TaxTMI Updates e-Newsletter
Jan 07,2019

Seizure and detention of goods and vehicle - release of detained goods on furnishing security under Clause (c) of Section 129(1) read with Section 129(1)(a) of the U.P. GST Act - notice under Section 129(3) of the U.P. GST Act

Seizure and detention of goods and vehicle - release of detained goods on furnishing security under Clause (c) of Section 129(1) read with Section 129(1)(a) of the U.P. GST Act - Detained goods and the vehicle were ordered to be released to the petitioner on furnishing security as prescribed by the Act. - HELD THAT: - The petition challenged the seizure/retention order and the notice dated 15.12.2018 under the U.P. GST Act. The Court directed that since the petitioner is the owner of the goods, the detained goods and the vehicle shall be released forthwith upon the petitioner furnishing security in terms of Clause (c) of Section 129(1) of the Act for the amount indicated under Section 129(1)(a). The direction effects a provisional release subject to statutory security; the matter otherwise remains listed for further pleadings by the respondents and rejoinder by the petitioner.

Goods and vehicle released to the petitioner on furnishing the statutory security forthwith.

Final Conclusion: The petition succeeds to the limited extent of directing immediate release of the detained goods and vehicle to the petitioner upon furnishing security as specified under the U.P. GST Act; further contestation to proceed by filing of counter and rejoinder as directed.

Summary order. Special Leave Petition dismissed; delay condoned; pending applications disposed of.

Summary order. Delay condoned and the Special Leave Petitions dismissed (in view of low tax effect in some matters); pending applications disposed of.

Summary order. Delay condoned; the special leave petition is dismissed; pending application disposed of.

Summary order. Delay condoned. The special leave petition is disposed of in terms of the Court's order dated 02.04.2018, which modified the impugned order and framed the question whether the Tribunal was justified in deleting the addition under unexplained cash credit / share capital/share premium for consideration in the appeal.

Deduction under Section 80DD - Condition of annuity/lump sum payable only on death of subscriber - Reasonable classification under Article 14 - Legislative competence to prescribe fiscal incentives subject to conditions - Judicial limitation in directing Parliament to amend statute

Deduction under Section 80DD - Condition of annuity/lump sum payable only on death of subscriber - Reasonable classification under Article 14 - Validity of the statutory condition that annuity or lump sum under schemes qualifying for deduction under Section 80DD is payable only on the death of the subscriber and whether that condition offends Article 14 - HELD THAT: - The Court held that Section 80DD is a fiscal provision enacted to incentivise parents/guardians to provide for the future maintenance of dependants with disability by making specified deposits or paying premiums into approved schemes. The legislative scheme contemplates securing the future of the disabled dependant after the death of the primary caregiver and, accordingly, makes the deduction subject to the condition that annuity/lump sum is payable on the death of the subscriber. That classification is founded on an intelligible differentia and bears a rational nexus to the legislative object of assuring post-death maintenance of the dependant. Taxation statutes enjoy wider latitude in classification and are not vulnerable to invalidation for inequities or harsh cases which the Legislature may address. While harsh cases may exist where payment during the subscriber's lifetime would be beneficial, remedy lies with the Legislature; the impugned condition is not arbitrary or violative of Article 14. [Paras 18, 19, 20, 21, 22]

Section 80DD and the attendant condition that annuity/lump sum is payable only on the death of the subscriber constitute a permissible classification and do not contravene Article 14.

Judicial limitation in directing Parliament to amend statute - Legislative competence to prescribe fiscal incentives subject to conditions - Whether the Court can direct amendment of Section 80DD or the Jeevan Aadhar scheme to permit payment of annuity/lump sum during the lifetime of the subscriber - HELD THAT: - The Court noted that it cannot command Parliament to amend or reframe statutory provisions; its role is to test validity under the Constitution. Although the petitioner sought directions for amendment of Section 80DD and modification of the Jeevan Aadhar policy to allow payments during the subscriber's lifetime, the Court declined to direct legislative change. Recognising the policy concerns and the existence of potentially harsh cases, the Court nonetheless disposed of the petition by urging the executive (respondent No.1/CBDT/Union of India) to re-examine the matter in light of the issues highlighted and to explore the possibility of suitable amendments or administrative measures. [Paras 18, 23]

The Court will not direct amendment of the statute or policy; it disposed the petition while urging respondent No.1 to relook into the matter and consider possible amendments or remedial measures.

Final Conclusion: The challenge to Section 80DD's condition that annuity/lump sum for a disabled dependant is payable only on the death of the subscriber was rejected as constitutionally permissible classification; the Court declined to order legislative amendment but urged the Union of India/CBDT to reconsider the provision and explore appropriate amendments or measures.

Summary order. Special Leave Petition dismissed; pending applications, if any, disposed of.

Provision for enhanced compensation - balance sheet provision not claimed as deduction - addition to income by treating unclaimed provision as income - remand for verification and giving effect to appellate order - set aside of tribunal order for failure to decide raised ground

Set aside of tribunal order for failure to decide raised ground - provision for enhanced compensation - Impugned Tribunal order dated 12.7.2017 was incorrect for failing to adjudicate the specific ground relating to the provision of Rs.16,77,14,178/- and is liable to be set aside. - HELD THAT: - The High Court found that the Tribunal omitted to consider the assessee's specific contention that the Rs.16.77 Crores was the residual balance of a provision made in the financial year 2008-09 (original provision Rs.25.66 Crores) which had been disallowed earlier and was not claimed as a deduction in the assessment year 2012-13. The Court recorded that the Tribunal noted the argument but failed to deal with it in its impugned order, thereby creating confusion which led to the Assessing Officer issuing a purported correction under Section 154. In consequence, the Tribunal's order is vitiated by that omission and must be set aside so that the matter can be properly considered. [Paras 9, 12, 13]

Impugned order of the Tribunal dated 12.7.2017 is set aside for failure to decide the specific ground concerning the Rs.16.77 Crores provision.

Balance sheet provision not claimed as deduction - remand for verification and giving effect to appellate order - addition to income by treating unclaimed provision as income - Remand to the Assessing Officer to give effect to the Tribunal's subsequent order dated 24.1.2018 and to verify whether the Rs.16,77,14,178/- was ever claimed as a deduction; if not claimed, it cannot be added to the assessee's income. - HELD THAT: - In view of the Tribunal's later direction (24.1.2018) allowing the entire original provision of Rs.25.66 Crores, and because the impugned order caused uncertainty leading to the Assessing Officer's Section 154 direction, the High Court directed that the matter be redone. The Assessing Officer is to implement the Tribunal's 24.1.2018 direction, verify whether the Rs.16.77 Crores balance was claimed as a deduction in 2012-13, and, if found not to have been claimed, refrain from treating that balance as income. The Court left the substantial questions of law open but mandated prompt compliance within eight weeks subject to cooperation by the assessee. [Paras 12, 13]

Matter remanded to the Assessing Officer to give effect to the Tribunal order dated 24.1.2018 and to verify the deductibility/claim status of the Rs.16.77 Crores; AO's Section 154 giving effect order dated 03.4.2018 is set aside.

Final Conclusion: The appeal is allowed: the Tribunal's order dated 12.7.2017 is set aside; the Assessing Officer's Section 154 order dated 03.4.2018 is set aside; the matter is remanded to the Assessing Officer to give effect to the Tribunal order dated 24.1.2018 and to verify whether the Rs.16.77 Crores balance was claimed as a deduction, with implementation directed within eight weeks.

Reopening of assessment - reason to believe - income escaping assessment - recording of reasons prior to issuing notice - scope of judicial review under Article 226 - sections 147 and 148 of the Income Tax Act, 1961 - sufficiency of reasons - prima facie material from investigation

Sections 147 and 148 of the Income Tax Act, 1961 - reason to believe - recording of reasons prior to issuing notice - sufficiency of reasons - scope of judicial review under Article 226 - prima facie material from investigation - Validity of notice issued under Section 148 and order rejecting objection to reopening assessment for AY 2011-12 - HELD THAT: - The Court held that the Assessing Officer had recorded and supplied reasons for issuance of notice under Section 148 and that there was prima facie material arising from search/post-search investigation implicating the assessee as a shell/dummy concern. Relying on settled precedents, the Court reiterated that at the stage of issuance of notice the existence of a "reason to believe" based on relevant material is the requisite threshold and the sufficiency or adequacy of that material is not to be examined in depth in writ jurisdiction under Article 226. The Court observed that the assessee had been supplied reasons, its objections were considered by the Assessing Officer by a speaking order, and the factual sufficiency can be tested during reassessment where the assessee will have opportunity to contest the allegations and lead evidence. Given the presence of specific information from the investigation and the departmental process followed, the Court found no grounds to hold the initiation of proceedings or the order rejecting objections as vitiated, and declined to conduct a roving inquiry into sufficiency of material at the writ stage. [Paras 41, 42, 44, 45, 46]

Notice under Section 148 and the order rejecting objections are not interfered with; writ petition dismissed.

Final Conclusion: The writ petition is dismissed; the reopening notice and the order rejecting objections for AY 2011-12 are upheld and the assessee may participate in the reassessment proceedings to contest the allegations.

Reasonable cause - penalty under Section 271B - condonation of delay under Section 273B - venial or technical breach - judicial exercise of discretion in imposition of penalty - filing of tax audit report with return

Reasonable cause - penalty under Section 271B - condonation of delay under Section 273B - venial or technical breach - filing of tax audit report with return - judicial exercise of discretion in imposition of penalty - Assessee's explanation for belated filing of tax audit report constitutes reasonable cause and whether penalty under Section 271B should be deleted. - HELD THAT: - The assessee, an individual in the granite business, filed the audit report along with the return on 31.3.2013 whereas the last date for filing was 30.9.2012. The Assessing Officer imposed penalty under Section 271B and the appellate authorities upheld it. The Court examined whether the failure to file the audit report by the statutory date was supported by reasonable cause under Section 273B. The assessee's explanation - sudden resignation of the accountant in August 2012, need to engage a new accountant and reconstruct disordered records - was not found to be false or mala fide. The Court applied the principle in Hindustan Steel that penalty is a quasi criminal consequence and ordinarily should not be imposed where the breach is venial, flows from bona fide circumstances, or where discretion ought to be judicially exercised after considering relevant circumstances. Given that the audit report was on file by the time assessment was completed and the breach was technical, the explanation amounted to a reasonable cause warranting condonation of the delay and precluding imposition of penalty in the facts of the case. [Paras 10, 11, 12]

Explanation accepted as reasonable cause; penalty under Section 271B deleted.

Final Conclusion: Appeal allowed; substantial questions answered in favour of the assessee and the penalty imposed by order dated 29.9.2015 is deleted.

Re-opening of assessment under Section 147/148 - True and full disclosure - Income escaping assessment - Tax Deducted at Source (TDS) deposit - Validity of TDS certificates - Application of Section 40A(ia)

Re-opening of assessment under Section 147/148 - True and full disclosure - Tax Deducted at Source (TDS) deposit - Validity of TDS certificates - Income escaping assessment - Validity of the notice under Section 148 and whether the department acted beyond jurisdiction in invoking Section 147/148 by re-opening assessment on the ground of TDS not being deposited or TDS certificates being invalid - HELD THAT: - The Assessing Officer had issued notices under Section 142 during the assessment proceedings and the assessee furnished a written reply dated February 20, 2015. The assessment order dated March 30, 2015, however, did not specifically deal with the TDS issue. The department has raised doubt as to whether the amounts shown as TDS were actually deposited with the Government and questioned the legal validity of the TDS certificates relied upon by the assessee. Where there is a doubt as to deposit of TDS or validity of TDS certificates such that income may have escaped assessment, the jurisdictional condition for invoking Section 147/148 is engaged. Reliance on precedents where an issue expressly dealt with in assessment precluded re-opening was noted, but on the facts here the TDS issue was not finally adjudicated in the assessment order and the department's doubt as to deposit/validity justifies examination under reassessment provisions. The Court therefore declined to hold that the authorities acted without jurisdiction in issuing the impugned notice under Section 148.

The notice under Section 148 is not held to be beyond jurisdiction and the department is permitted to examine the TDS deposit/validity and the question of income escaping assessment by invoking Section 147/148.

Final Conclusion: Writ petition dismissed; impugned notice under Section 148 (for AY 2012-13) sustained in jurisdictional challenge and the matter stands remitted to the tax authorities for examination under the reassessment provisions. WP 599 of 2018 disposed of with no order as to costs.

Exemption under section 2(14) of the Income-tax Act - adventure in the nature of trade - agricultural land as non-capital asset for exemption - intention of purchaser not determinative - profit amount or short holding period not determinative of trade

Agricultural land as non-capital asset for exemption - exemption under section 2(14) of the Income-tax Act - Profit earned on sale of the lands was exempt under section 2(14) as the lands sold were agricultural land and not capital assets chargeable to tax. - HELD THAT: - The Court accepted the Tribunal's factual finding that what was sold by the assessee was agricultural land and that the assessee belonged to a family of agriculturists. On a plain reading of section 2(14), sale of agricultural land falling within its scope attracts exemption under section 2(14) read with section 45 unless the transaction is an "adventure in the nature of trade." The Tribunal recorded that the transactions were not adventure in the nature of trade on appreciation of evidence; that finding was not displaced. Having regard to those findings, the Tribunal rightly directed that the profit be treated as exempt under section 2(14). [Paras 8, 10, 14]

Tribunal correctly directed that the profit of Rs. 1,20,21,138 on sale of agricultural land is exempt under section 2(14).

Adventure in the nature of trade - intention of purchaser not determinative - The intention of the purchaser to use the land for industrial purposes does not convert the seller's transaction into an adventure in the nature of trade so as to attract taxation as business income. - HELD THAT: - The Court held that the purchaser's subsequent use of the land for industrial purposes cannot be the determinative factor to treat the seller's profit as business income. The Tribunal had examined the evidence and found no adventure in the nature of trade; that factual conclusion was upheld. Consequently, the purchaser's intention or intended use did not negate the exemption available to the seller under section 2(14). [Paras 7, 9, 10]

Revenue's contention that purchaser's industrial use converts the sale into taxable business income was rejected.

Profit amount or short holding period not determinative of trade - adventure in the nature of trade - Receipt of a large profit and a holding period of approximately 15-16 months did not, by themselves, establish that the transaction was an adventure in the nature of trade. - HELD THAT: - The Assessing Officer relied on the alleged steep rise in profit and the short span of holding to treat the receipts as business income. The Court observed that the lands were sold after about 15 to 16 months from purchase and that mere magnitude of profit or comparatively short holding cannot, without more, convert a sale of agricultural land into business income. The Tribunal's factual conclusion that the transactions lacked characteristics of adventure in the nature of trade was therefore sustained. [Paras 2, 7, 9, 10]

Large profit and the holding period did not justify taxing the receipts as business income; the exemption under section 2(14) stands.

Final Conclusion: The appeal is dismissed; no substantial question of law arises and the Tribunal's direction to treat the profit on sale of the agricultural land as exempt under section 2(14) of the Income-tax Act is upheld.

Transfer Pricing Adjustment - Arm's Length Price - Comparability and Benchmarking - Transactional Net Margin Method (TNMM) - Profit/Revenue Split Method - Startup and Marketing Expense Adjustments - Depreciation on Goodwill - Remand for de-novo determination

Transfer Pricing Adjustment - Profit/Revenue Split Method - Arm's Length Price - Comparability and Benchmarking - Remand for de-novo determination - Transfer pricing adjustment in respect of Investment Banking Division international transactions set aside to AO/TPO for fresh determination. - HELD THAT: - The Tribunal observed that on identical facts in an earlier year the matter had been set aside for de-novo consideration because the assessee, being in its first year of operations and having suffered the collapse of its global parent group, could not make effective representations and could not collate required details. The authorities below had applied TNMM and selected comparables without allowing the assessee to press its contention for the Revenue/Profit Split method or to seek adjustments for start up and marketing costs. In light of the exceptional factual matrix and the need to permit the assessee to furnish evidence and explanations, the Tribunal directed that the issue be restored to the file of the AO/TPO for fresh adjudication on merits in accordance with law, allowing the assessee opportunity of being heard and to place relevant material. [Paras 6, 7]

Set aside to the file of the AO/TPO for de-novo determination of ALP and related transfer pricing issues.

Transfer Pricing Adjustment - Transactional Net Margin Method (TNMM) - Comparability and Benchmarking - Startup and Marketing Expense Adjustments - Remand for de-novo determination - Transfer pricing adjustment in respect of Equity Broking transactions set aside to AO/TPO for fresh determination. - HELD THAT: - The Tribunal noted that the TPO/AO applied ALP by TNMM in the absence of details from the assessee and that the same reasoning which supported setting aside the IBD issue applied to the broking transactions. Given the prior set-aside on identical reasoning and the prospect that relevant evidence and adjustments (volumes, research costs, client comparators, start up/marketing costs) may materially affect ALP, the Tribunal restored the broking-transaction issue to the AO/TPO for fresh adjudication. [Paras 8]

Set aside to the file of the AO/TPO for de-novo determination of ALP for broking transactions.

Depreciation on Goodwill - Remand for de-novo determination - Claim for depreciation on goodwill and attribution of the shortfall remitted to the AO for consideration during de-novo proceedings. - HELD THAT: - The Tribunal recorded that the lower authorities had not discussed the claim for depreciation on goodwill. Because the primary transfer pricing issues were being set aside for fresh determination, the Tribunal directed that the AO may consider the assessee's claim for depreciation on goodwill while adjudicating the assessment afresh. Similarly, the additional contention regarding whether the shortfall should be attributed to all transactions or limited to the international IBD transactions was left open for decision by the AO/TPO in the de-novo proceedings. [Paras 10, 12]

Matter remitted to the AO/TPO to decide the depreciation claim and the question of attribution in the course of de-novo assessment proceedings.

Final Conclusion: The Tribunal set aside the transfer pricing adjustments for the Investment Banking Division and for Equity Broking to the file of the AO/TPO for de novo determination, permitted the assessee to place relevant evidence and explanations (including claims for start up/marketing adjustments), remitted the claim for depreciation on goodwill and the question of attribution to the AO/TPO for consideration, and allowed the appeal for statistical purposes.

Unexplained cash credits - addition under section 68 - addition under section 69 - burden of proof on assessee to explain creditworthiness - sufficiency of bank deposit patterns and proximate cash deposits as indicia of sham transactions - non-pressing of a ground in appeal

Unexplained cash credits - addition under section 68 - addition under section 69 - burden of proof on assessee to explain creditworthiness - sufficiency of bank deposit patterns and proximate cash deposits as indicia of sham transactions - Whether deposits/loans totalling Rs. 17,51,000/- in the assessee's bank account were rightly treated as unexplained credits and added to income - HELD THAT: - The authorities below found that the amounts were received and reflected in the assessee's bank account and in the assessee's books as unsecured loans. The A.O. and CIT(A) rejected the creditors' explanations because the creditors' bank-deposit patterns showed multiple cash deposits of amounts just below Rs. 50,000/- immediately prior to the alleged loans, the depositors' agricultural land holdings were not commensurate with the deposits, and several depositors were related to the assessee, leading to the conclusion that the transactions were engineered. The CIT(A) applied section 68 (and alternatively section 69) on the basis that the assessee failed to satisfactorily explain the source and creditworthiness of the creditors, and relied on ledger/balance-sheet entries to invoke the provisions. The Tribunal noted that the CIT(A) had accepted that the depositors earned agricultural income but held that the pattern and timing of cash deposits, lack of corroborative evidence of regular agricultural receipts, and relationship between parties rendered the explanations unsatisfactory. However, the Tribunal found it fallacious to infer that the entire amounts could not belong to the depositors merely because cash deposits preceded the loans and because agricultural income was admitted; on that basis the Tribunal exercised its appellate power to moderate the addition and deleted 50% of the addition after considering the totality of material. [Paras 5, 6, 8]

Addition of Rs. 17,51,000/- confirmed by CIT(A) but reduced by the Tribunal by deleting 50% of the addition; the appeal on this ground is partly allowed.

Non-pressing of a ground in appeal - Whether the addition of transfer expenses of Rs. 2,00,000/- on sale of agricultural land should be adjudicated - HELD THAT: - The assessee did not press Ground No.1 during hearing before the Tribunal. The Tribunal recorded that the ground was not pressed and accordingly dismissed it as not pressed without adjudicating its merits. [Paras 3]

Ground relating to transfer expenses of Rs. 2,00,000/- dismissed as not pressed.

Final Conclusion: The appeal is partly allowed: the Tribunal deleted 50% of the addition of Rs. 17,51,000/- relating to unexplained deposits/loans for AY 2013-14, and dismissed the ground on transfer expenses as not pressed.

Treatment of sundry creditors as income under Section 68 - deeming fiction treating remission or cessation of trading liability as taxable under Section 41(1) - burden of proof on Revenue to establish allowance/deduction and subsequent cessation - acknowledgement of liability in balance-sheet as evidence against cessation - cessation by operation of law versus unilateral non-payment or bar of limitation

Treatment of sundry creditors as income under Section 68 - deeming fiction treating remission or cessation of trading liability as taxable under Section 41(1) - burden of proof on Revenue to establish allowance/deduction and subsequent cessation - acknowledgement of liability in balance-sheet as evidence against cessation - Sustainability of additions made in respect of sundry creditors, and correctness of applying the deeming fiction of cessation/remission to make additions under Section 41(1) instead of treating amounts as undisclosed income under Section 68. - HELD THAT: - The Tribunal found that the Assessing Officer had treated certain sundry-creditor balances as income on the basis of enquiries and non-availability of creditors at given addresses, while the CIT(A) sustained part of the addition by invoking the deeming provision for cessation/remission of trading liabilities. The Tribunal examined the records and noted that the amounts in question related to opening balances and that relevant documents and account entries had been placed on record. The Tribunal applied the principle that the burden lies on Revenue to establish the three pre requisites for applying the deeming fiction - (i) that a deduction or allowance was earlier made in respect of the loss/expenditure or trading liability, (ii) that the liability has ceased to exist, and (iii) that such cessation occurred in the year under consideration - and held that the AO had failed to discharge that burden. Reliance was placed on the jurisdictional High Court decision in New World Synthetics Ltd. which explains that mere non payment or the expiry of limitation does not constitute cessation or remission where the liability is admitted and acknowledged in the books; cessation is ordinarily a question of fact and requires positive evidence of extinction or remission. The Tribunal therefore held that neither Section 68 nor the deeming fiction under Section 41(1) was made out on the material on record and that the CIT(A)'s sustaining of the addition was unsustainable. [Paras 10, 11]

Appeal allowed; additions in respect of the sundry creditors sustained by the CIT(A) under the deeming fiction were deleted.

Final Conclusion: The Tribunal allowed the appeal for AY 2009-10, concluding that the Revenue failed to prove cessation/remission of the sundry creditor liabilities and that the additions sustained under the deeming fiction were unsupportable; the impugned additions were deleted.

Deduction under section 35D for expenditure on substantial expansion of an industrial undertaking - Deduction under section 43B for excise duty paid on warranty goods - Allowability of prior period tax payment under section 43B on actual payment basis - Business expenditure wholly and exclusively for the purpose of business - gifts

Deduction under section 35D for expenditure on substantial expansion of an industrial undertaking - Claim of deduction for share issue expenditure under section 35D on the ground of substantial expansion of the industrial undertaking was disallowed. - HELD THAT: - Assessee claimed one fifth of share issue expenditure as deductible under section 35D alleging substantial expansion, relying on audited accounts for the calendar year ended 31.12.2006. The Tribunal noted the assessee's financial year followed the calendar year and that the assessee did not clarify whether the alleged expansion occurred before 01.04.2006. The onus to prove that an expansion qualifying under section 35D had taken place lay on the assessee; having failed to establish the timing and existence of such expansion, the claim could not be allowed. The lower authorities were therefore justified in rejecting the deduction. [Paras 5]

Claim under section 35D denied for want of proof of substantial expansion.

Deduction under section 43B for excise duty paid on warranty goods - Claim for deduction of excise duty paid on goods manufactured for meeting warranty obligations was allowed under section 43B. - HELD THAT: - Assessee manufactured warranty goods which were held in stock until warranties were invoked and paid excise duty to the exchequer on those goods. The Tribunal observed that once excise duty has been actually paid, section 43B permits deduction of such tax irrespective of whether the warranty was invoked during the year. On this factual admission that the excise duty was paid, the Tribunal set aside the findings of the authorities below and allowed the deduction. [Paras 9]

Excise duty on warranty goods allowed as deductible under section 43B.

Allowability of prior period tax payment under section 43B on actual payment basis - Allowability of prior period items (including sales tax payment) was remitted to the Assessing Officer for fresh consideration. - HELD THAT: - The Assessing Officer disallowed prior period expenses because the assessee did not supply ledger transfer details, and before the CIT(A) no further particulars were furnished. The assessee later contended that part of the prior period amount represented sales tax actually paid in the relevant previous year and thus deductible under section 43B. Given the absence of adequate details in the record before the authorities and the factual nature of the claim, the Tribunal directed fresh verification by the Assessing Officer and remitted the matter for reconsideration in accordance with law. [Paras 14]

Issue remitted to the Assessing Officer for verification and fresh adjudication.

Business expenditure wholly and exclusively for the purpose of business - gifts - Expenditure on gifts disallowed as not shown to be wholly and exclusively for business. - HELD THAT: - Assessee produced a ledger list of gift related debit entries but failed to produce supporting documents identifying recipients, demonstrating commercial expediency or linking the expenses to the business. The CIT(A) examined the break up and noted numerous entries without details, which cast doubt on the bonafides and business nexus of the amounts. In absence of evidence establishing that the gifts were incurred wholly and exclusively for business, the Tribunal found no reason to interfere with the disallowance. [Paras 18]

Gift expenditure disallowed; claim dismissed for lack of proof of business nexus.

Final Conclusion: Appeal partly allowed: deduction for excise duty on warranty goods under section 43B was allowed; claim under section 35D and gift expenditure disallowed; claim of prior period items remitted to the Assessing Officer for fresh consideration.

Rectification of clerical errors - Correction of cause title - Substitution of incorrect names and addresses - Corrections in the body of the order

Rectification of clerical errors - Correction of cause title - Substitution of incorrect names and addresses - Corrections in the body of the order - Corrections to be made in the original order dated 16th October, 2018 as specified - HELD THAT: - The Court called the matter for speaking to its minutes of order dated 16th October, 2018 and directed specific textual corrections in the cause title and in the body of that order. In the cause title, the designation of Appellant No.2 and the names/addresses of Respondent No.1 and Respondent No.2 are to be substituted as specified. In the body of the order, multiple typographical and transpositional corrections are identified and are to be substituted (including corrections of firm names from variants to the correct form, and the interchange of numeric references to gold bars in two lines). The office is directed to carry out the enumerated corrections in the original orders. [Paras 2]

The specified corrections in the cause title and in the body of the original order dated 16th October, 2018 are directed to be carried out by the office.

Final Conclusion: The High Court directed clerical and textual corrections in its original order dated 16th October, 2018 and ordered the registry to effect the specified substitutions.

Transaction value - acceptance of transaction value where relationship did not influence price - related persons under Customs Valuation Rules - comparative/substitute values and adjustments for differences - onus on Revenue to produce evidence to rebut declared value

Transaction value - acceptance of transaction value where relationship did not influence price - related persons under Customs Valuation Rules - onus on Revenue to produce evidence to rebut declared value - Whether the relationship between the foreign parent-supplier and the importer influenced the import price so as to justify rejecting the declared transaction value. - HELD THAT: - The Tribunal examined the contract, supplier invoices, supplier's purchase invoices and the pricing matrix showing the supplier added an 11% margin over its purchase price and the importer added 2% on onward sale. The Customs Valuation Rules provide that where buyer and seller are related the transaction value is to be accepted if circumstances indicate the relationship did not influence price, and permit comparison with substitute values with due adjustments. The authorities below accepted the declared transactional value after analysing the contract terms (fixed contract price, DDU basis, payments on PPAP approval), invoices and evidence that the supplier purchased the tooling from third party manufacturers and resold at a demonstrated margin. Revenue's case rested on conjecture that costs such as technical know how, tooling, freight and supplier profit were not properly accounted for and an assertion that profit margin exceeded 11%, but it produced no contemporaneous evidence of higher import prices or other material to rebut the genuineness of the documents. The Tribunal found no material to displace the transaction value or show influence of the relationship on price, noting earlier interim order where Revenue failed to substantiate its contention. Consequently the rejection of the transaction value was not justified and allegations of mis declaration were unsustained. [Paras 6, 8, 9]

Declared transaction value accepted; relationship found not to have influenced price and rejection of transaction value by Revenue cannot be upheld.

Final Conclusion: The departmental appeal is dismissed; the transaction value declared by the importer is upheld as not influenced by the related party relationship.

Water Supply Project - interpretation of exemption notification - binding effect of sponsoring authority's essentiality/registration certificate - specific tariff entry versus general/residuary tariff entry in Project Imports - liberal interpretation of Heading 98.01 for project imports

Water Supply Project - interpretation of exemption notification - Imported goods were eligible for exemption as being for a 'Water Supply Project' under Notification No. 14/2004-Cus. - HELD THAT: - The notification expressly includes within the definition of 'Water Supply Project' plants for desalination, demineralisation, purification or similar processes intended to make water fit for agricultural or industrial use. The Sponsoring Authority's certificate and the documentary material (site plans/flow charts) established that the imported items formed part of a project which included processes to make water fit for irrigation. The Tribunal distinguished the decision in M/s. Pratibha Industries Ltd. on facts - there pipes only were imported and no treatment/process plant was involved - and relied on precedents holding Heading 98.01 to be interpreted liberally for project imports. Applying the inclusive explanation in the notification to the material on record, the project was held to fall within the scope of 'Water Supply Project' and hence within the ambit of the exemption under Notification No. 14/2004-Cus. [Paras 6, 8, 9]

The goods imported are part of a 'Water Supply Project' within the meaning of Notification No. 14/2004-Cus and are eligible for the exemption.

Binding effect of sponsoring authority's essentiality/registration certificate - interpretation of exemption notification - Whether the Revenue can go behind the Sponsoring Authority's certificate to deny the exemption - HELD THAT: - Following the ratio of the Hon'ble Supreme Court in Zuari Industries Ltd., once the Sponsoring Authority has approved the project as a water supply project and issued the requisite certificate, the Revenue cannot disregard that certification and deny the benefit of the exemption. In the present case the District Collector issued the requisite certificate and a subsequent clarification confirming that the project involved processes to make water fit for agricultural use; consequently the Revenue was not entitled to go beyond that certificate to refuse concession under the notification. [Paras 8]

The Sponsoring Authority's certificate is binding for the purposes of grant of exemption under Notification No. 14/2004-Cus and Revenue cannot deny the benefit by going behind it.

Specific tariff entry versus general/residuary tariff entry in Project Imports - liberal interpretation of Heading 98.01 for project imports - Whether a specific tariff entry for 'irrigation plant' (as contended by Revenue) excludes classification of the imported component as a 'Water Supply Project' under the general entry - HELD THAT: - The Tribunal examined the contention that a specific entry for irrigation should prevail over a general entry for other projects. It noted that where only part of an irrigation scheme is imported (in this case, machinery forming part of a water conductor/treatment system), the component can be classified as a Water Supply Project. The Tribunal relied on earlier decisions which treat Heading 98.01 as a specific entry for project imports that calls for liberal interpretation to promote industrialisation. The facts here demonstrate that the imported items formed part of a water supply/process plant rather than merely pipes for distribution; therefore the specific-entry argument did not justify denial of the notification benefit. [Paras 4, 7, 8]

The presence of a specific 'irrigation' entry does not preclude classification of the imported component as a 'Water Supply Project' under Heading 98.01 where the imported items form part of a water supply/process plant; the Revenue's specific-entry argument fails on the facts.

Final Conclusion: The Tribunal upheld the Commissioner (Appeals) and dismissed the Revenue's appeal, holding that the imported goods qualify as part of a 'Water Supply Project' within Notification No. 14/2004-Cus, that the Sponsoring Authority's certificate is binding, and that the specific-entry contention did not defeat entitlement to the exemption; the respondent accordingly remains entitled to the benefit claimed.

Allotment of shares void for lack of offer and acceptance - Conversion of deposits into equity without consent - Burden of proof on company to establish lawful issuance - Compliance with Section 62 - notice and procedure for rights/offer issue - Admissibility and filing of additional documents in appeal

Allotment of shares void for lack of offer and acceptance - Conversion of deposits into equity without consent - Burden of proof on company to establish lawful issuance - Whether the amounts deposited by the original petitioner were loans repayable to him or were validly received as share application money resulting in allotment. - HELD THAT: - The Tribunal found the receipt of money by the Company was not disputed but there was no evidence of any offer having been made to the petitioner and no proof of his acceptance. The Company's contention of telephone acceptance was rejected in view of the petitioner's strong denial and absence of documentary proof. The NCLT held that where receipt is admitted, the Company bears the burden to disprove that the amount was a loan and to prove compliance with the allotment process; the Company failed to produce evidence to show that the money was not a loan and that allotment was lawfully made. On these findings the impugned allotments were declared illegal and void and repayment directed. [Paras 9, 10, 21]

Amount treated as loan; impugned allotment of shares set aside and petitioner entitled to repayment.

Compliance with Section 62 - notice and procedure for rights/offer issue - Allotment of shares void for lack of offer and acceptance - Whether the Company complied with the procedural requirements of Section 62 (notice/offer and subsequent disposal) for issuance of shares. - HELD THAT: - The Court examined the alleged letter of offer dated 18.12.2014 and the asserted timeline for acceptance and allotment. There was no material to show the offer was sent to the petitioner by registered/speed post or electronic mode as required, nor any evidence that the petitioner consented to the offer. The Company also failed to show any shareholders' meeting or compliance steps authorising the allotment. The mismatch between amounts deposited by the petitioner and the shares purportedly allotted further undermined the Company's case. Consequently, procedural compliance under Section 62 was not established. [Paras 16, 17, 18, 20]

Procedural requirements under Section 62 not complied with; allotment invalid.

Admissibility and filing of additional documents in appeal - Whether additional documents and the rejoinder filed in the appellate proceedings (which were not part of the NCLT record) should be admitted and relied upon. - HELD THAT: - The Appellate Tribunal recorded that additional documents were filed with the rejoinder without prior permission or proper application for their admission; the appellant had been directed earlier that such materials would be treated as not on record unless leave was granted. The Tribunal found no good reason why those documents were not placed before the NCLT and observed doubts as to their genuineness. The application to admit the additional documents was rejected, and even if considered, they did not alter the conclusion reached by the NCLT. [Paras 14, 15, 19]

Additional documents not admitted; they do not persuade the Tribunal to interfere with the NCLT's decision.

Final Conclusion: The NCLT's judgment setting aside the allotment and directing repayment is upheld. The impugned order is approved with a typing correction (figure corrected to Rs.1,54,00,000/-) and the appeal is dismissed with costs; the appellant ordered to pay costs to the petitioner.

Remand for fresh consideration - Requirement to consult regulatory authority - Non-availability of prior approval from Reserve Bank of India - Speaking order and opportunity of hearing - Retrospective application of beneficial circulars

Remand for fresh consideration - Requirement to consult regulatory authority - Non-availability of prior approval from Reserve Bank of India - Speaking order and opportunity of hearing - Remand to the original authority to obtain RBI's response and to pass a fresh speaking order after hearing the appellants. - HELD THAT: - The Tribunal found that the determinative factual and legal matrix turned on whether prior approval of the Reserve Bank of India for the excess remittance was available. The record showed that RBI had been seized of the matter and had not rejected the appellants' request (RBI letter dated 18.11.2002). Given that the information which triggered the impugned order originated from the RBI, the Tribunal held it was appropriate for the adjudicating authority to consult RBI and secure its response before finalising the decision. In these circumstances the Tribunal did not decide the merits of the alleged contravention but directed a fresh adjudication: the original authority is to obtain the necessary response/reply from the RBI, afford the appellants an opportunity of being heard, and thereafter pass a fresh speaking order. The Tribunal also noted the need for expedition, observing the matter pertained to 2002 and prescribing a six months timeline for disposal by the adjudicating authority.

Matter remanded to the original authority to obtain RBI's response and to pass a fresh speaking order after giving the appellants an opportunity of being heard; to be disposed within six months.

Final Conclusion: The appeals succeed to the extent of directing remand for fresh consideration: the original authority must obtain RBI's response, hear the appellants and pass a fresh speaking order within six months; no adjudication on merits is recorded by the Tribunal.

Offence of money-laundering - Proceeds of crime - Attachment of property under PMLA - Provisional attachment and confirmation - Simultaneous proceedings under PMLA and corresponding law - Independence of the Special Court

Offence of money-laundering - Proceeds of crime - Provisional attachment and confirmation - Simultaneous proceedings under PMLA and corresponding law - Whether prosecution under Section 3 of the PMLA can be initiated or continued during pendency of attachment proceedings, before confirmation of attachment attains finality, or before conviction under the scheduled offence attains finality. - HELD THAT: - The Court held that the scheme of the PMLA contemplates two parallel streams - attachment/adjudicatory proceedings under Sections 5 and 8 and criminal prosecution before the Special Court - and there is no statutory bar to initiation of prosecution under Section 3 merely because attachment proceedings or appeals against confirmation of attachment are pending. Attachment proceedings are interim and intended to preserve the property pending adjudication; the second proviso to Section 5(1) permits provisional attachment even prior to criminal proceedings where non-attachment would frustrate proceedings. The Special Court functions independently and is not bound by orders of Enforcement Authorities; therefore initiation or continuance of criminal prosecution during the pendency of attachment or prior to finality of conviction under another enactment is not impermissible as a matter of law. [Paras 14, 15, 16, 17, 19]

Prosecution under Section 3 of the PMLA can be initiated and proceeded with notwithstanding pendency of attachment proceedings, appeal against confirmation of attachment, or pendency of trial/conviction under the scheduled offence.

Attachment of property under PMLA - Proceeds of crime - Independence of the Special Court - Whether the complaint and summoning order should be quashed on the ground that the complaint was based solely on the attachment/confirmation orders and that those orders had not attained finality. - HELD THAT: - The Court found that the complaint was not founded solely on the attachment and confirmation orders; it incorporated the factual matrix, statements recorded under Section 50 of the PMLA, and documentary material including bank statements and ITRs. Further, the allegation that the recovered amount was sale consideration for a membership/share certificate amounted to a defence that could be raised and tested at trial, but did not warrant quashing the complaint at the threshold. The Bhullar decision relied upon by the petitioner was factually distinguishable and the maxim that illegality in initial action vitiates subsequent proceedings did not apply where the foundation for prosecution was the recovery of alleged proceeds of crime. [Paras 20, 21, 23]

The complaint and the summoning order are not vitiated on the ground that they were based only on the attachment/confirmation orders; the plea regarding lawful source of the money is a defence to be tried and does not justify quashing at threshold.

Provisional attachment and confirmation - Simultaneous proceedings under PMLA and corresponding law - Whether the proceedings before the Special Court should be stayed pending disposal of the appeal against confirmation of attachment before the Appellate Authority. - HELD THAT: - The Court observed that the appeal against confirmation of attachment before the Appellate Authority does not operate as a statutory bar to criminal prosecution under PMLA, nor does it justify a stay of the complaint proceedings. Attachment is an interim protective measure and any challenge to its confirmation is to be determined in the appellate/administrative forum, but such challenge does not render continuation of criminal proceedings impermissible. Consequently, there is no ground to stay the complaint pending the appeal against attachment confirmation. [Paras 6, 16, 24]

No stay of the criminal proceedings is warranted merely because an appeal against confirmation of attachment is pending; the complaint proceedings shall continue.

Final Conclusion: The petition seeking quashing of the complaint and the summoning order is dismissed; prosecution under Section 3 PMLA may proceed notwithstanding pendency of attachment proceedings or appeal against confirmation of attachment, and the petitioner remains at liberty to raise his defence during trial.

Provisional attachment under Section 5(1) of PMLA - reason to believe as condition precedent for attachment - proceeds of crime and value thereof - priority of secured creditors under amended Section 26E of SARFAESI Act and Section 31B of Recovery of Debts Act - later non-obstante clause prevailing over earlier non-obstante clause

Provisional attachment under Section 5(1) of PMLA - proceeds of crime and value thereof - Attachment of the mortgaged Penthouse could not be sustained as against the Bank because the property was mortgaged to the Bank prior to the alleged scheduled offences and therefore did not represent proceeds of crime vis-a -vis the Bank. - HELD THAT: - The Tribunal found that the Penthouse was purchased in 2010 and repeatedly mortgaged in favour of the Bank from 2011 onwards, long before the alleged scheduled offences of 2015. Section 5(1) empowers provisional attachment only where there is reason to believe that a person is in possession of proceeds of crime. Where the property was acquired and mortgaged bona fide prior to the alleged criminality, it cannot be treated as proceeds of crime so as to justify attachment against a secured creditor who had advanced its own funds and taken the property as collateral. The Appellate Tribunal applied these facts to hold that the attachment insofar as it affected the Bank was unsustainable and the Adjudicating Authority erred in confirming the attachment against the Bank. [Paras 11, 12, 29]

Provisional Attachment Order and its confirmation set aside insofar as they affect the appellant Bank; the property cannot be treated as proceeds of crime vis-a -vis the Bank.

Reason to believe as condition precedent for attachment - Respondent lacked the requisite recorded 'reason to believe' that the mortgaged property constituted proceeds of crime in respect of the Bank's security. - HELD THAT: - Section 5(1) requires that the officer have reason to believe (to be recorded) on the basis of material in possession that a person is in possession of proceeds of crime. The Tribunal noted that the Deputy Director himself admitted the property was purchased in 2010, and the Enforcement officer did not produce material establishing that the property was acquired with proceeds of crime or that the Bank was in possession of proceeds of crime. In absence of such material and recorded reason, the power to attach could not properly be exercised against the secured creditor. [Paras 11, 12, 13]

Attachment could not stand for want of the necessary 'reason to believe' recorded on admissible material.

Priority of secured creditors under amended Section 26E of SARFAESI Act and Section 31B of Recovery of Debts Act - later non-obstante clause prevailing over earlier non-obstante clause - The Bank, as a secured creditor with registered security interest prior to attachment, has priority under the amended statutory regime and therefore the Enforcement authorities cannot override that priority to the Bank's detriment. - HELD THAT: - The Tribunal relied on the amended provisions granting priority to secured creditors (Section 26E SARFAESI and Section 31B Recovery of Debts Act) and on the principle that where two non-obstante clauses conflict, the later enactment prevails. Applying these principles and precedents, the Tribunal concluded that a secured creditor who lent its own funds and registered security interest enjoys priority over other claims and that the Enforcement Department had no power to attach the mortgaged property so as to defeat the Bank's statutory priority. [Paras 15, 19, 22, 26]

The Bank's priority as secured creditor is recognised and the attachment cannot prevail over the Bank's registered security interest.

Final Conclusion: Appeal allowed; Provisional Attachment Order dated 07.02.2018 and the adjudication confirming it are set aside insofar as they affect the appellant Bank, and the Bank's rights as a secured creditor over the mortgaged property are restored; connected proceedings against the borrowers may continue on their merits.

Summary order. Notice issued returnable in six weeks; stay of the impugned order declined.

Port Service - Renting of Immovable Property Service - service tax on tolls and entry fees - Cenvat credit - denial of Cenvat credit for telephone installed at residential premises - revenue share/royalty received by port as not taxable port service - duplication of demand / adjustment against miscellaneous income - remand for fresh adjudication - penalty under Section 78 of the Finance Act, 1994 - extended period of limitation

Service tax on tolls and entry fees - Port Service - Validity of service tax demand on entry permit fees and toll collection charged by the Port - HELD THAT: - The circular F. No. 354/27/2012-TRU (22.02.2012) relating to tolls for road users was examined but held not to be strictly applicable. The Tribunal found that the charges in issue, though described as 'toll' or 'entry fee', are paid for use of road and other port infrastructure within the port area and, on facts, relate to vehicles and persons attending to vessels or goods. Under the port service definition applicable for the dispute period (service rendered by a port in relation to a vessel or goods), such entry/toll charges fall within the ambit of port services and are taxable; hence the demand was sustained.

Demand on account of Toll Collection and Entry Fee is sustained.

Duplication of demand / adjustment against miscellaneous income - Treatment of testing charges of bitumen which were also included under miscellaneous income - HELD THAT: - The Tribunal confirmed liability in substance for the testing charges of bitumen but recognised that the same amount is also included under miscellaneous income and therefore requires re-quantification. The demand is upheld on merits subject to correct adjustment so as to avoid double recovery.

Demand on testing charges of bitumen is confirmed but to be re quantified against miscellaneous income to eliminate duplication.

Port Service - revenue share/royalty received by port as not taxable port service - Taxability of sundry handling, royalty for containers and revenue share/income from specified berths - HELD THAT: - On sundry handling the adjudicating authority's reasoning was found inadequate but the Tribunal, applying precedents on upfront/consideration and the nature of revenue share arrangements, treated sundry handling as taxable in the circumstances before it and did not set aside the demand. However, following Tribunal decisions in Cochin Port Trust, the receipts characterised as royalty/revenue share from contractors/operators (containers, 11th and 12th cargo berth) for permitting third parties to operate within port premises were held not to be consideration for rendering port services by the port itself and therefore not taxable as port services; such demands were set aside.

Demand in respect of sundry handling sustained; demand in respect of royalty for containers and income from 11th and 12th cargo berth set aside.

Renting of Immovable Property Service - remand for fresh adjudication - Taxability of township income under renting of immovable property services - HELD THAT: - The impugned order reproduced rule based material but did not address the factual matrix: the nature of the service, identity of payers, and the contractual arrangements. The Tribunal found the order non speaking on this head and remanded the issue to the Adjudicating Authority for fresh decision after proper enquiry into the nature of receipts and relevant facts.

Demand in respect of miscellaneous income under the head of renting of immovable property services set aside and remanded for fresh decision.

Cenvat credit - denial of Cenvat credit for telephone installed at residential premises - Allowability of Cenvat credit on telephone services at residential premises, taxi/bus hiring, CISF transportation and construction/repair services - HELD THAT: - Given the port's 24x7 operations and need for officers to be accessible, the Tribunal held that telephone services installed at residential premises constitute an essential ingredient for provision of service and credit cannot be denied. Cenvat credit on taxi and bus services used for movement of employees (excluding school bus, which was not contested) was allowed. Credit for transportation services of CISF personnel engaged in providing security was held admissible. Credits where supporting documents are absent, and credits on construction/repair of staff colony which the appellant did not contest, were sustained as denied by the adjudicating authority.

Cenvat credit partly allowed as detailed: telephone at residences, taxi/bus for employees and CISF transport allowed; denial sustained where documents are absent or where appeals were not pressed.

Penalty under Section 78 of the Finance Act, 1994 - extended period of limitation - Invocation of penalty provisions and extended period of limitation - HELD THAT: - Considering that several disputed issues were either decided in favour of the appellant or were contentious and not clearly against the appellant, the Tribunal found no merit in invoking the extended period of limitation or imposing penalty under the provision cited and refrained from upholding penalties and extension.

Invocation of extended period and imposition of penalty under Section 78 not upheld.

Final Conclusion: The appeal is disposed: demands for testing charges of bitumen and for entry/toll fees are sustained (testing charges to be re quantified); sundry handling demand sustained while royalty/revenue share receipts from operators and income from specified berths are set aside; township/township rental receipts under renting of immovable property are remanded for fresh adjudication; Cenvat credit is partly allowed as indicated; and invocation of extended period and penalties under the cited provision is not sustained. The matter is remitted for re quantification and further proceedings in accordance with these observations.

Power of revision under Section 84 of the Finance Act, 1994 - merger of original order with order-in-appeal - vivisection of an order for revision - appropriation of sanctioned refund against confirmed demand - time limit for refund claims under Notification No. 17/2009 ST - strict interpretation of exemption/notification - rejection of refund for discrepancy between invoice and shipping bill

Power of revision under Section 84 of the Finance Act, 1994 - merger of original order with order-in-appeal - vivisection of an order for revision - Whether the Commissioner could exercise revisionary power under Section 84 after the Commissioner (Appeals) had passed an order on the same original order - HELD THAT: - The Tribunal upheld the principle that once the Commissioner (Appeals) has passed an order, the original order merges into the order in appeal and ceases to exist; consequently the Commissioner cannot subsequently exercise revision under Section 84 against any portion of the original order which has been the subject of an order in appeal. The Tribunal relied on the reasoning in the cited High Court decision to conclude that an order cannot be vivisected so as to permit revision of part of the original order notwithstanding that another part was the subject of an appeal and appeal order. On this basis Order in Revision No. 2/2010 ST was held unsustainable and set aside. [Paras 10]

Order in Revision No. 2/2010 ST, dt. 26.02.2010 set aside as beyond the Commissioner's power after an order in appeal had been passed.

Appropriation of sanctioned refund against confirmed demand - appropriation pending filing of appeal / effect of subsequent filing of appeal - Whether the Assistant Commissioner was justified in adjusting/appropriating a sanctioned refund against the demand confirmed by the Order in Revision which was later set aside - HELD THAT: - At the time the Assistant Commissioner appropriated the sanctioned refund, there was no evidence on record that an appeal against the Order in Revision had been filed by the appellant, and the appropriation was based on the absence of proof of such filing and the expiry of the prescribed period (and relevant board instructions). However, since the Tribunal has set aside the Order in Revision in the related appeal, the appropriation of the refund against that now set aside demand cannot stand. Consequently the amount appropriated pursuant to that order becomes payable to the appellant. [Paras 11]

Adjustment/appropriation of the sanctioned refund towards the demand confirmed by the set aside Order in Revision is vacated; the adjusted amount is payable to the appellant.

Time limit for refund claims under Notification No. 17/2009 ST - strict interpretation of exemption/notification - Whether refund claims filed beyond one year from the date of export (let export order) under Notification No. 17/2009 ST are maintainable - HELD THAT: - The notification prescribes filing within one year from the date of export (explained as date of let export order) and leaves no scope for condonation of delay. Applying the principle of strict construction of exemption notifications (as affirmed by the Constitutional Bench cited), any ambiguity is to be resolved in favour of the revenue. The Tribunal therefore upheld the rejection of the refund claim filed beyond the one year period. [Paras 12]

Refund claims filed beyond one year from the let export order are not allowable; rejection of the amount on time bar grounds is upheld.

Rejection of refund for discrepancy between invoice and shipping bill - Whether the refund claim could be allowed despite discrepancy in the name of the Port between the invoice and the Shipping Bill - HELD THAT: - The refund related to port services required correlation between the exporter's invoice and the corresponding Shipping Bill as mandated by the notification. The Tribunal found that the details in the invoice and the Shipping Bill did not match as to the port, and that such discrepancy defeated the necessary co relation to establish the export of services. The Tribunal therefore sustained the rejection of the claim on this ground. [Paras 13]

Rejection of the refund claim due to discrepancy between invoice and Shipping Bill as to the port is sustained.

Final Conclusion: The revisionary order passed by the Commissioner (Order in Revision No. 2/2010 ST) is set aside as impermissible after an order in appeal had been passed; the appropriation of the sanctioned refund against the demand confirmed by that set aside revision is vacated and the amount is payable to the appellant; however, refunds denied for filing beyond the one year period under Notification No. 17/2009 ST and for discrepancy between invoice and Shipping Bill are upheld.

Convention Services - mandap keeper service - Exclusion of hotels from renting of immovable property service by Explanation 1(d) - Inclusion of food and beverages in value of service - Mutual exclusivity of value added tax/luxury tax and service tax - Taxability of hotel room rent as part of convention service - State levy under Entry 62, List II (luxury tax) vis-a -vis Union service tax

Taxability of hotel room rent as part of convention service - mandap keeper service - Exclusion of hotels from renting of immovable property service by Explanation 1(d) - Room rent charged by the appellant for letting rooms to corporate clients during the period 1.4.2002 to 31.8.2006 does not constitute taxable convention/mandap keeper service. - HELD THAT: - The Tribunal found that appellants charged only room rent and did not levy any separate mandap or convention-hall charges; conference/mandap facilities were often provided complimentary to attract customers. Hotels were by statutory explanation excluded from the renting of immovable property service, and the material on record did not establish that service tax was charged on convention service. Precedents of this Tribunal and other authorities were applied to hold that temporary occupation of rooms for boarding and residence cannot be converted into mandap keeper/convention service where no separate consideration was charged for mandap/convention facilities. The Tribunal relied on earlier decisions which held that letting of rooms on rent, when taxed under State law (VAT/luxury tax) and billed separately, is an independent activity not subsumable under convention service, and therefore the impugned demand could not be sustained.

Impugned demand insofar as it taxes room rent as convention/mandap keeper service is set aside and appeal allowed.

Inclusion of food and beverages in value of service - Mutual exclusivity of value added tax/luxury tax and service tax - Value of food and beverages supplied to participants cannot be included in the value of convention service where such supplies are billed separately and subjected to State tax (VAT/luxury tax). - HELD THAT: - The Tribunal accepted the appellant's bills showing separate indication of food and beverage charges and the payment of VAT/luxury tax thereon. Applying the constitutional and precedential principle of mutual exclusivity between State sales tax/VAT and Union service tax, the Tribunal held that once the sale tax has been discharged on food and beverages, their value cannot be included for levying service tax under convention service. Earlier decisions of this Tribunal and High Courts recognizing that supply of food/beverages is an independent taxable activity were followed, and the Commissioner's inclusion of such value was held unsustainable.

Inclusion of food and beverage charges in the value for convention service is rejected; such amounts are excludible.

State levy under Entry 62, List II (luxury tax) vis-a -vis Union service tax - Levy of tax on activities which fall within the scope of State Entry (luxury tax) cannot be validly charged as Union service tax in the circumstances of the present case. - HELD THAT: - The Tribunal noted that the High Courts of Delhi and Kerala have held that taxation of short-term accommodation falls within Entry 62 of List II (luxury tax) and that the appellant was paying such State taxes. In the factual matrix where the activity was assessed and taxed under State law, and where statutory explanation excluded hotels from renting of immovable property service, the Revenue failed to demonstrate entitlement to levy service tax on the same subject matter. The Tribunal therefore applied the principle that taxing entries must be construed to maintain exclusivity and relied on precedents holding that where State levy operates, Union cannot intrude by levying service tax on the same value.

Demand based on treating the appellant's activities as within Union service tax despite State taxation is unsustainable; the impugned order is set aside on this ground as well.

Final Conclusion: The Tribunal allowed the appellant's appeal, set aside the demand, interest and penalties confirmed by the Commissioner in relation to convention service for the period 1.4.2002 to 31.8.2006, and granted consequential relief, following earlier decisions that room rent and separately billed food/beverage supplies taxed under State law cannot be treated as convention service for levy of service tax.

Distinct supply and erection contracts - transfer of ownership before execution of works - service tax liability on goods supplied separately - works contract value to include goods supplied under other contracts (prospective application) - inapplicability of composition scheme where supplies are separately invoiced

Distinct supply and erection contracts - The supply contracts and the erection/erection-cum-services contracts were separate and not interlinked for the purpose of taxability. - HELD THAT: - The Tribunal found that the appellant had entered into clearly separate agreements for supply of goods and for erection/services, and that these contracts were not interlinked notwithstanding that the parties were the same. The invoices and contractual terms showed separate performance and separate billing under each contract. On this basis the Tribunal concluded that treating the contracts as a single composite works contract was incorrect and the Final Order was perverse in so concluding. [Paras 10]

Supply and erection contracts are to be treated as separate contracts for taxability.

Transfer of ownership before execution of works - service tax liability on goods supplied separately - Goods supplied under the supply contract had their ownership transferred to the principal before execution of the erection contract and therefore are not liable to service tax again as part of the erection/works contract. - HELD THAT: - The Tribunal examined sample invoices and records and held that the appellant purchased goods from suppliers and resold them to the principal, transferring title in the course of transit. As ownership of the pipes and other items stood transferred to the principal prior to erection, the materials could not be treated as being supplied again by the appellant through the erection contract. Consequently, the finding in the earlier Final Order that the supply was an accretion to the erection contract was erroneous and recalled. [Paras 11]

No service tax on goods supplied under the separate supply contract since ownership had passed to the principal prior to erection.

Works contract value to include goods supplied under other contracts (prospective application) - Notification No. 23/2009-ST, which provides that the gross amount for a works contract shall include value of goods used whether supplied under any other contract, is prospective and does not apply where execution commenced or payment was received on or before 07-07-2009. - HELD THAT: - The Tribunal noted that the relevant execution in the present matters commenced in 2007 and 2008, prior to the effective date of the Notification. Therefore, the Notification could not be applied retrospectively to club the value of separately supplied goods into the works contract valuation. The Tribunal held that clubbing under the Notification was not applicable to the appellant's contracts. [Paras 12]

Notification No. 23/2009-ST is not applicable to works commenced before 07-07-2009; clubbing not permissible in these matters.

Inapplicability of composition scheme where supplies are separately invoiced - The appellant is liable to pay service tax only on the erection contract under the normal scheme and not under the works contract composition scheme by clubbing separately invoiced supplies. - HELD THAT: - Having held that supply and erection contracts were separate, that ownership of supplied goods had passed to the principal before erection, and that the Notification allowing clubbing was not applicable, the Tribunal concluded that the composition scheme could not be invoked to tax the separately invoiced supplies. The Tribunal therefore allowed the applications, recalled the earlier Final Order, and directed that service tax liability arise only on the erection contract under the normal scheme. [Paras 11, 13]

Service tax payable only on erection contract under normal scheme; composition scheme not available to tax separately invoiced supplies.

Final Conclusion: The Tribunal recalled its Final Order dated 13.02.2018, held that supply and erection contracts were distinct and that goods whose ownership had transferred to the principal before erection are not liable to service tax as part of the erection contract; Notification No. 23/2009-ST is prospective and inapplicable to works commenced in 2007-2008; consequently service tax is payable only on the erection contract under the normal scheme, and the appellant is directed to file fresh computation for verification.

Reverse charge mechanism - service tax liability on Goods Transport Agency - verification of ledger accounts and worksheets - remand for de novo adjudication

Reverse charge mechanism - service tax liability on Goods Transport Agency - Appellant had been discharging service tax on GTA services under the reverse charge mechanism and maintained books of account showing such payments. - HELD THAT: - The Tribunal noted that the appellants were paying service tax on services received from Goods Transport Agencies under the reverse charge mechanism and maintained ledger accounts recording the amounts. The Tribunal observed that the authorities confirmed duty liability on the ground that worksheets and ledger correlation were not produced; however, the appellant contended that such worksheets and ledgers had been furnished. The Tribunal accepted that the appellant had produced worksheets before it showing payment on reverse charge basis.

Finding recorded that appellant was paying service tax under reverse charge and maintained relevant books, and that worksheets showing correlation had been produced to the Tribunal.

Verification of ledger accounts and worksheets - remand for de novo adjudication - Whether the demand should be sustained without verifying the appellant's ledger accounts and worksheets or whether the matter should be remanded for fresh verification and adjudication. - HELD THAT: - The Tribunal found that both lower authorities did not consider the worksheets and ledger correlation produced by the appellant. Given the existence of ledger entries and worksheets purporting to show payment of GTA service tax on reverse charge basis, the Tribunal held that the correctness of the tax liability required fresh verification against the material furnished. The Tribunal therefore directed that the original authority verify the correctness of the tax liability using the ledger accounts and worksheets submitted by the appellant and thereafter pass a de novo order in accordance with law.

Matter remanded to the original authority with directions to verify the ledger accounts and worksheets and to decide the demand afresh by passing a de novo order.

Final Conclusion: Appeal allowed to the extent of remanding the matter to the original authority for verification of ledger accounts and worksheets and for de novo adjudication of the service tax demand in accordance with law.

Special Economic Zone Act has overriding effect over other laws - SEZ units exempt from service tax on services used for authorised operations - Non-inclusion of services in Unit Approval Committee/Development Commissioner list is a procedural lapse and not a ground to reject refund - Approval from Unit Approval Committee is not a mandatory condition for refund - Adjudicating authority cannot travel beyond the show-cause notice - Violation of principles of natural justice where grounds for rejection were not the matters in the show-cause notice

Special Economic Zone Act has overriding effect over other laws - SEZ units exempt from service tax on services used for authorised operations - Approval from Unit Approval Committee is not a mandatory condition for refund - Non-inclusion of services in Unit Approval Committee/Development Commissioner list is a procedural lapse and not a ground to reject refund - Whether refund of service tax paid on input services consumed in the SEZ unit could be rejected for want of approval of those services by the Unit Approval Committee/Development Commissioner, despite the overriding provisions of the SEZ regime. - HELD THAT: - The Tribunal held that Section 26 read with Rule 31 of the SEZ Rules and Section 51 of the SEZ Act give the SEZ Act an overriding effect and exempt SEZ units from service tax for services used in authorised operations. Applying earlier Tribunal decisions on identical facts, the non-inclusion of specified input services in the UAC/Development Commissioner approved list is a procedural lapse which cannot be treated as a substantive ground to reject a refund claim. The impugned rejection grounded on absence of UAC approval was therefore not tenable in law and had to be set aside, with the refund claim allowed subject to consequential reliefs. [Paras 5, 6]

Impugned rejection of refund for lack of UAC approval set aside; refund claim allowed following the SEZ Act's overriding effect and precedent.

Adjudicating authority cannot travel beyond the show-cause notice - Violation of principles of natural justice where grounds for rejection were not the matters in the show-cause notice - Whether the adjudicating authority lawfully rejected refund claims on grounds that were not the subject matter of the show-cause notice and without affording opportunity to meet those grounds. - HELD THAT: - Relying on the reasoning in Mast Global Business Services and related decisions, the Tribunal found that the Order-in-Original and the Commissioner (Appeals) rejected claims on additional grounds not encompassed by the show-cause notices. Such action amounts to travelling beyond the show-cause and violates principles of natural justice because the appellant was not given a reasonable opportunity to defend against those additional grounds. Consequently, orders based on such extraneous grounds are unsustainable. [Paras 5]

Rejection founded on grounds outside the show-cause notice and without appropriate opportunity to the appellant is invalid; such part of the impugned order set aside.

Final Conclusion: The impugned order is set aside; the appeal is allowed and the refund claim is granted with consequential reliefs, the Tribunal applying the SEZ Act's overriding effect and established precedents that procedural non-approval by UAC/Development Commissioner and rejection on grounds beyond the show-cause notice do not justify denial of refund.

Reverse charge mechanism - service tax on services provided from outside India and received in India - suo moto re credit of previously debited amount - multiplicity of proceedings - jurisdiction of multiple Commissionerates

Suo moto re credit of previously debited amount - multiplicity of proceedings - jurisdiction of multiple Commissionerates - Maintainability of the Jaipur Commissionerate's adjudication objecting to the appellant's suo moto re credit where a parallel show cause notice on the same transactions was issued by the Delhi Commissionerate. - HELD THAT: - The Tribunal found that the transactions in dispute did not pertain to the Bhiwadi unit and that no accounts of the said transactions were maintained at the Bhiwadi factory office. The audit objection at Bhiwadi was raised on the basis of annual accounts/directors' report copies available there, but the operative transactions and accounting entries were not located in the Bhiwadi unit's books. Given that the Central Excise and Service Tax statutory scheme does not contemplate multiplicity of proceedings on the same cause of action, the adjudication by the Jaipur Commissionerate objecting to the appellant's suo moto re credit could not be sustained where the substantive show cause notice on the same subject matter had been prosecuted by the Delhi Commissionerate. For these reasons the Commissioner, Jaipur erred in upholding the part of the show cause notice relating to the suo moto re credit and in ordering recovery and penalty thereon. The Tribunal therefore set aside the Jaipur adjudication on that part, while noting that the main liability on merits had been decided against the appellant by the Division Bench in the parallel appeal. [Paras 7, 10, 11]

Order of the Commissioner, Jaipur insofar as it upheld objection to the suo moto re credit and ordered recovery/penalty is set aside; the issue does not survive.

Final Conclusion: The appeal is allowed for statistical purposes by setting aside the Jaipur Commissioner's adjudication insofar as it objects to the appellant's suo moto re credit; the principal liability on merits remains as concluded by the Division Bench in the parallel proceedings.

Voluntary Compliance Encouragement Scheme (VCES) 2013 - strict compliance of time limits - interpretation of "shall" - bonafide attempt to pay - technical failure of online payment facility

Voluntary Compliance Encouragement Scheme (VCES) 2013 - interpretation of "shall" - strict compliance of time limits - bonafide attempt to pay - technical failure of online payment facility - Validity of rejection of the appellant's VCES declaration under Section 107(4) for non-payment by the prescribed date where payment was attempted on the last day but completed on 01.01.2015 due to a technical defect in the online payment link. - HELD THAT: - The Tribunal found that sub section (3) required payment of not less than 50% by 31.12.2013 and sub section (4) required the remaining dues to be paid by 30.06.2014 or, at the latest, by 31.12.2014. The appellant undisputedly attempted to make the remaining payment on 31.12.2014 but could not complete it because of a technical defect in the CBEC online payment link; the outstanding amounts together with interest were paid on 01.01.2015. The adjudicating authorities below had accepted the appellant's conduct as bonafide. While exemption schemes and their time limits are to be strictly construed, the Tribunal held that a rigid literal application of the word "shall" in Section 107(4) was not justified where the declarant had made an admitted, timely effort to pay and the delay resulted from circumstances beyond its control. The decision distinguished Kasmisons Builders (where there was an unexplained delay and no apparent timely effort) and relied on the Department's own acknowledgment that amounts unpaid as on 01.01.2015 would not be recoverable under Section 87; since the full amount stood paid by 01.01.2015 nothing remained recoverable. Applying these considerations, the Tribunal concluded that the rejection for failure to pay by 31.12.2014 was unwarranted on the facts. [Paras 4, 5, 6, 7]

Rejection of the VCES declaration set aside; appeal allowed.

Final Conclusion: On the facts-an admitted bonafide attempt to pay on 31.12.2014 impeded by a technical failure and full payment (with interest) made on 01.01.2015-the Tribunal declined to apply a rigid literal construction of Section 107(4) and allowed the appeal, setting aside the rejection of the declaration.

Penalty under the Central Excise Rules, 2002 - CENVAT credit obtained by fraudulent representation - liability of management-persons for company's fraudulent availment of excise benefit - classification of entity as trader or manufacturer for excise benefits - sufficiency and vagueness of show cause notice

Penalty under the Central Excise Rules, 2002 - liability of management-persons for company's fraudulent availment of excise benefit - Imposition of penalty under the Central Excise Rules, 2002 on persons in management of a company for fraudulent availment of CENVAT credit was legally sustainable. - HELD THAT: - The Court upheld the order in original which imposed penalty under Rule 26 of the Central Excise Rules, 2002 upon the three petitioners in their capacities as Managing Director, Director and Manager of V.K. Udyog Ltd. The adjudicating authority's finding that the company had wrongfully declared itself a manufacturer to obtain CENVAT credit and that the petitioners were consciously involved in procuring CENVAT credit by false representation was accepted. The petitioners, being essentially in control of the company and privy to its activities, could not feign ignorance; their active involvement and knowledge justified imposition of penalty on them personally. The Court found no legal impediment to applying Rule 26 against the petitioners in the factual matrix presented and refused to set aside the penalty imposed.

The challenge to the imposition of penalty under Rule 26 on the three management-persons is dismissed and the penalty upheld.

CENVAT credit obtained by fraudulent representation - classification of entity as trader or manufacturer for excise benefits - Whether characterisation of the company as a trader (and not a manufacturer) precluded penalty against the petitioners for wrongful declaration and availment of CENVAT credit. - HELD THAT: - The Court relied on earlier proceedings in respect of V.K. Udyog Ltd., where it was determined that the company was at best a trader and had wrongfully declared itself to be a manufacturer to secure excise benefits. That conclusion, which is not under appeal, was applied to the present petitions. The petitioners' contention that an entity found to be a trader could not be treated as a manufacturer for purposes of imposing penalty was negatived because the misrepresentation itself-declaring the company as a manufacturer to obtain benefits-constituted the basis for liability. The factual finding that the company lacked manufacturing activity and that the petitioners were instrumental in procuring the false declaration sustained the penalty despite the trader/manufacturer distinction.

The contention that the trader/manufacturer classification absolves the petitioners is rejected; the penalty stands.

Sufficiency and vagueness of show cause notice - Validity of the show cause notice challenged as vague and insufficient to sustain penalty proceedings against the petitioners. - HELD THAT: - Although the petitioners argued that the show cause notice was vague and did not make specific allegations against them, the Court found that paragraph 6.1 of the notice sufficiently identified the petitioners and alleged their conscious involvement in fraudulent transactions to procure CENVAT credit. The adjudication proceedings substantiated those allegations, and the impugned order addressed the petitioners' contentions. Consequently the Court concluded that the notice and subsequent adjudication were legally adequate to support imposition of penalty.

The challenge to the show cause notice as vague is dismissed; the notice and ensuing adjudication are held sufficient.

Final Conclusion: All three writ petitions are dismissed; the penalties imposed on the petitioners for fraudulent availment of CENVAT credit are upheld and there shall be no order as to costs.

Condonation of delay in filing appeal - Violation of principles of natural justice / right to be heard - Remand for fresh adjudication after hearing

Condonation of delay in filing appeal - Principles of natural justice as ground for condonation - Application for condonation of 306 days' delay in filing the appeal - HELD THAT: - The Court examined the affidavit explaining delay caused by skeletal operations of the appellant-company and non-communication of the Tribunal's order within the company, and considered that the appellant seeks adjudication on merits because it was not heard before the Tribunal. Bearing in mind that the grievance relates to an infraction of the principles of natural justice and that those principles are intended to sub-serve justice, the Court exercised its discretion to condone the delay. Condonation was made subject to the appellant paying costs to the Advocates' Association Library Fund of the High Court of Karnataka, Dharwad Bench, within a stipulated period and filing the receipt. [Paras 8]

Delay of 306 days condoned subject to payment of costs and filing of receipt.

Violation of principles of natural justice / right to be heard - Remand for fresh adjudication after hearing - Speaking order on reconsideration - Validity of the Tribunal's final order in the absence of the appellant having been heard and appropriate remedy - HELD THAT: - On perusal of the impugned order, the Court noted that the Tribunal recorded that the department was heard but "none appeared on behalf of the respondent" and that cross-objections filed by the assessee were not the subject of representation; therefore the assessee was not heard. Without adjudicating the merits, the Court held that the impugned order was passed without affording the appellant an opportunity of hearing, thereby infringing the principles of natural justice. Consequently, the Court set aside the impugned order and remanded the matter to the Tribunal for fresh adjudication in accordance with law after giving opportunity to both parties. The Court directed counsel for both parties to appear before the Tribunal on the fixed date without expecting separate notices, required production of the costs receipt, and directed the Tribunal to pass a speaking order on the appeals and cross-objections after hearing both sides. [Paras 12, 15]

Impugned Tribunal order set aside; matter remanded for fresh adjudication after hearing both parties and for the Tribunal to pass a speaking order.

Final Conclusion: The application for condonation of delay is allowed subject to payment of costs and filing of receipt. The Tribunal's final order is set aside for want of hearing to the appellant; the matter is remanded to the Tribunal for fresh adjudication after giving both parties an opportunity to be heard and for a speaking order to be passed.

Cenvat credit - exempted goods - non-excisable goods - Rule 6(3) of Cenvat Credit Rules, 2004 - proportionate reversal of credit - option under Rule 6(3)(ii) / Rule 6(3A) - payment of interest on delayed reversal - remand for verification - penalty consequential to demand

Cenvat credit - exempted goods - non-excisable goods - Rule 6(3) of Cenvat Credit Rules, 2004 - proportionate reversal of credit - option under Rule 6(3)(ii) / Rule 6(3A) - payment of interest on delayed reversal - Whether demand under Rule 6(3) for payment of 10%/5% of value of goods cleared without payment of duty can be sustained where the assessee has reversed the cenvat credit attributable to exempted goods and paid interest - HELD THAT: - The Tribunal found on facts that the appellant had reversed the cenvat credit attributable to services used for exempted (non-excisable) goods and paid interest where there was delay. Applying the principle in decisions dealing with the operation of Rule 6(3) and the option under Rule 6(3)(ii)/(3A), the Tribunal held that where an assessee elects and complies with the option to pay an amount equivalent to the credit attributed to exempted goods (including payment of interest for belated payments) the alternative recovery under Rule 6(3)(i) (i.e. 5%/10%) cannot be sustained. The Tribunal emphasized that Rule 6 seeks to prevent wrongful availment of credit and that recovery should not exceed the credit attributable to exempted goods; Revenue cannot compel an assessee to adopt a particular option when the assessee has validly exercised another option and discharged the corresponding liability. The Tribunal relied on its earlier reasoning in Mercedez Benz (India) Pvt. Ltd. and related orders, and rejected reliance on decisions not addressing the specific Rule 6(3)/(3A) scheme where the assessee had complied with the prescribed option and interest obligations. [Paras 6, 11]

Demand under Rule 6(3) for 10%/5% cannot be sustained insofar as the assessee has reversed the cenvat credit attributable to exempted goods and paid interest; the large demand confirmed by the adjudicating authority is set aside to that extent.

Remand for verification - proportionate reversal of credit - penalty consequential to demand - Quantification of the reversal already made by the assessee and consequential penalty-whether adjudicating authority correctly verified the reversal and imposed penalty - HELD THAT: - Although the Tribunal accepted the legal proposition that reversal of the attributable credit (with interest) precludes imposition of the Rule 6(3) percentage-based demand, it observed that the Commissioner had not verified the correctness of the quantification of the reversal made by the assessee. Because final relief and any consequential determination on penalty depend upon verification of the amounts actually reversed, the Tribunal remanded the matters to the original authority for de novo consideration limited to verification of the quantification of reversal and consequential orders. Revenue appeals seeking enhancement of penalty were also remanded as the penalty is consequential to the demand and its final outcome awaits verification. [Paras 11, 13]

Matters remanded to the original adjudicating authority for fresh de novo determination confined to verification of the correctness of the assessee's quantification of reversal and for passing consequential orders (including on penalty).

Final Conclusion: The Tribunal held that where the assessee has validly exercised the option under Rule 6(3)(ii)/6(3A) and reversed the cenvat credit attributable to exempted/non-excisable goods (and paid interest for any delay), a percentage-based demand under Rule 6(3) cannot be sustained; however, because the correctness of the quantified reversal was not verified by the Commissioner, all appeals were remanded to the original authority for de novo verification of the reversal and for passing consequential orders (including on penalty).

Motor Spirit - flash point test - suitability for use as fuel in spark ignition engines - suitability in admixture with any other substance (other than mineral oil) - classification under Chapter 27 / Heading 2710

Motor Spirit - flash point test - suitability in admixture with any other substance (other than mineral oil) - classification under Chapter 27 / Heading 2710 - Whether the product 'Mixed Fuel Oil' qualifies as 'motor spirit' and is therefore taxable under Heading 2710 - HELD THAT: - The Tribunal examined whether the product satisfies both criteria for 'motor spirit' - (i) flash point below 25 C and (ii) suitability, either by itself or in admixture with any other substance, for use as fuel in spark ignition engines. While the departmental chemical examination established the flash point criterion, the Tribunal relied on precedents (India Oil Corporation and Oil India Ltd.) to hold that the suitability test requires evidence of use or testing in admixture with a substance other than mineral oil. The record shows the sample was tested in admixture with motor gasoline in the ratio of 10% V/V as per departmental correspondence, but Revenue has not produced evidence of suitability in admixture with a non-mineral substance as required by the cited authorities. In the absence of such testing or evidence of actual/practical/commercial use as spark-ignition fuel, the product does not meet the second determinative criterion. Consequently, classification of the product as 'motor spirit' under Heading 2710 is not established and the demand founded on that classification is unsubstantiated.

Demand of duty based on classification of 'Mixed Fuel Oil' as motor spirit under Heading 2710 is set aside and the appellant's appeals are allowed; Revenue's appeal is dismissed.

Final Conclusion: The Tribunal held that the product did not satisfy the dual tests for 'motor spirit' because Revenue failed to prove suitability in admixture with a non-mineral substance; the demands premised on classification under Heading 2710 are set aside, allowing the appellant's appeals and dismissing the Revenue's appeal.

Cenvat credit admissibility - Installation and use of capital goods in relation to manufacture - Common registration and allocation of credit between units - Rule 3(1) of the Cenvat Credit Rules - requirement of receipt/possession for availing credit - Non-alienation of capital goods as a condition for credit

Cenvat credit admissibility - Installation and use of capital goods in relation to manufacture - Non-alienation of capital goods as a condition for credit - Common registration and allocation of credit between units - Rule 3(1) of the Cenvat Credit Rules - requirement of receipt/possession for availing credit - Whether the appellant was entitled to retain/reclaim Cenvat credit on capital goods installed in adjacent/lease premises and to re-credit the amount in the main registered unit despite initial reversal and transfer between the appellant's units. - HELD THAT: - The Tribunal examined whether credit could be denied on the ground that the capital goods were not installed in the original registered premises and that credit was taken without actual receipt/possession in that unit. Reliance was placed on precedents holding that the essential requirement for availing credit is that the capital goods are used in or in relation to the manufacture of final products and are not alienated to any third party. The appellant had applied for common registration for the lease premises before availing credit and received no adverse communication; subsequently a separate registration was granted and the appellant formalised the transfer of credit between its units. The goods were used in processes connected with manufacture and final products were cleared from the main unit on payment of duty; the capital goods were not disposed of or alienated. In these circumstances, and applying the principle in the cited decisions, the Tribunal concluded that mere installation or use in an adjacent/lease premises which forms part of the integrated manufacturing operations does not disentitle the appellant to Cenvat credit, and the invocation of Rule 3(1) to deny re-credit was not justified on the facts.

Impugned demand, interest and penalty upheld by the lower authority set aside; appellant entitled to retain/reclaim the Cenvat credit and appeal allowed.

Final Conclusion: In view of the use of the capital goods in relation to manufacture, absence of alienation, pendency and eventual regularisation of registration, and relevant precedents, the impugned order denying/recovering Cenvat credit was set aside and the appeal allowed with consequential relief.

Confiscation and penalty under Rule 25 of the Central Excise Rules, 2002 - Penalty under Rule 26 of the Central Excise Rules, 2002 - Application of Section 11AC - requirement of fraud, collusion, wilful misstatement or suppression of facts and mens rea - Admissibility and sufficiency of Panchnama and search seizure records - Reliability of eye estimation for stock verification - Admissibility of admissions and need for corroborative evidence - Right to cross examine panch witness statements

Confiscation and penalty under Rule 25 of the Central Excise Rules, 2002 - Application of Section 11AC - requirement of fraud, collusion, wilful misstatement or suppression of facts and mens rea - Whether confiscation of goods and imposition of penalty under Rule 25 (and consequentially Rule 26) could be sustained without establishing the ingredients of Section 11AC, including mens rea. - HELD THAT: - Rule 25 begins with "Subject to the provisions of section 11AC of the CE Act" and therefore the exercise of power under Rule 25 is conditional upon the requirements of Section 11AC. Section 11AC requires that non levy/short levy/erroneous refund must be by reason of fraud, collusion, wilful misstatement or suppression of facts or contravention with intent to evade duty. Where these ingredients are not established, penalty under Section 11AC (and therefore as a corollary under Rule 25) cannot be levied. The Commissioner (Appeals) erred in holding that mens rea is not required to order confiscation under Rule 25. The record does not establish the necessary elements of Section 11AC (fraud, collusion or intention to evade duty) and therefore confiscation and penalty under Rule 25/26 cannot be sustained on the basis advanced by the Department. [Paras 5, 6]

Confiscation and penalty under Rule 25/26 set aside for failure to satisfy the ingredients of Section 11AC, including mens rea.

Admissibility and sufficiency of Panchnama and search seizure records - Reliability of eye estimation for stock verification - Admissibility of admissions and need for corroborative evidence - Right to cross examine panch witness statements - Whether the Panchnama, eye estimation of stock and the Director's statements constituted sufficient and reliable evidence of clandestine removal to justify confiscation and penalty. - HELD THAT: - A search Panchnama must record the place and manner of recovery, steps taken to safeguard seized documents/materials (packing, sealing) and movement/actions of officers and panchas so as to exclude possibilities of planting or interference; mere reference to annexures is insufficient. Where the assessee disputes truthfulness, denial of opportunity to cross examine panch witnesses undermines reliance on their statements. Eye estimation without contemporaneous physical stock taking, inventory or weightment is an unreliable basis for concluding clandestine removal; precedents support that allegations based on eye estimation alone are not sustainable. An admission of discrepancy by the Director, in the absence of cogent corroborative evidence of clandestine removal or proof of deliberate omission in statutory records, is not equivalent to admission of intentional clandestine clearance. The Director's statements indicated lacunae in invoices and willingness to rectify and pay dues, not clear proof of malafide clandestine removal. Given these deficiencies, the material on record did not constitute sufficient corroborative evidence to support confiscation or penalties. [Paras 6, 7, 8, 9]

Panchnama and eye estimation evidence and the Director's statements held insufficient and unreliable to prove clandestine removal; reliance upon them unsustainable and findings set aside.

Final Conclusion: Both appeals allowed; the adjudicating authority's findings of confiscation and imposition of penalty on the Director are set aside for lack of cogent and corroborative evidence and for failure to establish the requisite ingredients of Section 11AC.

Entitlement to Cenvat credit on supplementary invoices - application of Rule 9(1)(b) exclusion clause - suppression and collusion - presumption of regularity in government undertakings' invoices - recurring issue pending before the Hon'ble Supreme Court

Entitlement to Cenvat credit on supplementary invoices - application of Rule 9(1)(b) exclusion clause - suppression and collusion - presumption of regularity in government undertakings' invoices - Whether the appellant was entitled to avail Cenvat credit on the basis of supplementary invoices issued by the coal company and whether such credit was barred by the exclusion in Rule 9(1)(b) on account of alleged suppression or collusion. - HELD THAT: - The Tribunal accepted that the appellants had taken credit on supplementary invoices issued by South Eastern Coalfields Ltd. and examined whether Rule 9(1)(b) could be invoked to deny the credit on grounds of suppression or collusion. Having regard to the pendency of connected proceedings before the Hon'ble Supreme Court and the recurring nature of the controversy, the Tribunal held that mere failure by the appellant to ascertain the applicability of the exclusion in Rule 9(1)(b) did not amount to an affirmative act of suppression or collusion. In the absence of any positive record of suppression, and since the supplementary invoices were issued by a government undertaking, the Tribunal found no basis to presume collusion or suppression and therefore concluded that the exclusion in Rule 9(1)(b) could not be applied to deny the Cenvat credit in the facts of the case. [Paras 6, 7, 8]

The order under challenge was set aside and the appellant was held entitled to take Cenvat credit on the supplementary invoices.

Recurring issue pending before the Hon'ble Supreme Court - Whether the parties should be granted liberty to seek further relief after the Supreme Court decides the connected issues. - HELD THAT: - The Tribunal noted that substantially identical questions arising from supplementary invoices of the coal company were sub judice before the Hon'ble Supreme Court. In light of that pending adjudication and the recurring nature of the controversy, the Tribunal exercised its discretion to allow the appeal but granted liberty to the parties to approach the Tribunal again after the Supreme Court delivers its verdict, thereby preserving the parties' right to seek reconsideration if required. [Paras 7, 8]

Liberty granted to parties to come again after the Supreme Court's verdict.

Final Conclusion: Appeal allowed; impugned order set aside holding the appellant entitled to Cenvat credit on the supplementary invoices, with liberty to the parties to approach the Tribunal afresh after the Hon'ble Supreme Court pronounces on the connected issues.

Cenvat credit on goods transport agency services upto the place of removal - place of removal - definition of input service - binding effect of Supreme Court precedent over Board circulars - penalty for suppression where bona fide legal interpretation exists

Cenvat credit on goods transport agency services upto the place of removal - place of removal - definition of input service - binding effect of Supreme Court precedent over Board circulars - Whether CENVAT credit is admissible on GTA services used to transport goods from the place of removal to the buyers' premises. - HELD THAT: - The Tribunal examined the contracts showing supplies were on FOR basis and the department's contention that freight charged did not form part of assessable value. Having considered the statutory scheme, Board circulars and authoritative decisions, the Tribunal applied the Supreme Court's ratio in Ultratech Cement Ltd. which held that post-amendment the definition of 'input service' and the phrase 'upto the place of removal' preclude Cenvat credit for GTA services used beyond the place of removal. A subsequent Board circular cannot override the law declared by the Supreme Court. On that basis the Tribunal held that credit on GTA services for transport from place of removal to the buyer's premises is not admissible and confirmed the demand. [Paras 7]

Cenvat credit on GTA services for transport from place of removal to buyers' premises is not admissible; demand confirmed.

Penalty for suppression where bona fide legal interpretation exists - definition of input service - Whether penalty for suppression can be sustained against the appellant for availing CENVAT credit on GTA services. - HELD THAT: - The Tribunal found that the controversy concerned interpretation of the definition of 'input service' and that the Supreme Court's definitive ruling on the point (Ultratech) was rendered in 2018. Given that the appellant's position arose from a bona fide interpretation of law and the point was not settled at the time, suppression could not be attributed. Accordingly, imposition of penalty was held not sustainable and penalties were set aside. [Paras 7]

Penalties set aside on the ground that no suppression could be alleged where the issue involved a bona fide legal interpretation.

Final Conclusion: The Tribunal, following the Supreme Court in Ultratech Cement Ltd., upheld the demand disallowing CENVAT credit on GTA services transporting goods beyond the place of removal, but quashed the penalties imposed on the ground that the issue involved a bona fide legal interpretation and could not amount to suppression.

Eligibility of CENVAT credit on input services - definition of "input services" under Rule 2(l) of the CENVAT Credit Rules, 2004 - availability of credit for car hiring/car repair services prior to 1.4.2011 - availability of credit for canteen/outdoor catering services prior to 1.4.2011 - precedential weight of Tribunal decisions on pre 1.4.2011 credits

Eligibility of CENVAT credit on input services - definition of "input services" under Rule 2(l) of the CENVAT Credit Rules, 2004 - availability of credit for car hiring/car repair services prior to 1.4.2011 - CENVAT credit on car hiring/car repair services availed prior to 1.4.2011 is allowable. - HELD THAT: - The Tribunal found that prior to 1.4.2011 the definition of "input services" in Rule 2(l) did not contain the restrictions which were introduced thereafter. Applying that legal position to the facts, the credits in respect of car hiring/car repair services availed by the appellant during the disputed periods fall within the permissible scope of input services as understood before the amendment. The appellant's reliance on earlier Tribunal decisions upholding pre 1.4.2011 credit for such services was accepted and the impugned orders denying such credit were held unsustainable.

The denial of CENVAT credit for car hiring/car repair services for the stated periods is set aside and the appeals are allowed on this ground.

Eligibility of CENVAT credit on input services - definition of "input services" under Rule 2(l) of the CENVAT Credit Rules, 2004 - availability of credit for canteen/outdoor catering services prior to 1.4.2011 - CENVAT credit on canteen/outdoor catering services availed prior to 1.4.2011 is allowable. - HELD THAT: - Applying the same legal principle, the Tribunal concluded that canteen/outdoor catering services were not excluded from the definition of "input services" before 1.4.2011. The appellant's claim to credit for canteen/outdoor catering services during the disputed periods was therefore sustainable. The orders of the lower authority and Commissioner (Appeals) insofar as they denied such credits were set aside in view of the pre amendment statutory position and supporting Tribunal precedents.

The denial of CENVAT credit for canteen/outdoor catering services for the stated periods is set aside and the appeals are allowed on this ground.

Final Conclusion: The Tribunal allowed the appeals, holding that the definition of "input services" prior to 1.4.2011 did not exclude car hiring/car repair or canteen/outdoor catering services; the impugned orders denying CENVAT credit for those services for the specified periods are set aside with consequential relief as per law.

CENVAT credit on input services - place of removal (exports) - port of shipment - availability of credit up to place of removal - extended period of limitation - invokability where demand is based on audit objection - reverse charge payment and production of challans as proof of discharge of service tax - interest and penalty where wrongly availed credit is reversed prior to utilization

CENVAT credit on input services - place of removal (exports) - port of shipment - availability of credit up to place of removal - Validity of denial of CENVAT credit of service tax paid on Forwarding and Cargo Handling services used in respect of export consignments. - HELD THAT: - The Tribunal found that the services rendered by the courier/forwarding agents were composite and billed as a single service for export cargo. Relying on the Larger Bench view that, for exports, the place of removal is the port of export, the credit of service tax is admissible only up to the place of removal. The appellants' contention that place of removal was the customers' premises (CIF sales) was rejected because the Larger Bench precedent fixes the port as place of removal; accordingly the Commissioner (Appeals) was correct in confirming demand of CENVAT credit in respect of forwarding and cargo handling services beyond the place of removal. [Paras 7]

Denial of CENVAT credit on Forwarding and Cargo Handling services (as held by Commissioner (A)) is confirmed.

Extended period of limitation - invokability where demand is based on audit objection - Whether the extended period of limitation was invokable in appeal E/20023/2018 for the period June 2009 to May 2013. - HELD THAT: - The Tribunal held that the extended period cannot be invoked where the demand arises from an audit objection and there was no concealment with intent to evade duty. The appellant had filed ER-1 returns disclosing availment of credit and there was no finding of suppression or intent. Consequently, demands for the period June 2009 to May 2013 are time-barred and can only be confirmed for the normal one-year limitation period. [Paras 7]

Extended period of limitation not invokable; demand in E/20023/2018 is restricted to the normal period and the demand for June 2009 to May 2013 is barred by limitation.

Reverse charge payment and production of challans as proof of discharge of service tax - Whether CENVAT credit of service tax paid on Repair and Maintenance of ETP could be denied where invoices did not show service tax but recipient had discharged tax under reverse charge and produced challans. - HELD THAT: - The appellant produced monthly challans demonstrating discharge of service tax under reverse charge notification and explained the absence of service tax in supplier invoices on that basis. The Tribunal accepted that the appellant had paid the tax and therefore the denial of CENVAT credit in respect of Repair and Maintenance of the ETP was not justified. [Paras 7]

Denial of CENVAT credit of Rs. 35,535/- for Repair and Maintenance of ETP is set aside; credit allowed.

Interest and penalty where wrongly availed credit is reversed prior to utilization - Liability for interest and penalty where disputed CENVAT credit was reversed prior to utilization and sufficient balance remained in CENVAT account. - HELD THAT: - The appellant produced CENVAT account extracts showing closing balances and evidence that disputed credit was not utilized and was reversed. Applying the principle in Bill Forge (Karnataka High Court) and similar precedents, the Tribunal held that where the wrongly availed credit is reversed before utilization and sufficient balance existed, interest and penalty are not leviable. Consequently, interest and penalties confirmed by Commissioner (A) were set aside. [Paras 7]

Interest and equal penalties confirmed by Commissioner (A) are set aside.

CENVAT credit on input services - Computation and quantification of the demand for CENVAT credit after applying the limitation and credit-allowability findings. - HELD THAT: - The Tribunal allowed the appeals partly and remanded the matter for proper computation of the demand restricted to the normal period and after giving effect to the findings on allowability of specific credits, limitation, and deletion of interest and penalties. The remand is for numerical computation only in the light of the legal conclusions recorded by the Tribunal. [Paras 8]

Matter remanded for proper computation of demand for the normal period; interest and penalties set aside.

Final Conclusion: Appeals partly allowed: denial of CENVAT credit on forwarding and cargo handling services beyond the port of export upheld; extended period of limitation not invokable for specified earlier period in E/20023/2018; denial of credit for Repair and Maintenance of ETP set aside on proof of reverse charge payment; interest and penalties set aside; case remanded for computation of demand for the normal period in accordance with these findings.

Input service - Cenvat credit - nexus between service and manufacturing activity - construction of staff colony as input service - welfare activity - distinction between definition of input and input service

Input service - Cenvat credit - nexus between service and manufacturing activity - construction of staff colony as input service - welfare activity - distinction between definition of input and input service - Construction of staff quarters within factory premises is an input service eligible for Cenvat credit for the period April, 2005 to October, 2006. - HELD THAT: - The exclusion of construction activities from the definition of input service introduced post 2011 is not applicable to the period in dispute. The appellate finding that the construction was merely a welfare activity was contrary to the factual position recorded in the show cause reply that the staff quarters were built within the factory compound to ensure ready availability of labour and to maintain continuous manufacturing operations. That factual nexus between the impugned construction and the manufacturing activity is sufficient to treat the construction related services as input services. The Apex Court decision in Maruti Suzuki concerned the narrower concept of input, and does not preclude treating construction related services as input services where a reasonable nexus to the business is established. The Tribunal relied on consistent authority recognizing that provision and maintenance of staff accommodation at remote factory locations may be integral to manufacturing and, therefore, services connected therewith fall within the ambit of input services. The Commissioner (Appeals) failed to appreciate these facts and legal distinctions and therefore erred in denying credit. [Paras 5, 6, 7, 8]

The impugned construction of staff colony is held to be an input service linked to the appellant's manufacturing activity and the appellant is entitled to the Cenvat credit; appeal allowed and consequential benefits to follow.

Final Conclusion: The Tribunal allowed the appeal, holding that construction of staff quarters within the factory compound for the period April, 2005 to October, 2006 bore a sufficient nexus to manufacturing and constituted an input service admissible for Cenvat credit; the order under challenge is set aside and consequential benefits follow.

Procedural fairness - statutory remedy of appeal - stay petition - deferment of coercive steps

Stay petition - deferment of coercive steps - procedural fairness - Whether the revenue authority should refrain from taking coercive action pending disposal of the stay petition filed by the assessee in the appellate proceedings. - HELD THAT: - The petitioner had timely invoked the statutory remedy of appeal and had also filed a stay petition before the appellate authority. In the circumstances, principles of procedural fairness require that the revenue authority should await the appellate authority's decision on the stay petition before executing coercive measures. The High Court directed the respondent authority to defer coercive steps until the third respondent considers and disposes of the stay petition, urging expeditious consideration. [Paras 3]

Respondent authority directed to defer coercive steps until the appellate authority considers the stay petition; appellate authority to dispose of the stay petition expeditiously.

Final Conclusion: Writ petition disposed by directing the revenue authority to refrain from coercive action pending adjudication of the stay petition by the appellate authority, with a direction for expeditious disposal.

Mining includes quarrying - concessional inter state rate under Section 8(3)(b) of the Central Sales Tax Act - purposive interpretation of 'goods for sale' for use in manufacture, processing, mining or generation of power - restrictive meaning of 'goods' under the CST Act does not preclude concessional treatment where goods are used in mining or for generation of power - CST registration suffices for claiming concessional rate

Mining includes quarrying - Quarrying activity carried on by the petitioner is to be treated as 'mining' for the purposes of the Central Sales Tax Act. - HELD THAT: - After examining the statutory definitions in the Mines Act and the regulatory scheme under the MMDR Act, and having regard to authoritative decisions treating quarry leases as included within mining leases, the Court held that 'mine' is a genus of which quarrying is a species. The regulatory distinction (open cast versus subterranean workings) serves regulatory objectives (safety, allocation of permitting powers) and is not persuasive for construing fiscal concessions under the CST Act. Applying a common parlance and purposive approach to the fiscal context, the Court concluded that excavation of minerals by open cast working (quarrying) involves winning a mineral and falls within the expression 'mining' as used in Section 8(3)(b) of the CST Act. [Paras 3, 9, 11, 13, 18]

Quarrying carried on by the petitioner is included within 'mining' for CST Act purposes.

Concessional inter state rate under Section 8(3)(b) of the Central Sales Tax Act - purposive interpretation of 'goods for sale' for use in manufacture, processing, mining or generation of power - restrictive meaning of 'goods' under the CST Act does not preclude concessional treatment where goods are used in mining or for generation of power - The petitioner is entitled to claim the concessional inter state rate for high speed diesel (HSD) used in its quarrying activity; revocation of that concession was illegal. - HELD THAT: - The Court recognised that the definition of 'goods' in the CST Act was subsequently restricted to certain petroleum products and alcoholic liquor because most goods migrated to the GST regime. Nonetheless, adopting a purposive construction of Section 8(3)(b), the bench held that where goods are used in mining (including quarrying), in manufacture or processing, in telecommunications, or for generation/distribution of power, the phrase 'goods for sale' in the second limb must be read as a common category of goods exigible to tax under the applicable State enactment. The concession under Section 8 is intended to mitigate cascading tax where an inter state purchaser procures goods for resale or for use in manufacture/processing etc.; that object is not defeated by the restrictive definition introduced in the CST Act. Reliance on Carpo Power Ltd. (Division Bench) and the Supreme Court's approval of that decision further supports entitlement where the retained goods continue to be governed by CST until notifications under the CGST/SGST statutes take effect. Applying these principles, the Court found the Assessing Officer's revocation of the HSD authorization and deletion from the CST registration to be illegal and arbitrary. [Paras 13, 19, 20, 22, 24]

The petitioner is entitled to the concessional rate for inter state purchases of HSD used in its quarrying activity; the revocation is set aside and the registration is to be amended to reflect 'HSD'.

CST registration suffices for claiming concessional rate - The absence of a separate KG&ST (state GST) registration does not preclude the petitioner from claiming the concessional inter state rate under the CST Act. - HELD THAT: - The Court noted that the petitioner held a valid CST registration and had been allowed concessional treatment under the VAT regime. Section 7(2) of the CST Act permits a dealer liable to pay tax under the State sales law to obtain CST registration. The petitioner's claim was confined to use of HSD in quarrying and to inter state purchases; it was not a dealer in the goods retained under the general sales tax enactment for intra state resale. Consequently, the State's contention that KG&ST registration was a precondition was held to be without basis and not admissible at that stage. [Paras 25, 26]

CST registration is sufficient for claiming the concessional rate in the circumstances of this case; lack of KG&ST registration does not bar the claim.

Final Conclusion: The revision petition is allowed; the orders of the Assessing Officer, first appellate authority and the Tribunal are set aside. The Certificate of Registration under the CST Act is to be restored and amended to record HSD, and the petitioner is entitled to the concessional inter state rate for HSD used in its quarrying (mining) activity. Parties to bear their respective costs.

Estimation of sale price - stock transfer valuation - single point levy of tax - proof of inter-state movement of goods - F Forms not mandatory but corroborative evidence required

Estimation of sale price - stock transfer valuation - single point levy of tax - Tribunal was correct in confirming the assessment which estimated the sale price by the C&F agent because the stock transfer value exceeded the sale value. - HELD THAT: - The Court applied the ratio in STRev.No.306/2008 (M/s. Group Pharmaceuticals Ltd. v. State of Kerala) where the Head Office fixed the value and a lower sale price was found to be improper. At the time of the transactions there was a single point levy of tax; consequently a sale price fixed lower than the stock transfer value could not be sustained. On these facts, estimation of the sale price was upheld and the question is answered against the assessee and in favour of the Revenue. [Paras 2]

Estimation of sale price confirmed; assessment upheld in favour of the Revenue.

Proof of inter-state movement of goods - F Forms not mandatory but corroborative evidence required - Tribunal was correct in rejecting the claimed stock transfer for want of sufficient proof of movement of goods despite F Forms not being mandatory in that year. - HELD THAT: - Although F Forms became mandatory only from February 2002, the assessee failed to produce independent, authenticated evidence to establish movement of goods. Documents generated solely by the assessee (transfer invoices, Form 27B declarations and communications to check posts) were not properly authenticated by the Department or sealed by check post authorities and therefore were insufficient. In absence of any sustainable corroborative evidence, the Tribunal rightly rejected the stock transfer claim and the proof of movement was not accepted. [Paras 3]

Claimed stock transfer rejected for lack of satisfactory proof; finding upheld for the Revenue.

Final Conclusion: Revision dismissed; both questions answered against the assessee and in favour of the Revenue; no order as to costs.

Violation of principles of natural justice - Right to personal hearing - Duty of Assessing Officer to indicate date of personal hearing - Imposition of penalty without affording personal hearing - Remand for fresh assessment after affording personal hearing - Conditional relief subject to interim payment - Assessment to be decided on merits on fresh hearing

Violation of principles of natural justice - Right to personal hearing - Duty of Assessing Officer to indicate date of personal hearing - Imposition of penalty without affording personal hearing - Impugned assessment orders set aside for failure to afford an indicated date for personal hearing and thereby violating principles of natural justice. - HELD THAT: - The Court found that although a notice of proposal mentioned that personal hearing would be afforded, the Assessing Officer did not indicate any specific date for such hearing and the petitioner did not file a written reply. Having regard to Circular No.7/2014 and the Court's prior exposition of its scope, the absence of an indicated date for personal hearing-particularly where penalty has been proposed-amounts to denial of the personal hearing guaranteed by the procedure. The Court therefore set aside the impugned orders on grounds of violation of natural justice without adjudicating the merits of taxability or penalty.

Impugned assessment orders for AYs 2013-14 and 2014-15 are set aside on the ground of violation of principles of natural justice; merits not decided.

Remand for fresh assessment after affording personal hearing - Conditional relief subject to interim payment - Assessment to be decided on merits on fresh hearing - Matter remitted to the Assessing Officer for fresh assessment after affording personal hearing, subject to the petitioner paying 15% of the tax liability as a condition for reopening the assessment process. - HELD THAT: - The Court ordered that on receipt of the petitioner's written reply to the notice of proposal and payment of 15% of the tax liability for each assessment year within two weeks, the Assessing Officer shall intimate the exact date of personal hearing. Thereafter, upon completion of the personal hearing, the Assessing Officer is directed to pass fresh speaking orders of assessment on merits and in accordance with law within four weeks. These directions effect a remand for fresh consideration of the issues previously decided by the Assessing Officer, with the interim payment as a condition precedent to the fresh proceedings.

Proceedings remitted to the Assessing Officer for fresh assessment after indicating a date for personal hearing and upon the petitioner paying 15% of the tax liability; fresh orders to be passed on merits within prescribed time.

Final Conclusion: Writ petitions allowed; impugned assessment orders for AYs 2013-14 and 2014-15 set aside for breach of natural justice and remitted to the Assessing Officer for fresh assessment after an indicated personal hearing, subject to the petitioner making the specified interim payment; merits left open.

Reversal of Input Tax Credit - Enclosure of invoice-wise mismatch data with show-cause notice - Requirement of pre-revision enquiry with the assessing officer of the other end dealer - Opportunity of personal hearing before passing revisional orders - Remand for fresh consideration where procedure has not been followed

Enclosure of invoice-wise mismatch data with show-cause notice - Requirement of pre-revision enquiry with the assessing officer of the other end dealer - Validity of show-cause / pre-revision notices that do not furnish invoice-wise/web report particulars and where no preliminary inter office enquiry was conducted - HELD THAT: - The Court found that the pre-revision/show-cause notices in several matters merely referred to a web-based mismatch between Annexure I and Annexure II without enclosing the intranet/web report or invoice-wise particulars and without recording the scope or results of any preliminary enquiry. The Commissioner's Circular No.10 of 2015 (01.04.2015) mandates that invoice-wise data of mismatches must be attached to such notices and that enclosure must be acknowledged. The Court reiterated the principle in the cited decision of this Court in JKM Graphics Solutions Pvt. Ltd. that a mismatch is only a starting point and that the assessing officer is required, before issuing a mechanically drafted show-cause notice, to conduct enquiries (including with the assessing officer of the other end dealer) to ascertain whether the mismatch arises from factors other than deliberate default. Absent such enquiry and absence of invoice-wise particulars in the notice, the purchaser cannot reasonably be expected to reconcile or meet the allegations. [Paras 6, 7, 8, 9, 10]

Show-cause / pre-revision notices which do not enclose invoice-wise/web mismatch particulars and where the required preliminary enquiry has not been conducted are procedurally defective and liable to be set aside.

Reversal of Input Tax Credit - Opportunity of personal hearing before passing revisional orders - Remand for fresh consideration where procedure has not been followed - Sustainability of orders reversing Input Tax Credit and consequential demand notices where the assessing officers did not follow the mandated procedure or afford adequate opportunity of hearing - HELD THAT: - The Court held that reversal of ITC and issuance of consequent demands cannot be sustained where the Department has not followed the procedure of providing full particulars, conducting necessary inter office verification and giving the dealer a meaningful opportunity to respond, including personal hearing. The Court observed that the purchaser cannot be penalised for defaults of the selling dealer without independent enquiry and that where procedural compliance was partial or absent, the impugned revisional orders and consequent demands are vulnerable. In view of these infirmities, the Court quashed the impugned assessment revisions and demand notices and remitted the matters to the assessing officers for a thorough enquiry in consultation with the other end assessing officers. The Court mandated that any fresh show-cause notice must include invoice-wise particulars and reasons as required by the Circular and the cited precedent, give the dealer an opportunity to file objections and to be heard, and thereafter that reasoned orders be passed within eight weeks. [Paras 11, 12]

The revised assessment orders reversing ITC and the consequential demand notices are quashed; matters are remitted for fresh consideration after compliance with the Circular, inter office verification and after affording the petitioners a chance to object and a personal hearing; the assessing officers to complete the process within eight weeks.

Final Conclusion: The writ petitions are allowed in part: impugned revisional assessment orders reversing Input Tax Credit and the consequential demand notices are quashed and the matters remitted to the assessing officers for fresh enquiry and decision in accordance with Circular No.10 of 2015 and the principles stated in the cited decision, with invoice wise particulars furnished, inter office verification undertaken, and opportunity of personal hearing afforded; exercise to be completed within eight weeks.

Reversal of input tax credit - return mismatch between seller and buyer returns - requirement to furnish invoice-wise mismatch data - duty to enclose web report and particulars in show cause/pre revision notice - right to opportunity of personal hearing before revising assessments - remand for fresh consideration where procedural mandates not followed - compliance with Commissioner's Circular No.10 of 2015

Requirement to furnish invoice-wise mismatch data - duty to enclose web report and particulars in show cause/pre revision notice - right to opportunity of personal hearing before revising assessments - compliance with Commissioner's Circular No.10 of 2015 - remand for fresh consideration where procedural mandates not followed - Whether the revised assessment orders reversing the petitioner's input tax credit could be sustained when the pre-revision/show-cause notices did not furnish invoice-wise particulars or web-report details and a personal hearing was not afforded, in light of Circular No.10 of 2015 and the decision in [2017] 99 VST 343 (Mad). - HELD THAT: - The court found that the pre-revision notices relied upon a mismatch between Annexure I and Annexure II but did not furnish the name/TIN of the other dealer nor enclose the intranet web report or invoice wise data which would enable reconciliation. Circular No.10 of 2015 mandates that invoice wise mismatch data be attached to mismatch based notices (either in print, CD or by email) and that the fact of enclosure be recorded. The court relied on the procedure laid down in [2017] 99 VST 343 (Mad) that mismatch is a starting point requiring departmental enquiry, consultation with the assessing officer of the other end, and, only upon a prima facie view after such verification, issuance of a show cause notice specifying the scope of enquiry and particulars so the dealer can meaningfully defend. The Assessing Officer did not scrupulously follow these mandates; the impugned orders were therefore passed without requisite particulars and without affording an opportunity of personal hearing, rendering the revision procedurally flawed. [Paras 6, 7, 8, 9, 10]

Impugned orders dated 23.03.2018 are set aside and the matter is remitted for fresh consideration; respondent to conduct enquiry in consultation with the other end assessing officers, issue a show cause notice with full invoice wise particulars and reasons as required by Circular No.10 of 2015 and the cited decision, afford personal hearing, and thereafter pass orders on merits within eight weeks.

Final Conclusion: The writ petitions are allowed to the extent that the revised assessments for TIN: 33653783316 (2011-12 to 2013-14) are set aside and remitted for fresh consideration; the Assessing Officer must comply with Circular No.10 of 2015 and the procedure in [2017] 99 VST 343 (Mad), furnish invoice wise particulars and web report data, afford personal hearing, and conclude the exercise within eight weeks.

Termination of mandate and substitution of arbitrator - Appointment of substitute arbitrator according to rules applicable to the original appointment - Agreement-based appointment procedure binding for substitute arbitrator - Independence and impartiality / justifiable doubts test - Former employee not automatically disqualified as arbitrator

Termination of mandate and substitution of arbitrator - Appointment of substitute arbitrator according to rules applicable to the original appointment - Agreement-based appointment procedure binding for substitute arbitrator - Validity of the ICA's appointment of a nominee arbitrator on behalf of the State before the expiry of the period sought by the State and without following the appointment procedure agreed between the parties. - HELD THAT: - Section 15(2) of the Arbitration and Conciliation Act, 1996 requires that where the mandate of an arbitrator terminates a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. Clause 39.2.2 of the Concession Agreement obliged each party to nominate one arbitrator, with the presiding arbitrator appointed under ICA Rules. The procedure agreed for the original appointment therefore governs the appointment of a substitute. The State requested 30 days to nominate a substitute after ICA raised an objection; ICA declined and appointed a nominee arbitrator on behalf of the State. That appointment constituted a usurpation of the State's contractual right to nominate within the agreed procedure, and was unjustified because the ICA could validly fill the vacancy only if the State had no intention of filling it. The High Court failed to apply Section 15(2) and relevant precedent holding that the original appointment procedure applies to substitutes; its conclusion that institutional rules governed without regard to Section 15(2) was unsustainable. [Paras 3]

The ICA's appointment of the nominee arbitrator on behalf of the State was unjustified and contrary to Section 15(2) and the agreement; the High Court's order upholding that appointment is set aside.

Independence and impartiality / justifiable doubts test - Former employee not automatically disqualified as arbitrator - Temporal distance weakening bias objection - Whether the objection to the State's nominee on the ground that he was a former employee of the State (retired over ten years earlier) gave rise to justifiable doubts as to his independence and impartiality. - HELD THAT: - The 1996 Act does not per se disqualify a former employee from acting as an arbitrator; the test is whether circumstances would lead a fair-minded and informed person to conclude a real possibility of bias. The objection by ICA was a bald assertion of possible lack of independence and impartiality, unsupported by material. The passage of over ten years since retirement substantially weakens any apprehension of bias, consistent with authorities applying the 'real danger' or informed observer test. Moreover, the nomination and objection predated the 2015 amendment inserting the Fifth Schedule; even reading Entry 1 of the Fifth Schedule, the wording indicates present/current relationships are disqualifying, and does not extend to past/former employment per se. Mere allegations of bias without substantiation do not warrant removal. [Paras 3]

The objection to the nominee based on his being a former employee (retired over ten years ago) was untenable and insufficient to disqualify him for justifiable doubts of independence or impartiality.

Final Conclusion: The High Court order is set aside; the ICA's appointment on behalf of the State was unjustified. By mutual agreement of the parties, the three-member tribunal's mandate is terminated and Justice S.S. Nijjar (Retd.) is appointed Sole Arbitrator to continue the arbitration, with the material on record deemed received by the Sole Arbitrator. The appeal is disposed of accordingly.