Refusing to direct unconditional release of the seized gold, the Delhi High Court has ruled that protection under Article 300A of the Constitution does not entitle a passenger (petitioner) to bypass the statutory process where competent Customs authorities have initiated action. Accordingly, the Court held that a passenger who crossed the Green Channel at Delhi airport and had a 58-gram yellow metal chain recovered from her possession cannot secure unconditional release of the article by approaching the High Court after a delay of approximately 938 days without disclosing her own contemporaneous statement under Section 108 of the Customs Act, 1962.
The Court said that an extraordinary jurisdiction under Article 226 of the Constitution is discretionary and equitable, and a petitioner invoking it must approach the Court with reasonable promptitude and place before it the complete and material factual record, including admissions made under Section 108 of the Act. Further, the Supreme Court’s decision in Union of India v. Jatin Ahuja [Civil Appeal No.3489/2024] lays down the legal consequences of non-compliance with the statutory safeguards under Sections 110 and 124 of the Customs Act, but the precedent must be applied having regard to the factual and statutory context of each case and cannot be invoked mechanically by suppressing material contemporaneous admissions.
A bald assertion that goods constitute bona fide personal effects cannot entitle a petitioner to a writ of release where the contemporaneous Detention Receipt itself records the value as ‘to be appraised’ and the statutory authorities dispute the factual foundation, since such disputed questions of fact are not ordinarily adjudicated in writ proceedings, added the Court.
While rejecting the blanket levy, the Delhi High Court has clarified that sales tax applies only to rolling stock the Railways owned and transferred to the Indian Railway Finance Corporation (IRFC), not to stock procured as agent. The Court ruled that railways can be a ‘dealer’ under the Delhi Sales Tax Act, but being a dealer does not mean every transaction is a sale. The legal character of each transaction must be independently established, and stock procured as agent falls outside the levy.
The Court drew a sharp three-way classification: rolling stock manufactured by the Railways, rolling stock purchased by the Railways in its own right, and rolling stock procured by the Railways on behalf of IRFC. Only the first two classes can constitute sales; the third class is outside the levy. Hence, the impugned assessments failed because they treated the entire IRFC-financed rolling stock as turnover from sales by the Railways without segregating the source and title history of each item, rendering the composite demands unsustainable.
On territorial taxability, the Court clarified that once a sale is established, the burden shifts to the dealer under Section 6 of the DST Act to prove non-liability under Section 8 read with Sections 3 and 4 of the CST Act. Accordingly, the head office location, Clause 15 deemed appropriation, and absence of other-State assessment are not, by themselves, conclusive of Delhi situs. Resultantly, the Court ordered a structured, time-bound remand with a four-week inter-governmental meeting between the Railways, GNCTD and IRFC to jointly classify transactions, followed by reasoned assessment orders within twelve weeks, with deposits to be adjusted and no recovery for four weeks after communication.
Delhi HC: Parallel GST Proceedings Not Barred Where Allegations and Source of Material Are Different
The Delhi High Court has held that where parallel proceedings under the CGST and SGST enactments arise from distinct sources of material and distinct allegations of default, the Section 6(2)(b) CGST Act bar does not apply and the proceedings cannot be rendered non est. The Court also said that a taxpayer who fails to avail repeated opportunities of hearing cannot invoke natural justice, and the constitutional validity of Section 16(2)(c) of the CGST Act stands settled by the Gujarat High Court in Maruti Enterprise v. Union of India [2026 SCC OnLine Guj 4013].
The Division Bench comprising Justice Anil Kshetarpal and Justice Bharat Parashar examined Section 6(2)(b) of the CGST Act, 2017, which bars a proper officer under the CGST Act from initiating proceedings on a subject matter upon which a proper officer under the SGST Act has already initiated proceedings, and noted that this bar is attracted only if (i) the State proceedings were initiated prior in point of time, and (ii) the subject matter of both proceedings is the same.
The Delhi High Court has clarified that the expression ‘any person’ in Section 122(1A) of the CGST Act is not confined to a ‘taxable person’ under Section 2(107), and extends to every person, whether or not registered or liable to be registered, who satisfies the twin conditions of retaining the benefit of a fraudulent transaction and the transaction being conducted at his instance. The Court clarified that Section 122(1A) applies only to transactions or acts committed on or after Jan 01, 2021, the date the provision came into force, and cannot be invoked retrospectively merely because the SCN was issued after that date.
The Court further held that the monetary penalty under Section 122(1A), though civil in form, is penal in consequence, and that making its applicability dependent on the date of the SCN would offend Article 20(1) of the Constitution by permitting differential treatment of identical transactions based on administrative timing.
The New Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has strongly held that Assessing Officer cannot rely on the Form 10-K filed before the US Securities & Exchange Commission (SEC) to allege that a foreign assessee has a fixed place PE in India, if the report reflects the worldwide assets of the entire group and not the standalone entity of the assessee.
The ITAT explained that a subsidiary with its own manufacturing unit, independent customer base, and turnover running into hundreds of crores cannot be treated as economically or administratively dependent on its foreign parent, and therefore does not constitute a Dependent Agency PE under Article 5(4) of the India-US DTAA.
Further, the Tribunal emphasised that the Revenue cannot extract clauses from a License Agreement relating to royalty income already offered to tax and use the same to allege that the subsidiary is habitually promoting the business of the foreign assessee in a different segment such as sale of machinery and raw material. Hence, once it is established that the assessee does not have a fixed place PE or DAPE in India, the question of attribution of profits to the alleged PE does not arise.
The Bombay High Court has held the RG Studios entitled to settle legacy service tax dispute, as lien-cum-quantification letter dated 5th March 2019 addressed to Kotak Mahindra Bank satisfied the definition of ‘quantified’ under Section 121(r) of the Finance Act, 2019. The Court clarified that a written communication under Section 87(b) of the Finance Act, 1994 creating a lien on the assessee’s bank account and quantifying the duty liability prior to 30th June 2019 constitutes a valid ‘quantification’ under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.
The fact that the quantification letter is addressed to a third party such as a bank, rather than directly to the assessee, is immaterial where the legal effect of the communication operates on the assessee’s account, added the Court, while emphasising that non-quantification of interest does not invalidate a communication as a ‘quantification’ under Section 121(r) of the Finance Act, 2019, since the statutory requirement is only a written communication of the amount of duty payable under the indirect tax enactment.
The High Court also said that CBIC Circular dated 27th August 2019 clarifies that ‘written communication’ includes letters intimating duty demand, duty liability admitted during enquiry/investigation/audit, or audit reports, all of which satisfy the definition of ‘quantified’. Moreover, the Designated Committee’s rejection of the declaration on the ground of ineligibility was unjustified, and the assessee was entitled to the benefit of the Scheme upon fulfilling the prescribed payment conditions.
The Calcutta High Court has held that the Income Tax Department’s adjustment of Ultra Tech Cement’s refund for Assessment Year 2019-2020 against outstanding demand for Assessment Year 2011-2012, both relating to the pre-CIRP period, was illegal and unsustainable. The Court clarified that once a Resolution Plan is approved under Section 31(1) of the IBC, all claims stand frozen and are binding on every stakeholder, including the Central Government, State Government, and local authorities, regardless of whether such stakeholder was a party to the CIRP proceedings.
The Court said that all claims not forming part of the approved Resolution Plan stand extinguished, and no person is entitled to initiate or continue any proceedings in respect of such claims, including the Income Tax Department, and the Income Tax Authorities have no right to adjust refunds pertaining to a period which stood frozen upon approval of the Resolution Plan, nor can they initiate any fresh proceedings in respect of demands raised prior to the transfer date.
The High Court emphasised that Section 238 of the IBC gives the Code overriding effect over any inconsistent provisions of any other law for the time being in force, including Section 245 of the Income Tax Act. Further, income tax dues, being ‘crown debts’, have no priority over secured creditors and stand extinguished upon approval of the Resolution Plan if not included therein. Hence, the Income Tax Authorities are expected to forthwith withdraw all demands pertaining to the pre-transfer period.
Rejecting constitutional challenge to Section 93(1)(b), the Delhi High Court has clarified that ‘determined after his death’ covers fresh proceedings and does not require a Show Cause Notice during the deceased’s lifetime. The Court ruled that Section 93 of the CGST Act expressly permits determination of tax, interest or penalty against the legal representative of a deceased person even after death, and the provision does not require that adjudicatory proceedings must have commenced during the lifetime of the deceased.
The Court explained that the expression ‘is determined after his death’ covers both liability determined before death but remaining unpaid and liability determined thereafter, and issuance of a Show Cause Notice during the deceased’s lifetime is not a condition precedent. Thus, the constitutional challenge to Section 93(1)(b) on the grounds of discrimination and denial of meaningful defence was rejected, emphasising that the provision has a rational basis, confines payment to the estate’s capacity to meet the charge, and preserves adjudicatory safeguards including the right to be heard under Section 126(3) and the right of appeal.
The Calcutta High Court has held that interest payments by Permanent Establishment (PE) to head office cannot be excluded on the ground of mutuality or as a ‘payment to self’ and require TDS compliance as business income in India. Essentially, interest payments by an Indian PE to its overseas head office attract mandatory tax deduction at source under Section 195, and failure to deduct tax triggers automatic disallowance under Section 40(a)(i) even though Article 7(3) of the DTAA permits such deduction for banking enterprises.
The Court ruled that a non-resident foreign bank operating through a PE in India cannot claim the domestic company tax rate by invoking the non-discrimination clause in Article 24(2) of the India-Netherlands DTAA, as the explanation to Section 90 clarifies that charging a higher rate on foreign companies is not ‘less favourable’ treatment. The Explanation to Section 90, inserted by the Finance Act 2001 with retrospective effect from April 1, 1962, is clarificatory in nature and bars foreign companies from claiming the domestic company tax rate by invoking the non-discrimination clause in Article 24(2) of the India-Netherlands DTAA.
The High Court also said that Automated Teller Machines qualify as ‘computers’ under item 2B of Appendix I to the Income Tax Rules and are entitled to the higher rate of depreciation, given their functional character as complex data-processing units integral to modern digital banking infrastructure. Hence, ATMs are data-processing units entitled to higher depreciation.
In a ruling favouring a US-based LLC, the New Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that the interest component of a foreign arbitral award, once deemed a decree of the Delhi High Court under Section 49 of the Arbitration and Conciliation Act, assumes the character of a ‘judgment-debt’ and falls outside the scope of the Income Tax Act.
The Tribunal observed that the statutory definition of ‘interest’ under Section 2(28A) of the Income Tax Act covers interest payable in respect of money borrowed or debt incurred. Since the impugned interest arose from a court decree and not from any borrowing or debt, it does not fall within the statutory definition.
The Tribunal also held that the India-USA Double Taxation Avoidance Agreement applies only to ‘interest’ as understood under the treaty, and since the receipt had lost its nomenclature and characteristic as interest upon merger into the decree, the DTAA could not be invoked to tax it in India.
In a ruling with significant implications for municipal taxation of process-integrated industrial installations, the Punjab & Haryana High Court (Chandigarh Bench) has held that an Ammonia Gas Storage Tank equipped with refrigeration and compression systems cannot be subjected to house tax merely because it is permanently erected on land. The Court explained that an Ammonia Gas Storage Tank equipped with refrigeration machinery, compressors and pressure-control systems, requiring continuous operation and round-the-clock supervision, is functionally integrated with the manufacturing process and constitutes an integral part of plant and machinery, not a taxable building.
The Court clarified that mere fact that an industrial installation is permanently erected upon land or involves substantial civil construction is not determinative of its legal character for house tax purposes, and the court must examine the substance, function and purpose of the installation. Further, the Court clarified that Entry 49 of List II of the Seventh Schedule to the Constitution authorises taxation of lands and buildings, and not of plant and machinery merely because such machinery is situated upon or attached to the land or building.
In a significant ruling on the integration of manufacturing operations, the Chennai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has set aside the demand of over Rs. 10.77 lakhs, holding that an intermediate product arising unavoidably in the continuous manufacture of a dutiable final product cannot be treated as an exempted final product merely because it is exempt or cleared at nil rate of duty.
The CESTAT held that where ‘Processed Milk’ is manufactured by evaporating fresh milk and adding sugar and is either captively consumed in the manufacture of sugar-boiled confectionery or sent to job workers for such manufacture, it is an intermediate product forming an integral part of the continuous manufacture of the dutiable final product.
The manufacturing operation must be considered as an integrated whole, and an intermediate stage cannot be isolated to create an artificial ‘exempted final product’ for the purposes of Rule 6 of the CENVAT Credit Rules, 2004. Further, a product which emerges unavoidably or as a technological necessity in the course of manufacture of the principal final product is in the nature of a by-product, and Rule 6 is not attracted merely because such by-product is exempt or cleared at nil rate of duty, added the Tribunal.
In a significant ruling on GST classification of cinematographic film rights, the Bombay High Court has held that licensing of copyright in films by the original producer does not qualify as ‘Information Technology Software’ and squarely falls under SAC 997332, taxable at 12% prior to 1 October 2021. The Court clarified that cinematographic film, being a passive audio-visual work incapable of manipulation or interactivity, does not satisfy the statutory definition of ‘Information Technology Software’ under Explanation 4(v) of the Rate Notification, which requires the content to be capable of being manipulated or providing interactivity to a user.
Going further, the Court explained that the scheme of Classification of Services separately lists SAC 997331 (licensing of computer software and databases) and SAC 997332 (licensing for the right to broadcast and show original films). The existence of a specific SAC for cinematographic films demolishes any attempt to subsume film licensing within ‘software’. At the same time, the Court also pointed out that whether content is delivered physically on encrypted hard disks or transmitted electronically, the mode of delivery cannot determine classification, which must turn on the essential character of the supply, not the technology of transmission.
The Delhi High Court has held that where the Revenue places prima facie material showing that an Advocate was actively involved in the affairs of the entity under investigation, the protection of professional privilege does not operate as an absolute bar to search, seizure and examination of electronic devices, subject to safeguards for genuinely privileged third-party client data. The Court also held that a search authorization under Section 67(2) of the CGST Act for the premises of a law firm covers all cabins situated within those premises, and the mere fact that one cabin is used by an Advocate does not, by itself, render the search of that cabin unauthorized.
The High Court clarified that Section 132 of the Bharatiya Sakshya Adhiniyam, 2023 confers a privilege for the protection of the client and not a personal privilege of the Advocate. Consequently, the privilege cannot be invoked to prevent investigation into the Advocate’s own activities where those activities are themselves the subject matter of investigation. Further, the investigative material, including statements of persons examined, produced before the Court in a sealed cover during the pendency of investigation need not be furnished to the person under investigation, since disclosure cannot be directed as a matter of course where it may impede or interfere with the investigation; the Madhyamam Broadcasting Limited principle was distinguished on facts.
The Court emphasised that non-issuance of a Show Cause Notice to the entity under investigation at the stage of search and investigation does not render the search or the summons illegal, since issuance of a Show Cause Notice is a subsequent stage that arises only if the investigation results in adjudicatory proceedings. The Court also pointed out that Administrative instructions, Master Circulars and internal manuals regulate the manner of exercise of statutory power but cannot curtail or extinguish the power conferred by the statute; in the absence of demonstrated violation of a mandatory statutory requirement affecting the validity of the authorization or jurisdiction, procedural deviation does not render the search void ab initio.
In a landmark ruling on the interplay between Chapter XIX-A and the reassessment provisions of the Income Tax Act, the Supreme Court has reaffirmed that once the Income Tax Settlement Commission passes a final settlement order, the Assessing Officer is denuded of jurisdiction to reopen the concluded assessment by issuing a notice under Section 148 of the Income Tax Act. The Court held that the settlement procedure under Chapter XIX-A of the Income Tax Act is a self-contained code, and the finality attached to a settlement order passed under Section 245D(4) cannot be defeated by permitting the Assessing Officer to independently exercise reassessment jurisdiction under Section 148 of the Act.
The Apex Court clarified that the expression ‘full and true disclosure of income’ under Section 245C must be read with the expression ‘the manner in which such income has been derived’, and once the ITSC admits the application and passes a final order determining the total income after allowing deductions claimed in the original return, the entire assessment year stands concluded and is conclusive under Section 245-I.
In a landmark ruling on cross-border taxation, the Delhi High Court has quashed Section 148 notices for AYs 2012-13 to 2014-15 and directed refund of approximately Rs. 783 crores in TDS to Teva Israel, subject to a corporate guarantee from Teva USA. The High Court held that the mere fact that an Indian resident is the payer of a cross-border payment does not, by itself, constitute income ‘accruing or arising’ in India within the meaning of Section 5(2)(b) of the Income Tax Act. The Revenue must establish a sufficient nexus between India and the income-producing right or activity or bring the receipt within one of the specific deeming provisions under Section 9 of the Income Tax Act.
The High Court set aside the AAR’s order dated 25 October 2019 which had declined to rule on the taxability of the Rs. 1,851 crore payment received by Teva Israel from Ranbaxy India, holding that the AAR exceeded its jurisdiction by recording findings on the tax liability of Teva USA, a third party who was not before it, and by conflating the distinct statutory stages of admission under Section 245R(2) and pronouncement of ruling under Section 245R(4).
The New Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has asserted that assessee’s evidence of actual rendition of services, withholding tax payments and absence of comparables under CUP warrants full deletion of adjustment. The ITAT held that where the assessee demonstrates actual rendition of intra-group services through contemporaneous evidence, cost-benefit analysis, benefits derived and withholding tax payments, and the TPO applies the CUP method without bringing any comparables to justify ALP at NIL, the entire transfer pricing adjustment on intra-group services is liable to be deleted.
The Division Bench comprising Vimal Kumar (Judicial Member) and S. Rifaur Rahman (Accountant Member) held that the TPO, having applied the CUP method for benchmarking the international transaction of administrative support service charges, had not brought any comparables to justify the ALP of such services at NIL, which by itself justified deletion of the TP adjustment. The Tribunal also accepted that the services rendered were in the nature of regular intra-group business services and not stewardship or shareholder activities, since they produced effect on the recipient company and facilitated the carrying on of its business operations.
While quashing AY 2022-23 assessment framed directly under Section 143(3) post-search, the New Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that where the AO himself accepts that alleged unaccounted purchases led to corresponding sales, only the embedded profit qualifies as ‘income chargeable to tax’ for Section 149(1)(b) threshold.
Since the profit embedded in the alleged unaccounted purchases was admittedly below Rs. 50 lakhs in each relevant year, the statutory condition for reopening beyond three years was not satisfied, and the notices under Section 148 for AY 2014-15 to AY 2018-19 were quashed as without jurisdiction.
The ITAT clarified that following a search under Section 132, the only permissible statutory course is to issue notice under Section 148 and pass an assessment order under Section 147/144B. Resultantly, an assessment framed directly under Section 143(3) without following the Section 148 procedure is void ab initio.
Microsoft cannot be penalised for legally exercising statutory right to file six-monthly returns, rules the Bombay High Court while holding interest under Section 30(2) of the Maharashtra VAT Act cannot be levied on an assessee who has filed six-monthly returns and paid tax strictly in accordance with Rule 17(4) read with Rule 41 of the MVAT Rules, merely because the turnover in the relevant year was substantial.
The High Court ruled that the concept of ‘unjust enrichment’ has no statutory basis under the MVAT Act in relation to return periodicity or timing of tax payment where the dealer has acted in compliance with the prescribed Rules, and the revenue cannot rewrite or read down delegated legislation on the basis of its own perception of legislative intent. The Court declared the levy of interest as dehors the statutory provisions and constitutionally impermissible in violation of Article 265 of the Constitution, observing that interest being a fiscal levy can be imposed only with the authority of law.
Ruling that the two are chemically and commercially different products and cannot be clubbed under an omnibus ‘fuel’ entry, the Madhya Pradesh High Court (Jabalpur Bench) has quashed the order passed under Section 68 of the Commercial Tax Act, 1994 and the consequential assessment order, which had treated Furnace Oil as Light Diesel Oil and created an additional demand of Rs. 3.50 crores on Indian Oil Corporation Limited for the assessment year 2007-2008.
The Court undertook a detailed comparative analysis of the two products across eight technical parameters, including pour point, distillation range, carbon chain length, sedimentation, ash content, water content, sulphur content, and kinematic viscosity, and held that Furnace Oil and Light Diesel Oil are distinct commercial and chemical commodities arising at different stages of fractional distillation of crude oil.
The Court observed that the respondents had failed to rebut or controvert the extensive technical material placed on record by the petitioner, including Bureau of Indian Standards specifications, certificates from the National Accreditation Board and Maulana Azad Institute of Technology, and the Central Excise Tariff notification, all of which treat the two products as separate commodities.
At the same time, the High Court ruled that an identical rate of tax cannot be extended to Furnace Oil at par with Light Diesel Oil under an omnibus concept of ‘fuel’ where the legislature itself has provided a specific, distinct tariff heading for Light Diesel Oil, and in the absence of a shared, uniform entry, Furnace Oil cannot be taxed at the rate applicable to Light Diesel Oil.
While quashing the penalty imposed on FedEx Express Transportation, the Chennai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that the courier agency cannot be held liable for concealed narcotics without knowledge. The Tribunal asserted that the treatment of the Appellant as consignor/exporter, and attribution of knowledge or conscious participation in the attempted export, travelled beyond the SCN and could not be sustained.
On the merits, the Tribunal held that Regulation 13(i) of the Courier Imports and Exports (Clearance) Regulations, 2010 (CIER) does not mandate two identity documents, and non-production of a second document, absent evidence that the consignor’s identity or address could not be verified from the genuine driving licence, does not establish breach of Regulation 13(i). Regulation 13(j) prohibits outsourcing only of a regulatory function which the Regulations themselves contemplate as a function of the Authorised Courier, and mere outsourcing of physical pick-up does not violate Regulation 13(j).
On penalty, the Tribunal held that Section 114(i) of the Customs Act, 1962 requires an act or omission rendering goods liable to confiscation, while Section 114AA requires use of false material with knowledge or intent, and neither ingredient was present in the absence of evidence of knowledge, connivance or collusion.
The Bombay High Court has held that where classification turns on specialised technical considerations, the adjudicating authority must meaningfully evaluate expert opinion and can only reject it based on commensurate scientific material, not subjective assumptions. Where the assessee places reliance on an expert opinion based on physical inspection and detailed component-level analysis, the adjudicating authority cannot reject it merely by observing that it is ‘not relevant’.
The Court clarified that classification of BMS under CTH 9032 8990 and CSC under CTH 8537 1000 / 8537 1090 was not in dispute. The real controversy was whether the imported products fall within the exclusion of ‘Printed Circuit Board Assembly’ under Serial No. 512 of Notification No. 50/2017-Customs. The Court treated the VJTI report as a credible, independent technical opinion from a premier engineering institute with a specific EV automotive division, and held that it deserved meaningful evaluation rather than a one-line rejection.
The Rajasthan High Court (Jodhpur Bench) has held that disallowance under Section 40(a)(i) of Income Tax Act survives where foreign currency is routed through a third-party funding agency, since the contractual obligation to pay for technical know-how remained with the Indian assessee. The Court explained that where an Indian assessee contracts with a foreign company for technical know-how and services utilised in its Indian business, and the foreign currency consideration is released through a third-party funding agency such as the Crown Agents administering a foreign government grant, the assessee remains the person on whose behalf the payment is made.
The Court ruled that a third-party funding mechanism, including a sovereign grant administered through an agency such as the Crown Agents, discharges the assessee’s contractual liability without converting the third party into the person who incurred the underlying expenditure. Essentially, Article 13(7) of the India-UK DTAC deems fees for technical services to arise in the Contracting State of which the payer is a resident, reinforcing source-rule treatment where the Indian assessee is the contracting party.
The Court clarified that the physical situs from which foreign currency is released is not determinative of who is the ‘payer’ for purposes of TDS deduction under Section 195, and the inquiry centres on the person on whom the contractual obligation to pay rests. The Court also clarified that an Indian assessee cannot claim deduction under Section 35AB for technical know-how expenditure while simultaneously denying that it ‘paid’ or ‘incurred’ the consideration for Section 40(a)(i) purposes.
The Delhi High Court has ruled that Customs Department’s failure to file claim during CIRP cannot be revived post-resolution, reinforcing the binding effect of Section 31(1) of the IBC on governmental authorities. The Court clarified that once a Resolution Plan is approved by the NCLT under Section 31(1) of the IBC, all claims not forming part of the plan stand extinguished, and no proceedings can be continued against the Corporate Debtor in respect of such extinguished claims.
The Court explained that the expression ‘claim’ under Section 3(6) of the IBC is wide enough to cover a right to payment arising from a pre-CIRP transaction, irrespective of whether the liability has been adjudicated or quantified by the statutory authority. Thus, the statutory mechanism of public announcement under the CIRP Regulations is sufficient to invite claims, and there is no obligation on the Corporate Debtor to individually notify every governmental authority of the commencement of CIRP.
The High Court asserted that 2019 Amendment to Section 31(1) of the IBC is declaratory and clarificatory in nature, and binds the Central Government, State Governments, and local authorities to whom statutory dues are owed, including the Customs Department. At the same time, Section 238 of the IBC gives the Code overriding effect over any inconsistent provision of any other law, including the Customs Act, 1962, and a creditor who fails to participate in the CIRP cannot acquire a superior position after approval of the Resolution Plan.
The Delhi High Court has upheld the view that movement of equipment from Free Trade Warehousing Zone (FTWZ) / Special Economic Zone (SEZ) to Domestic Tariff Area (DTA) against a fresh Essentiality Certificate constitutes a fresh import and not a re-import, thereby disentitling the appellants from the residuary exemption under Serial No. 5 of Notification No. 45/2017-Cus. The Court held that the proposed movement of equipment from DTA to FTWZ and back to DTA against a fresh Essentiality Certificate for a new contract does not qualify for exemption from Basic Customs Duty, IGST and compensation cess under Serial No. 5 of Notification No. 45/2017-Cus.
The Court reasoned that the original transaction, founded upon the original EC and the corresponding contractual deployment, stood concluded upon completion thereof, and any subsequent EC gives rise to a distinct transaction notwithstanding the identity of the equipment. The appellants cannot attribute two inconsistent legal characters to the same movement, namely import under NN-50 and re-import under NN-45, merely to secure separate fiscal exemptions.
The FTWZ mechanism cannot be placed in a position of fiscal advantage over the express transfer mechanism under Condition No. 48(c) of NN-50, and the interposition of FTWZ cannot, merely by creating an additional procedural step, generate a further exemption under NN-45. The statutory fiction under SEZ legislation cannot be extended to create a benefit which the exemption notifications have not expressly conferred, added the Court.
The Karnataka High Court (Bengaluru Bench) has held that the Finance Act, 2010 amendment to Section 9 of the Income Tax Act, though framed as a clarification, effectively creates a fresh charge of tax on non-residents by eliminating the requirement that services be rendered in India. Applying the settled principle that an Explanation which widens the taxing net cannot be presumed retrospective merely because it uses the phrase “for removal of doubts,” the Court read down the amendment as prospectively applicable and not retrospective from June 01, 1976. The Court further held that the amendment is contrary to Article 12(4) of the India-USA DTAA, and under Section 90(2), the interpretation more beneficial to the assessee must prevail.
The Division Bench comprising Justice D K Singh and Justice T.M. Nadaf observed that Section 9(1)(vii)(c) of the Income Tax Act, in its plain reading, requires the fulfilment of twin conditions for income to be chargeable to tax, i.e., the services must be rendered in India and must be utilized in India. The Court noted that the Finance Act, 2007 only removed the requirement of the non-resident having a residence, place of business, or business connection in India, but did not affect the twin conditions laid down by the Supreme Court in Ishikawajima-Harima Heavy Industries Ltd. v. Director of Income Tax, Mumbai [(2007) 3 SCC 481].
The Delhi High Court has asserted that conscious use of another Customs Broker’s credentials, combined with failure to advise client on Plant Quarantine restrictions, constitutes substantive Customs Brokers Licensing Regulations, 2018 (CBLR) violations warranting revocation. The Court held that the statutory scheme governing Customs Brokers does not contemplate one Customs Broker undertaking the functions of another by using the latter’s credentials. A Customs Broker is required to transact business in accordance with the authorisation obtained from the importer and to discharge the obligations cast upon it under the CBLR.
The Division Bench comprising Justice Anil Kshetarpal and Justice Shail Jain observed that despite holding its own valid Customs Broker licence, Goodwings Maritime consciously chose to undertake the clearance-related activities using the credentials of M/s Prakhar Gupta. The Court noted that the fact that M/s Prakhar Gupta may have permitted or consented to this arrangement did not absolve Goodwings of its independent statutory obligations under the Customs Brokers Licensing Regulations, 2018 (CBLR).
The Court further observed that the goods were ultimately found to be prohibited for import under the Plant Quarantine regime, and Goodwings failed to advise its client regarding the applicable restrictions or bring the matter to the notice of the Customs authorities as required under the CBLR. The Court also noted that the relief granted to M/s Prakhar Gupta by the CESTAT Allahabad Bench in separate proceedings did not affect the independent violations committed by Goodwings, as the proceedings against two separate Customs Brokers concerned their respective statutory obligations.
In a landmark ruling on the taxability of corporate guarantees under GST, the Gujarat High Court (Ahmedabad Bench) has upheld the constitutional validity of Rule 28(2) of the CGST Rules and the levy of 1% GST on corporate guarantees furnished by Holding Companies to lenders on behalf of their subsidiaries, while striking down the expression “whichever is higher” as arbitrary and violative of Article 14 and 19(1)(g) of the Constitution. The Court further held that the retroactive application of the levy to guarantees executed prior to Oct 26, 2023, is unconstitutional, and quashed all proceedings under Section 74 of the CGST Act.
The Court held that the execution of a corporate guarantee by a Holding Company in favour of its subsidiary constitutes a “supply of service” under Section 7(1)(c) of the CGST Act read with Article 2 of Schedule I, since the Holding Company and subsidiary are “related persons” under the Explanation to Section 15, and the guarantee is furnished in the course or furtherance of business. The Court further held that the corporate guarantee satisfies the ingredients of Article 5(e) of Schedule II, as it constitutes “agreeing to the obligation to do an act” within the meaning of that provision.
On the constitutional validity of Rule 28(2), the Court upheld the Rule as intra vires the CGST Act and Articles 14, 19(1)(g), and 265 of the Constitution, except to the extent of the expression “whichever is higher.” The Court reiterated that the expression “whichever is higher” is arbitrary and violative of Article 14 and 19(1)(g) since it does not confer any option to the corporate guarantor to pay GST on the actual commission or charge when such actual consideration is lower than 1%. The Court read down this expression to mean that the valuation shall be the actual consideration or 1%, whichever is lower, thereby preserving the constitutional validity of the Rule.
In a significant ruling on cross-border intra-group services, the Mumbai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has allowed the appeal filed by DBS Bank India Limited, setting aside the service tax demand of approximately covering the period from April 01, 2013 to June 30, 2017, along with penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The Tribunal held that the Indian branch/subsidiary of a foreign bank, while performing credit assessment, loan structuring, disbursement, and monitoring functions for External Commercial Borrowings booked at the Singapore head office, does not qualify as an ‘intermediary’ under Rule 2(f) of the Place of Provision of Services Rules, 2012.
The CESTAT clarified that for any activity to qualify as an ‘intermediary service’ under Rule 2(f) of the Place of Provision of Services Rules, 2012, there must be a minimum of three parties involved, with the intermediary arranging or facilitating a main supply between two principals without providing the main supply on his own account. When an Indian branch or subsidiary of a foreign bank performs functions like credit assessment, loan structuring, disbursement, and monitoring for its head office in connection with External Commercial Borrowings, such activities cannot be classified as intermediary services because the Indian entity and the foreign head office constitute a single legal person rather than two distinct entities.
The services rendered by the Indian entity to its head office are performed on its own account and not as a facilitator of any main supply between two separate principals. The place of provision of such services falls under Rule 3 of the POPS Rules, being the location of the service recipient in Singapore, and the services qualify as exports outside the taxable territory, thereby falling outside the scope of service tax levy under the Finance Act, 1994, added the Tribunal.
In a significant ruling on the interplay between special and general criminal laws, the Gauhati High Court (Kohima Bench) has set aside an order of the Sessions Judge, Dimapur, granting zimma of 570 bags of seized foreign-origin areca nuts worth over Rs. 3.19 crore, holding that the power of provisional release of goods seized under the Customs Act, 1962 lies exclusively with the proper officer under Sections 110 and 110A, and cannot be exercised by a regular criminal court under Section 497 of the BNSS, 2023.
The Court emphasised that where goods are seized by the customs authorities under Section 110 of the Customs Act, 1962, on suspicion of being smuggled and liable to confiscation, and no cognizance of any offence under Chapter-XVI of the said Act has been validly taken by the regular criminal court for want of the mandatory previous sanction of the appropriate customs authority under Section 137, the regular criminal court has no jurisdiction to exercise the power of provisional release of such seized goods under Section 497 of the BNSS, 2023.
The power of provisional release of goods seized under the Customs Act, pending adjudication, lies exclusively with the proper officer designated under Section 122 of the Customs Act, 1962, in accordance with the procedure laid down under Sections 110 and 110A read with Section 122A of the said Act. The provisions of the Customs Act, 1962, being a special law, override the general criminal law provisions of the BNSS, 2023, in matters relating to seizure, confiscation and provisional release of goods under the said Act, added the Court.
In a transfer pricing appeal, the Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) has ordered the removal of Aurigene Discovery Technologies from the final set of comparables for benchmarking R&D services, accepted LIBOR plus 200 basis points as the arm’s length rate for delayed trade receivables, and restored LIBOR plus 3% as the benchmark for interest on External Commercial Borrowings.
The ITAT clarified that where the TPO himself adopts a specific filter or threshold for selecting comparables, that filter must be applied uniformly and consistently to all companies under consideration, and a comparable that fails the self-imposed filter cannot be retained in the final set merely because it was initially included.
Further, where the assessee has benchmarked the interest on ECBs at LIBOR plus 3% and such rate is within the ceiling prescribed by the RBI Master Circular on ECB and trade credits, the same is to be treated as at arm’s length, since RBI’s approval of the rate of interest is a relevant factor in determining the ALP of that rate, added the Tribunal.
While dismissing Delhi Development Authority’s twin appeals worth over Rs. 530 crores, the New Delhi Principal Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that statutory bodies engaged in commercial activity cannot escape service tax liability, regardless of sovereign status. The CESTAT clarified that a statutory or governmental authority, even though created under a statute and discharging statutory functions, is liable to pay service tax whenever its activity amounts to an activity for commerce, irrespective of its status as a sovereign or public authority.
The CESTAT also clarified that the exemption carved out under Circular No. 89/7/2006 dated Dec 18, 2006 applies only where the activity is a mandatory and statutory function and the fee collected is a compulsory levy deposited into the Government treasury, and not where the consideration is in the nature of commercial receipts such as lease premium, salami, ground rent, membership or subscription charges.
The Division Bench comprising Dr. Rachna Gupta (Judicial Member) and P.V. Subba Rao (Technical Member) observed that the lease premium or salami received against renting of immovable property is excisable to service tax under Section 65(105)(zzz) of the Finance Act, 1994 prior to July 01, 2012 and under Section 65B(44) post July 01, 2012, as settled by the Larger Bench decision in RIICO Ltd. [Interim Order No. 1/2025 dated 27.01.2025], and the service provider need not be the owner of the property for the activity to be taxable.
The Tribunal emphasised that the exemption notifications in a taxing statute are to be strictly construed, and the beneficiary must fall within the ambit of the exemption and fulfil the conditions thereof, failing which the question of application of the notification does not arise. The activity of charging membership and subscription for DDA sports complex is a commercial activity and not a sovereign function, and is therefore taxable.
The Rajasthan High Court (Jodhpur Bench) has held that deferred annuity payments under DBFOT concession agreements constitute taxable works contract services falling under Heading 9954, and that CBIC Circular dated 17 June 2021 is a valid clarification under Section 168 of the CGST Act. The High Court asserted that where a concessionaire undertakes construction, design and maintenance of a road under a DBFOT agreement and receives the project cost partly upfront and partly through deferred biannual annuity payments, the underlying service is a taxable works contract falling under Heading 9954 and not an exempt transport service under Heading 9967.
The Division Bench comprising Justice Pushpendra Singh Bhati and Justice Praveer Bhatnagar observed that construction services under DBFOT concession agreements do not qualify for the Nil rate exemption under Entry 23A of Notification No. 12/2017, even where the consideration is received through deferred biannual annuity payments spread over the operation period. Entry 23A of the said Notification applies exclusively to services falling under Heading 9967 covering supporting services in transport, and cannot be stretched to cover construction of roads which squarely falls under Heading 9954.
The Supreme Court has laid down that the extended limitation period under Section 74 of the CGST Act is not meant to be invoked through mere lip service or mechanical recitation of words like “fraud”, “wilful misrepresentation” or “suppression”. The foundational facts which led to the inference of fraud, wilful misrepresentation or suppression must be evident from the notice itself, and the satisfaction of the Assessing Officer must be based on a genuine application of mind, not on the mere employment of such words.
A bland statement made at some places of suppression of facts, merely to avail the extended period of limitation, would barely suffice and puts to peril the notice under Section 74. The Court further held that the concept of “protective assessment” is not statutorily permitted under the GST Act, and proceedings under Section 73/74 must be initiated only upon the satisfaction of the Assessing Officer, even where observations or objections are made on audit.
A Two-Judge Bench comprising Justice J.B. Pardiwala and Justice K. Vinod Chandran unequivocally held that the concept of protective assessment is statutorily not permitted under the CGST Act. A notice cannot be revived merely because the limitation period is closing, and the Department’s attempt to issue a fresh notice on July 01, 2025, as a protective measure was rejected outright. The Court drew a bright line that invocation of the extended five-year limitation under Section 74 requires foundational facts of fraud, wilful misrepresentation or suppression to be evident from the four corners of the show cause notice itself. A bland, mechanical recitation of statutory phrases without substantive factual backing will not sustain the notice.
The Madras High Court has affirmed the ITAT’s order treating Rs. 94.66 lakhs of bank deposit interest as taxable revenue receipt, ruling that absence of a specific written direction from the donor at the time of contribution defeats the corpus claim under Section 11(1)(d) of the Income-tax Act, 1961.
The Court clarified that where a charitable trust receives foreign donor grants for micro-credit and revolving loan programmes and invests the refunded amounts in its own bank fixed deposits, the interest so earned is taxable revenue receipt in the hands of the trust and does not qualify for corpus exemption under Section 11(1)(d) of the Income-tax Act, in the absence of an express written direction from the donor at the time of contribution that such interest shall form part of the corpus.
The Division Bench comprising the Chief Justice Sushrut Arvind Dharmadhikari and Justice G. Arul Murugan observed that Section 11(1)(d) of the Income Tax Act exempts voluntary contributions only when made with a specific written direction from the donor that they shall form part of the corpus. Interest earned from investing these capital funds constitutes income generated by the trust itself.
In a significant ruling on the scope of Section 38(3) of the Finance Act, 1979, the Supreme Court draws a clear line between non-payment and delayed payment of Foreign Travel Tax (FTT), holding that belated deposit of tax attracts Section 38(4) and not the strict liability penalty under Section 38(3). The Court held that the expression “fails to pay the foreign travel tax” in Section 38(3) of the Finance Act means non-payment of tax and does not cover delayed payment of tax, and hence, Section 38(3) is not attracted in cases of mere delay in depositing FTT into the Government treasury.
The Apex Court also held that on mere belated remittance of tax, no penalty is leviable under the strict liability provision, and that delayed payment must be dealt with under Section 38(4) read with the relevant Rules. The Court further held that imposition of penalty is not automatic upon breach of the statutory timelines, and that the adjudicating authority retains discretion to decide whether penalty should be imposed at all. Applying the principle of “no reformatio in peius”, the Court held that an appellant cannot be placed in a worse position merely because he chose to exercise his right of appeal.
In view of the Revenue Department’s own contemporaneous opinion that services to government hospitals and educational institutions were non-taxable, the Delhi High Court has accorded finality to CESTAT’s finding of no suppression and shields assessee from penalty. The Court emphasised that where an assessee acts under a bona fide and reasonable belief that the services rendered by it are not exigible to service tax, and the Department itself, at the contemporaneous time, holds a similar view regarding the non-taxability of such services, the default in payment of service tax arises from a bona fide understanding of the applicable legal position rather than from any deliberate attempt to avoid statutory liability.
In the absence of any material suggesting suppression, fraud, wilful misstatement or an intention to evade tax, such interpretational uncertainty and bona fide conduct constitute a reasonable cause within the meaning of Section 80 of the Finance Act, 1994, and the imposition of penalty under Section 78 of the Finance Act, 1994 is not warranted, added the Court.
The Division Bench comprising Justice Anil Kshetarpal and Justice Manmeet Pritam Singh Arora observed that the communications dated 11 September 2006 and 20 November 2007 from the Assistant Commissioner and Deputy Commissioner of Service Tax to the Senior Audit Officer, CAP-IV, clearly demonstrated that the Department itself was of the opinion that the services rendered by the Appellant to government institutions were not exigible to service tax. This lent credence to the Appellant’s submission that it had a reasonable and bona fide cause for its failure to deposit service tax.