from whose possession they were seized.

The Court further held that decisions of other High Courts, which directed return of seized currency where Section 110(2) was not complied with, were squarely applicable to the present facts, reinforcing that the seizure becomes bad in law upon such non-compliance.

Conclusion: Due to the Customs Department's failure to issue a show cause notice within the time prescribed under Section 110(2) or to obtain a valid extension, the continued retention of the seized currency was illegal. The seizure memo was liable to be quashed and the currency had to be returned to the concerned person.

(iii) Entitlement of the petitioner to the seized currency

Interpretation and reasoning: The respondent argued that the currency was seized from the petitioner's father, Mittalal, and not from the petitioner, and therefore the petitioner was not entitled to seek its return. The Court examined the documents annexed to the writ petition and the averments in the supporting affidavit. It found that the petitioner had satisfactorily established that the seized currency belonged to him, as it was duly reflected in his Income Tax Return and balance sheet. The filial relationship between the petitioner and Mittalal (father and son) was undisputed.

On this basis, the Court concluded that, notwithstanding the physical seizure being from the custody of the father, the beneficial ownership of the currency was with the petitioner, and the relief of return could appropriately be directed in favour of the petitioner.

Conclusion: The petitioner successfully proved ownership of the seized currency through financial records and the admitted relationship with the person from whose premises it was seized, and was therefore entitled to its return pursuant to Section 110(2).

Overall Disposition and Directions

Reasoning and conclusion: The Court held that the Customs Department, having acted under Section 110 of the Customs Act and seized "currency" which statutorily falls within "goods", was bound to comply with Section 110(2). Non-issuance of show cause notice within the prescribed time rendered the continued seizure unsustainable in law. Consequently, the impugned seizure memo was quashed.

The Court directed the respondent to return the seized currency to the petitioner within eight weeks from receipt of the order. At the same time, the Court preserved the authority of the Customs Department by granting liberty to initiate fresh proceedings, if warranted, strictly in accordance with the provisions of the Customs Act, 1962 and in accordance with law.

1. ISSUES PRESENTED AND CONSIDERED

1. Whether an importer who used a fraudulently manipulated duty credit scrip to discharge customs duty remains liable for the demanded duty, interest, and penalty under section 114A, notwithstanding the importer's plea of bona fide purchase and absence of involvement in the manipulation.

2. Whether a penalty under section 114AA can be sustained against an importer who used the manipulated scrip, when the record does not establish that the importer knowingly or intentionally used a false or incorrect document or declaration.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Duty demand, interest, and penalty under section 114A where duty credit scrip was fraudulently manipulated

Legal framework (as addressed by the Court): The Tribunal proceeded on the basis that duty was demanded under section 28(4) with interest under section 28AA, and an equal penalty was imposed under section 114A, arising from duty payment through a fraudulently enhanced duty credit scrip registered in the Customs EDI system.

Interpretation and reasoning: The Tribunal treated the controlling question-liability of an importer who used a fraudulently manipulated scrip though not involved in the manipulation-as already answered against importers by the Supreme Court decision referred to in the order. The Tribunal noted that the appellant's scrip was originally issued for a small value but was fraudulently enhanced and thereafter used by multiple importers, including the appellant, to pay customs duty far exceeding the original value. During hearing, the appellant did not press the challenge to the duty demand and penalty under section 114A in view of the Supreme Court ruling.

Conclusions: The Tribunal upheld the duty demand with interest and sustained the penalty under section 114A, thereby maintaining the "rest of the impugned order" on these aspects.

Issue 2: Sustainability of penalty under section 114AA for use of false or incorrect material

Legal framework (as discussed in the judgment): Section 114AA applies only where a person knowingly or intentionally makes, signs, uses, or causes to be made/signed/used, any declaration, statement, or document that is false or incorrect in any material particular in a transaction under the Customs Act.

Interpretation and reasoning: The Tribunal emphasized the statutory requirement of knowledge or intention as a condition precedent for imposing penalty under section 114AA. On the record before it, the Tribunal found no material showing that the appellant had knowledge that the scrip had been manipulated. It also recorded that the appellant was not the person who fraudulently manipulated the scrip. In the absence of proof of knowing or intentional use of a false/incorrect document, the legal threshold for section 114AA penalty was not satisfied.

Conclusions: The Tribunal set aside the penalty of Rs. 10,00,000/- imposed under section 114AA, holding that it could not be sustained due to lack of established knowledge or intention on the part of the appellant, while upholding the remaining portions of the order.

Issues: Whether the redemption fine imposed on import of old and used digital multifunctioning devices was excessive and required reduction, while the duty demand and penalty could be sustained.

Analysis: The imports were treated as liable to confiscation for contravention of the Foreign Trade Policy and the Customs Act, and the dispute before the Tribunal centered on the quantum of redemption fine. The Tribunal reiterated that redemption fine is intended to neutralize the profit that may arise from the contravention and that both redemption fine and penalty, though discretionary, must remain proportionate and justifiable in the facts of the case. Consistency with past cases was also treated as relevant in fixing the amount of fine.

Conclusion: The redemption fine was reduced to about 10% of the value of the goods. The duty demand and penalty were upheld.

Issues: Whether the identity of the reimported tyres and tubes as the same goods earlier exported along with tractors in semi knocked down condition was established so as to qualify for exemption under Notification No. 94/96-Cus. dated 16.12.1996.

Analysis: The goods exported were tractors in SKD condition, but the record showed that the disputed reimported goods were the identifiable tyres and tubes forming part of that consignment. The invoices, packing list, examination report, markings on the goods, and supplier reference supported the claim that the returned goods were the same tyres and tubes earlier exported from India. The insistence that the entire tractor must be reimported ignored the commercial reality of a partial rejection of goods and the notification requirement that the goods reimported must be the same as those exported.

Conclusion: The identity of the reimported goods was satisfactorily established, and the denial of exemption was unsustainable.

Issues: (i) Whether the seized/confiscated cigarette packets, not complying with the packaging and labelling requirements, could be released for domestic sale after the circular dated 29.03.2017 came into force; (ii) whether the amounts deposited by the successful bidder towards the e-auction could be forfeited, or were refundable with interest.

Issue (i): Whether the seized/confiscated cigarette packets, not complying with the packaging and labelling requirements, could be released for domestic sale after the circular dated 29.03.2017 came into force.

Analysis: Rule 3(1) of the Cigarettes and other Tobacco Products (Packaging and Labelling) Rules, 2008 required each cigarette package to bear the prescribed particulars, including the date of manufacture. The circular dated 29.03.2017 reiterated that cigarettes not complying with the applicable statutory requirements should not be released for home consumption and should be destroyed. Since the goods had not been released when the circular came into force, and the mandatory particulars were not shown to be present, the goods could not lawfully be delivered for retail sale.

Conclusion: The cigarette packets were not releasable for domestic consumption and were liable to be destroyed.

Issue (ii): Whether the amounts deposited by the successful bidder towards the e-auction could be forfeited, or were refundable with interest.

Analysis: Once the goods could not legally be released, the bidder's failure to deposit the balance bid amount did not justify forfeiture of the amounts already paid. The earlier refund order in a similar matter supported the same treatment. The Tribunal also rejected the objection based on section 27 of the Customs Act, 1962, and held that the deposited sums retained toward the auction could not be withheld after the goods became incapable of lawful release. Interest was also warranted because the department had retained the money despite the bidder's repeated requests for refund.

Conclusion: The forfeiture was unsustainable and the deposited amounts were refundable with interest at 6% per annum.

Final Conclusion: The impugned orders were set aside and the department was directed to refund the auction deposits with interest, thereby granting relief to the bidder.

Ratio Decidendi: Where confiscated cigarettes do not satisfy the mandatory packaging and labelling requirements and cannot lawfully be released for domestic consumption, a bidder's default in paying the balance auction amount does not justify forfeiture of the amounts already deposited, and refund with interest may follow.

1. ISSUES PRESENTED AND CONSIDERED

1. Whether the customs authority was justified in withholding provisional release of 63 pieces of "Used Highly Specialized Equipment Digital Multifunction Print & Copying Machine" on the ground that the model-wise import had crossed 100 units per calendar year.

2. Whether, given that the importers had executed "Provisional Duty Bond" and "Bank Guarantee" taking into account the assessable value of the whole consignments, there remained any valid basis to deny provisional release of the withheld 63 pieces.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification for withholding provisional release of 63 pieces on the "100 units per model per year" premise

Legal framework (as discussed/applied by the Court): The Court proceeded on the admitted position that the goods are "Used Highly Specialized Equipment Digital Multifunction Print & Copying Machine" and treated them as restricted items. The Court considered the stated premise on which seizure/detention had been continued and provisional release withheld, namely a model-wise cap of 100 pieces per calendar year for HSE and the absence of a centralised monitoring mechanism.

Interpretation and reasoning: The Court noted that the stated approach being followed led to different practices across Custom Houses, and that in Kolkata the practice was to count imports at that port, resulting in withholding of the subject 63 pieces. The Court treated as material that, for similar imports seized earlier, the goods were directed to be released provisionally against bond and bank guarantee by the High Court, as affirmed by the Supreme Court, and that in those directions no model-wise quantity restriction was imposed. The Court further observed that following those directions, similar consignments were being released provisionally against P.D. Bond and bank guarantee, whereas the present case alone involved withholding of part quantity.

Conclusions: The Court held that withholding provisional release of the 63 pieces was not justified in the circumstances and directed that the 63 pieces be provisionally released, subject to fulfilment of the same conditions (bond and bank guarantee) as in the High Court's order on similar imports.

Issue 2: Effect of execution of P.D. Bond and Bank Guarantee for the whole consignments on entitlement to provisional release of the withheld goods

Legal framework (as discussed/applied by the Court): The Court applied the approach reflected in the High Court's directions for provisional release on similar imports-release against execution of bond and furnishing of bank guarantee, without prejudice to adjudication-treating those conditions as governing the present provisional release as well.

Interpretation and reasoning: The Court found it undisputed that the appellants had already furnished "Provisional Duty Bond" and "Bank Guarantee" taking into account the assessable value of the whole consignment, and not merely the portion initially ordered to be released. On that factual premise, the Court held that once the security requirements stood complied with for the entire consignment, there was no valid reason to continue withholding provisional release of the remaining 63 pieces.

Conclusions: The Court concluded that the 63 withheld pieces must be provisionally released and ordered release on execution of P.D. Bond and bank guarantee in terms aligned with the High Court's conditions for similar imports, leaving the merits to adjudication.

1. ISSUES PRESENTED AND CONSIDERED

(1) Whether non-inclusion/non-endorsement of vendors (supporting manufacturers) in EPCG authorisations and installation of imported capital goods at such vendors' premises, without prior DGFT approval, constitutes violation of conditions of EPCG exemption notifications so as to justify denial of exemption, demand of duties foregone, confiscation and imposition of penalties beyond what was already ordered.

(2) Whether post facto approvals/amendments granted by the EPCG Committee/DGFT for inclusion of vendors' premises as places of installation regularise prior movements of capital goods and amount to substantial compliance with conditions of EPCG notifications and Foreign Trade Policy, thereby negating further duty and penal demands.

(3) Whether, in the facts of the case, any additional or enhanced confiscation and penalties under sections 111(o), 112, 114A and 114AA of the Customs Act, 1962, on the importer, its employees and vendors, are legally sustainable beyond what was already imposed or confirmed by the adjudicating authority.

(4) Whether the extended period of limitation is invocable on the facts, and whether any direction is required to be issued to withdraw requests of investigative authorities to DGFT regarding issue of EODC/amendments in relation to the concerned EPCG authorisations.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2 - Effect of non-endorsement of vendors and post facto DGFT/EPCG Committee approval on liability to duty and eligibility to EPCG exemption

Legal framework as discussed

(a) The Tribunal noted that capital goods were imported under various EPCG exemption notifications, whose common conditions, as distilled by the adjudicating authority and not challenged in the appeal, required: (i) endorsement of name and address of supporting manufacturers on the authorisation; (ii) submission of installation certificates from jurisdictional Central Excise authorities certifying installation at supporting manufacturers' factories; and (iii) execution of bonds to fulfil export obligation, failing which duty and interest were recoverable. The imports were also subject to "Actual User Condition" till completion of export obligation (paras 13-14 of the order).

(b) The Tribunal recognised that Foreign Trade Policy is framed under the Foreign Trade (Development and Regulation) Act, 1992, that DGFT is appointed under that Act to carry out the policy, and that the EPCG Committee/DGFT is the competent authority to decide on matters of EPCG authorisation and related relaxations (para 19).

Interpretation and essential reasoning

(c) The Tribunal recorded and accepted the adjudicating authority's factual findings that: (i) in respect of a number of vendors, their names were already duly endorsed in EPCG licences before the show cause notice, and hence duty demands did not survive; (ii) for a substantial number of vendors, the importer had approached the EPCG Committee on various dates seeking post facto recognition/inclusion, and the EPCG Committee had granted such recognition/approval; and (iii) the licences were amended by DGFT by issue of amendment sheets incorporating such vendors (paras 14-15, 32.1.1-32.1.4 and 32.1.8-32.1.9 as relied on). These factual findings were expressly noted as not having been controverted in the Revenue's grounds of appeal.

(d) The Tribunal concurred with the adjudicating authority that the primary and substantial conditions of the EPCG Scheme and the exemption notifications are: (i) fulfilment of export obligation, and (ii) non-alienation/continued ownership of imported capital goods while satisfying the actual user condition. Ancillary requirements such as endorsement of vendors' names, obtaining prior installation certificates, and procedural approvals were characterised as mechanisms or safeguards to ensure compliance with these core conditions (paras 15, 19-21).

(e) The Tribunal noted that, as found by the adjudicating authority, there was no allegation in the show cause notice of non-fulfilment of export obligation and no allegation that the imported capital goods were sold, transferred or disposed of in a manner contrary to the EPCG Scheme or notifications. It was also noted that the importer asserted fulfilment of export obligations and that the capital goods remained in its ownership, albeit installed at various vendors' premises, and were used for manufacture of export products (paras 17, 18, 21, 23).

(f) The Tribunal emphasized that the EPCG Committee, despite being informed of the lapses and notwithstanding a request from the investigative authorities to maintain status quo and not to issue EODC or amendments, had, after considering the nature of the industry, turnover, export performance and actual usage, consciously granted post facto approval for inclusion of supporting manufacturers in the relevant EPCG licences (paras 15, 18, 32.1.8-32.1.9).

(g) On this basis, the Tribunal accepted the adjudicating authority's conclusion that post facto approvals granted by the EPCG Committee/DGFT amounted to substantial compliance with the notification conditions regarding endorsement and installation, regularised the earlier movements of capital goods to vendors' premises, and cured the initial procedural lapses in respect of those vendors for whom such approvals were granted (paras 15, 19-22).

(h) The Tribunal also attached weight to the fact that in an earlier, substantially identical matter involving the same importer and EPCG licences, a higher customs authority had, after EPCG Committee post facto approvals, dropped demands, treating the non-prior endorsement as procedural, focusing on export fulfilment and non-alienation, and that the Revenue had accepted that decision. The Tribunal agreed with the adjudicating authority that a contrary stand could not now be taken in the present matter when the DGFT/EPCG Committee had again granted similar expost facto amendments (para 22).

Conclusions on Issues 1 & 2

(i) Non-inclusion/non-endorsement of vendors in the EPCG authorisations and installation of capital goods at their premises, without prior DGFT approval, in circumstances where export obligations are satisfied, capital goods remain in the importer's ownership and actual user condition is complied with, constitutes at most a procedural lapse. It does not, by itself, justify denial of the substantive benefit of EPCG exemption or automatic recovery of duties foregone.

(j) Post facto approvals/amendments by the EPCG Committee/DGFT for inclusion of vendors' premises as places of installation have the effect of regularising the earlier shifting of capital goods and constitute substantial compliance with notification and policy conditions. Once such approvals are granted, Revenue cannot disregard them to raise or sustain duty demands under the EPCG notifications in respect of those vendors.

(k) Given the above, and in the absence of any challenge to the adjudicating authority's factual findings, the Tribunal held that no further duty demand, beyond the limited amount already confirmed in the order in original for one specific vendor/licence where export obligation period had expired and no approval existed, could be sustained. The Tribunal, therefore, upheld dropping of the remaining duty demands.

Issue 3 - Confiscation and penalties under sections 111(o), 112, 114A and 114AA

Interpretation and essential reasoning

(l) The Tribunal noted that the adjudicating authority had: (i) held capital goods installed at certain vendors' premises liable to confiscation under section 111(o), but, finding no prohibition involved, declined application of section 111(d); (ii) allowed redemption of such goods on payment of a limited redemption fine, holding this sufficient to meet the ends of justice; (iii) imposed penalties under section 112 on the importer and two of its employees, which had been paid and not appealed by those employees; and (iv) refrained from imposing penalties on vendors and other employees, giving reasons recorded in the impugned order (paras 23-24).

(m) The Tribunal found it significant that the show cause notice itself acknowledged that investigation into the role of individual employees and their penal liability was incomplete and that further examination of persons at the helm was required before conclusions could be drawn. On these admitted investigative lacunae, the Tribunal agreed that it was not appropriate to impose penalties on employees where their roles had not been clearly established (para 24).

(n) The Tribunal also endorsed the adjudicating authority's categorical finding that the show cause notice did not bring out any clear case of intentional false declaration, statement or document by the importer that was false or incorrect in any material particular. Allegations regarding leave and licence agreements and supposed fabrication were held to be unsupported by adequate, specific material in the show cause notice, beyond bare assertions (paras 24-25).

(o) On this reasoning, the Tribunal upheld the refusal to impose penalty on the importer under section 114AA, as the statutory ingredients of that provision were not established on the pleaded and proved facts (para 25).

(p) The Tribunal further noted that no separate appeals had been filed by the Revenue against vendors and employees on whom the adjudicating authority had refrained from imposing penalties, as required by the applicable procedural rules. In consequence, the Tribunal accepted that the non-imposition of penalties on such parties had attained finality and could not be revisited through the present departmental appeal (para 25).

Conclusions on Issue 3

(q) Confiscation of capital goods under section 111(o), coupled with the limited redemption fine imposed, and the penalties under section 112 already levied and accepted, represent a legally sustainable and proportionate response to the procedural lapses found. The Tribunal found no basis to enhance, extend or add to these measures.

(r) Additional or enhanced penalties on the importer, its employees, and vendors under sections 112, 114A or 114AA are not justified, as: (i) the core conditions of export obligation and actual user have been met; (ii) DGFT/EPCG Committee has regularised movements by post facto approvals; (iii) there is no demonstrated deliberate misstatement, suppression or use of false documents; and (iv) procedural and appellate requirements for challenging non-imposition of penalties on certain parties have not been met by the Revenue.

Issue 4 - Extended period of limitation and request to DGFT to withhold EODC/amendments

Interpretation and essential reasoning

(s) On limitation, the Tribunal addressed the respondent's plea in cross-objection that the extended period was not invocable. The Tribunal observed that the imports under EPCG were made under bonds binding the importer to fulfil export obligations or pay duty, and that such bonds remained "live" until export obligations were discharged and EODC obtained. In such a bonded context, issuance of show cause notice upon failure to obtain EODC falls within the permissible period, and the Tribunal found no merit in the plea that extended period could not be invoked (para 26).

(t) As to the request that the Tribunal direct investigative authorities to withdraw letters to DGFT requesting non-issuance of EODCs or amendments, the Tribunal noted: (i) DGFT authorities function as independent authorities under the Foreign Trade (Development and Regulation) Act; (ii) they are bound to decide applications independently and are not to be swayed by instructions from investigative agencies; and (iii) in the present case, by granting expost facto approvals despite such requests, DGFT had in practice acted independently. In this light, the Tribunal saw no necessity to issue directions regarding withdrawal of such communications (para 26).

Conclusions on Issue 4

(u) The contention that the extended period of limitation is per se inapplicable in respect of the EPCG imports in question was rejected. In the context of bond-backed EPCG imports, Revenue is entitled to issue show cause notices upon non-production of EODC, and the invocation of the extended period in this case was not held to be legally infirm.

(v) No direction is warranted from the Tribunal to compel withdrawal of investigative communications to DGFT concerning EODC or authorisation amendments. DGFT/EPCG authorities remain bound to act independently under their statute, which they have in fact done by granting expost facto approvals.

Overall disposition

(w) Having accepted that the substantive conditions of the EPCG Scheme were fulfilled, that DGFT/EPCG Committee had regularised procedural lapses by post facto endorsements, and that the adjudicating authority had already imposed appropriate duty, fine and penalties wherever legally sustainable, the Tribunal found no error warranting interference. The order in original was upheld in toto, the Revenue's appeal was dismissed as devoid of merits, and the cross-objections of the respondent were disposed of in line with the Tribunal's findings.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether, under the constitutional and statutory scheme governing customs, customs duty can be demanded and confirmed on a "joint and several" basis from more than one person.

1.2 Whether earlier decisions of the Tribunal relied upon by the appellants conclusively bar confirmation of customs duty on a joint and several basis.

1.3 Whether, in the absence of any discussion by the adjudicating authority on the legality of joint and several liability, and in the absence of complete relied-upon documents before the Tribunal, the matter requires remand for de novo adjudication.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality of joint and several liability for customs duty

Legal framework (as discussed by the Tribunal)

2.1 The Tribunal examined the issue in the context of Article 265 of the Constitution, which mandates that no tax shall be levied or collected except by authority of law. The meaning of "law" and "authority of law" was discussed with reference to Articles 13(3), 366(10) and 246 of the Constitution, to highlight that the person liable to tax must be fixed by or under law.

2.2 The Tribunal referred to the principles laid down by the Supreme Court that a tax statute must clearly identify: (i) the subject of tax, (ii) the person liable to pay, (iii) the rate of tax, and (iv) the measure or value to which the rate applies. In the present matter, the focus was on component (ii), namely, determination of the person liable.

2.3 The Tribunal noted that "joint and several liability" is recognised in Indian law in various statutes, including:

(a) The Indian Contract Act (specified sections dealing with joint promises and liabilities).

(b) The Indian Partnership Act (joint and several liability of partners).

(c) The Income Tax Act (joint and several liability in certain circumstances).

2.4 Under the Customs Act, it was noted that while Section 28 fixes the primary liability on the importer for differential duty, Section 147 permits, in certain circumstances, collection of customs dues from a person other than the actual importer, where such person is expressly or impliedly authorised as an agent of the owner/importer/exporter.

2.5 The Tribunal also referred, illustratively, to provisions in the EXIM Policy and related customs notifications where joint and several liability is expressly stipulated between authorisation holders / merchant exporters and supporting manufacturers in relation to export obligations and bond execution.

Interpretation and reasoning

2.6 The Tribunal recognised that the concept of joint and several liability is not alien to Indian law and is expressly provided for in multiple enactments. It observed that the core question is whether, in the present case, the demand of duty on a joint and several basis is traceable to and justified by applicable "law" in terms of the constitutional and statutory scheme, including the Customs Act and related instruments.

2.7 The Tribunal noted that the impugned adjudication order did not examine or record any reasoning on this core legal issue, namely, whether customs duty can be demanded on a joint and several basis and, if so, under which provision(s) or legal authority.

Conclusions

2.8 The Tribunal did not finally decide whether joint and several liability for customs duty is legally permissible in the facts of the case. Instead, considering the absence of any discussion or findings on this fundamental legal issue in the impugned order, the Tribunal held that the question must first be examined and decided by the original adjudicating authority in de novo proceedings.

Issue 2: Precedential value of prior Tribunal decisions on joint and several duty demands

Legal framework (as discussed by the Tribunal)

2.9 The Tribunal discussed the doctrine of precedent with reference to the Supreme Court's elucidation of "ratio decidendi", emphasising that a decision is a precedent only to the extent it lays down a principle of law which is applied to the facts.

Interpretation and reasoning

2.10 The Tribunal examined the earlier Tribunal decision cited for the proposition that demand under Section 28 cannot be confirmed jointly and severally on more than one person. It noted that in that case, the Tribunal's primary reasoning related to issues of burden of proof for export obligation and Modvat credit. As regards the joint and several demand aspect, the order:

(a) Contained only a brief assertion that determination jointly and severally from more than one person "cannot be sustained" under Section 28; and

(b) Did not provide detailed reasoning for treating the word "person" in Section 28 in the singular.

2.11 The Tribunal further observed that, where a term such as "person" is not defined in the Customs Act, it may be construed in line with the General Clauses Act, which includes in its definition any company or association or body of individuals, whether incorporated or not. The earlier decision had not considered this interpretive aspect.

2.12 Several other decisions cited by the appellants were noted to be interim orders, or remand orders, or orders arising in different statutory contexts (e.g. central excise), or otherwise not containing a detailed examination of the legal issue of joint and several liability for customs duty.

Conclusions

2.13 The Tribunal held that the earlier decisions relied upon did not conclusively decide, with detailed legal reasoning, the permissibility of joint and several customs duty demands and thus have limited precedential value on this specific legal issue.

2.14 Consequently, those earlier decisions do not by themselves operate as binding authority to bar examination or confirmation of joint and several liability in the present matter, and the issue must be independently considered by the adjudicating authority on remand.

Issue 3: Necessity of remand for de novo adjudication

Interpretation and reasoning

2.15 The Tribunal noted that:

(a) The impugned order did not contain any discussion or findings on the crucial question of law relating to joint and several liability for customs duty.

(b) The appeal memorandum before the Tribunal did not annex all documents relied upon in the show cause notice, thereby constraining a complete evaluation of facts and the legal implications.

2.16 In view of the above omissions, the Tribunal considered itself not suitably placed to conclusively decide the core legal issue and its application to the factual matrix of the case at the appellate stage.

Conclusions

2.17 The Tribunal set aside the portion of the impugned order pertaining to the appellants and remanded the matter to the original adjudicating authority for de novo adjudication.

2.18 The adjudicating authority has been directed to:

(a) Examine in detail, and decide afresh, the legal issue of joint and several liability for customs duty and its application to the facts;

(b) Consider all contentions of the appellants on law and facts, after affording full opportunity of oral and written submissions;

(c) Complete the proceedings expeditiously and, in any case, within ninety days of receipt of the Tribunal's order.

2.19 The appellants have been left at liberty to advance all arguments in law and on facts before the adjudicating authority, and are entitled to consequential relief, if any, in accordance with law, depending on the outcome of the de novo proceedings.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the appellants could be penalised under section 112 of the Customs Act for mis-declaration or other violations relating to consignments imported in the names of non-existent third-party firms, merely because those consignments were present in the same containers as the appellants' consignments.

1.2 Whether the confiscation of goods imported in the name of the proprietorship concern under sections 111(i), (l), (m) read with section 119 of the Customs Act was legally sustainable when no Bill of Entry had been filed and the description in the Bills of Lading matched the goods found on examination.

1.3 Whether section 119 of the Customs Act, relating to confiscation of goods used for concealing smuggled goods, was correctly invoked in respect of the goods imported in the name of the proprietorship concern.

1.4 Consequentially, whether the penalties imposed under section 112(b) of the Customs Act on the proprietorship concern, its proprietor, and the individual who used the IEC were sustainable in law.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Liability for consignments of non-existent firms sharing the same containers

Interpretation and reasoning

2.1 The Tribunal noted that two consignments, imported in the names of firms later found to be non-existent, were absolutely confiscated and no appeal was filed on their behalf. The appellants never claimed ownership of these consignments, and there was no evidence that the goods, though imported in the names of those firms, actually belonged to the appellants.

2.2 The Commissioner had nevertheless imposed penalties on the appellants by taking into account the discrepancies and violations relating to these two consignments, apparently because they were found in the same containers as the appellants' consignments.

2.3 The Tribunal analysed the nature of Less than Container Load (LCL) cargo, where goods of multiple importers are stuffed in the same container. It likened such a container to a shared taxi or a bus, holding that each traveller is responsible only for what is personally carried and not for contraband carried by fellow passengers.

2.4 Applying this analogy, the Tribunal held that an importer whose goods share container space with other importers' consignments cannot be held responsible, or penalised under section 112, for violations pertaining to the consignments of other importers.

Conclusions

2.5 The Tribunal concluded that the appellants could not be held liable or penalised under section 112 of the Customs Act in relation to the consignments imported in the names of the non-existent firms, merely because those consignments were in the same containers. The Commissioner's reliance on those consignments to impose penalties on the appellants was unsustainable.

Issue 2 - Validity of confiscation of goods imported in the name of the proprietorship concern under sections 111(i), (l), (m)

Legal framework as discussed

2.6 The Tribunal reproduced and examined sections 111(i), (l) and (m) of the Customs Act, which render goods liable to confiscation where dutiable or prohibited goods are concealed, or where goods do not correspond with, or are in excess of, what is declared in the entry (Bill of Entry) made under the Act.

Interpretation and reasoning

2.7 The Tribunal observed that sections 111(l) and (m) presuppose the existence of an "entry made under this Act", which is done by filing a Bill of Entry. In the present case, no Bill of Entry was filed for the consignments imported in the name of the proprietorship concern. It was recorded that no Bill of Entry was filed because the IEC had been suspended by the DGFT.

2.8 In the absence of any Bill of Entry, the precondition for invoking sections 111(l) and (m) - namely, that the goods do not correspond to or are in excess of the goods included in the entry - was not satisfied. Therefore, the Tribunal held that confiscation on the basis of these clauses could not be sustained.

2.9 With respect to section 111(i), the Tribunal noted that this clause deals with dutiable or prohibited goods "found concealed in any manner in any package". It does not depend on the filing of a Bill of Entry and could apply independently.

2.10 The Tribunal examined the Bills of Lading pertaining to the proprietorship concern. In one Bill of Lading, cotton towels were declared and, upon examination, small cotton towels were found. The Tribunal held that small cotton towels fall within the description "cotton towels" and thus there was no discrepancy.

2.11 In the other Bill of Lading, the declared goods were footwear, and the examination revealed baby shoes (both unbranded and branded). The Tribunal held that baby shoes are a species of footwear and therefore the goods matched the description in the Bill of Lading. There was no concealment or mis-declaration in these consignments to attract section 111(i).

Conclusions

2.12 The Tribunal concluded that, in the absence of a Bill of Entry, sections 111(l) and (m) could not be invoked, and on the facts, there was no concealment or discrepancy to attract section 111(i). Confiscation of the goods imported in the name of the proprietorship concern under sections 111(i), (l) and (m) was therefore unsustainable.

Issue 3 - Applicability of section 119 (confiscation of goods used for concealing smuggled goods)

Legal framework as discussed

2.13 The Tribunal reproduced section 119 of the Customs Act, which provides for confiscation of goods used for concealing smuggled goods, excluding conveyances used as means of transport.

Interpretation and reasoning

2.14 The Commissioner had invoked section 119 against the consignments of the proprietorship concern on the footing that those goods were used for concealing mis-declared goods of different Bills of Lading of different importers.

2.15 The Tribunal found, however, that the goods imported in the name of the proprietorship concern were "separate and distinct" consignments and were not used to conceal any other goods. The mere fact that they were in the same physical container as mis-declared or offending goods belonging to other importers did not mean they were "used for concealing" such goods.

Conclusions

2.16 The Tribunal held that section 119 did not apply to the goods imported in the name of the proprietorship concern, as there was no factual basis to treat those goods as concealment devices for other smuggled or mis-declared goods.

Issue 4 - Sustainability of penalties under section 112(b) against the appellants

Interpretation and reasoning

2.17 The penalties on the proprietorship concern, its proprietor, and the individual who used the IEC were imposed on the footing that their acts and omissions rendered the seized goods liable to confiscation under sections 111 and 119.

2.18 The Tribunal first held that the appellants could not be held liable for the consignments imported in the names of the non-existent firms, even though they were found in the same containers. Therefore, those consignments could not form a legal basis for penalties under section 112 against the appellants.

2.19 Second, the Tribunal held that the confiscation of the consignments imported in the name of the proprietorship concern under sections 111(i), (l), (m) read with section 119 was not legally sustainable. Once the very foundation of confiscation failed, the consequential penalties under section 112(b), which depended on acts or omissions rendering goods liable to confiscation, could not survive.

2.20 The Tribunal noted that, although section 7 of the Foreign Trade (Development & Regulation) Act prohibits imports without an IEC and prohibits lending of IEC, the Commissioner had not confiscated the proprietorship concern's goods under section 111(d) on that basis. The Tribunal did not proceed to recharacterise the confiscation under section 111(d); instead, it confined itself to examining the legality of the grounds actually invoked in the impugned order and found them unsustainable.

Conclusions

2.21 The Tribunal held that, since confiscation of the appellants' goods could not be sustained under the sections invoked, and the appellants could not be held liable for the goods of other importers, the penalties imposed under section 112(b) on the proprietorship concern, its proprietor, and the individual user of the IEC were legally unsustainable.

2.22 The Tribunal set aside the impugned order insofar as it confiscated the goods imported in the name of the proprietorship concern and imposed penalties on all three appellants, and allowed all the appeals.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether "Climatic Test Chambers" are classifiable under Heading 90.27, specifically under Tariff Item 9027 89 90, as "instruments and apparatus for physical analysis - other", in preference to Heading 84.79.

1.2 Whether Climatic Test Chambers equipped with additional features such as vibration testing, solar simulation and pressure variation testing are also covered by the same classification under Heading 90.27 / Tariff Item 9027 89 90.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Classification of Climatic Test Chambers under Heading 90.27 / Tariff Item 9027 89 90

Legal framework

2.1 The Court applied Rule 1 of the General Rules for the Interpretation of the Import Tariff, holding that classification must be determined according to the terms of the headings and any relevant Section or Chapter Notes, titles being for reference only.

2.2 Heading 90.27 covers "Instruments and apparatus for physical or chemical analysis...; 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", with subheading 9027 89 90 as the residual "Other" entry.

2.3 The Court referred to the HSN Explanatory Notes to Chapter 90, particularly General Note (I), which states that Chapter 90 covers a wide variety of high-precision instruments and apparatus used mainly for scientific, specialised technical or industrial purposes (including analysis, measuring, checking and observation), and that the Chapter includes, in particular, machines, instruments and appliances for testing materials.

Interpretation and reasoning

2.4 The Court found that Climatic Test Chambers are specialised equipment used to artificially create and control environmental conditions such as temperature, humidity, light, vibration and pressure so that products, materials or components can be tested for durability, reliability and performance under those conditions.

2.5 It was noted that the equipment exposes specimens to controlled environmental stresses without changing their chemical composition, and is used to observe and measure physical responses such as expansion, contraction, warping, cracking, fading, moisture absorption, strength loss and functional failure. On this basis, the Court characterised the function of the chambers as "physical analysis" of durability, stability and performance.

2.6 The Court held that Heading 90.27 is not confined to small analytical devices but extends to apparatus designed to analyse or measure the physical properties of materials or products. The fact that testing may be based on visual observation and data acquired through sensors and software (recording and graphically representing environmental parameters and their impact on the specimen) does not disqualify the equipment from being regarded as apparatus for physical analysis.

2.7 Relying on the scope indicated in the HSN Explanatory Notes, the Court reasoned that machines for testing materials fall within Chapter 90, and that Climatic Test Chambers, by testing materials and products under controlled climatic conditions, are of the type contemplated by Heading 90.27.

2.8 The Court also took note that psychrometric sensors (psychrometers/hygrometers), a component of the chambers, are themselves specifically covered by Chapter 90 under Heading 90.25, reinforcing that the overall apparatus is of the class of measuring/checking and analysis instruments envisaged under Chapter 90.

2.9 The Court placed reliance on the decision of the Tribunal in VDO India v. Commissioner of Customs, which held that "Climatic Test Cabinet Systems" used to test the function of products during temperature variations are correctly classifiable under Heading 9027 as apparatus for physical analysis. It accepted the reasoning that even if the apparatus does not measure a parameter in the conventional sense, visual observation of physical behaviour under controlled conditions constitutes physical analysis for the purpose of Heading 90.27.

Conclusions

2.10 The Court concluded that Climatic Test Chambers, by artificially creating and controlling environmental conditions to enable the physical analysis of materials and products, fall squarely within the expression "instruments and apparatus for physical analysis" under Heading 90.27.

2.11 As there is no more specific subheading within Heading 90.27 that describes Climatic Test Chambers, the Court held that they are correctly classifiable under the residual subheading 9027 89 90 ("Other").

Issue 2 - Treatment of models with additional features (vibration, solar simulation, pressure variation)

Interpretation and reasoning

2.12 The Court noted that all the models and series of the product in question necessarily incorporate temperature and humidity control and are designed to test specimens under controlled climatic conditions for physical analysis.

2.13 It further observed that certain models additionally integrate vibration testing, solar simulation (using metal halide lamps) or pressure variation testing to enable more precise or application-specific environmental simulations, particularly for automotive, aerospace and electronics components subjected to combined stresses.

2.14 The Court treated these additional functionalities as ancillary or complementary features that enhance or refine the environmental simulation and testing capability of the chambers, without altering their essential character as apparatus for physical analysis of the specimen under varied climatic conditions.

Conclusions

2.15 The Court concluded that the presence of auxiliary features such as vibration testing, solar simulation or pressure variation testing does not change the principal function of the equipment, namely, physical analysis of products under controlled climatic conditions.

2.16 Accordingly, all the models of Climatic Test Chambers described, including those with such additional features, were held to merit classification under Heading 90.27, more specifically under Tariff Item 9027 89 90 ("Other") of the First Schedule to the Customs Tariff Act, 1975.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Classification of so-called "Oven Roasted Areca nuts" under the First Schedule to the Customs Tariff Act, 1975, and whether, having 10-15% moisture, they are to be treated as "roasted areca nuts" under Chapter 20 or as "raw/fresh or dried" areca nuts under Chapter 8.

1.2 Classification of "Oven Roasted Cashew nuts" under the First Schedule to the Customs Tariff Act, 1975, particularly whether they fall under the specific entry for "cashew nuts, roasted, salted, or roasted and salted" in Heading 2008.

1.3 Classification of "Oven Roasted Walnuts" and "Oven Roasted Pista nuts" under the First Schedule to the Customs Tariff Act, 1975, and whether they are covered as "other roasted nuts and seeds" in Heading 2008.

1.4 Applicability of preferential basic customs duty exemption under Notification No. 46/2011-Cus, dated 01.06.2011, and Notification No. 26/2000-Cus, dated 01.03.2000, to the classified goods, subject to proof of origin under the relevant Rules of Origin.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Classification of "Oven Roasted Areca nuts" (moisture 10-15%)

Legal framework

2.1 The Court applied the General Rules for the Interpretation of the Tariff, particularly Rule 1 and Rule 3(a), and examined the scope of Chapters 7, 8, 11 and 20, along with the Harmonized System of Nomenclature (HSN) Explanatory Notes.

2.2 Chapter 8 covers fruits and nuts "fresh or dried", including processes such as chilling, steaming, boiling, drying and provisional preservation. Heading 0802 specifically covers "Other nuts, fresh or dried, whether or not shelled or peeled", with subheading 080280 for areca (betel) nuts and further tariff items for whole, split and ground forms.

2.3 Chapter 20, and in particular Heading 2008, covers fruit, nuts and other edible parts of plants "otherwise prepared or preserved" by processes other than those specified in other Chapters. The HSN Explanatory Notes to Heading 2008 include "almonds, ground-nuts, areca (or betel) nuts and other nuts, dry-roasted, oil-roasted or fat-roasted...".

2.4 The Court relied on earlier rulings of the same Authority and their affirmation by the High Court of Madras, which had treated moisture content as a determinative parameter for distinguishing raw areca nuts from roasted areca nuts, and held that moisture between 10-15% indicates raw areca nuts, while significantly lower moisture indicates roasted areca nuts.

Interpretation and reasoning

2.5 The applicant described a process of de-husking, drying, and repeated oven heating of areca nuts up to 100°C until moisture content is 10-15%, and sought classification as roasted areca nuts under Heading 2008.

2.6 The Court analysed the distinction between "drying" and "roasting" in common parlance, noting that drying is primarily removal of moisture (dehydration, evaporation), whereas roasting is a severe heat treatment producing fundamental physical and chemical changes and a charred appearance.

2.7 Referring to its earlier advance ruling and to the High Court's judgment, the Court held that moisture content is a settled parameter: areca nuts with moisture content between 10-15% are to be treated as raw areca nuts; only products with substantially lower moisture fall within "roasted areca nuts" for Heading 2008.

2.8 On the admitted facts, the product claimed as "oven roasted areca nuts" had moisture content in the 10-15% range. Applying the settled parameter, the Court treated the product as raw areca nuts, not "roasted" nuts for tariff purposes.

2.9 Given that the product thus retained the character of raw/fresh or dried areca nuts, and that Chapter 8 specifically provides for areca nuts under subheading 080280, the Court held that Heading 0802 is the appropriate and specific classification, to be preferred over Heading 2008 under Rule 3(a).

Conclusions

2.10 "Oven Roasted Areca nuts" with moisture content between 10-15% are to be treated as raw areca nuts and do not qualify as roasted nuts under Heading 2008.

2.11 Such goods merit classification under Heading 0802, specifically:

* 08028010 - Areca nuts, whole;

* 08028020 - Areca nuts, split;

* 08028030 - Areca nuts, ground;

as applicable to the form of the imported goods.

Issue 2 - Classification of "Oven Roasted Cashew nuts"

Legal framework

2.12 Heading 2008 covers "Fruit, nuts and other edible parts of plants, otherwise prepared or preserved... not elsewhere specified or included". The amended tariff structure under Heading 2008 (as per Finance Act, 2025) specifically includes:

* 20081910 - Cashew nuts, roasted, salted, or roasted and salted;

* 20081991 - Other roasted nuts and seeds;

* 20081992 - Other nuts, otherwise prepared or preserved.

2.13 The Court reiterated that under GRI 1, classification must be determined according to the terms of headings and any relevant Section or Chapter Notes, and that a specific entry prevails over a residual or general entry. Reference was made to the principle that residuary entries cannot be invoked when a specific tariff entry exists.

Interpretation and reasoning

2.14 The applicant's description of the process (oven heating at about 350°F, single-layer roasting) showed that the product is a roasted form of cashew nuts, distinct in moisture, colour, appearance and flavour from raw cashew nuts.

2.15 The Court observed that the Customs Tariff now contains an explicit and specific tariff item 20081910 for "cashew nuts, roasted, salted, or roasted and salted".

2.16 Applying GRI 1 and the rule that a specific entry must be preferred over a general or residuary entry, the Court held that roasted cashew nuts squarely fall under tariff item 20081910 and cannot be classified under any broader or residuary provision.

Conclusions

2.17 "Oven Roasted Cashew nuts" merit classification under Heading 2008, specifically tariff item 20081910 - "Cashew nuts, roasted, salted, or roasted and salted".

Issue 3 - Classification of "Oven Roasted Walnuts" and "Oven Roasted Pista nuts"

Legal framework

2.18 Heading 2008 applies to fruit, nuts and other edible parts of plants which are "otherwise prepared or preserved" by processes other than those specified in earlier chapters. The HSN Explanatory Notes to Heading 2008 expressly include almonds, ground-nuts, areca (betel) nuts and "other nuts, dry-roasted, oil-roasted or fat-roasted...".

2.19 Under the amended tariff, relevant sub-classifications in Heading 2008 include:

* 20081910 - Cashew nuts, roasted, salted, or roasted and salted;

* 20081991 - Other roasted nuts and seeds;

* 20081992 - Other nuts, otherwise prepared or preserved.

Interpretation and reasoning

2.20 The applicant described a similar oven-roasting process for walnuts and pista nuts, involving heating raw nuts on baking sheets at about 350°F for 10-15 minutes, resulting in a product distinct from the raw nuts in terms of moisture, colour, appearance and flavour.

2.21 The Court held that walnuts and pista nuts are "other nuts" within the meaning of the HSN Explanatory Notes, and that once subjected to roasting they fall squarely within the class of "dry-roasted, oil-roasted or fat-roasted" nuts contemplated by Heading 2008.

2.22 Noting that there is a specific residual roasted-nuts entry under Heading 2008 for "other roasted nuts and seeds" (distinct from the specific cashew entry), the Court applied GRI 1 and reasoned that roasted walnuts and roasted pista nuts are properly covered by tariff item 20081991.

2.23 The Court distinguished these products from raw nuts of Chapter 8 on the basis that Chapter 8 covers "fresh or dried" nuts and associated processes (chilling, steaming, boiling, drying, provisional preservation), whereas the present goods are nuts prepared by roasting, a process not enumerated in Chapter 8 and specifically contemplated in Heading 2008.

Conclusions

2.24 "Oven Roasted Walnuts" and "Oven Roasted Pista nuts" merit classification under Heading 2008, specifically tariff item 20081991 - "Other roasted nuts and seeds".

Issue 4 - Applicability of preferential duty exemptions under Notification No. 46/2011-Cus and Notification No. 26/2000-Cus

Legal framework

2.25 Notification No. 46/2011-Cus, dated 01.06.2011, grants preferential basic customs duty for imports from specified ASEAN member states and other listed countries, subject to the importer proving origin in accordance with the relevant Preferential Trade Agreement Rules of Origin and the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020.

2.26 Notification No. 26/2000-Cus, dated 01.03.2000, grants preferential basic customs duty on goods of Sri Lankan origin, subject to proof of origin under the Customs Tariff (Determination of Origin of Goods under the Free Trade Agreement between Sri Lanka and India) Rules, 2000 and the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020.

Interpretation and reasoning

2.27 Having determined the tariff classifications of the subject goods, the Court noted that eligibility for preferential basic customs duty under the above notifications is conditional on proof of origin to the satisfaction of the proper officer, in accordance with the applicable Rules of Origin and administrative rules.

2.28 The Court did not adjudicate on factual satisfaction of origin conditions for specific consignments, but confined itself to indicating that the preferential benefit, if otherwise applicable to the classified tariff lines, can be availed only upon compliance with the prescribed origin requirements before the assessing authority.

Conclusions

2.29 Preferential basic customs duty under Notification No. 46/2011-Cus and Notification No. 26/2000-Cus may be claimed for the classified goods, subject strictly to the importer establishing origin in accordance with the applicable Rules of Origin and to the satisfaction of the jurisdictional customs authorities; the advance ruling does not itself grant or deny such benefits on facts.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the application for advance ruling on classification of "Roasted Areca Nuts" is maintainable in view of proviso (b) to Section 28I(2) of the Customs Act, 1962, when the same classification issue has already been decided by a High Court in the applicant's own case.

1.2 Whether the amendments to the Customs Tariff (Finance Act, 2025) for heading 2008, including the shift from tariff item 2008 19 20 to 2008 19 91, constitute a change in the legal framework sufficient to take the present classification question outside the bar under proviso (b) to Section 28I(2).

1.3 Whether, and to what extent, the benefit of exemption under Sr. No. 172 of Notification No. 46/2011-Cus dated 01.06.2011 (as amended) is available to imports of Roasted Areca Nuts, particularly with reference to the country-of-origin conditions.

1.4 Whether the request of the applicant to keep the ruling confidential should be accepted under Regulation 27 of the Customs Authority for Advance Rulings Regulations, 2021.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2 - Maintainability of the classification ruling in light of prior High Court decision and tariff amendment

Legal framework

2.1 The Court examined Section 28H and Section 28I of the Customs Act, 1962, particularly proviso (b) to Section 28I(2), which mandates that the Authority "shall not allow the application where the question raised in the application is the same as in a matter already decided by the Appellate Tribunal or any Court."

2.2 The Court noted that the applicant holds a valid Importer Exporter Code and that the questions on classification and interpretation of an exemption notification are, in principle, questions covered by Section 28H(2), making the applicant otherwise eligible to seek an advance ruling.

2.3 The Court also considered the tariff amendments under the Finance Act, 2025 to heading 2008, specifically the substitution of tariff items 2008 19 20 to 2008 19 90 by 2008 19 21 to 2008 19 99, and the movement of "Other roasted nuts and seeds" from 2008 19 20 to 2008 19 91.

Interpretation and reasoning

2.4 The Court recorded that the issue of classification of Roasted Areca Nut had already been "unequivocally dealt" with by a High Court in the applicant's own case, wherein roasted betel/areca nut was classified under heading 2008, and that this decision has attained finality.

2.5 The applicant argued that, due to the 2025 tariff amendments, a new legal framework exists, rendering the present question different from the one already decided. The Court therefore compared the pre-amendment and post-amendment tariff structure to test this assertion.

2.6 On comparative analysis, the Court found that:

(a) The four-digit heading (2008: "Fruit, nuts and other edible parts of plants, otherwise prepared or preserved...") remains unchanged.

(b) The six-digit sub-heading 2008 19 ("Other, including mixtures") also remains unchanged.

(c) The description at the eight-digit level "Other roasted nuts and seeds" is identically retained; only the numerical code shifted from 2008 19 20 to 2008 19 91.

2.7 The Court further observed that there has been no change in the relevant Section Notes (Section IV) or Chapter Notes (Chapter 20), and thus no alteration in the legal basis or interpretative framework under the General Rules for the Interpretation of the Tariff.

2.8 The Court noted that the applicant itself had acknowledged in the application that the introduction of tariff item 2008 19 91 "has not altered the settled fact" that roasted betel nut is classifiable under heading 2008, and that only the rate of duty has changed.

2.9 In these circumstances, the Court held that the core question-classification of Roasted Areca Nuts under heading 2008 as "other roasted nuts and seeds"-had already been decided by a High Court, and the mere renumbering of the eight-digit code did not create a new or distinct question of law or fact for purposes of Section 28I(2).

Conclusions

2.10 The Court concluded that proviso (b) to Section 28I(2) squarely applies, as the question raised is the same as a matter already decided by a Court.

2.11 The Court therefore refrained from issuing any advance ruling on the classification of the subject goods "Roasted Areca Nuts."

Issue 3 - Applicability of exemption under Sr. No. 172 of Notification No. 46/2011-Cus

Legal framework

2.12 The Court considered Notification No. 46/2011-Cus dated 01.06.2011 (as amended), specifically Sr. No. 172, covering tariff range 2007 10 to 2008 20 ("All goods") with a specified basic customs duty rate of 0%, subject to conditions.

2.13 The Court referred to the conditions that the exemption is available only where the importer proves to the satisfaction of the Deputy Commissioner or Assistant Commissioner of Customs that the goods are of the origin of specified countries, in accordance with:

(a) The Customs Tariff (Determination of Origin of Goods under the Preferential Trade Agreement between the Governments of Member States of the Association of Southeast Asian Nations (ASEAN) and the Republic of India) Rules, 2009, and

(b) The Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020.

Interpretation and reasoning

2.14 Without entering into or reopening the issue of tariff classification (in view of the bar under Section 28I(2)), the Court confined itself to stating the conditional nature of the exemption.

2.15 The Court emphasized that entitlement to preferential basic customs duty under the said notification is not automatic but contingent on the goods satisfying applicable rules of origin and related procedural requirements, to be examined by the jurisdictional assessing officer at the time of import.

Conclusions

2.16 The Court held that, if the imported Roasted Areca Nuts meet the origin and procedural requirements stipulated in Notification No. 46/2011-Cus, read with the 2009 Rules and the 2020 Rules, the benefit under Sr. No. 172 would be available.

2.17 The Court clarified that the actual grant of the exemption is subject to proof of origin and compliance, to the satisfaction of the proper officer, and did not render any further ruling on classification-linked aspects of the notification.

Issue 4 - Request for confidentiality of the ruling

Legal framework

2.18 The Court examined Regulation 27 of the Customs Authority for Advance Rulings Regulations, 2021 (as amended), which authorizes publication of orders and rulings, and its proviso that, at the request of the applicant, the Authority may take necessary steps to protect "commercially confidential information."

Interpretation and reasoning

2.19 The applicant requested that the ruling be kept confidential. The Court assessed whether the ruling contained any "technical data, proprietary data or commercially confidential information" unique to the applicant that would warrant protection under Regulation 27.

2.20 The Court found that:

(a) The ruling does not contain any such technical or proprietary data specific to the applicant.

(b) The product description and its characteristics have already been discussed at length in a previously published High Court order.

2.21 On this basis, the Court held that there was no sensitive or commercially confidential information in the ruling requiring protection under Regulation 27.

Conclusions

2.22 The Court declined the applicant's request to keep the ruling confidential and held that the ruling could be published in accordance with Regulation 27.

Outcome: The appeal was dismissed and the impugned order of the Securities Appellate Tribunal was not interfered with.

Issues: Whether the appellant's activity of procuring export orders for a foreign principal amounts to export of service and is therefore not liable to service tax under Business Auxiliary Service.

Analysis: The appellant procured orders in India for an overseas company, had no authority to conclude the orders on its behalf, and the foreign company supplied goods directly to the customers while paying commission to the appellant on realisation. Applying Rule 3(1)(iii) read with Rule 3(2) of the Export of Service Rules, 2005, and following the coordinate bench decisions on materially similar facts, the service was held to be rendered for and consumed by the foreign principal outside India and not taxable in India. On that basis, the demand, interest and penalties could not be sustained.

Conclusion: The activity constituted export of service and the demand of service tax, interest and penalty was unsustainable; the appeal succeeded for the assessee.

Issues: Whether, for computing reversal under Rule 6(3A) of the Cenvat Credit Rules, 2004, the total credit should include input services exclusively used for dutiable services or only common input services.

Analysis: The relevant scheme under Rule 6 permits credit reversal only to the extent attributable to exempted services. The formula under Rule 6(3A) was read harmoniously with Rule 6(3)(ii) so that credit exclusively relatable to taxable or dutiable output is not reduced or reversed. The substituted sub-rule was treated as clarificatory, and the Tribunal followed the earlier view that "total Cenvat credit" in the formula means only common input service credit.

Conclusion: The reversal computation must exclude input services exclusively used for dutiable services and apply only to common input service credit; the demand could not be sustained.

1. ISSUES PRESENTED AND CONSIDERED

(1) Whether fabrication of truss, columns, girders and other structural components in the respondent's factory, out of duty-paid iron and steel items, resulted in "manufacture" of excisable goods under Section 2(f) of the Central Excise Act, 1944.

(2) Whether the structural components so fabricated, being tailor-made parts of factory sheds removed in unassembled/CKD condition to customers' sites, satisfied the test of "goods" and "marketability" under Section 2(d) of the Central Excise Act, 1944.

(3) Whether, in the facts of the case, the respondent's activity was more appropriately classifiable as provision of works contract service rather than manufacture of excisable goods.

(4) Whether the precedents relied on by the Revenue (relating to fabrication of steel structures) were applicable to the present facts.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (1) & (2): Whether fabrication in factory amounted to manufacture of excisable, marketable goods

Legal framework (as discussed by the Court/Tribunal)

(a) Section 2(d) of the Central Excise Act, 1944 - Explanation that "goods" include any article or material which is capable of being bought and sold for a consideration, and such articles shall be deemed to be marketable.

(b) The Court reiterated that excisability requires a "twin test": (i) the article must be manufactured; and (ii) it must be capable of being marketed / saleable and known to the market as a distinct commodity.

(c) Reliance placed (through the Commissioner (Appeals)) on the Supreme Court decision in Gujarat Narmada Valley Fert. Co. Ltd. v. Collector of C.Ex. & Cus., affirming that mere specification in the Tariff does not suffice; marketability (capability of being sold/known in the market) is essential.

Interpretation and reasoning

(d) The respondent fabricated truss, columns, girders and similar structural items in its factory from Angles, Channels, Plates, Joists, Tubes, Rods etc., as per the layout and specifications of individual customers' factory sheds.

(e) The fabricated items were removed in parts/unassembled (CKD condition) from the factory to the customers' sites, where they were assembled and erected as factory sheds permanently embedded to earth. The final erected sheds were undisputedly non-excisable.

(f) The Tribunal endorsed the finding that the impugned structural components were tailor-made, intermediate parts of specific factory sheds, made solely to the design and requirement of particular clients, and not capable of any general or independent use elsewhere.

(g) The only "customer" for each set of impugned goods was the particular client for whom the shed was being erected; the components were not goods that could be brought to the general market for sale, nor shown to be bought or sold as a commodity in the market.

(h) The purchase orders examined showed provisions for VAT and Service Tax on erection, with no reference to payment of central excise duty on the fabricated structural parts, supporting the finding that the transaction was not treated by the parties as involving sale of excisable goods.

(i) The Department did not adduce any evidence to show that similar tailor-made structural components were bought and sold in the market as goods, or that the specific impugned items were capable of being marketed.

(j) The Court agreed with the Commissioner (Appeals) that, although the items are classifiable as "steel structures" under the Central Excise Tariff, this classification alone does not render them excisable in the absence of proof of marketability.

Conclusions

(k) The structural items, being tailor-made, unassembled parts of factory sheds intended solely for specific clients and not shown to be capable of being bought and sold in the market, did not satisfy the test of "goods" and "marketability" under Section 2(d).

(l) Consequently, the process carried out by the respondent did not result in manufacture of excisable goods for the purposes of Section 2(f) and Section 3 of the Central Excise Act, 1944.

(m) On this ground, the demand of central excise duty, interest and penalties was unsustainable.

Issue (3): Characterisation of activity as works contract service rather than manufacture

Interpretation and reasoning

(n) The respondent had contracts with customers for supply, fabrication, transportation and erection of structural work (factory sheds) at customers' sites.

(o) The Tribunal noted the respondent's submission, accepted by the Commissioner (Appeals), that Service Tax had been paid on the services rendered under the category of "works contract service."

(p) The Court observed that the overall activity, viewed as a composite contract for supply and erection of factory sheds permanently embedded to earth, was more appropriately treated as provision of works contract service, rather than manufacture of distinct excisable goods.

(q) In the absence of marketable goods emerging, the process could not be treated as manufacture under Section 2(f); instead, the tax liability properly arose under Service Tax on works contract, already discharged by the respondent.

Conclusions

(r) The respondent's activity constituted works contract service involving fabrication and erection of factory sheds, not manufacture of excisable goods.

(s) No central excise duty was chargeable on the fabricated structural components in the circumstances of the case.

Issue (4): Applicability of precedents cited by Revenue

Interpretation and reasoning

(t) In the decision concerning Richardson & Cruddas Ltd., the fabricated goods were sold to customers as marketable commodities. The Tribunal distinguished that case on the factual ground that, in the present matter, the goods were tailor-made to individual client specifications, and no evidence existed of their being sold or capable of being sold in the open market.

(u) In the Mahindra & Mahindra Ltd. decision, fabrication of iron and steel structures like roof frames at site was treated as a process of manufacture. The Tribunal held that this precedent was inapplicable because, in the present case, the activity was in the nature of a works contract, and-critically-there was no evidence that the impugned goods were marketable.

(v) The Tribunal emphasized that, in both authorities relied on by Revenue, either the goods were sold or the issue was distinct; by contrast, the decisive feature in the present case was absence of marketability and the works-contract nature of the transaction.

Conclusions

(w) The precedents cited by the Revenue were factually distinguishable and did not govern the present case.

(x) The Commissioner (Appeals) correctly relied on the Supreme Court's marketability jurisprudence to hold the impugned goods non-excisable.

Overall Conclusion

(y) The fabricated structural components removed from the respondent's factory were not "goods" within the meaning of Section 2(d), and their fabrication did not amount to "manufacture" of excisable goods under Section 2(f). The respondent's activity was in the nature of works contract service on which Service Tax had been paid. The order of the Commissioner (Appeals) dropping the excise duty demand, interest and penalties was upheld, and the Revenue's appeal was rejected.

1. ISSUES PRESENTED AND CONSIDERED

(a) Whether, under the Bihar Finance Act, 1981, sales tax can be charged separately on packing materials (gunny bags and HDPE bags) and on cement at different rates, or whether the "sale price" for levy of sales tax must be treated as a consolidated amount at the cement rate irrespective of separate itemisation in invoices.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Taxability of cement and packing materials at separate rates versus consolidated "sale price"

Legal framework

The Court examined the scheme of the Bihar Finance Act, 1981, focusing on Section 2(u) defining "sale price". Section 2(u) provides that "sale price" means the amount payable to a dealer as valuable consideration in respect of the sale or supply of goods. Explanation I states that sale price includes any amount charged by the dealer for anything done in respect of the goods at or before delivery to the buyer. Explanation II excludes cash discounts (if shown separately and according to ordinary trade practice) and transport costs (if separately charged).

The Court also noted the statutory rate structure under Section 12 and related notifications, under which cement was taxable at 11%, gunny bags at 4%, and HDPE bags at 7% during the relevant periods.

Interpretation and reasoning

The appellant argued that cement and packing materials (gunny and HDPE bags) are independent commodities with distinct tax rates under the statute; therefore, invoices showing 11% tax on cement and 4%/7% on bags were said to be in conformity with Section 12. The appellant relied on Supreme Court authorities emphasizing plain meaning in taxation statutes and, particularly, on the principle that where packing material is an independent commodity and sold separately, it may be taxed independently.

The respondent relied on the statutory definition of "sale price" in Section 2(u) and on precedent indicating that charges integral to putting goods in a deliverable state can form part of the sale price of the goods sold.

The Court held that the central question was whether the sale transaction in substance involved a separate sale of packing materials, or whether the sale of cement in packed condition constituted a single composite sale of "goods" for which cement together with its packing is the relevant taxable unit. It observed that, in the present case, the packing of cement in gunny/HDPE bags was carried out at or prior to delivery and that there existed an implied agreement to sell the packing material along with the cement. However, the Court underscored that no specific contract or evidence of a separate agreement for sale of bags had been produced before the authorities or the Tribunal by the appellant.

Applying Section 2(u), the Court reasoned that the "goods" for purposes of the transaction were cement along with its packing, and the valuable consideration payable to the dealer in respect of such goods constituted a single "sale price". Under Explanation I, amounts charged for anything done in respect of the goods at or before delivery (including packing) form part of that sale price. Therefore, the total consideration for cement in its packed form is to be treated as one integrated "sale price" for levy of tax.

The Court distinguished the authorities cited by the appellant on the ground that they merely reaffirm the rule of plain construction of taxing statutes. It held that, on a plain reading, Section 2(u) clearly covers the instant situation and leaves no room for treating packing material as separately taxable in absence of evidence of an independent sale.

Consequently, the Court held that the statutory definition of "sale price" governs and that the separate rate entries for packing materials under Section 12 do not override the composite nature of the consideration in the given transaction when no separate sale of bags is established.

Conclusions

The Court concluded that, under Section 2(u) of the Bihar Finance Act, 1981, the "sale price" for the transaction in question is the consolidated amount payable for cement in its packed condition, which includes the value of the packing material. As such, sales tax is leviable on the consolidated sale price at the cement rate (11%) and not at separate rates on cement and packing materials (4%/7% and 11%) merely because separate prices are shown in the invoices.

The Court held that the substantial question of law claimed by the appellant-whether cement and packing material should be taxed separately-does not in fact arise on the statutory scheme properly construed, and in any event such separate taxation is not legally permissible on the facts of the case. The orders of the Assessing Authority, Appellate Authority, and Revisional Authority treating the sale price as consolidated and levying tax accordingly were upheld as being in accordance with law, and all appeals were dismissed.

Issues: Whether the Tribunal's order required to be set aside and the matter remanded for fresh decision on whether the Commissioner's order under Section 52(2) of the Sales Tax Act should operate prospectively or retrospectively.

Analysis: The earlier order relied upon by the Tribunal had already been interfered with, and the High Court had specifically held that the question of prospective effect under Section 52(2) had not been dealt with and therefore required independent adjudication. Since the Tribunal's decision in the present reference was founded on that earlier order, the basis of the Tribunal's disposal no longer survived. The proper course was to restore the matter to the Tribunal so that the limited question of prospectivity or retrospectivity could be decided afresh, and, if necessary, together with the connected remand proceedings already pending or decided.

Conclusion: The Tribunal's order was set aside and the matter was remanded to the Tribunal for fresh decision on the limited issue of prospective or retrospective operation of the Commissioner's order under Section 52(2) of the Sales Tax Act.

Issues: (i) Whether the assessee was entitled to exemption on inter se sales of aluminium sole moulds and cutting dyes under the cited notifications, and whether those items could be treated as raw materials, packing materials or consumables; (ii) Whether penalty under Section 16(2) of the Tamil Nadu General Sales Tax Act, 1959 was sustainable.

Issue (i): Whether the assessee was entitled to exemption on inter se sales of aluminium sole moulds and cutting dyes under the cited notifications, and whether those items could be treated as raw materials, packing materials or consumables.

Analysis: The claim under the 1994 notification failed because it was confined to inter-unit sales within the Madras Export Processing Zone, whereas the assessees were not located in that zone. The 1997 notification applied generally to sales of raw materials, packing materials and consumable goods to 100% export oriented units, but the items in question were not consumed in the manufacturing process; they were only aids or implements. The ordinary meaning of consumables, as reflected in the EXIM policy, supported the revenue's case, and the exemption notifications could not be stretched beyond their clear language.

Conclusion: The exemption claim was rejected and the issue was answered against the assessee and in favour of the revenue.

Issue (ii): Whether penalty under Section 16(2) of the Tamil Nadu General Sales Tax Act, 1959 was sustainable.

Analysis: Penalty under Section 16(2) required proof of willful non-disclosure of assessable turnover. All material facts were already on record, and the dispute turned only on the legal interpretation of the notifications. In those circumstances, the statutory condition for penalty was not met.

Conclusion: The penalty was set aside and the issue was answered in favour of the assessee.

Final Conclusion: The tax exemption claim failed, but the penalty component was annulled, leaving the appeals successful only to that limited extent.

Ratio Decidendi: An exemption notification in a fiscal statute must be confined to its clear terms, and penalty for escapement cannot be sustained where the dispute is only one of legal interpretation and there is no willful non-disclosure.

Issues: Whether, at the Section 11 stage, the referral court must finally decide if an individual consortium member has the capacity to invoke arbitration, or whether that question should be left to the arbitral tribunal after a prima facie finding on the existence of an arbitration agreement.

Analysis: The statutory scheme under Section 11(6A) confines the referral court to a prima facie examination of the existence of an arbitration agreement. Questions touching the true parties to the contract, the capacity of an individual consortium member to invoke arbitration, the continuing existence of the consortium, consent of other members, and related maintainability objections involve disputed facts and contractual construction. Those matters fall within the arbitral tribunal's jurisdiction under Section 16, which can rule on its own jurisdiction and on objections to the existence or validity of the arbitration agreement. Entertaining such objections in detail at the referral stage would amount to a mini-trial, contrary to the principle of minimal judicial intervention and the doctrine of kompetenz-kompetenz.

Conclusion: The referral court was justified in constituting the arbitral tribunal, and the preliminary objections raised by the appellants must be decided by the tribunal.

Ratio Decidendi: At the Section 11 stage, the court is limited to a prima facie examination of the existence of an arbitration agreement, and disputed questions about a consortium member's authority or capacity to invoke arbitration must ordinarily be left to the arbitral tribunal under Section 16.

Issues: (i) Whether the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 could be invoked when no security interest was created in favour of the lender and the transaction documents did not establish the lender as a secured creditor; (ii) Whether the Act could be applied in Nagaland against the borrower in the absence of an applicable notification and having regard to Article 371A of the Constitution of India.

Issue (i): Whether the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 could be invoked when no security interest was created in favour of the lender and the transaction documents did not establish the lender as a secured creditor.

Analysis: The statutory scheme of the Act permits enforcement only where a security interest exists in favour of a secured creditor. A security interest under Section 2(1)(zf) presupposes a right, title, or interest created in property for securing the debt. On the facts found, the loan arrangement and guarantee documents did not create such security interest in favour of the lender, and the record did not establish any mortgage or equivalent security arrangement that could bring the lender within the definition of secured creditor. In the absence of such foundational requirement, recourse to Sections 13 and 14 of the Act could not be sustained, and the existence of an alternative remedy under Section 17 did not cure the jurisdictional defect.

Conclusion: The invocation of the Act against the borrower was unlawful and without jurisdiction.

Issue (ii): Whether the Act could be applied in Nagaland against the borrower in the absence of an applicable notification and having regard to Article 371A of the Constitution of India.

Analysis: Article 371A gives special constitutional protection in matters concerning ownership and transfer of land and its resources in Nagaland. The Act does not override the Constitution, and its operation in the State depended on the relevant notification issued much later than the transaction and recovery steps in question. The Court treated the later notification as showing that the Act became implementable in Nagaland only from that later date, which did not assist the lender for action taken earlier. The constitutional limitation, coupled with the absence of a valid security interest, reinforced the conclusion that the recovery measures under the Act were impermissible on the facts.

Conclusion: The Act could not validly be invoked in the manner attempted against the borrower in Nagaland at the relevant time.

Final Conclusion: The impugned writ relief was sustained, and the lender was left to pursue any available remedies in accordance with law against the borrower or the guarantor.

Ratio Decidendi: Enforcement under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is maintainable only where a valid security interest exists in favour of a secured creditor, and the Act cannot be applied contrary to constitutional limitations or without the statutory preconditions for securitisation.

Issues: (i) Whether complaints under Section 138 of the Negotiable Instruments Act, 1881 survived after the corporate debtor had entered insolvency and liquidation proceedings under the Insolvency and Bankruptcy Code, 2016. (ii) Whether dishonour of cheques with the remark "ACCOUNT BLOCKED" attracted liability under Section 138 of the Negotiable Instruments Act, 1881.

Issue (i): Whether complaints under Section 138 of the Negotiable Instruments Act, 1881 survived after the corporate debtor had entered insolvency and liquidation proceedings under the Insolvency and Bankruptcy Code, 2016.

Analysis: Once the corporate debtor was admitted into CIRP, moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 came into force and management and control of the company's affairs vested in the IRP and thereafter the liquidator. The accused directors ceased to have authority over the company's bank account and could not validly issue cheques from the account after the insolvency process had taken over. In such a situation, the foundational requirement of a cheque drawn by a person maintaining the account was not satisfied, and the directors could not be fastened with liability on the basis of cheques allegedly issued after they had lost control.

Conclusion: The complaints were not maintainable against the petitioners in view of the insolvency and liquidation proceedings.

Issue (ii): Whether dishonour of cheques with the remark "ACCOUNT BLOCKED" attracted liability under Section 138 of the Negotiable Instruments Act, 1881.

Analysis: Section 138 is attracted when a cheque is dishonoured for insufficiency of funds or where the account continues to be maintained by the drawer but payment fails for a reason legally covered by the provision. Where the account is blocked because of insolvency proceedings and the drawer has already been divested of authority and control over the account, the dishonour is not attributable to insufficiency of funds in a live and operative account maintained by the drawer. The statutory ingredients of the offence therefore remain unfulfilled.

Conclusion: Dishonour for "ACCOUNT BLOCKED" in the facts of the case did not constitute an offence under Section 138 of the Negotiable Instruments Act, 1881.

Final Conclusion: The summoning orders and the connected criminal complaints were unsustainable and had to be quashed in consequence of the insolvency proceedings and the nature of the cheque dishonour.

Ratio Decidendi: Where a corporate debtor has entered CIRP and its bank accounts come under the control of the IRP or liquidator, a cheque presented thereafter cannot found prosecution under Section 138 of the Negotiable Instruments Act, 1881 if dishonour results from the account being blocked pursuant to insolvency proceedings rather than from insufficiency of funds in an account maintained by the drawer.