TaxTMI Updates e-Newsletter
Jan 08,2019

Bank guarantee - encashment of security pending appeal - appropriation of security - adjudication of tax demand and penalty - release of detained goods on furnishing security

Bank guarantee - encashment of security pending appeal - appeal against adjudication - The Bank Guarantee furnished by the petitioner shall not be encashed or appropriated by the authorities pending disposal of the petitioner's appeal (Ext.P9). - HELD THAT: - The petitioner transported goods which were detained and released on furnishing a Bank Guarantee in terms of an earlier order. Subsequently the primary authority completed adjudication, imposed penalty and appropriated the Bank Guarantee; the petitioner filed an appeal against that adjudication (Ext.P9) and apprehended encashment of the Bank Guarantee before the appeal is considered. In the exercise of the court's supervisory jurisdiction and in the interest of justice, the authorities were directed to keep the Bank Guarantee untouched until the appeal is disposed of, thereby preserving the status quo pending adjudication of the statutory remedy invoked by the petitioner.

Authorities directed not to encash or appropriate the Bank Guarantee till Ext.P9 is considered.

Final Conclusion: The writ petition is disposed of by directing the authorities to keep the Bank Guarantee intact and not to encash it until the petitioner's appeal (Ext.P9) is decided.

Zero rated supply - Refund of integrated tax on export - Withholding refund under rule 96(4) of the CGST Rules - Drawback claim serial number suffixed with A or C

Amendment of pleadings - The petitioner's draft amendment was permitted to be carried out forthwith. - HELD THAT: - The learned advocate for the petitioner tendered a draft amendment during the hearing. The Court considered the request and allowed the proposed amendment in terms of the draft produced in Court, directing that the same be carried out forthwith.

Amendment allowed and to be carried out forthwith.

Zero rated supply - Refund of integrated tax on export - Withholding refund under rule 96(4) of the CGST Rules - Drawback claim serial number suffixed with A or C - Petitioner's claim for refund of integrated tax on exported goods requires adjudication; notice issued to respondents. - HELD THAT: - The petitioner contended that, being a registered person making zero rated supply, it was eligible to claim refund of integrated tax as provided under the statute and that all requirements of the relevant refund rule had been fulfilled. Reliance was placed on the contention that the only circumstances in which a refund may be withheld are those enumerated in sub rule (4) of rule 96, which the petitioner says do not apply. The petitioner also disputed the applicability of the Board Circular relied upon by the respondents and stated that any differential drawback amount has already been returned. The Court did not adjudicate the merits of the refund claim; having considered the submissions, it directed that notice be issued to the respondents for consideration of the claim.

Notice issued returnable on 24th January, 2019 for adjudication of the petitioner's refund claim.

Final Conclusion: The Court allowed the petitioner's proposed amendment to pleadings and issued notice to the respondents for adjudication of the petitioner's claim for refund of integrated tax on exports, returnable on 24 January 2019.

Detention and release of goods on furnishing bank guarantee - consideration of e-way bills in adjudication

Detention and release of goods on furnishing bank guarantee - Detained goods to be released to the petitioner on furnishing a bank guarantee. - HELD THAT: - The Court ordered that the goods detained under Ext.P7 shall be released to the petitioner upon the petitioner furnishing a bank guarantee. The direction is interlocutory and conditions release on the provision of the bank guarantee by the petitioner to secure the concerned revenue or interests of the respondents pending adjudication.

Goods detained under Ext.P7 released to petitioner on its furnishing a bank guarantee.

Consideration of e-way bills in adjudication - The first respondent is to consider specified e-way bills while adjudicating the matter. - HELD THAT: - The Court directed that while adjudicating the matter, the first respondent shall take into account Exts.P3, P3(a), P4 and P4(a) e-way bills. This requires the adjudicating authority to examine those documents as part of the determination of the substantive dispute.

First respondent to consider Exts.P3, P3(a), P4 and P4(a) e-way bills during adjudication.

Final Conclusion: Writ petition disposed of by directing release of the detained goods on the petitioner furnishing a bank guarantee and by mandating that the first respondent shall consider Exts.P3, P3(a), P4 and P4(a) e-way bills while adjudicating the matter.

Summary order. Let the appeal be listed in the month of April, 2019 before the appropriate Bench; application for early hearing disposed of.

Exemption under Section 11 of the Income tax Act dependent on validity of registration - registration under Section 12A granted on basis of objects of the trust - effect of amendments to trust deed on validity of prior registration - duty to intimate change in objects to tax authorities - distinction between charitable objects and enabling powers to accomplish objects - presumption of continuity of registration until cancelled by competent authority

Effect of amendments to trust deed on validity of prior registration - registration under Section 12A granted on basis of objects of the trust - exemption under Section 11 of the Income tax Act dependent on validity of registration - duty to intimate change in objects to tax authorities - distinction between charitable objects and enabling powers to accomplish objects - presumption of continuity of registration until cancelled by competent authority - Whether exemption under Section 11 could be denied because the Trust amended its object clause without intimating the changes to the Commissioner, thereby rendering the earlier 12A registration invalid. - HELD THAT: - The Trust was registered under Section 12A on the basis of its original Trust Deed (dated 19.03.1969) and subsequently amended its deed in 1975 and 1979 without intimating the changes. The Tribunal and CIT(A) found, and this Court agrees, that the amendments did not alter or dilute the foundational charitable objects of the Trust (education and medical relief) but added objects relating to rural socioeconomic welfare and powers to make donations and promote upliftment. Those additions were viewed as enabling powers to accomplish the Trust's original charitable purposes rather than a wholesale change of objects that would vitiate the basis of the original registration. The Allahabad High Court decision relied upon by Revenue turned on a foundational fact of a wholesale alteration of objects; that factual matrix is absent here and the decision is therefore distinguishable. The Court also observed the practical and legal force of a registration granted by the competent authority and noted, while keeping the point open, that it was questionable whether the Assessing Officer could ignore a registration granted by the Commissioner in the absence of its cancellation by that authority. Applying these conclusions, the Tribunal correctly upheld the exemption claim because the trust's objects remained charitable despite the amendments and the registration continued to subsist for the year in question. [Paras 4, 5, 8, 9]

Tribunal's finding that the amendments did not annul the charitable character of the Trust and that exemption under Section 11 could not be denied was upheld; Revenue's appeal dismissed.

Final Conclusion: The High Court dismissed the Revenue's appeal, upholding the Tribunal's and CIT(A)'s conclusions that the post 1973 amendments to the Trust Deed did not effect a wholesale change of charitable objects and therefore did not invalidate the Trust's 12A registration or its entitlement to exemption under Section 11 for AY 2009 10.

Disallowance under Section 14A in relation to exempt income - Computation under Rule 8D(2) - Requirement of nexus between borrowed funds and exempt income - Application of Rule 8D(2)(ii) where interest is not directly attributable - Independence of Assessing Officer's re examination despite DRP directions - Remand for fresh consideration

Disallowance under Section 14A in relation to exempt income - Requirement of nexus between borrowed funds and exempt income - Computation under Rule 8D(2) - Application of Rule 8D(2)(ii) where interest is not directly attributable - Remand for fresh consideration - Remand to the Assessing Officer to examine afresh the claim that debenture interest was incurred for acquisition of a company and therefore not liable to disallowance under Section 14A read with Rule 8D. - HELD THAT: - The Court found that the Dispute Resolution Panel and the Tribunal did not advert to the assessee's specific contentions that (a) CCD proceeds raised in FY 2008-09 were applied for purchase of Glamouroom Taps Pvt. Ltd. (amalgamated with the assessee w.e.f. 01.04.2008) and the debenture interest related to that borrowing, and (b) investments during the relevant year were made out of accumulated reserves and operating cash flows, negating any nexus with interest-bearing borrowings. The Court noted a factual error in the Tribunal's treatment of investment movement and held that the proper forum to examine these factual and nexus questions is the Assessing Officer. While recognising that Section 14A issues must be addressed using the machinery of Rule 8D, including Rule 8D(2)(ii) where interest is not directly attributable, the Court did not decide the merits. Instead it directed the Assessing Officer to take an independent decision on whether disallowance under Section 14A/Rule 8D is warranted, uninfluenced by the DRP's directions or the Tribunal's order, and to consider the assessee's documentary and financial submissions regarding source and application of funds. [Paras 11, 12, 13]

Matter remanded to the Assessing Officer for independent fresh consideration of the applicability of Section 14A read with Rule 8D to the debenture interest claimed to relate to acquisition of Glamouroom Taps Pvt. Ltd.; no decision on merits by the High Court.

Final Conclusion: The appeal is disposed by remanding the matter to the Assessing Officer to examine afresh, without being influenced by the DRP or Tribunal, whether the debenture interest relates to acquisition (and hence is not chargeable to disallowance under Section 14A/Rule 8D) or is attributable to exempt income; no costs.

Waiver of interest under section 158BFA(1) - exclusion of period spent awaiting seized documents for purpose of interest - liability to pay interest on undisclosed income under section 158BFA(1) - principles of natural justice in computation of statutory interest - computation of interest from the date following excluded period

Waiver of interest under section 158BFA(1) - exclusion of period spent awaiting seized documents for purpose of interest - principles of natural justice in computation of statutory interest - Whether the petitioners were entitled to waiver or exclusion of part of the period for levy of interest under Section 158BFA(1) on account of delay caused by non-supply of seized documents, and the period for which interest is payable. - HELD THAT: - The Central Board of Direct Taxes circular permits waiver or reduction of interest where failure to furnish return within the time specified in notice under section 158BC is for reasons beyond the assessee's control. Section 158BFA(1) charges interest from the day following expiry of the time specified in the notice; however, the Court recognised that principles of natural justice require exclusion of the period during which the assessee was unable to furnish returns because the seized documents were not in his possession. The factual dispute regarding when the documents were furnished could not be resolved on the record; consequently the Court accepted the petitioners' version that the documents were furnished in July 1998 and allowed a corresponding one month exclusion. On that basis delay for computing interest is treated as commencing from August 1998. The Court therefore modified the impugned orders to set aside levy of interest for the period prior to August 1998 and directed computation of interest for the period from August 1998 up to 11 January 1999 in terms of Section 158BFA(1). [Paras 31, 36, 37]

Petitions partly allowed; levy of interest prior to August 1998 set aside, interest to be calculated from August 1998 to 11th January 1999 on undisclosed income under Section 158BFA(1), to be paid within four weeks, and files to be closed thereafter.

Final Conclusion: Writ petitions partly allowed: period prior to August 1998 excluded for levy of interest; respondents directed to compute and recover interest from August 1998 to 11 January 1999 within four weeks and then close the files.

Unexplained cash credit under section 68 - exemption of long term capital gains under section 10(38) - test of human probabilities - requirement of evidentiary confrontation and cross-examination of investigation material - preponderance of probabilities versus admissible evidence

Unexplained cash credit under section 68 - exemption of long term capital gains under section 10(38) - test of human probabilities - requirement of evidentiary confrontation and cross-examination of investigation material - Whether the amounts claimed as long-term capital gains from sale of shares of M/s Unno Industries Ltd. were to be treated as unexplained cash credits under section 68 or accepted as genuine LTCG exempt under section 10(38). - HELD THAT: - The Tribunal examined the documentary evidence placed on record by the assessees (contract notes, demat statements, bank statements, allotment/merger communications) and the Revenue's reliance on investigation reports and generalised modus operandi findings. Applying the requirement that evidence collected from third parties or investigative wings must be placed before the assessee and confronted for rebuttal, the Tribunal found no material on record specifically implicating these assessees or identifying them in the investigation reports. The Tribunal reviewed coordinate-bench decisions holding that mere suspicion, price volatility or generalised project reports cannot supplant admissible evidence; where the assessee produces supporting third party documents uncontroverted by tangible material, the claim of bona fide LTCG must prevail. While acknowledging authorities applying the test of human probabilities to detect sham transactions, the Tribunal concluded that on the facts here the assessees had placed sufficient contemporaneous documentary proof and the AO/CIT(A) had not produced or confronted any investigative evidence to discredit those documents. Consequently, the addition under section 68 was held to be unsustainable and was deleted, with any corollary disallowance of brokerage treated as consequential. [Paras 6, 7]

Addition treating the claimed LTCG as unexplained cash credit under section 68 is deleted and the LTCG accepted as genuine for AY 2014-15.

Final Conclusion: The Tribunal allowed the appeals of the assessees for assessment year 2014-15, deleted the additions under section 68 treating the impugned LTCG as genuine and noted that investigation material relied upon by the Revenue was not placed before or confronted to the assessees.

Duty to dispose of appeal on merits - power of Commissioner (Appeals) to decide issues arising from impugned order - prohibition on dismissal of appeal in limine for non-prosecution - obligation to state points for determination and reasons in order - remand for fresh disposal in accordance with Sections 250 and 251

Prohibition on dismissal of appeal in limine for non-prosecution - duty to dispose of appeal on merits - obligation to state points for determination and reasons in order - Ld. CIT(A) erred in dismissing the assessee's appeal for non-prosecution by passing a non-speaking order instead of deciding the appeal on merits. - HELD THAT: - The Tribunal held that once an appeal under Section 246A is filed and found maintainable, the Commissioner (Appeals) is obliged to apply his mind and dispose of the appeal on merits. Relying on the statutory scheme, particularly the mandate of Section 250(6) that the order shall state the points for determination, the decision thereon and the reasons, and the powers conferred by Section 251 to confirm, reduce, enhance or annul the assessment, the Tribunal concluded that CIT(A) has no power to dismiss an appeal in limine for non-prosecution. The Tribunal explained that allowing such dismissal would effectively permit an indirect withdrawal of the appeal by the assessee or enable the first appellate authority to halt the appellate machinery, which the provisions do not permit. The Tribunal also noted precedent support for the proposition that the first appellate authority must consider and decide issues arising from the impugned order whether or not raised by the appellant. Applying these principles, the Tribunal found the impugned summary, non-speaking dismissal to be legally impermissible. [Paras 4, 5]

Impugned order of Ld. CIT(A) dated 15/02/2016 set aside insofar as it dismissed the appeal in a summary, non-speaking manner; such dismissal held impermissible and contrary to statutory obligations.

Power of Commissioner (Appeals) to decide issues arising from impugned order - remand for fresh disposal in accordance with Sections 250 and 251 - Direction issued to Ld. CIT(A) to re-hear and decide the appeal afresh on merits in accordance with Sections 250 and 251 of the Income Tax Act. - HELD THAT: - Having found the earlier dismissal unlawful, the Tribunal directed that the appeal be disposed of anew. The Tribunal required the Commissioner (Appeals) to apply the procedural mandates of Section 250 (including making further inquiries where necessary and stating points for determination) and to exercise the powers under Section 251 while recording reasons for each decision. The Tribunal remitted the matter for de novo consideration so that the substantive grounds (including additions under Section 69, disallowance under Section 24(b), and alleged discrepancy with Form 26AS) may be examined and decided on merits by the CIT(A). [Paras 5]

Appeal remitted to Ld. CIT(A) for fresh disposal on merits in conformity with statutory requirements.

Final Conclusion: The Tribunal set aside the CIT(A)'s summary non-speaking dismissal of the appeal and remitted the matter to the CIT(A) for de novo disposal on merits in accordance with Sections 250 and 251 of the Income Tax Act; appeal treated as partly allowed for statistical purposes.

Deemed full value under section 50C(1) - Reference to Valuation Officer under section 50C(2) - Requirement to refer to DVO upon assessee's claim - Remand for fresh valuation and adjudication - Opportunity of hearing before DVO and Assessing Officer - Procedural irregularity remedied by remand

Deemed full value under section 50C(1) - Reference to Valuation Officer under section 50C(2) - Requirement to refer to DVO upon assessee's claim - Whether the Assessing Officer and CIT(A) were justified in adopting the stamp duty (circle) value as the full consideration under section 50C(1) without referring the matter to the Valuation Officer despite the assessee's specific claim under section 50C(2)(a). - HELD THAT: - The Tribunal examined the facts that the assessee sold shops for a consideration lower than the value adopted for stamp duty and had specifically sought reference to the Valuation Officer under section 50C(2)(a). The Assessing Officer rejected the request and applied the circle rates as deemed full value under section 50C(1); the CIT(A) upheld that approach on the ground that reference to the DVO was not mandatory. The Tribunal held that the refusal to refer for valuation was not sustainable in law, having regard to the requirement to consider an assessee's claim for valuation by the DVO. Relying on the principles that procedural irregularities of this nature are to be cured by remand and the need to afford the assessee an opportunity to substantiate the claimed market value, the Tribunal found that the matter could not be finally decided in favour of applying the stamp duty value without obtaining the DVO's report when the statutory provision for reference had been invoked by the assessee. [Paras 5]

The Assessing Officer's and CIT(A)'s conclusion that reference to the DVO was not mandatory was held unsustainable and set aside.

Remand for fresh valuation and adjudication - Opportunity of hearing before DVO and Assessing Officer - Procedural irregularity remedied by remand - Remedial course to be followed where the DVO was not referred despite the assessee's claim under section 50C(2)(a). - HELD THAT: - Applying the precedent relied upon by the Revenue and in the interest of justice, the Tribunal directed that the issue be set aside to the Assessing Officer with a specific mandate to refer the matter to the Valuation Officer for determination of fair market value. The Tribunal directed that the DVO afford the assessee full opportunity of hearing and thereafter submit the valuation report to the Assessing Officer. On receipt of the DVO report the Assessing Officer is to decide the dispute afresh, giving the assessee adequate opportunity of being heard in accordance with law. The Tribunal treated the defect as curable by remand rather than quashing the assessment outright. [Paras 5, 6]

Matter remitted to the Assessing Officer with directions to refer to the DVO, allow hearings, consider the DVO report and decide afresh; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the impugned conclusion that the circle rate could be applied without reference to the Valuation Officer, remitted the matter to the Assessing Officer with directions to obtain a DVO valuation after affording the assessee full opportunity of hearing and to decide the issue afresh; the appeal is allowed for statistical purposes.

Limitation for fresh assessment under section 153(2A) of the Income tax Act - date of dispatch treated as date of order for reckoning limitation - annulment of assessment as barred by limitation - binding precedent of the jurisdictional High Court

Limitation for fresh assessment under section 153(2A) of the Income tax Act - date of dispatch treated as date of order for reckoning limitation - annulment of assessment as barred by limitation - binding precedent of the jurisdictional High Court - Whether the fresh assessment orders dated 30.12.2011 but despatched on 09.01.2012 are barred by limitation under section 153(2A) and thus liable to be annulled. - HELD THAT: - The Tribunal found it undisputed that the orders were signed on 30.12.2011 but were dispatched to the assessee only on 09.01.2012, whereas the applicable limitation under the second proviso to limitation for fresh assessment under section 153(2A) of the Income tax Act expired on 31.12.2011. Relying on the reasoning of the jurisdictional High Court (following the principle in the Kerala High Court decision cited), the Tribunal held that an order is not complete for purposes of limitation unless it is issued or made known so as to be beyond the control of the authority, and therefore the date of dispatch/publication is the relevant date for reckoning limitation. The Tribunal rejected reliance on a contrary decision of the Calcutta High Court as not binding in the present jurisdiction. Applying that principle, the Tribunal concluded that the assessments were passed after the prescribed period and hence are liable to be annulled as time barred. The Tribunal further held that in view of this conclusion other substantive grounds did not require adjudication. [Paras 12, 13, 14, 15, 16]

The assessment orders for AYs 2001 02, 2002 03 and 2003 04 are annulled as barred by limitation; the Tribunal followed the binding decision of the jurisdictional High Court that the date of dispatch/publication is relevant for reckoning limitation under limitation for fresh assessment under section 153(2A) of the Income tax Act.

Final Conclusion: Appeals of the assessee allowed and appeals by the revenue dismissed; assessments for AYs 2001 02 to 2003 04 annulled as time barred under the applicable limitation rule.

Stay on recovery of demand - balance of convenience - interim payment condition - automatic vacating of stay on non-compliance - assessment under section 143(3) r.w.s. 144C

Stay on recovery of demand - interim payment condition - balance of convenience - automatic vacating of stay on non-compliance - Grant of interim stay on recovery of the demand raised for Assessment Year 2014-15 and the conditions governing such stay. - HELD THAT: - The Tribunal noted that the assessment for AY 2014-15 was completed under section 143(3) r.w.s. 144C and that the assessee had not paid any part of the outstanding demand. The assessee sought stay on recovery, asserting a strong prima facie case on merits (notably on transfer-pricing adjustments) and potential hardship due to business expansion, but failed to establish concrete financial hardship. Applying the balance of convenience, the Tribunal concluded that a conditional interim stay was appropriate rather than an unconditional injunction against recovery. Consequently, the Tribunal granted stay for a limited period subject to an interim payment equal to approximately 50% of the assessed tax demand (exclusive of interest), fixed at Rs. 35 Crores, to be paid in three specified instalments within prescribed dates. The stay was limited to six months from 04.01.2019 or until disposal of the appeal, whichever was earlier. The Tribunal further directed that failure to comply with the payment schedule would result in automatic vacating of the stay and attendant legal consequences, and fixed an early hearing date for the appeal. [Paras 5, 6, 7]

Stay on recovery granted for six months from 04.01.2019 or till disposal of the appeal, subject to payment of Rs. 35 Crores in three instalments by the dates specified; non-compliance will automatically vacate the stay.

Final Conclusion: The assessee's stay petition for Assessment Year 2014-15 is partly allowed: recovery is stayed for six months from 04.01.2019 or until disposal of the appeal on the condition that the assessee pays Rs. 35 Crores in the stipulated instalments; the stay will stand vacated automatically on default and the appeal is listed for early hearing.

Bonafide estimate of salary under section 192 - vicarious liability under section 201(1) - interest liability under section 201(1A) - exemption for leave encashment under section 10(10AA) - scope of miscellaneous petition under section 254(2) - mistake apparent on the record

Bonafide estimate of salary under section 192 - exemption for leave encashment under section 10(10AA) - vicarious liability under section 201(1) - Whether the Tribunal correctly held that KPTCL made a bonafide estimate of its employees' salary for TDS purposes and thereby discharged its obligation under section 192 so as to quash proceedings under sections 201(1) and 201(1A). - HELD THAT: - The Tribunal accepted that KPTCL, in valuing perquisites and estimating taxable salary, acted on a bonafide belief that its employees (many of whom were erstwhile employees of the Karnataka State Electricity Board) should be equated with State Government employees and thus that leave encashment on retirement was exempt under section 10(10AA)(i). The appellate bench recorded contemporaneous facts relied upon by KPTCL - the historical corporatisation of KEB into KPTCL, the Tripartite Agreement assuring continuity of benefits, longstanding acceptance by the revenue of KPTCL's TDS practice, and prior judicial and Tribunal decisions on identical facts - as factors bearing on the honesty of the estimate. The Tribunal applied established authority that an employer's obligation under section 192 is to make a bonafide estimate of salary; where such estimate is bona fide, short deduction does not render the employer an "assessee in default." The Court emphasised that the Revenue's change of view in later years did not, in these proceedings under section 254(2), permit reopening the factual assessment of bonafide belief. It further noted that decisions cited by the Revenue on different statutory contexts (search, reassessment, or discrimination under Article 14) were not apt to displace the Tribunal's conclusion on the limited enquiry under section 192. Finally, the Court reiterated the narrow scope of section 254(2) - limited to correcting patent, self evident mistakes apparent on the record - and held that the Revenue's contentions involved debatable points of fact and law not amenable to rectification under that provision. [Paras 20, 22, 23, 27, 28]

The Tribunal's conclusion that KPTCL made a bonafide estimate and thereby discharged its obligation under section 192 was upheld; proceedings under sections 201(1) and 201(1A) were rightly quashed by the Tribunal.

Scope of miscellaneous petition under section 254(2) - mistake apparent on the record - Whether the Revenue's miscellaneous petitions under section 254(2) disclosed a mistake apparent on the face of the record warranting recall of the Tribunal's orders. - HELD THAT: - The Court explained that the power under section 254(2) is confined to correcting patent, obvious errors and does not permit review, rehearing or re examination of debatable findings of fact or law. Allegations that the DR was not afforded opportunity, that certain authorities were not considered, or that different decisions undermined the Tribunal's factual findings, required detailed argument and factual reappraisal and therefore did not constitute a mistake apparent on the record. The Revenue's attempt to advance fresh or extended arguments (including reliance on earlier High Court and Supreme Court decisions in different contexts) could not convert contested questions into manifest errors. Consequently, none of the pleaded grounds warranted rectification under section 254(2). [Paras 21, 28]

The miscellaneous petitions do not disclose any mistake apparent on the record; they are without merit and do not justify recall of the Tribunal's orders.

Final Conclusion: The miscellaneous petitions filed by the Revenue under section 254(2) fail: the Tribunal correctly held that KPTCL made a bonafide estimate of salaries under section 192 and lawfully discharged its TDS obligation, and the petitions do not disclose any mistake apparent on the face of the record - accordingly the MPs are dismissed.

Penalty under section 271(1)(c) - Concealment of income - Furnishing inaccurate particulars of income - Reliance Petroproducts principle - Additions arising from non acceptance of claims

Penalty under section 271(1)(c) - Concealment of income - Furnishing inaccurate particulars of income - Reliance Petroproducts principle - Additions arising from non acceptance of claims - Whether the penalty levied under section 271(1)(c) is sustainable where additions were made by the Assessing Officer after not accepting the assessee's explanations and claims. - HELD THAT: - The Tribunal found that the additions were made because the Assessing Officer did not accept the assessee's explanations and claims in respect of various items (travel allowance reimbursement, minor discrepancy in house property receipt, management fees provisioning, certain cash deposits/capital introductions and a small disallowance under section 43B). The assessee had offered explanations and, in some instances, made voluntary additions; there was no finding of deliberate concealment or of furnishing inaccurate particulars. The Tribunal relied on the principle in Reliance Petroproducts that mere non acceptance of claims or failure to pursue an appeal against an addition does not automatically sustain a penalty under section 271(1)(c). Applying that principle, the Tribunal concluded that penalty was not leviable on the facts of the case.

Penalty under section 271(1)(c) deleted and appeal allowed.

Final Conclusion: The Tribunal set aside the penalty imposed under section 271(1)(c) for assessment year 2013-14, holding that the additions arose from non acceptance of the assessee's claims and explanations and that there was no concealment or furnishing of inaccurate particulars of income; the appeal is allowed.

Penalty under section 271(1)(c) - Concealment versus income disclosed in the return - AO's satisfaction in the course of assessment proceedings - Notice under section 274 r.w.s. 271(1)(c) requiring specification of the limb - Rejection of a claim is not equivalent to concealment or furnishing inaccurate particulars - Application of section 43B in relation to service tax remittance

Penalty under section 271(1)(c) - Concealment versus income disclosed in the return - AO's satisfaction in the course of assessment proceedings - Penalty could not be sustained insofar as it was levied with reference to income that was disclosed in the return of income. - HELD THAT: - The Tribunal held that penalty under section 271(1)(c) can be levied only if the Assessing Officer is satisfied in the course of assessment proceedings that there has been concealment or furnishing of inaccurate particulars. That satisfaction must be determined with reference to the returned income; where the amount is shown in the return, penalty for concealment cannot be sustained. The Tribunal relied on authorities (including the Delhi High Court in CIT v. SAS Pharmaceuticals) to the effect that disclosure in the return negates the charge of concealment for the purposes of section 271(1)(c). Applying this principle, the penalty based on the income returned by the assessee was held unsustainable. [Paras 11]

Penalty levied with reference to the returned income is not sustainable and is deleted.

Penalty under section 271(1)(c) - Rejection of a claim is not equivalent to concealment or furnishing inaccurate particulars - Application of section 43B in relation to service tax remittance - Penalty could not be sustained insofar as it related to additions made by the AO (donations disallowance and section 43B disallowance), because those disallowances did not amount to concealment or furnishing of inaccurate particulars. - HELD THAT: - The Tribunal examined each component of the additions. The undisclosed income item of Rs. 2,83,100/- was deleted by the CIT(A) and Revenue did not pursue appeal, so penalty relating to that addition fell with the deletion. The disallowance of donations was sustained by the CIT(A) because the assessee failed to produce evidence and TDS was not deducted; the Tribunal held that mere rejection of a claim does not automatically amount to concealment or inaccurate particulars for the purpose of section 271(1)(c), following the Apex Court in Reliance Petroproducts. Similarly, the disallowance under section 43B for service tax remittance disclosed the particulars and did not constitute concealment; furthermore, judicial authority supported the assessee's view on non-attraction of section 43B to collected service tax. On these bases the Tribunal held the penalty on these additions to be unsustainable. [Paras 12, 14, 15, 16]

Penalty insofar as it related to the additions (including donation disallowance and section 43B disallowance) is not sustainable and is deleted.

Notice under section 274 r.w.s. 271(1)(c) requiring specification of the limb - AO's satisfaction in the course of assessment proceedings - Penalty was liable to be deleted because the penalty notice and assessment order did not specify which limb of section 271(1)(c) (concealment or furnishing inaccurate particulars) was being invoked and thus showed non-application of mind. - HELD THAT: - The Tribunal accepted the CIT(A)'s reasoning that the standard proforma notice and the assessment proceedings failed to identify the specific limb of section 271(1)(c) on which penalty was proposed. The AO's assessment order did not expressly record satisfaction as to whether the additions arose from concealment or from inaccurate particulars, and the printed penalty notice omitted specification of the charge. In the absence of such specification and application of mind, the notice and consequent penalty were held to be defective and invalid, consistent with Supreme Court and High Court precedents relied upon by the CIT(A). [Paras 5, 17, 18]

Penalty is invalid for want of specification of the charge and non-application of mind in the initiation of penalty proceedings; deletion upheld on this ground as well.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s deletion of penalty under section 271(1)(c) for assessment year 2009-10: penalty could not be levied on income declared in the return, the additions did not constitute concealment or inaccurate particulars, and the penalty proceedings were defective for failure to specify the limb and for non-application of mind.

Deduction under section 80IC - test of new machinery vis-a -vis used machinery - conditions of formation to be tested in the year of formation - yearly compliance requirements for continuing deduction - prior years' acceptance not to be disturbed as basis for later years

Deduction under section 80IC - test of new machinery vis-a -vis used machinery - conditions of formation to be tested in the year of formation - yearly compliance requirements for continuing deduction - prior years' acceptance not to be disturbed as basis for later years - Whether the 80:20 ratio condition (new machinery vis-a -vis used machinery) which relates to formation must be satisfied every year of claim of deduction under section 80IC or only in the year of formation, and whether the assessee's claim for AY 2012-13 was rightly allowed. - HELD THAT: - The CIT(A) examined the textual import of conditions relating to formation and distinguished those conditions from annual compliance requirements. The tribunal accepted the view that conditions attributable to the formation of a new undertaking (such as the 80:20 ratio) are to be tested in the year of formation and need not be revisited in subsequent years; thereafter only yearly statutory tests (for example audit report, quantum of profits from the undertaking) require verification. The CIT(A) also noted that the assessee's Rudrapur unit had its entitlement to deduction accepted in earlier years and that factual indicators (sales, employment, fresh acquisitions) did not suggest fabrication to claim the benefit. Reliance was placed on precedents and the principle that, absent disturbance of the first year's acceptance or a change in facts, the revenue cannot ordinarily withdraw the deduction in subsequent years. The Assessing Officer's contrary approach of applying the formation-condition year-by-year was rejected on the facts and law, and the claim for AY 2012-13 was held to be justified. [Paras 5]

The condition of the 80:20 ratio relating to formation is to be tested only in the year of formation; the assessee's claim of deduction under section 80IC for AY 2012-13 is justified and upheld.

Final Conclusion: The Appellate Tribunal upheld the CIT(A)'s finding that formation-related conditions (including the 80:20 machinery ratio) are to be tested in the year of formation and not every year; accordingly the deduction claimed by the assessee for AY 2012-13 under section 80IC was sustained and the Revenue's appeal was dismissed.

Charitable purpose as defined in Section 2(15) - first proviso to Section 2(15) - exception for activities in the nature of trade, commerce or business or rendering any service for fee or other consideration - interpretation of the proviso to Section 2(15) in the context of Section 10(23C)(iv) - profit motive as the determinative test for distinguishing business from charitable activity - deletion of disallowances where dominant object is charitable - TDS credit - verification and grant by Assessing Officer - appealability of interest under section 220(2)

Charitable purpose as defined in Section 2(15) - first proviso to Section 2(15) - exception for activities in the nature of trade, commerce or business or rendering any service for fee or other consideration - interpretation of the proviso to Section 2(15) in the context of Section 10(23C)(iv) - profit motive as the determinative test for distinguishing business from charitable activity - deletion of disallowances where dominant object is charitable - Whether the assessee's activities fall outside charitable purpose under the first proviso to Section 2(15), thereby disqualifying it from exemption under Sections 11 and 12. - HELD THAT: - The Tribunal examined the nature and dominant object of the assessee - a society constituted to publish a weekly newspaper and disseminate information about government welfare schemes - in light of authoritative decisions (including the ratio in India Trade Promotion Organization and GS1 India) holding that the proviso to Section 2(15) must be read in the context of Section 10(23C)(iv) and that the decisive test is whether the dominant object is profit-making. Where an institution's primary purpose is advancement of objects of general public utility and not profit-making, incidental receipts or token charges do not convert the activity into business. Applying these principles to the facts, the Tribunal found no change in the assessee's objects since inception, no evidence that profit-making is the dominant object, and that income is applied for its stated objects. Consequently the authorities below erred in treating the entire surplus as business income and disallowing exemption. The Tribunal therefore directed deletion of the disallowances relating to the claim under Sections 11 and 12. [Paras 9, 16]

Grounds relating to denial of exemption under Sections 11 and 12 (application of first proviso to Section 2(15)) are allowed; disallowances deleted.

TDS credit - verification and grant by Assessing Officer - Whether the assessee is entitled to full credit for TDS claimed. - HELD THAT: - The Tribunal noted that the lower appellate authority had not adjudicated the claim for TDS credit. It restored the issue to the Assessing Officer for verification of records; if TDS was in fact deducted and deposited in accordance with law, the Assessing Officer is to grant the credit. The direction is administrative and limited to verification and grant of credit as per law. [Paras 10, 17]

Issue remanded to the Assessing Officer for verification and grant of TDS credit where legally deductible; allowed for statistical purposes.

Appealability of interest under section 220(2) - Whether the levy of interest under section 220(2) was appealable and could be set aside by the Appellate Commissioner/Tribunal. - HELD THAT: - The Tribunal agreed with the CIT(A) that interest under section 220(2) is compensatory and mandatory and that orders charging such interest are not appealable to the Commissioner (Appeals) under the provisions cited. Consequently the appellate forum had no power to entertain the grievance against the levy under that provision. [Paras 13]

Ground challenging levy of interest under section 220(2) is dismissed as not appealable before the Commissioner (Appeals).

Final Conclusion: The Tribunal partly allowed the appeals for A.Y. 2009-10 and A.Y. 2010-11 by holding that the first proviso to Section 2(15) did not operate to deny the assessee charitable status on the facts, directing deletion of the disallowances; the TDS-credit claim was remanded to the Assessing Officer for verification and grant if legally due; and the challenge to interest under section 220(2) was dismissed as not appealable.

Penalty under Section 271(1)(c) - Explanation 1 to Section 271(1)(c) - Concealment of income - Furnishing inaccurate particulars of income - Requirement of recording satisfaction by the Assessing Officer

Penalty under Section 271(1)(c) - Concealment of income - Furnishing inaccurate particulars of income - Requirement of recording satisfaction by the Assessing Officer - Validity of penalty imposed under Section 271(1)(c) where the Assessing Officer inter changed the limbs of 'concealment' and 'furnishing inaccurate particulars' and failed to record the requisite satisfaction. - HELD THAT: - The Tribunal examined the sequence of events - the quantum assessment, the show cause notice and the final penalty order - and found that the notice under Section 274 read with Section 271 did not have the appropriate clause/limb marked and that the Assessing Officer used the two limbs interchangeably. The court reiterates that 'concealment' and 'furnishing inaccurate particulars' are distinct; concealment means hiding while furnishing inaccurate particulars means adducing incorrect information. Where the AO does not specify with due application of mind which specific limb of Section 271(1)(c) is being invoked and fails to record proper satisfaction as to the exact nature of the offence, the foundational requirement for levy of penalty is absent. Given these deficiencies in recording satisfaction and identification of the charge, the penalty levied under Explanation 1 to Section 271(1)(c) could not be sustained. [Paras 5]

Penalty under Section 271(1)(c) set aside for failure to record proper satisfaction and for inter changing distinct limbs; appeal allowed.

Final Conclusion: The penalty confirmed by the lower authority under Section 271(1)(c) is quashed as the Assessing Officer failed to specify and record satisfaction as to the exact limb of the offence-concealment or furnishing inaccurate particulars-thereby vitiating the penalty proceedings; the appeal is allowed.

Mandamus - Initiation of proceedings under Handling of Cargo in Customs Area Regulations, 2009 - Investigation by Customs Department - Judicial restraint where administrative investigation pending - Interim relief pending investigation

Mandamus - Initiation of proceedings under Handling of Cargo in Customs Area Regulations, 2009 - Investigation by Customs Department - Direction to the 3rd respondent to initiate proceedings against the 4th respondent - HELD THAT: - The petitioner sought a mandamus directing the 3rd respondent to initiate proceedings under the Handling of Cargo in Customs Area Regulations, 2009, alleging unlawful release of its container by the 4th respondent. The respondents informed the Court that the Department of Chennai Customs had already commenced an investigation and produced a letter confirming the same. In view of the ongoing investigation, the Court declined to issue the specific mandamus sought and did not pronounce on the merits of the allegations. The Court disposed of the writ petition while leaving the matter to the administrative process so that appropriate action may be taken after completion of the investigation.

Writ petition disposed without issuing the mandamus sought; investigation already underway and authorities to take appropriate action after its completion.

Judicial restraint where administrative investigation pending - Interim relief pending investigation - Whether the Court should express a view on the merits or interfere while administrative investigation is in progress - HELD THAT: - The Court refrained from expressing any view on the merits of the contentions between the parties because an administrative investigation by the Customs Department was in progress. The Court emphasised that the parties ought to cooperate with the investigation and the Adjudicating Authority should pass appropriate orders on conclusion of the inquiry. The Court granted liberty to the petitioner and the 4th respondent to cooperate with the investigation and to apply for interim relief, if necessary, during the pendency of the investigation.

Court declined to adjudicate merits and exercised judicial restraint; liberty granted to parties to cooperate and to seek interim relief during investigation.

Final Conclusion: The writ petition is disposed of as the Customs Department's investigation is already underway; the Court declined to issue the mandamus sought or to opine on merits, leaving the matter to the investigatory and adjudicatory process while granting liberty to the parties to cooperate and to move for interim relief if necessary.

Confiscation of seized goods - penalty under the Customs Act - presumption under Section 123 of the Customs Act - burden of proof to establish smuggling and foreign origin - lawful possession by way of familial gift/stridhan - requirement of foreign marking and purity evidence to prove import origin - application of Gyan Chand precedent

Presumption under Section 123 of the Customs Act - burden of proof to establish smuggling and foreign origin - confiscation of seized goods - penalty under the Customs Act - lawful possession by way of familial gift/stridhan - requirement of foreign marking and purity evidence to prove import origin - Whether the seized gold bars could be presumed to be smuggled and lawfully confiscated with penalty imposed where the department failed to establish foreign origin and ownership was claimed as familial gifts - HELD THAT: - The Tribunal found that the Department did not produce evidence to establish that the two seized gold bars were of foreign origin or smuggled into India. The bars bore no foreign marking, the departmental test reports from the Government mint were not on record, and no further investigation was undertaken to connect the seized household gold with the earlier seizure of 4 kgs. The appellant's family statements and an affidavit by the donor consistently asserted that the bars were purchased earlier at Raxaul and gifted within the family as customary gifts (described as stridhan). In these circumstances the statutory presumption of smuggling under Section 123 could not be invoked; the onus on the Department to prove illegal importation and possession was not discharged. Applying the principle in Gyan Chand, the Tribunal held that, absent proof of smuggling or foreign origin, confiscation under Section 111(b) and penalty under Section 112 could not be sustained. [Paras 18, 19]

Seizure and confiscation of the two gold bars and the penalty imposed upon Shri Ram Naresh Chaurasia are set aside; the appeal is allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeal, holding that the Department failed to establish that the seized gold bars were smuggled or of foreign origin, the presumption under Section 123 did not apply, and therefore the confiscation and penalty against the appellant were set aside.

Classification of goods - countervailing duty leviability - appealability of assessment of bill of entry - mixed question of law and fact - remand for fresh adjudication

Countervailing duty leviability - manufacture in India - CVD claim on imported used jute bags raised for first time before the Tribunal - HELD THAT: - The Tribunal held that the contention that countervailing duty is not chargeable because the imported used jute bags are not manufactured in India raises a substantial question of law and may be taken up even at the Tribunal stage. Both lower authorities had not considered this legal issue. Given that it involves a substantial question of law which was not adjudicated below, the matter requires fresh consideration by the assessing/adjudicating authority.

Issue not adjudicated on merits by lower authorities and remanded to the assessing/adjudicating authority for reasoned consideration.

Appealability of assessment of bill of entry - assessment of bill of entry - Maintainability of appeal against assessment arising from the bill of entry where importer declared classification in the bill - HELD THAT: - The Tribunal disagreed with the Commissioner (Appeals) who had dismissed the appeal as not maintainable on the ground that the importer had declared the classification in the bill of entry. Relying on settled law that an assessment order embodied in a bill of entry is appealable, the Tribunal held that the importer has the right to challenge the assessment even if a classification was declared in the bill of entry. Consequently, the dismissal of the appeal as non maintainable was unsustainable.

Appeal is maintainable; impugned dismissal by Commissioner (Appeals) set aside.

Classification of goods - mixed question of law and fact - Correct Customs Tariff Heading for the imported goods (whether other jute bags or used gunning cuttings) - HELD THAT: - The Tribunal noted that the classification dispute - whether the imported items fall under the heading for other jute bags as treated by the Revenue or under the heading for used gunning cuttings as contended by the importers - involves mixed questions of law and fact which the lower authorities have not finally determined on a reasoned basis. In view of the mixed character of the issues and the absence of a speaking, reasoned decision resolving these matters, the Tribunal considered it appropriate that the assessing/adjudicating authority examine classification afresh and pass a reasoned order on all aspects.

Classification issue remanded to the assessing/adjudicating authority for fresh adjudication by a reasoned speaking order.

Final Conclusion: The Tribunal allowed the appeals by setting aside the impugned order and remanding the matters to the assessing/adjudicating authority for fresh, reasoned consideration on classification, the newly raised CVD point, and related issues, and held that the appeal against the bill of entry assessment is maintainable.

Summary order. Delay condoned; notice issued; stay granted on operation of the impugned order passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi, until further orders.

Limitation - extended period under proviso to Section 73 - willful suppression of facts - penalty for suppression requiring mens rea - statutory effect of amendment to Section 80 - payment of duty with interest prior to issuance of show cause notice

Limitation - extended period under proviso to Section 73 - payment of duty with interest prior to issuance of show cause notice - statutory effect of amendment to Section 80 - willful suppression of facts - penalty for suppression requiring mens rea - Whether the show cause notice and the consequential orders for non-payment of service tax for 2012-13 are time-barred and whether penalty can be sustained on the ground of suppression of facts where duty and interest were paid before issuance of the notice. - HELD THAT: - The Department's audit on 27.09.2013 recorded non-payment for the period April 2012-March 2013, and the appellant paid the tax on 27.09.2013 and interest on 14.10.2014. The record shows prior audits had been conducted earlier by the Department, indicating the matter was not discovered for the first time during the impugned audit. The proviso to Section 73 (invoking the extended period) is not attracted in the absence of proven willful suppression. The amendment to Section 80 requires that where duty along with interest has been paid prior to issuance of a show cause notice, adjudication is unnecessary; this statutory intent was not considered by the authorities below. Suppression for imposition of penalty requires proof of a deliberate intention (mens rea) to evade liability; the burden to prove such suppression lies on the Department and no cogent evidence of a positive act of willful concealment is on record. Reliance on earlier case law was misplaced insofar as many decisions predate the Section 80 amendment and the facts of prior authorities differ. In these circumstances the extended period cannot be invoked, the show cause notice issued on 27.06.2016 is barred by limitation, and penalty based on alleged suppression is unsustainable.

Impugned orders set aside; show cause notice held time-barred and penalty for suppression not sustainable where duty and interest were paid prior to issuance of the notice.

Final Conclusion: Appeal allowed; Order-in-Original and Commissioner (Appeals) order set aside. Show cause notice dated 27.06.2016 in respect of 2012-13 held barred by limitation and penalty for suppression could not be imposed; consequential benefits to follow.

Penalty for wrong availing of cenvat credit - reversal of cenvat credit with interest prior to show cause notice - requirement of separate accounts for inputs for dutiable and exempted products - options under Rule 6(3) of Cenvat Credit Rules where separate accounts not maintained - no penalty where tax and interest paid before issuance of show cause notice - limitation benefit under Section 80(2) of the Finance Act

Penalty for wrong availing of cenvat credit - reversal of cenvat credit with interest prior to show cause notice - no penalty where tax and interest paid before issuance of show cause notice - limitation benefit under Section 80(2) of the Finance Act - Imposability of penalty when cenvat credit wrongly availed is reversed with interest before issuance of the Show Cause Notice. - HELD THAT: - The appellant had not maintained separate accounts for inputs used for dutiable and exempted activities as contemplated by Rule 6(2) Cenvat Credit Rules and had not elected either of the alternatives under Rule 6(3). Consequently a demand equivalent to 6% of the value of exempted services was proposed. However, it is admitted that the amount of wrongly availed cenvat credit was reversed and the corresponding interest paid before issuance of the Show Cause Notice. The Tribunal held that where the tax (or equivalent credit reversal) and interest are paid in full prior to the Show Cause Notice, penalty under provisions such as Section 11AC of the Excise Act and Rule 15 of the CCR cannot be imposed. The decision is reinforced by the limitation protection in Section 80(2) of the Finance Act where payment within the prescribed period precludes levy of penalty, and by precedents relied upon by the Tribunal including Commissioner of Central Excise, Ludhiana v. Sangrur Agro Ltd. 2010 (2) T.M.I. 438 and CCE, Panchkula v. Krishna Cylinder 2015 (1) TMI 1197, which hold that no penalty is leviable where tax and interest are paid before issuance of the Show Cause Notice and there are no allegations of fraud, collusion, wilful mis-statement or suppression of material facts. Applying these principles to the admitted facts, the Tribunal concluded that imposition of penalty was not sustainable.

Penalty set aside and appeal allowed as the wrongly availed credit was reversed with interest before issuance of the Show Cause Notice, precluding imposition of penalty.

Final Conclusion: The Tribunal allowed the appeal, set aside the penalty imposed by the Commissioner(Appeals) because the appellant had reversed the wrongly availed cenvat credit and paid interest prior to issuance of the Show Cause Notice, and accordingly no penalty could be imposed.

Liability of service recipient for payment of service tax after amendment to Notification - Evidence of payment by service provider and relevance of challans - Onus on Department to prove intention to evade payment - Revenue neutrality - Limitation; proviso to Section 73 Central Excise Act, 1944 and extended period - Ignorance of law in context of frequent regulatory changes

Liability of service recipient for payment of service tax after amendment to Notification - Evidence of payment by service provider and relevance of challans - Onus on Department to prove intention to evade payment - Limitation; proviso to Section 73 Central Excise Act, 1944 and extended period - Whether the demand for short payment of service tax (April 2015 to December 2015), confirmed on the ground that the service recipient became 100% liable after amendment, is sustainable. - HELD THAT: - The Tribunal found as admitted that prior to 01.04.2015 the service recipient discharged 75% and the provider 25% of the service tax, and that the same pattern continued during April 2015 to December 2015. The appellant produced challans showing payment of the remaining 25% by the service provider, but the adjudicating authorities did not consider or record any view on that evidence. There was no material before the Department to show any deliberate intention by the appellant to evade tax; the Department bore the onus to demonstrate evasive conduct and failed to do so. While ignorance of law is not ordinarily a defence, the Tribunal accepted that frequent and recurrent regulatory changes can make a reasonable delay in acquiring specific knowledge plausible. Crucially, because the Department did not discharge its onus and remained silent on the documentary evidence of complete payment, the extended period under the proviso to Section 73, Central Excise Act, 1944 could not be invoked. The Show Cause Notice dated 31.03.2017 therefore stood barred by limitation in respect of the period April 2015 to December 2015, and the confirmation of demand was held to be a manifest error apparent on the face of the record.

Order-in-Original confirming the demand set aside; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the Order-in-Original confirming the short payment demand for April 2015 to December 2015 as time-barred and unsupported by evidence, and held that the Department failed to discharge its onus to show intent to evade or to justify invocation of the extended limitation under the proviso to Section 73, Central Excise Act, 1944.

Cenvat credit on inputs used in provision of taxable service - applicability of Rule 8 of the Cenvat Credit Rules, 2004 to service providers - receipt and utilisation of inputs as pre condition for availing cenvat credit - maintainability of show cause notice founded on alleged breach of Rule 8

Applicability of Rule 8 of the Cenvat Credit Rules, 2004 to service providers - Rule 8 of the Cenvat Credit Rules, 2004 is not applicable to an output service provider. - HELD THAT: - The Tribunal analysed the scope of Rule 8, which governs storage of inputs outside the factory, and concluded that its provisions are directed to manufacturers. The show cause notice was predicated on alleged contravention of Rule 8; however, that rule does not apply to a provider of taxable service rendering construction/commissioning/installation services. Since the foundational legal premise of the demand was a misconstruction of Rule 8's applicability, the notice was held to be misconceived. [Paras 6]

Rule 8 CCR 2004 does not apply to the appellant as a service provider; reliance upon it to sustain the show cause notice is misplaced.

Receipt and utilisation of inputs as pre condition for availing cenvat credit - cenvat credit on inputs used in provision of taxable service - The appellant was entitled to cenvat credit as the inputs were received and used in rendering the output service. - HELD THAT: - The Tribunal recorded that the appellant produced invoices showing supply of MS bars to the appellant and that the inputs were admittedly used in providing the output service. The decision notes that the appellant paid service tax and used the inputs in rendering the service; consequently the essential requirement of receipt and utilisation for availing cenvat credit was satisfied in the factual matrix before the Tribunal. On that basis the denial of credit was overturned. [Paras 6]

The appellant is entitled to the cenvat credit claimed because the inputs were received and utilised in rendering the taxable service.

Maintainability of show cause notice founded on alleged breach of Rule 8 - The show cause notice was not maintainable as it was founded on an incorrect premise regarding applicability of Rule 8. - HELD THAT: - Although the adjudicating authority and Commissioner (Appeals) sustained the demand on the basis that entries were not made in stock register and the premises were not declared as storage, the Tribunal found the notice to be wholly misconceived because it relied on Rule 8 which does not govern service providers. The Tribunal therefore held the show cause notice unsustainable and allowed the appeal. [Paras 6]

The show cause notice and the consequent order are set aside as not maintainable.

Final Conclusion: The appeal is allowed: the impugned order disallowing cenvat credit is set aside because Rule 8 CCR 2004 does not apply to the service provider and the appellant had received and used the inputs; consequential benefits to the appellant accrue in accordance with law.

Refund of unutilized accumulated credit on closure of factory - remand for quantification of eligible accumulated credit - implementation of appellate tribunal directions - assignment to an officer having jurisdiction for compliance - dismissal on account of low tax effect while leaving substantial questions of law open

Refund of unutilized accumulated credit on closure of factory - remand for quantification of eligible accumulated credit - Tribunal's finding that refund of unutilized credit arising from closure of the assessee's factory is admissible and the matter remanded for ascertainment of the correct amount of eligible accumulated credit. - HELD THAT: - The Tribunal observed that unutilized credit reflected in books due to closure of the factory ought not be denied solely because procedural requirements of the Rules and Notification were not met, and held the refund claim admissible. The Tribunal remanded the matter to the original authority for the limited purpose of ascertaining the correct amount of eligible accumulated credit that remained unutilized on account of closure. The High Court, on the Revenue's withdrawal of the appeal, directed that the Tribunal's determination on admissibility and its limited remand be implemented, thereby leaving quantification to the original authority in accordance with the Tribunal's remit. [Paras 5]

Tribunal's view that refund is admissible was accepted for implementation and the matter remanded to the original authority for limited quantification of eligible accumulated credit.

Implementation of appellate tribunal directions - assignment to an officer having jurisdiction for compliance - Direction to the Revenue to implement the Tribunal's order and to assign the file to an officer having jurisdiction to carry out the remand/quantification. - HELD THAT: - Given the peculiar facts (closure of the assessee's factory and prompt filing of the refund application), the Court, while dismissing the appeal as not pressed, considered it appropriate to order implementation of the Tribunal's directions. The Court further directed that the appellant may assign the files to an officer who has jurisdiction to deal with the matter so that the limited task of ascertaining eligible accumulated credit and processing the refund can be executed without procedural delay. [Paras 3, 6]

Appellant directed to implement the Tribunal's directions and to assign the file to an officer with jurisdiction to effectuate the remand and quantification.

Dismissal on account of low tax effect while leaving substantial questions of law open - Appeal dismissed on the ground of low tax effect; substantial questions of law framed are left open for consideration in an appropriate case. - HELD THAT: - The Revenue informed the Court that the appeal is withdrawn as not pressed due to low tax effect, and the Court accepted the withdrawal. The Court accordingly dismissed the appeal on that ground but explicitly left open the substantial questions of law framed for future adjudication when a case with sufficient tax effect arises. [Paras 2, 5, 7]

Appeal dismissed as not pressed on account of low tax effect; substantial questions of law framed are left open.

Final Conclusion: The appeal is dismissed as not pressed on account of low tax effect; the Tribunal's finding that the refund of unutilized accumulated credit on account of factory closure is admissible is to be implemented, the matter remanded to the original authority for limited quantification, and the Revenue directed to assign the file to an officer having jurisdiction to effectuate the directions; substantial questions of law remain open for future consideration.

Classification of goods - Tariff item 2106 90 70 - Churna for pan - Trade description / trade parlance as determinant of classification - Assessment under Section 4A of the Central Excise Act, 1944 - Penalty under Section 11AC and Rule 25 - requirement of suppression or fraud

Classification of goods - Tariff item 2106 90 70 - Churna for pan - Trade description / trade parlance as determinant of classification - Assessment under Section 4A of the Central Excise Act, 1944 - Product 'Bilas' Pan Sughandh is classifiable as 'churna for pan' under tariff item 2106 90 70 and not under tariff item 2008 99 99. - HELD THAT: - The Tribunal found that the product, manufactured by cleaning, grinding, blending listed ingredients and packing, is sold and described in trade and on its packaging as pan flavour material. A specific tariff entry exists for 'churna for pan' under 2106 90 70. Classification is to be guided by the product as known in trade parlance rather than solely by its ingredients. Given the specific entry for churna for pan and the product's predominant use to give flavour and taste to pan, the Tribunal held it is predominantly classifiable under 2106 90 70 and not under chapter heading 2008 99 99. The demand and classification ordered by the lower authorities were therefore upheld (modified only as to penalty). [Paras 5, 7]

Demand of duty and classification under 2106 90 70 (churna for pan) upheld.

Penalty under Section 11AC and Rule 25 - requirement of suppression or fraud - Penalty imposed under Section 11AC and Rule 25 was not sustainable and is set aside. - HELD THAT: - The Tribunal noted that the SCN did not allege suppression of fact, fraud or mis-declaration. Penalty under Rule 25 (and by extension Section 11AC) is not imposable in absence of suppression or fraud. Further, the classification issue involved interpretation of goods, and where the controversy is one of classification without culpable concealment, penalty cannot be sustained. Accordingly, the penalty imposed by the lower authorities was set aside. [Paras 6, 7]

Penalty under Section 11AC/Rule 25 set aside.

Final Conclusion: Appeals partly allowed: classification and duty demand upheld as per tariff item 2106 90 70 (churna for pan) for the periods specified; imposed penalties under Section 11AC/Rule 25 quashed.

Exemption under notification 12/2012-CE - parts and components of wind operated electricity generator - essential component / part - place of use irrelevant for exemption under specified entry - Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable goods) Rules, 2001 - Condition No.2

Exemption under notification 12/2012-CE - parts and components of wind operated electricity generator - essential component / part - Whether bearings manufactured by the appellant qualify as parts/components of wind operated electricity generators and are eligible for exemption under notification 12/2012-CE (List 8, Sr. No. 13). - HELD THAT: - Notification 12/2012-CE (as amended) exempts 'wind operated electricity generator, its components and parts thereof including rotor and wind turbine controller' under List 8. The Tribunal applied the principle from Insulation Electrical P. Ltd. that a 'part' is an essential component without which the whole cannot function. The bearings supplied directly to wind mill manufacturers and used as components of the wind turbine are essential to its functioning. Therefore such bearings fall within the words 'components and parts thereof' in the notification and are eligible for exemption.

Bearings are parts/components of wind operated electricity generators and eligible for exemption under notification 12/2012-CE.

Place of use irrelevant for exemption under specified entry - Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable goods) Rules, 2001 - Condition No.2 - Whether non-observance of Condition No.2 (relating to concessional removal rules) disentitles the appellant to exemption after the amendment inserting Sr. No. 332A. - HELD THAT: - The Tribunal held that because the bearings qualify as components/parts of wind operated electricity generators under Sr. No. 332 of the notification, the question of place of use under Condition No.2 is immaterial for those bearings covered by Sr. No. 332. Consequently, the appellant cannot be denied exemption on the ground of non-compliance with the concessional removal procedure insofar as the bearings are covered by the principal exemption entry.

Failure to follow Condition No.2 does not deny exemption in respect of bearings that are covered by Sr. No. 332; place of use is irrelevant for such covered parts.

Final Conclusion: The impugned order denying exemption was set aside and the appeal allowed: bearings supplied to and used as components of wind operated electricity generators are exempt under notification 12/2012-CE, and non-observance of Condition No.2 does not defeat the exemption for such parts.

CENVAT credit refund under Rule 5 of Cenvat Credit Rules, 2004 - Exception for export under Rule 6(6) of Cenvat Credit Rules, 2004 - Reversal and lapsing of CENVAT credit under Rule 11(3) of Cenvat Credit Rules, 2004 - Applicability of Rule 11(3) to input services and capital goods - Limitation for issuance of show cause notice for reversal of credit

CENVAT credit refund under Rule 5 of Cenvat Credit Rules, 2004 - Exception for export under Rule 6(6) of Cenvat Credit Rules, 2004 - Reversal and lapsing of CENVAT credit under Rule 11(3) of Cenvat Credit Rules, 2004 - Whether CENVAT credit attributable to inputs used in goods exported before 01.04.2008 and refunded under Rule 5 can be demanded under Rule 11(3). - HELD THAT: - The Tribunal held that credit attributable to inputs used in goods already exported before 01.04.2008 was admissible under Rule 6(6) and refundable under Rule 5, and that the department had sanctioned the refund. Rule 6(6) provides an express exception to the operation of sub rules (1)-(4) (which include the reversal/lapsing consequences) where goods are cleared for export under bond; consequently, invoking Rule 11(3) in isolation to reclaim credit already the subject of refund would amount to impermissible review of the refund sanction. Rule 5 is independent of Rule 11(3) and, absent any statutory provision making Rule 11(3) override refunds under Rule 5, the demand insofar as it related to exported goods whose refund was sanctioned was unsustainable. [Paras 5, 6]

Demand insofar as it related to CENVAT credit already refunded under Rule 5 for inputs used in exported goods is not sustainable and cannot be raised under Rule 11(3).

Reversal and lapsing of CENVAT credit under Rule 11(3) of Cenvat Credit Rules, 2004 - Applicability of Rule 11(3) to input services and capital goods - Whether Rule 11(3) requires reversal/lapsing of unutilized CENVAT credit attributable to input services and capital goods as on 01.04.2008. - HELD THAT: - The Tribunal examined the language of Rule 11(3) which speaks of CENVAT credit 'in respect of inputs received for use in the manufacture of the said final product' lying in stock, in process or contained in finished goods. Applying the principle ejusdem generis to Clause (ii) (which treats lapsing of any remaining balance where exemption is absolute), the Tribunal concluded that the reversal/lapsing mechanism in Rule 11(3) is confined to inputs and does not extend to credit attributable to capital goods and input services. Therefore the portion of unutilized credit relating to capital goods and input services could not be demanded under Rule 11(3). [Paras 6]

Unutilized CENVAT credit attributable to capital goods and input services as on 01.04.2008 is not liable to reversal or lapse under Rule 11(3).

Reversal and lapsing of CENVAT credit under Rule 11(3) of Cenvat Credit Rules, 2004 - Whether Clause (ii) of Rule 11(3) (lapsing of balance after reversal) applies where the assessee opted for a conditional exemption notification (Notification No.30/2004 CE). - HELD THAT: - Rule 11(3) has two limbs: (i) reversal of credit in respect of inputs in stock/process/contained in finished goods on opting exemption; and (ii) lapsing of any balance after such reversal where the exemption is absolute. The Tribunal found that Notification No.30/2004 CE is a conditional exemption and not an absolute exemption. Therefore Clause (ii), which causes remaining balances to lapse only where exemption is absolute, does not apply. Consequently the provision for lapsing could not be invoked in the facts of this case. [Paras 7]

Clause (ii) of Rule 11(3) (lapsing of balance) does not apply because the exemption availed under Notification No.30/2004 CE is conditional and not absolute.

Limitation for issuance of show cause notice for reversal of credit - Whether issuance of the show cause notice dated 06.05.2009 seeking reversal of credit lying as on 31.03.2008 was within the period of limitation. - HELD THAT: - The Tribunal noted that the disputed demand related to balances as on 31.03.2008 and that a show cause notice in respect of that date ought to have been issued within one year. The SCN was, however, issued on 06.05.2009, beyond the normal one year period. Further, the appellant had filed refund claims which were sanctioned, and there was no allegation of suppression or wilful misstatement that would justify invoking an extended period of limitation. On these grounds the Tribunal concluded that the SCN was time barred. [Paras 8]

The show cause notice issued on 06.05.2009 in respect of amounts lying as on 31.03.2008 is time barred and the demand is not maintainable on limitation grounds.

Penalty for alleged wrongful availment/carry forward of CENVAT credit - Reversal and lapsing of CENVAT credit under Rule 11(3) of Cenvat Credit Rules, 2004 - Whether imposition of penalty and interest along with the demand for reversal of CENVAT credit was sustainable. - HELD THAT: - Because the Tribunal held that the demand for the challenged amounts was unsustainable both on merits (refund sanctioned; export exception; inapplicability to input services and capital goods; conditional exemption) and on limitation grounds, the consequential imposition of interest and equal penalty based on that demand also lacked foundation. The adjudicating authority had not established contravention with intent to evade duty, and the underlying demand itself was set aside. [Paras 6, 8, 9]

Interest and penalty confirmed with the demand are unsustainable and set aside along with the demand.

Final Conclusion: The Tribunal allowed the appeal, setting aside the adjudicating authority's demand (including interest and penalty) as unsustainable on merits and time barred: refunded CENVAT credit for inputs used in exported goods cannot be reclaimed under Rule 11(3), credit attributable to capital goods and input services does not lapse under Rule 11(3), Clause (ii) does not apply to the conditional exemption availed, and the SCN issued on 06.05.2009 in respect of balances as on 31.03.2008 was time barred.

Clandestine removal of goods - reliability and corroboration of search recorded statements - requirement of independent corroborative evidence for large demands - inadmissibility of demand based solely on input output ratio - reliance on documents recovered from third parties - penalty under Rule 26 of the Central Excise Rules, 2002

Clandestine removal of goods - reliability and corroboration of search recorded statements - requirement of independent corroborative evidence for large demands - inadmissibility of demand based solely on input output ratio - reliance on documents recovered from third parties - Whether demand of central excise duty, interest and equivalent penalty for alleged clandestine clearance of copper ingots could be sustained - HELD THAT: - The Tribunal held that the demand was unsustainable. The adjudicating authority relied primarily on entries in a spiral notebook and loose parchies recovered from third party/residential premises and on statements recorded during search. The Tribunal found that named purchasers denied purchases, no buyers were identified, suppliers were not investigated and no corroborative material (no moulds, no unaccounted cash, no seized consignments, no transporter enquiries, limited raw material/stock and a furnace under installation) supported the allegation of manufacture and clandestine clearance. Statements relied upon had been retracted or were not amenable to cross examination and therefore lacked requisite reliability. The Tribunal also rejected calculation of demand based on assumed input output ratios without independent proof. In view of absence of independent corroboration and reliance on unreliable material, the demand could not be confirmed. [Paras 8, 9]

Demand of central excise duty, interest and equivalent penalty for clandestine removal set aside and appeals allowed.

Penalty under Rule 26 of the Central Excise Rules, 2002 - reliability and corroboration of search recorded statements - requirement of independent corroborative evidence for large demands - Whether penalty under Rule 26 could be sustained against Shri Vijay Goyal and Shri Dinesh Goyal - HELD THAT: - Penalty was imposed by the Commissioner based on the same evidentiary material as the duty demand. Given the Tribunal's finding that the foundational material (statements and recovered papers) was unreliable and uncorroborated, and that the demand itself was unsustainable, the concomitant penalties could not stand. The adjudication failed to produce independent evidence connecting the individuals to confirmed clandestine clearances. [Paras 8, 9]

Penalty under Rule 26 imposed on the individual appellants set aside consequential to the quashing of the duty demand; appeals allowed.

Final Conclusion: The Tribunal set aside the impugned order confirming duty, interest and equivalent penalty and imposing penalties under Rule 26; the appeals were allowed and consequential relief granted, the demand being based on assumptions, unreliable statements and uncorroborated documentary material.

Excisability of food prepared in restaurants - SSI exemption/benefit - extended period of limitation - clandestine removal and evasion - penalty for suppression

Extended period of limitation - clandestine removal and evasion - penalty for suppression - Whether invocation of the extended period of limitation and imposition of penalty was justified on the ground of alleged clandestine removals and suppression. - HELD THAT: - The Tribunal found that the Department's allegation of evasion and suppression was not supported by any evidence of contumacious conduct. The appellant had been continuously running the restaurant business, was registered under Commercial Taxes, did not charge or account for excise duty in its books, and maintained vouchers, bills and menu-cards; moreover, the appellant entertained a bona fide belief about applicability of exemption. In these circumstances invocation of the extended period of limitation and levy of penalty on the ground of alleged suppression is not tenable. Consequently, the extended period demand and the penalty related thereto were set aside. [Paras 7]

Extended period invocation and penalty set aside for lack of evidence of clandestine removal or suppression.

Excisability of food prepared in restaurants - SSI exemption/benefit - Which categories of food items prepared and served in the restaurant are excisable and which attract exemption for purposes of SSI turnover and duty liability. - HELD THAT: - The Tribunal accepted that tailor-made food, fast food and other food items with short shelf-life, and bought-out trading items, are not excisable and were rightly excluded while computing SSI turnover; therefore SSI benefit was allowed for such turnover. However, items falling under the tariff entry covering bread, pastry, cakes and biscuits (Chapter heading 1905) are not covered by the restaurant/hotel exemption and are marketable/excisable. Accordingly, the demand in respect of cakes and pastries (items excluded from the exemption) was held chargeable for the normal period of limitation and confirmed, while the remaining demand relating to exempt or non-excisable items was dropped. [Paras 4, 7]

SSI benefit upheld for short shelf-life and bought-out items; demand confirmed for items falling under Chapter heading 1905 for the normal limitation period, remaining demand set aside.

Final Conclusion: The appeal is allowed in part: demands and penalty raised by extended period are set aside for lack of suppression; SSI exemption benefit of the appellant is upheld for restaurant-prepared and short shelf-life food items, but the demand in respect of bread/pastry/cakes/biscuits (Chapter 1905) is confirmed for the normal limitation period with consequential adjustment.

Cenvat credit - definition of "inputs" under Rule 2(k) of the Cenvat Credit Rules, 2004 - beneficial legislation principle - rectification of final order (Review/Rectification application) - exclusion of cement from input classification

Rectification of final order (Review/Rectification application) - typographical error apparent on the face of record - Rectification application to correct the final order and modify its operative text was allowed. - HELD THAT: - The Tribunal considered the ROM application seeking correction of the final order No.52767/2018 dated 7.6.2018 and accepted that certain portions were typographical or clerical errors apparent on the face of the record. The proposed deletions and amendment to record the correct tax period (March, 2011 to September, 2013) were not opposed by the Revenue. Accordingly the Tribunal allowed the rectification and directed that the final order be modified to incorporate the corrected text and delete specified paras and the table, resulting in the modified final order as recorded. [Paras 2, 3, 4, 5, 9]

ROM application allowed; final order modified as set out in the order.

Cenvat credit - definition of "inputs" under Rule 2(k) of the Cenvat Credit Rules, 2004 - beneficial legislation principle - exclusion of cement from input classification - Entitlement to Cenvat credit on the disputed goods for the period March, 2011 to September, 2013 was allowed except in respect of cement. - HELD THAT: - On merits the Tribunal examined whether the disputed goods were used in or in relation to manufacture/production of the final products necessary for mining operations. Applying the broad definition of "inputs" in Rule 2(k) of the Cenvat Credit Rules, 2004 and recognising the purposive, beneficial nature of the Cenvat credit regime intended to arrest cascading, the Tribunal held the disputed goods (including TIS Cog, Drum, Fixed Contact Assly, Moulded Steel Sleeper, Tyre & Tube, Flexible Trailing Cable, PVC Belt, etc.) were duly used in the manufacture/production process and were not within the excluded category of inputs. Cement alone was held not to participate either directly or indirectly in the manufacture of the final product and therefore excluded from credit. Consequently the Tribunal set aside the adjudicating authority's disallowance and allowed the appeal in part. [Paras 6, 7]

Cenvat credit allowed on the disputed goods for March, 2011 to September, 2013 except cement; impugned order set aside and appeal allowed.

Final Conclusion: The ROM application is allowed; the final order is modified to record the correct period (March, 2011 to September, 2013) and to delete specified portions, and on merits the Tribunal allowed Cenvat credit for the disputed goods (excluding cement) and set aside the impugned order.

Maintainability of rectification of mistake (ROM) - restoration of appeal (ROA) as the appropriate remedy - dismissal for non-prosecution - liberty to seek restoration subject to satisfying reasons for default

Maintainability of rectification of mistake (ROM) - restoration of appeal (ROA) as the appropriate remedy - The rectification of mistake (ROM) application filed against an order dismissing the appeal for non-prosecution is not maintainable where there is no mistake in the order; the proper remedy is restoration of appeal (ROA). - HELD THAT: - The Tribunal examined the application filed as a request for rectification of mistake in the Final Order which dismissed the appellant's appeal for non-prosecution while granting liberty to seek restoration subject to satisfying the reasons for default. The Tribunal found no material indicating any mistake in the order itself. Consequently, there was no scope for entertaining a ROM petition. The Tribunal therefore directed that, if the appellant wishes to proceed, the appellant should seek restoration of the appeal by filing ROA in accordance with law, since restoration-not rectification-is the appropriate remedy where an appeal has been dismissed for non-prosecution.

ROM application dismissed; appellant advised to file ROA if desired.

Final Conclusion: The ROM application was dismissed because the impugned order contained no mistake; the appellant was advised to pursue restoration of the appeal (ROA) as the proper remedy, in accordance with law.

Deduction of sales tax/VAT from transaction value - transaction value under Section 4 of the Central Excise Act - actual payment of VAT for excise deduction - subsidy/remission of tax treated as payment - use of VAT 37B challans as discharge of VAT liability

Deduction of sales tax/VAT from transaction value - actual payment of VAT for excise deduction - use of VAT 37B challans as discharge of VAT liability - Whether VAT amounts remitted back to the assessee in the form of subsidy challans (VAT 37B) constitute VAT actually paid and therefore qualify for deduction from transaction value under Section 4(3)(d) of the Central Excise Act. - HELD THAT: - The appellants operated under Rajasthan Investment Promotion Schemes whereby VAT collected on sales was initially deposited with the State and a portion was subsequently disbursed back as subsidy in Form VAT 37B, which could be utilised to discharge VAT liability in subsequent periods. Revenue treated utilization of 37B challans as not constituting actual payment of VAT and included such amounts in assessable value. The Tribunal noted the Apex Court's ruling in Super Synotex that post 01/07/2000 only sales tax/VAT actually paid can be deducted under Section 4(3)(d), but observed that the Tribunal in Welspun Corporation Ltd. distinguished Super Synotex on facts under a remission scheme where remission was a separate assessment and tied to capital investment and conditions, holding such remission need not be included in transaction value. Applying that reasoning, the Tribunal found that Rajasthan's scheme requires initial payment of VAT and returns a portion as subsidy in the form of legally recognisable challans which are equivalent to cash for the purpose of discharging VAT in later periods. Given that the scheme does not exempt payment of VAT but involves actual payment followed by sanctioned remission usable for tax discharge, the Tribunal concluded that VAT discharged by utilisation of 37B challans amounts to VAT actually paid and is deductible from transaction value. The impugned inclusion of such subsidy amounts in assessable value was therefore incorrect.

Impugned orders holding that VAT discharged through VAT 37B challans is not actual payment and including those amounts in assessable value are set aside; such VAT utilisation qualifies for deduction under Section 4(3)(d).

Final Conclusion: Appeals allowed; orders substituting inclusion of VAT remitted back via VAT 37B challans in assessable value were set aside and the subsidy-challan amounts were held deductible as VAT actually paid for purposes of transaction value under Section 4.

Eligibility for cenvat credit on inputs used for fabrication of supporting structures - treatment of structural steel as inputs or immovable capital structures for cenvat credit - admissibility of credit under Rule 2(a) of the Cenvat Credit Rules, 2004 - requirement of primary evidence of receipt, issue, consumption and inventory for denial of credit - precedential effect of High Court rulings on Tribunal Larger Bench decisions

Eligibility for cenvat credit on inputs used for fabrication of supporting structures - admissibility of credit under Rule 2(a) of the Cenvat Credit Rules, 2004 - requirement of primary evidence of receipt, issue, consumption and inventory for denial of credit - Appellant's entitlement to cenvat credit on structural steel items used in fabrication of supporting structures during April, 2004 to April, 2005 - HELD THAT: - The Tribunal found that the Adjudicating Authority's order (as upheld by the Commissioner (Appeals)) went beyond the scope of the show cause notice and was self-contradictory, disputing facts admitted in the show cause notice (paras 5-6). The record showed inspection by DGCEI and production of invoices and a communication by the appellant identifying purchase and use of structural steel items for fabrication of supporting structures; a modest earlier reversal was recorded by the appellant (para 3). The Tribunal observed that the Larger Bench view denying credit on such structural/ foundational items as immovable had been reversed by the Hon'ble Chhattisgarh High Court in Vandana Global Ltd. and that the ratio of other High Court decisions (Mundra Ports & Special Economic Zone Ltd. and Thiru Arooran Sugars ) supports availability of credit (para 7). Applying these precedents and the facts on record, the Tribunal held that the denial based on absence of primary inventory records was not sustainable and that credit should be allowed. [Paras 3, 5, 6, 7]

Appeal allowed; impugned order set aside and appellant entitled to cenvat credit in accordance with law for the period April, 2004 to April, 2005.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned order and held that the appellant is entitled to cenvat credit on the structural steel items used for fabrication of supporting structures for the period April, 2004 to April, 2005, in accordance with law and relevant High Court precedents.

Rectification of typographical error - review/rectification of orders (ROM application) - clerical correction in appellate order

Rectification of typographical error - clerical correction in appellate order - Typographical error in Final Order corrected by substituting the incorrect notification reference with the correct notification number in specified paragraphs. - HELD THAT: - The Revenue filed a ROM application seeking rectification of a typographical error in the Final Order dated 1.2.2018. The appellant/assessee was absent despite notice. The Revenue's representative pointed out that paras 3, 6 and 9 of the Final Order incorrectly refer to 'Notification No.15/2003-CE' when they should refer to 'notification no.50/2003-CE'. The Tribunal found the objection to be correct and directed that the notification number in the specified paragraphs be read as 'notification no.50/2003' in place of 'notification no.15/2003'. The ROM application was allowed to effect this clerical correction.

ROM application allowed and the notification reference in paras 3, 6 and 9 of the Final Order dated 1.2.2018 is rectified to read 'notification no.50/2003' instead of 'notification no.15/2003'.

Final Conclusion: The Tribunal allowed the Revenue's ROM application and ordered a clerical correction of the notification number in the Final Order dated 1.2.2018, substituting 'notification no.50/2003' for 'notification no.15/2003' in paragraphs 3, 6 and 9.

Summary order. Review on Miscellaneous (ROM) application allowed; paragraph 3 of the final order rectified to correct a typographical error and substituted with the corrected paragraph as recorded in the order.

Entitlement to avail Cenvat Credit on supplementary invoices - applicability of Rule 9(1)(b) of the Cenvat Credit Rules, 2004 - suppression and collusion as bar to credit - effect of sub judice/pending apex court decision on adjudication

Entitlement to avail Cenvat Credit on supplementary invoices - suppression and collusion as bar to credit - The appellant is entitled to avail Cenvat credit on the supplementary invoices issued by the coal companies; denial of credit on the ground of alleged suppression/collusion is not sustainable in the facts of the case. - HELD THAT: - The Tribunal held that the appellants were entitled to take Cenvat credit on the supplementary invoices issued by the coal companies. The adjudicatory denial based on alleged suppression or collusion could not be sustained because the matter was connected with other cases pending before the Hon'ble Supreme Court, creating an element of confusion. In these circumstances mere failure by the appellant to ascertain whether the supplementary invoices related to excluded items under Rule 9(1)(b) could not be equated with suppression or collusion. Further, the supplementary invoices were issued by coal companies which are Government undertakings, and absent any positive act on the record by the appellant, a presumption of suppression/collusion could not be made. Applying these considerations, the Tribunal set aside the orders denying credit and allowed the appeal. [Paras 6, 7]

Order denying Cenvat credit set aside and appeal allowed; appellant entitled to take Cenvat credit on the supplementary invoices.

Applicability of Rule 9(1)(b) of the Cenvat Credit Rules, 2004 - effect of sub judice/pending apex court decision on adjudication - Rule 9(1)(b) could not be invoked to deny the claimed credit in the absence of evidence of suppression or collusion, particularly while the issue was sub judice before the Supreme Court. - HELD THAT: - The Tribunal observed that Rule 9(1)(b)'s exclusion could not be pressed into service where the question was part of a larger controversy already pending before the Supreme Court, giving rise to confusion on the correct approach. The Court emphasised that suppression implies a positive act on record and cannot be imputed merely because the appellant did not independently verify the nature of charges reflected in supplementary invoices. Consequently, the permission contemplated by Rule 9(1)(b) (first part) could not be denied on the present facts. [Paras 6, 7]

Invocation of Rule 9(1)(b) to deny credit was rejected; issue left decided in favour of appellant given the factual and procedural context.

Final Conclusion: The Tribunal set aside the impugned order of the Commissioner (Appeals) and allowed the appeal, holding that the appellant is entitled to take Cenvat credit on the supplementary invoices; denial based on alleged suppression/collusion and invocation of Rule 9(1)(b) was not sustained in the circumstances described.

Entitlement to cenvat credit on services of selling/commission agents - definition of input service and sales promotion - retrospective effect of an explanation inserted into a rule - harmonious reading of Board clarification with statutory provisions

Entitlement to cenvat credit on services of selling/commission agents - definition of input service and sales promotion - retrospective effect of an explanation inserted into a rule - Whether cenvat credit is admissible on service tax paid for commission to selling/commission agents for the period in dispute - HELD THAT: - The Tribunal considered earlier precedents of benches of the Tribunal and several High Courts holding that services of commission/selling agents qualify as services in relation to sales promotion and therefore fall within the definition of input service. The Commissioner (Appeals) relied on Board Circular No. 943/4/2011 - CX and the amendment by Notification No. 02/2016 CX (NT) (inserting an explanation in Rule 2(l) of the Cenvat Credit Rules, 2004) which clarified that commission on sales effected through commission agents is an allowable input service. The Tribunal held that the explanation in the notification merely clarifies the existing legal position and has retrospective effect; moreover, even before insertion of the explanation, the activity of a sales commission agent was in the nature of sales promotion. On that basis the Commissioner (Appeals) was right in allowing cenvat credit and there was no error in the impugned order. [Paras 2, 4, 5, 8, 9]

Cenvat credit on commission paid to selling/commission agents for the period August 2014 to December 2015 is allowable; the appeal filed by Revenue is dismissed.

Final Conclusion: The appeal by Revenue is dismissed; cenvat credit in respect of commission paid to selling/commission agents for August 2014 to December 2015 is held allowable, the explanation inserted by notification dated 3.2.2016 is treated as clarificatory and retrospective, and the respondent is entitled to consequential benefits in law.

Treatment of incidental by-products as waste for excise exemption - scope of exemption under Notification No. 89/95-CE for wastage, parings and scrap - excisability of gums, sludge, acid oil and spent earth arising during refining - entitlement to exemption where the final product is itself an exempted good - precedential weight of tribunal and Supreme Court decisions on classification of by-products

Treatment of incidental by-products as waste for excise exemption - scope of exemption under Notification No. 89/95-CE for wastage, parings and scrap - excisability of gums, sludge, acid oil and spent earth arising during refining - gad (gum), sludge (soap stock), acid oil and spent earth arising during refining are to be treated as waste and covered by Notification No. 89/95-CE - HELD THAT: - The Tribunal held that the products in dispute emerge as unavoidable, incidental residues during the refining process, which consists essentially of removing unwanted materials from crude vegetable oil to obtain refined oil. Applying the reasoning in Ricela Health Foods Ltd. (and earlier tribunal and Supreme Court precedents), the removal of unwanted materials producing gums, waxes, fatty acids, soap stock and spent earth cannot be regarded as a process of manufacture of separate excisable goods but are merely wastes. Where the principal product (refined vegetable oil) was exempt during the relevant period, these incidental wastes fall within the exemption conferred by Notification No. 89/95-CE. The Tribunal also noted conflicting tribunal decisions relied upon below but followed the Larger Bench view in Ricela which overruled the contrary view, and found the Commissioner(Appeals) erred in confirming the demand even for the normal period. [Paras 5, 6]

Demand for duty for the normal period set aside in respect of the by-products; the by-products held to be waste and entitled to exemption under Notification No. 89/95-CE.

Final Conclusion: The appeal is allowed: the Tribunal sets aside the confirmed demand for the normal period, holding the impugned by-products to be waste eligible for exemption under Notification No. 89/95-CE; the Commissioner(Appeals)'s confirmation of demand is not sustainable.

Stay petition - defer coercive steps - procedural fairness - appeal as statutory remedy - expeditious disposal by appellate authority

Stay petition - defer coercive steps - procedural fairness - appeal as statutory remedy - Whether coercive steps by the assessing authority should be deferred pending the appellate authority's consideration of the stay petition filed in the statutory appeal. - HELD THAT: - The petitioner filed a statutory appeal against the assessment order and concurrently filed a stay petition before the appellate authority. The Court observed that the petitioner had exercised the statutory remedy on time and that, in the interest of procedural fairness, the assessing authority ought to await the appellate authority's determination of the stay petition before taking coercive action. On that basis the Court directed the assessing authority to refrain from coercive steps until the appellate authority considers the stay petition, and urged the appellate authority to decide the stay petition expeditiously.

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

Final Conclusion: Writ petition disposed by directing the respondent authority to defer coercive action pending consideration of the stay petition by the appellate authority, with a request for expeditious disposal.

Procedural fairness - stay petition - deferment of coercive steps pending appellate consideration - exercise of statutory remedy by filing appeal - expeditious disposal of interim applications by appellate authority

Procedural fairness - stay petition - deferment of coercive steps pending appellate consideration - Respondent authority directed to refrain from taking coercive steps until the appellate authority disposes of the stay petition filed in the appeal against the assessment order. - HELD THAT: - The petitioner had timely availed the statutory remedy by filing an appeal against the assessment order and had also moved the appellate authority for interim relief by filing a stay petition. The court observed that procedural fairness requires that the assessing authority should await the appellate authority's decision on the stay petition before initiating coercive measures. In view of this, the court exercised its supervisory jurisdiction to protect the efficacy of the appellate process and directed temporary restraint on coercive action, coupled with an expectation that the appellate authority will decide the stay petition expeditiously. [Paras 3]

Respondent authority restrained from taking coercive steps until the second respondent considers and disposes of the stay petition.

Final Conclusion: Writ petition disposed by directing the assessing authority to defer coercive action pending the appellate authority's consideration of the stay petition, with a request for expeditious disposal of the stay application.