1. ISSUES PRESENTED and CONSIDERED

• Whether customs authorities have jurisdiction to seize goods stored within a Special Economic Zone (SEZ) unit under the SEZ Act, 2005.
• Whether the seizure of imported goods declared as "leftover fabrics of tarpaulin" but found to be different types of fabrics is justified and lawful.
• Whether the conditions imposed for provisional release of seized goods, including submission of bond and bank guarantee, are reasonable and justified under Section 110A of the Customs Act, 1962.
• Whether goods warehoused within SEZ are liable to customs duty prior to clearance into Domestic Tariff Area (DTA), in light of exemptions under Section 26 of the SEZ Act, 2005.
• Whether the importer's failure to cooperate with investigation and provide requisite documents justifies stringent conditions for provisional release.
• Appropriateness of the quantum of bank guarantee demanded, particularly the inclusion of differential duty plus penalty at the provisional release stage.
• Whether the appellant should be allowed to re-export or clear goods in DTA without conditions or penalties.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Jurisdiction to Seize Goods Within SEZ

Legal Framework and Precedents: Section 53(1) of the SEZ Act, 2005 restricts customs officers' jurisdiction within SEZ. The appellant relied on judgments holding that customs officers lack jurisdiction to seize goods inside SEZ premises.

Court's Interpretation and Reasoning: The Court recognized the appellant's contention regarding SEZ being a deemed foreign territory and the jurisdictional limitation. However, it held that such questions of jurisdiction and duty liability can only be conclusively addressed after issuance of show cause notice and adjudication process. At the provisional release stage, these issues are premature.

Conclusion: Jurisdictional objections are deferred to adjudication. The Court will not interfere with the seizure legality at provisional release stage.

Issue 2: Legality and Justification of Seizure Based on Mis-declaration

Legal Framework and Evidence: The goods were declared as "leftover fabrics of tarpaulin" but examination and testing by CRCL Vadodara revealed multiple types of fabrics (woven, non-woven, PVC/PU coated etc.). Seizure was under Section 111 of the Customs Act, 1962 for mis-declaration.

Court's Reasoning: The Court noted that test reports received prima facie indicate discrepancies in composition. However, final determination requires adjudication, including possible retesting and cross-examination of experts. Investigation was ongoing and incomplete.

Conclusion: Seizure is prima facie justified but final sustenance depends on adjudication. The Court refrained from final conclusion at this stage.

Issue 3: Applicability of Customs Duty on Goods Within SEZ Under SEZ Act, 2005

Legal Framework: Section 26 of the SEZ Act, 2005 grants exemption from customs duty on goods imported into SEZ for authorized operations. Duty becomes payable only when goods move from SEZ to DTA.

Appellant's Argument: Since goods are warehoused within SEZ, no customs duty is payable at this stage, and thus, conditions for provisional release demanding bond and bank guarantee are legally incorrect.

Court's Analysis: The Court acknowledged the exemption under Section 26 and that SEZ is a deemed foreign territory. However, it emphasized that the question of duty liability and classification disputes must be adjudicated after investigation. The Court did not accept the appellant's contention to waive conditions solely on this ground at provisional release stage.

Conclusion: Duty exemption under SEZ Act is recognized but does not preclude provisional conditions pending adjudication.

Issue 4: Reasonableness and Legality of Conditions Imposed for Provisional Release (Bond and Bank Guarantee)

Legal Framework: Section 110A of the Customs Act, 1962 mandates taking bond in proper form with security and conditions as adjudicating authority may require for provisional release. Circular 35/2017 guides discretion in imposing conditions.

Court's Reasoning: The Court held that submission of bond equal to the value of goods with an undertaking to pay duty, fine, or penalty is a mandatory and justified condition. However, the imposition of a bank guarantee covering 100% of differential duty plus 10% penalty was found onerous and disproportionate at the provisional release stage.

The Court emphasized that provisional release aims to balance revenue protection and preventing goods deterioration. It criticized mechanical imposition of maximum financial security without considering the ongoing nature of investigation and the appellant's rights. The Court noted that the department's duty calculations are tentative and subject to change upon adjudication.

Conclusion: Condition requiring bond equal to goods value is upheld. Condition demanding full bank guarantee covering differential duty plus penalty is modified as excessive and contrary to the purpose of provisional release.

Issue 5: Importer's Non-Cooperation and Impact on Provisional Release Conditions

Evidence: The importer failed to provide requested documents such as packing lists, purchase agreements, and financial transaction details. Searches revealed the importer's premises to be a nominal address with a dummy director and lack of operational business knowledge.

Court's Analysis: The appellant's non-cooperation and suspicious circumstances justified the department's cautious approach. However, the Court balanced this with the need to allow provisional release on reasonable terms to prevent loss due to goods deterioration.

Conclusion: Non-cooperation supports imposition of security but does not justify excessive conditions defeating the purpose of provisional release.

Issue 6: Allowance for Re-export or Clearance into DTA Without Conditions or Penalties

Appellant's Submission: The appellant sought provisional release without conditions to allow re-export or clearance into DTA freely.

Court's Reasoning: The Court held that movement of goods from SEZ to DTA or re-export requires compliance with statutory provisions and security for duty payment where applicable. It directed that for re-export, a bank guarantee of 10% of goods' value is sufficient, as no duty is payable. For clearance into DTA, 50% of differential duty must be deposited upfront, allowing payment in installments as goods are cleared.

Conclusion: Provisional release without any conditions is not permissible. Reasonable conditions linked to duty payment and security are mandated.

Issue 7: Quantum and Mode of Payment of Security for Provisional Release

Court's Analysis: The Court modified the impugned order by directing that instead of 100% differential duty plus penalty as bank guarantee, the importer shall deposit 50% of differential duty at the time of clearance from SEZ to DTA or movement to other SEZ/EOU units. The balance may be paid in installments as goods are cleared. For re-export, a 10% bank guarantee is sufficient.

The Court emphasized a pragmatic approach balancing revenue protection and business viability, preventing goods deterioration, and avoiding undue hardship.

Conclusion: Bank guarantee and duty deposit conditions are modified to a more reasonable and practicable regime facilitating provisional release.

Summary of Court's Conclusions:

• Jurisdictional and duty liability issues within SEZ are deferred for adjudication; seizure legality not interfered with at provisional release stage.
• Seizure based on prima facie mis-declaration is justified but final outcome depends on adjudication.
• Section 26 SEZ Act exemptions acknowledged but do not obviate provisional release conditions.
• Bond equal to goods value with undertaking is mandatory and justified.
• Bank guarantee covering full differential duty plus penalty at provisional release stage is excessive and modified.
• Importer's non-cooperation supports caution but does not justify onerous conditions defeating provisional release purpose.
• Provisional release conditions modified to require 50% differential duty deposit for DTA clearance or movement and 10% bank guarantee for re-export.
• Adjudicating authority's discretion must balance revenue protection with avoiding undue hardship and goods deterioration.

1. Whether the accused is entitled to bail under Section 480 of BNSS, 2023 in connection with alleged fraudulent availment of Input Tax Credit (ITC) under Section 132 of the Goods and Services Tax Act, 2017.

2. Whether the accused's custodial interrogation is necessary for the ongoing investigation.

3. Whether there is a reasonable apprehension of tampering with evidence or influencing witnesses if bail is granted.

4. The impact of the accused's cooperation with the investigation and voluntary payment of tax liability on the bail application.

5. The applicability of legal precedents and guidelines in deciding bail in GST-related offences involving large-scale alleged tax fraud.

6. Conditions to be imposed on the accused if bail is granted to ensure the integrity of the investigation and trial.

Issue 1: Entitlement to Bail under Section 480 of BNSS, 2023 for Alleged Fraudulent Availment of ITC under GST Act

Relevant legal framework and precedents: The Court considered Section 480 of BNSS, 2023, and Section 132 of the GST Act, 2017, which criminalizes fraudulent availment of ITC. The Court also reviewed guidelines from previous judgments related to bail in GST offences, emphasizing the seriousness of allegations and the nature of evidence.

Court's interpretation and reasoning: The Court acknowledged the gravity of allegations involving fraudulent availment of ITC amounting to Rs. 92.45 crores, constituting a serious offence under GST law. However, the Court noted that the offence relates to past transactions (2018-2019) and that investigation is ongoing but advanced, with significant evidence already collected.

Key evidence and findings: The investigation included thorough searches of business premises, seizure of documents (purchase and sales invoices, lorry receipts, e-way bills, transport bills, electronic records), and recorded statements of the accused and employees. The accused admitted involvement under Section 70 of GST Act and voluntarily paid Rs. 1,66,89,405/- as tax liability.

Application of law to facts: Although the offence is serious, the Court balanced the nature of the offence against the accused's cooperation and the stage of investigation. The offence being triable by the Magistrate and absence of criminal antecedents favored bail. The Court emphasized that prosecution powers under GST are ancillary to tax collection powers and that the accused's presence is not essential for further investigation.

Treatment of competing arguments: The prosecution argued that the accused's release may hinder investigation and lead to tampering with evidence or witnesses. The defense highlighted continuous cooperation, completion of custodial interrogation, and voluntary tax payment. The Court found the defense's arguments persuasive given the evidence collected and cooperation shown.

Conclusions: The accused is entitled to bail subject to conditions safeguarding investigation integrity, as no compelling reason exists to keep him in custody pending charge-sheet filing.

Issue 2: Necessity of Custodial Interrogation for Ongoing Investigation

Relevant legal framework and precedents: Custodial interrogation under GST investigation is permitted only if necessary for gathering evidence or preventing tampering. Courts must assess whether continued detention is justified.

Court's interpretation and reasoning: The Court found that custodial interrogation has been completed. All relevant documents and electronic evidence have been seized. The accused has cooperated fully, and further investigation does not require his physical custody.

Key evidence and findings: Multiple summons were complied with by the accused. Statements of accused and employees recorded. Documents seized during searches.

Application of law to facts: Since investigation is at an advanced stage and evidence secured, continued custody lacks necessity.

Treatment of competing arguments: Prosecution's apprehension of interference was noted but not supported by evidence of ongoing custodial necessity.

Conclusions: Custodial interrogation is no longer necessary; bail can be granted without prejudice to investigation.

Issue 3: Risk of Tampering with Evidence or Influencing Witnesses if Bail is Granted

Relevant legal framework and precedents: Bail considerations include risk of tampering with evidence, influencing witnesses, or fleeing justice. Courts impose conditions to mitigate such risks.

Court's interpretation and reasoning: The Court observed no direct evidence of tampering or intimidation by the accused. The accused's cooperation and seizure of evidence reduce risk. Conditions can be imposed to prevent interference.

Key evidence and findings: Evidence already seized; accused voluntarily submitted to investigation; no criminal antecedents; accused is sole breadwinner with family responsibilities.

Application of law to facts: The Court balanced the risk against liberty interests and found manageable risk with conditions.

Treatment of competing arguments: Prosecution's apprehension acknowledged but not substantiated with concrete evidence.

Conclusions: Bail can be granted with conditions to prevent tampering or witness influence.

Issue 4: Impact of Accused's Cooperation and Voluntary Payment on Bail Application

Relevant legal framework and precedents: Voluntary cooperation and payment of tax liability during investigation weigh in favor of bail.

Court's interpretation and reasoning: The accused complied with summons, cooperated fully, and made a substantial voluntary tax payment of Rs. 1,66,89,405/-. This demonstrates good faith and reduces risk of flight or interference.

Key evidence and findings: Multiple summons complied; documents produced; payment made during investigation.

Application of law to facts: Cooperation and payment mitigate concerns about accused's conduct and intentions.

Treatment of competing arguments: Prosecution did not dispute cooperation but emphasized seriousness of offence.

Conclusions: Cooperation and voluntary payment favor bail grant.

Issue 5: Applicability of Legal Precedents and Guidelines in Bail Decisions for GST Offences

Relevant legal framework and precedents: The Court referred to guidelines from High Courts on bail in GST-related offences, emphasizing seriousness of offence, nature of evidence, cooperation, and investigation stage.

Court's interpretation and reasoning: The Court applied these guidelines, recognizing serious allegations but also considering accused's cooperation, stage of investigation, and absence of criminal antecedents.

Key evidence and findings: Cited precedents from Bombay and Chhattisgarh High Courts provided framework balancing public interest and accused's rights.

Application of law to facts: The Court found the case fit for bail under established guidelines.

Treatment of competing arguments: Prosecution's reliance on precedents to deny bail was considered but outweighed by facts favoring bail.

Conclusions: Established precedents support bail grant with appropriate conditions.

Issue 6: Conditions to be Imposed on Bail to Safeguard Investigation and Trial

Relevant legal framework and precedents: Courts may impose conditions on bail to prevent interference with investigation, ensure attendance, and safeguard public interest.

Court's interpretation and reasoning: The Court imposed conditions including bond with sureties, cash bail, prohibition on influencing witnesses or tampering evidence, mandatory cooperation, surrender of passport, restriction on foreign travel, and furnishing of contact details.

Key evidence and findings: Conditions tailored to mitigate risks identified by prosecution and protect investigation integrity.

Application of law to facts: Conditions ensure accused's presence and cooperation without undue restriction on liberty.

Treatment of competing arguments: Conditions address prosecution's concerns while respecting accused's rights.

Conclusions: Bail granted subject to stringent conditions to balance interests of justice and investigation.

1.1 Whether the limitation period prescribed under Section 153(3) of the Income Tax Act, 1961 (the Act) for passing a fresh assessment order on remand applies cumulatively or concurrently with the timelines prescribed under Section 144C of the Act for eligible assessees.

1.2 Whether the period of eleven months prescribed under Section 144C(4) and (13) for completion of assessment proceedings is over and above, or subsumed within, the limitation period under Section 153(3) or Section 153(1) of the Act.

1.3 The interpretation and interplay between the non-obstante clauses contained in Section 144C(1), (4), and (13) and the limitation provisions in Section 153, particularly with respect to eligible assessees defined under Section 144C(15).

1.4 Whether the procedure under Section 144C constitutes a separate code for eligible assessees, distinct from the general assessment procedure under Sections 143 and 144, and the implications of such distinction on the limitation period for assessment.

1.5 The scope and effect of the non-obstante clauses in Section 144C on the applicability of Section 153 timelines to draft and final assessment orders.

1.6 Whether the timelines prescribed under Section 144C for the Dispute Resolution Panel (DRP) and the Assessing Officer are independent of, or included within, the limitation periods under Section 153.

1.7 The validity of the High Courts' judgments holding that the entire procedure under Section 144C must be completed within the limitation period prescribed under Section 153.

1.8 The meaning and scope of "assessment order" and "fresh assessment" in the context of Sections 144C and 153.

1.9 The relevance of legislative intent, including Budget speeches and explanatory notes, in interpreting the interplay between Sections 144C and 153.

1.10 The effect of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and related notifications on limitation periods.

2.1 Interpretation of the interplay between Section 144C and Section 153(3) limitation periods

- Legal framework: Section 153(3) prescribes a limitation period of nine months (extended to twelve months from 1.4.2019) from the end of the financial year in which an appellate order under Section 254 or similar is received by the Commissioner for passing a fresh assessment order. Section 144C prescribes a specific procedure for eligible assessees involving a draft order, objections to the DRP, directions by the DRP, and final assessment order within fixed timelines.

- Court's reasoning: The Court emphasized that Section 144C is a special procedural code applicable only to eligible assessees (non-resident companies and certain others) and contains its own timelines for completion of assessment proceedings. The non-obstante clauses in Section 144C(4) and (13) specifically override the limitation provisions in Section 153 or 153B for passing the assessment order under Section 144C.

- Key findings: The timelines under Section 144C for passing the final assessment order (one month from end of month in which acceptance or objections period expires, or one month from end of month in which DRP directions are received) are independent and additional to the limitation period under Section 153(3) for passing a fresh assessment order on remand.

- Application to facts: The Court held that the limitation period under Section 153(3) applies to passing the draft assessment order under Section 144C(1), while the timelines under Section 144C(4) and (13) for passing the final assessment order operate over and above that period. Thus, the procedure under Section 144C is not subsumed within the limitation period prescribed under Section 153(3).

- Competing arguments: Revenue argued that Section 144C timelines are to be read cumulatively within Section 153(3) limitation, while respondents contended that Section 153(3) applies to the entire procedure. The Court rejected the latter, holding that the non-obstante clauses in Section 144C exclude the application of Section 153(3) timelines for final assessment order.

- Conclusion: The limitation period under Section 153(3) governs the passing of the draft assessment order, and the timelines under Section 144C govern the subsequent procedure, including DRP directions and final assessment order, which are additional and independent.

2.2 Scope and effect of non-obstante clauses in Section 144C

- Legal framework: Section 144C(1) contains a non-obstante clause "notwithstanding anything to the contrary contained in this Act" requiring the Assessing Officer to forward a draft order to the eligible assessee. Sections 144C(4) and (13) contain non-obstante clauses "notwithstanding anything contained in Section 153 or 153B" requiring the assessment order to be passed within one month from specified events.

- Court's interpretation: The non-obstante clause in Section 144C(1) is a legislative device to establish a distinct procedural code for eligible assessees, mandating the issuance of a draft order before final assessment. It is not directed at overriding the limitation provisions in Section 153. In contrast, the non-obstante clauses in Sections 144C(4) and (13) explicitly override the limitation periods in Section 153 or 153B for passing the final assessment order.

- Reasoning: The Court examined authoritative precedents on non-obstante clauses, emphasizing that such clauses only override conflicting provisions to the extent intended by the legislature and must be read in context. The non-obstante clause in Section 144C(1) does not conflict with Section 153 but establishes a different procedural step. The clauses in 144C(4) and (13) specifically deal with limitation periods and thus override Section 153 timelines for final assessment.

- Conclusion: The non-obstante clause in Section 144C(1) establishes a separate procedure for eligible assessees, while those in Sections 144C(4) and (13) override limitation periods for final assessment orders, thereby separating the timelines for draft and final orders.

2.3 Meaning of "assessment order" and "fresh assessment" under Sections 144C and 153

- Legal framework: Section 153(3) refers to "an order of fresh assessment" to be passed within the prescribed limitation period. Section 144C(1) requires forwarding a "draft order" of assessment, which is not a final assessment order. Sections 144C(4) and (13) deal with passing the final assessment order.

- Court's reasoning: The Court held that the draft order under Section 144C(1) is distinct from the final assessment order contemplated under Section 143(3) and Section 153(3). The draft order is a preliminary step in the special procedure for eligible assessees, while the final assessment order determines total income and tax payable.

- Key findings: The "order of fresh assessment" under Section 153(3) means the final assessment order and not the draft order. The procedure under Section 144C contemplates a draft order first, followed by objections and directions, and then a final order. The timelines for these stages are separately prescribed.

- Conclusion: The draft assessment order under Section 144C is not an "order of fresh assessment" within the meaning of Section 153(3). The final assessment order under Section 144C is the "order of fresh assessment" subject to the timelines prescribed in Section 144C(4) and (13).

2.4 Legislative intent and purpose behind Section 144C and its timelines

- Material: Budget speeches of Finance Ministers (2009 and subsequent years), Memorandum to the Finance Bill 2009, and explanatory notes to Finance Acts of 2016, 2017, 2021, and 2022.

- Court's interpretation: The legislative intent behind Section 144C was to provide an alternative dispute resolution mechanism within the Income Tax Department for speedy disposal of tax disputes involving eligible assessees, particularly foreign companies and non-residents. The DRP mechanism was introduced to reduce prolonged litigation and uncertainty affecting foreign investment.

- Reasoning: The Court emphasized that the procedure under Section 144C was designed to be expeditious and distinct from the general assessment procedure. The timelines prescribed under Section 144C reflect a balance between giving the revenue adequate time to assess and protecting the assessee's rights to timely resolution.

- Conclusion: The timelines under Section 144C are intended to provide a fast-track dispute resolution mechanism and must be interpreted as a separate procedural code with fixed timelines, independent of the limitation periods under Section 153.

2.5 Principles of statutory interpretation applied

- The Court applied established principles including purposive interpretation, strict construction of taxing statutes, and harmonious construction of apparently conflicting provisions.

- It rejected interpretations that would render provisions futile or unworkable, emphasizing that statutes must be construed to give effect to legislative intent and to ensure operability.

- The Court distinguished between non-obstante clauses and "subject to" clauses, noting that non-obstante clauses override conflicting provisions only to the extent intended.

- It held that the non-obstante clauses in Section 144C must be read in context and not to negate the entire limitation framework under Section 153.

- The Court reaffirmed that equitable considerations or adequacy of time are not grounds to depart from clear statutory language in fiscal statutes.

2.6 Treatment of competing High Court judgments and precedents

- The Bombay and Madras High Courts held that the entire procedure under Section 144C must be completed within the limitation period prescribed under Section 153(3), thus subsuming Section 144C timelines within Section 153.

- The Supreme Court, in the opinion dissenting from the majority, rejected this view, holding that such interpretation would be unworkable and contrary to legislative intent, and that Section 144C timelines operate independently and additionally.

- The majority judgment held that the High Courts' interpretation is correct, that the limitation under Section 153(3) applies to the entire procedure under Section 144C, and no additional time beyond Section 153 is available.

- The Court considered precedents on statutory interpretation, non-obstante clauses, and the meaning of assessment orders, and found the High Courts' approach consistent with statutory scheme and legislative intent.

- The Court distinguished the Madras High Court's decision in Roca Bathroom Products Pvt. Ltd., which supported the High Courts' view, and overruled the contrary view that Section 144C timelines are additional.

2.7 Impact of TOLA and related notifications on limitation periods

- The Court noted that due to the COVID-19 pandemic, the Central Board of Direct Taxes issued notifications extending limitation periods under Section 153 to 30.09.2021.

- These extensions were relevant in the facts of the case where the draft assessment order was passed on 28.09.2021, just before the extended limitation period expired.

- The Court held that the extended limitation period under Section 153(3) applied and that no final assessment order could be passed after expiry of this period.

2.8 Application of law to facts and conclusions

- The respondents were eligible assessees under Section 144C(15) and the assessment proceedings involved draft orders, objections, DRP directions, and final assessment orders.

- The Income Tax Appellate Tribunal set aside the original assessment and remanded the matter, triggering Section 153(3) limitation period for fresh assessment.

- The Assessing Officer passed a draft assessment order and final assessment order after expiry of the limitation period prescribed under Section 153(3) (as extended by TOLA), but within the timelines prescribed under Section 144C.

- The High Courts held that the final assessment orders were barred by limitation as the entire Section 144C procedure must be completed within Section 153(3) timelines.

- The Supreme Court majority concurred with the High Courts, dismissing the Revenue's appeals and holding that the limitation period under Section 153(3) subsumes the timelines under Section 144C.

- The dissenting opinion held the opposite view, that Section 144C timelines are independent and additional to Section 153(3).

2.9 Consequences of the Court's interpretation

- If the procedure under Section 144C is to be completed within the limitation period prescribed under Section 153(3), the Assessing Officer must pass the draft assessment order within the limitation period and complete the entire procedure including DRP directions and final assessment order within the same period.

- Failure to comply with the limitation period under Section 153(3) results in the assessment order being time-barred and the return of income filed by the assessee must be accepted.

- The Court emphasized that adequacy of time or practical difficulties faced by the Assessing Officer cannot override the statutory limitation periods.

- The Revenue is not precluded from taking other lawful steps in accordance with the Act.

2.10 Additional observations

- The Court noted that the option to file objections before the DRP is exercised by the assessee and cannot be a ground for extending limitation periods.

- The procedure under Section 144C is a continuation of the assessment proceedings and not an appeal proceeding.

- The timelines under Section 144C are designed to ensure expeditious disposal of disputes involving eligible assessees, consistent with the legislative objective of promoting foreign investment and reducing uncertainty.

- The Court directed constitution of an appropriate Bench to consider the divergent opinions expressed.

1. ISSUES PRESENTED and CONSIDERED

• Whether Countervailing Duty (CVD) on imported CNG kits and components should be assessed on Retail Sale Price (RSP) basis or on transaction value.
• Whether the importer's failure to declare RSP constitutes suppression of material facts with intent to evade customs duty.
• Whether the Customs Broker/Appellant had knowledge or intention (mens rea) regarding the alleged short payment of customs duty based on incorrect assessment method.
• Whether penalty under Section 112(a) of the Customs Act, 1962 is sustainable against the Customs Broker/Appellant for alleged abetment of duty evasion.
• Whether the demand for customs duty and penalty is barred by limitation under the Customs Act, 1962.
• Whether the goods imported can be held liable for confiscation on account of alleged duty short payment.
• Whether the burden of assessment and duty payment prior to self-assessment scheme (prior to 08.04.2011) lies on the department or the importer/appellant.
• Whether the difference in interpretation regarding assessment basis (RSP vs transaction value) amounts to fraud or deliberate suppression justifying penalty.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Basis of Assessment of Countervailing Duty (CVD) - Retail Sale Price (RSP) vs Transaction Value

Legal Framework and Precedents: The proviso to sub-section (2) of Section 3 of the Customs Tariff Act, 1975 read with Section 4A of the Central Excise Act, 1944 and Notification No. 49/2008-CE (N.T.) mandates that CVD on certain imported goods like parts and components of automobiles should be assessed on RSP basis rather than transaction value.

Court's Interpretation and Reasoning: The Tribunal observed that the imported goods fall within the category of "Parts, components and assemblies of automobiles" and thus legally require CVD assessment on RSP basis. However, the goods were cleared by Customs after assessment on transaction value basis without any objection from the Customs Broker or the importer. The clearance was approved by the Assistant Commissioner of Customs, confirming the assessment method used.

Key Evidence and Findings: The goods were imported, examined, and cleared on transaction value basis. The RSP was not declared on the packages at the time of import. The department's intelligence and subsequent investigation revealed that CVD should have been assessed on RSP basis.

Application of Law to Facts: The Tribunal noted that the policy under Import Policy chapter 1A of ITC (HS) Classification requires compliance with RSP provisions before clearance. Since the goods were cleared without such compliance, raising demand post-clearance was questionable.

Competing Arguments: The department argued that RSP was mandatory and non-disclosure amounted to evasion. The appellant contended that the assessment on transaction value was accepted by Customs officers at the time of clearance and no objection was raised.

Conclusion: The Tribunal held that the demand for additional duty based on RSP after clearance was not sustainable, as the assessment method was approved at the time of clearance and RSP compliance was not enforced pre-clearance.

Issue 2: Suppression of Material Facts and Mens Rea of Customs Broker/Appellant

Legal Framework and Precedents: Under Section 28(1) proviso of the Customs Act, suppression of material facts with intent to evade duty attracts extended limitation and penalties. Supreme Court decisions emphasize that suppression must be deliberate and accompanied by mens rea (intent or knowledge).

Court's Interpretation and Reasoning: The Tribunal found no evidence of the Customs Broker's personal involvement or knowledge about the incorrect basis of CVD assessment. The broker had no mens rea or deliberate intention to conceal RSP or mislead Customs. The assessment was done by Customs officers, and the broker merely filed Bills of Entry as per documents provided.

Key Evidence and Findings: No documentary or oral evidence showed that the broker had knowledge of the discrepancy or abetted the importer. The broker did not advise the importer on RSP compliance, but that alone was insufficient to prove intentional suppression.

Application of Law to Facts: The Tribunal applied the principle that penalty requires proof of deliberate or dishonest conduct. Mere difference of opinion or error in interpretation does not amount to suppression or fraud.

Competing Arguments: The department relied on the broker's statutory obligations and failure to ensure proper compliance as grounds for penalty. The broker denied any mens rea or active role in assessment.

Conclusion: The Tribunal concluded that penalty against the Customs Broker was not sustainable due to lack of evidence of mens rea or deliberate suppression.

Issue 3: Imposition of Penalty under Section 112(a) of the Customs Act

Legal Framework and Precedents: Penalty under Section 112(a) requires deliberate or dishonest conduct. Supreme Court rulings emphasize judicial discretion and non-imposition of penalty in cases of bona fide belief or technical breaches.

Court's Interpretation and Reasoning: The Tribunal noted that the case involved a difference of opinion on legal interpretation rather than deliberate evasion. The broker's conduct did not demonstrate contumacious or dishonest behavior.

Key Evidence and Findings: Absence of evidence showing the broker deliberately misled Customs or colluded with importer. The broker's role was limited to filing Bills of Entry based on importer's declarations.

Application of Law to Facts: The Tribunal applied the principle that penalty cannot be imposed where there is no mala fide or deliberate mis-declaration.

Competing Arguments: Department urged penalty based on statutory obligations of Customs Broker and failure to advise importer. Appellant argued absence of mens rea and bona fide conduct.

Conclusion: Penalty under Section 112(a) was set aside as unsustainable.

Issue 4: Limitation Bar on Demand and Penalty

Legal Framework and Precedents: The proviso to Section 28(1) of the Customs Act allows extended limitation period only in cases of deliberate suppression of facts. Supreme Court clarified that suppression must be deliberate and cannot be inferred from mere omission or difference of opinion.

Court's Interpretation and Reasoning: The Tribunal found no deliberate suppression by the Customs Broker. Since the facts were known to Customs at the time of clearance and the assessment method was accepted, the extended limitation period was not applicable.

Key Evidence and Findings: The demand was raised several years after clearance based on intelligence and investigation. However, no evidence of concealment or fraud was found.

Application of Law to Facts: The Tribunal held that the show cause notice was barred by limitation as extended period did not apply.

Competing Arguments: Department argued suppression justified extended limitation. Appellant argued demand was time-barred.

Conclusion: Demand and penalty were barred by limitation and thus unsustainable.

Issue 5: Liability of Customs Broker/Appellant for Assessment and Duty Payment Prior to Self-Assessment Scheme

Legal Framework and Precedents: Prior to 08.04.2011, assessment and duty payment were primarily department's responsibility. Customs Broker's role was limited to facilitating clearance based on importer's declarations.

Court's Interpretation and Reasoning: The Tribunal emphasized that the broker cannot be held liable for assessment errors or underpayment of duty prior to self-assessment introduction.

Key Evidence and Findings: The goods were cleared after department's assessment and approval. No evidence showed broker's involvement in assessment decisions.

Application of Law to Facts: The Tribunal applied the principle that liability for assessment errors lies with the department, not the broker, in the pre-self-assessment era.

Competing Arguments: Department contended statutory obligations of broker include advising importer. Appellant denied responsibility for assessment.

Conclusion: Broker not liable for duty shortfall or penalty on assessment errors prior to self-assessment scheme.

Issue 6: Confiscation of Goods on Account of Alleged Duty Short Payment

Legal Framework and Precedents: Confiscation is generally imposed for prohibited goods or deliberate evasion. Mere difference in assessment basis without fraud does not justify confiscation.

Court's Interpretation and Reasoning: The Tribunal found no justification for confiscation as the goods were cleared legally after assessment and there was no evidence of deliberate concealment.

Key Evidence and Findings: No confiscation order was passed. The goods were cleared after assessment on transaction value basis.

Application of Law to Facts: The Tribunal held that goods cannot be confiscated solely due to difference of opinion on duty assessment basis.

Competing Arguments: Department implied goods were prohibited due to short payment. Appellant denied any such status.

Conclusion: Confiscation of goods was not warranted.

Issue 7: Effect of Difference in Legal Interpretation on Liability and Penalty

Legal Framework and Precedents: Penalty cannot be imposed where breach arises from bona fide difference in interpretation of law. Supreme Court and Tribunal decisions support this principle.

Court's Interpretation and Reasoning: The Tribunal recognized the matter as a difference of opinion regarding assessment basis, not deliberate evasion.

Key Evidence and Findings: No evidence of mala fide or dishonest conduct by broker or importer.

Application of Law to Facts: The Tribunal applied the principle that honest difference in legal interpretation does not attract penalty.

Competing Arguments: Department argued statutory mandate of RSP basis. Appellant relied on clearance without objection and accepted assessment.

Conclusion: Difference in interpretation does not justify penalty or extended limitation.

1. Whether the declaration of a person as a "wilful defaulter" under Clause 2.1.3 of the RBI Master Circular on Wilful Defaulters, 2015, was legally sustainable based on the alleged diversion or siphoning of funds by the borrower or associated persons.

2. Whether the funds invested by the borrower company in its subsidiaries and related entities constituted "borrowed funds" and, if not, whether such investments could amount to diversion or siphoning of funds under the Master Circular.

3. Whether the Identification Committee and Review Committee of the bank complied with the procedural and substantive requirements of the Master Circular, including objective examination and application of mind before declaring a wilful default.

4. The evidentiary value and role of the Forensic Audit Report (FAR) prepared by independent auditors in the process of declaring a wilful defaulter.

5. Whether the classification of the borrower company under the Corporate Debt Restructuring (CDR) scheme (Class-B vs. Class-C) was relevant and indicative of the existence or absence of diversion or siphoning of funds.

6. The extent of scrutiny and standards to be applied by the bank's Identification and Review Committees in declaring wilful default, including the requirement of intentional, deliberate, and calculated default.

7. Whether the respondent's exit from the borrower company's management prior to the alleged diversion or siphoning of funds affects liability for wilful default.

8. The impact of prior knowledge and acceptance by lender banks of the investments and transactions alleged to constitute wilful default.

9. The legal consequences of a wilful defaulter declaration and the necessity for strict compliance with the Master Circular to avoid miscarriage of justice.

Issue 1 & 2: Applicability of the Master Circular and Definition of Diversion/Siphoning of Funds

- The Master Circular defines wilful default as occurring only when "borrowed funds" are diverted or siphoned off for purposes other than those for which the loan was sanctioned (Clauses 2.1.3(b) and (c)).

- Diversion of funds includes transferring borrowed funds to subsidiaries or group companies without lender approval; siphoning involves use of borrowed funds for unrelated purposes detrimental to borrower or lender (Clauses 2.2.1 and 2.2.2).

- The Court emphasized that the fundamental prerequisite for wilful default is that the funds involved must be borrowed funds; investments made from internal accruals or other non-borrowed funds do not fall within the scope of diversion or siphoning under the Master Circular.

- The Final Restructuring Scheme (FRS), a document prepared by the lender banks themselves, acknowledged that investments made by the borrower company in its subsidiaries were funded from substantial cash surpluses generated in earlier years and from Foreign Currency Convertible Bonds (FCCBs), not from borrowed funds.

- The Forensic Audit Report (FAR), relied upon by the bank for declaring wilful default, explicitly acknowledged that it did not verify the source of funds for investments in subsidiaries.

- Consequently, the issuance of show cause notices and declaration of wilful default based solely on alleged diversion of funds was found to be legally unsustainable as the investments were not from borrowed funds.

Issue 3 & 6: Compliance with Procedural and Substantive Requirements of the Master Circular

- Clause 3 of the Master Circular mandates a multi-tiered process: examination by Identification Committee, issuance of show cause notice, consideration of borrower's response, and final decision by Review Committee.

- The Identification Committee and Review Committee are required to apply their minds objectively, examining all relevant facts and circumstances, including the borrower's track record, before declaring wilful default.

- The Court found that the Identification Committee's decision was based solely on the FAR without independent application of mind or detailed reasoning.

- The Minutes of Meeting of the bank revealed no substantive examination or reasons justifying the conclusion of wilful default prior to issuance of the show cause notice.

- The Review Committee merely affirmed the Identification Committee's findings without addressing critical factual and legal points raised by the respondent.

- The Court held that such mechanical and superficial exercise fell short of the procedural safeguards and substantive standards mandated by the Master Circular.

- The stringent requirement that wilful default must be "intentional, deliberate and calculated" was not satisfied, as the investments were initially considered strategic and viable by lenders and no evidence of mens rea was established.

Issue 4: Evidentiary Value and Role of the Forensic Audit Report (FAR)

- The FAR is an expert opinion and not conclusive proof of wilful default; it must be corroborated by objective facts and subjected to independent scrutiny by the bank's committees.

- The FAR in this case was found to be incomplete and lacking credibility, particularly as it did not verify the source of funds invested in subsidiaries and contained disclaimers about limitations of its review period and data availability.

- The Court emphasized that issuing show cause notices and declaring wilful default solely on the basis of such a report without further inquiry or verification was improper and legally untenable.

- The Court cited precedent holding that forensic audit reports are not conclusive proof and must be treated as evidence subject to examination and challenge.

Issue 5 & 8: Relevance of CDR Classification and Prior Knowledge of Lenders

- The borrower companies were classified as Class-B under the CDR scheme, which pertains to corporates affected by external factors and not involved in diversion or siphoning of funds. Class-C classification applies to entities found to have diverted funds.

- The lenders, including the bank, were aware of and had accepted the investments in subsidiaries as strategic and viable at the time of CDR approval and in subsequent internal documents (FRS, Flash Reports).

- No objections or concerns were raised by the lenders at the time regarding these investments, nor were any management changes or forensic audits ordered during the CDR process.

- The Court found that the bank's later characterization of these investments as diversion or siphoning was inconsistent with its earlier acceptance and classification of the borrower as Class-B, undermining the wilful defaulter declaration.

Issue 7: Liability of the Respondent after Exit from Management

- The respondent had resigned as Executive Director and ceased to be associated with the day-to-day functioning of the borrower company prior to the period during which alleged diversion or siphoning of funds occurred.

- The Court noted that wilful default requires involvement or control over the acts constituting diversion or siphoning, which was not established in the respondent's case post-resignation.

Issue 9: Consequences of Wilful Defaulter Declaration and Need for Strict Compliance

- Declaration as a wilful defaulter results in severe consequences including bar on future loans, reputational damage, and potential criminal proceedings, effectively amounting to a "financial death knell."

- The Court underscored the necessity for strict and scrupulous adherence to the Master Circular's procedural and substantive requirements to prevent miscarriage of justice.

- The Supreme Court's precedent was noted emphasizing reasonable construction of the Master Circular and caution in declaring wilful default.

- The Court held that failure to comply with these standards vitiates the wilful defaulter declaration and warrants quashing of such orders.

Additional Observations

- The Court observed that the TRA (Trust and Retention Account) mechanism mandated that all financial transactions of the borrower be routed through monitored accounts under lender supervision, negating the possibility of diversion of borrowed funds during the review period.

- The Court found that the bank's reliance on isolated transactions without considering the overall track record and financial health of the borrower was contrary to the Master Circular's mandate.

- The Court noted that multiple forensic audits conducted over years did not find evidence of wilful default or diversion, reinforcing the conclusion that the wilful defaulter declaration was unfounded.

- The discharge of the respondent and others in associated criminal proceedings further supported the conclusion that wilful default was not established.

Conclusions

- The declaration of the respondent as a wilful defaulter was quashed and set aside for non-compliance with the Master Circular's requirements, absence of diversion or siphoning of borrowed funds, lack of objective and reasoned decision-making by the bank's committees, and reliance on an incomplete and inconclusive forensic audit report.

- The bank's actions were found to be legally unsustainable, arbitrary, and unreasonable.

- The procedural safeguards and substantive standards prescribed by the Master Circular must be strictly observed before declaring wilful default given the grave consequences involved.

- The CDR classification and lender banks' prior acceptance of investments negated the possibility of wilful default based on those investments.

- The appeal(s) challenging the quashing of wilful defaulter declaration were dismissed, affirming the detailed and well-reasoned judgments of the Single Judge.

1. ISSUES PRESENTED and CONSIDERED

• Whether Indian banks acting on behalf of exporters are recipients of services provided by foreign banks in export transactions involving transfer/exchange of documents and transfer of money.
• Whether Indian banks are liable to pay service tax under the Reverse Charge Mechanism (RCM) on foreign bank charges deducted by foreign correspondent or intermediary banks.
• Whether the value of foreign bank charges deducted at source forms part of the taxable value for service tax purposes under the Finance Act, 1994.
• The applicability and interpretation of relevant provisions of the Finance Act, 1994, including Sections 66B, 67, 68, 73, 76, and 77, in the context of banking and financial services related to export transactions.
• The legal effect and binding nature of departmental Trade Notices and interim Tribunal orders relied upon by the Revenue.
• The interpretation of "consideration" and its nexus with taxable services in determining service tax liability.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 and 2: Whether Indian banks are recipients of services provided by foreign banks in export transactions and liable to pay service tax under RCM on foreign bank charges

Relevant legal framework and precedents:

The Finance Act, 1994, defines taxable services including "Banking and Other Financial Services" under Chapter V. Section 66B mandates service tax on specified services. Section 68 and 73 relate to demand and recovery of service tax, while Sections 76 and 77 provide for penalty provisions. Section 67 governs the valuation of taxable services, requiring that service tax be levied on the gross amount charged for the taxable service provided for a consideration. The Reverse Charge Mechanism (RCM) imposes tax liability on the service recipient in certain cases.

Key precedents include:

• State Bank of Bikaner & Jaipur v. Commissioner of Central Excise & Service Tax (Tribunal decision): Held Indian banks are not recipients of services provided by foreign banks in export transactions and thus not liable under RCM.
• Madras High Court in BGR Energy Systems Ltd. v. Addl. Commissioner of GST & C. Ex.: Affirmed that Indian banks act as agents for exporters and are not recipients of foreign bank services; the exporter is the service recipient liable for service tax.
• Supreme Court decisions in Union of India v. Intercontinental Consultants and Technocrats and Commissioner of Service Tax v. Bhayana Builders: Clarified that "consideration" must flow from the service recipient to the service provider and must relate directly to the taxable service provided.

Court's interpretation and reasoning:

The Tribunal examined the nature of export transactions involving Indian banks facilitating remittances and exchange of documents. It was noted that foreign banks deduct charges at source before remitting net amounts to Indian banks. The Indian banks act as agents for exporters and do not receive or pay consideration to foreign banks for any service.

The Tribunal relied on the protocols URC 522 and UCP 600 governing international trade banking transactions, which establish the roles and obligations of exporters, importers, and their banks.

The Tribunal held that the Indian banks do not receive any service from foreign banks; rather, they facilitate services on behalf of exporters. Consequently, Indian banks cannot be considered recipients of foreign bank services for RCM liability.

Key evidence and findings:

• Exporters instruct Indian banks to send documents and collect payments; Indian banks charge exporters commission and pay service tax on such services.
• Foreign banks deduct charges directly from export proceeds before remitting to Indian banks; Indian banks do not pay or reimburse these charges.
• No contractual relationship or agreement exists between Indian banks and foreign banks for these deducted charges.
• Trade Notice No. 20/2013-14-ST-I dated 10.02.2014, relied upon by Revenue, was found to be based on interim Tribunal orders and not binding.

Application of law to facts:

Applying Section 67's requirement that service tax be levied only on consideration paid for taxable services, the Tribunal concluded that since Indian banks do not pay consideration to foreign banks, no taxable service is received by them. The foreign bank charges deducted at source are not part of the taxable value for Indian banks.

The Tribunal also distinguished between "conditions" to contracts and "consideration" for taxable services, emphasizing that mere deductions or expenses not constituting consideration cannot form part of the taxable value.

Treatment of competing arguments:

The Revenue argued that Indian banks are recipients of foreign bank services and liable under RCM, relying on the Trade Notice and interim Tribunal orders. The Tribunal rejected this, noting the Trade Notice's non-binding nature and reliance on interim orders. The Tribunal also cited the Madras High Court decision, which held exporters liable, not Indian banks.

Conclusions:

Indian banks acting on behalf of exporters are not recipients of foreign bank services in export transactions. They are not liable to pay service tax under RCM on foreign bank charges deducted by foreign correspondent or intermediary banks. The service tax liability, if any, lies with the exporter who bears the expenditure.

Issue 3: Whether foreign bank charges deducted at source form part of taxable value under Section 67 of the Finance Act, 1994

Relevant legal framework and precedents:

Section 67(1) of the Finance Act requires valuation of taxable services to be based on the gross amount charged for such service provided for consideration. The Explanation to Section 67(1) defines "consideration" as any amount payable for taxable services or reimbursable expenditure.

Supreme Court rulings in Commissioner of Service Tax v. Bhayana Builders and Union of India v. Intercontinental Consultants and Technocrats clarified that only amounts paid as consideration for taxable services are includible in valuation, and that conditions to a contract are distinct from consideration.

Court's interpretation and reasoning:

The Tribunal emphasized that the foreign bank charges deducted at source do not constitute consideration paid by the Indian banks for any taxable service. The Indian banks do not receive or pay these charges; rather, they are borne by the exporters.

Therefore, such deductions cannot be included in the taxable value of services provided by Indian banks or foreign banks to Indian banks.

Key evidence and findings:

• Indian banks do not remit or reimburse foreign bank charges; these are deducted before remittance.
• There is no flow of consideration from Indian banks to foreign banks.
• Exporters bear the cost of foreign bank charges as part of their export proceeds realization.

Application of law to facts:

Since no consideration flows from Indian banks to foreign banks, and the charges are borne by exporters, the foreign bank charges deducted at source are not includible in the taxable value of services for Indian banks under Section 67.

Treatment of competing arguments:

Revenue's reliance on Trade Notice and interim orders to treat Indian banks as service recipients and include foreign bank charges in taxable value was rejected based on binding precedents and statutory interpretation.

Conclusions:

Foreign bank charges deducted at source do not form part of the taxable value of services for Indian banks under Section 67 of the Finance Act, 1994.

Issue 4: Applicability and binding nature of departmental Trade Notices and interim Tribunal orders

Relevant legal framework and precedents:

Departmental Trade Notices are administrative instructions and do not have the force of law. Courts and Tribunals are not bound by such circulars or notices. Interim orders passed by Tribunals are not final and may be subject to review or reversal.

Supreme Court in Commissioner of Central Excise, Bhopal v. Minwool Rock Fibres Ltd. held departmental circulars are not binding on assessees or quasi-judicial authorities.

Court's interpretation and reasoning:

The Tribunal observed that the Trade Notice dated 10.02.2014 relied upon by Revenue is based on interim orders and prima facie views, not final decisions. It is not binding on the appellants or the Tribunal.

Key evidence and findings:

• Trade Notice relied on interim orders from other Benches.
• Subsequent final orders and High Court decisions contradicted the views expressed in the Trade Notice.

Application of law to facts:

The Tribunal declined to give effect to the Trade Notice for determining liability, relying instead on binding judicial precedents and final Tribunal decisions.

Treatment of competing arguments:

Revenue's reliance on the Trade Notice and interim orders was rejected as not legally sustainable.

Conclusions:

Departmental Trade Notices and interim Tribunal orders do not bind the Tribunal or the assessees and cannot be relied upon to impose service tax liability contrary to settled law.

Issue 5: Interpretation of "consideration" and nexus with taxable services for service tax valuation

Relevant legal framework and precedents:

Section 67 and its Explanation define "consideration" as amount payable for taxable services. Supreme Court rulings clarified that consideration must flow from service recipient to provider and relate directly to the taxable service.

Court's interpretation and reasoning:

The Tribunal reiterated that consideration must have a direct nexus with the taxable service provided. Mere contractual conditions or deductions not constituting consideration cannot be included in taxable value.

Key evidence and findings:

• No consideration flows from Indian banks to foreign banks for foreign bank charges.
• Indian banks act as agents for exporters and do not receive services for which they pay consideration.

Application of law to facts:

Foreign bank charges deducted at source do not constitute consideration for taxable services by Indian banks and hence are not includible in valuation.

Treatment of competing arguments:

Revenue's argument that foreign bank charges form part of taxable value was rejected based on statutory interpretation and judicial precedents.

Conclusions:

Only amounts paid as consideration for taxable services form part of taxable value under Section 67; foreign bank charges deducted at source do not qualify.

Overall Conclusion:

Indian banks providing banking and financial services in export transactions are not recipients of services from foreign banks and are not liable to pay service tax under RCM on foreign bank charges deducted at source. The foreign bank charges are borne by exporters and do not form part of taxable value for Indian banks. Departmental Trade Notices and interim orders relied upon by Revenue do not override settled judicial precedents. The impugned demand, interest, and penalties imposed on Indian banks are set aside as legally unsustainable.

1. ISSUES PRESENTED and CONSIDERED

• Whether the appeals were filed within the statutory limitation period prescribed under Section 85(3) of the Finance Act, 1994.
• Determination of the exact date of receipt of the Orders-in-Original (OIO) by the appellant for the purpose of computing limitation.
• Whether the delay in filing the appeals beyond the initial three months period could be condoned under the proviso to Section 85(3) of the Finance Act, 1994.
• Interpretation and application of the provisions of Section 9 and Section 3(35) of the General Clauses Act, 1897 in computing the limitation period.
• Assessment of evidentiary value of departmental records and acknowledgments regarding the date of receipt of the orders.
• Scope and exercise of discretion by the Commissioner (Appeals) in condoning delay beyond the statutory period.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Whether the appeals were filed within the statutory limitation period prescribed under Section 85(3) of the Finance Act, 1994

- Legal Framework: Section 85(3) mandates that an appeal must be presented within three months from the date of receipt of the adjudicating authority's order, with a further period of three months allowed for condonation of delay by the Commissioner (Appeals) upon sufficient cause.

- Court's Interpretation and Reasoning: The limitation period is strictly prescribed and the appeal filed beyond six months (three months plus three months condonation) is liable to be dismissed on grounds of limitation.

- Key Evidence and Findings: Departmental records and acknowledgments indicate receipt of Orders-in-Original on 13.06.2011, while appellant claims receipt on 15.06.2011 based on inscriptions on the order and related documents.

- Application of Law to Facts: If 13.06.2011 is the date of receipt, the last date for filing appeal without condonation is 13.09.2011 and with condonation is 13.12.2011. The appeal filed on 15.12.2011 exceeds this period. If 15.06.2011 is accepted, the appeal falls within the condonable period.

- Treatment of Competing Arguments: The department relies on dated acknowledgments dated 13.06.2011; appellant challenges the authenticity and argues physical impossibility of receipt on that date and reliance on the date "15.06.2011" inscribed on the order.

- Conclusion: Determination of the correct date of receipt is critical to deciding limitation; the matter requires remand for factual verification.

Issue 2: Determination of the exact date of receipt of the Orders-in-Original (OIO) by the appellant for limitation computation

- Legal Framework and Precedents: The date of receipt is the triggering point for limitation under Section 85(3). The General Clauses Act, 1897, Sections 3(35) and 9, govern the computation of months and exclusion of the first day.

- Court's Interpretation and Reasoning: The Court recognized the conflicting dates (13.06.2011 vs. 15.06.2011). The inscription "DOR 15.06.2011" on the order and Form ST-4 supports appellant's claim. Departmental letter dated 03.01.2012 claims receipt on 13.06.2011 but lacks dated acknowledgment signatures. The Court noted absence of evidence that appellant's authorized signatory physically collected the orders on 13.06.2011.

- Key Evidence and Findings: Letters dated 13.06.2011 enclosing orders bear signature without date; no affidavit or direct evidence identifying the recipient or exact date of receipt. The appellant's new management unable to identify the person who acknowledged receipt due to company takeover and staff turnover.

- Application of Law to Facts: Given the ambiguity and lack of conclusive evidence, the Court held that the date of receipt must be ascertained by the Commissioner (Appeals) on remand by examining departmental records.

- Treatment of Competing Arguments: The appellant's argument that the date on the order (15.06.2011) should be accepted as receipt date was found plausible; the department's reliance on undated acknowledgments was insufficient to conclusively fix 13.06.2011 as receipt date.

- Conclusion: The exact date of receipt is a factual question requiring further inquiry; the matter is remanded for determination of the correct date of receipt.

Issue 3: Whether the delay in filing appeals beyond the initial three months could be condoned under proviso to Section 85(3)

- Legal Framework and Precedents: The proviso to Section 85(3) empowers the Commissioner (Appeals) to condone delay up to an additional three months if sufficient cause is shown. The limitation period is thus six months maximum.

- Court's Interpretation and Reasoning: The Court emphasized that condonation beyond the further three months is not permissible. The Commissioner (Appeals) must exercise discretion based on facts and reasons presented.

- Key Evidence and Findings: The appellant filed the appeal on 15.12.2011 with an application for condonation of delay. If the date of receipt is 15.06.2011, the appeal was within the condonable period; if 13.06.2011, it was beyond.

- Application of Law to Facts: The Court held that the Commissioner (Appeals) must re-examine the matter after ascertaining the correct receipt date and then decide on condonation by reasoned order.

- Treatment of Competing Arguments: Department argued that the appeal was filed beyond six months and delay was not condonable; appellant contended delay was within permissible period and condonation should be granted.

- Conclusion: Discretion to condone delay arises only if appeal is within six months; remand required for fresh exercise of discretion after receipt date determination.

Issue 4: Interpretation and application of Sections 9 and 3(35) of the General Clauses Act, 1897 in computing limitation

- Legal Framework and Precedents: Section 3(35) defines "month" as calendar month reckoned according to the British calendar; Section 9 excludes the first day in computing time periods. Apex Court rulings clarify that three months expire on the corresponding date in the third month.

- Court's Interpretation and Reasoning: The Court applied these principles to compute limitation periods, excluding the date of receipt and counting calendar months accurately.

- Key Evidence and Findings: The appellant's computation of limitation starting from 16.06.2011 (excluding 15.06.2011) was consistent with these provisions.

- Application of Law to Facts: The Court recognized that the limitation period must be computed strictly per these provisions, affecting the final permissible date for filing appeals and condonation applications.

- Treatment of Competing Arguments: Department's calculation was slightly different but aligned with the legal principles; the dispute centered on the date of receipt rather than method of computation.

- Conclusion: Computation of limitation must follow Sections 9 and 3(35) of the General Clauses Act; this principle was accepted and applied.

Issue 5: Assessment of evidentiary value of departmental records and acknowledgments regarding date of receipt

- Legal Framework: Acknowledgments and official correspondence serve as prima facie evidence of receipt dates; however, authenticity and completeness are critical.

- Court's Interpretation and Reasoning: The Court scrutinized the letter dated 03.01.2012 and accompanying letters dated 13.06.2011, noting absence of dated signatures confirming receipt by authorized person. The Court found departmental evidence insufficiently conclusive.

- Key Evidence and Findings: Letters enclosing orders had signature of authorized signatory but without date; no affidavit or direct evidence of physical receipt on 13.06.2011 was produced.

- Application of Law to Facts: The Court observed that absence of clear acknowledgment undermined the department's claim; the appellant's claim based on inscription on orders was credible.

- Treatment of Competing Arguments: Department relied on internal letters as proof; appellant challenged the credibility and physical possibility of receipt on that date.

- Conclusion: Departmental records alone were inadequate to conclusively establish receipt date; further inquiry required.

Issue 6: Scope and exercise of discretion by Commissioner (Appeals) in condoning delay beyond statutory period

- Legal Framework and Precedents: The Commissioner (Appeals) has limited discretion to condone delay up to three months beyond initial three months period under Section 85(3). Delay beyond six months cannot be condoned.

- Court's Interpretation and Reasoning: The Court recognized that the Commissioner (Appeals) must consider sufficient cause and exercise discretion through reasoned orders. The Court remanded the matter for fresh exercise of discretion after determining the correct receipt date.

- Key Evidence and Findings: Appellant submitted grounds for condonation delay; however, the Commissioner (Appeals) rejected the appeal on limitation without detailed discussion of sufficient cause due to acceptance of 13.06.2011 as receipt date.

- Application of Law to Facts: The Court held that if receipt date is 15.06.2011, the appeal is within condonable period and discretion must be exercised on merits.

- Treatment of Competing Arguments: Department argued delay was beyond condonable period; appellant argued for condonation based on facts and legal principles.

- Conclusion: Discretion to condone delay must be exercised after factual determination of receipt date; remand directed for reasoned consideration.

1. ISSUES PRESENTED and CONSIDERED

• Whether the activities undertaken on aluminium coils/sheets by the respondent amount to "manufacture" under Section 2(f) of the Central Excise Act, 1944.
• Whether the laminated aluminium sheets fall under Central Excise Tariff Heading (CETH) 7606 or 7607, based on thickness and classification criteria.
• Applicability of Chapter Note 3 to Chapter 76 of the Central Excise Tariff Act regarding deeming certain processes on aluminium foils as manufacture.
• Whether the process of coating/lamination with polycraft or polysurlyne changes the nature, use, or identity of the aluminium sheets sufficiently to constitute manufacture.
• Whether the department's demand for excise duty and penalty based on classification and manufacture findings is sustainable.
• Whether estoppel applies due to respondent's prior classification of goods under CETH 7607.
• Evaluation of evidentiary weight of documents (challans, letters) relating to thickness of aluminium sheets and their impact on classification and manufacture determination.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Whether the activities undertaken on aluminium coils/sheets amount to "manufacture" under Section 2(f) of the Central Excise Act, 1944

Legal Framework and Precedents: Manufacture is defined under Section 2(f) to include any process incidental or ancillary to the completion of a manufactured product, or processes specified in Section or Chapter Notes of the Central Excise Tariff Act as amounting to manufacture. The test involves two components: (i) whether the process is incidental or ancillary to manufacture, and (ii) whether the product is a new, distinct, marketable article with different characteristics or use.

Key precedents include:

• Commissioner of Central Excise Hyderabad-II vs. Aldec Corporation: Emphasizes that manufacture depends on facts and circumstances, and includes processes incidental or ancillary to manufacture; painting furniture post-sale does not amount to manufacture.
• M/s. Shree Jee Laminators vs. CCE Delhi: Lamination of HDPE fabrics did not change the basic character or description; hence no manufacture.
• M/s. Central Excise, Jaipur vs. Pitamber Coated Paper Ltd: Coating paper produced an article with a different commercial name but not a distinct article with different character or use; no manufacture.

Court's Interpretation and Reasoning: The process of cutting, slitting, and coating aluminium sheets with a thin layer of polycraft or polysurlyne does not change the essential character or use of the aluminium sheets. The product remains aluminium sheets, not a new distinct article. The coating is neither incidental nor ancillary to the manufacture of aluminium coils but a subsequent process. The process does not satisfy the test of manufacture under Section 2(f).

Key Evidence and Findings: The respondent's activities involved job work on aluminium coils supplied free of cost, involving cutting, slitting, and lamination. The lamination layer is very thin and serves as a protective coat without altering the nature or use of the sheets.

Application of Law to Facts: Applying the twin tests of manufacture, the process does not amount to manufacture as it neither results in a new product nor is incidental/ancillary to manufacture of aluminium coils.

Treatment of Competing Arguments: The Revenue argued that lamination created a new marketable product "Aluminium Laminate" with different characteristics, relying on case laws where coating or processing was held to be manufacture. The Court distinguished these cases based on facts, noting that the coating here does not alter the essential character or use.

Conclusion: The activities undertaken do not amount to manufacture under Section 2(f) of the Central Excise Act.

Issue 2: Classification of laminated aluminium sheets under CETH 7606 or 7607

Legal Framework and Precedents: CETH 7606 covers aluminium plates, sheets, and strips exceeding 0.2 mm thickness; CETH 7607 covers aluminium foil of thickness not exceeding 0.2 mm. Chapter Note 3 to Chapter 76 applies only to products under heading 7607.

Court's Interpretation and Reasoning: The thickness of the aluminium sheets supplied was more than 0.2 mm, placing them under CETH 7606. The department failed to produce cogent evidence to rebut the documents (challans, letters) submitted by the respondent supporting this thickness. The Commissioner (Appeals) rightly held that Chapter Note 3, which deems cutting, slitting, and printing of aluminium foils as manufacture, is not applicable to sheets exceeding 0.2 mm thickness.

Key Evidence and Findings: Documents including a letter dated 07.08.2015 and delivery challans showed thickness exceeding 0.2 mm. The department did not conduct further investigation to verify thickness despite requests.

Application of Law to Facts: Since the product is classified under 7606, the deeming provision of manufacture under Chapter Note 3 (applicable only to 7607) does not apply, negating the department's basis for demand.

Treatment of Competing Arguments: The Revenue contested the authenticity and timing of the documents produced by the respondent but failed to provide contrary evidence. The Court rejected the Revenue's contention that the documents were afterthoughts.

Conclusion: The laminated aluminium sheets fall under CETH 7606, not 7607, and Chapter Note 3's deeming provisions do not apply.

Issue 3: Applicability of Chapter Note 3 to Chapter 76 and its impact on manufacture determination

Legal Framework: Chapter Note 3 states that for products under heading 7607, cutting, slitting, and printing amount to manufacture. This note is limited in scope to aluminium foils (<=0.2 mm thickness).

Court's Interpretation and Reasoning: Since the product here is classified under 7606 (thickness >0.2 mm), Chapter Note 3 is inapplicable. Therefore, the processes of cutting, slitting, and printing cannot be deemed manufacture under this provision.

Application to Facts: The department's reliance on Chapter Note 3 to justify manufacture and duty demand is misplaced given the classification of goods.

Conclusion: Chapter Note 3 is not applicable; thus, the processes do not amount to manufacture under this provision.

Issue 4: Whether coating/lamination changes the nature, use, or identity of aluminium sheets to constitute manufacture

Legal Framework and Precedents: Manufacture requires emergence of a new product with distinct identity, character, or use. Mere coating or lamination that does not alter these aspects does not constitute manufacture.

Court's Reasoning: The lamination with polycraft or polysurlyne serves as a protective barrier and does not change the fundamental nature or use of the aluminium sheets. The product remains aluminium sheets used for cladding, jacketing, or partitioning.

Supporting Precedents: Cases such as Aldec Corporation and Shree Jee Laminators support that lamination/coating without change in identity/use is not manufacture.

Conclusion: Coating/lamination does not amount to manufacture as it does not create a new distinct product.

Issue 5: Sustainability of excise duty demand and penalty imposed by Original Adjudicating Authority

Legal Framework: Demand and penalty under Section 11AC(1)(c) of the Central Excise Act require proof of duty liability based on manufacture and classification.

Court's Reasoning: Since the processes do not amount to manufacture and classification is under 7606 (not attracting Chapter Note 3 deeming provisions), the demand for duty and penalty is unsustainable.

Conclusion: The original demand and penalty are set aside; the impugned order allowing the respondent's appeal is upheld.

Issue 6: Applicability of estoppel based on respondent's prior classification under CETH 7607

Legal Framework: Erroneous classification and duty payment on job charges alone do not create estoppel against the respondent if there is no chargeability under Section 3.

Precedent: The Supreme Court in Dunlop India vs. UOI held that absence of chargeability negates promissory estoppel arising from erroneous classification.

Court's Reasoning: The respondent's prior use of CETH 7607 in invoices does not estop them from asserting correct classification and non-chargeability.

Conclusion: No estoppel arises from prior classification errors.

Issue 7: Evaluation of evidentiary weight of documents relating to thickness and classification

Findings: The Commissioner (Appeals) examined letters and challans submitted by the respondent indicating thickness exceeding 0.2 mm. The department did not produce contrary evidence or conduct further investigation despite requests.

Court's Reasoning: Absence of cogent contrary evidence and failure to investigate undermines Revenue's challenge to thickness claims.

Conclusion: Thickness of aluminium sheets is conclusively more than 0.2 mm for classification purposes.

1. Whether the appellant is entitled to refund of Customs Duty (including CVD, Education Cess, S&H Education Cess, and Additional Customs Duty) paid due to non-fulfillment of export obligation under the EPCG Scheme after having initially imported capital goods duty-free under the said scheme.

2. Whether the appellant was eligible to claim Cenvat credit on the Customs duties paid post non-fulfillment of export obligation under the erstwhile Cenvat Credit Rules, 2004, and whether such credit can be refunded in cash under Section 142(3) of the CGST Act, 2017.

3. Whether failure to produce installation certificate and other prescribed documentation under the EPCG scheme disentitles the appellant from claiming Cenvat credit or refund.

4. Interpretation and applicability of Section 142(3) of the CGST Act, 2017 read with Sections 140, 174, and relevant provisions of the Central Excise Act, 1944 and Cenvat Credit Rules, 2004, in relation to refund claims arising from duties paid under the erstwhile regime.

5. Whether the appellant's conduct, including delayed payment of Customs duties and failure to fulfill export obligations, precludes refund or credit claims under principles of equity and legal maxims.

6. Whether the claim for refund under Section 142(3) of CGST Act can be allowed where transitional credit was not availed in terms of Section 140 of the CGST Act.

7. Whether the appellant's reliance on precedents from other Benches and High Courts supports entitlement to refund or credit.

Issue 1: Entitlement to Refund of Customs Duty Paid Due to Non-Fulfillment of Export Obligation under EPCG Scheme

- Relevant Legal Framework and Precedents:

The EPCG Scheme permits import of capital goods at concessional customs duty subject to fulfillment of export obligations. Notification No. 64/2008-Cus exempts customs duty subject to export obligation. Failure to fulfill export obligation triggers liability to pay the forgone customs duty with interest as per Foreign Trade Policy (FTP) and Handbook of Procedures (HBP), paragraph 4.50.

Precedents include Tribunal decisions holding that non-fulfillment of export obligation results in loss of duty exemption and no refund is admissible upon payment of duty subsequently.

- Court's Interpretation and Reasoning:

The Tribunal noted that the appellant imported capital goods duty-free under EPCG subject to export obligation but failed to fulfill the same. The appellant paid the customs duties years later and claimed refund on the ground of inability to avail Cenvat credit post GST implementation.

The Tribunal emphasized that the EPCG scheme is conditional, and the benefit of duty exemption is contingent upon fulfilling export obligations. Non-fulfillment results in loss of benefit and payment of duty is mandatory.

The appellant's failure to produce installation certificate and other statutory documents further undermined the claim.

- Key Evidence and Findings:

No installation certificate was produced as required under EPCG scheme. The appellant admitted non-fulfillment of export obligation and delayed payment of customs duty.

- Application of Law to Facts:

Since the export obligation was not fulfilled and the capital goods were not evidenced to be installed and used in manufacturing, the appellant was not entitled to retain the benefit of duty exemption or claim refund.

- Treatment of Competing Arguments:

The appellant argued that no demand was raised by Customs for 10 years and that payment of duty was voluntary, hence refund should be allowed. The Tribunal rejected this, holding that voluntary payment after breach of conditions does not confer right to refund.

- Conclusion:

The appellant is not entitled to refund of customs duty paid due to non-fulfillment of export obligation under EPCG scheme.

Issue 2: Eligibility to Claim Cenvat Credit on Customs Duties Paid Post Non-Fulfillment and Refund under Section 142(3) of CGST Act

- Relevant Legal Framework and Precedents:

Cenvat Credit Rules, 2004 permit credit of duties paid on inputs and capital goods used in manufacture. Rule 3(1)(xi)(i) requires capital goods to be received in factory for credit. Section 142(3) of CGST Act provides transitional provisions for refund of amounts paid under existing law but requires disposal as per existing law.

Precedents include Tribunal decisions in M/s Servo Packaging Ltd. (2020) and M/s ITCO Industries Ltd. (2023), and High Court decisions including M/s Rungta Mines Ltd. (2022), interpreting the scope of refund under Section 142(3).

- Court's Interpretation and Reasoning:

The Tribunal examined whether the appellant was eligible to claim Cenvat credit under the old regime. It found that due to non-production of installation certificate, the appellant failed to satisfy Rule 3(1)(xi)(i) conditions, thus not entitled to credit.

Further, Section 142(3) mandates disposal of refund claims as per existing law. Since existing law did not permit refund where credit was not availed as per rules, refund was not admissible.

The Tribunal also rejected appellant's reliance on decisions allowing refund under Section 142(3) where transitional credit was not availed, holding that Section 142(3) does not create new rights but preserves existing rights.

- Key Evidence and Findings:

Absence of installation certificate and statutory compliance; payment of duties post-GST implementation; failure to claim credit within prescribed time.

- Application of Law to Facts:

Since the appellant failed to comply with conditions for claiming credit and did not avail transitional credit under Section 140, refund under Section 142(3) was not permissible.

- Treatment of Competing Arguments:

Appellant argued entitlement to refund citing favorable precedents and that non-availment of credit due to GST implementation should not preclude refund. Tribunal distinguished these precedents based on facts and emphasized that credit/refund rights must have existed under old law at appointed day.

- Conclusion:

The appellant is not entitled to claim Cenvat credit or refund under Section 142(3) of the CGST Act for customs duties paid after non-fulfillment of export obligation.

Issue 3: Effect of Failure to Produce Installation Certificate and Other Documentation under EPCG Scheme

- Relevant Legal Framework:

Notification No. 64/2008-Cus and EPCG Scheme require production of installation certificate from jurisdictional Central Excise officer within six months of import completion to validate use of capital goods in factory.

- Court's Interpretation and Reasoning:

Tribunal found that appellant did not produce installation certificate or original EPCG license despite repeated opportunities. This non-compliance prevented verification of receipt and use of capital goods in manufacture of excisable goods.

Without such evidence, credit under Rule 3(1)(xi)(i) cannot be allowed.

- Key Evidence and Findings:

Non-production of installation certificate or EPCG license; no evidence of capital goods being installed or used in factory.

- Application of Law to Facts:

Non-compliance with statutory procedural requirements disentitled appellant from claiming credit or refund.

- Treatment of Competing Arguments:

Appellant did not produce any satisfactory explanation or evidence to overcome statutory requirements.

- Conclusion:

Failure to produce installation certificate and required documentation precludes entitlement to Cenvat credit or refund under EPCG scheme.

Issue 4: Interpretation and Applicability of Section 142(3) of CGST Act and Related Provisions

- Relevant Legal Framework and Precedents:

Section 142(3) CGST Act provides for disposal of refund claims relating to amounts paid under existing law in accordance with existing law, with refund payable in cash. Section 140 provides for transitional credit. Section 174 saves accrued rights. Relevant case law includes decisions of Hon'ble Jharkhand High Court and various Tribunal benches interpreting these provisions.

- Court's Interpretation and Reasoning:

The Tribunal held that Section 142(3) does not create new rights but preserves existing rights accrued under old law. Refund claims under Section 142(3) must be adjudicated under the existing law applicable at the appointed day.

Failure to claim credit under Section 140 or non-compliance with procedural requirements under old law extinguishes rights to refund under Section 142(3).

Section 174 read with General Clauses Act preserves accrued rights but does not create new rights.

- Key Evidence and Findings:

Appellant failed to claim transitional credit under Section 140; did not comply with procedural requirements; claimed refund under Section 142(3) which was not supported by existing law.

- Application of Law to Facts:

Since appellant had no accrued right to credit or refund under old law at appointed day, Section 142(3) could not confer such right.

- Treatment of Competing Arguments:

Appellant contended that refund should be allowed as a matter of equity and reliance on certain judgments. Tribunal distinguished these on facts and emphasized strict interpretation of taxing statutes and that equitable considerations do not override statutory provisions.

- Conclusion:

Section 142(3) does not entitle appellant to refund where no right existed under old law or where procedural requirements for credit/refund were not complied with.

Issue 5: Effect of Appellant's Conduct and Principles of Equity

- Relevant Legal Principles:

Legal maxim "nullus commodum capere potest de injuria sua propria" (no one can take advantage of his own wrong) applies to prevent a party from benefiting from its own wrongdoing.

- Court's Interpretation and Reasoning:

Appellant was aware of non-fulfillment of export obligation and failed to produce installation certificate. Capital goods were allegedly diverted elsewhere. Payment of duty was made belatedly after 10 years without justification.

Tribunal held appellant cannot claim refund or credit benefit when conditions of EPCG scheme were violated and statutory requirements ignored.

- Key Evidence and Findings:

Admission of non-fulfillment of export obligation, failure to produce installation certificate, delayed payment of duty, and diversion of capital goods.

- Application of Law to Facts:

Appellant's own wrongful acts disentitle it from claiming refund or credit benefits.

- Treatment of Competing Arguments:

Appellant's plea of hardship or delay was rejected as no equitable relief is available in taxation without statutory mandate.

- Conclusion:

Appellant's claim is barred by principle of equity and legal maxim against profiting from own wrong.

Issue 6: Applicability of Precedents and Distinguishing Conflicting Decisions

- Relevant Legal Framework and Precedents:

Tribunal considered precedents including M/s Servo Packaging Ltd., M/s ITCO Industries Ltd., and High Court decisions such as M/s Rungta Mines Ltd.

- Court's Interpretation and Reasoning:

Tribunal distinguished precedents allowing refund under Section 142(3) where transitional credit was properly claimed or procedural compliance was met. It emphasized that such precedents are not applicable where conditions of scheme or procedural requirements are not fulfilled.

- Key Evidence and Findings:

Appellant failed to comply with procedural requirements and statutory conditions, unlike in favorable precedents.

- Application of Law to Facts:

Precedents relied upon by appellant were not binding or applicable due to factual distinctions.

- Treatment of Competing Arguments:

Appellant's reliance on favorable decisions was rejected on the ground of non-compliance and absence of accrued rights.

- Conclusion:

Precedents allowing refund under Section 142(3) are distinguishable and do not support appellant's claim.

1. Whether the appellant had fulfilled the export obligation (EO) under the EPCG scheme within the stipulated time as per Customs Notification and bond conditions.

2. Whether the non-submission or delay in submission of Export Obligation Discharge Certificate (EODC) by the appellant, due to reasons beyond their control, can justify denial of benefits under the EPCG scheme or sustain a demand for duty.

3. Whether the Appellate Authority was justified in refusing to transfer the matter to call book pending receipt of EODC and in directing recovery of duty by coercive means.

4. The scope and applicability of CBEC instructions and circulars regarding handling of export obligation fulfilment, issuance, and acceptance of EODC under the EPCG scheme.

5. The procedural correctness and legal propriety of the demand for duty and interest raised on the ground of non-fulfilment of export obligation without considering the appellant's application for redemption and subsequent issuance of EODC.

Issue 1: Fulfilment of Export Obligation under EPCG Scheme

- Legal Framework: The EPCG scheme under Customs Notification No.55/2003 and relevant Foreign Trade Policy (FTP) provisions require the importer to fulfil export obligations equivalent to eight times the duty saved amount within eight years from the date of licence issuance. The importer executes a bond undertaking payment of duty and interest in case of non-fulfilment.

- Court's Reasoning: The Adjudicating Authority initially found that the appellant failed to produce evidence of export obligation fulfilment and thus breached the bond and notification conditions. However, the appellant submitted documentary proof including ANF-5B export statements and a redemption letter issued by the competent authority confirming full discharge of export obligation in proportion to duty utilised.

- Key Evidence: The redemption letter dated 28.04.2025 issued by the Zonal Director General of Foreign Trade (JDGFT) confirming export obligation discharge; appellant's correspondence dated 04.06.2012 acknowledging submission of application for redemption; and export documents filed before DGFT.

- Application of Law to Facts: The Court recognized that the appellant had fulfilled the export obligation as per the redemption letter and that the initial demand was based solely on non-production of EODC, not on any substantive failure to meet EO.

- Treatment of Competing Arguments: The Revenue relied on absence of EODC at the time of demand to justify duty recovery. The appellant contended that the delay in issuance of EODC was beyond their control and that the export obligation was met.

- Conclusion: The Court accepted that export obligation was fulfilled and that the appellant was entitled to benefits under the EPCG scheme subject to production of EODC.

Issue 2: Effect of Delay or Non-submission of EODC Beyond Appellant's Control

- Legal Framework and Precedents: The condition precedent for discharge of bond and claiming benefits under EPCG is submission of EODC. However, established legal principle holds that delay caused by government/public authorities beyond the control of the importer cannot be a ground to deny benefits or sustain demands. This principle is supported by authoritative precedent emphasizing that conditions hinging on government action should not prejudice the applicant if delay is not attributable to them.

- Court's Reasoning: The Court observed that the appellant had applied for redemption well within the stipulated time and that delay in issuance of EODC by DGFT was beyond their control. It noted that it is not in the appellant's interest to delay EODC production as it is necessary to redeem bonds and bank guarantees.

- Key Evidence: Correspondence showing timely application for redemption; the eventual issuance of EODC; absence of any allegation of fraud or evasion by appellant.

- Application of Law to Facts: The Court held that delay in issuance of EODC by DGFT cannot be a ground for denying benefits or sustaining recovery demands under the EPCG scheme.

- Treatment of Competing Arguments: The Revenue's insistence on strict compliance with submission timelines was rejected in light of the binding instructions and legal principles protecting the importer from consequences of administrative delay.

- Conclusion: Delay in obtaining EODC beyond appellant's control does not justify denial of EPCG benefits or duty demand.

Issue 3: Refusal to Transfer Matter to Call Book and Direction for Recovery

- Legal Framework: The procedural practice under Customs law allows for transfer to call book when export obligation discharge is pending, especially if the delay is due to reasons beyond the importer's control. CBEC instructions emphasize issuance of simple notices rather than immediate SCNs or coercive recovery in such cases.

- Court's Reasoning: The Appellate Authority refused to transfer the case to call book pending receipt of EODC and directed recovery by coercive means. The Court found this approach inconsistent with CBEC instructions and principles of natural justice.

- Key Evidence: CBEC Instruction F.No.605/71/2015-DBK dated 14-10-2016 and Circular No.16/2017-Cus dated 02-05-2017 mandating issuance of notices and abeyance of action pending EODC issuance; absence of fraud or evasion allegations against appellant.

- Application of Law to Facts: The Court held that the Appellate Authority's refusal to transfer the matter to call book and direction for recovery was unsustainable and contrary to binding administrative instructions.

- Treatment of Competing Arguments: The Revenue's reliance on strict enforcement of duty recovery was outweighed by the procedural safeguards and instructions protecting exporters awaiting EODC issuance.

- Conclusion: The refusal to transfer the matter to call book and coercive recovery direction was improper and the matter requires remand for verification and appropriate action.

Issue 4: Applicability of CBEC Instructions and Circulars on EPCG Export Obligation Monitoring

- Legal Framework: CBEC issued instructions to rationalize procedures for handling export obligations under EPCG, including acceptance of EODC issued by DGFT without further verification except in selected cases; emphasis on transparency, natural justice, and avoidance of undue hardship to exporters.

- Court's Reasoning: The Court emphasized that these instructions are binding on Revenue authorities and must be adhered to in handling cases of export obligation fulfilment and redemption under EPCG.

- Key Evidence: CBEC Instruction dated 14-10-2016 and Circular dated 02-05-2017 outlining procedures for notices, verification, and handling of EODC submissions; requirement of natural justice and avoidance of routine demands without basis.

- Application of Law to Facts: The Court found that the lower authorities failed to follow these instructions, resulting in premature demand and coercive recovery without proper consideration of the appellant's redemption application and EODC issuance.

- Treatment of Competing Arguments: The Revenue's failure to apply these instructions was a critical flaw; the appellant's case was consistent with the prescribed procedural safeguards.

- Conclusion: The impugned orders are contrary to CBEC instructions and must be set aside with directions to comply strictly with these administrative guidelines.

Issue 5: Procedural and Legal Validity of Duty Demand and Interest on Non-fulfilment of Export Obligation

- Legal Framework: Under the EPCG scheme, duty and interest are payable if export obligation is not fulfilled within prescribed time and bond conditions. However, demand must be based on substantive non-fulfilment, not merely procedural delay in submission of EODC. Natural justice and procedural fairness require opportunity for verification and consideration of redemption applications.

- Court's Reasoning: The Court found that the demand was premised solely on non-submission of EODC and did not consider the appellant's bona fide efforts and eventual discharge of export obligation. The absence of fraud or evasion further weakened the case for demand.

- Key Evidence: The redemption letter confirming EO discharge; appellant's timely application for redemption; absence of adverse findings on export performance.

- Application of Law to Facts: The Court held that the demand and interest confirmed by the Adjudicating Authority and upheld by the Appellate Authority were unsustainable in light of the appellant's fulfilment of EO and issuance of EODC.

- Treatment of Competing Arguments: The Revenue's reliance on strict timelines and procedural non-compliance was rejected in favor of substantive compliance and binding administrative instructions.

- Conclusion: The demand for duty and interest is liable to be set aside; the matter is remanded for verification of EODC and grant of consequential benefits.

Remand and Directions

- The matter is remitted to the adjudicating authority for the appellant to produce the EODC and for limited verification as per CBEC instructions and prevailing procedures.

- The adjudicating authority is directed to conduct denovo proceedings within ninety days, adhering to principles of natural justice and transparency.

- The appellant is entitled to consequential benefits under law upon verification of EODC.

1. ISSUES PRESENTED and CONSIDERED

• Whether the Show Cause Notice (SCN) issued under Section 28(4) of the Customs Act, 1962 for the extended period of demand is valid or barred by limitation.
• Whether the importer's classification of the imported 'Polyurethane Sheet' under Customs Tariff Item (CTI) 3926 9099 is correct or the department's classification under CTI 3921 1390 is appropriate.
• Whether there was willful misstatement, suppression of facts, or collusion on the part of the importer justifying invocation of extended period of limitation under Section 28(4) of the Customs Act, 1962.
• Whether penalty under Section 114A of the Customs Act, 1962 is justified in the facts of the case.
• Whether the Tribunal should decide the classification issue on merits when the demand is held barred by limitation.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of SCN under Section 28(4) of the Customs Act, 1962 (Extended Period of Limitation)

Relevant Legal Framework and Precedents:

• Section 28(4) of the Customs Act, 1962 allows demand of duty beyond the normal limitation period if there is collusion, willful misstatement, or suppression of facts by the importer.
• Amendment to Section 17 of the Customs Act, 1962 (effective 8.4.2011) introduced self-assessment, placing onus on importers to correctly declare classification, valuation, and claim of notifications.
• Supreme Court rulings in Uniworth Textiles Ltd. and Aban Loyd Chiles Offshore Ltd. clarified that invocation of extended period requires proof of deliberate default or willful misstatement with a mental element of intent.

Court's Interpretation and Reasoning:

• The Tribunal examined whether the essential ingredients for invoking extended limitation-collusion, willful misstatement, or suppression-were established.
• The department relied on specific intelligence and suspicion of willful misstatement, supported by testing of samples and classification changes.
• The Tribunal found no evidence of willful default or suppression by the importer; rather, the importer's classification differed but was not fraudulent or deliberately misleading.
• 18 Bills of Entry were examined under Risk Management System (RMS) instructions without detection of misclassification or misdeclaration.
• The importer did not seek testing; the department initiated testing based on intelligence.
• The Tribunal emphasized that mere difference of opinion on classification does not amount to willful misstatement.

Key Evidence and Findings:

• CIPET report dated 18.6.2020 confirmed the goods as 'polyurethane sheet used for car seat'.
• No positive act by importer indicating intention to evade duty was found.
• Department's own officers had accepted classification under CTI 3926 9099 in several Bills of Entry prior to investigation.

Application of Law to Facts:

• Since no willful misstatement or suppression was established, invocation of extended limitation under Section 28(4) was improper.
• The SCN dated 1.11.2022 for extended period demand was therefore time barred.

Treatment of Competing Arguments:

• Department argued importer's failure to correctly classify and pay duty justified extended period demand.
• Importer contended absence of malafide intention and that classification was a bona fide difference of opinion.
• The Tribunal accepted the importer's bona fide belief and lack of willful default.

Conclusion: The SCN invoking extended limitation period under Section 28(4) is barred by limitation and does not survive.

Issue 2: Classification of Imported Goods

Relevant Legal Framework and Precedents:

• Classification under Customs Tariff is governed by the Customs Tariff Act and related Notes.
• End use of goods is generally not determinative of classification; classification depends on the nature and composition of goods.
• Relevant Chapter Notes, HSN, and Board Circulars guide classification.
• Precedents caution against penalty or adverse findings where classification disputes arise from genuine differences of opinion.

Court's Interpretation and Reasoning:

• The goods were declared as 'polyurethane sheet used for car seat' and tested as such.
• The importer classified the goods under CTI 3926 9099 (flexible polyurethane sheets), while the department classified under CTI 3921 1390 (other sheets).
• There was divergence even within the department: Bangalore authority classified similar goods under CTI 3926 3090.
• The Tribunal noted the classification issue involves interpretation of competing tariff entries.
• The Tribunal observed that classification differences alone do not amount to misdeclaration or suppression.

Key Evidence and Findings:

• CIPET test report confirming composition.
• Different classification positions taken by Customs authorities at Chennai and Bangalore.
• Principal Commissioner, Bangalore, found no malafide intention and invoked doctrine of bona fide belief to waive penalty.

Application of Law to Facts:

• The Tribunal declined to decide classification on merits as the SCN was held time barred.
• The divergence in classification within the department itself supports the conclusion that the classification dispute was bona fide.

Treatment of Competing Arguments:

• Importer argued classification under CTI 3926 9099 was correct based on composition and flexibility.
• Department argued classification under CTI 3921 1390 was correct and importer misclassified to claim duty exemption.
• Tribunal favored importer's bona fide classification difference, especially in absence of willful misstatement.

Conclusion: The Tribunal did not adjudicate classification on merits due to limitation bar but recognized bona fide difference of opinion on classification.

Issue 3: Willful Misstatement, Suppression of Facts, and Collusion

Relevant Legal Framework and Precedents:

• Section 28(4) requires proof of collusion, willful misstatement, or suppression of facts to invoke extended limitation.
• "Willful" implies conscious, voluntary, and intentional act to evade duty.
• Supreme Court rulings emphasize mental element and deliberate default as mandatory prerequisites.

Court's Interpretation and Reasoning:

• The Tribunal found no evidence of collusion or willful misstatement by the importer.
• The importer's conduct showed bona fide belief in classification rather than deliberate evasion.
• The department's own acceptance of classification in multiple Bills of Entry negates suppression or misstatement.
• Testing was department-initiated, not importer-driven.

Key Evidence and Findings:

• No material indicating fraudulent intent or concealment by importer.
• RMS examination of 18 Bills of Entry without adverse findings.

Application of Law to Facts:

Treatment of Competing Arguments:

• Department relied on intelligence and sample testing to allege willful misstatement.
• Importer denied any malafide intent and asserted bona fide classification difference.
• Tribunal sided with importer's bona fide belief and absence of willful default.

Conclusion: No willful misstatement, suppression, or collusion established; extended limitation and penalty unjustified.

Issue 4: Imposition of Penalty under Section 114A of the Customs Act, 1962

Relevant Legal Framework and Precedents:

• Penalty under Section 114A is linked to evasion of duty by misclassification or misdeclaration.
• Doctrine of bona fide belief recognized by courts as a defense against penalty in classification disputes.
• Precedents hold penalty cannot be imposed where no malafide intent or deliberate evasion is found.

Court's Interpretation and Reasoning:

• The Tribunal noted the Principal Commissioner, Bangalore, had invoked bona fide belief doctrine to waive penalty in a similar case.
• The Tribunal found no malafide intention or deliberate evasion in the present case.
• Since the SCN itself was barred by limitation, penalty based on it cannot be sustained.

Key Evidence and Findings:

• No evidence of willful evasion or suppression by importer.
• Classification dispute was bona fide and contested in good faith.

Application of Law to Facts:

• Penalty under Section 114A is not justified without proof of willful default.
• SCN being time barred negates penalty imposition.

Treatment of Competing Arguments:

• Department sought penalty based on alleged misclassification and evasion.
• Importer relied on bona fide belief and absence of malafide intent.
• Tribunal accepted importer's defense and rejected penalty.

Conclusion: Penalty under Section 114A is not sustainable in the absence of willful misstatement and given limitation bar.

Issue 5: Whether Tribunal Should Decide Classification Merits when Demand is Time-Barred

Relevant Legal Framework and Precedents:

• Judicial precedent holds that once demand is held barred by limitation, adjudication on merits is unnecessary and beyond jurisdiction.
• Supreme Court and High Court rulings emphasize that limitation bar precludes merit adjudication.

Court's Interpretation and Reasoning:

• The Tribunal relied on authoritative rulings holding that limitation bar ends proceedings.
• Consequently, the Tribunal declined to examine classification or eligibility for duty exemption on merits.

Key Evidence and Findings:

• SCN held barred by limitation.
• Precedents cited supporting non-adjudication on merits post limitation bar.

Application of Law to Facts:

• Tribunal set aside impugned order on limitation grounds without deciding classification merits.

Treatment of Competing Arguments:

• Importer urged dismissal on limitation grounds.
• Department sought to argue classification merits.
• Tribunal held limitation bar decisive and preclusive of merit adjudication.

Conclusion: Tribunal correctly refrained from deciding classification merits after holding SCN time barred.

1. ISSUES PRESENTED and CONSIDERED

Whether the activities undertaken by the appellant fall under works contract service or site formation and clearance, excavation, earthmoving and demolition services for the purpose of service tax liability.

Whether the demand of service tax raised by the Revenue invoking extended period of limitation is valid in the facts of the case.

Whether there was any suppression, collusion, or mis-statement by the appellant to justify invocation of extended period of limitation.

Whether absence of executed contract agreement affects the classification of the service and the liability to pay service tax.

Whether the appellant's failure to submit recipient-wise details and relevant documents justifies the demand and penalties imposed.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification of Service - Works Contract Service vs. Site Formation and Clearance, Excavation, Earthmoving and Demolition Services

Relevant Legal Framework and Precedents: The classification of services under service tax law depends on the nature of the activity and the contractual terms. Works contract service involves a composite contract for construction, fabrication, or erection involving supply of materials and labor. Site formation and clearance, excavation, earthmoving and demolition services are distinct categories under service tax.

Court's Interpretation and Reasoning: The Tribunal examined the work orders and related documents. Work orders indicated supply of materials such as cement concrete with specific rates quoted, implying involvement of materials inseparable from the work. Although the formal contract agreement was not executed or produced, the work orders stated that the contract agreement was under preparation, which is common in government or public sector contracts where tenders are finalized and formal agreements follow work orders.

Key Evidence and Findings: Presence of VAT payment records and worksheets showing break-up of taxable sales and purchases supported the involvement of materials. No evidence suggested that the work was purely service without material supply.

Application of Law to Facts: The Tribunal held that the absence of a formal contract agreement does not negate the nature of the service. The facts indicated a composite contract involving materials and labor, consistent with works contract service.

Treatment of Competing Arguments: The Revenue argued that no agreement was produced and the work orders mentioned contract agreement under preparation. The appellant argued that the service was works contract service and hence liable under that category. The Tribunal found the appellant's argument reasonable given the nature of the work and supporting documents.

Conclusions: The service undertaken by the appellant is classified as works contract service and not under site formation and clearance, excavation, earthmoving and demolition services.

Issue 2: Validity of Demand Invoking Extended Period of Limitation

Relevant Legal Framework and Precedents: Extended period of limitation under service tax law can be invoked only if there is evidence of suppression of facts or intent to evade tax. Audit-based detection without evidence of suppression does not justify extended period invocation. The Tribunal relied on authoritative precedents establishing that audit-based cases are subject to normal limitation period.

Court's Interpretation and Reasoning: The case originated from an audit of the public sector undertaking's records, which are in the public domain. The appellant had submitted statutory documents and there was no evidence of suppression or collusion.

Key Evidence and Findings: No evidence was brought forward by the Revenue to prove suppression, mis-statement, or collusion by the appellant. The demand was based on audit findings and statutory documents.

Application of Law to Facts: Since the case was detected through audit and no evidence of suppression was found, invocation of extended period of limitation was not justified.

Treatment of Competing Arguments: The appellant contended that the demand was barred by limitation and no suppression was involved. The Revenue contended that non-submission of recipient-wise details justified extended period. The Tribunal rejected the Revenue's contention due to lack of evidence of suppression.

Conclusions: The demand raised invoking extended period of limitation is barred and cannot be sustained.

Issue 3: Allegation of Suppression or Non-Submission of Documents

Relevant Legal Framework and Precedents: Suppression or concealment of facts with intent to evade tax is a precondition for invoking extended limitation and penalties. Mere non-submission of details without intent does not amount to suppression.

Court's Interpretation and Reasoning: The Tribunal noted that the appellant failed to submit recipient-wise details despite repeated requests. However, the appellant had submitted statutory documents and records maintained by the housing board were available to the Revenue.

Key Evidence and Findings: The Revenue did not produce any evidence of suppression or fraudulent intent. The appellant's records and the public documents were accessible to the Revenue.

Application of Law to Facts: Absence of recipient-wise details alone cannot be equated with suppression or evasion of tax liability.

Treatment of Competing Arguments: Revenue argued that non-submission justified demand and penalties. The appellant denied suppression and stated all relevant documents were submitted.

Conclusions: No suppression or intent to evade tax was established; hence, penalties and extended limitation are not justified on this ground.

Issue 4: Effect of Absence of Executed Contract Agreement on Service Classification and Tax Liability

Relevant Legal Framework and Precedents: Service classification depends on the substance of the contract and nature of work, not solely on the existence of a formal contract document.

Court's Interpretation and Reasoning: The Tribunal observed that the work order explicitly mentioned contract agreement was under preparation, a common practice in government contracts. The presence of material supply and VAT payment records indicated works contract service.

Key Evidence and Findings: Work orders, VAT payment records, and worksheets evidencing taxable sales and purchases.

Application of Law to Facts: Absence of formal contract agreement does not negate the nature of the service as works contract.

Treatment of Competing Arguments: Revenue argued absence of agreement undermined appellant's claim. The appellant emphasized the substance over form principle.

Conclusions: Absence of executed contract agreement does not affect classification of the service as works contract service.

Issue 5: Justification for Demand and Penalties Based on Non-Submission of Documents

Relevant Legal Framework and Precedents: Demand and penalties require proof of suppression, mis-statement, or evasion. Mere non-submission of documents without such intent is insufficient.

Court's Interpretation and Reasoning: The Tribunal found that although recipient-wise details were not submitted, the appellant had submitted other statutory documents and the records were available in public domain.

Key Evidence and Findings: No evidence of fraudulent intent or suppression was established by the Revenue.

Application of Law to Facts: Demand and penalties based solely on non-submission of details without suppression or evasion are not sustainable.

Treatment of Competing Arguments: Revenue sought to justify demand and penalties due to non-submission. The appellant denied suppression and argued for limitation bar.

Conclusions: Demand and penalties are not justified on the ground of non-submission of recipient-wise details in absence of suppression or evasion.

Overall Conclusion: The appeal is allowed solely on the ground of limitation as extended period cannot be invoked in audit-based cases without suppression. The classification of service as works contract is accepted. Demand and penalties are not sustainable due to lack of evidence of suppression or evasion. The case need not be remanded for merits as limitation alone decides the matter.

1. ISSUES PRESENTED and CONSIDERED

• Whether the appellant is entitled to avail CENVAT credit of sugar cess paid on imported raw sugar under the Sugar Cess Act, 1982 and the Cenvat Credit Rules, 2004.
• Whether sugar cess paid under the Sugar Cess Act, 1982 qualifies as a duty of excise for the purpose of availing CENVAT credit.
• Whether interest and penalty imposed under the Cenvat Credit Rules, 2004 and the Central Excise Act, 1944 are sustainable when the demand of duty itself is disputed.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to CENVAT credit of sugar cess paid on imported raw sugar

Relevant legal framework and precedents:

• Sugar Cess Act, 1982 - Section 3(1) levies sugar cess as a duty of excise.
• Cenvat Credit Rules, 2004 - Rule 3(1)(vii) allows CENVAT credit of additional customs duty (CVD) paid on imported inputs, where such duty is equivalent to excise duty.
• Central Excise Act, 1944 - Provides the general framework for levy and collection of excise duties.
• Judicial precedents:
  • Tribunal decision holding sugar cess as duty of excise and eligible for CENVAT credit.
  • High Court judgment affirming Tribunal decision that sugar cess is a duty of excise and credit is admissible.
  • Supreme Court decision recognizing cess levied under certain enactments as duty of excise.

Court's interpretation and reasoning:

• The sugar cess, though termed a cess, is levied and collected as a duty of excise under Section 3(1) of the Sugar Cess Act, 1982, applicable to sugar production.
• The Cenvat Credit Rules, 2004 apply to the sugar cess, permitting credit for duties of excise paid on inputs used in manufacture.
• The appellant paid sugar cess on imported raw sugar under ex-bond bill of entry and availed credit in bona fide belief of its admissibility.
• The High Court's ruling clarifies that sugar cess is a duty of excise, not a mere fee, and thus credit under Cenvat Credit Rules is allowable.
• The additional duty (CVD) paid on import of raw sugar is equivalent to excise duty and eligible for credit under Rule 3(1)(vii) of the Cenvat Credit Rules.

Key evidence and findings:

• Payment of sugar cess on imported raw sugar at Rs. 24 per quintal.
• Notification and circular exempting sugar cess, but appellant paid it unaware of exemption.
• Show cause notice and demand confirmed by Commissioner denying credit on ground that sugar cess is not a duty of excise.
• Judicial precedents supporting appellant's claim.

Application of law to facts:

• The appellant's payment of sugar cess qualifies as payment of duty of excise under Sugar Cess Act, 1982.
• The Cenvat Credit Rules allow credit of such duty paid on inputs used in manufacture.
• The appellant's claim for credit is consistent with statutory provisions and judicial pronouncements.

Treatment of competing arguments:

• Revenue argued that sugar cess is not a duty of excise and hence credit is inadmissible.
• Revenue's appeal against High Court decision is pending before Supreme Court but not stayed, hence binding precedent applies.
• Appellant relied on binding High Court decision and Supreme Court precedent recognizing cess as duty of excise.

Conclusions:

• The appellant is entitled to avail CENVAT credit of sugar cess paid on imported raw sugar.
• The impugned order denying credit is unsustainable in law and set aside.

Issue 2: Nature of sugar cess as duty of excise

Relevant legal framework and precedents:

• Sugar Cess Act, 1982 - defines sugar cess as a duty of excise.
• Central Excise Act, 1944 - governs levy and collection of duty of excise.
• Customs Tariff Act, 1975 - Section 3 levies additional customs duty (CVD) equivalent to excise duty on imported goods.
• Judicial precedents:
  • High Court ruling holding sugar cess as duty of excise, not a fee.
  • Supreme Court decision recognizing cess levied under statute as duty of excise.

Court's interpretation and reasoning:

• Section 3 of Sugar Cess Act provides for levy and collection of cess as duty of excise for Sugar Development Fund.
• Since the cess is levied on production of sugar, it is a tax on production and hence a duty of excise.
• At the time of import, the sugar cess is collected as additional customs duty (CVD) under Customs Tariff Act, 1975.
• This additional duty is equivalent to excise duty and eligible for credit under Cenvat Credit Rules.

Key evidence and findings:

• Legislative provisions explicitly describe sugar cess as duty of excise.
• High Court observations clarifying the nature of sugar cess and additional duty paid on import.

Application of law to facts:

• The sugar cess paid by appellant on imported raw sugar is a duty of excise under the Sugar Cess Act, 1982.
• It is also paid as additional customs duty (CVD) under Customs Tariff Act, 1975.

Treatment of competing arguments:

• Revenue's contention that sugar cess is not a duty of excise rejected based on statutory language and judicial pronouncements.

Conclusions:

• Sugar cess is a duty of excise and not a mere fee or tax.
• Therefore, it qualifies for credit under Cenvat Credit Rules.

Issue 3: Sustainability of interest and penalty when duty demand is disputed

Relevant legal framework:

• Rule 14 and Rule 15 of Cenvat Credit Rules, 2004 - provisions for interest and penalty on wrongful availment of credit.
• Section 11A, 11AB, and 11AC of Central Excise Act, 1944 - provisions for demand, interest, and penalty on duty and cess.

Court's interpretation and reasoning:

• If the demand of duty itself is not sustainable in law, then imposition of interest and penalty cannot be sustained.
• The appellant's entitlement to credit negates the basis for demand of sugar cess and corresponding interest and penalty.

Application of law to facts:

• The demand of sugar cess and CENVAT credit disallowance is set aside.
• Consequently, interest and penalty based on such demand cannot be maintained.

Conclusions:

• Interest and penalty imposed under the impugned order are not sustainable and are set aside along with the demand.

1. ISSUES PRESENTED and CONSIDERED

1) Whether the refund claims were barred by limitation under Section 11B, in view of the payer's assertion that the differential duties were paid "under protest".

2) Whether the refund was hit by the doctrine of unjust enrichment under Section 11B(2), having regard to the accounting treatment and the evidentiary record concerning passing on of duty incidence, and the consequent credit to the Consumer Welfare Fund.

3) Ancillary to Issue 1: Whether non-compliance with the procedural steps in the Supplementary Instructions for payment "under protest" defeats the substantive claim that the payments were in fact made "under protest".

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Limitation under Section 11B in light of "payment under protest" (read with Issue 3)

- Relevant legal framework and principles:

• Section 11B prescribes a limitation period for refund claims; however, amounts paid "under protest" are not subject to the limitation bar in the same manner.

• Supplementary Instructions (concerning "under protest") generally require contemporaneous written intimation to the jurisdictional officer, appropriate endorsements in returns/accounts, and linkage to the impugned payments; under the erstwhile regime, the rule on protest did not mandate a rigid form.

• Established jurisprudence recognizes that the concept of "under protest" should not be construed narrowly or pedantically; procedural lapses do not extinguish substantive rights where the protest is otherwise clearly conveyed and acknowledged.

- Court's interpretation and reasoning:

• The Tribunal found no dispute on merits that the duty ought not to have been paid on MRP for the clearances; the differential amounts were paid pursuant to an audit objection later found untenable.

• The payer addressed contemporaneous letters stating that the differential duty was being paid "under protest," which were acknowledged by the Department. One letter accompanied payment; another followed shortly after payment. The Tribunal treated a delay of a day or two as immaterial.

• Although the payer did not strictly follow all procedural steps (e.g., endorsements in ER-2 returns/Profit & Loss or ledger annotations), the intent to pay under protest was clearly conveyed and officially acknowledged. The Department neither disputed receipt nor rebutted the basis for protest at the relevant time.

• The Tribunal emphasized that procedural prescriptions are directory in this context; a mere letter can constitute a valid protest where it unambiguously communicates the payer's objection and links to the payments.

- Key evidence and findings:

• Acknowledged letters contemporaneous with the payments indicating "under protest."

• Background that the payments were prompted by audit objection; subsequently, the Department accepted that MRP-based valuation was not required.

- Application of law to facts:

• Given acknowledged written protests tied to the specific payments, and the broader legal principle that no rigid form is prescribed for protest, the amounts paid were held to be "under protest."

- Treatment of competing arguments:

• Revenue pressed for strict adherence to procedural formalities in the Supplementary Instructions. The Tribunal held that failure to strictly comply does not negate a valid protest where intent and acknowledgment are present; substantive rights prevail over procedural lapses.

- Conclusion:

• The limitation bar under Section 11B does not apply to the refund claim sums paid under protest. The finding that any portion of the refund was time-barred was set aside. See Issue 2 for the ultimate disposition on unjust enrichment, which independently controls the outcome.

Issue 2: Unjust enrichment under Section 11B(2) and credit to Consumer Welfare Fund

- Relevant legal framework and principles:

• Under Section 11B(2), refund amounts found due on merits are, by default, to be credited to the Consumer Welfare Fund unless the claimant proves that the incidence of duty has not been passed on to any other person (or falls within statutory exclusions).

• The satisfaction of the Refund Sanctioning Authority regarding non-passing of incidence is paramount; the burden lies on the claimant.

- Court's interpretation and reasoning:

• The Tribunal agreed that the claimant did not furnish persuasive documentary evidence to demonstrate that the incidence was not passed on, either directly or indirectly.

• The duty amounts were booked as expenses in the books of account/Balance Sheet. This accounting treatment is a strong indicator of passing on of incidence unless convincingly rebutted.

• Sample invoices and an affidavit from a company officer were held insufficient to discharge the burden. There was no evidence negating recovery from consignment agents/customers, nor proof of the absence of supplementary invoicing or any one-to-one correlation ruling out pass-through.

• The Sanctioning Authority's dissatisfaction was justified on the record; hence, the statutory presumption under Section 11B(2) remained unrebutted.

- Key evidence and findings:

• Books of account reflecting the differential duty as an expense.

• Absence of comprehensive documentary evidence showing non-recovery from downstream buyers or intermediaries; lack of one-to-one correlation; inability to produce further proof.

- Application of law to facts:

• In the absence of compelling rebuttal evidence, the doctrine of unjust enrichment applies. Therefore, although the refund is otherwise admissible on merits (and not time-barred per Issue 1), the amount must be credited to the Consumer Welfare Fund.

- Treatment of competing arguments:

• The claimant contended that incidence was not passed on; however, the Tribunal upheld the authorities' view that the evidence was inadequate and that the accounting treatment undermined the claim.

- Conclusion:

• The refund cannot be paid to the claimant due to unjust enrichment; any sanctioned amount is to be credited to the Consumer Welfare Fund. Interest is not payable to the claimant.

Inter-issue cross-references and overall disposition

• Issue 1 resolves limitation in favor of the claimant by recognizing valid "under protest" payments; however, Issue 2 independently bars payment of refund to the claimant due to unjust enrichment.

• Resultantly, despite the absence of time bar and the admitted merits on valuation, the entire refundable amount, if any, stands credited to the Consumer Welfare Fund. Appeals dismissed.

1. ISSUES PRESENTED and CONSIDERED

- Whether Section 142(3) of the CGST Act, 2017 entitles a claimant to cash refund of Countervailing Duty (CVD) and Special Additional Duty (SAD) paid after 01.07.2017 in respect of import transactions where Bills of Entry were filed prior to 01.07.2017 and CENVAT credit cannot be availed post-GST?

- Whether refund under Section 142(3) can be granted where the existing (pre-GST) law did not expressly provide for cash refund of the particular credit/duty paid?

- Whether the requirement of "unjust enrichment" precludes cash refund under Section 142(3) where the duty/tax was paid out of the claimant's own funds after 01.07.2017?

- How to reconcile and apply divergent judicial decisions (including Larger Bench and coordinate Bench decisions of the Tribunal and certain High Court decisions) on the scope of Section 142(3) in granting cash refunds of amounts that previously could only be taken as CENVAT credit?

2. ISSUE-WISE DETAILED ANALYSIS

Issue A - Entitlement to cash refund under Section 142(3) of CGST Act in respect of CVD and SAD paid after 01.07.2017 when CENVAT credit cannot be availed

- Relevant legal framework and precedents: Section 142(3) of the CGST Act (transitional provision) permitting disposal of claims in accordance with existing law and providing for refund of "any amount of CENVAT Credit, duty, tax, interest or any other amount paid" under the existing law; Tribunal Larger Bench and several coordinate Bench decisions addressing whether such amounts paid post-01.07.2017 are refundable in cash under Section 142(3).

- Court's interpretation and reasoning: The Tribunal interprets Section 142(3) as wide enough to encompass not only claims for CENVAT credit but also refund in cash of amounts (CVD+SAD) paid after 01.07.2017 where CENVAT credit cannot be availed in the GST regime. The Tribunal relies on the Larger Bench and subsequent consistent decisions which held that a claimant is eligible for cash refund under Section 142(3) when the amount was paid post-GST and cannot be taken as credit.

- Key evidence and findings: Applicant imported iron ore/iron ore fines through 17 Bills of Entry filed prior to 01.07.2017; final assessments resulted in payment of CVD and SAD of Rs.9,80,040 between July 2018 and July 2019; CENVAT credit could not be availed in GST; refund claim under Section 142(3) was rejected by sanctioning authority and appellate authority.

- Application of law to facts: Applying the Larger Bench reasoning, the Tribunal finds that the amounts paid after 01.07.2017 are eligible for refund in cash under Section 142(3) because the transitional provision contemplates disposal in accordance with existing law and permits refund of "any other amount" paid under the existing law where credit cannot be availed in GST regime.

- Treatment of competing arguments: The Department argued that Section 142(3) does not create new substantive rights not available under existing law and relied on decisions holding that such credits may only be carried forward and not refunded in cash. The Tribunal distinguishes those decisions on facts and legal analysis, emphasizing the Larger Bench and coordinate Bench authorities that permit cash refund and finding them directly applicable.

- Conclusion: The Tribunal concludes that refund of CVD and SAD paid after 01.07.2017 is admissible in cash under Section 142(3) where CENVAT credit cannot be availed under GST; claimant entitled to refund of Rs.9,80,040 with applicable interest.

Issue B - Whether Section 142(3) requires existence of an express refund right under pre-GST law and the role of "existing law" in transitional claims

- Relevant legal framework and precedents: Text of Section 142(3) referencing disposal in accordance with provisions of existing law (Excise Act and related rules as applicable); prior decisions of the Tribunal and some High Courts that interpreted the scope of "existing law" and whether cash refund was allowable where pre-GST law did not expressly permit cash refund.

- Court's interpretation and reasoning: The Tribunal reads Section 142(3) as not being confined to claims for CENVAT credit alone but extending to "any other amount" paid under existing law; where an amount is found admissible under existing law as credit/refund, Section 142(3) empowers disposal and refund in cash notwithstanding absence of express provision for cash refund under pre-GST statute. The Tribunal relies on coordinated Tribunal precedents and the Larger Bench that adopt this expansive reading.

- Key evidence and findings: The sanctioning authority and appellate authority treated pre-GST law as not permitting cash refund for manufacturers who are not exporters, and concluded refund could not be granted; Tribunal examined precedents where similar statutory gaps were remedied under transitional provisions.

- Application of law to facts: Given that the existing law permitted recognition of the amounts as CENVAT credit (though not as cash refund), Section 142(3) is applied to permit cash refund in transition because the claimant cannot utilize CENVAT credit in GST regime; the Tribunal treats such relief as within the scope of the transitional provision.

- Treatment of competing arguments: The Department's submission that Section 142(3) cannot confer a right not available under existing law is addressed by the Tribunal through reliance on the Larger Bench and related authorities which held that transitional provisions can and do operate to allow cash refunds where appropriate; contrary High Court decisions were considered but distinguished on context and scope.

- Conclusion: The Tribunal holds that Section 142(3) permits disposal and grant of cash refund of amounts paid under the existing law, even where pre-GST statutes lacked an express provision for cash refund, when the claimant cannot take credit in the GST regime.

Issue C - Unjust enrichment principle and requirement for refund under Section 142(3)

- Relevant legal framework and precedents: Unjust enrichment doctrine as a limiting principle on refunds; Tribunal decisions considering whether unjust enrichment is attracted where tax/duty was paid out of claimant's funds post-01.07.2017.

- Court's interpretation and reasoning: The Tribunal adopts the view from coordinate decisions that unjust enrichment is not attracted where the claimant has admittedly paid the duty/tax from its own funds after 01.07.2017 and as such is entitled to refund under Section 142(3). The Tribunal points to prior Bench reasoning that where the payment was made post-GST and the claimant cannot take credit, refund does not result in unjust enrichment.

- Key evidence and findings: Admissions in the record that CVD and SAD were paid between July 2018 and July 2019 out of the claimant's funds; no evidence that the amount sought to be refunded was retained elsewhere or benefited any other party unjustly.

- Application of law to facts: On the facts, unjust enrichment is held not attracted; therefore the requirement of unjust enrichment does not operate to deny refund under Section 142(3).

- Treatment of competing arguments: Department did not establish any factual basis for unjust enrichment; reliance on general principle that refund must not cause unjust enrichment is acknowledged but found inapplicable on these facts.

- Conclusion: Unjust enrichment does not bar the cash refund in the present case; refund permissible with interest.

Issue D - Reconciliation of divergent judicial decisions and precedential weight

- Relevant legal framework and precedents: Larger Bench decision(s) of the Tribunal and multiple coordinate Bench decisions finding in favour of cash refunds; some High Court decisions and earlier Bench decisions taking a contrary view.

- Court's interpretation and reasoning: The Tribunal gives precedence to the Larger Bench and consistent recent coordinate Bench decisions that interpret Section 142(3) broadly to allow cash refund of amounts paid post-01.07.2017 where credit is not available. The Tribunal notes that some contrary High Court or Bench decisions were decided in different contexts or without consideration of the later Larger Bench rulings; accordingly, those decisions do not displace the applicable Tribunal precedent relied upon.

- Key evidence and findings: Review of multiple authorities and the Larger Bench holding that refund claims under Section 142(3) are to be disposed of in accordance with existing law and that cash refund may be granted where appropriate; recognition that some judgments reached different conclusions but were distinguishable.

- Application of law to facts: Tribunal applies the Larger Bench/coordinate Bench line to the facts, finding them squarely covered and thus allowing the refund despite contrary authorities.

- Treatment of competing arguments: The Department's reliance on contrary High Court decisions is acknowledged and considered; Tribunal explains the distinctions and the superior/relevant weight of the Larger Bench and consistent coordinate Bench decisions for the present statutory provision.

- Conclusion: Divergent decisions do not prevent grant of refund in the present case; Tribunal follows the Larger Bench and consistent Bench authorities permitting cash refund under Section 142(3).

Issue E - Relief granted and incidental directions

- Court's interpretation and reasoning: Having found entitlement, the Tribunal sets aside the impugned appellate order and directs refund with applicable interest.

- Application of law to facts: Refund of Rs.9,80,040 allowed with applicable interest; respondent directed to pay within two months.

- Conclusion: Appeal allowed; direction to sanctioning authority/department to pay refund with interest within stipulated time.

1. ISSUES PRESENTED and CONSIDERED

• Whether the claim for Input Tax Credit (ITC) for the financial year 2018-2019, filed after the due date prescribed under Section 16(4) of the CGST Act, 2017, can be rejected.
• Effect and applicability of the amendments introduced by the Finance (No. 2) Act, 2024, specifically Sections 16(5) and 16(6) of the CGST Act, 2017, on the eligibility for ITC claims pertaining to financial years 2017-18 to 2020-21.
• Whether retrospective effect of the amendment to Section 16 of the CGST Act, 2017, alters the entitlement to ITC and impacts the validity of demand notices issued prior to amendment.
• Scope and procedural requirements for reassessment of ITC claims in light of the amended provisions.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Eligibility for Input Tax Credit (ITC) when claim is filed after due date under Section 16(4) of the CGST Act, 2017

Relevant legal framework and precedents: Section 16(4) of the CGST Act, 2017, prior to amendment, restricts the entitlement of a registered person to take ITC after the earlier of (a) 30th November following the end of the financial year to which the invoice pertains, or (b) furnishing of the relevant annual return. The due date for filing the GSTR-3B return for the financial year 2018-19 was 20-10-2019, and the petitioner filed on 23-10-2019, thus beyond the prescribed deadline.

Court's interpretation and reasoning: The Court recognized that under the pre-amendment regime, the claim for ITC filed beyond the deadline prescribed under Section 16(4) was liable to be rejected. The impugned order rejecting the claim on this ground was consistent with the statutory provisions before amendment.

Application of law to facts: The petitioner's ITC claim for Rs. 79,05,895/- was filed after the due date, thus prima facie barred under Section 16(4).

Conclusions: Under the original Section 16(4), the claim was rightly rejected for being time-barred.

Issue 2: Effect of Finance (No. 2) Act, 2024 amendments (Sections 16(5) and 16(6)) on ITC eligibility for financial years 2017-18 to 2020-21

Relevant legal framework and precedents: The Finance (No. 2) Act, 2024, introduced sub-sections (5) and (6) to Section 16 of the CGST Act, 2017, which provide that notwithstanding anything contained in sub-section (4), a registered person may claim ITC for invoices or debit notes pertaining to financial years 2017-18, 2018-19, 2019-20, and 2020-21 in any return filed up to 30th November 2021.

Court's interpretation and reasoning: The Court emphasized the overriding effect of the amendment, which relaxes the earlier stringent timeline for claiming ITC for specified financial years. The amendment was notified with retrospective effect from 01-07-2017, thereby validating claims made beyond the original deadline.

Key evidence and findings: The amendment notification (No. 17/2024-Central Tax) and submissions by the respondent's counsel acknowledged the retrospective effect and applicability of the amendment.

Application of law to facts: The petitioner's claim for the 2018-19 financial year, though filed after the original due date, falls within the extended timeline under Section 16(5) and is thus eligible for ITC.

Treatment of competing arguments: The respondent initially rejected the claim based on the original Section 16(4). However, upon amendment and retrospective effect, the respondent conceded the petitioner's entitlement.

Conclusions: The petitioner is entitled to avail ITC for the relevant period under the amended provisions, rendering the original rejection unsustainable.

Issue 3: Retrospective effect of amendment and its impact on the validity of demand notices and prior orders

Relevant legal framework and precedents: The retrospective amendment to Section 16 was notified effective from 01-07-2017. Section 16(6) further provides for ITC entitlement in cases of cancellation and subsequent revocation of registration.

Court's interpretation and reasoning: The Court held that the retrospective amendment nullifies the basis for the Demand-cum-Show Cause Notice dated 27-12-2023, which was issued under the pre-amendment regime.

Application of law to facts: Since the amendment allows ITC claims beyond the previously prescribed deadline, the demand notice and the impugned order rejecting the claim are rendered redundant and unsustainable.

Conclusions: The demand notice and the impugned order stand set aside in light of the retrospective amendment.

Issue 4: Procedural directions for reassessment of ITC claims post-amendment

Court's interpretation and reasoning: The Court directed remand of the matter to the Assistant Commissioner for issuance of a fresh Show Cause Notice, if necessary, and to proceed in accordance with the amended provisions, ensuring due opportunity of hearing to the petitioner.

Application of law to facts: The petitioner's claim is to be reconsidered afresh under the amended statutory framework, with procedural fairness.

Conclusions: The matter is remanded for fresh adjudication consistent with the amended Section 16, ensuring compliance with principles of natural justice.