TaxTMI Updates e-Newsletter
Jan 16,2024

Cancellation of GST registration with retrospective effect under Section 29(2) of the Central Goods and Services Tax Act, 2017 - show cause notice - opportunity of hearing - objective satisfaction for cancellation - failure to furnish returns - consequences for input tax credit

Show cause notice - opportunity of hearing - failure to furnish returns - Validity of the Show Cause Notice and the impugned order cancelling the petitioner's GST registration - HELD THAT: - The Show Cause Notice merely recited a standard reason that the petitioner failed to furnish returns without specifying particulars, quantum or period, and the impugned order recorded only non-receipt of a reply. Both the notice and the order lack any reasoning or particulars required to put the petitioner meaningfully on notice. The retrospective cancellation was not mentioned in the Show Cause Notice, so the petitioner had no opportunity to contest retrospective effect. For these reasons the proceedings are vitiated by want of adequate notice and absence of reasons. [Paras 3, 4, 5, 6, 9]

Show Cause Notice and impugned order set aside as being bereft of particulars, reasoning and opportunity to contest retrospective cancellation.

Cancellation of GST registration with retrospective effect under Section 29(2) of the Central Goods and Services Tax Act, 2017 - objective satisfaction for cancellation - consequences for input tax credit - Legal limits and requirements for cancelling GST registration retrospectively - HELD THAT: - Section 29(2) permits cancellation with retrospective effect only where the proper officer, based on objective criteria, deems it fit; the satisfaction must not be merely subjective or mechanical. Cancellation cannot be applied retrospectively to periods when the taxpayer was compliant merely because returns were not filed for a later period. The officer should also consider consequences such as denial of input tax credit to the taxpayer's customers and other effects before ordering retrospective cancellation. These considerations must inform any fresh exercise of power. [Paras 7, 8, 10]

Retrospective cancellation is permissible only upon objective satisfaction and after considering consequences; it cannot be ordered mechanically and requires proper reasons and notice.

Final Conclusion: The Show Cause Notice and the cancellation order are set aside. The respondent remains free to initiate fresh proceedings and, if warranted, cancel registration with retrospective effect or recover tax, penalty or interest, provided such action is taken in accordance with law after issuing a proper show cause notice, stating reasons (including retrospective effect) and affording an opportunity of hearing.

Reasonable opportunity of hearing - personal hearing before adverse order - quashing and remand for fresh consideration - blocking and reversal of Input Tax Credit under Rule 86-A

Reasonable opportunity of hearing - personal hearing before adverse order - blocking and reversal of Input Tax Credit under Rule 86-A - Whether the impugned order directing reversal of Input Tax Credit could be sustained where the show cause notice allegedly providing only two hours' notice was received on the date fixed for personal hearing, and whether the order required quashing and remand for fresh consideration - HELD THAT: - The Court found that the show cause notice dated 09.10.2023 was asserted by the petitioner to have been served by e-mail on 25.10.2023 with a hearing fixed two hours later, and that consequently a reasonable opportunity was not afforded to submit documents or to explain facts before an order directing reversal of ITC was passed. Although the respondent contended that the notice had been sent by registered post with acknowledgment due, the Court concluded on these facts that the impugned order could not stand for want of a reasonable opportunity. The Court did not decide the merits of the claim to ITC or the correctness of the substantive action under Rule 86-A, but quashed the order and remanded the matter for reconsideration, directing that the petitioner be given a personal hearing after supplying relevant documents and that the respondent pass a reasoned order within a stipulated time-frame. [Paras 3, 4]

Impugned order dated 30.10.2023 quashed; matter remanded for fresh consideration after providing a reasonable opportunity including a personal hearing and on receipt of documents, with a direction to decide the matter by a reasoned order within four weeks.

Final Conclusion: Writ petition allowed in part: the order reversing Input Tax Credit is quashed on the ground that the petitioner was not afforded a reasonable opportunity; the matter is remanded for fresh consideration after personal hearing and receipt of documents, to be decided by a reasoned order within the time directed.

Maintainability of appeal - electronic or manual filing - interpretation of Rule 108 of the Haryana Goods & Service Tax Rules, 2017 - technical ground for dismissal - hearing on merits

Interpretation of Rule 108 of the Haryana Goods & Service Tax Rules, 2017 - electronic or manual filing - maintainability of appeal - technical ground for dismissal - Order rejecting the appeal as not maintainable on the ground that it was filed offline (manual) was quashed and the appeal was restored for hearing on merits. - HELD THAT: - The Court examined the challenge to the appellate authority's order rejecting the appeal as not maintainable because it had been presented manually on 31.08.2020. The wording of Rule 108, which permits filing "electronically or otherwise", was taken into account. The Court followed the view of a co-ordinate Bench in Go Daddy India Domains and Hosting Services Pvt. Ltd. v. State of Haryana and the Andhra Pradesh High Court decision in Ali Cotton Mill, which treated rejection on such a technical ground as inappropriate and directed that the appeal be heard on merits. In light of these authorities and the Rule's wording, the Court found no reason to sustain a dismissal on the technicality of offline filing and restored the appeal to the Appellate Authority for adjudication on merits after giving opportunity of hearing to the parties. [Paras 2, 3, 6]

Order dated 01.03.2023 rejecting the appeal as not maintainable is quashed; the appeal is restored to the Appellate Authority to be decided on merits.

Final Conclusion: The writ petition is disposed of by quashing the impugned order rejecting the appeal for offline filing; the appeal is restored to the Appellate Authority for consideration on merits with opportunity of hearing.

Eligibility for input tax credit for capital goods and input services - rooftop solar system as plant and machinery - blocked input tax credit under section 17(5) of the CGST Act, 2017 - captively consumed electricity for manufacture - capitalisation in books of account

Eligibility for input tax credit for capital goods and input services - captively consumed electricity for manufacture - capitalisation in books of account - Applicant entitled to claim input tax credit on purchase, installation and commissioning of the rooftop solar system. - HELD THAT: - The Authority examined the nature and use of the rooftop solar plant and the applicant's submissions including the interconnection agreement with the distribution licensee, photographs of the installation, invoice and treatment in the financial statements. The solar plant is installed for generation of electricity which is solely and captively consumed within the applicant's manufacturing premises for furtherance of its business of supplying taxable goods. The plant has been capitalised in the applicant's books. On these facts and having regard to the statutory entitlement to ITC where goods or services are used or intended to be used in the course or furtherance of business, the Authority held that the applicant is eligible to avail input tax credit on the rooftop solar system including installation and commissioning under the CGST/GGST Acts. [Paras 17]

Input tax credit on the rooftop solar system with installation and commissioning is available to the applicant.

Rooftop solar system as plant and machinery - blocked input tax credit under section 17(5) of the CGST Act, 2017 - The rooftop solar system constitutes plant and machinery of the applicant and is not a construction of an immovable property attracting blocked credit under section 17(5). - HELD THAT: - The Authority applied the statutory explanation of 'plant and machinery' and examined factual materials submitted by the applicant. Photographs and other material showed the solar modules and mounting structure are bolted to the factory roof, not embedded into the earth, and can be dismantled and removed. The rooftop solar plant has been treated as a fixed asset (capitalised) in the accounts. On that factual basis the installation was held to be apparatus/equipment used for making outward supply and hence qualifies as plant and machinery rather than construction of an immovable property. Consequently the exclusion of ITC in respect of construction of immovable property under section 17(5) does not apply. [Paras 17]

The rooftop solar system is plant and machinery and ITC in respect thereof is not blocked by section 17(5).

Final Conclusion: Advance Ruling: the applicant may avail input tax credit on the rooftop solar system including installation and commissioning; the rooftop solar system qualifies as plant and machinery of the applicant and is not subject to the blocked credit provision in section 17(5).

Revisionary power under section 263 - erroneous and prejudicial to the interest of revenue - deduction under section 80IB(11) - deduction under section 80IB(11A) - rectification under section 154

Revisionary power under section 263 - erroneous and prejudicial to the interest of revenue - Validity of the Pr. CIT's exercise of revisionary jurisdiction under section 263 to quash the assessment order. - HELD THAT: - The Tribunal upheld the Pr. CIT's invocation of section 263 because the Assessing Officer had overlooked a material legal requirement and passed an assessment order that was erroneous and prejudicial to the revenue. The order records that the AO failed to examine the eligibility conditions for the deduction claimed and completed assessment without applying the correct legal provision, thereby constituting an erroneous order prejudicial to revenue. Consequently the Pr. CIT was justified in directing fresh inquiry and verification and setting aside the earlier assessment order. [Paras 7]

The Pr. CIT lawfully exercised revisionary power under section 263 and the section 263 order is sustained.

Deduction under section 80IB(11) - deduction under section 80IB(11A) - Whether the Assessing Officer erred in allowing deduction under section 80IB(11) instead of applying section 80IB(11A). - HELD THAT: - The Tribunal found that the assessee had claimed and the AO had allowed deduction under section 80IB(11) despite the assessee's commencement date showing in Form No.10CCB that the undertaking began operations well after the period prescribed for 80IB(11). The bench recorded that the AO did not consider the applicability of section 80IB(11A) (under which the assessee's activity of processing, preservation and packaging might fall) and thus failed to apply the correct statutory provision. This omission rendered the assessment order erroneous and prejudicial to revenue, justifying revision. [Paras 7]

The AO erred in allowing deduction under section 80IB(11) without applying section 80IB(11A); the assessment is therefore erroneous and prejudicial to revenue.

Rectification under section 154 - revisionary power under section 263 - Whether the mistake could be corrected by rectification under section 154 instead of invoking section 263. - HELD THAT: - The Tribunal rejected the contention that the matter was a mere mistake curable under section 154. It held that the assessee had claimed a deduction under a provision not applicable to it and did not point out the error during assessment or thereafter. Once the Pr. CIT invoked revisionary jurisdiction under section 263, the assessee could not convert the revision into a rectification under section 154, particularly where the order was held to be erroneous and prejudicial to revenue. [Paras 7]

Rectification under section 154 was not an available alternative to prevent exercise of revisionary powers under section 263 in the facts of the case.

Final Conclusion: The appeal is dismissed; the Pr. CIT's order under section 263 quashing the assessment for AY 2017-18 was justified because the AO erroneously allowed a deduction under section 80IB(11) without applying the correct provision, and the error was not amenable to rectification under section 154 in the circumstances.

Characterisation of income as business income versus long term capital gain - adventure in the nature of trade - exemption under section 54F of the Income Tax Act - surrounding circumstances and preponderance of human probabilities - substance over form - use of a partnership to divert profits - burden on revenue to establish adventure in the nature of trade

Characterisation of income as business income versus long term capital gain - adventure in the nature of trade - surrounding circumstances and preponderance of human probabilities - substance over form - use of a partnership to divert profits - Whether the profit arising on sale of the land is taxable as business income being an adventure in the nature of trade or as long term capital gain - HELD THAT: - The Tribunal upheld the concurrent finding of the Assessing Officer and Commissioner (Appeals) that the sequence of events and surrounding circumstances established that the assessee acquired and dealt with the land with the motive of earning profit by development and sale rather than for investment. Relevant facts relied upon include: purchase of the land in 2006 by the co-owners; formation of a partnership (M/s Ashirwad Infrastructure) in 2010 with partners holding the same proportions as their land shares; execution of a development agreement with that firm in 2011 for development into bungalows and the assessee's proportionate share of the consideration; formation of another similar partnership and acquisition of further land with the same co-owners; lack of wealth-tax returns despite a substantial increase in the assessed value after the development agreement; and the partnership's reported accounts and returns showing no tax on the consideration. Applying the principle that taxing authorities may look to surrounding circumstances and the preponderance of human probabilities to test the recitals in documents, the Tribunal held that these cumulative circumstances discharged the requisite threshold to treat the transaction as an adventure in the nature of trade. The Tribunal found the lower authorities' reliance on the sequence of events, non-filing of wealth-tax returns, formation and use of the partnership to carry out development, and other co-owners' parallel actions to be a valid basis for characterisation. The Tribunal rejected the assessee's contention that mere formation of a partnership for administrative convenience or the absence of intention at the time of original acquisition precluded the finding, observing that the factual matrix established an intention to exploit the land commercially and to divert profits through the partnership structure.

Profit on sale of the land is business income being an adventure in the nature of trade; concurrent findings of the lower authorities are upheld.

Exemption under section 54F of the Income Tax Act - characterisation of income as business income versus long term capital gain - Whether the assessee was entitled to claim exemption under section 54F in respect of the amount treated as proceeds of sale - HELD THAT: - Having held that the profit on sale of the land is business income (adventure in the nature of trade), the Tribunal confirmed that the exemption under section 54F - which applies to capital gains on transfer of a capital asset - is not available. The denial of exemption was sustained because the underlying income had been correctly characterised as business income, and therefore the statutory conditions for section 54F were not satisfied.

Claim for exemption under section 54F is disallowed.

Final Conclusion: The appeal is dismissed: the Tribunal affirms the concurrent conclusion that the profit on sale of the land for AY 2015-16 is business income as an adventure in the nature of trade, and consequently the exemption claimed under section 54F is not allowable.

Allowability of Employees Stock Option Plan (ESOP) expenditure as deduction - revised return under section 139(5) of the Income Tax Act - treatment of reimbursement to holding company for ESOPs as deductible business expense - recognition of expenses in profit and loss account versus claim in revised return - taxation of ESOPs as perquisites in the hands of employees and compliance with tax deduction at source - prima facie documentary proof (invoice, payment evidence, audited financials, scheme policy) for claiming ESOP deduction

Allowability of Employees Stock Option Plan (ESOP) expenditure as deduction - revised return under section 139(5) of the Income Tax Act - treatment of reimbursement to holding company for ESOPs as deductible business expense - taxation of ESOPs as perquisites in the hands of employees and compliance with tax deduction at source - Deduction of ESOP cost invoiced by ITC Ltd. and claimed by the assessee for the year under consideration - HELD THAT: - The Tribunal found that all material documents necessary to substantiate the claim - invoice raised by ITC Ltd., period-wise breakup, bank payment evidence, audited financial statements with comparative figures and the ESOP scheme policy - were placed before the authorities. The ESOP expenditure had been taxed as perquisites in the hands of the employees and tax was deducted at source by the assessee, evidencing the economic incidence and genuineness of the expenditure. The claim was made in a revised return filed within the time permitted under section 139(5) and the assessee had re-cast comparative financial statements to reflect the expenditure for the relevant year. Having considered these factors and noted binding judicial precedents favourable to the assessee on the allowability of such ESOP-related reimbursements, the Tribunal held that the Commissioner (Appeals) erred in upholding the assessing officer's disallowance where the assessee had adequately rebutted the AO's findings and furnished requisite proof. Consequently the ESOP expenditure was held to be allowable as a deduction for the year under consideration. [Paras 3, 4, 5, 7, 9]

The disallowance of the ESOP expenditure was set aside and the assessee's claim allowed.

Final Conclusion: The appeal is allowed: the Tribunal held that the ESOP reimbursement paid to ITC Ltd., supported by invoice, payment evidence, audited statements and TDS compliance, and claimed in a timely revised return, is an allowable deduction for Assessment Year 2016-17 (financial year 2015-16).

Exemption of charitable trust activities - accumulation under section 11(2) - earmarked/accumulated fund versus income-routing through income & expenditure account - funds held in fiduciary capacity / overriding title / not income of the holder - addition to income on account of receipts retained in balance sheet

Accumulation under section 11(2) - earmarked/accumulated fund versus income-routing through income & expenditure account - Validity of addition of the Swachh Bharat fund taken directly to balance sheet instead of routing through income & expenditure account - HELD THAT: - The Assessing Officer added the Swachh Bharat receipt to the assessee's income on the ground that the sum had not been incorporated in the income & expenditure account and was directly transferred to the balance sheet. The Commissioner (Appeals) examined the assessee's accounts and found that the sum had, in fact, been routed through the income & expenditure account and that the amount had been accumulated under section 11(2) for a specified purpose (construction of public toilets under the Swachh Bharat Abhiyan) with requisite resolution and Form 10 on record. The Tribunal accepts the appellate finding that the receipt had been properly accounted for and that including it again in income would amount to double accounting. In view of the undisputed finding on examination of accounts by the CIT(A), the addition by the AO was not sustained. [Paras 13, 14, 15]

Addition in respect of the Swachh Bharat fund deleted; Revenue appeal on this ground dismissed.

Funds held in fiduciary capacity / overriding title / not income of the holder - exemption of charitable trust activities - Validity of addition of R & R (disaster relief) funds shown as liability in the balance sheet and treated as income by the AO - HELD THAT: - The assessee demonstrated that the R & R funds were contributions by PSUs collected pursuant to government/NDMA decisions after the Uttarakhand floods, with THDCIL nominated as nodal agency and the assessee acting only as the designated holder/facilitator. Documentary evidence including governmental minutes, letters, core committee directions and correspondence from contributing PSUs showed that (a) projects and disbursements were to be made as per state requirements and core committee directions, (b) the assessee could not use the funds for its own objects and (c) any unutilised balance was repayable to the contributors. The CIT(A) found on these facts that the assessee merely held the amounts on behalf of the contributing agencies and accordingly treated them as liability items in the balance sheet. Applying the principle that where income is diverted at source or an overriding title exists the amount never becomes the income of the collector, the Tribunal concurs that the assessee was not owner of the R & R funds and the AO's addition was not warranted. [Paras 16, 17, 18, 19]

Addition in respect of R & R funds deleted; order of CIT(A) affirmed.

Final Conclusion: The Revenue's appeal is dismissed in entirety; the CIT(A)'s deletions in respect of the Swachh Bharat fund and the R & R disaster relief funds are affirmed. The assessee's cross objection is dismissed as infructuous.

Revision under Section 263 - erroneous and prejudicial to the interest of the Revenue - benefit of India-Mauritius DTAA under Article 13(4) - grandfathering of pre-1 April 2017 investments - tax residency certificate as evidentiary proof - scope of inquiry by the Assessing Officer

Revision under Section 263 - erroneous and prejudicial to the interest of the Revenue - scope of inquiry by the Assessing Officer - benefit of India-Mauritius DTAA under Article 13(4) - tax residency certificate as evidentiary proof - grandfathering of pre-1 April 2017 investments - Validity of the Commissioner's order under Section 263 setting aside the AO's assessment which accepted exemption of long term capital gain claimed by the Mauritius-resident assessee under Article 13 - HELD THAT: - The Tribunal examined whether the AO's acceptance of the assessee's claim of non-taxability under Article 13 was a result of failure to make enquiries that "should have been made", thereby rendering the assessment order erroneous and prejudicial to revenue. The record shows that the AO issued detailed queries (including computation of LTCG, claim under DTAA, tax residency certificate, acquisition details, share transfer agreement, valuation and details of buyer) and the assessee furnished incorporation documents, GBL-1 license, tax residency certificates, acquisition documents evidencing purchase in FY 2007-08, the share purchase agreement of the sale, valuation report and other material. The AO, on that basis, accepted the claim that shares were acquired prior to 1 April 2017 and applied the unamended Article 13. The Commissioner's order under Section 263 focussed on notes in the assessee's financial statements and asserted absence of routine expenses and lack of enquiries into beneficial ownership and purpose, but did not dispute validity of the tax residency certificate or show that the AO's enquiries were insufficient in respect of the determinative facts. The Tribunal noted the CBDT press release and the protocol's grandfathering of investments made before 1 April 2017, which supports application of Article 13 to the present transaction. In the absence of any finding by the Commissioner that the TRC was invalid or that the AO ignored material that would vitiate the AO's conclusion, the AO's concise assessment order accepting the exemption was not shown to be a stereotyped or perverse order amounting to an error prejudicial to revenue. Applying these considerations, the Tribunal concluded that the revisionary exercise under Section 263 was not justified and the order setting aside the assessment was to be quashed. [Paras 21, 22]

The Section 263 order setting aside the AO's assessment is quashed and the appeal is allowed.

Final Conclusion: The Tribunal held that the Assessing Officer had made necessary enquiries and permissibly accepted the assessee's claim of exemption under Article 13 in respect of shares acquired before 1 April 2017; the Commissioner's revision under Section 263 was unjustified and is quashed. Appeal allowed.

Imposition of penalty under section 271AAB - Search under section 132 - Requisition under section 132A - Assessment under section 143(3) - Triggering event for applicability of section 271AAB

Imposition of penalty under section 271AAB - Search under section 132 - Requisition under section 132A - Triggering event for applicability of section 271AAB - Section 271AAB applies because a search was initiated under section 132 (warrant of authorization dated 01.12.2016) and no requisition under section 132A was made. - HELD THAT: - The Third Member examined the factual finding that a warrant of authorization was issued on 01.12.2016 and cash was seized under the Panchnama, concluding that the assessee was a searched person under section 132. The Third Member held that the statutory scheme and wording of section 271AAB apply where search has been initiated under section 132 during the relevant period, and disagreed with the Accountant Member's view that the Department had made a requisition under section 132A. Consequently, on the facts of this case the provisions of section 271AAB are attracted. [Paras 15, 16]

Penalty under section 271AAB is permissible as the search under section 132 was the operative triggering event; requisition under section 132A was not made.

Levy rate under section 271AAB (10% v 60%) - Assessment under section 143(3) - The question as to whether penalty is leviable at 10% under section 271AAB(1)(a)(iii) or 60% under section 271AAB(1)(c) was not finally adjudicated by the Third Member and the matter was directed to be placed before the regular bench for appropriate order. - HELD THAT: - Although the Third Member recorded consideration of the difference between the members and reviewed the assessment, penalty and appellate orders, he did not express a concluded, enforceable finding on which rate should apply. Instead, after noting the factual position and the lack of agreement with the Accountant Member's premise, the Third Member directed that the matter be placed before the regular bench for appropriate determination. [Paras 14, 17]

Issue remanded to the regular bench for determination of the appropriate rate of penalty under section 271AAB.

Final Conclusion: The majority view of the Tribunal was that section 271AAB applies because a search under section 132 was conducted (no requisition under section 132A), and the matter concerning the precise rate of penalty was directed to the regular bench; accordingly ITA Nos.1712 & 1714/Del/2020 were allowed and ITA No.1713/Del/2020 was partly allowed.

Inclusion of service tax in gross receipts for presumptive taxation under section 44BBA - service tax collected in fiduciary capacity and absence of income element - pari materia interpretation with section 44BB and applicability of judicial precedents and CBDT circulars

Inclusion of service tax in gross receipts for presumptive taxation under section 44BBA - service tax collected in fiduciary capacity and absence of income element - distinction from commercial receipts (mobilisation fees) and application of precedent - reliance on CBDT circulars - Service tax collected by the assessee is not includible in the gross receipts for computing presumptive income under section 44BBA of the Act. - HELD THAT: - The Tribunal held that section 44BBA deems 5% of the aggregate of amounts paid or payable/received on account of carriage of passengers/goods to be the profits of a non-resident airline. The qualifying phrase "on account of" limits gross receipts to amounts paid for services rendered by the assessee. Service tax is a statutory levy collected for and on behalf of the Central Government and lacks any element of income for the assessee; the assessee acts merely as a collection agent and the tax is not at the assessee's disposal. The Bench followed its coordinate decision in the assessee's own case for AY 2015-16, noting the parity of provisions of section 44BB with section 44BBA, the view of the Hon'ble Uttarakhand High Court (and subsequent developments), and CBDT circulars excluding service tax from receipts for certain tax treatments. Sedco (mobilisation fees) was distinguished on facts because mobilization fees were commercial receipts with a profit element unlike service tax. The coordinate-bench decision being operative and no stay having been granted, the Tribunal applied that ratio and allowed the appeals. [Paras 9, 10, 11]

The service tax component collected and deposited by the assessee is not part of gross receipts for the purpose of computing deemed taxable income under section 44BBA; appeals allowed.

Final Conclusion: The Tribunal allowed the consolidated appeals, holding that service tax collected by the non-resident airline is not includible in gross receipts for computing presumptive income under section 44BBA for the specified assessment years.

Section 56(2)(x)(b) - date of acquisition for immovable property - stamp duty value - conditions of the first proviso to section 56(2)(x)(b) - natural justice - non-compliance with section 250(6)

Section 56(2)(x)(b) - date of acquisition for immovable property - stamp duty value - conditions of the first proviso to section 56(2)(x)(b) - Whether the stamp duty value to be compared with the registered consideration for the purpose of computing income under section 56(2)(x)(b) should be taken as on 13/4/2007 (date of allotment letter and payment of advance) or on the later agreement/registration date - HELD THAT: - The assessing officer treated the relevant date as the date of the agreement for sale dated 8/12/2017 because the allotment letter dated 13/4/2007 did not identify the property nor state the full consideration and therefore, in the AO's view, did not satisfy the conditions of the first proviso to section 56(2)(x)(b). The assessee relied on the allotment letter and an advance payment of Rs. 5 lakhs as constituting the date of acquisition. The Tribunal found that the factual controversy as to whether the 2007 allotment coupled with payment satisfies the proviso and hence fixes the relevant stamp duty date was not finally adjudicated by the first appellate authority on merits. Given the lack of consideration of the specific ground raised in the appeal and the absence of a reasoned decision by the CIT(A) on this factual-legal contention, the Tribunal did not decide the substantive merit but restored the matter for fresh consideration by the CIT(A) so that the date-of-acquisition issue may be decided after giving the assessee opportunity to place material and be heard. [Paras 9]

Remitted to the learned CIT(A) for fresh adjudication on merits on the question whether the allotment letter dated 13/4/2007 (with the advance payment) qualifies as the date of acquisition for the purpose of section 56(2)(x)(b) and whether the first proviso conditions are satisfied

Natural justice - non-compliance with section 250(6) - Whether the order of the learned CIT(A) was vitiated by failure to consider the specific ground of appeal and to give a reasoned decision in terms of section 250(6) - HELD THAT: - The Tribunal observed that the CIT(A) issued notices which the assessee did not respond to, but also noted that the assessee's contact details on record did not indicate non-receipt of notices. More importantly, the CIT(A) upheld the AO's action without addressing the specific ground raised concerning the date of acquisition and the supporting allotment letter. That omission meant the CIT(A)'s order did not comply with the requirement to deal with grounds of appeal and give reasons under section 250(6). In the interest of natural justice the Tribunal directed restoration to enable the assessee to submit material when the CIT(A)'s portal is open and for the CIT(A) to decide the issue on merits after affording opportunity of hearing. [Paras 9, 10]

Held that the CIT(A)'s order is not in accordance with section 250(6); appeal restored to the CIT(A) for reconsideration after hearing the assessee

Final Conclusion: The appeal is allowed for statistical purposes by restoring the matter to the learned CIT(A) with direction to permit the assessee to file submissions within the prescribed time and to decide the disputed addition under section 56(2)(x)(b) (date of acquisition/stamp duty value issue) on merits after affording proper opportunity of hearing.

Allowability of ESOP expenses as revenue/business expenditure under section 37(1) - Power of the Commissioner (Appeals) to enhance assessment under section 251(1)(a) - Requirement that the Assessing Officer must have considered an issue for the Commissioner (Appeals) to have enhancement jurisdiction - Disallowance under section 14A read with Rule 8D - Consolidation of mutual fund units not being a transfer under section 47(xviii)

Power of the Commissioner (Appeals) to enhance assessment under section 251(1)(a) - Requirement that the Assessing Officer must have considered an issue for the Commissioner (Appeals) to have enhancement jurisdiction - Whether the Commissioner (Appeals) exceeded jurisdiction by enhancing the assessment by disallowing ESOP expenses that were not considered by the Assessing Officer - HELD THAT: - The Tribunal examined section 251(1)(a) and authoritative decisions establishing that the power to enhance is confined to matters that were considered by the Assessing Officer expressly or by clear implication in the assessment proceedings. If the AO did not apply his mind to an item or did not deal with it in the body of the assessment order, the first appellate authority cannot convert that omission into a new addition by exercising enhancement powers; alternative remedies such as proceedings under section 154, 263 or 147 are the appropriate routes. In the present case the AO's assessment order does not record consideration of the revised return or the ESOP claim in the body of the order; the mere appearance of figures in the computation sheet does not establish that the AO adjudicated the allowability of ESOP expenditure. Consequently, the CIT(A)'s invocation of enhancement powers to disallow the ESOP expenditure amounted to acting beyond jurisdiction on the facts of this case. The Tribunal emphasised that its conclusion is fact-specific to the circumstance that the AO had not examined the ESOP claim in the assessment order. [Paras 11, 12, 13]

CIT(A) acted beyond jurisdiction in enhancing the assessment by disallowing ESOP expenses which were not considered by the Assessing Officer; this ground is allowed.

Allowability of ESOP expenses as revenue/business expenditure under section 37(1) - Whether ESOP expenses claimed by the assessee are allowable as business expenditure under section 37(1) - HELD THAT: - On merits the Tribunal applied and respectfully followed the Karnataka High Court decision in Biocon Ltd., which characterised ESOP discounts as a form of employee compensation and held such expenditure to be revenue in nature and deductible. The Tribunal accepted that the substance of issuing shares at a discount is payment for employees' services rather than a capital outlay or conversion into a capital receipt. Having regard to that precedent and the nature of the transaction, the Tribunal held the disallowance of ESOP expenses unsustainable on merits and allowed the assessee's claim. [Paras 14]

ESOP expenditure is revenue in nature and allowable under section 37(1); the addition disallowing ESOP expenses is not tenable on merits and is deleted.

Disallowance under section 14A read with Rule 8D - Consolidation of mutual fund units not being a transfer under section 47(xviii) - Whether disallowance under section 14A r.w. Rule 8D was correctly invoked in respect of amounts shown as exempt arising from consolidation of mutual fund units - HELD THAT: - Section 14A applies only where expenditure is incurred in relation to income that does not form part of total income because that income is exempt. The assessee explained that the amounts shown as 'exempt' arose from consolidation of mutual fund schemes and relied on section 47(xviii) which treats such consolidation as not being a transfer and thus not a taxable event. The Tribunal accepted that the consolidation did not give rise to exempt income within the meaning required for section 14A to apply. The insertion of the explanation to section 14A with effect from 01.04.2022 is prospective and therefore not relevant to the year under consideration. On the facts, since there was no exempt income attracting section 14A, the AO was not justified in making the disallowance. [Paras 15, 20, 21]

Disallowance under section 14A read with Rule 8D is deleted because the consolidation transaction did not result in exempt income for the purposes of section 14A in AY 2017-18.

Final Conclusion: The appeal is allowed: the CIT(A) acted beyond jurisdiction in enhancing the assessment by disallowing ESOP expenses not considered by the AO; on merits ESOP expenses are deductible as revenue expenditure under section 37(1); and the section 14A disallowance is deleted because the consolidation of mutual fund units did not produce exempt income for AY 2017-18.

Violation of principles of natural justice by non-disclosure of material relied upon - failure to provide opportunity to cross-examine witnesses or persons whose statements form basis of addition - reliance on third party seized material for making additions without independent findings - deletion of additions made under income tax reassessment proceedings where procedural fairness is vitiated

Violation of principles of natural justice by non-disclosure of material relied upon - failure to provide opportunity to cross-examine witnesses or persons whose statements form basis of addition - reliance on third party seized material for making additions without independent findings - Validity of additions made in reassessment for AY 2015-16 on account of alleged cash loan and interest where AO relied on information/seized material without providing it to the assessee and denied opportunity for cross examination. - HELD THAT: - The Tribunal accepted the CIT(A)'s finding that the Assessing Officer made additions based on information originating from third party seizure and statements of the Wadhwa Group, but did not furnish the seized material to the assessee nor grant opportunity for cross examination. The AO's contention that additions were based on circumstantial evidence and therefore disclosure/cross examination was unnecessary was rejected. Reliance was placed on authoritative decisions holding that where an order is founded on third party statements or seized material, failure to disclose such material and to permit cross examination infringes principles of natural justice and vitiates the addition unless the AO has carried out independent findings based on disclosed material. Applying that principle to the facts, and noting that the AO did not indicate any independent source of undisclosed cash nor supplied the seized material, the Tribunal concluded that the additions were unsustainable and rightly deleted by the CIT(A). [Paras 5, 8]

Additions for alleged cash loan and interest in AY 2015-16 deleted; Revenue appeal dismissed on this ground.

Deletion of additions made under income tax reassessment proceedings where procedural fairness is vitiated - Consequential treatment of additions for AY 2016-17 relating to interest on the cash loans which were deleted for AY 2015-16. - HELD THAT: - The Tribunal held that once the primary addition for cash loans in AY 2015-16 has been deleted for breach of natural justice, the related addition in AY 2016-17 for interest arising out of those purported cash loans no longer survives. Therefore there is no subsisting basis to sustain the impugned addition in AY 2016-17. [Paras 10]

Addition for AY 2016-17 relating to interest on the deleted cash loans is also not sustained; Revenue grounds for AY 2016-17 dismissed.

Final Conclusion: The Tribunal upheld the CIT(A)'s deletion of additions for alleged cash loans and interest for AY 2015-16 on the ground that the Assessing Officer failed to disclose material relied upon and denied the assessee opportunity of cross examination, and accordingly dismissed the Revenue appeals; the related addition for AY 2016-17 was also rendered unsustainable and dismissed as consequential.

Transfer pricing - arm's length price - comparability analysis - TNMM (Transactional Net Margin Method) - aggregation of business segments - software development services - IT services / ITeS - remand for de novo consideration

Aggregation of business segments - software development services - IT services / ITeS - arm's length price - TNMM (Transactional Net Margin Method) - Remand to re examine aggregation of SWD and ITeS segments and to recompute ALP margins for each segment independently. - HELD THAT: - The Tribunal found that the assessee rendered two distinct streams of services - software development (SWD) and IT services (ITeS/NOS/TSS) - and that the Transfer Pricing Officer's categorical aggregation of both streams into a single SWD segment was not justified on the record. The Tribunal noted the assessee's submission that the ITeS segment was newly introduced in the year and that the TP study had benchmarked segments separately. Having examined the functions as described in the TP report and the TPO's reasoning, the Tribunal concluded that the TPO's approach to aggregate the segments could not be upheld. Consequently, the Tribunal remanded Grounds 3-5 to the TPO/Assessing Officer for de novo verification of the functions performed under each segment, and directed recomputation of the ALP margin for each segment independently in accordance with law, granting the assessee a proper opportunity of being heard. [Paras 3, 4]

Grounds 3-5 remanded to the Ld.TPO/AO for fresh consideration and independent recomputation of ALP margins for SWD and ITeS segments.

Comparability analysis - transfer pricing - remand for de novo consideration - Comparables and related challenges remanded for fresh consideration; revenue grounds rendered infructuous. - HELD THAT: - Because the Tribunal remanded the issue of aggregation and directed fresh verification and recomputation of ALP for each segment, all contested issues concerning inclusion/exclusion of comparable companies were returned to the TPO/AO to be revisited in the new exercise. The Tribunal therefore held that the grounds raised by the revenue (challenging exclusions of certain comparables) become infructuous and dismissed the department's appeal on that basis. [Paras 4, 5]

Comparables to be reconsidered by the Ld.TPO/AO in the remand; revenue's grounds dismissed as infructuous.

Final Conclusion: The assessee's appeal is partly allowed for statistical purposes by remanding the transfer pricing issues (aggregation of SWD and ITeS and the comparability exercise) to the Ld.TPO/AO for de novo consideration and recomputation of ALP margins for each segment with opportunity to the assessee; the revenue's appeal is dismissed as infructuous.

Exemption clause - strict construction - doctrine of substantial compliance - writ of mandamus cannot compel State to act contrary to law - conditions for transitional exemption in export notification - administrative policy and judicial restraint in policy matters

Conditions for transitional exemption in export notification - exemption clause - strict construction - Whether the petitioner was entitled to export the remaining 11,000 MT of non-basmati rice under the exemptions carved out by Notification No.20/2023 dated 20.07.2023 and its amendment No.29/2023 dated 29.08.2023. - HELD THAT: - The Court examined the specific conditions prescribed by the Notification and its amendment and found that the exemptions were made subject to fulfilment of enumerated requirements - e.g., loading commenced before the Notification, vessel berthed/arrived/anchored with rotation number allocated prior to the Notification, consignments handed over to Customs or entered and registered in the Customs electronic systems with verifiable date time stamping prior to 21:57:01 hours on 20.07.2023, or export duty having been paid before that time. On the material on record the ship had not berthed and loading had not commenced before the Notification, the 11,000 MT in question had not been handed over to or registered in the Customs system with verifiable date time stamps before 21:57:01 hours on 20.07.2023, and export duty for that quantity was not paid before the stipulated time. As the petitioner failed to satisfy any of the prescribed conditions, the exemptions did not apply to the remaining 11,000 MT and the denial of permission to export that quantity was consistent with the Notification read strictly. [Paras 16, 18, 19, 25]

Petitioner was not entitled to export the remaining 11,000 MT as the conditions for exemption in the Notification and its amendment were not satisfied.

Doctrine of substantial compliance - exemption clause - strict construction - Whether the doctrine of substantial compliance or intended use could relieve the petitioner from strict fulfilment of the conditions prescribed by the Notification. - HELD THAT: - The Court noted that exemptions in fiscal or regulatory notifications must ordinarily be construed strictly and that the doctrine of substantial compliance is an equitable doctrine applicable only where non compliance relates to procedural or directory requirements and not to conditions essential to the statute's object. Given that the purpose of the Notification was to immediately prohibit exports to protect domestic supply and prices, the temporal and registration requirements were essential. The petitioner had not met the mandatory prerequisites that effectuated the Notification's object; therefore, the doctrine of substantial compliance and intended use reasoning could not be invoked to permit export of the unpaid/ unregistered 11,000 MT. [Paras 23, 24, 26]

Doctrine of substantial compliance and intended use could not be invoked in the petitioner's favour; substantial compliance did not excuse failure to meet mandatory conditions.

Writ of mandamus cannot compel State to act contrary to law - administrative policy and judicial restraint in policy matters - Whether a writ of mandamus could be issued to direct the Respondent to permit export contrary to the terms of its own Notification. - HELD THAT: - The Court reaffirmed the settled principle that no mandamus lies to compel the State or its authorities to act in breach of law or to refrain from enforcing a statutory or regulatory provision. Policy making and decisions as to the framing and enforcement of export restrictions are within the executive domain; courts will not direct the Executive to violate its own Notifications unless the measure is shown to be arbitrary or violative of Article 14. The petitioner did not impugn the validity of the Notifications on constitutional grounds and sought compulsion to relax their terms; such relief is impermissible. [Paras 20, 21, 22]

Writ of mandamus cannot be issued to compel the Government to breach or relax its own Notification; judicial interference with policy is unwarranted in the absence of invalidity.

Final Conclusion: Writ petition dismissed: petitioner failed to satisfy the mandatory conditions for exemption under the Notification and its amendment; substantial compliance and intended use doctrines were not available; courts cannot direct the State to contravene its Notification.

Unreasonable delay - reasonableness - Article 14 of the Constitution of India - proceedings under Section 124 of the Customs Act, 1962 - absence of prescribed limitation and the reasonable time doctrine - pre-shipment inspection certificate as a condition precedent for import of metal scrap

Unreasonable delay - reasonableness - Article 14 of the Constitution of India - proceedings under Section 124 of the Customs Act, 1962 - absence of prescribed limitation and the reasonable time doctrine - Validity of show cause notices issued under Section 124 of the Customs Act, 1962, approximately twelve years after import on the ground of unreasonable delay and arbitrariness under Article 14. - HELD THAT: - The Court held that where a statute does not prescribe a period of limitation, administrative action must be taken within a reasonable time and unreasonable delay renders the action arbitrary and violative of Article 14. Although limitation under Section 110 is not applicable to proceedings under Section 124, that does not permit initiation of confiscation proceedings after an inordinate delay. Reliance was placed on established authorities that a suo motu power or adjudicatory action must be exercised within a reasonable period; what constitutes reasonable time depends on the nature of the statute and relevant facts. Having regard to the scheme of the Customs Act and the maximum recovery period provided elsewhere in the Act, the Court found initiation of proceedings under Section 124 twelve years after import to be unreasonable. The delay was not justified on the record and, applying the cited precedents where long delays in fiscal adjudications were held to vitiate proceedings, the impugned show cause notices and proceedings were set aside as suffering from arbitrariness and lack of reasonableness.

Impugned proceedings under Section 124 issued about twelve years after import are set aside on the ground of unreasonable delay; writ petitions disposed of.

Final Conclusion: The High Court set aside the confiscation proceedings initiated under Section 124 of the Customs Act, 1962, on the ground that issuance of show cause notices roughly twelve years after import amounted to unreasonable delay and arbitrariness violative of Article 14; the writ petitions were disposed of and connected miscellaneous matters closed.

Obligations of Customs House Agent under Customs House Agent Licensing Regulations, 2004 - Non-transferability and lending/sub-letting of CHA licence - Responsibility for acts or omissions of authorised representatives and employees - Due diligence and duty to verify client authorisations - Jurisdiction of licensing authority to act against parent licence for misuse by authorised representative - Proportionality of punitive measures - forfeiture of security deposit vis-a -vis revocation and restoration of licence

Non-transferability and lending/sub-letting of CHA licence - Due diligence and duty to verify client authorisations - Responsibility for acts or omissions of authorised representatives and employees - Appellant breached duties under the CHALR, 2004 by lending/allowing use of its licence and failing to exercise due diligence and supervision, thereby violating Regulation 12, Regulation 13(a), 13(b), 13(d), 13(e) and Regulation 19(8). - HELD THAT: - The Tribunal accepted the investigation findings that the appellant permitted an outside person (Power of Attorney holder) to use the licence in return for recurring and lump-sum payments, with no evidence that the person was an employee or that proper authorisations from importers were obtained. The pattern of monthly consideration and a lump-sum payment established lending/sub-letting of the licence in breach of the prohibition on transferability. There was no record of authorisations from the actual importers nor evidence that business was transacted personally or through approved employees, demonstrating failure of due diligence and lack of requisite supervision. In these circumstances the appellant is held responsible for the acts and omissions committed in the transaction of business in their name and licence. [Paras 10]

Findings of breach of Regulation 12, 13(a), 13(b), 13(d), 13(e) and 19(8) are upheld and the appellant is held guilty of the contraventions alleged.

Jurisdiction of licensing authority to act against parent licence for misuse by authorised representative - Objection that Kolkata authority lacked jurisdiction because the alleged misconduct occurred at Mumbai was rejected. - HELD THAT: - The Tribunal observed that the parent licence was granted by the Calcutta Customs House and that, under the regulatory scheme permitting establishment of an office at another station, the Kolkata authority was entitled to proceed against the parent licence for misuse through an authorised representative. The plea based on breach of natural justice and want of jurisdiction was found unpersuasive in light of the licence relationship and the Power of Attorney arrangements relied upon by the appellant. [Paras 5]

Jurisdictional objection and plea of breach of natural justice are dismissed.

Proportionality of punitive measures - forfeiture of security deposit vis-a -vis revocation and restoration of licence - Appropriate relief: forfeiture of the security deposit is maintained but revocation of the licence is set aside and the licence is restored. - HELD THAT: - While the Tribunal affirmed that the appellant committed serious breaches, it took into account mitigating factors: recovery of dues in several cases and the prolonged period (nearly a decade) since revocation causing severe hardship to the appellant. Applying a proportionality assessment to the consequences imposed, the Tribunal concluded that maintaining forfeiture of the security deposit meets the disciplinary need, but perpetual revocation was excessive. Accordingly, the order of forfeiture is sustained while the licence revocation is vacated and the licence restored. [Paras 11, 12]

Forfeiture of the security deposit is upheld; revocation of the licence is set aside and the licence is restored to the appellant.

Final Conclusion: The Tribunal affirmed that the appellant breached multiple obligations under the CHALR, 2004 and rejected the jurisdictional/natural justice plea; it sustained forfeiture of the security deposit but, on a proportionality assessment, quashed the revocation and restored the CHA licence.

Revocation of Customs Broker license - forfeiture of security deposit - penalty under Regulation 18(1) of CBLR, 2018 - natural justice - communication regarding non-acceptance of enquiry report - due diligence obligations of Customs House Agent under Regulation 10(n) - proportionality in imposing revocation

Natural justice - communication regarding non-acceptance of enquiry report - revocation of Customs Broker license - proportionality in imposing revocation - Validity of revocation of the Customs Broker licence of M/s. Souparnika Shipping Services in view of an enquiry report favourable to the broker which was not communicated or expressly rejected before revocation, and whether revocation was a proportionate penalty. - HELD THAT: - The Tribunal found that an enquiry officer's report dated 06.12.2019 had absolved the Customs Broker of the charges, but the adjudicating authority did not communicate non-acceptance of that report to the broker or afford an opportunity in that regard, thereby violating principles of natural justice as articulated by the High Court of Kerala in Accrete Shipping Services. Applying authorities that limit a CHA's duty of verification and the test of aggravating conduct necessary to justify revocation, the Tribunal held that revocation of the licence was disproportionate. The Tribunal noted that the licence had been under suspension since 15.07.2019 and that more than four years had elapsed; suspension for that period was treated as a sufficiently onerous consequence and revocation would unduly affect the broker's livelihood. For these reasons the revocation order (Order-in-Original No. 74163/2020 dated 28.02.2020) was set aside and the authority was directed to revive/issue the Customs Broker licence. [Paras 9, 11, 13]

Impugned revocation in Order-in-Original No. 74163/2020 dated 28.02.2020 set aside; licence to be revived/issued.

Due diligence obligations of Customs House Agent under Regulation 10(n) - forfeiture of security deposit - penalty under Regulation 18(1) of CBLR, 2018 - Whether the adjudicating authority's confirmation of revocation, repeated forfeiture of the security deposit and imposition of penalty under Regulation 18(1) in the second impugned order were sustainable in the facts of the export over-valuation and other alleged misconduct. - HELD THAT: - On the evidence, the Tribunal concluded that the Customs Broker had failed to exercise required due diligence under Regulation 10(n) in relation to certain export/import transactions, and that negligent conduct and repeated involvement in questionable consignments were established to an extent. However, the Tribunal held that once the security deposit had already been forfeited by Order-in-Original No. 74163/2020, a subsequent order again forfeiting the same deposit could not be sustained. Applying proportionality and precedents limiting revocation to grave or mens rea conduct, the Tribunal modified the subsequent Order-in-Original No. 74601/2020 dated 18.03.2020 by setting aside the revocation and the second forfeiture of the security deposit but upheld the monetary penalty imposed under Regulation 18(1) as not excessive. [Paras 10, 12, 13]

Impugned order No. 74601/2020 dated 18.03.2020 modified: revocation and repeat forfeiture set aside; penalty under Regulation 18(1) upheld.

Final Conclusion: Appeal C/40199/2020 allowed by setting aside the revocation in Order-in-Original No. 74163/2020 and directing revival/issuance of the Customs Broker licence; Appeal C/40248/2020 partly allowed by setting aside revocation and repeat forfeiture but upholding the penalty under Regulation 18(1), with consequential reliefs as per law.

Cenvat credit - reverse charge mechanism - deeming provision - input service - mistake of law - extended period of limitation

Cenvat credit - reverse charge mechanism - deeming provision - mistake of law - Entitlement to CENVAT credit of service tax paid on import of services under reverse charge mechanism for period prior to 18.04.2006 - HELD THAT: - The Tribunal held that the appellant was entitled to CENVAT credit of service tax paid as recipient on imported services prior to 18.04.2006. The Tribunal relied upon earlier benches which recognised that Section 66A is a deeming provision and that the charging section remained Section 66, and on board circulars and judicial decisions clarifying the applicability of reverse charge. The services received from foreign providers qualified as input services under the Cenvat Credit Rules and, therefore, credit of tax paid even under a bona fide mistake of law is allowable. The Tribunal followed precedent, including the reasoning in Alcatel Lucent India Ltd., 3M India Ltd. and Aditya Birla NUVO Ltd., and noted the Board's circular and Supreme Court pronouncements that confined the operative liability under reverse charge to w.e.f. 18.04.2006 in relevant circumstances. Applying these principles, the Tribunal concluded that denial of credit for amounts paid prior to 18.04.2006 was not justified. [Paras 6]

CENVAT credit of service tax paid on import of services prior to 18.04.2006 is allowable to the appellant; the denial on this ground is set aside.

Extended period of limitation - regular disclosure - bonafide belief - Validity of invocation of extended period of limitation for recovery of CENVAT credit availed prior to 18.04.2006 - HELD THAT: - The Tribunal found that invocation of the extended period was unjustified. The appellant had been filing returns, was subject to regular audit, and had acted under a bona fide belief arising from genuine uncertainty in law about applicability of reverse charge prior to 18.04.2006. There was no finding of suppression with intent to evade duty. In view of the unsettled legal position during the relevant period and the appellant's disclosure and conduct, extended period could not be invoked to deny relief. [Paras 6]

Invocation of extended period of limitation to deny CENVAT credit is not justified; the demand based on extended period is set aside.

Final Conclusion: The impugned adjudication is set aside on merits and limitation; the appeal is allowed and the appellant is entitled to consequential relief in accordance with law.

Exemption for vocational training / Commercial Training and Coaching Centre Services - Recognition by law (certificate/course approval) as basis for exemption - Small scale exemption applicable to Airport Services - Quashing of show cause notices held contrary to Section 65(27) and Notification dated 25 04 2011

Exemption for vocational training / Commercial Training and Coaching Centre Services - Recognition by law (certificate/course approval) as basis for exemption - Whether the training imparted by the appellants is exigible to service tax as Commercial Training and Coaching Centre Services - HELD THAT: - The Tribunal applied the ratio of the decision which held that a course completion certificate or qualification that is recognised in law (even if further regulatory examination is required for practice) falls within the exclusion for educational/vocational training and is not exigible to service tax. The Tribunal noted that a subsequent order of the Commissioner (Appeals) in favour of the appellants had dropped proceedings following the same ratio. On that basis the Tribunal held that the training imparted by the institute is not taxable as Commercial Training and Coaching Centre Services and the demands raised on that count are unsustainable.

Demand in respect of Commercial Training and Coaching Centre Services set aside; training held not exigible to service tax

Small scale exemption applicable to Airport Services - Whether the demand confirmed on Airport Services is sustainable - HELD THAT: - The Tribunal accepted the contention that the demand, insofar as it relates to Airport Services, falls within the exemption limit available to small scale providers during the relevant period. Having held the training activity non taxable, and having found the Airport Services demand to be within the exemption threshold, the Tribunal did not sustain the remaining demand.

Demand in respect of Airport Services held to be within exemption limit and not sustained

Quashing of show cause notices held contrary to Section 65(27) and Notification dated 25 04 2011 - Validity of the Department's appeal against non imposition of penalty - HELD THAT: - The Department's appeal against the Adjudicating Authority's decision not to impose penalties under the relevant provisions was considered in light of the Tribunal's findings on taxability and the precedents relied upon. Since the principal demands were held unsustainable or within exemption, and the Adjudicating Authority had refrained from imposing penalty, the Tribunal dismissed the Department's appeal.

Department's appeal against non imposition of penalty dismissed

Final Conclusion: The appeal by the assessee is partly allowed by setting aside the demand in respect of Commercial Training and Coaching Centre Services and holding Airport Services within the exemption limit; the Department's appeal against non imposition of penalty is dismissed.

Purchase and sale of space in ocean freight - commission as Business Auxiliary Service - principal-to-principal transaction - multimodal transport operator

Purchase and sale of space in ocean freight - commission as Business Auxiliary Service - principal-to-principal transaction - multimodal transport operator - Whether the income earned by the appellant on ocean freight is commission chargeable to service tax as Business Auxiliary Service or is trading income arising from purchase and sale of space in vessels and therefore not exigible to service tax under that category - HELD THAT: - The Tribunal examined the appellant's invoices and commercial practice and held that the appellant, an international freight forwarder and customs agent, procured space in ships from shipping lines and thereafter sold that space to its customers, earning a margin which was reflected as Ocean Freight trading income. Relying on precedent, the Tribunal accepted the reasoning that where a logistics provider contracts for slots or space with carriers and assumes the commercial risk of procurement and allotment, the transactions are principal-to-principal commercial purchases and sales of space rather than agency commissions. As a multimodal transport operator contracting for space and issuing a document of title, the appellant's receipts represent consideration for purchased freight-space resold to shippers and not promotional or marketing services of a client. On that basis the activity does not fall within the scope of Business Auxiliary Service as construed in the cited decisions, and the demand for service tax was unsustainable.

The impugned demand for service tax on ocean freight income was set aside and the appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, concluding that the appellant's income on ocean freight represented purchase and sale of space (trading income) and not commissionable Business Auxiliary Service; the demand was set aside.

Royalty as tax versus consideration - assignment of right to use natural resources - lease versus assignment - negative list exemption for pre 1.4.2016 one time charges - reverse charge liability for services provided by government

Royalty as tax versus consideration - negative list exemption for pre 1.4.2016 one time charges - Whether royalty paid to the State Government is a 'consideration' attracting service tax or is in the nature of a tax so as to preclude levy of service tax. - HELD THAT: - The Tribunal followed the binding precedent of the seven judge bench in India Cements and related authorities to hold that royalty is in the nature of a tax. Applying that principle, the Tribunal concluded that the demand of service tax on royalty paid to the Government cannot be sustained. Although the department relied on post 2016 changes to the negative list and the exemption proviso for one time charges, the Tribunal held that the primary question is whether royalty is consideration; having held royalty to be tax like and dominantly regulatory in character, the Service Tax demand founded on treating royalty as consideration fails. Consequently, it was unnecessary to decide other rival contentions once this issue was answered in favour of the appellant.

Royalty is in the nature of a tax and not a consideration for services; the demand of service tax on royalty is unsustainable.

Assignment of right to use natural resources - lease versus assignment - reverse charge liability for services provided by government - Whether the grant by the State Government to the appellant constituted an 'assignment of right to use' (taxable as service) or was a mining lease not amounting to assignment. - HELD THAT: - On the documentary materials the Tribunal found the instrument to be a mining lease (expressly so described) and noted statutory prohibitions on transfer/assignment (including Rule 17), and other indicia of continued governmental control. The Tribunal concluded that the transaction is in form and substance a lease and not an 'assignment' as understood in law; further, the demand framed primarily by reference to the exemption notification was an attempt to characterise the lease as an assignment. That characterisation was not borne out by the lease document or the statutory framework relied upon by the department.

The grant is a mining lease and not an 'assignment of right to use'; the department's characterization as assignment is not sustained.

Final Conclusion: The Tribunal set aside the impugned order, held the demand of service tax on royalty to be unsustainable, and allowed the appeal with consequential reliefs; the service tax demand for the period April 2016 to June 2017 is quashed.

Exemption for construction services to government or local authority - Services provided for use predominantly other than for commerce, industry or any other business or profession - Construction services rendered for municipal functions under Article 243W and the Twelfth Schedule - Mega Exemption Notification No.25/2012-ST - Entry 12(a)

Exemption for construction services to government or local authority - Mega Exemption Notification No.25/2012-ST - Entry 12(a) - Construction services rendered for municipal functions under Article 243W and the Twelfth Schedule - Construction services undertaken for the Kolkata Municipal Corporation for establishment of a slaughterhouse are exempt from service tax under Entry 12(a) of the Mega Exemption Notification No.25/2012-ST dated 20.06.2012. - HELD THAT: - The Tribunal accepted the Commissioner (Appeals) conclusion that the slaughterhouse was established for the Kolkata Municipal Corporation and that regulation and provision of slaughterhouses is a function of municipal bodies under Article 243W read with the Twelfth Schedule of the Constitution. The record contains no material showing that the slaughterhouse was established for commerce or industry; on the contrary, it falls within the municipal function. Entry 12(a) of the Mega Exemption Notification exempts from service tax construction and allied services provided to a government or local authority where the civil structure is meant predominantly for use other than for commerce, industry or any other business or profession. Reliance placed in the impugned order on precedents such as Ganpati Mega Builders (India) Pvt. Ltd. and the coordinated bench decision in Krishi Upaj Mandi Samiti supports the view that construction services rendered for statutory/local authorities for non-commercial public use attract the exemption. Applying these principles, the Tribunal held that the appellant (Revenue) was not entitled to demand service tax, interest and penalties levied in the Order-in-Original, and that the Commissioner (Appeals) order allowing the respondent benefit of Entry 12(a) was sustainable. [Paras 4, 5]

The service tax demand, interest and penalties imposed in the adjudicating order were set aside as the construction services for the Kolkata Municipal Corporation fall within the exemption at Entry 12(a) of Mega Exemption Notification No.25/2012-ST.

Final Conclusion: Revenue's appeal dismissed; appellant entitled to exemption under Entry 12(a) of Mega Exemption Notification No.25/2012-ST for construction of the slaughterhouse carried out for the Kolkata Municipal Corporation, and the demands and penalties in the original order are not sustainable.

Claims not part of approved resolution plan extinguished - resolution plan binding on creditors including Central Government and local authorities - appeal abates and tribunal becomes functus officio on approval of resolution plan - operational creditors required to submit claims during CIRP; failure leads to extinction of claim - pre-deposit refundable where claim does not survive approval of resolution plan

Claims not part of approved resolution plan extinguished - appeal abates and tribunal becomes functus officio on approval of resolution plan - operational creditors required to submit claims during CIRP; failure leads to extinction of claim - pre-deposit refundable where claim does not survive approval of resolution plan - Effect of NCLT approval of a resolution plan on the pending appeal for refund of service tax and on the CESTAT's jurisdiction to proceed - HELD THAT: - The Tribunal held that with the approval of the Resolution Plan by the adjudicating authority (NCLT), claims that are not part of the approved Resolution Plan stand frozen and extinguished, and the resolution plan is binding on the corporate debtor and all creditors. Reliance was placed on the decision in Ghanashyam Mishra and Sons Pvt. Ltd. and the Supreme Court decision cited in Ruchi Soya, as well as the CBIC SOP directing that GST/Customs authorities, being operational creditors, must file claims during the CIRP; failure to do so results in their claims being inadmissible and extinguished upon approval of the plan. Consequentially, once the Resolution Plan was approved in the insolvency proceedings of the appellant, the appeals before the Tribunal abated and the CESTAT became functus officio in respect of the matters under appeal. While the Tribunal noted the principle that amounts deposited at the time of admission of appeals may be refundable where the claim does not survive approval of the resolution plan, the operative conclusion was that the appeals stand abated on account of the approved Resolution Plan. [Paras 7, 8]

Appeals abated upon approval of the Resolution Plan by NCLT; CESTAT functus officio and unable to continue proceedings in respect of claims not part of the approved plan.

Final Conclusion: The appeals filed by the appellant against rejection of refund stand abated because the NCLT-approved Resolution Plan has rendered the claim extinguished; the Tribunal is functus officio and cannot proceed further in the appeals.

Goods transport agency service under reverse charge mechanism - Exemption under Notification No. 18/2009-ST - procedural compliance and non-filing of EXP-1/EXP-2 - Revenue neutrality - Cenvat credit/refund entitlement - Extended period of limitation - requirement of mala fide intention

Exemption under Notification No. 18/2009-ST - procedural compliance and non-filing of EXP-1/EXP-2 - Appellant's entitlement to exemption under Notification No. 18/2009 ST for transportation to port of export despite non-filing of EXP 1 and EXP 2 returns. - HELD THAT: - The Tribunal considered whether non-filing of EXP 1 and EXP 2 returns is a merely procedural lapse that should not deprive the appellant of the exemption under Notification No. 18/2009 ST for goods transported to the port for export. Noting precedent and recent Tribunal authority, the bench held that in the facts of this case the appellant is not entitled to the benefit of Notification No. 18/2009 ST where the statutory procedural returns were not filed. The Tribunal expressly followed the view in M/s N.M. Zackriah & Co. (Final Order No. 40748 of 2023 dated 01.09.2023) and rejected the contention that substantial benefit cannot be denied on technical grounds, thereby upholding the demand on merits. [Paras 9]

Appellant is not entitled to the benefit of Notification No. 18/2009 ST for the stated period; demand on merits sustained.

Revenue neutrality - Cenvat credit/refund entitlement - Extended period of limitation - requirement of mala fide intention - Invokability of the extended period of limitation for demand of service tax where the appellant, an exporter, was entitled to Cenvat credit or refund making the situation revenue neutral and lacking mala fide intention. - HELD THAT: - The Tribunal examined whether the Department could invoke the extended period of limitation given that the service tax which was allegedly payable could be either taken as Cenvat credit or refunded under the relevant rules because the appellant was an exporter. Relying on Tribunal precedent in M/s Satyam Enterprises and other authorities cited by the appellant, the bench found that where the tax liability is revenue neutral (entitlement to credit/refund exists) and there is no malafide intention not to pay tax, the ingredient necessary to invoke the extended period is missing. Applying that legal principle to the admitted facts, the Tribunal held the extended limitation period could not be invoked and accordingly set aside the demand on limitation grounds. [Paras 10, 11]

Extended period of limitation not invocable; appellant succeeds on limitation ground.

Final Conclusion: The appeal is allowed in part: although the appellant is not entitled to exemption under Notification No. 18/2009 ST due to non filing of EXP 1/EXP 2, the demand was barred by limitation because the case was revenue neutral (entitlement to Cenvat credit/refund) and lacked mala fide intention; the impugned order is set aside with consequential relief.

Refund of amounts deposited under protest / pre-deposit - applicability of limitation for refund claims under Section 11B(1) of the Central Excise Act - characterisation of a deposit as duty or as payment made without authority of law - prohibition on retention of tax not authorised by law under Article 265 of the Constitution - inapplicability of unjust enrichment where deposit is made under protest during investigation

Refund of amounts deposited under protest / pre-deposit - applicability of limitation for refund claims under Section 11B(1) of the Central Excise Act - characterisation of a deposit as duty or as payment made without authority of law - prohibition on retention of tax not authorised by law under Article 265 of the Constitution - Whether the one year limitation under Section 11B(1) applies to the appellant's claim for refund of Rs.30 Lakhs deposited under protest during investigation. - HELD THAT: - The Tribunal found that the amount was deposited by the appellant under protest during investigation and was appropriated in the original adjudication but, on appeal, this Tribunal allowed the appellant's appeal and dismissed the revenue's appeal, an order which attained finality. Relying on consistent High Court authority and principles cited in the judgment, the Court held that amounts deposited during the pendency of adjudication or investigation are in the nature of pre deposits or deposits under protest and do not partake the character of duty where the assessee is not liable to pay; in such circumstances principles of unjust enrichment do not bar refund and the revenue has no authority to retain such sums. Consequently, the statutory limitation under Section 11B(1), which governs refund of duty, does not apply to refund claims where the payment was not a duty but a deposit made without authority of law. The Tribunal further observed that allowing the revenue to retain sums not lawfully collectible would be contrary to Article 265 of the Constitution. Applying these principles to the facts, the appellant was entitled to refund with interest. [Paras 10, 11, 12, 14, 15]

Limitation under Section 11B(1) is not applicable; the appellant is entitled to refund of the amount deposited under protest along with interest.

Final Conclusion: The appeal is allowed; the appellant is entitled to refund of the amount deposited under protest with interest, as the one year limitation under Section 11B(1) does not apply where the payment did not constitute duty and the revenue has no authority to retain such sums.

Adjudication beyond the scope of the show cause notice - lapsing of Cenvat credit under Rule 11(3) of the Cenvat Credit Rules, 2004 - ten percent demand under Rule 6(3) of the Cenvat Credit Rules, 2004 for common input services - disallowance of Cenvat credit on capital goods where capital goods were not exclusively used for exempted goods

Adjudication beyond the scope of the show cause notice - Adjudication cannot sustain where the order travels beyond the charges framed in the show cause notice. - HELD THAT: - The show cause notice proposed a demand under Rule 6(3) for 10% of value of exempted goods. The adjudicating authority, however, confirmed a lapsing of credit under Rule 11(3) based on the balance as on 07.12.2008 - a ground not put to the appellant in the show cause notice. Reliance of the Tribunal on binding authorities establishes the settled principle that an adjudication cannot decide an issue which was not the subject matter of notice. Consequently the demand confirmed on a ground not raised in the notice is unsustainable. [Paras 4]

Demand set aside insofar as it rests on a ground not raised in the show cause notice.

Ten percent demand under Rule 6(3) of the Cenvat Credit Rules, 2004 for common input services - Demand of 10% under Rule 6(3) is unsustainable where the cenvat credit attributable to inputs and input services used in exempted goods has already been finally reversed. - HELD THAT: - An earlier show cause proceeding resulted in confirmation of a specified amount and discharge of that liability, with the balance demand dropped on remand; the appellant had reversed the confirmed amount and that outcome attained finality. Because the entire cenvat credit attributable to inputs and input services used in the exempted goods was already reversed and finally concluded, the foundational basis for invoking Rule 6(3)(b) to demand 10% of the value of exempted goods did not subsist. Therefore the proposed 10% demand could not be sustained. [Paras 1, 4]

Demand under Rule 6(3) set aside as the basis for it no longer existed.

Lapsing of Cenvat credit under Rule 11(3) of the Cenvat Credit Rules, 2004 - Rule 11(3) lapsing provision does not apply where common Cenvat credit is used to manufacture both dutiable and exempted goods and the assessee continues to manufacture and clear dutiable goods. - HELD THAT: - Rule 11(3) requires payment of Cenvat credit equivalent where a final product becomes fully exempt and relates to inputs lying in stock, in process or contained in final products on the date of exemption; after deducting that amount, any remaining balance lapses. The Tribunal held, following prior authorities, that the provision is inapplicable where common credit funds manufacture of multiple final products and some remain dutiable. Here the appellant manufactured and cleared dutiable goods as well as exempted goods, and utilized carried forward credit for duty on dutiable products; therefore the balance credit as on 07.12.2008 remained available for utilization and could not be held to have lapsed under Rule 11(3). [Paras 4]

Demand based on lapsing under Rule 11(3) held not sustainable; appellant not liable to reverse or pay back the credit balance as on 07.12.2008.

Disallowance of Cenvat credit on capital goods where capital goods were not exclusively used for exempted goods - Cenvat credit on capital goods cannot be denied where the capital goods were used for manufacture of dutiable products prior to, and after, the final product became exempted, and thus were not exclusively used for exempted production. - HELD THAT: - The adjudicating authority alleged exclusive use of capital goods for exempted products. The Tribunal found that the same capital goods had been used when the goods were dutiable (clearances under an optional/paid-notification at 4%), and therefore exclusivity was not established. Precedent supports that Rule 6(4) disallows credit only when capital goods are exclusively used for exempted goods; where capital goods are used for both dutiable and exempted goods, credit cannot be denied. Consequently the allegation of exclusive use fails and the demand on this ground is unsustainable. [Paras 2, 4]

Demand for reversal of cenvat credit on capital goods set aside as capital goods were not used exclusively for exempted products.

Final Conclusion: All demands and penalties sustained by the adjudicating authority have been set aside: the adjudication cannot travel beyond the show cause notice; the 10% Rule 6(3) demand fails as the attributable credits were already reversed; the Rule 11(3) lapse does not apply where common credit funds both dutiable and exempted goods; and credit on capital goods cannot be denied where exclusivity of use for exempted goods is not established. Appeal allowed with consequential relief as per law.

Eligibility for Cenvat credit on invoices issued prior to the effective date of a limiting notification - applicability of time-limit for availing Cenvat credit prescribed by Notification No.21/2014 - retrospective application of limitation provisions in indirect tax notifications

Applicability of time-limit for availing Cenvat credit prescribed by Notification No.21/2014 - eligibility for Cenvat credit on invoices issued prior to the effective date of a limiting notification - Appellant entitled to avail Cenvat credit in December 2014 on invoices issued in March and April 2013 despite the six month limit in Notification No.21/2014. - HELD THAT: - The Tribunal found no dispute that duty was paid and inputs were received. The determinative question was whether the six month period introduced by Notification No.21/2014 (dated 11.07.2014) could be applied to invoices issued prior to that date. Relying on the Tribunal's earlier decision in Voss Exotech Automotive Pvt. Ltd., the Court observed that a notification prescribing a time limit for taking credit is operative only for invoices issued on or after the notification's effective date because no such time limit existed at the time the earlier invoices were issued. The Tribunal's reasoning - accepted by several subsequent decisions - is that limitation in a later notification cannot be applied retrospectively to invoices issued before the notification; consequently, invoices dated March and April 2013 were not subject to the six month restriction introduced on 11.07.2014. Applying that ratio, the Tribunal concluded that the appellant was entitled to the credit availed in December 2014 on the pre notification invoices. [Paras 6, 8, 9]

Impugned order denying credit under the six month rule set aside; appellant entitled to the Cenvat credit claimed on the invoices dated March and April 2013.

Final Conclusion: Appeal allowed; denial of Cenvat credit under Notification No.21/2014 set aside and credit granted in respect of invoices issued prior to 11.07.2014.

Admissibility of third party electronic records - corroborative evidence requirement where admissions are retracted - evidentiary value of RG 23 Part I register vis a vis third party statements - proof of clandestine removal / availing cenvat credit without physical receipt - burden of proof after retraction of admissions

Corroborative evidence requirement where admissions are retracted - burden of proof after retraction of admissions - Whether the department discharged its burden once statements admitting fraudulent invoicing were retracted on cross examination. - HELD THAT: - The Tribunal found that the investigation rested on statements of third parties (notably Shri Amit Gupta and Shri Sanjeev Magoo) which were retracted during cross examination. Once admissions relied upon by the Revenue were retracted, the burden shifted to the department to prove the allegations by producing corroborative evidence. The Court held that mere initial admissions, if subsequently retracted, do not dispense with the requirement of independent supporting evidence and that the department failed to produce such corroboration in the present case. [Paras 11]

Retraction of admissions shifted the burden to the department, which was not discharged.

Admissibility of third party electronic records - evidentiary value of RG 23 Part I register vis a vis third party statements - proof of clandestine removal / availing cenvat credit without physical receipt - Whether the documents recovered from premises of third parties (electronic gadgets) and other third party records could sustain a finding that the appellants availed cenvat credit without physical receipt of inputs. - HELD THAT: - The Tribunal observed that most impugned documents were recovered from electronic devices seized from premises of the investigated third party and that no certificate under the statutory provision required to admit such electronic records was placed on the file; consequently those documents were not admissible. Further, there was no search or recovery from the appellants' premises and the department produced no material to falsify the appellants' RG 23 Part I register entries, ER 1 returns or bank payment records. The Tribunal relied on established principle that third party records alone, without clinching corroborative evidence of clandestine manufacture/removal (such as excess production, dispatch particulars, flow of funds, power consumption etc.), cannot form the basis for confirming a demand. Applying these principles to the facts, the Tribunal concluded that the department had not proved that the appellants availed cenvat credit on fake invoices without physical delivery. [Paras 12, 13, 14]

Third party electronic records and uncorroborated evidence could not sustain the demand; the RG 23 register and other records of appellants stood unrefuted.

Proof of clandestine removal / availing cenvat credit without physical receipt - Whether recovery of cenvat credit and imposition of penalty on the appellants could be upheld. - HELD THAT: - On the combined findings that (a) admissions relied upon were retracted, (b) electronic records from third parties were not admitted in evidence for lack of requisite certification, and (c) the appellants produced contemporaneous purchase registers and returns which the department did not disprove, the Tribunal held there was no evidence to prove that the appellants availed cenvat credit without physical receipt of goods. In absence of proof of the primary allegation, imposition of penalty could not be sustained. [Paras 15]

Demand and penalty confirmed by the adjudicating authorities were set aside and the appeals allowed.

Final Conclusion: The Tribunal allowed the appeals: holding that retracted admissions required corroboration which the department failed to furnish; third party electronic records were inadmissible for want of proper certification; the appellants' records remained unrefuted; consequently the confirmed demand and penalties for the period 17.02.2012 to 01.03.2012 were set aside.

Input service - CENVAT credit - outward transportation - place of removal - export of goods / export consignments - remand for fresh consideration

Input service - CENVAT credit - outward transportation - place of removal - Entitlement to CENVAT credit of service tax paid on outward transportation for the period prior to April 2008 - HELD THAT: - The Tribunal held that for the period prior to April 2008 the coverage of 'outward transportation' within the definition of 'input service' under rule 2(l) of the CENVAT Credit Rules, 2004 is settled by the decision of the High Court of Karnataka in ABB Ltd (affirmed by the Supreme Court in Vasavadatta Cements Ltd). The first appellate authority erred in preferring contrary Tribunal decisions over the High Court's ruling. Consequently the reversal of the original authority's order (which had dropped proceedings) in respect of the period prior to April 2008 was contrary to law and was set aside. [Paras 5]

Impugned order set aside for the period prior to April 2008 and credit held allowable in accordance with the High Court/Supreme Court ruling.

Export of goods / export consignments - place of removal - CENVAT credit - remand for fresh consideration - Whether CENVAT credit of service tax on outward transportation for goods cleared for export (post-March 2008) is allowable - HELD THAT: - The Tribunal noted that the original authority found the credits in the later period related to freight for export consignments up to port of shipment and examined whether 'port of shipment' can be treated as the 'place of removal' for exports. The first appellate authority did not examine eligibility of credit in relation to outward transportation for export goods but confined itself to applicability of the ABB decision. As the question of entitlement for the period after March 2008 requires specific consideration in light of circulars and authorities addressing export shipments (including Board clarification treating port/ICD/CFS as place of removal for manufacturer-exporters), the Tribunal remanded the limited issue to the first appellate authority for fresh adjudication in accordance with law. [Paras 6, 9]

Matter remanded to the first appellate authority to render a finding on eligibility of credit for outward transportation in respect of export consignments for the period after March 2008.

Final Conclusion: The appeal is allowed: the impugned order is set aside for the period prior to April 2008 (credit sustained in favour of the appellant) and, for the remaining period after March 2008, the matter is remanded to the first appellate authority for fresh decision in accordance with law.

Cenvat credit utilization for payment of duty on final products - distinction between bye-product and input for purposes of cenvat - application of sub-rule (3) of Rule 3 of the Cenvat Credit Rules, 2001 allowing utilization of credit for duty on any final product - precedential effect of Bombay High Court, Aurangabad Bench decision on identical question

Cenvat credit utilization for payment of duty on final products - distinction between bye-product and input for purposes of cenvat - application of sub-rule (3) of Rule 3 of the Cenvat Credit Rules, 2001 allowing utilization of credit for duty on any final product - precedential effect of Bombay High Court, Aurangabad Bench decision on identical question - Whether cenvat credit availed on molasses (a bye-product of sugar) could be utilized for payment of central excise duty on sugar for the period September 2001 to December 2001. - HELD THAT: - Revenue did not dispute the availment of cenvat credit on molasses; its sole contention was that molasses being a bye-product and not an input for manufacture of sugar, credit on molasses could not be utilised to pay duty on sugar. Sub-rule (3) of Rule 3 of the Cenvat Credit Rules, 2001 permits utilization of cenvat credit for payment of duty on any final product. The Tribunal applied the binding precedent of the Bombay High Court, Aurangabad Bench in First Appeal No.810 of 2004 (order dated 28.09.2017), which answered the substantial question of law in favour of the assessee, holding that credit on molasses can be used for payment of duty on sugar. Following that decision, the Tribunal held the impugned order-in-appeal unsustainable and allowed the appeal, remediating the departmental demand and penalties confirmed contrary to that principle. [Paras 4, 5, 6]

Impugned order-in-appeal set aside and the appeal allowed on the ground that cenvat credit on molasses could be utilised for payment of duty on sugar.

Final Conclusion: Following the Bombay High Court, Aurangabad Bench ruling, the Tribunal held that cenvat credit availed on molasses for the period September 2001 to December 2001 was lawfully utilisable for payment of duty on sugar; the impugned order confirming demand and penalty was set aside and the appeal allowed.

CENVAT credit on banking services - input service - interpretation of Rule 2(l) of the CENVAT Credit Rules, 2004 - documentary requirements for availing credit under Rule 3 - nexus with manufacturing activity

CENVAT credit on banking services - input service - interpretation of Rule 2(l) of the CENVAT Credit Rules, 2004 - documentary requirements for availing credit under Rule 3 - nexus with manufacturing activity - Eligibility for CENVAT credit of Service Tax paid on bank charges for the period April 2009 to August 2010 - HELD THAT: - The Tribunal examined whether banking charges on which Service Tax was collected could be treated as an "input service" eligible for CENVAT credit. It noted that banking services are expressly covered by the definition contained in Rule 2(l) of the CENVAT Credit Rules, 2004 and that the period concerned is prior to the amendment of the definition effective 01.04.2011. The Tribunal also considered the department's contention on documentary requirements under Rule 3 and observed that banks customarily issue a certificate evidencing collection of Service Tax along with details of tax paid and that separate invoices in such transactions cannot be expected. The Tribunal rejected the alternative contention that the bank charges lacked requisite nexus with manufacture, holding that such banking activities fall within activities "relating to business" and therefore qualify as input services. For these reasons the disallowance of credit by the authorities below was found to be without basis. [Paras 11, 12, 13]

The disallowance of CENVAT credit of Service Tax on bank charges is set aside and the appeal is allowed with consequential reliefs.

Final Conclusion: The Tribunal held that banking charges for the period April 2009 to August 2010 constitute input services under Rule 2(l) of the CENVAT Credit Rules, 2004, that the bank certificate evidencing collection of Service Tax was acceptable, and therefore the impugned orders denying credit are set aside and the appeal allowed with consequential reliefs.

Exemption for captive consumption of inputs - proviso (vi) to Notification No.67/1995 - obligation under Rule 6 of the Cenvat Credit Rules - application of binding Supreme Court precedent

Proviso (vi) to Notification No.67/1995 - obligation under Rule 6 of the Cenvat Credit Rules - exemption for captive consumption of inputs - Whether exemption under Notification No.67/1995 is available on clinker captively consumed in manufacture of cement while the manufacturer avails exemption under Notification No.50/2003 on cement. - HELD THAT: - The Tribunal applied the Supreme Court's decision in Ambuja Cement & Others, where the Court construed clause (vi) of the proviso to Notification No.67/1995 and held that clause (vi) contemplates the situation where a manufacturer produces both dutiable and exempt final products (which may be different final products), and that the proviso will not operate where the manufacturer clears exempted goods after discharging the obligation prescribed in Rule 6 of the Cenvat Credit Rules. The Apex Court further recorded that, on the facts, the manufacturers had discharged the Rule 6 obligation and that there was no requirement that the same final product be partly dutiable and partly exempt. Applying that binding precedent, the Tribunal found that the appellants had discharged the obligation under Rule 6 and therefore exemption under Notification No.67/1995 was available in respect of clinker captively consumed while Notification No.50/2003 applied to cement. [Paras 6, 7]

Exemption under Notification No.67/1995 is available on clinker captively consumed while Notification No.50/2003 is availed for cement, as governed by clause (vi) and discharge of the Rule 6 obligation; the impugned order is unsustainable.

Final Conclusion: The appeal is allowed; the impugned adjudication confirming demands in relation to clinker and cement is set aside in view of the Supreme Court's ruling that clause (vi) applies where the Rule 6 obligation is discharged, entitling the appellants to the claimed exemption on clinker.

Power of Appellate Court under Section 148 of the Negotiable Instruments Act to order deposit of a minimum of twenty per cent pending appeal - Exception/special reasons to waive deposit under Section 148 - Purposive interpretation of Section 148 in light of precedents - Remand for fresh consideration of exceptional circumstances

Power of Appellate Court under Section 148 of the Negotiable Instruments Act to order deposit of a minimum of twenty per cent pending appeal - Exception/special reasons to waive deposit under Section 148 - Purposive interpretation of Section 148 in light of precedents - Whether the appellant is entitled to exemption from depositing twenty per cent of the compensation/fine under Section 148 of the NI Act on account of alleged exceptional circumstances - HELD THAT: - The Court reviewed Section 148 and the governing precedents, noting that ordinarily an appellate court is to direct deposit of a minimum of 20% to prevent delay tactics by accuseds; however, an appellate court may grant an exception and waive the deposit if it records special or exceptional reasons. The judgment refers to the principles articulated in Surinder Singh Deswal @ Col. S.S. Deswal , and the clarification that exceptional circumstances must be specifically recorded in Jamboo Bhandari , as well as this Court's earlier exposition in Gulshan Arora . On the facts, the petitioner had raised before the Sessions Court the pendency of insolvency proceedings and her medical condition; before this Court an additional circumstance (pendency of consumer proceedings against the insurer) was also urged. The impugned order dealt with the insolvency contention but did not record any finding on the medical ground, and the consumer-complaint contention was not pressed before the Sessions Court. In view of the requirement that any waiver be based on recorded special reasons and the need for the appellate court to consider all exceptional circumstances raised, this Court concluded that the matter should be remitted to the learned Sessions Court/Appellate Court for fresh consideration of whether the three circumstances (insolvency proceedings, medical condition, and consumer complaints against the insurer) - or any other exceptional circumstance the appellant may advance - warrant exemption from the 20% deposit. The Sessions Court is to decide the issue on merits within the prescribed timeframe and without being influenced by observations in the present judgment. [Paras 17, 18]

Remand to the learned Sessions Court/Appellate Court to decide afresh, on merits, within two months whether the exceptional circumstances alleged warrant waiver of the 20% deposit.

Final Conclusion: The petition is disposed of by remitting the matter to the Sessions Court/Appellate Court to decide afresh, within two months, whether the petitioner should be exempted from depositing twenty per cent of the compensation on account of exceptional circumstances; liberty granted to the petitioner to raise any other exceptional circumstance.