TaxTMI Updates e-Newsletter
Jan 04,2020

Interim protection from arrest - deposit as condition for interim relief - co-operation with investigation - surrender of passport - periodic appearance before investigating officer - directions for progress report of investigation

Interim protection from arrest - deposit as condition for interim relief - co-operation with investigation - surrender of passport - Grant of interim protection from arrest on specified conditions. - HELD THAT: - The High Court granted temporary immunity from arrest to the petitioner subject to the petitioner's undertaking and compliance with specified conditions. The petitioner, who had already deposited sums with tax authorities, undertook to deposit an additional amount within seven days. The court conditioned the interim protection on (a) deposit of the additional amount as undertaken, (b) co-operation with the investigation in accordance with law, (c) meeting the investigating officer once a week, and (d) depositing the petitioner's passport with the investigating officer. The protection was time-limited: the petitioner shall not be arrested in connection with the case for a period of two weeks after vacation or until further orders, whichever is earlier. The court also directed that a progress report of the investigation be filed on the next date of hearing.

Petitioner to deposit the additional sum within seven days, cooperate with investigation, meet the investigating officer weekly and deposit passport; if these conditions are complied with, petitioner shall not be arrested for the limited period specified and a progress report shall be filed on the next date.

Final Conclusion: Interim protection from arrest was granted on condition of the petitioner depositing the additional amount within seven days, cooperating with the investigation, making weekly appearances before the investigating officer, surrendering the passport to that officer, and subject to filing of a progress report; protection is limited to two weeks after vacation or until further orders.

Release of seized conveyance on payment of fine in lieu of confiscation - confiscation under the Central Goods and Services Tax Act, 2017 - cooperation and disclosure obligations to enforcement authorities

Release of seized conveyance on payment of fine in lieu of confiscation - confiscation under the Central Goods and Services Tax Act, 2017 - Petition for release of the seized conveyance bearing No. GJ-01-BT-8242 upon payment of amounts exceeding the fine in lieu of confiscation. - HELD THAT: - The Court noted that the petitioner had already paid an amount which exceeds the fine in lieu of confiscation imposed by the order of confiscation under the Central Goods and Services Tax Act, 2017. In view of that payment, the respondents were directed to forthwith release the seized conveyance. The order conditions release on the petitioner's continued cooperation with the authorities and provision of requested information relating to Crown Metals and other details as may be called for by the respondent authorities. [Paras 2]

Release of the conveyance directed forthwith, subject to the petitioner's cooperation and furnishing of requested details.

Final Conclusion: The petition succeeds to the extent that the conveyance is to be released immediately because the petitioner has paid an amount exceeding the fine in lieu of confiscation; release is subject to the petitioner's cooperation and provision of information as directed.

Refund of IGST on zero-rated supplies - Entitlement to refund where tax is paid on export - Refund claim under the Integrated Goods and Services Tax regime - Circulars cannot override or alter statutory provisions - Effect of availing duty drawback on IGST refund - System-managed refund mechanism and automatic adjustments

Refund of IGST on zero-rated supplies - Entitlement to refund where tax is paid on export - Refund claim under the Integrated Goods and Services Tax regime - Effect of availing duty drawback on IGST refund - Circulars cannot override or alter statutory provisions - Petitioner entitled to refund of IGST paid on exports of zero-rated supplies despite earlier availing higher duty drawback and subsequent voluntary repayment; Circular No.37/2018-Customs, dated 09.10.2018 cannot defeat the statutory right to refund. - HELD THAT: - The Court examined the statutory framework under the IGST Act and CGST Act which permits refund of integrated tax paid on exports made after payment of tax. The petitioner exported goods after paying IGST and claimed refund in accordance with the applicable Rules (Sub-Clauses (a) and (b) of Sub-Rule (1) of Rule 96 of the CGST Rules, 2017). A departmental circular asserting that exporters who declare drawback serial numbers suffixed with A or C have "consciously relinquished" IGST/ITC claims was found to be inapplicable to defeat the statutory entitlement. Reliance was placed on the principle that executive circulars cannot prevail over statutory provisions; where the statute grants a refund, a contrary interpretation in a circular cannot nullify that right. The Court noted that a Division Bench of the Gujarat High Court has treated the circular as not affecting IGST refund claims and that subsequent administrative steps (including a later circular addressing system-managed refunds) do not supplant the statutory refund route. Applying these principles to the facts - that IGST was paid on exports and refund procedures under the statute and rules were complied with - the Court concluded that the petitioner is entitled to the refund notwithstanding the earlier duty drawback issue and its voluntary repayment. [Paras 9, 11, 13]

Respondents directed to refund the IGST paid on the exported zero-rated supplies to the petitioner.

Final Conclusion: Writ petition allowed; respondents directed to refund the IGST paid on the exported zero-rated supplies to the petitioner within six weeks; no costs.

Re-opening of assessment under Section 147/148 - reason to believe - live-link between investigative material and formation of belief - change of opinion versus material change of circumstances - onus under Section 68 to prove identity, creditworthiness and genuineness - genuineness and creditworthiness of investor companies

Re-opening of assessment under Section 147/148 - reason to believe - live-link between investigative material and formation of belief - Validity of the notice issued under Section 148 read with Section 147 to re-open the assessment for AY 2012-13 - HELD THAT: - The Court held that the reasons recorded disclose sufficient material to constitute a reasonable belief that income chargeable to tax had escaped assessment. Investigative material established that the two investor companies which credited substantial sums to the petitioner were promoted and controlled by a known accommodation-entry operator, and that those investments therefore gave rise to a serious doubt as to their genuineness. The Court found an actionable "live-link" between the new information supplied by the Investigation Wing and the Assessing Officer's belief that escapement of income had occurred; this knowledge was not available to the AO at the time of the original scrutiny assessment. In these circumstances, and insofar as the re-opening was within the period of limitation under the proviso to Section 147, the reasons to reopen were held to be legally sustainable at the prima facie stage. [Paras 14, 31, 33, 39, 40]

The re-opening notice under Section 148/147 in respect of AY 2012-13 is valid

Change of opinion versus material change of circumstances - reason to believe - Whether the reassessment amounted merely to an impermissible change of opinion because the original assessment was completed under Section 143(3) - HELD THAT: - The Court rejected the contention that the reassessment was a mere change of opinion. It observed that the original assessment order was silent on the genuineness and creditworthiness of the investor companies and that material information about those companies being promoted by an accommodation-entry provider became available only later. The subsequent acquisition of that information constituted a material change of circumstances, not a simple change of opinion, and therefore justified formation of a fresh belief to reopen the assessment. [Paras 34, 36, 38, 40, 44]

Reopening did not amount to an impermissible change of opinion

Onus under Section 68 to prove identity, creditworthiness and genuineness - genuineness and creditworthiness of investor companies - Whether the petitioner had discharged the primary onus under Section 68 in respect of the share-application monies received from the two investor companies - HELD THAT: - The Court noted settled principles that the assessee must prima facie prove identity, creditworthiness and genuineness of transactions under Section 68. It recorded that while the petitioner did not dispute receipt of monies, the earlier assessment had not examined the creditworthiness or genuineness of the investor companies, and investigative material suggested those companies were linked to an accommodation-entry operator. On that basis the Court held there was reasonable cause to question discharge of the onus and to reopen the assessment for fuller inquiry. [Paras 22, 23, 43]

The petitioner had not, for purposes of precluding reassessment, conclusively discharged the onus under Section 68; further inquiry was justified

Live-link between investigative material and formation of belief - re-opening of assessment under Section 147/148 - Whether the reasons recorded suffer from non-application of mind or are based on borrowed satisfaction of another authority - HELD THAT: - The Court examined the reasons and held they are detailed and demonstrate application of mind by the Assessing Officer. The reasons identify the specific transactions with the two investor companies and rely upon investigatory findings linking those companies to a known accommodation-entry provider; thus the belief was formed on tangible material rather than mere borrowed satisfaction. The Court also remarked that, once reopened, the Assessing Officer must proceed independently in framing reassessment and the assessee will have the opportunity to meet the material. [Paras 3, 14, 37, 41]

Reasons do not suffer from non-application of mind or mere borrowed satisfaction; reopening is not vitiated on that ground

Final Conclusion: The petition challenging the reassessment notice and the order rejecting objections was dismissed. The Court held that the Assessing Officer had prima facie reason to believe that income had escaped assessment in AY 2012-13, that the reopening was not a mere change of opinion, and that further inquiry under Section 147/148 was justified; costs were imposed on the petitioner.

Reopening of assessment under section 147/148 of the Income Tax Act, 1961 - sanction/approval under section 151 of the Income Tax Act, 1961 - mechanical approval without application of mind - quashing of reassessment for invalid sanction

Sanction/approval under section 151 of the Income Tax Act, 1961 - mechanical approval without application of mind - reopening of assessment under section 147/148 of the Income Tax Act, 1961 - quashing of reassessment for invalid sanction - Approval granted by the Addl. CIT under section 151 was mechanical and lacked application of mind, rendering the notice under section 148 and consequent reassessment invalid and liable to be quashed. - HELD THAT: - The Tribunal examined the reasons/satisfaction form placed on record which recorded the Addl. CIT's remark: "Yes, I am satisfied on the reasons recorded by the AO that it is a fit case for issue of notice u/s. 148 of the I.T. Act." From that recital the Tribunal found no indication of what material, information or documents were considered by the Addl. CIT or that any independent application of mind had been made. Relying on precedents addressing the requirement that the sanctioning authority must apply its mind and not accord approval in a routine or mechanical manner, the Tribunal held that the approval in the present case was vitiated. In view of the invalid sanction under section 151, issuance of notice under section 148 and the reopening were held to be bad in law. The Tribunal noted reliance placed by the assessee on a co-ordinate ITAT decision and found the facts of the cited authorities relied upon by the Department not pari materia with the present case; following precedents on mechanical sanction, the reassessment was quashed. As the assessee pressed only this legal ground, other grounds of appeal were not argued and therefore dismissed. [Paras 4]

Approval by the Addl. CIT was mechanical and without application of mind; notice under section 148 and reassessment quashed.

Final Conclusion: The appeal is partly allowed: the reassessment initiated by notice under section 148 is quashed for invalid sanction under section 151; other grounds not pressed are dismissed.

International transaction - Explanation to section 92B retrospective effect - arm's length price of corporate guarantee - transfer pricing adjustment on corporate guarantee - condonation of delay

International transaction - Explanation to section 92B retrospective effect - arm's length price of corporate guarantee - transfer pricing adjustment on corporate guarantee - Whether the corporate guarantee transactions entered into by the assessee with its associated enterprises for assessment year 2011-12 constitute an international transaction attracting transfer pricing adjustment and whether the ALP for corporate guarantee could be determined. - HELD THAT: - The Tribunal followed coordinate-bench decisions holding that the Explanation to section 92B (inserted by the Finance Act, 2012) cannot be given retrospective operation to AY 2011-12, and therefore the Explanation is not applicable to the year under assessment. The authorities below had determined ALP of corporate guarantee by treating the Explanation as retrospective; that legal premise was held unsustainable. Further, on the material on record the Tribunal noted absence of any indication of diversion of profits out of India, the assessee having declared losses and the group showing accumulated brought forward losses, and also the lack of any cogent material that the assessee incurred cost in providing the guarantees. In light of the foregoing and following the coordinate-bench precedents, the transfer pricing adjustment made by the AO in respect of corporate guarantee fee (and the partial confirmation by the CIT(A) fixing ALP at 1%) was held not sustainable; the additions on account of corporate guarantee fee were directed to be deleted and the Revenue appeal dismissed. [Paras 10, 11, 12, 13, 14]

Transfer pricing adjustment in respect of corporate guarantee for AY 2011-12 is not sustainable; corporate guarantee transactions are not to be treated as international transactions for that year and the addition is deleted; Revenue's appeal dismissed.

Condonation of delay - Whether the assessee's cross objections should be admitted notwithstanding a delay of 512 days and whether the application for condonation of delay should be allowed. - HELD THAT: - The assessee's cross objections were filed with a delay of 512 days. The application for condonation of delay was examined and rejected as being generic and not satisfactorily explaining each day of delay; factual averments such as reshuffling of staff and departure of finance personnel were not adequately substantiated. The settled principle that the appellant must prove the delay for every single day was applied, and the Tribunal found the reasons insufficient. [Paras 15]

Application for condonation of delay dismissed; cross objections held hopelessly time barred and dismissed.

Final Conclusion: Following coordinate-bench precedent, the transfer pricing adjustment for corporate guarantee in AY 2011-12 is deleted and the Revenue's appeal is dismissed; the assessee's cross objections are dismissed as time-barred for want of condonation of delay.

Exemption under section 11(1)(c) - approval of CBDT for income applied outside India - Foreign Contribution (Regulation) Act not attracted to transactions between governments - instrumentality of the Government

Exemption under section 11(1)(c) - approval of CBDT for income applied outside India - Addition made under section 11(1)(c) for amounts incurred outside India was rightly deleted in view of CBDT approval effective for the years under assessment. - HELD THAT: - The Assessing Officer added amounts on the ground that the assessee had not obtained CBDT approval for incurring expenditure outside India under section 11(1)(c). The Commissioner (Appeals) recorded, and the Tribunal noted, that CBDT approval had been accorded by letter dated 08.02.2016 which was effective for A.Y. 2011-12 and 2012-13. The revenue did not controvert the factual position of CBDT approval before the Tribunal. In those circumstances, there was no infirmity in the CIT(A)'s deletion of the additions made under section 11(1)(c). [Paras 7]

Addition under section 11(1)(c) deleted and ground decided against the revenue.

Foreign Contribution (Regulation) Act not attracted to transactions between governments - instrumentality of the Government - Disallowance under FCRA for receipt of grants from the Government of France was not sustainable because the receipts constituted transactions between Governments and the assessee is an instrumentality of the Government of India. - HELD THAT: - The Assessing Officer disallowed amounts on the basis that the assessee received foreign contribution from the Government of France without filing returns under FCRA. The Tribunal found on facts that the assessee is a registered society established as a joint venture of the Government of India and the Government of France and that the funds were contributed by those governments. The Ministry of Home Affairs' communication was relied upon, which states that FCRA does not apply to transactions between the Government of India and the Government of any foreign country. The Tribunal also noted a communication from the Indian Foreign Secretary confirming the assessee's establishment for promotion of scientific research and its exemption from income-tax. Applying these findings, the Tribunal agreed with the CIT(A) that FCRA was not attracted and the disallowance was unsustainable. [Paras 8, 9, 11]

Disallowance under FCRA set aside and grounds decided against the revenue.

Final Conclusion: Both appeals filed by the revenue for A.Y. 2011-12 and A.Y. 2012-13 are dismissed; additions and disallowances made by the Assessing Officer were deleted by the CIT(A) and the Tribunal affirmed those deletions on the grounds of CBDT approval and non-attraction of FCRA to gov-to-gov transactions and the assessee's character as an instrumentality of the Government.

Assumption of jurisdiction under section 153C - requirement of issuance of notice under section 153A before notice under section 153C - date of deemed search as the date of recording of satisfaction note - mandatory issuance of notice under section 153C where the six year block period is attracted - consequential deletion of penalty under section 271(1)(c)

Assumption of jurisdiction under section 153C - requirement of issuance of notice under section 153A before notice under section 153C - Validity of assessment framed under section 153C for Assessment Year 2007-08 - HELD THAT: - The Tribunal found that the notice under section 153C in the assessee's case was issued on 27.11.2008, prior to issuance of the notice under section 153A to the searched person (dated 06.01.2009). Applying the principle in CIT v. Calcutta Knitwears and CBDT Circular No.24/2015, the satisfaction note cannot lawfully precede issuance of notice to the searched person; the satisfaction note here was prepared before the searched person's proceedings were initiated, rendering the assumption of jurisdiction under section 153C defective. Consequently the assessment framed for AY 2007-08 was without jurisdiction and unsustainable in law. [Paras 5]

Assessment for AY 2007-08 framed under section 153C is quashed for want of jurisdiction; consequential penalty under section 271(1)(c) is deleted.

Date of deemed search as the date of recording of satisfaction note - mandatory issuance of notice under section 153C where the six year block period is attracted - Validity of assessment for Assessment Year 2008-09 where no notice under section 153C was issued though the year fell within the six year block period - HELD THAT: - The Tribunal accepted that the seized material alleged to belong to the assessee was handed over to the assessee's Assessing Officer on 27.11.2008 and, consequently, the six year period under section 153C covered AYs 2003-04 to 2008-09. As no notice under section 153C was issued for AY 2008-09 and the assessment was completed under section 143(3) after issuing only a notice under section 143(2), the AO failed to comply with the mandatory pre condition of issuing notice under section 153C when the block period applied. The assessment order for AY 2008-09 was therefore not in conformity with law and unsustainable. [Paras 5]

Assessment for AY 2008-09 is quashed for non compliance with mandatory provisions relating to notice under section 153C; consequential penalty under section 271(1)(c) is deleted.

Final Conclusion: All four appeals are allowed: assessments for AY 2007-08 and AY 2008-09 are quashed for want of jurisdiction/non compliance with mandatory notice requirements under section 153C, and the consequential penalties under section 271(1)(c) stand deleted.

Additional depreciation under section 32(1)(iia) - disallowance under section 40(a)(ia) for failure to deduct tax at source - disallowance under section 14A and application of Rule 8D - diversion of income by overriding title / income not accruing to assessee - capital receipt arising from government capital subsidy held on trust/for adjustment - real income doctrine

Additional depreciation under section 32(1)(iia) - Deletion of addition on account of claim for additional depreciation - HELD THAT: - The Tribunal found that the deletion of the addition made by the Assessing Officer regarding additional depreciation is squarely covered in favour of the assessee by its earlier decisions in the assessee's own cases for earlier assessment years, which held that generation/distribution of electricity constitutes a manufacturing activity or production of an article or thing and is eligible for benefit under the provision. Having considered those coordinate-bench and High Court precedents relied upon, and in the absence of contrary judicial authority, the Tribunal followed the precedent and upheld the deletion of the addition. [Paras 3, 6]

Addition on account of additional depreciation deleted and revenue's challenge dismissed

Disallowance under section 40(a)(ia) for failure to deduct tax at source - Deletion of addition in respect of ERPC charges for which tax was not deducted at source - HELD THAT: - The Tribunal observed that the same issue had been decided in the assessee's own case for an earlier year where the Assessing Officer's disallowance under section 40(a)(ia) in respect of ERPC charges was deleted by the Commissioner (Appeals) and that deletion had been upheld by the Tribunal. On the basis of those earlier findings in the assessee's own proceedings, the Tribunal held that the issue was covered in favour of the assessee and therefore upheld the Commissioner (Appeals)'s deletion of the disallowance. [Paras 4, 6]

Addition on account of ERPC charges deleted and revenue's challenge dismissed

Disallowance under section 14A and application of Rule 8D - Deletion of disallowance made under section 14A read with Rule 8D in respect of exempt dividend income - HELD THAT: - The Tribunal noted that for invocation of Rule 8D the Assessing Officer must record dissatisfaction with the correctness of the assessee's claim regarding expenditure in relation to exempt income. As earlier recorded in the assessee's own case for a prior year, no such dissatisfaction was recorded in the present facts and the dividend was received by single cheque with no expenditure shown to have been incurred to earn that dividend. Accordingly, application of Rule 8D was held unsustainable and the disallowance under section 14A was deleted. [Paras 5, 6]

Disallowance under section 14A deleted and revenue's challenge dismissed

Diversion of income by overriding title / income not accruing to assessee - capital receipt arising from government capital subsidy held on trust/for adjustment - real income doctrine - Taxability of interest earned on fixed deposits created out of capital subsidy under RGGVY - whether interest accrued to the assessee or was diverted at source and thus not taxable - HELD THAT: - The Tribunal examined the scheme letters and related correspondence and concluded that funds released as capital subsidy under the RGGVY were to be kept in separate interest bearing deposits and that the interest so earned was to be accounted for and used for the project by adjustment against the last instalment of capital subsidy (and was subsequently required to be remitted to the Government). Applying the principle that where, by the nature of the obligation, income is diverted before it reaches the assessee it does not constitute the assessee's income, the Tribunal found that the Implementing/Executing Agencies (including the assessee) never acquired title to the interest because of the overriding obligation under the scheme to apply or remit that interest for the project. The Tribunal rejected reliance on Accounting Standard 12 and distinguishable authorities cited by the revenue, accepted the relevance of the correspondence showing eventual recovery/remittance to Government, and held that the interest did not form part of the assessee's income but was a capital related receipt diverted at source. [Paras 14, 15, 16, 20]

Addition of interest on fixed deposits deleted and assessee's appeal allowed

Final Conclusion: The Revenue's appeal is dismissed in respect of additional depreciation, ERPC charges and section 14A disallowance; the assessee's appeal is allowed in respect of interest earned on fixed deposits created out of RGGVY capital subsidy, the Tribunal treating that interest as diverted at source/not accruing as the assessee's income.

Revisional jurisdiction under section 263 - Erroneous and prejudicial to the interest of the revenue (twin conditions) - Lack of enquiry versus inadequate enquiry - Assessing Officer's dual role as investigator and adjudicator - Scope of CBDT "Penny Stock" instruction

Revisional jurisdiction under section 263 - Erroneous and prejudicial to the interest of the revenue (twin conditions) - Lack of enquiry versus inadequate enquiry - Whether the Principal CIT rightly exercised revisional jurisdiction under section 263 by holding the Assessing Officer's assessment erroneous and prejudicial to revenue for alleged lack of enquiry into the claim of short term capital loss. - HELD THAT: - The Tribunal applied the Malabar twin conditions and the settled distinction between lack of enquiry and inadequate enquiry. It found that the AO had issued detailed notices under section 142(1), called for contract notes, bank statements, broker KYC and obtained information from the broker under section 133(6), and that the assessee furnished contract notes, bank statements and ledger entries corroborating the transactions. On the material before the AO the Tribunal concluded that the AO had acted both as investigator and adjudicator and taken a plausible view in allowing the short term capital loss after examining documents and explanations. The Pr. CIT's action proceeded on the premise of lack of enquiry, but the record showed enquiries were made; at best the Pr. CIT considered them inadequate. The Tribunal held that inadequate enquiry does not render an AO's order erroneous unless the revising authority, after conducting its own enquiry, records that the AO's view is unsustainable in law. Absent such a recorded finding and given the plausible view adopted by the AO, the jurisdictional precondition for invoking section 263 was not satisfied and the revisional order was without jurisdiction. [Paras 13, 14, 15, 16, 30]

The Pr. CIT's exercise of jurisdiction under section 263 was unjustified; the assessment order was not shown to be erroneous and prejudicial to revenue for lack of enquiry, and the revisional order is quashed.

Scope of CBDT "Penny Stock" instruction - Assessing Officer's dual role as investigator and adjudicator - Whether the CBDT Instruction regarding 'Penny Stock' mandated a specific mode of enquiry that the AO violated, thereby rendering the assessment erroneous. - HELD THAT: - The Tribunal examined the CBDT Instruction relied upon by the Pr. CIT and found that it notified availability of a 'Penny Stock' functionality to display investigational inputs and directed officers to access the information; it did not prescribe a specific manner or mandatory line of enquiry to be followed by the AO. The Pr. CIT failed to identify any specific mandatory procedure in the Instruction that the AO had violated. Given that the AO had in fact accessed information, issued detailed queries, and verified documents obtained from the assessee and broker, the premise that the AO breached the CBDT Instruction was factually and legally untenable. Consequently, the Instruction did not supply a valid jurisdictional basis for revisional interference in the absence of a recorded finding that the AO's view was unsustainable. [Paras 15, 16, 30]

The CBDT Instruction did not prescribe a mandatory mode of enquiry which the AO violated; reliance on that Instruction did not justify exercise of revisional jurisdiction under section 263.

Final Conclusion: The Tribunal allowed the appeal, holding that the Principal CIT's revision under section 263 was without jurisdiction because the AO had made enquiries and taken a plausible view in allowing the short term capital loss; the revisional order is quashed.

Advertising, Marketing and Promotion expenses as international transaction - Bright Line Test - Transactional Net Margin Method (TNMM) versus Resale Price Method (RPM) - Onus on Revenue to prove agreement/arrangement/action in concert for AMP - Subvention payments - operating receipt versus non operating/capital receipt - Chapter X transfer pricing - substitution of transaction price with arm's length price - Allowability of direct sales and marketing team expenses as revenue expenditure - Safe Harbour Rules - retrospective operation

Advertising, Marketing and Promotion expenses as international transaction - Bright Line Test - Onus on Revenue to prove agreement/arrangement/action in concert for AMP - Chapter X transfer pricing - substitution of transaction price with arm's length price - AMP expenditure incurred by the assessee is not an international transaction and no TP adjustment on AMP can be sustained - HELD THAT: - The Tribunal held that where there is no agreement, arrangement or action in concert obliging the Indian entity to incur AMP expenditure for the benefit of the associated enterprise, the Revenue cannot treat such AMP spend as an international transaction under section 92B. The decision follows the Delhi High Court's analysis that Chapter X contemplates substitution of an existing transaction price with an ALP and does not furnish a machinery for creating or quantifying an assumed international transaction by application of the Bright Line Test. In the present facts the revenue itself found no arrangement between assessee and AE; accordingly the AMP spend was domestic, not subject to transfer pricing benchmarking, and the TP adjustment based on BLT was deleted. [Paras 11, 22, 23, 32, 33]

Adjustment on account of AMP expenditure deleted; AMP expenditure not an international transaction in absence of arrangement/understanding

Allowability of direct sales and marketing team expenses as revenue expenditure - Expenditure on the sales and marketing team is a direct selling expense and allowable as revenue expenditure - HELD THAT: - The Tribunal accepted that amounts booked under sales and marketing team were incurred by the assessee for spreading awareness of specialised drugs among doctors and others as part of direct selling activity. Relying on precedent (including Sony Ericsson) and the factual categorisation by the assessee, these amounts were held to fall outside AMP benchmarking and to be allowable as revenue expenditure. The AO was directed to allow the expenditure so categorized. [Paras 12]

Sales and marketing team expenditure of the assessee allowed as revenue expenditure

Transactional Net Margin Method (TNMM) versus Resale Price Method (RPM) - RPM as most appropriate method for distributors not adding substantial value - RPM is the most appropriate method for benchmarking the distribution transactions of the assessee - HELD THAT: - Having held that the AMP expenditure is not a separate international transaction and that the assessee did not add substantial value to imported goods, the Tribunal concluded that the Resale Price Method is the appropriate TP method for a reseller who does not alter the tangible goods or employ intangibles to add substantial value. TNMM was rejected in the factual matrix of this assessee and the AO was directed to apply RPM after affording opportunity of hearing. [Paras 36]

AO/TPO to apply RPM for benchmarking distribution transactions

Subvention payments - operating receipt versus non operating/capital receipt - Subvention receipts payable by the AE are to be included as operating income for computing PLI to the extent relatable to the relevant year - HELD THAT: - On the facts the subvention was paid by the AE to reimburse part of operating expenses in initial years and was linked to distribution activity. Applying precedents on similar subvention arrangements, the Tribunal held the subvention to be operating in nature for purposes of computing the profit level indicator and directed inclusion of the amount relatable to the assessment year in operating income. The Tribunal did not disturb any other taxability findings not challenged by the assessee. [Paras 39, 41]

Subvention income to be included as operating income for PLI computation, limited to amount relatable to the assessment year

Safe Harbour Rules - retrospective operation - Safe harbour rules do not have retrospective operation as contended by Revenue - HELD THAT: - The Tribunal allowed the assessee's additional ground that the Safe Harbour Rules cannot be applied retrospectively to the assessment year in issue and therefore directions based on retrospective application were not sustained. [Paras 44]

Additional ground on retrospective operation of Safe Harbour Rules allowed

Allowance of depreciation - rate dispute - Depreciation to be allowed at the rate directed by the DRP - HELD THAT: - The Tribunal noted that although the DRP directed allowance at 16%, the AO had allowed at 15%. The AO was directed to allow depreciation at 16% for the assets in question. [Paras 43]

Assessing Officer directed to allow depreciation at 16%

Prematurity of penalty proceedings - Penalty ground raised by the assessee is premature - HELD THAT: - The Tribunal recorded that the challenge to penalty initiation (ground no.21) was premature and did not adjudicate the penalty on merits. [Paras 45]

Ground against initiation of penalty held to be premature

Interest under section 234C - verification on returned income - Charge of interest under section 234C to be verified by the Assessing Officer with reference to returned income - HELD THAT: - The Tribunal directed that the question of charging interest under section 234C (noted as section 24C in the order) be examined and verified by the Assessing Officer against the returned income; no final adjudication on the correctness of interest charge was undertaken by the Tribunal. [Paras 46]

Assessing Officer to verify interest under section 234C against returned income

Final Conclusion: The appeal is partly allowed: AMP related TP adjustment deleted; sales and marketing team expenditure allowed as revenue deduction; RPM to be applied for distribution transactions; subvention income to be included as operating income for PLI computation for the year; depreciation to be allowed at 16%; Safe Harbour Rules not to be applied retrospectively; penalty challenge held premature and interest under section 234C referred back to the AO for verification.

Disallowance under Section 14A - Rule 8D apportionment - Recording of satisfaction before invoking Rule 8D - Assessee's suo-moto disallowance - Pre-requisite satisfaction as held in Maxopp Investment Ltd.

Disallowance under Section 14A - Assessee's suo-moto disallowance - Recording of satisfaction before invoking Rule 8D - Rule 8D apportionment - Validity of invoking Rule 8D to compute disallowance u/s 14A where the assessee had offered a suo-moto disallowance and the assessing officer did not record requisite satisfaction rejecting that methodology - HELD THAT: - The Tribunal examined whether the AO was entitled to apply the apportionment mechanism under Rule 8D after the assessee had made a suo-moto disallowance in the return. It was held that the AO was obliged to record an objective and judicious satisfaction explaining why the assessee's methodology was unacceptable before discarding it and invoking Rule 8D. The AO's assessment order merely recorded non-satisfaction without providing cogent reasons or examination of relevant factors (such as the nature of loans, where applicable), and therefore failed to meet the pre-requisite required for applying Rule 8D. The Tribunal followed the Supreme Court's decision in Maxopp Investment Ltd., which requires recording of satisfaction as a pre-condition to apply apportionment under Rule 8D, and relied on earlier coordinate bench decisions in the assessee's own case. Given the parity of facts across the years and the AO's failure to record satisfaction with reasons, the Tribunal deleted the additional disallowances computed by the AO under Rule 8D and allowed the appeals. [Paras 4, 5, 6]

Additional disallowances computed under Rule 8D were deleted for AYs 2012-13, 2013-14 and 2014-15 because the AO failed to record the requisite satisfaction with reasons before rejecting the assessee's suo-moto disallowance.

Final Conclusion: Appeals allowed: the Tribunal set aside the additional disallowances under Section 14A read with Rule 8D for AYs 2012-13, 2013-14 and 2014-15, directing deletion of the disallowances because the assessing officer did not record the necessary satisfaction explaining rejection of the assessee's suo-moto disallowance.

Characterisation of lump-sum payment as revenue expenditure - distinction between capital expenditure and revenue expenditure in respect of leasehold/annual lease rent - deductibility of arrear annual lease rent paid in lump sum - application of precedents on rent versus capital payment

Characterisation of lump-sum payment as revenue expenditure - deductibility of arrear annual lease rent paid in lump sum - distinction between capital expenditure and revenue expenditure in respect of leasehold/annual lease rent - The payment of a one time sum by the assessee, representing arrears and a lumpsum discharge of annual lease rent liability in respect of leased land, is revenue in nature and allowable as a business expenditure. - HELD THAT: - The assessee purchased a hotel constructed on leased land and, under the sale agreement, became liable to pay government rates and annual lease rent. The demand by the lessor/JDA for cumulative lease dues was discharged by a one time payment whose assessee's proportion was claimed as rent. The Tribunal held that where annual lease rent (approximately 1%-1.25% per annum) is ordinarily deductible if paid annually, a single payment in discharge of accumulated annual rent does not change its character into capital expenditure. Reliance was placed on precedent treating payments that confer business advantage but do not create a capital asset for the assessee as revenue expenditure. The Tribunal found that the assessee did not acquire the land (the leasehold asset belonged to another) and the payment was incurred for conducting the business (use of existing premises), hence it could not be treated as a capital payment relating to land. Consequently the Assessing Officer's disallowance treating the amount as capital was reversed and the CIT(A)'s confirmation was set aside. [Paras 7]

The one time payment representing arrears and lumpsum discharge of annual lease rent is revenue expenditure and the assessee's appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the lump sum payment in discharge of annual lease rent dues is revenue in nature and deductible for Assessment Year 2012 13.

Treatment of unexplained cash payments as income from other sources - disallowance for failure to deduct tax at source under section 40(a)(ia) - disallowance of deferred marketing expenses as non-business expenditure - allowability and quantification of employer's contribution to provident fund and ESIC - consequential levy of interest under section 234C

Treatment of unexplained cash payments as income from other sources - Addition of Rs. 1,37,69,626 treated as income under the provisions relating to unexplained investments/transactions. - HELD THAT: - Survey material and impounded documents recorded cash and cheque entries relating to a land purchase; those entries corresponded with the assessee's books and statements of company officials. The Assessing Officer treated the cash payments and related outgoings as unaccounted expenditure and brought the amount to tax as income. The Commissioner (Appeals) examined the material, found the evidence compelling that the transaction and on-money payments were made by the assessee (despite use of another company's name), and confirmed the addition. In the absence of any representation or contrary evidence before the Tribunal and with the CIT(A)'s findings uncontroverted, the Tribunal upheld the addition affirmed by the CIT(A). [Paras 5, 6, 12]

Addition of Rs. 1,37,69,626 treated as income is confirmed and the assessment stand upheld.

Disallowance for failure to deduct tax at source under section 40(a)(ia) - Disallowance of lease/lease-charge payments for cooling equipment for failure to deduct TDS. - HELD THAT: - The assessee had debited lease charges in profit and loss account but could not satisfactorily demonstrate TDS compliance; the assessee's representative conceded that TDS may not have been deducted. The Assessing Officer disallowed the amount u/s 40(a)(ia) and the CIT(A) concurred, treating the agreements as long-term leases/contractual payments on which TDS obligation arose. No contrary material was placed before the Tribunal and the CIT(A)'s conclusion was accepted. [Paras 7, 12]

Disallowance under section 40(a)(ia) is confirmed.

Disallowance of deferred marketing expenses as non-business expenditure - Disallowance of amounts claimed as business expenses paid to market/sales staff. - HELD THAT: - The Assessing Officer disallowed amounts claimed as business expenses relating to payments to certain employees of C&F agents. The CIT(A) upheld the disallowance, following the Tribunal's earlier decision in the assessee's own case for AY 2003-04 which had confirmed a similar disallowance. No fresh material or representation was before the Tribunal to disturb the CIT(A)'s reliance on the earlier decision; accordingly the appellate view was upheld. [Paras 8, 12]

Disallowance of the deferred market expense is confirmed.

Allowability and quantification of employer's contribution to provident fund and ESIC - Whether the amounts paid towards PF and ESIC (comprising employer and employee contributions) are allowable and in what quantum. - HELD THAT: - The assessee contended that only the employer's portion is allowable while the impugned amounts included both employer's and employees' shares. The CIT(A) directed the Assessing Officer to quantify the employer's contribution within the amounts paid and allow that portion as deduction in accordance with law. The Tribunal, noting the CIT(A)'s direction and that no contrary case was made before it, upheld the approach of directing quantification and allowance of the employer's contribution. [Paras 9, 12]

Matter remitted for quantification of employer's contributions to PF and ESIC and allowance of such quantified employer's share.

Consequential levy of interest under section 234C - Applicability of interest under section 234C in respect of transfer proceeds realized in March, 2006. - HELD THAT: - The question of interest under section 234C was treated as consequential. The CIT(A) did not allow the assessee's plea to exclude section 234C and directed appropriate action. The Tribunal observed that the determination on interest is consequential to the substantive assessment adjustments and directed that the Assessing Officer be guided accordingly. [Paras 11, 12]

Interest under section 234C to be computed/levied by the Assessing Officer in accordance with the adjustments; matter left consequentially to AO.

Final Conclusion: The Tribunal, in absence of any representation from the assessee and on the basis that the findings of the Commissioner (Appeals) were uncontroverted, upheld the CIT(A)'s orders: additions and disallowances as affirmed by the CIT(A) are sustained; quantification of employer's PF/ESIC contribution and computation/levy of consequential interest are remitted to the Assessing Officer for determination in accordance with law. The assessee's appeal is dismissed.

Provision treated as an accrued liability - allowable expenditure under u/s.37(1) of the Act - mercantile system of accounting and recognition of contractual liabilities - distinction between ascertained liability and contingent liability - application of tests for allowing provision (as laid down in Rotork Controls India)

Provision treated as an accrued liability - allowable expenditure under u/s.37(1) of the Act - distinction between ascertained liability and contingent liability - Whether the provision of Rs. 8,31,86,662/- made in the books towards differential price for gas supplied by GAIL is an allowable deduction as an accrued liability under u/s.37(1) of the Act for AY.2010-11 - HELD THAT: - The Tribunal followed the decision of a Coordinate Bench in the assessee's own case and applied the established tests for allowing a provision: there must be a present obligation from past events, settlement is expected to cause an outflow, and a reliable estimate of the obligation is possible. The assessee had received intimation of a likely price revision and continued to receive fuel thereafter, creating an implicit obligation to pay the revised rate (subject to a stated maximum) with effect from 1.12.2008. Although the final fixation of price remained inconclusive until later, the liability to pay the revised charges had accrued and was not merely contingent. Given that the liability was ascertained in character and the assessee itself offered taxation on cessation, the provision for the differential price qualified as an allowable business expenditure under u/s.37(1). The Tribunal therefore set aside the orders of the AO and the CIT(A) and treated the provision as allowable. [Paras 7]

The provision of Rs. 8,31,86,662/- for differential gas price is an allowable expenditure as an accrued liability under u/s.37(1) and the addition is deleted.

Final Conclusion: Appeal allowed; order of the CIT(A) and addition made by the AO set aside and the provision for differential gas price treated as an allowable expenditure for AY.2010-11.

Allowability of bank guarantee commission - disallowance under section 40(a)(ia) on account of non-deduction of tax at source - tax deduction under section 194H and absence of principal-agent relationship - notification No. 56/2012 and section 197A(1F) - temporal scope of exemption from TDS

Allowability of bank guarantee commission - disallowance under section 40(a)(ia) on account of non-deduction of tax at source - tax deduction under section 194H and absence of principal-agent relationship - Whether the addition under section 40(a)(ia) for bank guarantee commission paid till 31/12/2012 is sustainable where tax was not deducted at source. - HELD THAT: - The Tribunal noted that identical facts for assessment year 2011-12 in the assessee's own case were considered by a coordinate Bench which held that, in the absence of any principal-agent relationship between the bank issuing the bank guarantee and the assessee, the transaction is not one between principal and agent and therefore does not attract tax deduction under section 194H. The issue for 2013-14 was found to be factually identical and no contrary factual or legal distinction was urged by Revenue. Accordingly, the Tribunal followed the earlier decision in the assessee's own case and concluded that bank guarantee commission paid to the bank was not liable to TDS under section 194H; consequently, the prerequisite for disallowance under section 40(a)(ia) (non-deduction of tax at source) did not exist. The Tribunal therefore held that the addition made by the assessing officer and confirmed by the CIT(A) could not be sustained. [Paras 7, 8]

Addition under section 40(a)(ia) in respect of bank guarantee commission of Rs. 1,50,59,663/- deleted and the appeal allowed.

Final Conclusion: The Tribunal allowed the appeal for assessment year 2013-14, holding that bank guarantee commission paid to the bank was not chargeable to TDS under section 194H in the absence of a principal-agent relationship; therefore the disallowance under section 40(a)(ia) is unsustainable and is directed to be deleted.

Deductibility of commission as business expenditure - genuineness and reasonableness of expenditure - burden of proof for rendition of services by commission agent - comparability of commission rates across different commodities - timing of bookkeeping entries and implications for genuineness - principles of natural justice in assessment proceedings

Deductibility of commission as business expenditure - genuineness and reasonableness of expenditure - burden of proof for rendition of services by commission agent - comparability of commission rates across different commodities - timing of bookkeeping entries and implications for genuineness - Allowability of commission payment of Rs. 4,989,000 paid to M/s. Vidhyashree Buildcon Pvt. Ltd. - HELD THAT: - The Tribunal, after considering the material placed before it and the findings of the lower authorities, upheld the disallowance. The assessee failed to prove that the commission agent actually rendered the services for securing export orders: no confirmations from importers, no evidence of introductions or negotiations, no credentials of the broker's directors and no independent evidence of the broker's capability were produced. Although payments were made by cheque and invoices, those documents alone did not establish rendition of services. The Tribunal also relied on the circumstance that the broker's audited accounts showed negligible operating expenditure and primary income being the commission from the assessee, which did not inspire confidence in the broker's capacity to secure such exports. The timing of booking the broker's bills (recorded in March after exports) further weighed against the genuineness. The Assessing Officer's comparison of commission rates across different commodities was considered but the Tribunal noted that mere comparison is not decisive; nonetheless, the totality of failures in evidencing actual services and commercial substance led to upholding the conclusion that the expenditure was not genuine or allowable. The Tribunal therefore affirmed the findings of the Assessing Officer and the Commissioner (Appeals). [Paras 10, 11]

Disallowance of Rs. 4,989,000 paid as commission to M/s. Vidhyashree Buildcon Pvt. Ltd. confirmed.

Principles of natural justice in assessment proceedings - Allegation that the Commissioner (Appeals) confirmed the disallowance in violation of principles of natural justice by not affording adequate opportunity to the assessee. - HELD THAT: - The Tribunal considered the ground alleging violation of natural justice but found that the assessee had ample opportunity during assessment and on appeal to produce evidence and explanations. The Tribunal recorded that the assessee did not place before it evidence proving rendition of services (such as importer confirmations, particulars of introductions or negotiations, or credentials of broker's personnel) and that documentary materials produced earlier (invoices, cheque payments, ledger entries, broker's audited accounts) were insufficient to establish genuineness. On this basis the Tribunal concluded there was no breach of natural justice warranting interference. [Paras 10, 11]

Ground alleging violation of principles of natural justice rejected; confirmation of disallowance sustained.

Final Conclusion: The appeal is dismissed; the disallowance of the commission payment of Rs. 4,989,000 is upheld and the orders of the assessing officer and the Commissioner (Appeals) are confirmed.

Levy of fee under Section 234E - processing of TDS statement under Section 200A - prospective application of amendment enabling Section 234E in Section 200A from 01.06.2015 - condonation of delay in filing appeal - receipt of TRACES intimation and computation of limitation

Condonation of delay in filing appeal - receipt of TRACES intimation and computation of limitation - Whether the delay of 12 days in filing the manual appeal before the CIT(A) should be condoned. - HELD THAT: - The Tribunal examined the date on which the intimation under Sec.200A was received by the assessee. Although the CIT(A) relied on CPC-TDS records suggesting earlier processing dates, only the intimation dated 29.08.2016 was visible on TRACES and the intimation produced with the appeal shows the "Order pass date" as 29.08.2016. No material was placed on record to rebut the assessee's claim of receipt on that date. Computing limitation from 29.08.2016, the delay in manual filing on 10.10.2016 amounted to 12 days. The assessee explained that the short delay arose because she was attending to an ailing mother away from the city during the relevant period; the Tribunal found this to be a sufficient cause. On these factual findings, the Tribunal concluded that the CIT(A) erred in declining to condone the delay and set aside that portion of the CIT(A)'s order. [Paras 4]

Delay of 12 days in filing the appeal is condoned and the CIT(A)'s refusal to condone is set aside.

Levy of fee under Section 234E - processing of TDS statement under Section 200A - prospective application of amendment enabling Section 234E in Section 200A from 01.06.2015 - Whether the late filing fee under Section 234E levied on processing of the TDS statement for the third quarter of financial year 2012-13 is sustainable. - HELD THAT: - The Tribunal noted that the assessee's Form 26Q for Q3 FY 2012-13 was filed on 07.02.2013 and processed on 16.06.2013, and that the late fee under Sec.234E was imposed by way of intimation under Sec.200A. The Tribunal followed the view in precedents holding that the amendment enabling computation/levy of fee under Sec.234E in the course of processing under Sec.200A is prospective with effect from 01.06.2015, and therefore fees computed under Sec.234E for TDS periods prior to 01.06.2015 are without authority of law. Applying this settled position, the Tribunal held that the fee levied for the delay in filing the TDS return for the period prior to 01.06.2015 could not be sustained and set aside the levy. [Paras 5]

Late filing fee under Section 234E levied in respect of the Q3 FY 2012-13 (period prior to 01.06.2015) is vacated.

Final Conclusion: The appeal is allowed: the Tribunal condoned the 12-day delay in filing the appeal and set aside the CIT(A)'s refusal to condone; on merits the late filing fee under Section 234E imposed for the TDS period prior to 01.06.2015 (Q3 FY 2012-13) is deleted and the demand is vacated.

Power of writ against a hearing notice - return of seized documents by an investigative agency after completion of investigation - compliance with court direction to furnish documents - timeline for filing reply and adjudication of show cause notice - abatement of proceedings under Section 28(9) of the Customs Act, 1962

Power of writ against a hearing notice - return of seized documents by an investigative agency after completion of investigation - Whether a writ petition can be entertained to quash a hearing notice and the principle governing retention or return of seized documents by an investigative agency. - HELD THAT: - The Court held that a writ petition cannot be entertained for quashing a mere hearing notice as the notice itself is not an order amenable to such relief. Separately, the Court recorded the principle that an investigative agency, once its investigation is complete and a Show Cause Notice is issued, ought not to retain seized documents and should either return them or provide copies to the person to whom they belong. These legal observations were applied to the facts where the petitioner complained of non-return of documents following issuance of the Show Cause Notice, underpinning the directions issued later in the order. [Paras 10]

Writ for quashing the hearing notice is not maintainable; investigative agency must return or give copies of documents once investigation completes and a Show Cause Notice is issued.

Compliance with court direction to furnish documents - Whether the respondents have complied with the earlier court order dated 22.12.2014 to furnish documents and what remedial direction should follow non-compliance. - HELD THAT: - The Court found that the 2nd respondent (DRI) had not fully complied with the order dated 22.12.2014 and, despite supplying some documents, failed to furnish all documents directed to be given. In view of that non-compliance and the governing circulars requiring return of documents not relied upon, the Court directed strict compliance with the 22.12.2014 order in letter and spirit within 30 days of receipt of the present order, and further directed that the petitioner attend to collect the documents on specified dates for handing over without reservation. [Paras 12]

Respondents directed to comply with the 22.12.2014 order and furnish the remaining documents within 30 days; petitioner directed to collect the documents as ordered.

Timeline for filing reply and adjudication of show cause notice - Fixing of time-limits for the petitioner to file reply to the Show Cause Notice and for adjudication by the Commissioner of Customs. - HELD THAT: - Noting the prolonged delay in adjudication caused by pendency of the writ petition, the Court imposed a firm timetable: after compliance with the directions to supply documents, the petitioner and other noticees shall file their replies within the period specified (completion by 31st March 2020), with no extension of time; the Commissioner is directed to adjudicate the Show Cause Notice within six months from receipt of a copy of this order. The directions are aimed at ensuring expeditious completion of adjudication without further adjournments. [Paras 13]

Petitioner to file reply within the specified period (by 31 March 2020) and Commissioner to adjudicate the Show Cause Notice within six months; no extensions of time will be permitted.

Abatement of proceedings under Section 28(9) of the Customs Act, 1962 - Whether the Show Cause Notice abated by operation of the amended Section 28(9) of the Customs Act, 1962. - HELD THAT: - The Court did not decide the question of abatement under the amended provision. It expressly left all defenses raised in the writ petition, including the contention regarding abatement in light of Section 28(9), open for decision by the adjudicating authority. Thus the legal question of abatement was remitted to the Commissioner for determination in the course of adjudication on merits. [Paras 14]

Question of abatement under Section 28(9) is left open and to be decided by the adjudicating authority; not finally adjudicated by this Court.

Final Conclusion: The writ petition is disposed by directing strict compliance with the earlier order to furnish documents within 30 days, by fixing time-limits for the petitioner to file replies (by 31 March 2020) and for the Commissioner to adjudicate within six months, while legal defences including the contention of abatement under Section 28(9) are left open for decision by the adjudicating authority; no costs.

Confiscation of smuggled goods - penalty under Section 112 of the Customs Act, 1962 - seizure under Section 110 of the Customs Act, 1962 - statements recorded under Section 108 of the Customs Act, 1962 - circumstantial evidence and degree of probability - requirement to establish individual role for imposition of penalty

Confiscation of smuggled goods - Validity of confiscation of the seized foreign gold bars. - HELD THAT: - The confiscation of the four foreign gold bars was not challenged on appeal and the carriers from whom the gold was recovered are not in appeal. The Tribunal recorded that none claimed ownership and the fact of smuggling stood established on the material on record. In these circumstances the confiscation order was left intact and not disturbed. [Paras 12]

Confiscation of the seized gold sustained.

Penalty under Section 112 of the Customs Act, 1962 - statements recorded under Section 108 of the Customs Act, 1962 - circumstantial evidence and degree of probability - requirement to establish individual role for imposition of penalty - Sustainability and quantum of penalties imposed on the appellants. - HELD THAT: - The Tribunal applied the well settled principle that the Department need not prove matters with mathematical precision but by such degree of probability as to satisfy a prudent person. On the materials, including statements of the carriers, call detail verifications and searches, the Tribunal found sufficient circumstantial evidence to uphold penal liability of the principal persons implicated in the smuggling. However, the Department failed to establish or distinguish the specific individual roles of two family members (Ankur Kumar Jain and Saurav Kumar Jain) and also failed to establish the involvement of Shri Arjun Sah; further, no incriminating material was found during searches and lawful funds recovered from one appellant were returned prior to issuance of show cause notice. For these reasons the penalties imposed on Saurav Kumar Jain, Ankur Kumar Jain and Arjun Sah were found unsustainable and set aside. As to Krishna Kumar Jain and Santosh Kumar Jain, the Tribunal held that a reduced penalty would meet the ends of justice and fixed the penalty at Rs. 5,00,000 each. [Paras 13, 14]

Penalties on Saurav Kumar Jain, Ankur Kumar Jain and Arjun Sah set aside; penalty on Krishna Kumar Jain and Santosh Kumar Jain reduced to Rs. 5,00,000 each.

Final Conclusion: The appeals are allowed in part: confiscation of the seized foreign gold is sustained; penalties imposed on Saurav Kumar Jain, Ankur Kumar Jain and Arjun Sah are set aside; penalties on Krishna Kumar Jain and Santosh Kumar Jain are reduced to Rs. 5,00,000 each.

Dismissal for non-prosecution - defective appeal for non-compliance with tribunal directions - requirement to place Order-in-Original and show cause notice on record - failure to prosecute appeal

Defective appeal for non-compliance with tribunal directions - requirement to place Order-in-Original and show cause notice on record - dismissal for non-prosecution - Whether the appeal should be dismissed as defective for failure to file the Order-in-Original and show cause notice despite repeated directions to do so. - HELD THAT: - The Tribunal recorded repeated adjournments granted at the appellant's request with explicit directions that the Order-in-Original and show cause notice be placed on record. Despite clear warning that failure to remove this defect would result in dismissal without further notice, the appellant failed to procure or file the required documents and sought further adjournment claiming inability to obtain them from the client. The Tribunal found the request not genuine and, viewing the absence of the documents as indicating lack of interest in prosecuting the appeal, held that in the absence of the mandated record the appeal could not be decided on merits. Consequently, dismissal of the appeal as defective was the only available course. [Paras 5, 6]

The appeal is dismissed as defective for non-compliance with directions to file the Order-in-Original and show cause notice and for failure to prosecute.

Final Conclusion: The Tribunal dismissed the appeal as defective because the appellant repeatedly failed to file the Order-in-Original and show cause notice despite directions and warnings, and appeared not to be prosecuting the appeal.

Refund of accumulated CENVAT credit under Rule 5 of Cenvat Credit Rules, 2004 - examination of availability of CENVAT credit at refund stage - nexus between input services and exported services - export of services - place of provision and intermediary services

Examination of availability of CENVAT credit at refund stage - refund of accumulated CENVAT credit under Rule 5 of Cenvat Credit Rules, 2004 - Revenue cannot, at the stage of adjudicating a refund under Rule 5, re-open or examine the availability of CENVAT credit which was not objected to at the time of its availment. - HELD THAT: - The Tribunal held that Rule 5 provides for refund of accumulated credit and does not permit the Revenue to re-examine the propriety of the credit at the refund stage where no objection was taken when the credit was availed. The Court relied on its earlier Final Order No. A/86651-86655/2019 dated 20.09.2019 recording that the Revenue was required to initiate separate proceedings at the time of availment if it intended to challenge the credit; having failed to do so, it cannot raise that objection in the refund proceeding. The said reasoning was applied to set aside the Commissioner (Appeals) order which had reversed the original authority's grant of refund on substantive objection to the credit. [Paras 4, 6]

Impugned order of Commissioner (Appeals) reversed; original authority's grant of refund restored on the ground that Revenue cannot question availability of credit at refund stage where no prior objection was raised.

Nexus between input services and exported services - refund of accumulated CENVAT credit under Rule 5 of Cenvat Credit Rules, 2004 - Substituted Rule 5 (post-2012) does not require demonstration of nexus or correlation between input/input services and export turnover for claiming refund of accumulated credit. - HELD THAT: - The Tribunal referred to the substitution of Rule 5 by Notification No. 18/2012-CE (NT) and the contemporaneous clarification from the Tax Research Unit that the amended scheme dispenses with the detailed correlation previously required between inputs/input services and exports. Under the simplified scheme the refund is payable in the ratio of export turnover to total turnover without requiring the kind of nexus earlier demanded. The Tribunal applied this principle and earlier decisions (including Accelya Kale Solutions Ltd. and Barclay Global Service Centre Pvt. Ltd. cited in the order) to uphold the original authority's calculation and sanction of refund. [Paras 2, 5]

Refund claim upheld on the basis that the substituted Rule 5 does not mandate nexus between inputs and exported services for determination of refund entitlement.

Export of services - place of provision and intermediary services - refund of accumulated CENVAT credit under Rule 5 of Cenvat Credit Rules, 2004 - The question whether the services were intermediary services (and hence the place of provision being in India) was not permitted to be used by Revenue in the refund proceeding to deny refund where no objection to credit was taken earlier; the Tribunal did not re-adjudicate the Place of Provision Rule contention but relied on the Rule 5 position. - HELD THAT: - The Commissioner (Appeals) had reversed the original order on the ground that the appellant provided intermediary services and so could not be treated as exporter of services under the Place of Provision Rules, 2012. The Tribunal declined to enter into a fresh factual or legal determination on that ground in the refund proceedings because the Revenue had not challenged the availment of credit at the relevant earlier stage. The Tribunal therefore restored the original authority's order granting refund, treating the Place of Provision contention as impermissible to raise at refund stage in the absence of prior objection. [Paras 3, 4]

The Commissioner (Appeals) order reversing the refund on the ground of intermediary classification set aside; refund restored without re-opening the place-of-provision issue in the refund adjudication.

Final Conclusion: Appeal allowed; the order of the original authority sanctioning refund of accumulated CENVAT credit for the period October, 2015 to March, 2016 is restored on the grounds that substituted Rule 5 does not require nexus between inputs and exports and the Revenue cannot, at the refund stage, dispute the availability of credit which was not objected to when availed.

Eligibility to avail Cenvat credit - Recovery of wrongfully availed credit from an Input Service Distributor (ISD) - Recovery under Rule 14 of the Cenvat Credit Rules, 2004 - Service tax levy on reverse charge for foreign remittances / out-of-pocket expenses - Application of Section 80 to set aside penalty under Section 77

Eligibility to avail Cenvat credit - Recovery of wrongfully availed credit from an Input Service Distributor (ISD) - Recovery under Rule 14 of the Cenvat Credit Rules, 2004 - Whether the appellant, being an Input Service Distributor, was rightly denied Cenvat credit on services rendered by Axis Bank and whether recovery could be effected from the appellant under Rule 14 of the Cenvat Credit Rules, 2004. - HELD THAT: - The Tribunal examined the Bank's letter and found no indication that the service tax element of the arrangement fee was refunded to the appellant; the Bank had only agreed to cancel the loan facility and to adjust the arrangement fee against any future facility. The Tribunal held that processing services had in fact been rendered by the Bank and received by the appellant, so the denial of credit based on an assumption that service tax was not paid was unsustainable. Further, the Tribunal followed earlier coordinate-bench decisions and the CBEC position noted therein that Rule 14 does not provide for recovery of credit from an ISD and contemplates recovery from the manufacturer or the service provider. Applying that ratio, the demand for recovery of the alleged wrong credit from the appellant in its capacity as an ISD could not be sustained and was set aside. [Paras 7]

Denial of Cenvat credit of Rs. 40,17,000/- and consequential recovery from the appellant (an ISD) set aside.

Service tax levy on reverse charge for foreign remittances / out-of-pocket expenses - Application of Section 80 to set aside penalty under Section 77 - Whether service tax on reverse charge for foreign remittances to IFC towards out-of-pocket travel expenses is exigible and whether penalties under Section 77 should be sustained. - HELD THAT: - The appellant did not press its challenge to the demand relating to the foreign remittances to IFC and therefore the Tribunal upheld the confirmed demand for service tax under reverse charge in respect of that amount. However, the Tribunal allowed the benefit of Section 80 and set aside the penalties imposed under Section 77, noting that penalties had been removed by the adjudicating authority in part and extending the statutory benefit in respect of the upheld demand. [Paras 7]

Demand of service tax of Rs. 63,207/- on reverse charge upheld; penalties under Section 77 set aside by applying Section 80.

Final Conclusion: The appeal is partly allowed: the demand for recovery of Cenvat credit from the appellant (ISD) in respect of services by Axis Bank is set aside, while the demand for service tax on reverse charge relating to foreign remittances to IFC is upheld; penalties under Section 77 are set aside by extending the benefit of Section 80.

CENVAT credit of tax paid and not tax payable - conditional exemption and right not to avail exemption - excess payment and excess availment of credit - rejection of appeal under Rule 5 of Central Excise (Appeals) Rules, 2001 for non-appearance

CENVAT credit of tax paid and not tax payable - conditional exemption and right not to avail exemption - excess payment and excess availment of credit - Whether the appellant was entitled to avail CENVAT credit of the full service tax actually paid though a notification permitted payment of only 25% and exempted the balance subject to conditions. - HELD THAT: - The Tribunal held that the only allegation in the show cause notice related to excess payment of service tax and excess availment of credit; the appellant had in fact paid 100% of the service tax. The Court applied the settled principle that an assessee cannot be compelled to avail a conditional exemption and that entitlement to credit under the CENVAT Credit Rules, 2004 is based on tax actually paid and not on the tax payable after taking exemption. Revenue did not object at the time of payment; objection was raised only after credit was availed. Reliance was placed on prior authorities supporting the proposition that payment of duty confers entitlement to credit even where an exemption could have been availed. For these reasons the denial of credit was unsustainable and the credit must be allowed. [Paras 4, 5]

Credit of the entire service tax actually paid must be allowed to the appellant; the addition/disallowance was erroneous.

Rejection of appeal under Rule 5 of Central Excise (Appeals) Rules, 2001 for non-appearance - Whether Commissioner (Appeals) was justified in rejecting the appellant's appeal under Rule 5 for non-filing of reply and non-appearance when the controversy was purely a legal issue. - HELD THAT: - The Tribunal found that the appellate authority erred in dismissing the appeal under Rule 5 because the matter involved a legal issue of entitlement to credit based on payment, which did not require production of evidence before the Commissioner (Appeals). By mechanically applying Rule 5 to preclude consideration of the legal defence, the Commissioner (Appeals) failed to examine the determinative legal question and therefore misapplied the appeal rule. [Paras 3, 4]

The Commissioner (Appeals)'s rejection of the appeal under Rule 5 was incorrect and could not stand.

Final Conclusion: Impugned order disallowing credit and confirming interest and penalty set aside; appeal allowed and full credit of service tax actually paid granted to the appellant.

Admissibility of cenvat credit on service tax paid on outward freight where goods are delivered to buyer's premises - Valuation for place of removal when freight is included in assessable value (Roofit Industries principle and Board Circular No.1065/4/2018-CX) - Remand to adjudicating authority for fresh consideration and opportunity to adduce evidence

Admissibility of cenvat credit on service tax paid on outward freight where goods are delivered to buyer's premises - Valuation for place of removal when freight is included in assessable value (Roofit Industries principle and Board Circular No.1065/4/2018-CX) - Whether the appellants were entitled to cenvat credit of service tax paid on outward freight for goods delivered to the buyer's premises, having regard to inclusion of freight in the assessable value. - HELD THAT: - The Tribunal noted that the question turns on whether freight charges were included in the assessable value so as to make the place of removal the buyer's premises, applying the principle in M/s. Roofit Industries and Board Circular No.1065/4/2018-CX dt. 08.06.2018. The appellants had not produced sufficient documentary evidence at this stage to demonstrate that freight was included in assessable value. Having regard to these legal principles and the Tribunal's earlier discussion in M/s. Genau Extrusions Ltd., the Bench declined to decide the entitlement on the existing record and considered it appropriate to afford the appellants an opportunity to produce evidence. The matter is therefore remanded to the adjudicating authority for fresh consideration after giving the appellant a hearing and while taking note of the cited decisions and the Board circular.

Remanded to the adjudicating authority for fresh consideration after opportunity of hearing and production of evidence; Tribunal directed the authority to take note of Roofit Industries, Board Circular No.1065/4/2018-CX and the Tribunal's discussion in M/s. Genau Extrusions Ltd.

Setting aside of impugned orders and appellate relief by way of remand - Disposition of the present appeals and the impugned orders. - HELD THAT: - In view of the remand for fresh adjudication on the core factual-legal issue, the Tribunal set aside the impugned orders of the original authority and the Commissioner (Appeals) to the extent they are under challenge and allowed the appeals by remand. The Bench also recorded that Commissioner (Appeals) had earlier given relief for an earlier period by specified OIAs, which was noted in disposing of the present applications.

Impugned orders are set aside and the appeals are allowed by way of remand to the adjudicating authority for fresh consideration.

Final Conclusion: Appeals allowed by way of remand; impugned orders set aside and matter remitted to the adjudicating authority to decide afresh after giving the appellant an opportunity to adduce evidence and be heard, taking into account the Roofit Industries principle, Board Circular No.1065/4/2018-CX and the Tribunal's discussion in M/s. Genau Extrusions Ltd.