TaxTMI Updates e-Newsletter
Feb 28,2019

Input tax credit - used or intended to be used in the course or furtherance of business - perquisite outside the scope of GST - integrally connected / nexus with business - blocked credit for personal consumption - non obstante clause in Section 17(5) - plantation and gardening as business necessity / environmental compliance - supply between related persons and Schedule I

Input tax credit - perquisite outside the scope of GST - used or intended to be used in the course or furtherance of business - blocked credit for personal consumption - Input tax credit in respect of goods and services used for management, repair, renovation, alteration or maintenance of residential townships/colonies for employees - HELD THAT: - The Authority for Advance Ruling's denial of ITC for supplies used in relation to residential colonies is affirmed. The provision of housing to employees is a perquisite and, as admitted by the appellant and explained by CBIC clarification, perquisites fall outside the scope of GST; accordingly ITC is not available. Even assuming perquisites were taxable, expenditure for comfort, convenience or welfare of employees lacks the requisite nexus of being integrally connected with the business and therefore does not qualify as input used in the course or furtherance of business. The statutory scheme, including the non-obstante clause in Section 17(5) and the prohibition of credit where goods or services are for personal consumption, supports disallowance. The reasoning of the Bombay High Court on analogous facts is applied to hold that services rendered for employee residential colonies are welfare activities and not eligible for credit. [Paras 9]

ITC disallowed for goods and services used for management, repair, renovation, alteration or maintenance of employee residential townships/colonies.

Input tax credit - perquisite outside the scope of GST - integrally connected / nexus with business - Entitlement to input tax credit for supplies in relation to guest house, transit house and trainee hostel - HELD THAT: - The AAR's grant of ITC for guest house, transit house and trainee hostel is modified. Transit house and trainee hostel providing residential accommodation to employees are perquisites; ITC for inward supplies used for these cannot be allowed. The guest house, although used occasionally for non-employees, is not shown to be integrally connected with the appellant's core business such that supplies to it qualify as used in the course or furtherance of business. Consequently, tax paid on inward supplies for these establishments is not eligible for ITC. [Paras 9]

ITC disallowed for supplies used in relation to guest house, transit house and trainee hostel.

Input tax credit - plantation and gardening as business necessity / environmental compliance - used or intended to be used in the course or furtherance of business - Entitlement to input tax credit for services availed in relation to plantation and gardening within plant/mining/office premises - HELD THAT: - The AAR's finding that ITC is available for plantation and gardening within plant, mining and business premises is upheld. Creation and maintenance of green areas inside plant/mining/office premises are business necessities for controlling pollution, preventing soil erosion and complying with statutory environmental obligations (for example under the Forest Conservation Act and Environment Protection Act). Such activities are integrally related to and in furtherance of the appellant's business and therefore qualify as inputs/input services eligible for credit. [Paras 9]

ITC allowed for supplies used for plantation and gardening within plant, mining and other business premises.

Final Conclusion: The appeal filed by M/s National Aluminium Company Limited is rejected insofar as it seeks ITC for supplies relating to employee residential colonies, transit houses, trainee hostels and guest house; the appeal filed by the Commissioner is allowed in part to deny ITC for guest house/transit house/trainee hostel; the AAR ruling is modified to allow ITC only for plantation and gardening within plant/mining/office premises, and otherwise remains valid where unchallenged.

Applicability of customs exemption to import of goods - Liability to pay IGST on import - Concessional GST rates for specified scientific equipment - Binding nature of GST Council recommendations versus statutory notifications - Advance Ruling jurisdiction under Section 97

Applicability of customs exemption to import of goods - Liability to pay IGST on import - Notification No.51/1996-Customs dated 23.07.1996 as amended by Notification No.43/2017-Customs dated 30.06.2017 applies to the Applicant for import of specified equipment but does not extend to OEM suppliers supplying those imported equipments domestically. - HELD THAT: - The Proviso to Section 5(1) of the IGST Act confines levy of IGST on goods imported into India to the time of customs clearance and the levy is limited to importers. Where an eligible institution itself imports specified equipment, the customs notifications providing exemption apply and the importer (the institution) may claim exemption. However, where an OEM supplier located in India imports goods of its own and subsequently supplies them domestically to eligible institutions, the initial import by the OEM remains a taxable import for which IGST is leviable at customs clearance; the subsequent domestic supply is a separate taxable supply (CGST/SGST or IGST depending on locations) and the liability to pay tax lies on the supplier, not on the recipient institution. The customs notification is restricted to specified public funded research/educational institutions as importers and cannot be extended to confer exemption upon OEM suppliers importing for their own account. [Paras 6]

Notification No.51/1996-Customs as amended is applicable to the Applicant when it directly imports specified equipment; it is not applicable to OEM suppliers importing for supply to such institutions.

Binding nature of GST Council recommendations versus statutory notifications - Advance Ruling jurisdiction under Section 97 - Whether the Authority for Advance Ruling can rule on the legal question of the binding effect of GST Council decisions in the absence of corresponding statutory notifications. - HELD THAT: - While the GST Council is the constitutional body making recommendations on policy, including exemptions, issues of rate or tax concessions require enactment by way of statutory notifications. The Authority observed that questions on whether a Council decision is binding in the absence of a corresponding notification involve matters of issuance of statutory notifications and are not within the competence of the Authority constituted under the OGST Act to pronounce under Section 97/98. Consequently, the Authority cannot entertain a ruling on the binding effect of Council decisions where the question pertains to non-issuance of requisite statutory notifications. [Paras 6]

The Authority has no competence to rule on whether GST Council decisions are binding on the Department absent corresponding notifications; that question is beyond the remit of advance rulings under the OGST/CGST Act.

Concessional GST rates for specified scientific equipment - Applicability of rate notifications to imported and indigenous goods - Whether Notification No.45-CGST(Rate) dated 14.11.2017 and Notification No.47-IGST(Rate) dated 14.11.2017 granting a concessional rate of 5% apply to both imported and indigenous specified goods supplied to eligible institutions. - HELD THAT: - The rate notifications grant concessional taxation in excess of 5% (2.5% CGST and 2.5% SGST) for specified goods listed in the notification to specified institutions subject to stated conditions. The notifications do not distinguish between imported and indigenous goods in their entries; therefore the concessional rate is applicable to the listed scientific and technical instruments, apparatus, equipment (including computers), accessories, parts, consumables and other specified items whether they are imported or domestically sourced, subject to fulfillment of the conditions in the notifications. [Paras 6]

The concessional rate of GST/IGST at 5% under the cited notifications applies to the specified goods whether imported or indigenous, subject to the conditions specified in the notifications.

Final Conclusion: The Authority ruled that the customs exemption as amended applies to direct imports by the Applicant but not to OEM suppliers; the Authority cannot rule on the binding effect of GST Council decisions absent statutory notifications; and the concessional 5% GST/IGST rate under Notifications dated 14.11.2017 applies to the listed specified goods whether imported or indigenous.

Classification of goods by tariff sub-headings - residual tariff entry - water pipe (Hookah) tobacco - essential character and use in classification - ejusdem generis rule of construction - jurisdiction of Authority for Advance Ruling under Section 97 - National Calamity Contingency Duty not leviable under GST

Classification of goods by tariff sub-headings - water pipe (Hookah) tobacco - essential character and use in classification - residual tariff entry - Gudakhu manufactured by the applicant is classifiable under GST Tariff Heading 2403 99 90. - HELD THAT: - The Authority examined the tariff scheme of Chapter 24 and the sub-heading note which confines sub-heading 2403 11 to water pipe tobacco intended for smoking and consisting of mixtures used in a water pipe. The applicant's product is manufactured and sold as a paste for application on teeth (not for smoking) and is commercially distinct in form and use from hookah/gudakhu tobacco sold in granular form for smoking. Sub-heading 2403 99 is a residual entry intended to cover tobacco products not specified in preceding sub-headings and includes a variety of products beyond chewing tobacco. Because the applicant's gudakhu paste is not covered by the specific provision for water pipe tobacco and, by its composition, character and use falls within the residual category, it is properly classifiable under 2403 99 90. [Paras 4]

Classified under GST Tariff Heading 2403 99 90.

Jurisdiction of Authority for Advance Ruling under Section 97 - National Calamity Contingency Duty not leviable under GST - The Authority has no jurisdiction to rule on liability to pay National Calamity Contingency Duty (NCCD). - HELD THAT: - NCCD is a levy under the Central Excise Act and not a levy under the CGST/OGST/IGST Acts. The power of the Authority for Advance Ruling is limited to matters within the scope prescribed by Section 97 (and sub-section (2)) of the OGST/CGST Acts. Since NCCD is outside the statutory ambit of GST laws, the Authority is not competent to give a ruling on the applicant's liability to pay NCCD. [Paras 4]

Ruling on NCCD liability is beyond the competence of the Authority for Advance Ruling.

Final Conclusion: The Authority rules that the gudakhu manufactured by the applicant is classifiable under GST Tariff Heading 2403 99 90, and that it cannot pronounce a ruling on liability to pay NCCD because NCCD is a Central Excise levy outside the jurisdiction of the Authority for Advance Ruling under the GST Acts.

Summary order. Writ petition dismissed in view of M/s. Sheen Golden Jewels (India) Pvt. Ltd. v The State Tax Officer (IB)-1 (2019 (2) TMI 300 - KERALA HIGH COURT ) Judgment dated 11.01.2019 in WP(C) No.11335 of 2018 and connected cases.

Summary order. Delay condoned; Special Leave Petition dismissed.

Summary order. Delay condoned; Special Leave Petition dismissed; pending application disposed of.

Condonation of delay - Sufficient cause - Appeal under Section 260A of the Income Tax Act - Affidavit explanation for delay - Death of key decision-maker as cause for delay - Restoration of appeals for merits

Condonation of delay - Sufficient cause - Affidavit explanation for delay - Death of key decision-maker as cause for delay - Appeal under Section 260A of the Income Tax Act - Delay of 224 days in filing appeals under Section 260A was condoned. - HELD THAT: - The appellant filed an affidavit explaining the delay, stating that the company's ex Chairman and key decision maker had been seriously ill for over six months and died on 8 May 2017, that the appellant's representative took time to comprehend the Tribunal's order and its implications, and that consequential notices and proceedings before the Assessing Officer occurred thereafter. The High Court rejected this explanation and refused to condone the delay. The Supreme Court examined the explanation and concluded that it constituted sufficient cause for the delay. Accepting the affidavit and the circumstances narrated, the Court set aside the High Court's order of refusal, condoned the delay, and restored the appeals for adjudication on merits by the High Court.

Delay of 224 days condoned; order of the High Court dated 05.07.2018 set aside; appeals restored to the High Court for hearing on merits.

Final Conclusion: The Court granted condonation of delay in filing appeals under Section 260A, set aside the High Court's refusal to condone, and restored the appeals to the High Court for disposal on merits.

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

Summary order. Special Leave Petition disposed of in terms of the judgment in Commissioner of Income Tax & Anr. vs. Yokogawa India Ltd., (2017) 2 SCC 1; pending applications, if any, stand disposed of.

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

Condonation of delay - Judicial restraint in appeals involving limited tax effect - Refusal to interfere in special leave petitions on account of low tax implication

Condonation of delay - Application for condonation of delay in filing the special leave petitions was allowed. - HELD THAT: - The Court recorded satisfaction with the explanation for delay and expressly condoned the delay. No further reasoning was provided or required in relation to this procedural relief.

Delay in filing is condoned.

Judicial restraint in appeals involving limited tax effect - Refusal to interfere in special leave petitions on account of low tax implication - Whether the Court should entertain the special leave petitions despite the tax effect being below one crore. - HELD THAT: - The Court exercised judicial restraint, noting that the tax effect in the matter is below one crore and, on that basis, found no reason to interfere. The limited monetary stake was treated as determinative for declining further adjudication in the special leave petitions.

The special leave petitions are dismissed for want of sufficient tax effect to justify interference.

Final Conclusion: Delay in filing has been condoned; on merits the Court declined to entertain the special leave petitions and dismissed them because the tax effect involved is below one crore; pending applications are disposed of.

Transfer pricing - Arm's length price - International transaction - Chapter X of the Income Tax Act - Capital account investment - Income must arise under substantive heads - Secondary transfer pricing adjustment

Transfer pricing - Arm's length price - International transaction - Capital account investment - Chapter X of the Income Tax Act - Income must arise under substantive heads - Deletion of adjustment made by TPO in respect of excess payment for acquisition of shares of associated enterprise - HELD THAT: - The Tribunal's deletion of the transfer pricing adjustment in respect of the excess consideration paid to acquire shares of the 100% subsidiary was upheld because the payment was an investment on capital account and, in the view of this Court, Chapter X is a machinery provision that can be invoked only where income arises under the substantive heads of the Act. Reliance was placed on the jurisdictional High Court's decision in Vodafone, which held that determining ALP under Chapter X presupposes that income arises from the international transaction; absent such income, the machinery provisions do not operate. The distinction urged by Revenue between inbound and outbound investments was held immaterial because the statute makes no such distinction. The contention that a potential future loss on sale of shares could justify current taxation was rejected as speculative and not supported by any provision applicable to the assessment year. Subsequent amendments to deem certain share premium as income were noted but held inapplicable to the assessment year in issue. [Paras 4]

Tribunal's deletion of the excess payment adjustment affirmed; no substantial question of law warranting interference.

Secondary transfer pricing adjustment - Transfer pricing - International transaction - Upholding deletion of interest charged on deemed loan transaction with associated enterprise - HELD THAT: - The Revenue's appeal against deletion of the interest adjustment was held to be academic because the primary transfer pricing adjustment (treating the share purchase as generating taxable income) was rejected. Since no amount paid to acquire equity shares of the associated enterprise could be treated as a loan in the facts of the assessment year, the question of interest on a deemed loan did not survive for adjudication and did not raise a substantial question of law. [Paras 3, 5]

Appeal on the interest adjustment not entertained as academic and dismissed.

Final Conclusion: Appeal dismissed: Tribunal's deletion of the transfer pricing adjustment in respect of excess consideration for share acquisition affirmed on the ground that Chapter X operates only where income arises under substantive heads; the consequential interest adjustment issue is academic and not entertained.

Interest on delayed refund under Section 244 - attributable delay in grant of refund - relevance of Form-29B for MAT computation - computation under Minimum Alternate Tax (MAT) - effect of revised return on date of claim

Interest on delayed refund under Section 244 - relevance of Form-29B for MAT computation - Whether the Tribunal was justified in declining or restricting interest by invoking the authority under Section 244A(2) on the ground that delay in grant of refund was attributable to the assessee for late filing of Form 29B. - HELD THAT: - The Court found that processing under Section 143(1) and the grant of refund had been carried out well before the filing of Form 29B, as evidenced by issuance of an intimation under Section 143(1) and a refund order prior to the date on which Form 29B was filed. Consequently, the filing of Form 29B was not material or essential to the processing of the return or to the grant of refund in this case. The Tribunal's and lower authorities' restriction of interest solely on the basis of the date of filing of Form 29B was therefore not justified.

The restriction of interest based on the date of filing of Form 29B is set aside; Form 29B filing is not a valid basis for denying or limiting interest in the facts of this case.

Attributable delay in grant of refund - effect of revised return on date of claim - computation under Minimum Alternate Tax (MAT) - Whether any part of the delay in payment of the enhanced refund is attributable to the assessee and, if so, from what date interest on the enhanced refund is payable. - HELD THAT: - The Court held that the enhanced refund arises from the revised return filed on 22.03.2004; the claim for the larger refund therefore relates back to that revised return and not to the date of filing of Form 29B. Any delay in claiming the enhanced refund is attributable to the assessee only from the date the revised return was filed. Accordingly, interest on the enhanced portion of the refund must be computed from 22.03.2004.

Interest on the enhanced refund is payable from the date of the revised return, 22.03.2004; the Assessing Officer is directed to modify the orders and grant interest accordingly.

Final Conclusion: The appeal is partly allowed: the orders restricting interest until the date of filing Form 29B are set aside; Form 29B was not material to processing the refund in this case, and interest on the enhanced refund is to be computed from the date of the revised return (22.03.2004); the Assessing Officer shall modify the orders and grant interest as directed.

Reassessment under Section 147/148 - new material for reopening - scrutiny assessment and finality - duty of assessee to disclose relevant material - investigation report/STR as basis for reassessment - vagueness of reasons for reopening

Scrutiny assessment and finality - duty of assessee to disclose relevant material - reassessment under Section 147/148 - Whether reassessment for A.Y.2009-10 was valid where a scrutiny assessment had been completed and the assessee had disclosed bank account particulars and related material. - HELD THAT: - The Court found that during the original scrutiny assessment the assessee had furnished bank account statements, balance sheets disclosing the accounts, lists and confirmations of sundry creditors, purchase lists, TDS registers and other particulars requested by the AO. The AO had thus been put in possession of the material facts relevant to the cash intensive multi level marketing business. If the AO remained unsatisfied about particular entries, the correct course was to make further inquiries or seek specific confirmations during the scrutiny proceedings. The mere fact that the business involved high volume cash transactions, or that related accounts showed significant credits, did not amount to non disclosure by the assessee where those accounts and transactions had been disclosed. Consequently the foundational requirement for reopening - that relevant material facts were not disclosed in the original assessment - was not satisfied.

Reassessment quashed as the condition precedent for reopening under Section 147/148 was not established where relevant material had been disclosed in the scrutiny assessment.

Investigation report/STR as basis for reassessment - new material for reopening - vagueness of reasons for reopening - Whether information in the STR/investigation report constituted fresh material justifying reopening of assessment. - HELD THAT: - The Court observed that the impugned notice relied principally on an investigation office dissemination note (STR) which described aggregate bank credits and cash deposits and expressed suspicion based on internet material about the assessee's MLM type business. Much of the information in the STR either duplicated material already before the AO in the scrutiny proceedings or consisted of vague inferences drawn from internet searches and account turnovers. The Court held that such generalized or speculative material does not qualify as 'new tangible material' that was withheld at the time of the original assessment. The reason for reopening which rested on the STR's broad characterisation of transactions as suspicious and on historical credits in related accounts was held to be vague and insufficient to justify reassessment.

Information in the STR did not constitute fresh material justifying reopening; reliance on it rendered the reassessment notice unsustainable.

Final Conclusion: Writ petition allowed; the notice dated 30.03.2016 under Section 147/148 proposing reassessment for A.Y.2009-10 and all consequential proceedings are quashed.

Section 44BB - services in connection with prospecting, extraction or production of mineral oils - taxability of non-resident second-level contractor/sub-contractor under section 44BB - fee for technical services (FTS) and classification under section 9(1)(vii) - section 234B - interest for failure to pay advance tax where payer liable to deduct tax at source

Section 44BB - taxability of non-resident second-level contractor/sub-contractor under section 44BB - services in connection with prospecting, extraction or production of mineral oils - Assessee's receipts from services to ENI India Ltd fall within the scope of section 44BB and the provision applies to the assessee notwithstanding that it was a second level contractor/sub contractor. - HELD THAT: - The Tribunal, following co ordinate bench decisions including Technip UK Ltd and authoritative guidance in ONGC, examined the service contract and held that section 44BB does not distinguish between main contractors and sub contractors where the services or facilities are used for prospecting, extraction or production of mineral oils. The language of section 44BB was read purposively and not narrowly to exclude second level contractors; prior decisions and the scope of works (as exemplified by ONGC) demonstrate that managerial, technical, consultancy and related services integral to oil exploration fall within section 44BB. The Assessing Officer's classification of the receipts as FTS under section 9(1)(vii) was rejected, and the assessee's claim to be taxed under section 44BB was accepted. [Paras 9, 11]

Assessee's income is taxable under section 44BB.

Section 234B - interest for failure to pay advance tax where payer liable to deduct tax at source - obligation of the payer to deduct tax at source and liability of payer under section 201 - No interest under section 234B is leviable on the assessee for the year under consideration. - HELD THAT: - Relying on precedent and the reasoning of a co ordinate bench, the Tribunal held that where the payer had the primary obligation to determine and deduct tax at source, the non resident payee cannot be saddled with interest under section 234B for failure to pay advance tax for assessment years prior to AY 2013 14. The proviso to section 209(1)(d) inserted by the Finance Act 2012 is prospective (effective from AY 2013 14) and cannot be given retrospective effect to impose interest liability for the assessment year in question. Accordingly, the Assessing Officer was directed not to charge interest under section 234B. [Paras 14]

Interest under section 234B shall not be charged for the year under consideration.

Final Conclusion: The appeal is allowed: the assessee's income from services to ENI India Ltd is held taxable under section 44BB for A.Y 2012-13, and the Assessing Officer is directed not to levy interest under section 234B for the year under consideration.

Treatment of deposits as unexplained cash credits under section 68 - proof of source of bank deposits - credit for prior cash withdrawals and agricultural receipts - deduction for tuition/education fees under section 80C - deduction for interest on savings account under section 80TTA - remand to Assessing Officer for verification of documentary proof

Treatment of deposits as unexplained cash credits under section 68 - proof of source of bank deposits - credit for prior cash withdrawals and agricultural receipts - Confirmation of addition in respect of unexplained bank deposits - HELD THAT: - Assessing Officer, on bank statements obtained under section 133(6), treated total deposits of Rs. 49,22,000 made on 06.03.2014 and 07.03.2014 as unexplained cash credits for want of satisfactory source. The assessee furnished multiple explanations - agricultural receipts, sale of land, professional income, loans from individuals and prior bank withdrawals re-deposited - but failed to produce corroborative documentary evidence or particulars (such as receipts, confirmations or PAN of lenders) before the AO. The CIT(A) observed that the AO had not examined the pattern of withdrawals and deposits for the whole year but found merit in giving credit for certain claimed agricultural receipts, land sale and past withdrawals while rejecting unsupported personal loan claims. On appeal the Tribunal, after hearing parties, concluded that the assessee had not satisfactorily explained sources for Rs. 3,00,000 out of the total deposits and accordingly sustained the addition for that unexplained portion while accepting the balance explanation as credited by the CIT(A).

Addition of Rs. 3,00,000 as unexplained cash credits is confirmed; balance deposits treated as explained on facts and credit given as per CIT(A).

Deduction for tuition/education fees under section 80C - deduction for interest on savings account under section 80TTA - remand to Assessing Officer for verification of documentary proof - Claimed deductions under sections 80C and 80TTA remitted to Assessing Officer for verification - HELD THAT: - The assessee claimed deduction under section 80C (tuition/education fees) and deduction under section 80TTA (interest on savings account) but did not produce before the AO the requisite details and evidence to substantiate the claims. Although the assessee submitted various tuition fee receipts and asserted children's educational expenses, the Tribunal observed absence of necessary particulars before the assessing authority for the year under consideration. Accordingly, the Tribunal directed remand to the Assessing Officer for verification on production of requisite details and to decide the claims afresh in accordance with law.

Claims under section 80C and section 80TTA are remitted to the Assessing Officer for verification on production of requisite details; grounds partly allowed for statistical purposes.

Final Conclusion: The appeal is partly allowed for statistical purposes: the addition of Rs. 3,00,000 as unexplained cash credits is confirmed, while the claims for deduction under section 80C and section 80TTA are remitted to the Assessing Officer for verification upon production of requisite particulars; the related stay petition is dismissed as infructuous.

Capital expenditure versus revenue expenditure - expenditure conferring an enduring benefit is capital in nature - feasibility/consultancy expenses for expansion of existing business treated as revenue where no new asset is created - unity of control and common fund-relevance in classifying project expenditure - deductibility of expenditure incurred for earning taxable income - section 14A disallowance limited by amount of exempt income - computer accessories/UPS treated as part of computer for depreciation purposes

Capital expenditure versus revenue expenditure - feasibility/consultancy expenses for expansion of existing business treated as revenue where no new asset is created - unity of control and common fund-relevance in classifying project expenditure - Allowability of professional fees paid to Accenture Services Pvt. Ltd.-whether the amount is capital in nature or revenue expenditure - HELD THAT: - The Tribunal examined the consultancy engagement which covered transformation of business operations across group plants (including three plants of the assessee). Applying the principle that expenditure incurred for starting a new and distinct business is capital, whereas expenditure for expansion or restructuring of the same business (under common control and common fund) is revenue if no new asset is created, the Tribunal found the payments were for expansion/restructuring of the assessee's existing business and not for a new line of business. As no new asset came into existence and the exercise was in respect of the same business, the payments are not properly classifiable as capital expenditure. Following the reasoning in the cited precedents, the disallowance upheld by the revenue authorities was reversed. [Paras 9, 10]

The addition of Rs. 56,45,833/- as capital expenditure is deleted; the professional fees are held to be revenue expenditure and the ground is allowed.

Capital expenditure versus revenue expenditure - Disallowance of government fee treated as capital (pre operative/project expense) - ground conceded by the assessee and dismissed - HELD THAT: - At the hearing the assessee's counsel conceded this ground against the assessee. In consequence and in absence of objection from revenue, the Tribunal recorded that the ground is decided against the assessee and dismissed. [Paras 12]

Ground dismissed against the assessee.

Deductibility of expenditure incurred for earning taxable income - capital expenditure versus revenue expenditure - Allowability of government subleasing fee paid to HSIDC - whether the fee is capital/penal or allowable as deduction against taxable sublease income - HELD THAT: - The facts show the assessee had offered the income from subleasing the leased land to tax. The Tribunal accepted the submission that the subleasing fee paid to HSIDC was incurred for the purpose of earning that taxable income. Since the income was offered to tax, the corresponding expenditure should be allowable as deduction. The CIT(A) had treated the fee as capital; the Tribunal found that classification unjustified in these circumstances and allowed the expenditure as deductible. [Paras 21]

The addition of Rs. 10,25,304/- is deleted; the subleasing fee is allowable as a deduction.

Computer accessories/UPS treated as part of computer for depreciation purposes - Rate of depreciation on UPS-whether UPS qualifies for higher depreciation rate applicable to computer accessories - HELD THAT: - Relying on the Tribunal's earlier decision in the closely related/sister concern and on authoritative decisions holding that UPS and similar peripherals are integral to computer systems, the Tribunal accepted that UPS is entitled to depreciation at the higher rate claimed (60%) rather than being equated with plant and machinery at a lower rate. The Tribunal found no infirmity in the view that UPS is part of the computer/computer accessories category for depreciation purposes. [Paras 24]

The disallowance for differential depreciation is reversed and the higher rate for UPS is allowed in favour of the assessee.

Section 14A disallowance limited by amount of exempt income - Applicability and quantum of disallowance under section 14A read with Rule 8D - whether further disallowance is required where actual exempt dividend income and the assessee's own disallowance are considered - HELD THAT: - The assessee received exempt dividend income of a specific amount and had already made a suo moto disallowance exceeding that exempt income. The Tribunal followed the consistent view of coordinate benches that any disallowance under section 14A/Rule 8D cannot exceed the actual exempt income received. Given that the assessee's own disallowance already exceeded the exempt dividend, the Tribunal held no additional disallowance was exigible. [Paras 31]

The additional disallowance under section 14A/Rule 8D is not warranted and the ground is allowed in favour of the assessee.

Final Conclusion: The appeal is partly allowed: the Tribunal deleted the disallowance of professional fees paid to Accenture and the subleasing fee, allowed higher depreciation on UPS, and disallowed any further section 14A addition beyond the exempt dividend already accounted for by the assessee; one ground on government fee was conceded and dismissed against the assessee.

Initiation of penalty proceedings - limitation for levy of penalty - penalty under section 271E of the Income-tax Act - competent authority for imposing penalty - reckoning of limitation from initiation of proceedings

Initiation of penalty proceedings - limitation for levy of penalty - penalty under section 271E of the Income-tax Act - competent authority for imposing penalty - Whether the penalty proceedings were initiated for limitation purposes on the date of the AO's assessment order/notice or on the date when the competent authority (Addl. CIT/JCIT) issued the show-cause notice, and whether the penalty order dated 30.12.2011 was barred by limitation. - HELD THAT: - The AO made additions and issued notice in the assessment order dated 31.12.2010 and intimated the matter to the Addl. CIT as the competent authority to impose penalty; the Addl. CIT issued the show-cause notice on 13.6.2011 and passed the penalty order on 30.12.2011. The CIT(A), following the decision of the jurisdictional High Court in IKD Capital & Finlease Ltd. and having regard to CBDT Circular No.9/2016 (which does not operate contrary to the jurisdictional High Court), held that limitation for imposition of penalty commenced from the date when proceedings were initiated in the course of assessment (i.e., from issuance of notice by the AO on 31.12.2010) and not from the later action of the JCIT/ACIT; on that footing the outer limit provided by the relevant limitation provision expired by 30.6.2011 and the penalty order dated 30.12.2011 was time-barred. The Tribunal found no illegality or infirmity in the reasoning and conclusion of the CIT(A) and upheld the finding that the penalty could not be sustained as barred by limitation. [Paras 8, 9]

Penalty held time barred and the deletion of the penalty by the CIT(A) is upheld; revenue's appeal dismissed.

Final Conclusion: The Tribunal upholds the CIT(A)'s decision that limitation for imposition of the penalty ran from the initiation of proceedings in the course of assessment (notice by the AO) and that the penalty order dated 30.12.2011 was barred by limitation; the revenue's appeal is dismissed.

Allowability of redemption fine as business expenditure - disallowance under Explanation 1 to Section 37(1) of the Income Tax Act - penalty or fine for infraction of law not deductible as an expenditure wholly and exclusively for business - additional cost of goods versus penal character of redemption fine - test of commercial expediency / wholly and exclusively for the purpose of business - application of the ratio in Haji Aziz & Abdul Shakoor Bros. regarding non deductibility of penalties

Allowability of redemption fine as business expenditure - disallowance under Explanation 1 to Section 37(1) of the Income Tax Act - penalty or fine for infraction of law not deductible as an expenditure wholly and exclusively for business - Redemption fine of Rs. 75,00,000 claimed as business expenditure under Section 37 is not allowable where the fine was incurred for an infraction of law attributable to the assessee. - HELD THAT: - The Assessing Officer and the CIT(A) found on the record that the assessee had imported the goods by using the licence and had paid the redemption fine; the representative of the licence holder (M/s. Rajnikant Bros.) expressly stated that the transactions and payment of the fine were made by the assessee and that Rajnikant Bros. were entitled only to service charges. Those findings were not displaced by the Tribunal. Where the payment is made as a consequence of an infraction of law attributable to the assessee, the payment is penal in character and cannot be treated as an expenditure "wholly and exclusively" for the purpose of business. The Court applied the principle in Haji Aziz & Abdul Shakoor Bros. that penalties imposed for breach of law are not deductible, and distinguished authorities (such as Pannalal) where the Tribunal had found that the assessee was not responsible for the breach and the payment genuinely formed part of the cost of goods. Here, on the materials, the fault or default attached to the assessee; accordingly the redemption fine partakes the character of penalty and falls within the disallowance contemplated by the first Explanation to Section 37(1). The Tribunal erred in ignoring the recorded statement and other materials and in treating the sum as an allowable business cost. [Paras 6, 20]

Tribunal's allowance of the redemption fine as business expenditure is set aside; the redemption fine is not deductible.

Final Conclusion: The Revenue's appeal is allowed; the Tribunal's decision treating the Rs. 75,00,000 redemption fine as an allowable business expenditure is set aside and the amount is disallowed for Assessment Year 1988-89.

Summary order. The special leave petitions are dismissed and, as a sequel, pending interlocutory applications, if any, stand disposed of.

Transaction value as primary assessable value - reopening assessment under Section 28 of the Customs Act, 1962 - rejection of declared value and sequential application of Customs Valuation Rules - confessional statements recorded under Section 108 as evidence - application of Rules 6 and 8 of Customs Valuation (Determination of Value of Imported Goods) Rules, 1988 - confiscation and penalty consequences under the Customs valuation findings

Reopening assessment under Section 28 of the Customs Act, 1962 - The Department's power to issue a show-cause notice under Section 28 after clearance of goods is not precluded by the earlier assessment and clearance. - HELD THAT: - Having considered binding precedents and the statutory scheme, the Tribunal held that show-cause proceedings under Section 28 can be validly instituted after clearance under Section 47 where there is satisfaction that duty has been short-levied or there is subsequent discovery of non-eligibility for clearance. Prior decisions treating clearances as tentative and permitting rectification under Section 28 (and related provisions) were followed, and the appellants' contention that the assessment precluded any remedy other than appeal was rejected. [Paras 9]

The plea that the assessment at the time of clearance precludes issue of a show-cause notice under Section 28 is rejected.

Confessional statements recorded under Section 108 as evidence - transaction value as primary assessable value - Whether confessional statements of a co-noticee, relied upon as the sole basis, can justify rejection of the declared transaction value. - HELD THAT: - The Tribunal distinguished precedents where confessions of the accused or statements of the importer were corroborated or directly relevant, noting that statements of natural persons connected with an organisational importer can only be corroborative and not the sole foundation for discarding declared values. As the impugned proceedings rested exclusively on admissions recorded from a co-noticee and documents recovered elsewhere, and no other corroborative evidence was on the record, those statements were held not to possess the requisite relevancy to sustain re-determination of value. [Paras 11]

The statements relied upon, being the sole basis for rejecting declared value and uncorroborated, do not suffice to discard the transaction value.

Rejection of declared value and sequential application of Customs Valuation Rules - application of Rules 6 and 8 of Customs Valuation (Determination of Value of Imported Goods) Rules, 1988 - confiscation and penalty consequences under the Customs valuation findings - Whether the reassessment of value by applying Rules 6 and 8 (and consequent demand of differential duty, confiscation and penalties) is legally sustainable where the sequential requirements of the Valuation Rules were not followed and necessary materials were unavailable to the importer. - HELD THAT: - The Tribunal reaffirmed that the transaction value from invoices is the primary assessable value and that rejection of declared value must follow the sequential application of the Customs Valuation Rules. Although invocation of Rule 10A for seeking evidence was permissible on the materials available, the impugned orders failed to show compliance with the rigorous requirements established by precedent (including Eicher Motors) for subsequent application of Rules 6 and 8. The record did not furnish the bills of entry or details to establish that comparative entries involved 'similar goods' under Rule 6, and reliance on Rule 8 was predicated on the now-discredited statements. Consequently, the re-determination of value, the demand of differential duty, and the confiscation and penalties founded thereon lacked legal support. [Paras 15, 16]

The re-determination of value under Rules 6 and 8 is unsustainable for failure to follow the required sequential process and absence of supporting material; therefore the differential duty, confiscation and penalties are set aside.

Final Conclusion: The appeals are allowed: the Tribunal upheld the Department's power to reopen assessments under Section 28 post-clearance but found that the rejection and re-determination of declared transaction values were legally unsustainable because they rested solely on uncorroborated statements and failed to follow the sequential application of the Valuation Rules; accordingly the differential duty, confiscation and penalties were set aside.

Inclusion of royalties in customs transaction value - Condition of sale - Rule 10(1)(c) of the Customs Valuation Rules, 2007 - Net sale price deduction of imported components - Application of Matsushita and Ferodo precedents

Inclusion of royalties in customs transaction value - Rule 10(1)(c) of the Customs Valuation Rules, 2007 - Condition of sale - Net sale price deduction of imported components - Application of Matsushita and Ferodo precedents - Whether the royalties (lump sum and running) paid to overseas licensors are includible in the assessable value of imported components under Rule 10(1)(c) of the Customs Valuation Rules, 2007 or otherwise require addition to transaction value - HELD THAT: - The question was addressed by reference to the two limbs of Rule 10(1)(c): (i) whether the royalty is related to the imported goods, and (ii) whether the royalty is paid as a condition of sale of those goods. The Member (Judicial) concluded on the factual matrix and the Licence and Technical Assistance Agreement that the royalties were payable only on net sales after deducting the cost/landed cost of imported components (subject to the contract definition) and were not a precondition for import or supply of components by the licensors; accordingly Rule 10(1)(c) had no application and the invoice value should not be loaded. The Member (Judicial) distinguished Matsushita on its facts and relied on Ferodo, BASF and other authorities holding that, absent a nexus or contractual stipulation making royalty a condition of sale or indicating price adjustment of imported goods in disguise, royalties are not includible. The Member (Technical) took the opposite factual view: relying on the contractual definition of "net sale price" and related clauses, he found a nexus between imported components supplied by the licensors and the royalty computation (noting that certain components procured from licensors are excluded from deduction only if they satisfy the specified condition), and held that on those facts the royalty was connected with the imported goods and therefore fell within Rule 10(1)(c), applying Matsushita and related decisions. Because the two Members reached conflicting conclusions on the application of Rule 10(1)(c) to the contract and the factual material, the matter could not be finally determined by the two-member bench.

Reference to a Third Member for determination of whether the royalties are includible in the assessable value under Rule 10(1)(c) (points of difference between Members to be decided by the Third Member)

Final Conclusion: The two Members of the Bench recorded divergent conclusions on whether the royalty payments are includible in the customs assessable value under Rule 10(1)(c); the matter is referred to a Third Member (Hon'ble President to refer) to resolve the points of difference and decide whether the appeal should be allowed or dismissed.

Customs Valuation (Determination of Value of Export Goods) Rules, 2007 - sequential application of valuation methods - transaction value - determination by comparison of goods of like kind and quality (Rule 4) - computed value method - cost of production and related adjustments (Rule 5) - residual method - reasonable means and limitation on sole reliance on local market price (Rule 6) - procedure for rejection of declared value and opportunity to explain (Rule 8) - DEPB benefit - valuation linkage to declared FOB and restriction with reference to PMV - onus on Revenue to establish comparability and identity of goods relied upon for downward valuation - acceptance of declared FOB where Revenue fails to rebut declared value with adequate evidence

Customs Valuation (Determination of Value of Export Goods) Rules, 2007 - sequential application of valuation methods - determination by comparison of goods of like kind and quality (Rule 4) - residual method - reasonable means and limitation on sole reliance on local market price (Rule 6) - onus on Revenue to establish comparability and identity of goods relied upon for downward valuation - acceptance of declared FOB where Revenue fails to rebut declared value with adequate evidence - Whether the declared FOB value for the shipments should be accepted or re determined by the department for the purpose of DEPB, and whether the authorities followed the valuation Rules in the correct sequence - HELD THAT: - The Member (Judicial) concluded that the Proper Officer must follow the Valuation Rules sequentially: accept transaction value unless rejected under Rule 8 and thereafter proceed through Rules 4 and 5 before resorting to Rule 6. Revenue proceeded to Rule 6 without first establishing that valuation under Rules 4 or 5 was impossible. The market enquiry relied upon by Revenue did not establish that the local or comparative export goods were of the same variety, description, dimensions or quality; RICT codes for the alleged comparables belonged to different tariff entries; the department did not produce expert evidence or samples proving identity; the market survey particulars (identity/status of sellers, full descriptions) and contemporaneous comparability were not recorded. The appellant had produced sales contracts, banking remittance evidence and costing sheets (which the adjudicating authority did not accept as certified but also did not test by adequate proof). In absence of sufficient evidence to show the declared export value was untrue, the declared FOB deserved acceptance and DEPB should not have been restricted on the basis of the impugned market/enquiry material. The Member (Judicial) therefore allowed the appeals and accepted the declared FOB. The Member (Technical) disagreed on facts and upheld the departmental determination after finding that Rule 4 comparables and market enquiry justified re determination under Rule 6; he found Rule 8 procedure complied with and the appellant's costing insufficiently corroborated. Because the two Members reached opposite results, the matter was referred to the Third Member for final determination. [Paras 6, 7, 11, 12]

Member (Judicial) would accept the declared FOB and allow the appeals on merits; Member (Technical) would dismiss the appeals; because of the difference, the matter is referred to the Third Member for final determination.

Final Conclusion: The Judicial Member would allow the appeals, holding that Revenue failed to follow the Valuation Rules sequentially and did not prove comparability to rebut the declared FOB; the Technical Member dissented and would dismiss the appeals. The dispute is referred to a Third Member for final adjudication.

Pre-deposit requirement under Section 129E of the Customs Act - statutory time-limits and condonation of delay for appeals to Commissioner (Appeals) - exclusion of time under Section 14 of the Limitation Act - remand for adjudication on merits

Pre-deposit requirement under Section 129E of the Customs Act - Validity of dismissal of the appellant's appeal by the Commissioner (Appeals) on the ground of non-compliance with the pre-deposit requirement - HELD THAT: - The Tribunal found that the impugned order dismissed the appellant's appeal solely on the ground that the statutory pre-deposit requirement under Section 129E had not been complied with before the Commissioner (Appeals). The appellant had, however, made the prescribed pre-deposit at the time of filing the appeal before the Tribunal. Having regard to this compliance and the circumstances recited in the record, the Tribunal concluded that dismissal on the ground of non-compliance with the pre-deposit requirement was not sustainable. Consequently the impugned order was set aside to enable adjudication on merits by the Commissioner (Appeals). [Paras 7]

Impugned dismissal for alleged non-compliance with pre-deposit requirement set aside and matter remanded to Commissioner (Appeals) for decision on merits.

Statutory time-limits and condonation of delay for appeals to Commissioner (Appeals) - exclusion of time under Section 14 of the Limitation Act - Whether the period consumed in pursuing a writ petition before the High Court should be excluded in computing limitation for filing the statutory appeal and whether the appeal before the Commissioner (Appeals) was barred by limitation - HELD THAT: - The Tribunal analysed Section 128 and its proviso, noting the Commissioner (Appeals) may condone delay only up to an aggregate of 90 days from communication of the order. The appellant had filed a writ petition before the High Court which was dismissed with liberty to file the statutory appeal. The Tribunal held that the time between filing of the writ petition and its disposal should be excluded for reckoning limitation under Section 14 of the Limitation Act because the appellant was diligently pursuing remedy and had sought judicial intervention. Applying that principle and following the Tribunal's earlier decision cited in the record, the Tribunal concluded that the appeal could not be summarily rejected as time-barred. However, since the appeal was not filed within 60 days from the High Court order, the Tribunal directed the appellant to explain the remaining delay by affidavit so that the Commissioner (Appeals) may consider it favourably when adjudicating the appeal on merits. [Paras 5, 6, 7]

Time spent in prosecution of the writ petition is excluded for limitation computation; appeal not to be rejected outright as barred by limitation and appellant directed to explain remaining delay by affidavit before the Commissioner (Appeals).

Final Conclusion: Impugned order dismissed to the extent it rejected the appeal for non-compliance with pre-deposit and as time-barred; order set aside and matter remanded to the Commissioner (Appeals) for decision on merits, with the appellant directed to file an affidavit explaining the delay for consideration by the Commissioner (Appeals).

Classification of goods - Chapter Note 3 of Chapter 12 - seeds used for sowing - exemption notification - additional duty (SAD) - General Rules of Interpretation of Import Tariff - Rule 1 - strict interpretation of exemption notifications

Classification of goods - Chapter Note 3 of Chapter 12 - seeds used for sowing - Whether germinated oil palm seeds (Variety Tenera Hybrids) imported are excluded from Heading 1209 and therefore liable to classification as oil seeds under the headings covering oilseeds. - HELD THAT: - The Tribunal upheld the classification adopted by the revenue. Chapter Note 3 to Chapter 12 excludes products of headings 1201 to 1207 (which cover oil seeds) from Heading 1209 even if intended for sowing; therefore oil seeds remain classified under the headings for oil seeds and cannot be recharacterised as general 'seeds used for sowing' under Heading 1209 merely because they are for cultivation. The appellants' contention that the goods ceased to be oil seeds once intended for cultivation and thus fell under Heading 1209 was rejected. The Tribunal applied Rule 1 of the General Rules of Interpretation, holding that classification must follow the terms of the headings and applicable Chapter Notes rather than being determined by an exemption notification. [Paras 4, 5]

The germinated oil palm seeds are oil seeds excluded from Heading 1209 by Chapter Note 3 and were correctly classified by the revenue under the applicable oil-seed heading.

Exemption notification - additional duty (SAD) - seeds used for sowing - Whether the importers were entitled to exemption from additional duty (SAD) under Notification No.20/2006-Cus (seeds other than oil seeds) or under Notification No.21/2002-Cus and whether the Assessing/Appeal authorities acted correctly. - HELD THAT: - The Tribunal found that Notification No.21/2002-Cus (relating to exemption from additional duty leviable under sub section (1) of Section 3) had been applied and the appellants were granted that exemption in assessment. Notification No.20/2006-Cus exempts 'All seeds other than Oil Seeds, falling within CTH 1209' from SAD; since the impugned goods are oil seeds and not classifiable under CTH 1209, they do not qualify for the benefit under Notification No.20/2006. Consequently, the Assessing/Appeal authorities were correct in granting the exemption applicable under Notification No.21/2002 and in holding that Notification No.20/2006 did not apply. [Paras 5, 6]

The exemption under Notification No.21/2002 was rightly applied; Notification No.20/2006 (relief for seeds other than oil seeds) is not applicable to the impugned oil seeds.

Exemption notification - strict interpretation of exemption notifications - General Rules of Interpretation of Import Tariff - Rule 1 - Whether an omission or dash in column 5 of Notification No.21/2002-Cus should be read as 'Nil' (full exemption from additional duty) in favour of the importer and whether exemption notifications should govern classification. - HELD THAT: - The Tribunal rejected the appellants' argument that a blank or '-' in column 5 of the Notification should be construed as 'Nil'. It held that where a notification indicates 'Nil' it expressly grants full exemption; where nothing is provided or a dash appears, no exemption from additional duty is contemplated. The Tribunal emphasised that exemption notifications are to be construed strictly and any ambiguity must be resolved in favour of the revenue, relying on the principle affirmed by the Supreme Court in Dilip Kumar & Company. Further, classification must be determined under the tariff headings and Chapter/Section Notes (Rule 1), not by the terms of an exemption notification. [Paras 5, 6]

A dash or omission in the rate column of the exemption notification does not amount to 'Nil'; exemption notifications are to be strictly construed and do not override proper classification under the tariff.

Final Conclusion: All appeals are dismissed: the impugned assessments were correctly upheld - the germinated oil palm seeds are oil seeds excluded from Heading 1209 by Chapter Note 3, the exemption under Notification No.21/2002 was properly applied while Notification No.20/2006 (exemption for seeds other than oil seeds) does not apply, and exemption notifications must be strictly construed so that a dash or omission in the rate column does not confer exemption.

Interest on delayed payment of duty - EPCG scheme conditional exemption and liability - computation of interest from date of import - effect of DGFT circular on interest rate - Section 28AA and Section 28AB of the Customs Act

Interest on delayed payment of duty - EPCG scheme conditional exemption and liability - computation of interest from date of import - Section 28AA and Section 28AB of the Customs Act - Levy of interest on the differential duty arising from failure to fulfill EPCG export obligation is sustainable under the Customs Act, and interest is to be computed from the date of importation. - HELD THAT: - The Tribunal upheld that where concessional duty was allowed subject to export obligation, failure to perform that obligation revives liability to pay the differential duty and attracts interest under the statutory provisions governing interest on delayed payment of duty. Reliance on the decision in Rai Agro Industries Ltd. establishes that Sections 28AA and 28AB provide a statutory basis for recovery of interest on the differential duty, and the Handbook of Procedures (para 105) and the legal undertaking bind the importer to interest liability from the date of import of the first consignment until actual payment. The Commissioner had accepted computation of interest from the date of importation; the Tribunal observed no reason to revisit that point and confirmed the statutory entitlement to interest in the circumstances. [Paras 5]

Demand of interest under the Customs Act is sustained and interest is to be computed from the date of importation.

Effect of DGFT circular on interest rate - EPCG scheme conditional exemption and liability - The DGFT Public Notice No.9/2003 reduced the applicable interest rate to 15% for pending regularisation cases only from the date of the circular; however the Commissioner's order granting benefit from 13.05.2002 (an earlier date) could not be faulted. - HELD THAT: - The circular expressly provides that where customs duty is to be paid under EPCG on account of shortfall, the duty shall be paid along with interest @15% per annum and that this facility shall be available to all pending cases of regularisation of EPCG licences irrespective of the date of issuance. The Tribunal interpreted the circular as changing the rate prospectively from its date of issue, so that for periods prior to the circular the 24% rate would normally apply and 15% apply from the date of the circular. Noting that the Commissioner had in any event allowed computation on a basis beneficial to the appellants from 13.05.2002 (earlier than the circular), the Tribunal held there was no error in the Commissioner's relief on this point. [Paras 5]

DGFT circular reduces interest to 15% from its date of issue for pending regularisations, and the Commissioner's grant of reduced rate from 13.05.2002 is not faulted.

Final Conclusion: Appeal dismissed.

Condonation of delay under proviso to Section 10F - limitation period 60+60 days (maximum 120 days) under Section 10F - effect of dismissal of review petition on limitation - requisite proof of date of communication of order for computing limitation - exclusion of Sections 4-24 of the Limitation Act for appeals under Section 10F

Condonation of delay under proviso to Section 10F - requisite proof of date of communication of order for computing limitation - Condonation of delay in filing the appeal beyond sixty days under the proviso to Section 10F - HELD THAT: - The Court examined the appellant's assertion that the impugned order dated 12.08.2014 was received on or before 25.08.2014 and that settlement talks constituted sufficient cause for delay. The provision under Section 10F permits filing within sixty days from communication and allows the High Court, on satisfaction of sufficient cause, to permit a further period not exceeding sixty days. The Court found the dates relied upon by the appellant not credible and noted absence of reliable proof of receipt on 25.08.2014. The pleaded ground of ongoing settlement talks (family negotiations) was held to lack credibility and not to constitute sufficient cause to extend time. Applying these findings, the Court held that the appellant failed to establish sufficient cause to condone the delay up to the extended sixty days under the proviso to Section 10F. [Paras 7, 8, 9, 12, 13]

Application for condonation of delay is dismissed; delay not condoned.

Limitation period 60+60 days (maximum 120 days) under Section 10F - effect of dismissal of review petition on limitation - exclusion of Sections 4-24 of the Limitation Act for appeals under Section 10F - Whether the appeal is time barred and the correct date from which limitation runs where a review petition was dismissed - HELD THAT: - The Court applied the statutory scheme of Section 10F and relevant authorities to hold that the maximum period available to prefer an appeal under Section 10F is sixty days from communication plus a discretionary further period not exceeding sixty days on sufficient cause (total 120 days). The Court relied on the established principle that where a review petition is dismissed (i.e., the original order remains unaltered), the limitation for appeal runs from the date of communication of the original order and not from the date of the dismissal of the review petition. The Court also noted precedent holding that Sections 4-24 of the Limitation Act (including Section 5) do not operate to extend the statutory maximum under Section 10F. Applying these principles, and given the appellant's inability to prove a later date of receipt or sufficient cause, the appeal was held to be barred by limitation. [Paras 6, 7, 8, 10, 11]

The appeal is time barred and cannot be entertained; limitation runs from the original order and the maximum permissible period under Section 10F is 120 days.

Final Conclusion: The application for condonation of delay is dismissed and, consequentially, the appeal is dismissed as time barred under Section 10F, the maximum period for filing being sixty days plus a discretionary further sixty days which the appellant failed to establish.

Admission of application under Section 9 of the Insolvency and Bankruptcy Code - Establishment of operational debt and default - Compliance with Section 9(3)(b) and (c) - absence of a pre existing dispute - Substituted service by publication and electronic service - Ex parte adjudication for non appearance of corporate debtor - Commencement of Corporate Insolvency Resolution Process - Moratorium under Section 14 of the IBC and its prohibitions - Appointment and duties of Interim Resolution Professional

Admission of application under Section 9 of the Insolvency and Bankruptcy Code - Establishment of operational debt and default - Compliance with Section 9(3)(b) and (c) - absence of a pre existing dispute - Application under Section 9 admitted after satisfaction of statutory requirements and finding of default by the corporate debtor - HELD THAT: - The Tribunal examined the contractual relationship and invoices evidencing supply of yarn and retention of goods by the corporate debtor, as well as the operational creditor's claim of unpaid dues. The operational creditor filed the statutory affidavit and produced a certified statement of account; the corporate debtor had acknowledged liability in e mail communication. The Tribunal found that the operational creditor complied with the requirements of Section 9(3)(b) and (c) by affirming that no notice disputing the debt was received, and on the materials before it was satisfied that the corporate debtor committed default. Consequently, the petition met the statutory threshold for admission under Section 9 and commencement of the insolvency process was ordered. [Paras 4, 6, 8, 9]

CP/1211/IB/2018 admitted and Corporate Insolvency Resolution Process ordered to commence.

Substituted service by publication and electronic service - Ex parte adjudication for non appearance of corporate debtor - Service by substituted publication and by e mail was held sufficient and the matter proceeded ex parte in absence of any appearance from the corporate debtor - HELD THAT: - Noting returned postal notices marked 'company closed', the Tribunal directed substituted service by publication, and the operational creditor filed proof of publication with an affidavit. Further, Form 3 demand notices were sent and an e mail to the whole time director was shown to have been delivered. There being no representation from the corporate debtor, the Tribunal proceeded ex parte and treated the steps taken for service as adequate to enable adjudication of the Section 9 application. [Paras 2, 7]

Substituted service and electronic service accepted as sufficient; matter proceeded and was decided ex parte.

Moratorium under Section 14 of the IBC and its prohibitions - Commencement of Corporate Insolvency Resolution Process - Appointment and duties of Interim Resolution Professional - Moratorium declared upon commencement of CIRP; Interim Resolution Professional appointed with directions to take charge and make public announcement and call for claims - HELD THAT: - Upon admission of the Section 9 application and commencement of the CIRP, the Tribunal declared moratorium as envisaged by Section 14, specifying the prohibitions on institution or continuation of suits, transfer or encumbrance of assets, enforcement of security, and recovery of property in possession of the corporate debtor. The Tribunal also directed that essential supplies not be interrupted. The IRP proposed by the operational creditor was appointed after being cleared on Form 2; directions were issued for immediate takeover, public announcement under Section 15, and compliance with statutory duties including co operation from directors and stakeholders. [Paras 10, 11, 12, 13, 14]

Moratorium declared for the duration of CIRP; Mr. C. Ramasubramaniam appointed as IRP with directions to act in accordance with the Code.

Final Conclusion: The Tribunal admitted the Section 9 petition, held the corporate debtor in default, declared moratorium under Section 14 for the period of the CIRP, accepted substituted and electronic service and proceeded ex parte, and appointed the proposed IRP with directions to take charge and comply with statutory obligations.

Existence of a plausible dispute - pre-existence dispute and maintainability under Section 9 of the Insolvency and Bankruptcy Code, 2016 - compliance with Form-5/Part IV - obligation to specify date from which debt fell due and particulars of transaction - proof of expenditure/vendor registration cost as element of operational debt - summary adjudication standard in light of Mobilox Innovations

Existence of a plausible dispute - pre-existence dispute and maintainability under Section 9 of the Insolvency and Bankruptcy Code, 2016 - summary adjudication standard in light of Mobilox Innovations - Whether the petition under Section 9 is maintainable in view of a pre-existing dispute between the parties - HELD THAT: - The Tribunal found that the agreement between the parties expressly specified the product as "PLP Duct Pipe of 40mm X 33mm" and that the Corporate Debtor disputed that supplies made (for PLB Duct) corresponded to that product. The conflicting contentions as to whether the supplies fall within the contractual product description establish a plausible dispute. In the summary jurisdiction under Section 9 the existence of such a plausible dispute is sufficient to reject admission. The Tribunal applied the principle in Mobilox Innovations to require that where a pre-existing dispute is shown to exist, the petition is not maintainable for admission to CIRP. Having found a plausible dispute, admission was inappropriate. [Paras 18, 19, 20]

Found existence of a plausible dispute between the parties; petition under Section 9 not maintainable on this ground.

Compliance with Form-5/Part IV - obligation to specify date from which debt fell due and particulars of transaction - proof of expenditure/vendor registration cost as element of operational debt - Whether the application complied with Form-5/Part IV requirements and furnished particulars and proof necessary to establish the claimed operational debt - HELD THAT: - The Tribunal observed that Part IV of the prescribed format did not specify the date from which the debt fell due and that the application recited the commissions only in general terms, indicating uncertainty as to amounts claimed. The claim included a alleged vendor registration cost, but no date of incurrence or documentary proof of that expenditure was produced. The Tribunal held that failure to furnish the requisite particulars and proof in Form 5/Part IV, coupled with the existence of dispute as to the contractual product and sums, rendered the application deficient and supported dismissal. [Paras 21]

Application failed to comply with Form 5/Part IV and did not establish the claimed vendor registration expenditure; this deficiency supported dismissal.

Final Conclusion: The petition under Section 9 of the IBC, 2016 was dismissed because a plausible pre existing dispute as to the product and entitlement to commission existed and the application failed to comply with Form 5/Part IV by not specifying when the debt fell due and by not proving the alleged vendor registration expenditure; dismissal was ordered without costs.

Financial creditor - financial debt - debt - default - consideration for the time value of money - satisfaction of default under Section 7(5) of the Insolvency and Bankruptcy Code, 2016

Financial creditor - financial debt - consideration for the time value of money - Whether the petitioners qualify as financial creditors by virtue of the deposits made with the respondent and thereby satisfy the first limb of Section 5(8) of the Code. - HELD THAT: - The Tribunal examined the statutory definition of financial creditor and financial debt, observing that a financial debt is a debt disbursed against the consideration for the time value of money and ordinarily comprises principal and interest. The material on record showed deposits made by the petitioners with the respondent pursuant to earlier commercial arrangements and that interest was paid until December 2015. On that basis the petitioners met the initial descriptive features of a financial transaction under Section 5(8). However, qualification as a financial creditor under Section 7 also requires demonstration of a due and payable debt and a default as contemplated by the Code. The Tribunal therefore proceeded to consider whether the amounts were presently payable to the petitioners or were conditional on the petitioners' performance of antecedent obligations. [Paras 20, 21]

Petitioners satisfy the descriptive features of a financial transaction but this alone does not render the amounts presently due and payable.

Default - debt - satisfaction of default under Section 7(5) of the Insolvency and Bankruptcy Code, 2016 - Whether a default has occurred such that the Section 7 petition for initiation of Corporate Insolvency Resolution Process is maintainable. - HELD THAT: - Applying the requirement in Section 7(5) (as explained in precedent), the Tribunal held that the adjudicating authority must be satisfied that a default has occurred and that the debt is due and payable. The respondent's pleaded case (accepted for the limited purpose of the admission inquiry) was that the deposited sums were held as security for liabilities of a third company and that payment to the petitioners was conditional upon the petitioners discharging certain liabilities within a prescribed period; accordingly the respondent denied any present liability to pay until those conditions were fulfilled. The petition contained no material to rebut that contention or to show that the conditions had been performed; consequently the Tribunal was not satisfied that any debt was presently due and that a default, as required by Section 7(5), had occurred. [Paras 21, 22, 23, 24]

No default is shown; the Section 7 petition is not maintainable and must be dismissed.

Final Conclusion: The Section 7 petition is dismissed because the amounts claimed were not shown to be presently due and payable and no default under the Code was established for the purpose of admitting the insolvency application.

Voluntary liquidation - Declaration of solvency - Compliance with Section 59 of the Insolvency and Bankruptcy Code, 2016 - IBBI (Voluntary Liquidation Process) Regulations, 2017 - Dissolution of the corporate person - Liquidator's duties and distribution of liquidation proceeds

Voluntary liquidation - Declaration of solvency - Compliance with Section 59 of the Insolvency and Bankruptcy Code, 2016 - IBBI (Voluntary Liquidation Process) Regulations, 2017 - Whether the voluntary liquidation process initiated by M/s. RAD-MRO Manufacturing Private Limited complied with the requirements of Section 59 of the IBC, 2016 and the relevant IBBI Regulations and whether the petition for dissolution should be allowed. - HELD THAT: - The Tribunal examined the chronology and documentary record of steps taken after the declaration of solvency dated 22.07.2017, including the Board and shareholder approvals for voluntary liquidation, publication of the public announcement, appointment of a registered insolvency professional as liquidator, intimation to IBBI and ROC, maintenance of separate liquidation bank account, submission of the preliminary and final liquidation reports, engagement of professional advisers (chartered accountant and company secretary), responses from tax and statutory authorities confirming no outstanding dues, admission of shareholder claims, audit of the liquidation account, deposit of tax on deemed dividend where applicable, remittance procedures for the foreign shareholder and filing of final report and audited liquidation accounts with ROC and IBBI. Having regard to these actions and the directors' sworn declarations that a full inquiry into affairs had been made and that the company had no debt, the Tribunal found that the statutory and regulatory requirements under Section 59 and the IBBI (Voluntary Liquidation Process) Regulations, 2017 were complied with and that no unresolved claims or liabilities remained to prevent winding up. [Paras 8, 9, 10]

The petition for voluntary winding up is allowed; the company is dissolved and ancillary directions for communication of the order and publication are issued.

Dissolution of the corporate person - Liquidator's duties and distribution of liquidation proceeds - Issuance of consequential directions upon dissolution. - HELD THAT: - Having allowed the petition, the Tribunal exercised powers under Section 59(8) of the Code to dissolve the corporate person and to give directions necessary for formal completion of the process. The Registry was directed to forward a copy of the order to the Registrar of Companies, Karnataka within two weeks. The liquidator was directed to forward copies of the order to all authorities connected with the company's affairs and to publish notification of dissolution in local newspapers immediately, ensuring administrative and public notice of dissolution. [Paras 10]

The company is dissolved with immediate effect and the Registrar, the liquidator and connected authorities are to be notified as directed.

Final Conclusion: The Tribunal found that the voluntary liquidation complied with the statutory and regulatory requirements, allowed the petition, dissolved M/s. RAD-MRO Manufacturing Private Limited with immediate effect and directed transmission of the order to the Registrar of Companies, notification to relevant authorities and publication of the dissolution.

Maintainability of writ petition at show cause stage - classification of services: cargo handling service versus goods transport agency - binding nature and applicability of CBEC circulars - availability of alternative statutory remedy and appellate forum - remand for fresh adjudication on merits

Maintainability of writ petition at show cause stage - availability of alternative statutory remedy and appellate forum - Whether the High Court was justified in entertaining and quashing show cause notices at the pre-adjudication stage by exercise of writ jurisdiction. - HELD THAT: - The Court examined settled principles that writs at the stage of show cause notice may be entertained in exceptional circumstances but where (i) there is no claim of lack of jurisdiction or breach of principles of natural justice and (ii) a disputed question of classification is amenable to adjudication and statutory appeals are provided, the High Court should ordinarily refrain from entertaining the petition. The High Court's conclusion that there were no factual disputes and that the petition could be decided at the show cause stage was found to be incorrect. Reliance on precedents emphasising the completeness of the statutory code and the propriety of using the prescribed statutory remedies was applied. In these circumstances, the Supreme Court held that the High Court erred in entertaining and quashing the notices at the interlocutory stage rather than leaving the controversy to the adjudicating authority and statutory appellate process. [Paras 19, 20]

Allow appeal; set aside the High Court's order quashing the show cause notices and hold that the High Court should not have entertained the writ petition at the show cause stage.

Classification of services: cargo handling service versus goods transport agency - binding nature and applicability of CBEC circulars - remand for fresh adjudication on merits - Whether the services rendered by the respondents are finally classifiable as "goods transport agency" and not as "cargo handling service", and whether CBEC circulars displace adjudication by the departmental authority. - HELD THAT: - The Court declined to decide the classification issue on merits. It held that classifiability depends on the facts and contracts of each case and that there are material disputes of fact, including the applicability of CBEC circulars relied upon by the parties. The Supreme Court found the earlier High Court determination distinguishable on facts from authorities relied upon and emphasised that the applicability of circulars must be assessed in light of case-specific facts. Consequently, the matter was left to the adjudicating authority to consider responses and evidence afresh rather than being decided in writ proceedings. [Paras 18, 21]

Classification issue not finally adjudicated; remit to the departmental authority to consider the respondents' responses and other material afresh and pass appropriate orders uninfluenced by this Court's observations.

Final Conclusion: The appeal is allowed: the High Court's order quashing the show cause notices is set aside. The classification dispute and the question of applicability of CBEC circulars are not finally decided and are remitted to the departmental adjudicating authority for fresh consideration after the respondents file their responses within the time granted by this Court.

Summary order. Notice issued on the application for stay and on the Civil Appeal, returnable within six weeks; Dasti permitted.

Commercial Training or Coaching services - exclusion where course completion certificate is recognized by law - Certificate recognised by law (recognition through statutory scheme or regulatory approval) - Reverse charge levy on services received from abroad effective from 18.4.2006 - Consulting Engineer services received from abroad - reverse charge applicability - Reimbursements not includable in value of services for taxation - Remand for redetermination of tax liability

Commercial Training or Coaching services - exclusion where course completion certificate is recognized by law - Certificate recognised by law (recognition through statutory scheme or regulatory approval) - Whether courses conducted by the appellant fall within the exclusion for 'Commercial Training or Coaching' because the course completion certificates are recognised by law. - HELD THAT: - The Tribunal examined the nature of the certificates issued on completion of the appellant's maritime courses and the statutory/regulatory framework under the Merchant Shipping Act, 1958 and the DGS Orders. The certificates are entered into and recorded in the INDoS database pursuant to DGS Order No.2 of 2007 (clause 4.18) and are thus communicated to the Director General of Shipping for all purposes. The Commissioner's conclusion that the institute's certificate was merely a pre requisite and not a certificate recognised by law was not supported when measured against the DGS regulatory scheme. The Tribunal accepted that recognition by law need not mean automatic grant of a practising licence; recognition by a statutory regulatory scheme suffices. On the materials and absence of effective rebuttal by the Revenue, the Tribunal held that the certificates are recognised by law and consequently the courses in question fall within the excluded category and are not taxable as Commercial Training or Coaching services. The Tribunal, however, noted that the appellants also conduct other courses which may not lead to similarly recognised certificates and therefore remand for determination of liability in respect of such other courses is appropriate. [Paras 3]

Certificates issued for the examined maritime courses are recognised by law and those courses are within the exclusion from Commercial Training or Coaching services; other courses not shown to carry such recognised certificates are remanded for fresh consideration.

Reverse charge levy on services received from abroad effective from 18.4.2006 - Consulting Engineer services received from abroad - reverse charge applicability - Reimbursements not includable in value of services for taxation - Remand for redetermination of tax liability - Whether service tax on Consulting Engineer services received from abroad is payable on reverse charge basis for the periods in dispute and whether reimbursable charges must be excluded from the taxable value. - HELD THAT: - Applying authoritative decisions, the Tribunal observed that the reverse charge mechanism became operational only from 18.4.2006 (with insertion of Section 66A); therefore service tax could not be collected on reverse charge basis prior to that date in absence of the requisite machinery. Further, following the Supreme Court's decision in Intercontinental Consultants and Technocrats Pvt. Ltd., reimbursements made in the course of providing services are not includable in the value of services. In view of these principles the Tribunal held that reverse charge liability for Consulting Engineer services received from abroad can be sustained only from 18.4.2006 onwards and the taxable value must be redetermined after allowing permissible deductions for reimbursable charges. Consequently, the matter was remanded to the adjudicating authority for recomputation of service tax payable in light of these conclusions. [Paras 3]

Service tax on Consulting Engineer services received from abroad is leviable only from 18.4.2006 on reverse charge basis; value must exclude reimbursable charges and the matter is remanded for redetermination.

Final Conclusion: The appeal is allowed in part: the Tribunal holds that the specified maritime courses are excluded from service tax as their completion certificates are recognised by law, remits for determination any other courses not so shown; and directs redetermination of reverse charge service tax on Consulting Engineer services received from abroad only from 18.4.2006 onwards after excluding reimbursable charges.

Commercial or Industrial Construction Service - exemption of services supplied to government projects / end-use by government as "personal use" - indivisible works contracts not leviable to service tax prior to the Finance Act, 2007 - Service Tax liability admitted and paid by assessee - interest and penalties for short payment of service tax - re-quantification of demand, interest and penalties and remand to adjudicating authority

Commercial or Industrial Construction Service - exemption of services supplied to government projects / end-use by government as "personal use" - Validity of demands of service tax in respect of services provided to government projects either directly or as a sub-contractor. - HELD THAT: - The Tribunal examined earlier decisions including Khurana Engineering Ltd. and a subsequent adjudication by the jurisdictional Commissioner holding works for Kerala Water Authority and related entities to be either within Commercial and Industrial Construction Service or otherwise exempted where end-use by the government falls within "personal use". Relying on those conclusions and the subsequent decisions followed by the Tribunal, the demands in respect of services provided to government projects or as sub-contractors were held not maintainable and are ordered to be dropped. [Paras 4]

Demands in respect of services to government projects/sub-contractors are quashed and dropped.

Indivisible works contracts not leviable to service tax prior to the Finance Act, 2007 - Whether work contract services rendered during 2004-05 to 2006-07 (prior to 01.03.2007 / prior to the Finance Act, 2007 applicability) were taxable. - HELD THAT: - The Tribunal applied the decision of the Hon'ble Supreme Court in Larsen & Toubro which held that indivisible composite works contracts were not leviable to service tax prior to the Finance Act, 2007 (decision disposing of appeals of revenue). The services rendered to M/s P K Thomas (Muscat Towers) and M/s G Yohannan (Nandan Square) fell in the period 2004-05 to 2006-07 and therefore the demands for service tax for that period cannot survive and are quashed. [Paras 4]

Demands for work contract services rendered during 2004-05 to 2006-07 are quashed.

Service Tax liability admitted and paid by assessee - interest and penalties for short payment of service tax - Disposition of demand in respect of services for construction of a cement silo to M/s Ambuja Cements Limited for 2007-08 to 2008-09, and consequent liability for interest and penalties. - HELD THAT: - The appellants did not contest the liability for service tax in respect of construction of the cement silo for the period 2007-08 to 2008-09 and have admitted and paid the tax. The Tribunal accordingly upheld the demand for service tax in respect of that work. For the contraventions that resulted in short payment, the Tribunal held that interest under the relevant provision and penalties under the procedural provisions must be upheld. The Tribunal also recognised the appellant's earlier payment with benefit of a reduced penalty (25%) and held that this benefit will continue. [Paras 4]

Demand in respect of cement silo construction (2007-08 to 2008-09) is upheld; interest and penalties for the short payment are sustained, with retention of earlier benefit of payment at reduced penalty rate.

Re-quantification of demand, interest and penalties and remand to adjudicating authority - Re-quantification of interest under Section 75 and penalties under Sections 76, 77 & 78 consequent to the Tribunal's determinations. - HELD THAT: - While the Tribunal decided which segments of the original demand must be dropped and which upheld, it found that computation/quantification of the net demand, interest and penalties requires recalculation in light of the parts of the demand quashed and the parts sustained. Therefore the matter of re-quantification of the demands, interest and penalties was remanded to the adjudicating authority for computation and fresh determination within the timeframe directed by the Tribunal. [Paras 4]

Matter remanded for re-quantification of demand, interest and penalties to the adjudicating authority to be completed within three months.

Final Conclusion: Appeal disposed: demands in respect of services to government projects and work-contract services rendered during 2004-05 to 2006-07 are quashed; demand for cement silo construction (2007-08 to 2008-09) is upheld (tax paid), interest and penalties sustained subject to earlier benefit of reduced penalty; re-quantification of interest and penalties remanded to the adjudicating authority with a three-month direction.

Limitation / extended period - suppression and effect of revised return - Service tax on advances - Reconciliation of advances for adjudication of tax liability

Limitation / extended period - suppression and effect of revised return - Service tax on advances - Show cause notice dated 30 April, 2010 raising demand for the period April, 2007 to March, 2008 is barred by limitation - HELD THAT: - The appellant filed the original ST-3 return on 25 April, 2008 and a revised ST-3 return on 23 July, 2008 in which the advances (amounting to the sums pointed out in audit) were reflected. The Tribunal in the appellant's own earlier decision considered identical facts and held that once a revised return disclosing the advances was filed on 23 July, 2008, the Department could not invoke the extended period by alleging suppression and serve a show cause notice after the expiry of the limitation period. Applying that reasoning to the present case, where the same revised return was filed and no additional justification for suppression is shown, the adjudicating authority was not justified in invoking the extended period; consequently the show cause notice issued on 30 April, 2010 is time-barred.

Show cause notice is time-barred; the impugned order confirming demand is set aside.

Final Conclusion: The appeal is allowed and the impugned Order-in-Original dated 31 January, 2014 is set aside as the demand raised by the show cause notice is barred by limitation.

Liability to pay interest on delayed payment of service tax - compensatory nature of interest for delayed tax payment - limitation on utilisation of CENVAT credit to balance available on last day - recovery of interest under provisions invoking Section 75 of the Finance Act, 1994 - precedent: recovery of CENVAT credit with interest where credit has been taken, utilized or erroneously refunded

Liability to pay interest on delayed payment of service tax - compensatory nature of interest for delayed tax payment - recovery of interest under provisions invoking Section 75 of the Finance Act, 1994 - Interest is payable for delayed payment of service tax even where the tax was admitted and paid before issuance of the show cause notice. - HELD THAT: - The Tribunal held that once the assessee was liable to pay service tax on the prescribed due date but failed to do so, the liability to pay interest follows and cannot be detached from the tax liability. Interest accrues from the date the duty became payable until its actual payment. The object of interest is compensatory - to make good the deprivation suffered by the Revenue on account of delayed receipt and to negate the benefit enjoyed by the assessee by withholding the tax amount. The show cause notice in the present case was limited to recovery of interest and the invocation of Section 75 for demanding interest was within the legal framework. [Paras 6]

Demand of interest for the period of delayed payment is legally sustainable and was rightly upheld.

Limitation on utilisation of CENVAT credit to balance available on last day - precedent: recovery of CENVAT credit with interest where credit has been taken, utilized or erroneously refunded - Availability of unutilized balance in the CENVAT account during the period in dispute does not absolve the assessee from liability to pay interest for delayed payment of service tax. - HELD THAT: - The Tribunal relied on Rule 3(4) of the CENVAT Credit Rules, 2004 which permits utilisation of CENVAT credit for payment of service tax only to the extent such credit is available on the last day of the relevant period. Consequently, delayed payment attracts interest. The defence that sufficient CENVAT balance existed at all times was rejected in light of the law and the Supreme Court authority cited by the Commissioner, which recognises recovery of CENVAT credit with interest where credit has been taken, utilized or erroneously refunded. Therefore the factual existence of some unutilized balance did not negate the legal requirement and the consequent interest liability. [Paras 5]

The contention based on unutilized CENVAT balance is not tenable; interest remains payable.

Final Conclusion: The appeal is dismissed; the demand for interest on delayed payment of service tax is sustained and the appellant's defence based on CENVAT balance is rejected.

Rectification of mistake - apparent mistake on the face of the record - miscellaneous application for rectification - consideration of findings of the adjudicating authority

Rectification of mistake - apparent mistake on the face of the record - consideration of findings of the adjudicating authority - Miscellaneous application by Revenue for rectification of the Tribunal's order on the ground that the adjudicating authority's findings were not properly considered. - HELD THAT: - The Tribunal examined the appeal records alongside the averments in the miscellaneous application and found that the order dated 10.04.2018 was passed after proper analysis of facts and after considering the findings of the adjudicating authority. The application alleged omission or error in perspective, but the Tribunal concluded there was no apparent mistake on the face of the record warranting rectification. Consequently, the Tribunal exercised its discretion to refuse rectification where the original order stands supported by the record and reasoning. [Paras 3]

Miscellaneous application dismissed as there is no apparent mistake on the face of the record requiring rectification.

Final Conclusion: The Tribunal dismissed Revenue's application for rectification of its order dated 10.04.2018, holding that the earlier order was passed after proper analysis and that no apparent error on the face of the record exists.

Summary order. Notice issued; notice on the application for stay also issued.

Summary order. Notice issued on the application for ex-parte stay and on the appeal; matter returnable in six weeks.

Admissibility of cenvat credit on outward goods transport agency (GTA) services - determination of place of removal with reference to point of sale - FOR (free on road/destination) contract and transfer of property/ownership - effect of beneficial administrative circulars and retrospective withdrawal - limitation and time bar where issue was subject to bona fide litigation

Admissibility of cenvat credit on outward goods transport agency (GTA) services - FOR (free on road/destination) contract and transfer of property/ownership - determination of place of removal with reference to point of sale - Appellants entitled to cenvat credit on service tax paid on outward transportation where goods were sold on FOR basis and ownership remained with seller until delivery at buyer's/depot doorstep. - HELD THAT: - The Tribunal found from excise invoices, gate passes and a Chartered/Cost Accountant certificate that the appellant bore freight, transit risk and responsibility for safe delivery up to the buyer's or depot doorstep, and did not separately charge freight. Applying the principle that 'place of removal' is to be determined with reference to the point of sale and the established line of decisions (notably Roofit/Emco principles reproduced in CBEC Circular No.1065/4/2018 CX), where transfer of property occurs on delivery at buyer's premises (FOR destination), outward freight borne by the seller qualifies as an input service and the cenvat credit on GTA service is admissible. The Supreme Court decision in Ultratech was held inapplicable because it did not address FOR/destination point of sale facts. [Paras 4, 5, 8]

Credit allowed; impugned orders set aside to the extent they denied credit.

Effect of beneficial administrative circulars and retrospective withdrawal - Benefit of the Board circulars relied upon by the appellant is available for the material period and such beneficial circulars cannot be withdrawn with retrospective effect. - HELD THAT: - Tribunal accepted the appellant's submission that the law on the issue was unsettled and that the circulars in question provided guidance operative at the relevant time. In the light of settled principles that beneficial circulars cannot be applied retrospectively to the prejudice of taxpayers, the Tribunal held that the benefit of those circulars shall apply to the appellant for the material periods. [Paras 7, 8]

Benefit of the circulars applied for the material period.

Limitation and time bar where issue was subject to bona fide litigation - Demands for extended periods are not sustainable on limitation grounds where the question was not free from doubt and was the subject of ongoing litigation. - HELD THAT: - The Tribunal noted that admissibility of cenvat credit on outward GTA had been contentious since introduction of the cenvat scheme and was the subject of recurring litigation before tribunals and higher courts. Given this bona fide litigation history, no malafide suppression by the appellant was found, and demands for extended periods were held to be time barred where raised solely on that ground. [Paras 7, 8]

Where demands related to extended periods, they are not sustainable on limitation grounds.

Quantification / relationship between excise paid on assessable value and cenvat credit availed - Quantitative contention that excise duty on assessable value (including freight) exceeded cenvat credit availed is not decided on merits and is left open. - HELD THAT: - Although the appellant advanced a contention that excise duty paid on the element of freight exceeded the credit availed and thus recovery should not be made, the Tribunal expressly stated that since the principal admissibility issue is decided in appellant's favour, the comparative/quantification aspect need not be adjudicated and is left open for determination as may be appropriate. [Paras 7]

Left open for determination; not decided by this order.

Final Conclusion: Appeals allowed: impugned orders denying cenvat credit on outward GTA for the stated periods set aside; credit permitted where goods were sold on FOR/destination basis and ownership passed on delivery at buyer/depot doorstep; benefit of relevant Board circulars upheld for the material period; limitation defence sustained in respect of extended periods; quantification issues left open.

Place of removal determined with reference to point of sale - Cenvat credit on outward transportation / GTA services as input service - FOR destination sale / transfer of property at buyer's premises - beneficial circulars to be applied retrospectively - limitation / time-bar where legal position was unsettled

Place of removal determined with reference to point of sale - FOR destination sale / transfer of property at buyer's premises - Cenvat credit on outward transportation / GTA services as input service - Admissibility of Cenvat credit on service tax paid for outward transportation (GTA) where sales were on FOR basis and ownership/point of sale was at buyer's doorstep or depot/stockist - HELD THAT: - The Tribunal found on facts that the appellant made FOR sales where freight, transit risk and responsibility for delivery upto the buyer's doorstep (or depot/stockist) remained with the seller and invoices showed price inclusive of freight. Applying the principle that 'place of removal' is to be determined with reference to the point of sale and that, in FOR destination sales, ownership passes at buyer's premises, the outward freight borne by the manufacturer qualifies as an input service eligible for Cenvat credit. The CBEC circular clarifying that place of removal is to be ascertained with reference to point of sale was held applicable; Roofit/Emco jurisprudence on FOR sales was applied to conclude that where property passes on delivery at buyer's premises, outward transportation costs are includible in assessable value up to that point and the corresponding service tax credit on GTA is admissible as input service. [Paras 4, 5, 8]

Cenvat credit of service tax paid on outward transportation (GTA) is admissible for the material period where sales were on FOR basis and ownership passed at buyer's premises or depot; impugned order denying such credit set aside.

Beneficial circulars to be applied retrospectively - Whether benefit of Board circulars relied upon by the appellant (operative during the material period) could be withdrawn retrospectively - HELD THAT: - The Tribunal accepted the appellant's submission that beneficial circulars operative at the relevant time cannot be withdrawn with retrospective effect. Relying on settled Supreme Court precedent regarding retrospective application of beneficial circulars, the Tribunal held that the benefit of the circulars in force during the material period is available to the appellant despite later withdrawal. [Paras 7]

Benefit of the relevant Board circulars operative during the material period is available to the appellant and cannot be retrospectively withdrawn.

Limitation / time-bar where legal position was unsettled - Whether the demand for extended periods is time-barred - HELD THAT: - The Tribunal observed that the admissibility of Cenvat credit on outward GTA was the subject of prolonged litigation and the law was not settled; consequently the appellant's conduct did not amount to suppression or mala fide action. Given the genuine doubt and continuing judicial controversy on the issue, demands for extended periods were not held to be barred by limitation. [Paras 7]

Demands for extended periods are not unsustainable on the ground of time-bar in view of the unsettled nature of the legal position.

Cenvat credit on outward transportation / GTA services as input service - Effect of excise duty paid on the freight element vis-a -vis recovery of Cenvat credit (left open) - HELD THAT: - The Tribunal noted the appellant's contention that excise duty paid on the freight component exceeded the Cenvat credit availed and that this might preclude recovery, and acknowledged force in the argument. However, since the Tribunal decided admissibility of Cenvat credit on merits under the Cenvat Credit Rules, it did not adjudicate the contention regarding net recovery or computation and left that aspect open for further consideration. [Paras 7]

Issue as to non-recovery or adjustment in view of excise duty on freight exceeding Cenvat credit is left open for determination and was not finally decided.

Final Conclusion: The appeal is allowed: the impugned order denying Cenvat credit on outward GTA is set aside and the appellant is held eligible to avail Cenvat credit for the material period (2009-10 to 2013-14) on the grounds stated; consequential reliefs, limitation objections and availability of beneficial circulars during the relevant period were decided in favour of the appellant, while the specific question of recovery adjustment vis-a -vis excise duty on freight is left open.

Excisability of goods - marketability - classification under Heading No. 85.02 - capital goods removal and Rule 57S(2)(b) - MODVAT/CENVAT credit reversal - short levy and demand under Section 11A - interest under Section 11AB - limitation for duty demand

Excisability of goods - marketability - classification under Heading No. 85.02 - Whether the 6 MW DG set sold by the assessee was excisable goods liable to central excise duty. - HELD THAT: - The Tribunal upheld the adjudicating authority's finding that the goods cleared were described, offered and invoiced by the assessee as "items of 6 MW DG Set" and were classified by the assessee under Heading No.85.02. The sale documents, tender conditions and invoice (sale on "as is where is" basis with delivery conditions and dismantling timelines) demonstrate that the goods cleared were marketable items of DG set and not an immovable installation. The authorities relied upon by the assessee dealing with permanently affixed, immovable installations were held inapplicable because the demand relates to goods cleared from the factory premises and not to an immovable power plant retained in situ. The Tribunal therefore sustained the conclusion that the cleared goods were excisable as DG sets. [Paras 5, 14]

Demand for excise duty on the cleared items as DG sets under Heading 85.02 is sustainable.

Capital goods removal and Rule 57S(2)(b) - MODVAT/CENVAT credit reversal - Whether Rule 57S(2)(b) permitting deduction of depreciation from credit applies so as to restrict duty demand because MODVAT credit was earlier taken on components. - HELD THAT: - The Tribunal accepted the Commissioner's analysis that the MODVAT credits had been taken on various identifiable components and parts (listed under different tariff headings) and not on a DG set as such. Rule 57S(2)(b) applies where the same capital goods on which credit was taken are removed as such after use; it does not apply where separately credited components have been assembled into a distinct excisable product and cleared as that product. Consequently, the deduction mechanism under Rule 57S(2)(b) was held inapplicable to the clearance of the assembled DG set, and reversal of credit on the basis advanced by the assessee could not be accepted. [Paras 15]

Rule 57S(2)(b) does not apply; the duty liability must be determined on the goods actually cleared (the DG set).

Short levy and demand under Section 11A - classification under Heading No. 85.02 - Whether the duty demand was correctly computed by applying the applicable rate to the sale value of the cleared DG set and whether the scope of the show cause notice was exceeded. - HELD THAT: - The adjudicating authority determined that the correct taxable value for duty was the sale consideration shown in the invoice and that the applicable rate for DG sets at the relevant time was 16% (ad valorem). The Tribunal accepted the Commissioner's acceptance of the assessee's sale value (Rs.5.30 crore) rather than the capitalised book value, applied the correct tariff rate and observed that the show cause notice sought duty for the clearance from factory under Heading 85.02. Although the adjudicated computation produced a higher notional short levy than the figure in the show cause notice, the Commissioner limited confirmation to the shortfall specifically alleged in the show cause notice. The Tribunal found no error in treating the demand as directed to the clearance from the factory and in applying the appropriate rate to the declared sale value. [Paras 5, 15]

Duty correctly determined on the declared sale value of the cleared DG set at the applicable rate; confirmation confined to the short levy alleged in the show cause notice.

Interest under Section 11AB - Whether interest on the short payment of duty could be levied under Section 11AB. - HELD THAT: - The Tribunal upheld the Commissioner's conclusion that when duty is short-paid as determined under Section 11A, interest liability under Section 11AB follows as a natural corollary. The statutory provision makes interest payable from the prescribed date until payment, subject to the exceptions provided in the Section. The Tribunal found the levy of interest in the impugned order to be within the scope of the show cause notice and consistent with statutory provisions. [Paras 5]

Interest under Section 11AB on the short-paid duty is justified.

Limitation for duty demand - short levy and demand under Section 11A - Whether the demand was barred by limitation. - HELD THAT: - The Tribunal accepted the Commissioner's reasoning that the liability to pay excise arose on clearance of the DG set for home consumption (invoice dated 01.03.2000) and that the relevant period for computing limitation under Section 11A is linked to the date of filing of the periodical return (return for March 2000 filed on 06.04.2000). The show cause notice was issued on 20.03.2001, within one year from the relevant date as prescribed by Section 11A(1). The Tribunal therefore rejected the contention that the demand was time-barred. [Paras 5]

Demand was made within the statutory period and is not barred by limitation.

Final Conclusion: The appeal is dismissed. The Tribunal affirms that the cleared items were excisable DG sets classifiable under Heading 85.02, that Rule 57S(2)(b) did not apply to the assembled and cleared DG set, that duty was correctly determined on the declared sale value at the applicable rate (with confirmation limited to the short levy alleged), that interest under Section 11AB was properly charged, and that the demand is within the period of limitation.

CENVAT credit on Business Auxiliary Service - input service - sales promotion - retrospective applicability of Explanation to Rule 2(l) of CCR - penalty under Section 11AC

CENVAT credit on Business Auxiliary Service - input service - sales promotion - retrospective applicability of Explanation to Rule 2(l) of CCR - Admissibility of CENVAT credit of service tax paid on 'Sole Selling Commission' (charged as Business Auxiliary Service) as an input service and applicability of the Explanation to Rule 2(l) of CCR retrospectively. - HELD THAT: - The Tribunal examined the terms of the Marketing/Agency Agreement (Clause 3) and found that the alleged 'Sole Selling Agent' undertook activities of promotion and marketing, maintaining customer relations, obtaining orders, providing consultation and identifying prospective customers - functions falling within sales promotion. The Tribunal noted that decisions relied upon by the appellant have consistently held that sales commission qualifies as an 'input service' and that the Explanation to Rule 2(l) of CCR (inserted by Notification No.2/2016 dated 3.2.2016) treating sales promotion to include sale of dutiable goods on commission basis has been applied retrospectively. Applying that ratio and the material terms of the agreement, the Tribunal concluded that the service tax paid on Sole Selling Commission was rightly claimable as CENVAT credit as an input service, and that the impugned demand was unsustainable.

Impugned demand for recovery of alleged inadmissible CENVAT credit on Sole Selling Commission is set aside and the appeals are allowed on merits.

Penalty under Section 11AC - Sustainability of penalties in view of the legal interpretation involved in admissibility of credit. - HELD THAT: - The learned counsel contended that the question involved interpretation of CCR provisions and, accordingly, penalties under Section 11AC are not sustainable. In view of the Tribunal's substantive finding that the credit was admissible (being an input service involving sales promotion) and that the legal position and precedents support retrospective applicability of the Explanation to Rule 2(l), the imposition of penalty was rendered unsustainable.

Penalties imposed are not sustained; consequential relief follows from allowing the appeals.

Final Conclusion: All five appeals are allowed; the Commissioner(A)'s order denying CENVAT credit on Sole Selling Commission and imposing recovery and penalties is set aside, with consequential relief as applicable.

CENVAT credit on inputs used in or in relation to manufacture of excisable goods - integral to the manufacturing process - allowability of credit for inputs used in fabrication of paint shop equipment - overruling of Tribunal Larger Bench precedent by High Court decision - prospectivity of rule amendments and non-clarificatory amendment

CENVAT credit on inputs used in or in relation to manufacture of excisable goods - integral to the manufacturing process - allowability of credit for inputs used in fabrication of paint shop equipment - overruling of Tribunal Larger Bench precedent by High Court decision - Validity of denial of CENVAT credit on hollow profiles and panels used in the paint shop and related equipment - HELD THAT: - The Tribunal held that the question was no longer res integra and that the denial of credit could not be sustained. The appellants established that hollow profiles and panels constitute GI ducts and insulating panels necessary for conditioned air distribution and oven insulation in the paint shop, thereby being integrally connected to and used in relation to the manufacture of excisable goods. The adjudicating authority had relied on a Larger Bench decision disallowing credit for items embedded to earth, but that view was displaced by the High Court of Chhattisgarh in Vandana Global Ltd., which set aside the Larger Bench conclusion. The High Court's reasoning (adopting Mundra Ports and Thiru Arooran Sugars) emphasised that the relevant amendment to the Cenvat Credit Rules could not be treated as clarificatory and that rule-making/prospective application principles do not sustain the Larger Bench approach; accordingly the earlier denial was incorrect. Applying these precedents and reasoning, the impugned order denying credit and imposing demand and penalty was held unsustainable and was set aside. [Paras 5, 6, 7]

Impugned order set aside; appeal allowed and consequential relief granted.

Final Conclusion: The Tribunal allowed the appeal, holding that CENVAT credit on the hollow profiles and panels used in the paint shop is allowable as integrally connected to manufacture; the impugned demand and penalty were set aside in view of subsequent High Court authority displacing the Larger Bench precedent.

Clandestine removal - higher electricity consumption as a pointer to higher production - remand for de novo consideration - preponderance of probability standard in clandestine removal cases - adverse inference for failure to decide remanded issue - consistency/equal treatment in enforcement

Higher electricity consumption as a pointer to higher production - remand for de novo consideration - adverse inference for failure to decide remanded issue - Whether the adjudicating authority complied with the Tribunal's remand direction to examine variations in power consumption and whether failure to render a specific finding warranted drawing an adverse inference in favour of the assessee. - HELD THAT: - The Tribunal's earlier remand explicitly required the original authority to re-consider all pleas raised by the assessee, including the specific issue of power consumption and the applicability of the Apex Court principle that higher electricity consumption is a pointer to higher production. On remand the adjudicating authority merely referred to earlier order-in-original findings and stated that the assessee's explanations (enumerated factors a-m) were unsustainable, without independently re-examining the power-consumption issue as directed. The Tribunal held that reliance on findings from an order previously set aside cannot substitute for fresh adjudication on a remitted issue. Because the backbone of the Department's case was variation in power consumption and the adjudicating authority failed to render the directed finding, the Tribunal drew an adverse inference and accepted the Commissioner (Appeal)'s conclusion that remand could not be sustained.

Adverse inference drawn for failure to decide remanded issue; no further remand ordered and Commissioner (Appeal)'s view on power consumption accepted.

Clandestine removal - preponderance of probability standard in clandestine removal cases - Whether the other pieces of evidence relied upon by Revenue (weighment receipts, receipts of ingots and furnace oil, dealer and driver statements, non-maintenance of records) sufficed to sustain the demand for clandestine removal. - HELD THAT: - The Tribunal examined the totality of material and the Commissioner (Appeal)'s consideration of those evidences. It found that the Commissioner (Appeal) had considered all evidences - weighment receipts, statements, alleged unaccounted receipts of ingots and fuel, and ledger entries - and concluded that the remand could not be sustained. Given that the adjudicating authority had failed to make the specific remanded finding on power consumption (the principal plank), and that Commissioner (Appeal) had considered other evidences and set aside the demand, the Tribunal accepted the appellate conclusion. The Tribunal also noted the Department's reliance on the preponderance of probability standard but held that, on the material before it and in view of the non-decision on the core remanded issue, the demands could not be upheld.

Commissioner (Appeal)'s setting aside of the demand on the available evidence upheld; demands not sustained.

Consistency/equal treatment in enforcement - Whether revenue could sustain demands selectively when similar demands against a similarly placed entity had been dropped. - HELD THAT: - The Tribunal observed that a demand made in a similar manner against a similarly placed entity (the Joint Commissioner's order in the sister concern) was dropped and that Revenue had not appealed that decision. It reiterated the settled principle that Revenue cannot 'pick and choose' in making demands against similar or identical persons on the same issue. This comparability and the decision in the sister case supported the view that the present demands ought not to be sustained.

Principle of consistency supports upholding the Commissioner (Appeal)'s order and dismissal of Revenue's appeals.

Final Conclusion: Both appeals filed by the Revenue are dismissed; the Commissioner (Appeal)'s order setting aside the demands is sustained because the adjudicating authority failed to comply with the remand in relation to power consumption (the core plank of Revenue's case), an adverse inference was drawn, and other evidence and the requirement of consistent treatment do not justify confirmation of the demands.

Classification of goods - End-use classification - Chapter 3917 vs Chapter 8424 classification - Exemption under notification No. 3/2005-CE, dt. 24.02.2005 - Reversal of CENVAT credit under Rule 6(3) of CENVAT Credit Rules, 2004 - Availability of CENVAT credit where duty is paid

Classification of goods - End-use classification - Chapter 3917 vs Chapter 8424 classification - Exemption under notification No. 3/2005-CE, dt. 24.02.2005 - LDPE pipes not cleared for agricultural or horticultural purposes are classifiable under chapter 3917 and liable to central excise duty; LDPE pipes attached with implements for agricultural/horticultural use fall under chapter 8424 and qualify for the exemption under notification No. 3/2005-CE. - HELD THAT: - The Tribunal examined sample invoices and the pattern of clearances and observed that where LDPE pipes were cleared for non-agricultural/horticultural purposes the appellant itself classified and accepted liability under chapter 3917 and paid central excise duty. It was also undisputed that LDPE pipes fitted with sprayers or other implements used for projecting or spraying liquids are classifiable under chapter 8424 and such supplies attract the exemption in notification No. 3/2005-CE. The Tribunal therefore accepted the legal proposition that classification depends on end use and product configuration: ordinary LDPE pipes are classifiable under chapter 3917 and attract duty, whereas LDPE pipes incorporated with agricultural/horticultural appliances are classifiable under chapter 8424 and may be exempt. [Paras 5, 6, 7]

Classification of LDPE pipes for non-agricultural/horticultural clearances is under chapter 3917 (dutiable); LDPE pipes fitted/combined with agricultural/horticultural implements are under chapter 8424 and fall within the exemption.

Reversal of CENVAT credit under Rule 6(3) of CENVAT Credit Rules, 2004 - Availability of CENVAT credit where duty is paid - Where LDPE pipes were cleared on payment of excise duty and accepted by Revenue, the appellant was entitled to avail CENVAT credit on inputs, input services and capital goods and no reversal was required in respect of such dutiable clearances; the demand for reversal of credit in those instances was set aside. - HELD THAT: - The Tribunal noted that the appellant had in several instances cleared LDPE pipes on payment of central excise duty (classification under chapter 3917) and had accepted the duty as revenue. Where duty was paid on such clearances, the appellant was entitled to the benefit of CENVAT credit in respect of common inputs, input services and capital goods used in manufacture. The record also showed that for exempted clearances the appellant had been reversing 10% of the value as mandated by Rule 6(3). The Revenue's contention that inputs (LDPE granules) and other inputs were exclusively used for exempted supplies was not sustained on the facts; therefore the demand for reversal of credit was not upheld. [Paras 3, 6, 7]

Demand for reversal of CENVAT credit in respect of clearances where duty was paid is rejected; reversal under Rule 6(3) by the appellant for exempted clearances was acknowledged.

Final Conclusion: The appeals filed by the assessee are allowed: the Tribunal set aside the adjudicating authority's demand to the extent challenged by the assessee, held that non-agricultural LDPE pipes are dutiable under chapter 3917 while agriculturally fitted pipes fall under chapter 8424 with exemption, and rejected the Revenue's appeal seeking reversal of CENVAT credit in respect of dutiable clearances.

Ineligible CENVAT credit - reversal of CENVAT credit - show-cause notice under Section 11A(4) of the Central Excise Act, 1944 - penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC - demand based on assessee's own records - absence of suppression, fraud or misstatement

Ineligible CENVAT credit - reversal of CENVAT credit - penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC - show-cause notice under Section 11A(4) of the Central Excise Act, 1944 - demand based on assessee's own records - absence of suppression, fraud or misstatement - Imposition of penalty under Rule 15(2) read with Section 11AC was not sustainable where irregular CENVAT credit was reversed and the demand arose from the assessee's own records without any suppression, fraud or mis-statement. - HELD THAT: - The adjudged demand had arisen from discrepancies discovered in the appellant's own books of accounts and the appellant had, upon detection, reversed the irregularly availed CENVAT credit and intimated the department. There was no finding or material to show that the appellant suppressed facts or resorted to fraud or mis-statement to defraud Government revenue. Given that the demand was based on records maintained by the appellant and reversal was made prior to initiation of adjudication, the conditions justifying invocation of penal provisions under Rule 15(2) read with Section 11AC were not satisfied. The Tribunal found that the department erred in invoking the penal/special provision by issuing a show-cause notice under Section 11A(4) for imposing penalty where the case did not involve suppression or concealment; accordingly, the penalty confirmed in the adjudication was set aside. [Paras 5, 6]

Penalty imposed under Rule 15(2) read with Section 11AC set aside; appeal allowed on penalty point.

Final Conclusion: The Tribunal upheld the confirmed demand (and interest) but allowed the appeal solely to the extent of setting aside the penalty imposed under Rule 15(2) read with Section 11AC, holding that penal provisions could not be invoked where the irregular credit was reversed and there was no suppression or fraud.

Validity of show-cause notice issued by an officer authorised by the Chief Commissioner - Imposition of penalty under Section 11AC for suppression/intentional evasion of duty - Effect of payment before service of notice under Section 11A(2B) read with its Explanations - Entitlement to discharge 25% of penalty under Section 11AC where differential duty and interest paid before notice - Remand for fresh adjudication of admissibility of CENVAT credit on supplementary invoices

Validity of show-cause notice issued by an officer authorised by the Chief Commissioner - The show-cause notice issued by the Additional Commissioner of Pune-I was valid and intra vires because he had been authorised by the Chief Commissioner to deal with matters of Pune-II Commissionerate. - HELD THAT: - The learned Commissioner (Appeals) found on the record that the Chief Commissioner had authorised Shri Tarun Kumar Govil, Additional Commissioner (Pune-I), to deal with adjudication matters relating to units falling under Pune-II Commissionerate (recorded in the impugned order). The show-cause notice proceeded on investigations of Pune-II and replies were filed to the Additional Commissioner of Pune-II, demonstrating that the officer issuing the notice had been authorised to perform the task. No evidence was produced to contradict the authorization or to show lack of jurisdiction. The Tribunal concurred with the Commissioner (Appeals)'s reasoning that the Chief Commissioner may allocate work across Commissionerates and that such allocation is not required to be backed by a separate Board notification for distribution of duties among Additional Commissioners. [Paras 10, 11]

Show-cause notice held valid; preliminary objection on jurisdiction dismissed.

Imposition of penalty under Section 11AC for suppression/intentional evasion of duty - Effect of payment before service of notice under Section 11A(2B) read with its Explanations - Entitlement to discharge 25% of penalty under Section 11AC - Penalty under Section 11AC was justified because the authorities found suppression of correct assessable value indicating intentional non-inclusion of landed cost; however, the appellant was entitled to discharge 25% of the penalty as they had paid the differential duty with interest before issue of show-cause notice. - HELD THAT: - The authorities relied on statements of the assessee's employees and admissions (recorded in the adjudication) that the landed cost of free-issue material had been taken less, leading to short payment of duty. Those factual findings supported the conclusion that the case fell within the exclusion in Explanation (2) to Section 11A(2B) (i.e., not attract the proviso exempting notice where escape was by deception/intent). Accordingly, imposition of penalty under Section 11AC was upheld. Separately, the Tribunal observed that the appellant had paid the entire differential duty with interest prior to service of the notice, entitling them to the statutory facility to discharge 25% of the penalty subject to conditions in Section 11AC; the lower authorities had not granted this concession, and the Tribunal modified the order to allow discharge of 25% of the penalty. The Tribunal relied on the legislative scheme in Section 11A(2B) and the judicial exposition recognizing that payment before notice does not automatically negate penalty where escape is intentional, while still preserving the limited concession under Section 11AC. [Paras 12, 13]

Penalty under Section 11AC sustained on merits, but modified to allow the appellant to discharge 25% of the penalty since differential duty and interest were paid before issuance of the show-cause notice; appeal partly allowed to that extent.

Remand for fresh adjudication of admissibility of CENVAT credit on supplementary invoices - Admissibility of CENVAT credit taken by M/s Fuel Instrument & Engineers on supplementary invoices issued by M/s SPM Tools was not decided on merits by the Commissioner (Appeals) and is remitted to the adjudicating authority for fresh decision. - HELD THAT: - The Commissioner (Appeals) set aside the adjudicating authority's denial of CENVAT credit as premature because the suppression charge against M/s SPM Tools had not been adjudicated. The Tribunal found that the Appeals authority had not examined the credit issue on its merits and therefore remanded the matter for adjudication of whether the respondent is entitled to CENVAT credit on the supplementary invoices issued by M/s SPM Tools. The remand directs the adjudicating authority to decide admissibility afresh, now that the related issues are being finally addressed. [Paras 14]

Matter remanded to adjudicating authority for fresh consideration of admissibility of CENVAT credit on supplementary invoices.

Final Conclusion: The appeal by the assessee was partly allowed: the show-cause notice was held valid and penalty under Section 11AC sustained for suppression, but the penalty was modified to permit discharge of 25% where differential duty and interest were paid before notice. The Revenue's appeal was allowed only to the extent of remanding the issue of admissibility of CENVAT credit on supplementary invoices to the adjudicating authority for fresh decision.

Rule 6 of CENVAT Credit Rules, 2004 - CENVAT credit on input services - use of common input services for maintenance of windmill and manufacture of dutiable goods - burden to produce evidence to substantiate non-use of input services - remand for fresh consideration

Rule 6 of CENVAT Credit Rules, 2004 - CENVAT credit on input services - use of common input services for maintenance of windmill and manufacture of dutiable goods - burden to produce evidence to substantiate non-use of input services - Whether demand under Rule 6 could be sustained in absence of scrutiny of evidence produced before the Tribunal that allegedly demonstrate non-use of common input services for windmill maintenance - HELD THAT: - The Tribunal examined the premise on which demands under Rule 6 were confirmed - that common input services were used both in manufacture of dutiable goods and in repair and maintenance of the windmill. The Commissioner (Appeals) had recorded that the appellant failed to produce evidence to show that credit availed on input services were not used for repair and maintenance of windmills. The appellant, however, placed evidences before the Tribunal which were not produced before the adjudicating authority. Given that these materials may bear upon the foundational factual finding of use of input services, the Tribunal held that such evidences require scrutiny by the adjudicating authority. The Tribunal did not decide the merits of the factual contention on non-use of input services; instead it directed fresh consideration so that the adjudicating authority may examine the evidence and ascertain the appellant's claim afresh.

Impugned orders set aside and matter remanded to the adjudicating authority for scrutiny of the evidences produced before the Tribunal and for passing an appropriate order; all issues kept open.

Final Conclusion: The appeals are allowed by way of remand: the impugned orders are set aside and the matter is remitted to the adjudicating authority to verify the appellant's evidences regarding non-use of common input services in windmill maintenance and to pass an appropriate order after fresh consideration; all issues remain open.

Related person - interconnected undertakings - transaction value - rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (cost of production plus 10%) - rule 10 (recourse to rule 8 where interconnected undertakings have demonstrable interest in each other's business) - rule 9 (exclusion in certain conditions) - valuation on cost of production

Interconnected undertakings - related person - rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (cost of production plus 10%) - rule 10 (recourse to rule 8 where interconnected undertakings have demonstrable interest in each other's business) - transaction value - Whether valuation under rule 8 could be applied to sales between the two companies alleged to be interconnected undertakings and thereby reject the transaction value. - HELD THAT: - The Tribunal held that mere interconnection (common shareholding) does not, by itself, invoke rule 8. Rule 9 excludes applicability in certain relationship contexts and rule 10 permits recourse to rule 8 only where interconnected undertakings have a demonstrable interest in each other's business. The material on record did not establish mutual interest in the business of each other; a unidirectional flow of material or claim that waste/scrap of the purchaser is an input in the seller's operations did not satisfy the statutory test. Reliance on authorities was examined and the Tribunal followed precedent which clarifies that transaction value cannot be rejected for interconnected undertakings unless the specific relationships contemplated by the relevant statutory provisions exist; where transaction value is available (including price to independent buyers), notional valuation under rule 8 is inappropriate.

Valuation under rule 8 cannot be applied to the impugned transactions between the two companies on the basis of mere interconnection; the transaction value stands.

Final Conclusion: The revenue appeal is dismissed; the Tribunal upheld the appellate authority's finding that the goods sold during the stated periods cannot be re valued under rule 8 on the basis of mere interconnection between the parties.

Principles of natural justice - continuation of proceedings upon change of officer - satisfaction of an intelligence officer requires a concrete order - efficacious alternative remedy by way of statutory appeal - compliance with Section 95 of the KVAT Act

Principles of natural justice - continuation of proceedings upon change of officer - The successor Intelligence Officer's issuance of notice and continuation of proceedings did not violate the principles of natural justice. - HELD THAT: - The Court found that the petitioner had submitted records before the outgoing Intelligence Officer and that the successor officer proceeded from the stage at which the earlier officer had left. Replacement of one officer by another does not disrupt adjudication where the successor issues fresh notice and continues the proceedings. Even if the successor did not request records again, that circumstance, if it affected consideration on merits, would amount to a shortcoming in adjudication but not a breach of the principles of natural justice that would justify intervention by this Court in exercise of writ jurisdiction. [Paras 7, 8, 9]

No violation of the principles of natural justice was made out by the petitioner's challenge to the successor officer's proceedings.

Satisfaction of an intelligence officer requires a concrete order - Inaction by the first Intelligence Officer does not amount to his satisfaction with the petitioner's explanation absent a concrete order closing the proceedings. - HELD THAT: - The Court held that any satisfaction of the initial officer must translate into a concrete measure, such as an order closing the proceedings. Mere inaction or delay by the first officer cannot be treated as acceptance of the petitioner's explanation; consequently, the successor officer was entitled to continue the adjudicatory process. [Paras 8]

The petitioner cannot rely on the first officer's inaction as proof of satisfaction that would preclude further proceedings.

Efficacious alternative remedy by way of statutory appeal - compliance with Section 95 of the KVAT Act - The petitioner has an efficacious alternative statutory remedy and must pursue the appellate remedy; the writ petition is therefore dismissed with liberty to appeal and with direction to exclude time spent in this Court. - HELD THAT: - The Court observed that the procedure adopted by the second respondent satisfied statutory requirements and that the appropriate remedy against the impugned order is by way of appeal to the appellate authority. Given the availability of that remedy, the writ petition is not maintainable. The Court, however, noted the bona fides of the petition and directed that if the petitioner avails the appellate remedy, the authority shall exclude the time the petitioner spent before the High Court. [Paras 10, 11]

Writ petition dismissed; petitioner may pursue statutory appeal and time spent in High Court to be excluded by the appellate authority.

Final Conclusion: The High Court dismissed the writ petition: continuation of proceedings by the successor Intelligence Officer did not breach natural justice, the outgoing officer's inaction did not amount to satisfaction, and the petitioner must seek relief by the statutory appellate remedy with the time spent before this Court to be excluded.

Obligation to remit tax collected to the State - deposit collected in lieu of tax treated as tax collection requiring remittance - penalty for filing incorrect return and evasion (penalty up to twice the amount of tax sought to be evaded) - refund remedy to purchaser or assessee upon exoneration - cap on penalty under Section 46A

Obligation to remit tax collected to the State - deposit collected in lieu of tax treated as tax collection requiring remittance - penalty for filing incorrect return and evasion (penalty up to twice the amount of tax sought to be evaded) - Assessee liable to penalty for collecting amounts in lieu of tax and failing to remit them to the State; return held to be incorrect on that account. - HELD THAT: - The agreement between the parties showed that amounts were collected expressly in lieu of sales tax. Once such collection was made by the assessee, the collected sums fell within the obligation to be paid over to the State under the statutory scheme and applicable rules. The assessee neither paid the collected amounts to the State nor reflected them in the return, thereby filing an incorrect return. Proceedings were correctly initiated under the provision permitting penalty for evasion or for filing incorrect returns, where the statutory sanction envisages penalty up to twice the amount of tax sought to be evaded. The Court rejected the contention that collection as a provisional deposit absolved the assessee of the duty to remit; the appropriate course if exonerated would have been refund to purchasers and claim of refund from the State, or purchasers seeking refund from the State on proof of payment.

Penalty upheld: assessee liable for not remitting tax collected and for filing an incorrect return; penalty quantum not to be further reduced.

Cap on penalty under Section 46A - penalty for filing incorrect return and evasion (penalty up to twice the amount of tax sought to be evaded) - Claim that penalty under Section 46A could not exceed a specified small monetary cap was not accepted; proceedings properly proceeded under the provision entitling penalty related to evasion/incorrect return. - HELD THAT: - The assessee relied on a contention that any penalty under the cited provision could not exceed a limited amount. The Court observed that the impugned proceedings were brought under the provision applicable to evasion or filing of incorrect returns, which contemplates penal consequences measured by the tax sought to be evaded (including penalty up to twice that amount). Consequently, the asserted small statutory cap did not operate to limit the penalty in the present facts where the collection constituted tax and was not remitted.

Submission regarding a small capped penalty was rejected; the penalty regime applicable to evasion/incorrect returns governs, and no further modification of quantum is warranted.

Final Conclusion: The appeal is dismissed; the High Court's confirmation of penalty for collection of amounts in lieu of tax without remittance and for filing an incorrect return is affirmed, and no further reduction of the penalty quantum is permissible; no order as to costs.

Rectification of assessment - opportunity of personal hearing in rectification proceedings - assessment finalisation and challenge to assessment order - reconciliation of purchases and sales for input tax credit - audit under section 63-A - claim that power to re-open rests with Appellate Authority

Assessment finalisation and challenge to assessment order - Validity of the assessment order dated 08.01.2019 for the period 2014-15 - HELD THAT: - The writ challenge to the assessment order of 08.01.2019 was considered on the material before the Court. The Court observed that the assessee had filed audited returns (Form WW) and cooperated with proceedings, and that the disputed issue-reconciliation of sales and purchases relating to Input Tax Credit-is technical and required professional assistance. Although adjournments were sought, the reasons (including non-availability of the Chartered Accountant due to relief work after the Gaja cyclone) did not indicate deliberate delay. Having regard to these facts and the record, the Court declined to disturb the assessment order.

Writ challenge to the assessment order dated 08.01.2019 dismissed; the impugned order is not disturbed.

Rectification of assessment - opportunity of personal hearing in rectification proceedings - claim that power to re-open rests with Appellate Authority - reconciliation of purchases and sales for input tax credit - Validity of the order dated 05.02.2019 rejecting the petition dated 31.01.2019 under Section 84 of the Act and the entitlement to a hearing on rectification - HELD THAT: - The petition filed on 31.01.2019 was, on its face, a request for rectification of errors in assessment under the statutory mechanism for rectification. The Assessing Officer rejected the petition summarily, relying on the proposition that power to re-open rests with the Appellate Authority; the Court found that such rejection was hyper-technical and that the petition fall within the rectification provisions. Given that the subject-matter involves factual and arithmetical reconciliation requiring presentation and explanation by the assessee, the Court held that the assessee is entitled to a personal hearing before the assessing officer either effects rectification or rejects the application. Accordingly the order rejecting the rectification petition was set aside and the matter remitted for hearing and fresh disposal in accordance with law.

Order dated 05.02.2019 is set aside; the Assessing Officer is directed to afford a personal hearing and decide the Section 84 rectification petition in accordance with law within four weeks of conclusion of the hearing (petitioner to appear on the date directed).

Final Conclusion: Writ Petition challenging assessment order dated 08.01.2019 dismissed; writ petition challenging rejection of rectification petition (05.02.2019) allowed by setting aside that order and remitting the petition for personal hearing and fresh disposal in accordance with law within the time directed.

Principles of natural justice - reasonable opportunity to show cause - personal hearing - assessment set aside for lack of fair hearing - administrative circulars on hearing

Personal hearing - reasonable opportunity to show cause - principles of natural justice - administrative circulars on hearing - Assessment completed despite the assessee's specific request for personal hearing and whether such completion violated principles of natural justice and departmental instructions. - HELD THAT: - The Court applied its earlier reasoning in a batch of similar matters and examined the pre-assessment process: inspection by enforcement officials, issuance of pre-assessment proposals, the assessee's written objections and an explicit request for a personal hearing. Departmental circulars and earlier judicial authorities were held to require that, where the assessee demands an oral hearing and the question involves disputed factual matters, fairness ordinarily requires that oral hearing be granted. The Assessing Officer rejected the adjournment request on the assumption that the assessee lacked supporting records and proceeded to complete the assessment without affording the personal hearing sought. That course was found to be contrary to the principles set out in the departmental circulars and the demands of fair procedure. For these reasons the impugned assessment was quashed and the matter remitted for fresh consideration after affording the assessee the personal hearing it had requested. [Paras 4, 5]

Impugned assessment set aside for failure to afford the requested personal hearing; matter remitted for fresh hearing and decision after allowing the assessee to produce materials.

Final Conclusion: The assessment order for 2014-15 is quashed. The assessee is directed to appear for personal hearing on the specified date with supporting materials and the Assessing Officer shall pass fresh orders within one month of conclusion of the personal hearing.

Waiver of statutory pre-deposit - application of mind while considering waiver/stay of pre-deposit - prima facie case as a determinative factor for waiver - maintainability of writ under Article 226 where appeal pending and revision under Section 58 not competent - Clause (b) of the second proviso of Section 57(9) of the VAT Act, 2008-application for waiver

Maintainability of writ under Article 226 where appeal pending and revision under Section 58 not competent - Writ under Article 226 is maintainable against the order disposing the application for waiver of statutory deposit where the substantive appeal remains pending and revision under Section 58 of the VAT Act, 2008 would not lie against such order. - HELD THAT: - The Court accepted the petitioner's contention that the order impugned was an interlocutory disposal of an application for waiver and the substantive appeal was still pending before the Tribunal; consequently a revision under Section 58 would not lie against that interlocutory order. The Court therefore held that the appropriate remedy in respect of the impugned disposal was by way of writ under Article 226, in view of the statutory scheme and the nature of the order challenged.

Writ petition was maintainable and entertained; the challenge to the waiver order proceeded under Article 226.

Waiver of statutory pre-deposit - application of mind while considering waiver/stay of pre-deposit - prima facie case as a determinative factor for waiver - Clause (b) of the second proviso of Section 57(9) of the VAT Act, 2008-application for waiver - Whether the Tribunal erred in declining to consider the merits/prima facie strength of the petitioner's case while disposing the waiver application under Clause (b) of the second proviso of Section 57(9) of the VAT Act, 2008, and whether the impugned order should be quashed and the waiver application reconsidered. - HELD THAT: - The Court examined the impugned order and the applicable legal principle as expounded by a Division Bench in I.T.C. Limited v. Commissioner (Appeals), holding that no rigid rule can be laid down but the appellate authority must apply its mind to whether the appellant has a strong prima facie case and whether the order is covered by binding precedent. The High Court found that the Tribunal proceeded on an incorrect premise that merits need not be considered while deciding the waiver application; that approach is inconsistent with the cited authority. Given that the Tribunal did not apply the requisite mind to the merits and relevant precedent (including the petitioner's contention about subsequent developments in authorities relied upon by the Tribunal), the Court concluded that the impugned order lacked the necessary consideration and therefore warranted interference. The Court remanded the waiver application for fresh consideration in light of the legal principles stated, directing expedition.

Impugned order quashed; the waiver application revived and remitted to the Tribunal for fresh consideration in accordance with law and the Division Bench guidance, to be decided expeditiously.

Final Conclusion: The writ petition is allowed: the impugned order is quashed; the petitioner's application for waiver of the statutory deposit under Clause (b) of the second proviso of Section 57(9) of the VAT Act, 2008 is revived and directed to be reconsidered by the Tribunal in accordance with the legal principles identified, with expedition.

Change in Law - restitutionary principle - carrying cost - adjustment in Monthly Tariff Payment effective from date of change in law - Supplementary Bill mechanism for Change in Law - No consequential or indirect losses

Change in Law - restitutionary principle - carrying cost - adjustment in Monthly Tariff Payment effective from date of change in law - Supplementary Bill mechanism for Change in Law - Whether Article 13 of the PPAs entitles the seller to carrying cost and restitutionary relief from the date of withdrawal of fiscal exemptions - HELD THAT: - Article 13 read as a whole incorporates a restitutionary principle (Article 13.2) that aims to restore, through monthly tariff payments, the affected party to the same economic position as if the Change in Law had not occurred. Article 13.4.1(i) requires that, where the Change in Law is by adoption, promulgation, amendment, re-enactment or repeal of law, the adjustment in monthly tariff payment shall be effective from the date of such Change in Law. The mechanism for payment is through supplementary bills as envisaged by Article 11.8.1 and Article 13.4.2. On the facts, the administrative withdrawal of fiscal exemptions by notifications (effective 01.04.2015 and a related notification) constitutes a Change in Law under Article 13 and, subject to the threshold and proof requirements in Article 13.2 and 13.3, the sellers are entitled to tariff adjustment from the date those exemptions were withdrawn. The restitutionary principle therefore supports payment of carrying cost relatable to Article 13 and is not an external equitable remedy outside the PPA. Consequently, the Appellate Tribunal did not act beyond the four corners of the PPA in allowing carrying cost and setting aside the CERC order which refused carrying cost on the ground that PPAs did not provide for it. [Paras 6, 7, 8, 10]

Article 13 of the PPAs entitles the seller to restitutionary relief (carrying cost) and tariff adjustment effective from the date on which the exemption notifications were withdrawn; the Appellate Tribunal's allowance of carrying cost is sustained.

Final Conclusion: Appeals dismissed; the Appellate Tribunal's judgment allowing carrying cost under Article 13 of the PPAs and setting aside the CERC order is upheld, with tariff adjustment effective from the dates on which the exemption notifications were withdrawn.