TaxTMI Updates e-Newsletter
Mar 04,2019

Interim deposit pending adjudication - conversion of deposited funds into interest-bearing FDR - no expression of final view by court (interim arrangement) - non-appealability of impugned order - issue of notice for impleadment - grant of exemption from filing

Grant of exemption from filing - Exemption application allowed subject to just exceptions. - HELD THAT: - The application for exemption (C.M. APPL. No. 42816/2018) was considered and allowed by the Court. The order records that exemption is granted subject to just exceptions and the application is disposed of accordingly.

Exemption granted and application disposed of.

Issue of notice for impleadment - Application for impleadment (C.M. APPL. No. 48246/2018) - notice issued returnable on 19.02.2019. - HELD THAT: - The Court directed that notice be issued in respect of the impleadment application and listed the matter for return on the specified date. This is a procedural direction ordering service and listing rather than a final adjudication on impleadment.

Notice ordered to be issued; matter listed on 19.02.2019.

Non-appealability of impugned order - The respondent's counsel informed the Court that the impugned order is not appealable; the Court recorded the statement. - HELD THAT: - Counsel for the respondent obtained instructions and stated before the Court that the impugned order is not appealable. The Court recorded this position. The statement was noted but the Court did not finally adjudicate the question of appealability beyond recording counsel's instruction.

Statement of non-appealability recorded by the Court.

Interim deposit pending adjudication - conversion of deposited funds into interest-bearing FDR - no expression of final view by court (interim arrangement) - Interim arrangement directing the petitioner to deposit specified funds and conversion into an interest-bearing FDR for nine months; deposit and interest to abide further orders. - HELD THAT: - In view of the matter requiring consideration and the competing figures placed before the Court regarding tax/VAT collections and credits for the period identified in the petition, the Court made an interim direction. The petitioner was directed to deposit the stated amount within three weeks. Upon deposit, the funds are to be converted by the respondent authorities into an interest-bearing fixed deposit receipt for nine months. The FDR amount and accrued interest will abide the further orders of the Court. The Court expressly stated that this is only an interim arrangement and no final view has been expressed.

Petitioner to deposit the directed amount within three weeks; deposited amount to be placed in an interest-bearing FDR for nine months and to abide further orders; arrangement is interim.

Procedural timelines for pleadings - Timelines for filing reply and rejoinder fixed. - HELD THAT: - The Court directed that respondents file their reply within four weeks and permitted the petitioner to file a rejoinder, if any, within four weeks after service of the reply. The matter is listed for further hearing on the specified date.

Reply to be filed within four weeks; rejoinder within four weeks after service of reply; list on 19.02.2019.

Final Conclusion: The Court allowed the exemption application, recorded the respondent's statement that the impugned order is not appealable, ordered issuance of notice on the impleadment application, and, as an interim measure, directed the petitioner to deposit the specified amount to be converted into an interest-bearing FDR for nine months pending further orders; timelines for pleadings were fixed and the matter listed for 19.02.2019.

Advance ruling - Maintainability of application for advance ruling - requirement of payment of prescribed fee for advance ruling applications under section 97(1) read with Rule 104 - incomplete application liable for rejection - opportunity to be heard and consequences of non-compliance with directions - Circular guidance on payment of fee for filing advance ruling application

Maintainability of application for advance ruling - requirement of payment of prescribed fee for advance ruling applications under section 97(1) read with Rule 104 - incomplete application liable for rejection - opportunity to be heard and consequences of non-compliance with directions - Circular guidance on payment of fee for filing advance ruling application - Application for advance ruling is not maintainable due to failure to comply with mandatory fee payment and non-compliance with directions to reframe questions and to cure defects. - HELD THAT: - The Authority observed that payment of the prescribed fee as mandated by section 97(1) read with Rule 104 is mandatory for filing an advance ruling application and that guidance in Circular No. 25/25/2017 clarifies the same. The applicant had deposited only one fee instead of the required fees under both Central and State Acts, rendering the application incomplete. The Authority also recorded that the applicant was directed to reframe questions and to cure defects but did not respond within the extended opportunity afforded. In view of the incompleteness of the application (short payment of fee) and the applicant's failure to comply with directions or to avail the opportunity to be heard, the application could not be entertained and was liable to be rejected as not maintainable. [Paras 7, 8]

Application for advance ruling rejected as not maintainable for being incomplete and for non-compliance with directions.

Final Conclusion: The Authority rejected the applicant's advance ruling application dated 11/10/2018 as not maintainable on account of non-payment of the full prescribed fee and failure to comply with directions to reframe questions and cure defects; order dated 23.01.2019.

Summary order. The application in GST ARA form No. 01 of Maharashtra Rajya Sahakari Dudh Mahasangh Maryadit Mumbai (ARA No. 100 dated 14.12.2018) is disposed of as withdrawn unconditionally.

Unexplained cash credit under section 68 - verification of identity and creditworthiness of shareholders - opportunity of being heard - remand for de novo assessment - directions under section 263 for investigation - best judgment assessment under section 144

Opportunity of being heard - directions under section 263 for investigation - best judgment assessment under section 144 - Whether the assessee was afforded a proper opportunity and whether the AO followed the investigative directions given by the Commissioner under section 263 before making the reassessment and passing an order under section 144. - HELD THAT: - The Tribunal found that the AO acted pursuant to the CIT's direction under section 263 to investigate the source, identity and creditworthiness of each shareholder, but did not carry out the requisite enquiries as directed. Notices sent to the assessee were returned, the assessee informed the AO of a change of address and subsequently filed written submissions with supporting documents, yet the AO passed the reassessment ex parte under section 144 within a short span without effectively verifying the documents or conducting the independent enquiries envisaged by the CIT. Relying on the Supreme Court's decision in Tin Box Company (supra) and the High Court's observations in Jansampark Advertising (supra), the Tribunal held that where the assessment order is made without giving the assessee a proper opportunity of setting out its case and where the directed inquiries were not carried out, the assessment must be set aside and the matter remitted for fresh consideration after affording opportunity to the assessee.

Order of the CIT(A) and the reassessment order were set aside and the matter was remanded to the AO for fresh consideration and effective inquiry after giving the assessee a proper opportunity of being heard.

Unexplained cash credit under section 68 - verification of identity and creditworthiness of shareholders - remand for de novo assessment - Whether the addition made by the AO under section 68 in respect of share capital and share premium could be sustained without the directed verification and opportunity to the assessee. - HELD THAT: - The Tribunal did not adjudicate the merits of the addition under section 68 on the basis of the material because the AO had not completed the independent enquiries directed by the CIT nor had he considered the documents filed by the assessee after change of address before making a best judgment assessment. In these circumstances the Tribunal held that the question of sustaining the addition could not be finally decided and must be examined afresh by the AO in accordance with law after undertaking the enquiries into identity, genuineness and creditworthiness of the subscribers and after giving the assessee opportunity to be heard.

The issue as to the correctness of the addition under section 68 was remanded to the AO for de novo adjudication following effective verification and opportunity to the assessee.

Final Conclusion: The appeal is allowed for statistical purposes; the orders under challenge are set aside and the matter is remanded to the assessing officer for de novo assessment and verification in accordance with the CIT's directions, after giving the assessee a proper opportunity of being heard.

Deduction under section 80-IB(10) - Joint Development Agreement - conversion of capital asset into stock-in-trade - business income v. capital gains - remand for verification by Assessing Officer

Deduction under section 80-IB(10) - Joint Development Agreement - business income v. capital gains - Claim of deduction under section 80-IB(10) by the assessee (HUF) in respect of profit on sale of flats arising under a Joint Development Agreement. - HELD THAT: - The Tribunal examined the JDA clauses and factual matrix and held that the arrangement was not an outright transfer of land to the developer but a development agreement under which the assessee retained certain super built-up area and retained rights of inspection and participation in pre-construction formalities. Clauses obliging developers to bear construction expenditure, while reserving to the assessee rights to supervise, obtain sanctioned plans and share proportionate statutory connection costs, indicate the assessee's involvement in the construction project albeit to a limited extent. The Tribunal noted that the developer had itself claimed deduction under section 80-IB(10) for profits on its share and, given that both parties were engaged in construction activities in the reported precedents, the assessee too would be eligible for the deduction in respect of profits attributable to its share, subject to fulfilment of the statutory conditions for 80-IB(10). The Tribunal therefore directed that the assessee's claim of exemption be considered on merits after verifying whether the statutory conditions are satisfied. [Paras 7, 8, 9]

Assessee prima facie engaged in construction activity under the JDA and entitled to claim deduction under section 80-IB(10) in respect of profit on sale of its share of flats, subject to verification of factual conditions by the AO.

Conversion of capital asset into stock-in-trade - remand for verification by Assessing Officer - business income v. capital gains - Whether the land was converted from capital asset into stock-in-trade before entering into the JDA, and consequent characterisation of profits as business income eligible for section 80-IB(10) or as capital gains. - HELD THAT: - The Tribunal observed that the assessee placed assets and liabilities statements and balance-sheets suggesting prior conversion of the land into stock-in-trade. However, the lower authorities had not verified this aspect. Because entitlement to section 80-IB(10) and the characterisation of the profit hinge on whether the land was held as stock-in-trade prior to the JDA, the Tribunal remanded this specific factual issue to the Assessing Officer for verification. The AO is to examine the documentary evidence and record whether capital asset was converted into stock-in-trade before the JDA and whether any capital gain arising on such conversion was offered to tax, and to decide the claim of exemption under section 80-IB(10) accordingly. [Paras 9]

Issue remanded to the AO for verification whether the land was converted to stock-in-trade before the JDA; if conversion is established and relevant disclosures made, exemption under section 80-IB(10) to be allowed in respect of business profits.

Interest under sections 234A and 234B - Challenge to levy of interest under sections 234A and 234B consequential to assessment. - HELD THAT: - The Tribunal treated the objection to interest as consequential to the assessment outcome on the primary issues and observed that no independent adjudication was necessary at this stage. Because the primary issues were set aside and remanded, the question of interest would be dealt with as consequential to the final assessment to be completed by the AO after verification. [Paras 10]

Objection to levy of interest under sections 234A and 234B is consequential and requires no separate adjudication; consequential relief to follow the final assessment.

Final Conclusion: Appeal allowed for statistical purposes; matter remanded to the Assessing Officer to verify whether the land was converted into stock-in-trade prior to the JDA and, if so, to allow deduction under section 80-IB(10) in respect of the assessee's share of business profit, with consequential adjustments (including interest) to follow.

Arm's length price - comparables - transfer pricing - functional differences - brand value as factor in comparability - recomputation of arm's length price

Comparables - functional differences - arm's length price - Exclusion of M/s Kerala Travels Interserve Ltd. from the final list of comparables for determination of ALP - HELD THAT: - The Tribunal examined the financial statements of Kerala Travels Interserve Ltd. and found that its principal revenues arise from activities other than tour operations (notably airlines commissions, visa, passport and related services), whereas the assessee's income is predominantly from international tourism services provided to its associated enterprise. Given this divergence in revenue composition and core operations, the company is functionally dissimilar and therefore not an appropriate comparable for determining the arm's length price of the assessee's international transactions. The Tribunal directed the AO/TPO to exclude Kerala Travels Interserve Ltd. from the list of comparables. [Paras 6]

Kerala Travels Interserve Ltd. excluded from the comparable set; AO/TPO directed to omit it while determining ALP.

Comparables - brand value as factor in comparability - arm's length price - Exclusion of Cox & Kings Ltd. from the final list of comparables for determination of ALP - HELD THAT: - The Tribunal found Cox & Kings to be engaged in a wide range of activities and to possess significant brand value and attendant market advantages. The revenue composition and the existence of brand-driven profitability distinguish Cox & Kings from the assessee, which is a captive service provider to its associated enterprise for tour operations in India. Reliance was placed on the principle, as recognised by the High Court, that brand value materially affects price and profit potential and therefore is a relevant factor in assessing comparability. For these reasons Cox & Kings cannot serve as a reliable comparable and was directed to be excluded from the comparable set. [Paras 9, 10]

Cox & Kings Ltd. excluded from the comparable set; AO/TPO directed to omit it while determining ALP.

Recomputation of arm's length price - arm's length price - transfer pricing - Direction to AO/TPO to recompute the ALP after exclusion of the two comparables and setting aside the assessment order in this regard - HELD THAT: - Having concluded that the two identified entities are not suitable comparables, the Tribunal set aside the assessment insofar as it related to the determination of ALP based on the impugned comparable list. The AO/TPO was directed to exclude the two companies from the comparable pool and to recompute the arm's length price for the international transactions in accordance with the corrected comparable set and applicable transfer pricing principles. [Paras 10, 11]

Assessment order set aside on the ALP issue; AO/TPO directed to exclude the two comparables and recompute the ALP.

Final Conclusion: The appeal is allowed for statistical purposes: the Tribunal excluded M/s Kerala Travels Interserve Ltd. and Cox & Kings Ltd. from the comparable set, set aside the assessment insofar as ALP determination is concerned, and directed the AO/TPO to recompute the arm's length price after excluding these comparables.

Rectification under section 154 - mistake apparent from the record - relief under Section 89(1) - finality of earlier orders - opportunity of hearing and service of notice - limitations in filing revised claim - absence of independent application of mind

Relief under Section 89(1) - finality of earlier orders - The petitioner's entitlement to relief under Section 89(1) as found in earlier orders and the consequent validity of the order dated 5.12.2014 allowing that relief. - HELD THAT: - The Court recorded that the Income Tax Officer in the order dated 30.08.2011 had held that relief under Section 89(1) was allowable to the petitioner and had invited a revised application, and that this finding was affirmed by the Commissioner of Income Tax (Appeals) by order dated 01.10.2012. Those orders remained unrecalled and final. The subsequent order of 05.12.2014 granting relief under Section 89(1) was passed on the petitioner's revised application and was expressly based upon and in conformity with the earlier orders of 30.08.2011 and 01.10.2012. Given these undisputed and final antecedent findings, the Court concluded that the petitioner was entitled to the benefit under Section 89(1) and that the order dated 5.12.2014 correctly implemented that entitlement. [Paras 23, 24]

The petitioner is entitled to claim and was correctly granted relief under Section 89(1) by the order dated 5.12.2014, that entitlement being founded on earlier final orders.

Rectification under section 154 - mistake apparent from the record - opportunity of hearing and service of notice - absence of independent application of mind - limitations in filing revised claim - Validity of the Section 154 proceedings initiated by the respondents (notice dated 9.5.2017 and order dated 1.8.2017) seeking to withdraw the relief granted on 5.12.2014. - HELD THAT: - The Court found that the impugned notice relied solely on the ground that the petitioner had not shown any income in his return for A.Y. 2009010 and had not originally claimed relief under Section 89(1), thereby asserting an apparent mistake; however, the authorities issuing the notice had ignored the earlier, final findings that relief under Section 89(1) was allowable and that the 5.12.2014 order was passed in conformity with those findings. The order dated 1.8.2017 was held to be passed without adequate notice to the petitioner (the respondents' material showed communications were sent to a third-party address), without reference to the show-cause notice and the petitioner's response, and with no independent application of mind but rather on the basis of departmental instructions. The respondents' submission that the relief was barred by limitation under Section 139(5) was not reflected in the show-cause particulars and was treated by the Court as an afterthought. In these circumstances the Section 154 proceedings were held to be misconceived, procedurally defective and perverse. [Paras 26, 30, 31, 32, 33]

The Section 154 proceedings (notice dated 9.5.2017 and order dated 1.8.2017) were quashed as misplaced and procedurally defective; the attempt to rectify the earlier order was not sustainable.

Final Conclusion: The petition is allowed. The show-cause notice dated 9.5.2017 and the subsequent order dated 1.8.2017 are quashed. The petitioner is entitled to the dues as per the order dated 5.12.2014, which the Income Tax Department shall pay within two months with allowable interest.

Concealment of particulars of income - furnishing inaccurate particulars of income - penalty under Section 271(1)(c) of the Income Tax Act - explanation and bona fides under Explanation 1 to Section 271(1)(c) - relevance of particulars furnished in the return - auditor's duty under Section 44-AB and effect of non-professional preparation of accounts

Penalty under Section 271(1)(c) of the Income Tax Act - relevance of particulars furnished in the return - concealment of particulars of income - furnishing inaccurate particulars of income - Whether the penalty under Section 271(1)(c) was rightly imposed on the assessee for AY 2007-08 - HELD THAT: - The Court applied the principle that imposition of penalty under Section 271(1)(c) depends on whether the particulars furnished in the return are found to be inaccurate or amount to concealment of income. The judgment examined the return filed by the assessee and noted that the amounts of Rs. 12.24 lacs (advance tax) and Rs. 52.24 lacs (debited as loss from non-banking business) were shown in the profit and loss account and not disclosed as deductible under Chapter VI-A; the assessee did not claim deductions under Chapter VI-A in the return. In light of the Supreme Court's decisions as discussed in the judgment - including Reliance Petroproducts and the earlier discussion of Dilip N. Shroff and Union of India v. Dharamendra Textile - the Court held that the particulars in the return are decisive for attracting penalty. The Court concluded that the particulars furnished were inaccurate and that the assessee had concealed taxable income by treating the specified amounts as expenditures or otherwise not reflecting them correctly in the taxable income. The fact that the assessee did not file a revised return after notices under Section 143(2) and could not establish bona fides or satisfactorily substantiate its explanation meant that the conditions for relief under Explanation 1 were not satisfied. Accordingly, initiation and confirmation of penalty proceedings were upheld.

Penalty under Section 271(1)(c) was rightly imposed and confirmed for AY 2007-08.

Explanation and bona fides under Explanation 1 to Section 271(1)(c) - auditor's duty under Section 44-AB and effect of non-professional preparation of accounts - Whether the assessee's plea of bona fide mistake, reliance on cooperative accounting practice and lack of professional advice/auditor explanation absolved it from penalty - HELD THAT: - The Court considered the assessee's contention that the error arose from transitional amendment (removal from benefit of Section 80-P) and from accounts prepared by cooperative-sector staff/auditors not being chartered accountants. The Court observed that Section 44-AB required audit by an accountant as defined and that the assessee failed to establish bonafides for the inaccurate particulars. The return itself did not disclose deductions under Chapter VI-A, contrary to the contention that the assessee had treated the matter as an exempt claim; therefore the asserted explanations were not substantiated. Reliance on non-professional preparation or customary cooperative formats did not relieve the assessee of liability when the particulars in the return were inaccurate and the assessee failed to prove its explanation to be bona fide under Explanation 1.

The plea of bona fide mistake, lack of professional advice or cooperative accounting practice did not absolve the assessee from penalty; such defence was rejected.

Final Conclusion: The High Court dismissed the appeal; the Tribunal's confirmation of penalty under Section 271(1)(c) for AY 2007-08 was held to be legally sustainable and the assessee's defences based on bona fide mistake and non-professional accounting were rejected.

Exclusion under Explanation (baa) to Section 80HHC - taxability under clause (iiid) of Section 28 - treatment of DEPB proceeds as export receipts - netting of face value against sale proceeds of DEPB - principle of strict interpretation of taxing statutes

Exclusion under Explanation (baa) to Section 80HHC - taxability under clause (iiid) of Section 28 - netting of face value against sale proceeds of DEPB - Assessee entitled, for computing deduction under Section 80HHC, to take only the net sale proceeds of DEPB after deducting its face value - HELD THAT: - The Tribunal's conclusion that the entire face value of DEPB was chargeable for computing export profit under Section 80HHC is displaced by the subsequent decision of the Supreme Court in Topman Exports. The Supreme Court held that where profits on transfer of DEPB are brought to tax under clause (iiid) of Section 28, Explanation (baa) to Section 80HHC permits exclusion of a smaller figure from 'profits of the business', and that benefit cannot be denied by judicial gloss. Applying that principle, the face value of DEPB must be treated as cost and may be deducted from sale proceeds so that only the profit (net amount) is relevant for computing the deduction under Section 80HHC. The view of the Bombay High Court relied upon by the Tribunal was reversed by the Supreme Court and the Tribunal's contrary conclusion therefore cannot stand. [Paras 6, 7]

Questions of law answered in favour of the Assessee: for computation under Explanation (baa) to Section 80HHC only the net amount (sale value less face value) of DEPB is to be considered.

Final Conclusion: Appeal allowed; the Assessee is entitled to compute deduction under Section 80HHC by excluding the face value of DEPB from sale proceeds and taking only the net profit, in accordance with the Supreme Court decision in Topman Exports; no order as to costs.

Ownership and right to claim depreciation - genuineness of transfer and sham transaction doctrine - allocation of cost on pro rata basis for capital asset - re-appreciation of concurrent factual findings

Ownership and right to claim depreciation - re-appreciation of concurrent factual findings - Assessee was the owner of the windmill and entitled to claim depreciation for the assessment year 2007-08. - HELD THAT: - The Tribunal, after following the assessee's own case in the earlier assessment year and re-appreciating the materials, analysed business prudence and commercial realities and rejected the Assessing Officer's conclusion that the transaction was not a purchase but merely a finance transaction. The Tribunal found that the existence of the windmill and the payments made were not disputed, and that denial of depreciation on the basis of the Assessing Officer's view of the transaction as a 'sham' was unsupportable. Having re-examined the factual matrix relied upon by the lower authorities, the Tribunal confirmed entitlement to depreciation which this Court has accepted, finding no substantial question of law calling for interference. [Paras 4, 7, 9, 10, 11]

Assessee is owner of the asset and entitled to depreciation; the Tribunal's factual conclusion is upheld.

Genuineness of transfer and sham transaction doctrine - The transfer of the windmill to the assessee was genuine and not a sham transaction. - HELD THAT: - The Tribunal examined the attendant facts and circumstances in depth, considered business prudence, and observed that the existence of the windmill and the quantum and method of payment were not disputed by the Revenue. It held that the Assessing Officer's reasons labelling the transaction a 'sham' did not withstand scrutiny and therefore rejected that characterisation. This Court found the Tribunal's reasoning to be a considered re-appreciation of the record and declined to disturb it. [Paras 7, 9, 10, 11]

Transfer held genuine; characterisation as a sham transaction rejected.

Allocation of cost on pro rata basis for capital asset - Cost of an individual windmill could be allocated on a pro rata basis out of the total project cost as accepted by the Tribunal. - HELD THAT: - The Tribunal, following its earlier detailed order in the assessee's own case, applied pro rata allocation of the total project cost to determine the cost attributable to one windmill. The Tribunal's approach was integrated into its overall finding that the transaction was genuine and commercially plausible, and this Court, having reviewed the Tribunal's reasoned analysis, found no infirmity warranting interference. [Paras 4, 9, 10, 11]

Pro rata allocation of total project cost to the individual windmill accepted.

Final Conclusion: The appeal by the Revenue is dismissed; the Tribunal's reasoned findings on ownership, genuineness of transfer and pro rata cost allocation are upheld and no substantial question of law arises. No costs.

Reasonableness of expenditure from businessman's perspective - remuneration to trustees - prohibition under Section 40A(2)(b) in relation to related-party payments - allowability of foreign travel expenses under Section 37(1) (business nexus)

Remuneration to trustees - reasonableness of expenditure from businessman's perspective - prohibition under Section 40A(2)(b) in relation to related-party payments - Whether the Tribunal was justified in upholding allowance of the remuneration paid to the trustees despite objections under Section 40A(2)(b). - HELD THAT: - The Tribunal and the Commissioner of Income Tax (Appeals) accepted that the remuneration to the trustees was disclosed in the return and that the recipients had paid tax on the amounts received. The court applied the principle that the reasonableness of an expenditure must be judged from the standpoint of a businessman and the Revenue cannot substitute its own subjective view of what is reasonable. The judgment relied on the precedent of S.A. Builders Ltd. as authority that the Revenue cannot sit in the armchair of the businessman to decide reasonableness. On the facts, there was no material warranting interference with the appellate authorities' concurrent conclusion that the remuneration was allowable, and therefore the Tribunal was right to uphold the allowance notwithstanding the Revenue's reliance on Section 40A(2)(b). [Paras 5]

Remuneration paid to the trustees was upheld as allowable; the Tribunal's and CIT(A)'s view stands in favour of the assessee.

Allowability of foreign travel expenses under Section 37(1) (business nexus) - business nexus of expenditure - Whether the Tribunal was correct in allowing foreign travel expenses where visas produced were not explicitly business visas. - HELD THAT: - The Assessing Officer disallowed travel expenditure relying on the type of visas produced (tourist/visitor endorsements). The court held that the presence of a tourist or visitor visa does not preclude business being transacted during the visits. In the absence of material disproving that business was conducted on those trips, the Tribunal and the CIT(A) correctly found that the requisite business nexus under Section 37(1) was satisfied. There was therefore no justification to substitute the findings of the appellate authorities. [Paras 6]

Foreign travel expenses were rightly allowed by the Tribunal and CIT(A); the disallowance by the Assessing Officer was set aside.

Final Conclusion: Both substantial questions of law were answered in favour of the assessee and against the Revenue; the Tribunal's decisions upholding allowance of the trustees' remuneration and the foreign travel expenses are sustained and the appeal is disposed of.

Summary order. AAR/62/2017 to be transferred from the Mumbai Bench to this Bench and tagged to AAR/61/2017; office directed to take necessary steps and issue notices to the parties in AAR/62/2017 and communicate this order to them; both matters posted for admission hearing on 15.04.2019.

Capitality of foreign exchange loss on restatement of foreign currency loan - allowability of expenditure under revenue v. capital heads on abandonment of project - deferred revenue expenditure - application of section 40A(2) - reasonableness of payments to related party - disallowance under section 14A read with Rule 8D - computation of expenditure attributable to exempt income - slump sale - requirement of transfer of assets and liabilities lock, stock and barrel - allocation of burden on Assessing Officer to demonstrate excess over fair market value under section 40A(2) - consequential appellate effect and verification on remand

Capitality of foreign exchange loss on restatement of foreign currency loan - Treatability of foreign exchange loss arising on restatement of closing balance of foreign currency loan as revenue or capital - HELD THAT: - The Tribunal upheld the findings of the AO and CIT(A) that the foreign exchange loss arose on restatement of a loan (a capital item) and therefore is not an allowable revenue deduction. The assessee's reliance on accounting standards and presentation in profit and loss account was examined and rejected on the ground that loss relating to a capital payment/advance cannot be treated as trading/revenue loss. The appellate authorities applied established principles distinguishing exchange differences on capital monetary items from revenue trading losses and found the loss exigible to addition.

Assessee's ground on this issue dismissed; exchange loss held to be capital in nature and added back.

Application of section 40A(2) - reasonableness of payments to related party - allocation of burden on Assessing Officer to demonstrate excess over fair market value under section 40A(2) - Validity of disallowance under section 40A(2) restricting service charges paid to the holding company (MEMG International India Pvt. Ltd.) - HELD THAT: - On the facts the Tribunal found that the AO/CIT(A) had not brought cogent material or comparable evidence to demonstrate that payments were excessive vis-a -vis fair market value. Judicial precedents require the AO to first establish excessiveness and then determine fair market value; section 40A(2) is not automatic. Where the AO merely restricted a portion of the claim without such justification, the disallowance cannot stand. Applying that principle to the service agreement and available record, the Tribunal set aside the disallowance and directed the AO to allow the claim.

Disallowance under section 40A(2) deleted; payments to holding company allowed.

Disallowance under section 14A read with Rule 8D - computation of expenditure attributable to exempt income - Appropriateness of disallowance under section 14A read with Rule 8D in respect of dividend/exempt income for certain assessment years - HELD THAT: - Where the assessee failed to furnish specific details of expenditure attributable to earning exempt income, the AO was justified in invoking Rule 8D to compute a notional disallowance. For the earlier reviewed years (AY 2009-10 and 2010-11) the Tribunal found no infirmity in the CIT(A)'s confirmation of disallowance. For later assessment years involving large and varying investments, the Tribunal observed that the AO had not considered the nature of investments and directed remand to the AO for proper examination of opening/closing balances and purpose of investments before applying Rule 8D.

Disallowance under section 14A/Rule 8D confirmed for certain years; for other years matter restored to AO for re examination and recomputation.

Allowability of expenditure under revenue v. capital heads on abandonment of project - deferred revenue expenditure - Nature and timing of write off of non recoverable project costs incurred on a hospital expansion project subsequently aborted - HELD THAT: - The Tribunal accepted that the appellant's core business was establishing and managing hospitals and that the Delhi project constituted expansion within the same business. Citing precedent, expenditure on an abandoned expansion project that did not yield an enduring asset was held to be revenue in nature. With respect to temporal allowance, the Tribunal applied a differentiated approach across assessment years: for AY 2009 10 it upheld the CIT(A)'s direction to spread a portion (CIT(A) had allowed 1/5th) where that direction was unchallenged; for AY 2011 12, where the assessee had contested spreading, the Tribunal held that once expenditure is revenue in nature and the project was aborted in that year it should be allowed in the year of abandonment and therefore directed full allowance in that year, subject to taxing any later recoveries.

Expenditure held to be revenue; allowance directed as per tribunal's year wise conclusions (spread upheld where unchallenged; full allowance ordered for the year of abandonment where appropriate).

Slump sale - requirement of transfer of assets and liabilities lock, stock and barrel - Whether the transfer of hospital business to related entity constituted a slump sale attracting section 50B - HELD THAT: - The Tribunal examined the business transfer agreement and the fact that land and buildings - a core and significant asset necessary to run the hospital - were not transferred. Consistent authorities were applied to hold that where significant assets required to carry on the business are retained by the vendor, the transaction is not a slump sale (transfer 'lock, stock and barrel'). Consequently, the deeming provisions of section 50B did not apply and the AO's computation treating negative net worth as addition under section 50B was set aside.

Transfer held not to be a slump sale; additions under section 50B deleted and receipt of lump sum consideration to be taxed according to law.

Revenue treatment of fees for corporate advisory / fund raising services - Characterisation of large fees paid to Allegro Corporate Finance Advisors Pvt. Ltd. for fund raising and business expansion services - HELD THAT: - The Tribunal, applying precedents which differentiate expenditures incurred for expansion within the existing business from those creating new capital assets, found that fees paid for valuation, investor identification, negotiation and fundraising to finance expansion of the existing hospital business were incurred in the ordinary course of that business and were revenue in nature. Consequently the amount was to be allowed under section 37.

Expenditure treated as revenue; disallowance reversed and amount allowed.

Commercial expediency and duplicate/group agreements - proof of service rendered - Allowability of management/consultancy payments to a group company (MHSPL) where similar services were contracted with the holding company - HELD THAT: - The Tribunal observed that the assessee had already contracted with the holding company for a broad suite of financial and management services and that the assessee failed to demonstrate distinct commercial exigency or specific services rendered by the other group company (MHSPL). In absence of tangible proof of separate, necessary services, the AO/CIT(A) were justified in disallowing such payments as not being for bona fide business exigency.

Disallowance of consultancy/management fees to MHSPL confirmed.

Consequential appellate effect and verification on remand - Procedure for consequential adjustment of brought forward losses and directions where prior-year appeals affect current year set offs - HELD THAT: - Where the assessment/order in a preceding year remained under appeal and had a bearing on brought forward losses, the Tribunal endorsed the CIT(A)'s direction to the AO to take consequential action after giving appeal effect to the earlier year's findings. The Tribunal, having disposed the related appeals, left appropriate consequential adjustments to the AO for compliance.

CIT(A)'s direction for consequential action upheld; AO to pass consequential order in light of appellate outcomes.

Final Conclusion: The Tribunal rendered a mixed outcome: (i) foreign exchange loss on restatement of loan held capital and disallowed; (ii) payments to the holding company under the service agreement were allowed because the AO had not proved excessiveness under section 40A(2); (iii) section 14A/Rule 8D disallowances were confirmed where no specific expenditure details were furnished and remitted to the AO for proper scrutiny in other years; (iv) non recoverable project costs of aborted hospital expansion were held revenue in nature (with year wise directions on spreading or immediate allowance as stated); (v) the hospital transfer was not a slump sale and additions under section 50B were deleted; (vi) fees to Allegro for fund raising were allowed as revenue expenditure; (vii) certain consultancy payments lacking proof of distinct services were disallowed; and (viii) matters requiring consequential computation or factual verification were remitted to the Assessing Officer for compliance.

Forfeiture of partly paid shares as short-term capital loss - Sham transaction / colourable device - Re-appreciation of facts by Tribunal - Absence of evidence of rerouting of funds

Forfeiture of partly paid shares as short-term capital loss - The Tribunal was correct in directing the Assessing Officer to accept the assessee's claim of short-term capital loss arising from forfeiture of partly paid shares of M/s. KPR Sugar Mills P. Ltd. - HELD THAT: - On re-appreciation of the facts the Tribunal found that the forfeiture arose in the context of an aborted project which could not be set up due to litigation and stay granted by the Supreme Court, and that prudent businessmen would not willingly permit loss of capital except under unavoidable circumstances. The Tribunal also recorded that there was no allegation or evidence that the forfeited amount had been rerouted back to the assessees. The CIT(A) did not record any positive finding to rebut these factual conclusions and proceeded on surmise. The High Court, on review of the Tribunal's factual conclusions and reasoning, found no reason to interfere with the Tribunal's acceptance of the forfeiture as giving rise to a genuine short-term capital loss. [Paras 5, 6]

Claim of short-term capital loss on account of forfeiture of partly paid shares was to be accepted.

Sham transaction / colourable device - Absence of evidence of rerouting of funds - The transaction could not be treated as a sham or colourable device and the revenue's reliance on McDowell to disallow the loss was not upheld on the facts. - HELD THAT: - The Tribunal concluded, after detailed factual analysis, that there was no whisper or allegation that the invested amount had come back to the assessees in any form, nor was the forfeiture shown to be bogus, fraudulent or a colourable device. The CIT(A)'s order lacked positive findings demonstrating a colourable device and rested on conjecture. Given the absence of evidence of rerouting or fraud, the Tribunal's conclusion that the transaction was not a sham was upheld. [Paras 5, 6]

Disallowance on the ground of sham/colourable device was not sustained.

Final Conclusion: Revenue's tax case appeals are dismissed; the Tribunal's order directing acceptance of the short-term capital loss arising from forfeiture of partly paid shares is upheld and the substantial questions of law are answered against the revenue.

Arm's Length Price - Addition under Section 92C(4) for international transactions - Transfer Pricing Officer reference and exercise of powers - Comparable Uncontrolled Price method - Associated enterprises versus unconnected enterprises - Material manipulation of prices to avoid tax - CBDT Instruction on reference to Transfer Pricing Officer

Arm's Length Price - Comparable Uncontrolled Price method - Associated enterprises versus unconnected enterprises - Material manipulation of prices to avoid tax - Addition of Rs. 23,72,129/- under Section 92C(4) as income from international transactions by fixing ALP was sustainable. - HELD THAT: - The Tribunal and lower authorities found that where imports from associated enterprises showed higher valuation than similar transactions with unconnected enterprises, the difference exceeded the permissible variance of 5% and therefore warranted adjustment to the Arm's Length Price. The Court accepted the legislative purpose of the ALP exercise - to prevent suppression of taxable income by manipulation of inter company prices - and held that the TPO/AO was justified in fixing ALP for those instances where the admitted import prices with associated enterprises were higher than comparable uncontrolled transactions. The contention that the TPO impermissibly 'picked and chose' transactions was rejected because ALP determination was confined to instances where a higher valuation in related party transactions, as compared to unconnected parties, indicated possible price manipulation; transactions where the assessee itself declared lower valuations were not to be disturbed. The Court concluded that the TPO's and AO's approach was in tandem with the statutory object of transfer pricing adjustments and there was no infirmity in sustaining the addition.

Addition under Section 92C(4) by fixing ALP on selected higher valued related party import transactions upheld.

Transfer Pricing Officer reference and exercise of powers - CBDT Instruction on reference to Transfer Pricing Officer - Validity of reference to the TPO despite CBDT Instruction No.3 dated 20.05.2003 was upheld. - HELD THAT: - The Court noted that Instruction No.3 required reference to the TPO where the value of international transactions exceeded a stated threshold but did not prohibit reference in cases where valuation was below that threshold. In the present case the reference to the TPO was made with the approval of the Commissioner of Income Tax. The Court found no ground to interfere with the lower authorities' finding that the reference was permissible and properly made, and therefore the TPO's exercise of jurisdiction in this matter was valid.

Reference to the TPO was valid and the TPO's jurisdiction and exercise of powers in the matter sustained.

Final Conclusion: The substantial questions are answered in favour of the Revenue and against the assessee; the order of the Tribunal upholding the addition and the reference to the TPO is upheld and the appeal is dismissed.

Penalty under Section 271(1)(c) - Concealment of income - Furnishing inaccurate particulars of income - Permanent Establishment (PE) - Initiation of penalty under Section 274 - Debatable question / substantial question of law - Penalty not leviable where issue is debatable

Penalty under Section 271(1)(c) - Permanent Establishment (PE) - Debatable question / substantial question of law - Penalty not leviable where issue is debatable - Validity of levy and confirmation of penalty under Section 271(1)(c) for the assessment years 2002-03 and 2008-09 where the penalty was founded on attribution of income to an alleged Permanent Establishment in India - HELD THAT: - The Tribunal noted that the assessments and the attribution of income to various forms of PE (fixed place, office, construction, agency) were upheld below, but those findings were the subject of appeals admitted by the Hon'ble Delhi High Court where substantial questions of law were framed as to the existence and nature of the PE and the quantum attributed. Because the question of whether the assessee had a fixed place PE in India was a debatable one (with substantial questions of law before the High Court), the Tribunal applied the principle that penalty under Section 271(1)(c) is not sustainable where the underlying issue is prima facie debatable. The Tribunal relied on the High Court's approach in a precedent where penalty was set aside because the contested tax issue was debatable and admitted before the High Court. In these circumstances the Tribunal concluded that penalty founded on the disputed PE finding could not be sustained and therefore deletion of the penalty was warranted. [Paras 8, 9, 10, 11]

Penalty under Section 271(1)(c) for AYs 2002-03 and 2008-09 deleted and the appeals allowed.

Final Conclusion: Since the question of existence and attribution to a Permanent Establishment in India was a substantial and debatable question of law admitted before the Hon'ble Delhi High Court, penalty levied under Section 271(1)(c) for AY 2002-03 and AY 2008-09 was deleted and the appeals were allowed.

Penalty under section 271(1)(c) for furnishing inaccurate particulars of income / concealment - Validity of enhancement by first appellate authority - Jurisdictional competence of CIT(Exemptions) to grant / determine registration under section 12AA and limits on CIT(A) commenting thereon - Remand to Assessing Officer for fresh examination of items of income

Penalty under section 271(1)(c) for furnishing inaccurate particulars of income / concealment - Validity of enhancement by first appellate authority - Deletion of penalty levied by the CIT(A) under section 271(1)(c) in respect of income enhanced by the CIT(A). - HELD THAT: - The Tribunal had earlier set aside the CIT(A)'s enhancement of income, holding that the first appellate authority exceeded its powers by questioning the registration granted by the CIT(Exemptions) and by making substantive enhancement beyond the scope of issues before it. Because the enhancement on which the CIT(A) based the penalty did not survive the Tribunal's order, the appellate Tribunal in the present proceedings concluded that the foundational basis for the penalty ceased to exist and directed deletion of the penalty. The assessee's grounds challenging the penalty were allowed for both assessment years. [Paras 10]

Penalty levied by the CIT(A) under section 271(1)(c) is deleted; appeals allowed.

Remand to Assessing Officer for fresh examination of items of income - Jurisdictional competence of CIT(Exemptions) to grant / determine registration under section 12AA and limits on CIT(A) commenting thereon - Restoration of the matter to the file of the Assessing Officer for fresh examination of each item of income (quantum) after setting aside the CIT(A)'s enhancement. - HELD THAT: - The Tribunal found that the Assessing Officer had doubted the surplus receipts without examining each item of income and therefore restored the issue to the Assessing Officer for detailed examination and fresh adjudication after affording the assessee reasonable opportunity of being heard. The first appellate authority's observations on the validity of registration under section 12AA were held to exceed his jurisdiction; accordingly, enhancement was set aside and the matter remitted for fresh factual and legal consideration by the Assessing Officer. [Paras 9]

Quantum issue remanded to the Assessing Officer for fresh examination of each item of income; CIT(A)'s enhancement set aside.

Final Conclusion: Both appeals by the assessee are allowed: the penalty under section 271(1)(c) imposed by the CIT(A) is deleted as its basis (the CIT(A)'s enhancement) was set aside by the Tribunal, and the quantum issues have been remitted to the Assessing Officer for fresh examination.

Reopening of assessment beyond four years - failure to disclose truly and fully all material facts - reason to believe based on information from subsequent assessment year - beneficial ownership for treaty relief under DTAA - prima facie satisfaction for reopening

Reopening of assessment beyond four years - failure to disclose truly and fully all material facts - Validity of notice reopening assessment issued beyond four years where the first proviso to Section 147 requires failure to disclose truly and fully all material facts - HELD THAT: - The Court examined the reasons recorded by the Assessing Officer and the material on record from the original scrutiny assessment. The Assessing Officer relied on conclusions formed while examining a subsequent assessment year but did not contend that the assessee had failed to disclose truly and fully all material facts in the original proceedings. The Court found that the petitioner had furnished the information and voluminous documents called for during the original scrutiny, and the Assessing Officer had carried out detailed inquiries and accepted the returned income in the assessment order. Merely taking a different view in a later year's assessment, without new material establishing non-disclosure in the earlier year, cannot sustain reopening beyond four years. Therefore the additional requirement in the first proviso - that escapement of income beyond four years be due to failure to disclose truly and fully all material facts - was not satisfied. [Paras 5, 6, 9, 10]

Reopening of the assessment beyond four years is not permissible because there was no failure on the part of the assessee to disclose truly and fully all material facts.

Reason to believe based on information from subsequent assessment year - beneficial ownership for treaty relief under DTAA - prima facie satisfaction for reopening - Whether formation of belief based on examination in a subsequent assessment year supplied a valid basis to reopen the earlier assessment - HELD THAT: - The Assessing Officer's reasons referenced findings from scrutiny of A.Y. 2014-15 concerning beneficial ownership and treaty entitlement, asserting those findings required verification for A.Y. 2012-13. The Court held that where the reopening is beyond four years, reliance on conclusions drawn during assessment of a later year does not suffice unless there is new material showing lack of true and full disclosure in the earlier year. The Court distinguished cases where fresh information obtained during later assessments justified reopening, noting that in this case the material relied upon was not shown to be newly discovered material that was not available or elicited in the original scrutiny. Accordingly, the Assessing Officer did not have valid prima facie material to form a belief justifying reopening. [Paras 10, 11, 12]

Reference to conclusions reached in the subsequent year's assessment, without new material proving non-disclosure in the earlier year, did not furnish a valid basis to reopen the assessment for A.Y. 2012-13.

Final Conclusion: The notice of reopening of assessment dated 3.4.2018 for A.Y. 2012-13 is quashed; the petition is allowed and disposed of.

Judgment on admissions under Order 12 Rule 6 CPC - Vague and evasive denials treated as constructive admissions - Requirement of specific pleading to establish existence of HUF/joint family property - Prohibition of suits/defences in respect of benami property under the Prohibition of Benami Property Transactions Act, 1988 - Estoppel of a licensee and the principle embodied in Section 116 of the Evidence Act ("once a licensee, always a licensee")

Judgment on admissions under Order 12 Rule 6 CPC - Vague and evasive denials treated as constructive admissions - Whether a decree could be passed under Order 12 Rule 6 CPC on the pleadings before the Court. - HELD THAT: - The Court held that the defendant's written statement contained vague, evasive and inconsistent denials which did not meet the requirements of Order VIII Rules 3 and 4 CPC to deal specifically with pleaded facts. Applying established tests for Order 12 Rule 6 CPC, the Court found that admissions (express or constructive) arose from the pleadings and that the defendant's vague pleas did not raise any bona fide defence requiring trial. The Court relied on precedents that permit the Court to ignore evasive denials and draw constructive admissions where the defence is unsubstantiated, and concluded that on the pleadings a decree based on admissions was appropriate. [Paras 22, 23, 24, 26, 27]

Application under Order 12 Rule 6 CPC allowed and decree may be passed on the basis of the admissions in the pleadings.

Requirement of specific pleading to establish existence of HUF/joint family property - Prohibition of suits/defences in respect of benami property under the Prohibition of Benami Property Transactions Act, 1988 - Whether the defendant's plea that the suit property was purchased from joint family/HUF funds (and hence outside the Benami Act bar) constituted a valid defence. - HELD THAT: - The Court examined the defendant's assertion that the property was acquired from joint family funds or from sale of HUF property and found the pleadings deficient. The judgment emphasises the settled requirement that detailed factual averments are necessary to bring a case within the HUF/joint family exception to the Benami prohibition, including how the HUF came into existence (pre 1956 nucleus or post 1956 hotchpotch), and supporting particulars such as relevant documents. In absence of such particulars and any challenge to the registered sale deed, the Court held the defendant's case to be vague and unsubstantiated and therefore barred by Section 4 of the Benami Act; the exceptions to Section 4 were not pleaded or made out. [Paras 34, 35, 36, 37, 38]

Defence based on alleged purchase from joint family/HUF funds rejected as vague, unpleaded and barred by the Benami Act.

Estoppel of a licensee and the principle embodied in Section 116 of the Evidence Act ("once a licensee, always a licensee") - Whether the defendant, having been permitted to occupy the premises as a licensee, could deny the plaintiffs' title and resist eviction. - HELD THAT: - The plaint averred that the defendant was inducted as a licensee and the written statement did not specifically and satisfactorily deny that status. Relying on Section 116 Evidence Act and authorities applying the principle that a person who entered on property by licence cannot later deny the title of the person who licensed him, the Court held that the defendant was estopped from disputing the plaintiffs' title. The license stood terminated and the defendant was liable to be evicted; the Court noted that the defendant's contrary contentions were not sufficiently pleaded to meet the burden of denial. [Paras 40, 41, 42, 43, 44]

The defendant is estopped from denying plaintiffs' title as a licensee and is liable to be removed from the premises.

Final Conclusion: The Court allowed the plaintiffs' application and passed a decree of permanent and mandatory injunction: the defendant, her agents and servants are restrained from entering or occupying the suit property and directed to remove her articles from the one room shown in the site plan. The suit is disposed of and the parties shall bear their own costs.

Confiscation of imported containers - mis-declaration and suppression of value in bill of entry - treatment of packing containers in import valuation - EPCG scheme import obligations - separate duty on containers not leviable

Confiscation of imported containers - mis-declaration and suppression of value in bill of entry - treatment of packing containers in import valuation - separate duty on containers not leviable - Whether the containers in which second hand machinery was imported were liable to confiscation and whether the appellant had mis-declared or suppressed their value in the bill of entry, attracting redemption fine and penalty. - HELD THAT: - The Tribunal examined the import documents, including the invoice and the supplier's certificate, which described the machinery as being duly packed in containers and stated that the invoice value was inclusive of the cost of the containers. On these undisputed facts the Tribunal found no basis to allege that the appellant failed to declare or mis-declared the containers or suppressed their value in the bill of entry. Applying the principle in Union of India v. Jain Shudh Vanaspati that where goods are imported in containers and the container cost is included in the price, separate duty on such containers is not leviable and containers are not liable to confiscation, the factual matrix here did not support confiscation, redemption fine or penalty. The Tribunal therefore held that the adjudicating authority's conclusion of mis-declaration and consequent confiscation and monetary penalties was unsustainable and set aside the impugned order.

Impugned order of confiscation, redemption fine and penalty set aside; appeal allowed.

Final Conclusion: On the admitted record that the imported machinery was declared as packed in containers and the invoice value included container cost, the finding of mis-declaration/suppression was reversed and the order confiscating containers and imposing redemption fine and penalty was set aside; appeal allowed.

Entitlement to refund of excess duty on post import price finalisation - provisional assessment and self assessment - admissibility of evidence under Rule 5(1)(b) of the Customs (Appeals) Rules, 1982 - amendment of Bill of Entry under Section 149 of the Customs Act, 1962 - doctrine of unjust enrichment

Entitlement to refund of excess duty on post import price finalisation - provisional assessment and self assessment - Refund of excess duty was payable where imports were provisionally priced at the time of clearance and the final invoice fixed a lower unit price. - HELD THAT: - The Tribunal found that the provisional nature of the price was disclosed to the Department at the time of filing the Bills of Entry and that the sale purchase agreement and provisional and final invoices demonstrated that the initially declared price was provisional and later finalised at a lower figure. Although provisional assessment was not specifically opted for, the duty was paid on the provisional price and the assessee filed a refund claim on finalisation of the price. On these facts the Commissioner(Appeals) correctly allowed the refund and the Tribunal found no infirmity in that conclusion.

The Commissioner(Appeals) order allowing the refund was upheld and the Revenue's appeal dismissed.

Admissibility of evidence under Rule 5(1)(b) of the Customs (Appeals) Rules, 1982 - Documents and communications received after the Order in Original could be admitted before the Commissioner(Appeals) under Rule 5(1)(b) where there was sufficient cause for not producing them earlier. - HELD THAT: - The Tribunal accepted the finding that e mails from the supplier were received by the respondent after the adjudicating authority had passed the Order in Original and therefore the respondent had sufficient cause for not producing that material earlier. In accordance with Rule 5(1)(b) the Commissioner(Appeals) was entitled to consider such documentary evidence and did so.

The admission and consideration of the post adjudication documentary evidence by the Commissioner(Appeals) was held proper.

Amendment of Bill of Entry under Section 149 of the Customs Act, 1962 - Amendment of the Bills of Entry was permissible where documentary evidence existed to support the corrected final invoice value. - HELD THAT: - Although the Additional Commissioner declined to amend the Bills of Entry, the appellate authority accepted documentary proof (including the final invoices and contractual clauses showing price variation) as justifying amendment under Section 149. The Tribunal agreed with the appellate conclusion that documentary evidence supported the relief granted.

The appellate decision setting aside the rejection of amendment was upheld.

Doctrine of unjust enrichment - Doctrine of unjust enrichment did not bar the refund claim on the facts of the case. - HELD THAT: - The Commissioner(Appeals) examined unjust enrichment and recorded that the excess duty was accounted as a receivable in the assessee's books and that a Chartered Accountant's certificate stated the refund claim did not attract unjust enrichment. The Tribunal found this treatment and the CA certificate sufficient to dispel the contention of unjust enrichment in the circumstances.

The finding that unjust enrichment was not attracted was sustained.

Final Conclusion: On the facts - provisional pricing disclosed at import, subsequent finalisation of a lower price, admissibility of post order documentary evidence, availability of documentary proof for amendment, and absence of unjust enrichment - the Commissioner(Appeals) order allowing refund was upheld and the Revenue's appeal dismissed.

Refund of Special Additional Duty (SAD) - time limit for refund claims - interpretation of conditional exemption - cause of action accrues on sale and payment of CST/VAT - stare decisis and jurisdictional High Court precedent - reading down subordinate legislation to give effect to legislative purpose

Refund of Special Additional Duty (SAD) - time limit for refund claims - cause of action accrues on sale and payment of CST/VAT - interpretation of conditional exemption - Whether the one year period prescribed by Notification No. 93/2008 for filing refund claims of SAD is to be computed from the date of payment of SAD at import or from the date of payment of the local sales tax (CST/VAT) consequent to sale of the imported goods. - HELD THAT: - The Tribunal concluded that the object and scheme of levy and relief of SAD demonstrate that SAD operated as a counter balance/security vis a vis CST/VAT and that the right to relief under the exemption notification accrues only upon sale of the imported goods and payment of the relevant CST/VAT. The one year stipulation in the amended sub para (c) of para 2 of Notification No. 102/2007 Cus. (as substituted by Notification No. 93/2008) must therefore be read so that the one year period is computed from the date of payment of CST/VAT (i.e., the effective discharge of the counter balancing liability), rather than from the date of payment of SAD at the time of import. The Tribunal relied on the public interest purpose behind the notifications, the design of the refund as an exemption tied to a market dependent condition (sale and tax payment), and practical administrative considerations such as the processing timeline in Board Circular No. 16/2008. While recognising conflicting High Court decisions, the Tribunal exercised its power to interpret the notification to give it operative effect consistent with its purpose and allowed the appeal accordingly. [Paras 7, 9, 10]

The one year period for filing refund claims is to be computed from the date of payment of CST/VAT consequent to sale of the imported goods; the appellant's refund claim is to be reassessed on that basis and allowed if made within one year of such payment.

Final Conclusion: The appeal is allowed in part: the appellate order is set aside and the refund claims are to be reassessed and allowed if filed within one year of payment of CST/VAT arising from the sale of the imported goods, the one year period being computed from that date.

Liability of a surety being co-extensive with the principal debtor - construction of a deed of guarantee - clause stipulating mode of discharge versus nature of liability - independence of contract of guarantee - effect of foreign court order suspending loan obligations on invocation of guarantee - requirement of demand/reconciliation as precondition to invocation of contingent corporate guarantee - admissibility of Section 7 I&B Code application in absence of a debt due and payable

Construction of a deed of guarantee - clause stipulating mode of discharge versus nature of liability - liability of a surety being co-extensive with the principal debtor - Whether Clause 4 of the Deed of Guarantee operates to limit the nature of the guarantor's liability making it not co-extensive with that of the principal borrower, thereby defeating the Section 7 application. - HELD THAT: - The tribunal examined Clause 4 of the Deed of Guarantee together with the General Conditions and concluded that the relevant clauses describe the mode and manner in which the guarantor is to discharge its obligation (including time for payment on notice and bank's certificate being conclusive) and incorporate assurances that the guarantee is enforceable notwithstanding securities or variations; they do not convert the guarantor's liability into something other than a contingent corporate guarantee enforceable upon default by the principal borrower. The tribunal rejected the Adjudicating Authority's conclusion that Clause 4 recorded an agreement that the guarantor's liability was not co-extensive with the principal borrower's; instead, the guarantee remains an independent contingent obligation which can be invoked only upon default by the principal borrower in accordance with its terms. [Paras 3, 4, 5, 7, 25]

Clause 4 and the General Conditions do not, by themselves, negate the contingent nature of the corporate guarantee or convert the surety's liability into a non-coextensive obligation; the guarantor's liability remains contingent on default by the principal borrower and subject to the contractual preconditions.

Effect of foreign court order suspending loan obligations on invocation of guarantee - requirement of demand/reconciliation as precondition to invocation of contingent corporate guarantee - admissibility of Section 7 I&B Code application in absence of a debt due and payable - Whether the Appellant could validly invoke the corporate guarantee and maintain a Section 7 I&B Code application when (a) obligations under the underlying Loan Agreement were under suspension by orders of the Economic Court at Dushanbe, and (b) no reconciliation/demand fixing any recalculated debt had been made on the principal borrower. - HELD THAT: - The tribunal found on the material that the Economic Court at Dushanbe issued orders suspending operation of the loan and related agreements (including, implicitly, arrangements arising from them) and ultimately rendered a final judgment requiring recalculation and reconciliation of loan amounts. In those circumstances no fresh demand based on reconciliation had been made on the principal borrower and therefore there was no sum established as due and payable by the principal borrower when the bank purported to recall the loan and invoked the guarantee. Because the guarantee could be invoked only "in the event of a default on the part of the borrower," and there was no ascertained debt or demand post-reconciliation, the condition precedent to invocation did not exist. Consequently, the Application under Section 7 could not be sustained in the absence of a debt and default as defined under the I&B Code. [Paras 18, 20, 21, 22, 23]

The suspension orders and the absence of any reconciled demand/debt precluded valid invocation of the corporate guarantee; hence the Section 7 application was not maintainable.

Final Conclusion: The appeal is dismissed for want of merit on the grounds that the corporate guarantee could not be validly invoked in the facts - Clause 4 and the General Conditions do not convert the guarantee into a non-contingent liability, and orders of the Economic Court at Dushanbe together with the absence of any reconciled demand meant no debt was due and payable; no order as to costs.

Operational creditor - Assignment of operational debt and rights of assignee - Admission of petition under section 9 of the Insolvency and Bankruptcy Code, 2016 by an assignee - Existence of a real dispute - Mobilox test - Rejection of petition under section 9(5)(2)(d) of the IBC where dispute is supported by documents

Operational creditor - Assignment of operational debt and rights of assignee - Petitioner qualifies as an operational creditor by virtue of assignment and is entitled to file a petition under section 9 of the IBC. - HELD THAT: - The Assignment of Claims Agreement dated 12.03.2013 assigned Glints' present and future claims, including the invoice dated 03.03.2014, to the Petitioner. Under the definition of operational creditor in the IBC the assignee of such debt falls within the scope of an operational creditor, and therefore the Petitioner has locus to file the section 9 petition as an operational creditor. [Paras 24, 30]

Petitioner is an operational creditor by assignment and has standing to file the section 9 petition.

Existence of a real dispute - Mobilox test - Rejection of petition under section 9(5)(2)(d) of the IBC where dispute is supported by documents - There existed a pre existing dispute regarding quality and agreed deductions which was supported by communications and therefore the section 9 petition was liable to be rejected under section 9(5)(2)(d). - HELD THAT: - Applying the principle in Mobilox, the Adjudicating Authority must determine whether the debt is disputed by a plausible contention and supported by evidence without adjudicating merits. The Corporate Debtor repeatedly communicated quality complaints, asserted an agreed $25/MT compensation and a 10% advance deduction in letters and correspondence dated between June 2014 and December 2014 and reiterated the dispute in reply to the demand notice dated 04.01.2018. The record shows notice of these contentions to the Petitioner prior to the demand notice, and the dispute is not a patently feeble one; consequently the petition cannot be admitted. [Paras 26, 28, 31, 32]

Section 9 petition rejected under section 9(5)(2)(d) on account of an existing dispute supported by documents.

Final Conclusion: The Tribunal held that the petitioner, as assignee, is an operational creditor but the petition under section 9 of the IBC is rejected under section 9(5)(2)(d) because a pre existing dispute regarding quality and agreed deductions, supported by documentary communications, existed prior to the demand notice.

Moratorium - overriding effect of insolvency law - possession of corporate debtor - duties of the resolution professional as Court officer - non-cooperation and penal consequences under section 70 - continuation as a going concern

Moratorium - overriding effect of insolvency law - possession of corporate debtor - Sealing of the corporate debtor's registered/corporate office by the Municipal Corporation despite the moratorium and whether such action was barred. - HELD THAT: - The Tribunal held that once the moratorium under Section 14 of the Insolvency and Bankruptcy Code was in force, actions to recover, enforce or otherwise interfere with the property of the corporate debtor, including enforcement by municipal authorities, are stayed. The Tribunal invoked the doctrine of overriding effect of the insolvency statute and concluded that the Municipal Corporation had no authority to seal the corporate debtor's premises after the moratorium was declared. On that basis the Municipal Corporation was directed to open the seals and hand over possession to the Resolution Professional so that the corporate debtor's property is under the control of the RP during CIRP.

Municipal Corporation's sealing was contrary to the moratorium and the Municipal Corporation was directed to open the seal and hand over possession of the entire property to the Resolution Professional.

Possession of corporate debtor - duties of the resolution professional as Court officer - Entrustment of possession and control of the corporate debtor's property to the Resolution Professional and related compliance. - HELD THAT: - The Tribunal reiterated that the Resolution Professional functions as an officer of the Court for purposes of CIRP and must be given control of the corporate debtor's property. In light of obstruction at site and conflicting assertions about the correct premises, the Tribunal nonetheless directed immediate handover of possession by the Municipal Corporation and required the ex-directors to cooperate and deliver property, papers and documents to the RP. The RP was directed to file a status report on the progress of taking control, and the ex-directors were ordered to appear personally to demonstrate compliance.

Possession and control of the corporate debtor's property to be delivered to the Resolution Professional; RP to file status report and ex-directors to appear and comply.

Non-cooperation and penal consequences under section 70 - Consequences of the ex-directors' alleged non-cooperation and failure to deliver property, books and papers to the Resolution Professional. - HELD THAT: - Having noted the reported conduct of the ex-directors in refusing to furnish title documents, obstructing access, and abusing the RP, the Tribunal recorded that such non-cooperation attracts the penal consequences envisaged in the insolvency law for officers who withhold property or documents. The Tribunal directed the ex-directors to file affidavits relating to their non-cooperation and to hand over possession and documents within the time directed, warning that failure to comply would invite action including contempt and invocation of the penal provisions applicable to non-cooperation.

Ex-directors directed to file affidavits, hand over possession and documents to the RP within the stipulated time; warned of contempt and penal action for non-compliance.

Continuation as a going concern - Implementation of earlier appellate directions to maintain the corporate debtor as a going concern and ensure payment of wages during CIRP in the factual situation where the RP has not yet obtained control. - HELD THAT: - The Tribunal noted the Hon'ble NCLAT's directions to keep the company as a going concern, to ensure continuance of manufacturing/production, payment of wages, and cooperation with the IRP. The Tribunal observed that such directions can be effectually implemented only after the Resolution Professional takes control of the corporate debtor. Accordingly, the Tribunal recorded that the RP, once in control, must comply with the NCLAT directions; until control is established, those measures could not be put into effect and the RP must report progress.

Directions of the appellate authority to maintain the company as a going concern are to be complied with by the RP after she takes full control; RP to report progress.

Possession of corporate debtor - Court's interim supervisory step to verify compliance with orders by listing the matter for supervisory status and requiring personal attendance. - HELD THAT: - To ensure compliance and to verify whether possession and documents have been handed over, the Tribunal fixed a return date for a status report and required personal attendance of the ex-directors. This listing functions as a supervisory mechanism to enable the Tribunal to take further action if non-compliance persists.

Matter listed for status report on the specified date; ex-directors directed to remain present personally and file compliance or face action.

Final Conclusion: The Tribunal directed the Municipal Corporation to unseal and deliver possession of the corporate debtor's property to the Resolution Professional, ordered the ex-directors to cooperate, hand over possession and documents and to file affidavits, required the RP to file a status report and to implement appellate directions regarding continuation as a going concern after taking control, and warned of contempt and penal consequences for non-compliance.

Reasons to believe - provisional attachment under Section 5(1) PMLA - supply of reasons to believe to the noticee - principles of natural justice and fair hearing - applicability of precedents across statutes

Supply of reasons to believe to the noticee - principles of natural justice and fair hearing - level playing field - Copy of the reasons to believe must be supplied to the appellants during the pendency of the appeals. - HELD THAT: - The Tribunal held that the appellants are entitled to know the allegations constituting the 'reasons to believe' so as to enable an effective response and to preserve a level playing field. Reliance was placed on the settled principle that reasons are integral to fairness, transparency and accountability of quasi judicial decision making. Although the Tribunal did not decide the ultimate validity of the reasons or the provisional attachment, it found that denial of the copy of reasons to believe would curtail fair defence and be an injustice to the parties. Consequently, the ED was directed to supply the copy of the reasons to believe to each appellant within one week, and the appellants were given three weeks thereafter to file their responses. [Paras 22, 28, 29]

Copy of the reasons to believe to be supplied to each appellant within one week; appellants allowed three weeks thereafter to file responses.

Provisional attachment under Section 5(1) PMLA - reasons to believe - applicability of precedents across statutes - Validity of recordal of reasons to believe and the lawfulness of the provisional attachment order were not finally adjudicated and remain open for consideration. - HELD THAT: - The Tribunal expressly refrained from deciding whether the provisional attachment order complied with the mandate of Section 5(1) PMLA or whether reasons must be recorded prior to or along with the Provisional Attachment Order, noting that those questions have been and would be argued in other appeals and on merits. The Tribunal observed precedents on the requirement of recording and communicating reasons and held that decisions in analogous statutes and High Court dicta (e.g., J. Sekar) are of precedential value unless set aside, but did not determine the attachment's validity at this stage. The matter was left for adjudication on merits after supply of the reasons and filing of responses. [Paras 22, 23, 26]

Issue of validity of the reasons to believe and the provisional attachment order is left open for adjudication on merits; not decided at this stage.

Final Conclusion: The Tribunal directed the respondent to furnish copies of the 'reasons to believe' to each appellant within one week and permitted three weeks for filing responses; questions as to the sufficiency, timing or validity of those reasons and the lawfulness of the provisional attachment were not decided and remain for determination on merits.

Classification of 'Construction of Residential Complex Service' - Classification of 'Works Contract Service' - Taxability of external infrastructure works (boundary wall, drains, parks) as part of residential complex - Penalty under Section 76 and Section 78 of the Finance Act, 1994

Classification of 'Construction of Residential Complex Service' - Applicability of Macro Marvel precedent - Construction of row houses/MIG, HIG, LIG and EWS for Rajasthan Housing Board are not exigible to service tax under the 'Construction of Residential Complex Service'. - HELD THAT: - The Tribunal accepted the appellant's submission that the issue is covered by the decision in Macro Marvel Projects (as affirmed by the Supreme Court) and applied that precedent to hold that construction of row houses awarded by Rajasthan Housing Board does not attract service tax under the heading 'Construction of Residential Complex Service'. The Tribunal noted the factual matrix of the schemes and followed the ratio that such row-housing activity is not exigible to the residential complex service category under the facts before it, and accordingly set aside the demand confirmed under that head. [Paras 6, 8]

Demand confirmed under 'Construction of Residential Complex Service' in respect of the row houses/scheme for Rajasthan Housing Board set aside.

Taxability of external infrastructure works (boundary wall, drains, parks) as part of residential complex - Classification of such works under 'Works Contract Service' - Construction of park, boundary wall and rain water drains in the housing scheme are not exigible to service tax as part of a residential complex and do not qualify as taxable 'Works Contract Service' under the facts of the case. - HELD THAT: - Relying on a coordinate Bench decision (Final Order No. 52034/2018 dated 22/05/2018 in Appeal No. ST/50226/2015) the Tribunal held that works such as construction of boundary walls and rain water drains constitute external development/infrastructure and are not facilities for residents of the quarters; consequently they are not taxable as part of 'Construction of Residential Complex Service'. The Tribunal also found that such works do not fall within the taxable ambit of 'Works Contract Service' under the relevant sub-clauses as employed by the adjudicating authority, and therefore set aside the demand insofar as it related to these works. [Paras 7, 8]

Demand in respect of construction of boundary wall, park and drains in the housing scheme set aside; such works held not exigible to service tax on the facts.

Penalty under Section 76 and Section 78 of the Finance Act, 1994 - Consequential relief on penalties - Penalties imposed under Section 76 and Section 78 insofar as they relate to the demands confirmed under 'Construction of Residential Complex Service' are set aside. - HELD THAT: - Having set aside the demands that were confirmed under the 'Construction of Residential Complex Service', the Tribunal also quashed the consequential penalties imposed under the statutory penal provisions as they related to those demands. The appellate order therefore relieved the appellant from the penalty liability to the extent it flowed from the set-aside demands. [Paras 8]

Penalties under Section 76 and Section 78 set aside to the extent they pertained to the impugned construction-of-residential-complex demands.

Final Conclusion: The appeal is allowed: the Tribunal set aside the adjudicating authority's confirmation of service tax demands insofar as they were based on classification as 'Construction of Residential Complex Service' (including demands relating to boundary wall/park/drain), and quashed the consequential penalties under Section 76 and 78; other portions of the impugned order not disturbed remain unaffected.

Penalty under section 78 of the Finance Act, 1994 where service tax paid with interest before issuance of show cause notice - effect of payment of tax with interest prior to show cause notice under sub-section (3) of section 73 - suppression of facts with intent to evade payment of service tax - voluntary compliance and reduction of litigation

Penalty under section 78 of the Finance Act, 1994 where service tax paid with interest before issuance of show cause notice - effect of payment of tax with interest prior to show cause notice under sub-section (3) of section 73 - suppression of facts with intent to evade payment of service tax - Whether the penalty imposed under section 78 is sustainable where the assessee discharged the service tax along with interest before issuance of the show cause notice. - HELD THAT: - The Tribunal found on the record that the appellant had filed periodical returns and had discharged the service tax together with interest before the show cause notice was issued and that the amounts paid were appropriated in the adjudication. Relying on the purpose of sub-section (3) of section 73 to encourage voluntary compliance and reduce litigation, and on precedents treating payment with interest made before notice as disentitling the department to impose penalty, the Tribunal held that mere collection of service tax followed by non-payment does not, without more, establish suppression with intent to evade where the tax and interest were promptly paid once pointed out and returns were filed. In those circumstances the penal provision under section 78 cannot be sustained and is liable to be set aside. The Tribunal referred to similar judicial treatment in earlier decisions to support this conclusion.

Penalty imposed under section 78 of the Finance Act, 1994 is set aside; the appeal is allowed with consequential relief as per law.

Final Conclusion: The penalty under section 78 was annulled because the service tax together with interest had been paid before issuance of the show cause notice and there was no finding of suppression with intent to evade; the appeal is allowed with consequential relief.

CENVAT credit admissibility despite supplier's non-registration - registration not a prerequisite for claiming CENVAT credit - supplementary invoice under Rule 9(1)(bb) not applicable where only invoices were issued - decision beyond scope of show cause notice and Order in Original

CENVAT credit admissibility despite supplier's non-registration - registration not a prerequisite for claiming CENVAT credit - Denial of CENVAT credit on the ground that input service providers were not registered with the Department - HELD THAT: - The Tribunal applied the ratio of authoritative decisions holding that statutory registration is not a condition precedent to claim CENVAT credit. The court observed that no provision in the CENVAT/Central Excise framework prescribes non registration of a service provider as disentitling the recipient to credit; registration is a technical formality and failure to register does not extinguish the underlying tax liability nor the right to credit where input services were actually used in providing taxable output services. Reliance was placed on Karnataka High Court and tribunal precedents to that effect and those ratios were held applicable to the facts of the present case. On that basis the denial of credit for inputs supplied by unregistered service providers was set aside and the appeal allowed. [Paras 6]

Appeal allowed and CENVAT credit granted; impugned order set aside.

Supplementary invoice under Rule 9(1)(bb) not applicable where only invoices were issued - decision beyond scope of show cause notice and Order in Original - Validity of Commissioner (A)'s reliance on Rule 9(1)(bb) and reversal on a ground not taken in the SCN or Order in Original - HELD THAT: - The Tribunal found that the Commissioner (A) based the rejection on Rule 9(1)(bb) though the original adjudication had set aside the applicability of that provision and the show cause notice did not contemplate denial on that basis. Further, the factual matrix showed only invoices had been issued (not supplementary invoices under Rule 9(1)(bb)), so the appellate reliance on that rule was misplaced and beyond the scope of the SCN and Order in Original. For these reasons the appellate order was held to be contrary to the SCN/OIO and liable to be set aside. [Paras 6]

Impugned appellate order set aside for being beyond scope and for improperly relying on Rule 9(1)(bb).

Final Conclusion: The appeal is allowed; the Commissioner (A)'s order is set aside and CENVAT credit is permitted despite the suppliers' lack of departmental registration, the appellate reliance on Rule 9(1)(bb) being inapplicable and beyond the scope of the proceedings.

Summary order. Notice issued returnable on 20 March 2019; ad interim restraint granted against coercive recovery pursuant to the impugned order in original dated 8.1.2019; direct service permitted on respondents Nos.2 and 3.

Overriding effect of the SEZ Act - refund of service tax on input services consumed within SEZ - procedural lapse versus mandatory condition for approval by UAC/Development Commissioner - refund of service tax paid under Reverse Charge Mechanism - principles of natural justice in adjudication of refund claims

Overriding effect of the SEZ Act - refund of service tax on input services consumed within SEZ - Entitlement to refund of service tax paid on input services used for authorised operations of a SEZ unit by reason of the SEZ Act having overriding effect over other laws. - HELD THAT: - The Tribunal held that the SEZ Act, read with the SEZ Rules, has an overriding impact over other laws and that SEZ units are exempt from service tax for services used in authorised operations. Prior Tribunal decisions on identical facts, including the appellant's own earlier decision, establish that where input services are received and consumed within the SEZ, the benefit of exemption applies and refund must be sanctioned. The Tribunal applied those precedents and the statutory scheme to set aside the aspects of the impugned orders denying refund on this ground. [Paras 6]

Refund claims in respect of input services consumed within the SEZ are allowable by reason of the overriding effect of the SEZ Act; the appeals on this ground are allowed.

Procedural lapse versus mandatory condition for approval by UAC/Development Commissioner - principles of natural justice in adjudication of refund claims - Whether non-inclusion of services in the approved list of services (UAC/Development Commissioner approval) or related procedural defects can justify rejection of refund claims. - HELD THAT: - The Tribunal reiterated that non-inclusion of services in the approved list is a procedural lapse and not a substantive bar to refund where services are in fact received and consumed in the SEZ. It further noted that rejection of refund claims on grounds not raised in the show-cause notices, or without giving the appellant an opportunity to defend on those grounds, offends principles of natural justice and is impermissible. On these bases and following earlier decisions, the impugned rejections on procedural grounds were held not sustainable. [Paras 6]

Rejection of refund claims solely for non-inclusion in approved lists or on grounds not part of show-cause notices is not tenable; such procedural lapses do not defeat refund entitlement.

Refund of service tax paid under Reverse Charge Mechanism - Whether the portion of service tax paid under Reverse Charge Mechanism (RCM) and paid through the same challan but rejected by the adjudicating authority is refundable. - HELD THAT: - The Tribunal examined the payment records showing total service tax paid through the relevant challan and noted that part of that payment had already been allowed as refund by the Order-in-Original while the residual amount paid by the same challan was rejected. Treating the payment as a single transaction and applying the principle that refund is due where payment pertains to services consumed in the SEZ, the Tribunal found rejection of the RCM portion to be incorrect and directed its grant. [Paras 6]

The rejection of the refund of the amount paid under RCM was incorrect; that amount is refundable and the appeal is allowed on this ground.

Final Conclusion: All four appeals are allowed and the impugned portions of the Commissioner (A)'s order rejecting refund are set aside; refunds are to be sanctioned in accordance with the Tribunal's findings (including the amount paid under Reverse Charge Mechanism), with consequential relief, if any.

Manpower recruitment or supply agency service - service tax liability for reimbursable expenses - penalty under Section 78 of the Finance Act, 1994 - penalty under Section 77 of the Finance Act, 1994 - closure under Section 73(3) of the Finance Act, 1994 - Intercontinental Consultants and Technocrats Pvt. Ltd. (reimbursable expenses principle)

Manpower recruitment or supply agency service - Validity of the service tax demand in respect of manpower recruitment or supply services supplied by the appellant. - HELD THAT: - The Tribunal found that the appellant had paid the bulk of the assessed service tax relating to manpower recruitment or supply services (amount paid before issuance of show cause notice and the balance paid after adjudication). Having regard to the payments made and the earlier view taken by the Bench in Final Order dated 22.12.2017, the demand in respect of manpower recruitment or supply services is left undisturbed and no interference is warranted with that portion of the demand. [Paras 4]

Demand of service tax relating to manpower recruitment and supply services is maintained and not interfered with.

Penalty under Section 78 of the Finance Act, 1994 - closure under Section 73(3) of the Finance Act, 1994 - Sustainability of the equal penalty imposed under Section 78 for non-payment/non-registration in respect of the services supplied. - HELD THAT: - The Tribunal applied its earlier reasoning in the Final Order dated 22.12.2017 where, in similar circumstances, penalties were set aside because tax liabilities had been discharged once pointed out by the department and there was no specific finding of fraud or deliberate mis-statement. Noting that substantial tax had been paid (both before and after SCN) and that the appellant's conduct mirrored the factual matrix dealt with earlier by the Bench, the Tribunal held that imposition of penalty under Section 78 was not warranted and set aside the same. [Paras 4]

Penalty imposed under Section 78 is set aside.

Penalty under Section 77 of the Finance Act, 1994 - Sustainability of penalty imposed under Section 77. - HELD THAT: - The Tribunal considered the penalties imposed and concluded, on the material before it, that penalty under Section 77 was properly imposed and therefore is upheld by the Tribunal. [Paras 4]

Penalty under Section 77 is upheld.

Service tax liability for reimbursable expenses - Intercontinental Consultants and Technocrats Pvt. Ltd. (reimbursable expenses principle) - Whether the disputed amount claimed by revenue as tax relates to reimbursable expenses and is liable to service tax. - HELD THAT: - The appellant asserted that the disputed amount relates to expenses initially borne by it and subsequently reimbursed by the recipient, relying on the rule in Intercontinental Consultants and Technocrats Pvt. Ltd. The Tribunal observed that no documentary evidence had been produced before the adjudicating authority or the lower appellate authority to substantiate the reimbursable-nature of the expenses. In view of the absence of proof and the relevance of the Apex Court's ruling, the Tribunal remanded the issue to the adjudicating authority for de novo consideration, permitting the appellant to produce documentary evidence and directing the authority to apply the Intercontinental Consultants principle. The Tribunal also directed that no penalty shall be imposed in respect of this issue given the prolonged litigation and subsequent clarification by the Apex Court. [Paras 2, 4]

Disputed demand relating to reimbursable expenses is remanded to the adjudicating authority for fresh adjudication; no penalty to be imposed in respect of this remanded issue.

Final Conclusion: The appeal is allowed in part: the service tax demand for manpower recruitment/supply services is maintained; penalty under Section 78 is set aside; penalty under Section 77 is upheld; and the claim relating to reimbursable expenses is remanded to the adjudicating authority for fresh consideration in light of the Apex Court's decision, with a direction that no penalty shall be levied on that remanded issue.

Business Auxiliary Services (BAS) - time bar / limitation - extended period of five years - voluntary payment and its effect on penalty - penalty under Section 78 of the Finance Act, 1994

Business Auxiliary Services (BAS) - penalty under Section 78 of the Finance Act, 1994 - Whether freight charges collected in excess of amounts paid to airlines/ships are taxable under Business Auxiliary Services and whether corresponding demands and penalties can be sustained. - HELD THAT: - The Tribunal held that the question is settled by earlier Tribunal decisions relied upon by the appellant and that those decisions are directly applicable. Applying the precedent, the Tribunal found that service tax demand on such freight charges under Business Auxiliary Services is unsustainable. Consequentially, the demands of tax and the penalties imposed on this ground cannot be sustained and are set aside. [Paras 10]

Demand of service tax and penalties apportioned to freight charges under Business Auxiliary Services set aside.

Voluntary payment and its effect on penalty - penalty under Section 78 of the Finance Act, 1994 - Whether penalty under Section 78 is sustainable in respect of excess charges for which tax and interest were voluntarily paid during departmental audit. - HELD THAT: - The Tribunal noted that the tax and interest in respect of the excess charges were paid by the appellant proximate to the audit and that the appellant did not contest the tax liability in appeal. In these circumstances the Tribunal concluded that imposition of penalty under Section 78 in respect of that liability is unjustified and set aside the penalty while not disturbing the tax and interest already paid. [Paras 11]

Penalty under Section 78 in respect of the voluntarily discharged liability set aside; tax and interest left undisturbed.

Time bar / limitation - extended period of five years - Whether demand of service tax and penalties on commission received from steamer agents/airlines for periods prior to October 2004 are sustainable in view of limitation. - HELD THAT: - The Tribunal found that the amounts relating to commission pertained to a period prior to October 2004 and that the Show Cause Notice dated 05.04.2010 could not cover those amounts even under the extended five year limitation. As the demands and penalties are squarely time barred, they cannot be sustained and the appeal on this score is allowed. [Paras 12]

Demands and penalties in respect of airline/steamer commission for the period prior to October 2004 are time barred and set aside.

Final Conclusion: Both appeals are allowed: demands and penalties in respect of freight charges under Business Auxiliary Services are set aside; penalty under Section 78 relating to voluntarily paid excess charges is set aside while tax and interest remain undisturbed; demands and penalties for airline/steamer commission prior to October 2004 are held time barred and set aside, with consequential benefits as per law.

Non-speaking order - principles of natural justice - opportunity of personal hearing - remand for de novo adjudication - refund claim under Rule 5 of the Cenvat Credit Rules read with Notification No.27/2012

Non-speaking order - principles of natural justice - opportunity of personal hearing - remand for de novo adjudication - Impugned order passed by the Commissioner (Appeals) was vitiated for being non-speaking and for violating the principles of natural justice by not considering the appellant's facts and grounds of appeal and by not affording an opportunity of hearing. - HELD THAT: - The Tribunal found that the Commissioner (Appeals) disposed of the appeals by issuing only general guidelines on refund adjudication without referring to or reasoning upon the Order in Original, the specific facts of the appellant, or the grounds raised in the appeals. The impugned order did not afford the appellant a personal hearing and therefore failed to comply with the requirements of a speaking order and the principles of natural justice. Having regard to the appellant's submissions and precedents relied upon, the Tribunal held that such defects warranted setting aside the impugned order. The matter was remitted to the Commissioner (Appeals) for fresh adjudication on merits, requiring consideration of the facts and grounds of appeal and affording an opportunity of hearing to the appellant. [Paras 6]

Impugned order set aside and the appeals remanded to the Commissioner (Appeals) for de novo adjudication after hearing the appellant.

Final Conclusion: The Tribunal set aside the impugned Commissioner (Appeals) order for being non speaking and for breach of natural justice, and remanded all three appeals for de novo adjudication with a direction to decide them after hearing the appellant within three months from receipt of the certified copy of this order.

Cargo Handling Service - Goods Transport Agency - Commercial or Industrial Construction Service - Supply of Tangible Goods - appropriation of tax paid - penalty under section 76 - interest under section 75

Cargo Handling Service - supply of goods - Whether contracts for supply of river sand and crusher grit attract service tax as Cargo Handling Service. - HELD THAT: - The Tribunal examined purchase orders and found the contracts were for the supply of material and not for rendering cargo handling operations. The activity as evidenced by the contractual documents cannot, by any stretch, be treated as provision of Cargo Handling Service; it is a sale/supply transaction rather than a taxable cargo handling service. Consequently, the demand raised under the category of Cargo Handling Service in respect of these contracts was held to be unjustified and is set aside. [Paras 12]

Demand under Cargo Handling Service in respect of supply contracts set aside.

Cargo Handling Service - Goods Transport Agency - loading and unloading incidental to transport - Characterisation of contracts for transportation of limestone - whether taxable as Cargo Handling Service or as Goods Transport Agency service. - HELD THAT: - A review of the contracts showed they were for mere transportation of limestone from the mines to the customer's premises, with loading and unloading incidental to the transport. The Tribunal concluded that the predominant activity is transportation and therefore falls within the scope of Goods Transport Agency rather than Cargo Handling Service. The adjudicating authority was directed to verify the appellant's claim that service tax for this activity was discharged under the GTA category after availing the prescribed abatement. [Paras 13]

Activity characterised as GTA; demand under Cargo Handling Service for transportation contracts set aside and factual verification by adjudicating authority directed.

Appropriation of tax paid - Whether the adjudicating authority correctly appropriated the amount already paid by the appellant. - HELD THAT: - The appellant asserted that the adjudicating authority appropriated an incorrect amount and that total tax paid exceeded the amount appropriated in the impugned order. The Tribunal noted the discrepancy between the amount appropriated and the total tax purportedly paid by the appellant and directed the adjudicating authority to verify the payments and correct the record accordingly. [Paras 14]

Adjudicating authority directed to verify payments and correct appropriation; matter remitted for factual verification.

Penalty under section 76 - service tax already discharged - Whether penalty under section 76 is sustainable where the service tax liability was discharged prior to issue of show cause notice. - HELD THAT: - Having found that the appellant had already discharged the service tax liability in respect of the services held taxable (Commercial/Industrial Construction, Supply of Tangible Goods and GTA for transportation) and having set aside the demands in respect of Cargo Handling Service, the Tribunal concluded there was no justification for imposing penalty under section 76. The Tribunal therefore set aside the penalty, applying the principle that penalty is unjustified where the admitted tax liability stood discharged prior to initiation of proceedings. [Paras 15]

Penalty under section 76 set aside.

Commercial or Industrial Construction Service - Supply of Tangible Goods - Validity of service tax demand confirmed under Commercial or Industrial Construction Service and Supply of Tangible Goods. - HELD THAT: - The appellant did not dispute the adjudicating authority's confirmation of service tax under Commercial or Industrial Construction Service and admitted the portion relating to Supply of Tangible Goods. The Tribunal therefore declined to disturb that portion of the demand and upheld the findings of the adjudicating authority in respect of these services. [Paras 11]

Demand confirmed under Commercial/Industrial Construction Service and Supply of Tangible Goods upheld.

Final Conclusion: The appeal is allowed in part: demands under Cargo Handling Service in respect of supply contracts and transportation contracts are set aside (transportation recharacterised as GTA with verification directed); the adjudicating authority is directed to verify and correct appropriation of tax paid; demands affirmed in respect of Commercial/Industrial Construction Service and Supply of Tangible Goods; penalty under section 76 is set aside.

Condonation of delay - limitation bar to appeal - intimation of change of address under Rule 4(5A) of Service Tax Rules - service deemed served - sufficient cause

Condonation of delay - limitation bar to appeal - sufficient cause - Whether the delay of about seven years in filing the appeal could be condoned. - HELD THAT: - The Tribunal upheld the view that the appellant failed to provide a reasonable and bona fide explanation for the prolonged delay in preferring the appeal. The appellant admitted receipt of the earlier show cause notice and could not explain why the change of address effected in 2007 was not intimated to the competent officer within the statutory timeframe; the ST-1 update in 2010, filed three years after the change, did not justify the long inaction. Citing settled principles that delay resulting from negligence or reasons which could have been avoided by due care are not sufficient cause, the Tribunal found no ground for liberal condonation. The Tribunal also noted that the Commissioner (Appeals) was not entitled to condone delay beyond the prescribed period and relied on precedent to reject the plea for condonation. [Paras 6, 7, 8]

Delay of seven years is not a sufficient cause and is not condoned; the appeal is dismissed.

Intimation of change of address under Rule 4(5A) of Service Tax Rules - service deemed served - Whether updating address in ST-1 / ST-3 returns without written intimation as prescribed by Rule 4(5A) suffices to render the department's service of the Order-in-Original ineffective. - HELD THAT: - The Tribunal held that the statute prescribes a specific procedure for intimating change of details - a written intimation to the Jurisdictional Assistant Commissioner or Deputy Commissioner within 30 days - and mere mention in returns filed years later does not comply with Rule 4(5A). The trade notice permitting online intimation could not override the statutory requirement. The Order-in-Original having been dispatched to the address on record and not returned, service had to be treated as effective (deemed served within the prescribed period), and the appellant failed to show that statutory service was vitiated. [Paras 6]

ST-1/ST-3 update filed belatedly did not satisfy statutory intimation requirements; service of the Order-in-Original was effective and cannot be set aside.

Final Conclusion: The Tribunal found no merit in the appellant's plea of non-receipt based on a belated address update, held the statutory intimation requirement unmet, refused to condone the seven-year delay, and dismissed the appeal.

Adjustment of excess duty against short duty - unjust enrichment - extended period / limitation - interest on short paid duty after adjustment - penalty unsustainable where adjustment allowed

Adjustment of excess duty against short duty - Entitlement of the appellant to adjust excess duty paid against duty short-paid for the periods in dispute. - HELD THAT: - On detection of an anomaly caused by faulty SAP software the appellant had both overpaid and underpaid duty. The appellant paid the shortfall at the instance of the Department and sought adjustment of the excess duty paid. The Tribunal held that the question of permitting adjustment of duties is settled by precedents and that the appellant is entitled to have the excess duty of Rs. 10,52,311/- adjusted against the short duty liability. The Commissioner(Appeals) erred in refusing adjustment and in pursuing demand without accounting for the excess payments made by the appellant. [Paras 7]

Appellant entitled to adjustment of excess duty paid against the short duty.

Unjust enrichment - Validity of rejection of refund on the ground of unjust enrichment. - HELD THAT: - The Commissioner(Appeals) rejected the refund in part and sanctioned part but credited it to the Consumer Welfare Fund on the basis that, relying on a presumption, the appellant had passed on the incidence of duty and had not disproved it. The Tribunal found that in the factual matrix - where excess and short payments arose from a software anomaly and the Department itself directed payment of short duty - the finding of unjust enrichment was not sustainable. The refund was therefore wrongly rejected on that ground. [Paras 7]

Rejection of refund on the ground of unjust enrichment is incorrect; unjust enrichment not applicable in the circumstances.

Extended period / limitation - Whether the demand was barred by limitation. - HELD THAT: - The Additional Commissioner had earlier dropped the demand on limitation grounds, but the Commissioner(Appeals) revived the demand. The Tribunal examined the chronology and noted that the anomaly was detected during audit; therefore the extended period was rightly invoked and the plea of bar by limitation was not sustainable. The record did not establish that the appellant had knowledge of the irregularity prior to audit so as to attract the limitation defence. [Paras 7]

Demand is not barred by limitation; invocation of extended period is sustainable.

Interest on short paid duty after adjustment - Determination of interest liability in light of the permitted adjustment. - HELD THAT: - While the appellant is liable for interest on the net short paid duty, the correct quantum of interest must be computed after adjustment of the excess duty paid. The Tribunal therefore held that interest liability requires fresh computation post-adjustment and remitted the matter to the original authority for determination. [Paras 7]

Interest payable to be determined after adjustment; matter remanded for quantification of interest.

Penalty unsustainable where adjustment allowed - Sustainability of penalties imposed under the impugned orders. - HELD THAT: - Given the Tribunal's conclusion that the appellant was entitled to adjustment of excess duty and that unjust enrichment did not arise, the imposition of penalties under the impugned orders was found to be untenable. The Tribunal set aside the penalties imposed by the Commissioner(Appeals). [Paras 7]

Penalties imposed by the impugned orders are set aside.

Adjustment of excess duty against short duty - interest on short paid duty after adjustment - Remand for quantification of net duty and interest after allowing adjustment. - HELD THAT: - Although the Tribunal allowed adjustment of excess duty against the short duty, it did not itself compute the net duty or interest. The Tribunal therefore remanded the matter to the original authority to carry out the mathematical adjustment of duties and to determine the correct interest payable in accordance with law, directing that the quantification be done consequentially to the allowed adjustment. [Paras 7]

Matter remanded to the original authority for computation of net duty liability after adjustment and for determination of interest payable.

Final Conclusion: Appeals allowed in part: adjustment of excess duty against short duty directed; refund rejection on unjust enrichment set aside; demand held not barred by limitation; interest liability to be quantified after adjustment; penalties set aside; matter remanded to original authority for quantification of duty and interest.

Admissibility of computer-generated or reconstructed data - evidentiary value under Section 36B of the Central Excise Act - requirement of identification and cross-examination of person who maintained private records - necessity of corroborative evidence to prove clandestine removal - proof of receipt and transportation of controlled raw materials (iron ore) - reliability of stock verification by eye-estimation - retracted confessional statements and need for independent corroboration

Admissibility of computer-generated or reconstructed data - evidentiary value under Section 36B of the Central Excise Act - Reliance on data retrieved from seized laptop/pen drive for establishing clandestine manufacture and removal - HELD THAT: - The Tribunal held that the data retrieved from the seized laptop/pen drive lacked the prerequisite factual foundation for admissibility under the statutory scheme governing computer-produced evidence. Revenue failed to establish that the printouts were produced by a computer during the period it was regularly used by a person having lawful control, or that the information was supplied to the computer in the ordinary course of activity. The person who maintained or entered the tally data was not identified or produced. For these reasons the cloned/reconstructed data carried insufficient evidentiary value and could not form a reliable basis for confirming clandestine manufacture and removals. [Paras 6]

Data retrieved from the laptop/pen drive does not have requisite evidentiary value and cannot be relied upon to sustain the demand.

Requirement of identification and cross-examination of person who maintained private records - necessity of corroborative evidence to prove clandestine removal - Reliance on private/unidentified records and notebooks recovered from residential/guesthouse premises - HELD THAT: - Records seized from the residential/guesthouse premises were held to be of limited probative value because the premises were used by many persons, the handwriting/author of the documents was not identified or produced, and the records were not shown to be official company books maintained under direction of the directors. In absence of identification, production and cross-examination of the person who prepared those private records, and without independent corroboration, the documents could not establish clandestine clearances. [Paras 6]

Documents and private records recovered from the guesthouse/residential premises are not reliable evidence to confirm clandestine removals.

Proof of receipt and transportation of controlled raw materials (iron ore) - necessity of corroborative evidence to prove clandestine removal - Whether the alleged clandestine manufacture is supported by evidence of receipt/transportation or purchase of unaccounted iron ore and other raw materials - HELD THAT: - The Tribunal found no evidence identifying suppliers of the large quantities of iron ore allegedly procured unaccountably, no evidence of transport or interception of consignments, and no permits/fit passes which are required for movement of controlled iron ore. Given the regulated regime for iron ore and absence of any transportation or supplier corroboration, Revenue failed to prove receipt or use of unaccounted raw materials necessary to sustain the clandestine manufacture allegations. [Paras 6]

Allegations of procurement and use of unaccounted iron ore and other raw materials are not supported by evidence and cannot sustain the demand.

Reliability of stock verification by eye-estimation - necessity of corroborative evidence to prove clandestine removal - Validity of demand based on stock-shortage calculations arrived at by eye-estimation - HELD THAT: - Stock verification at the time of search was conducted by eye-estimation and no calculation sheet was on record; moreover the opening stock figures used by Revenue were held to be erroneous. In these circumstances, and in absence of weighing, independent verification or corroborative evidence of clandestine removals, the shortfall calculations could not be treated as conclusive proof of clandestine clearance. [Paras 6]

Shortages asserted on basis of eye-estimation are unreliable and cannot form the basis for confirming duty demand.

Retracted confessional statements and need for independent corroboration - necessity of corroborative evidence to prove clandestine removal - Reliance on statements of the director and employees where such statements were retracted - HELD THAT: - The Tribunal noted that the director and an employee had retracted earlier statements and that the statements were not supported by primary corroborative evidence. Given the retractions and absence of independent corroboration (transporters, purchasers, suppliers, or seizable goods), the statements could not be treated as reliable primary evidence to establish clandestine manufacture or removal. [Paras 6]

Retracted statements of the director and employee are not sufficient, without corroboration, to sustain the demand.

Necessity of corroborative evidence to prove clandestine removal - Sustainability of the demand of duty and penalty in absence of cogent corroborative evidence - HELD THAT: - Weighing all evidentiary infirmities - unreliable reconstructed computer data, unidentified private records, lack of proof of receipt/transport of regulated raw material, eye-estimation stock-taking and retracted statements - the Tribunal held that the allegations remained presumptive and uncorroborated. Revenue had failed to discharge the burden of proving clandestine clearances by strong, positive and corroborative evidence. [Paras 6]

Impugned demand of duty and penalty cannot be maintained and the order is set aside.

Final Conclusion: On the merits the appeals are allowed: the Tribunal found the data and documents relied upon by Revenue to be inadmissible or uncorroborated, stock-taking and raw-material receipt allegations to be unreliable, and retracted statements untrustworthy; accordingly the demand and penalty confirmed by the adjudicating authority were set aside (order allowed).

Classification of goods between Chapter 49 and Chapter 48/4820 - treatment of exempted turnover for SSI exemption - application of judicial precedents / ratio of earlier decisions - remand for re adjudication to apply binding ratios - non imposability of penalty where liability is mired in litigation

Classification of goods between Chapter 49 and Chapter 48/4820 - treatment of exempted turnover for SSI exemption - application of judicial precedents / ratio of earlier decisions - remand for re adjudication to apply binding ratios - Whether the impugned computer stationery/manifold business forms are classifiable under CETA 4901 (exempt) or CETA 4820 (excisable) and whether turnover of such items must be excluded for computing SSI exemption - HELD THAT: - The Tribunal found that the appellant's submissions and the judicial authorities cited (including the Tribunal's decision in Data Processing Forms Pvt. Ltd. and other authorities) support classification of various computer generated stationery items (e.g., LIC intimation letters, share certificates, bus tickets, boarding passes, statutory and pre printed forms) under Chapter 49.11 / 4901 rather than under 4820. Because the classification directly affects the taxable turnover relevant to Notification 8/2003 CX (SSI exemption), the matter was remitted to the original adjudicating authority for fresh consideration. The authority is directed to apply the ratios of the cited decisions to the appellant's specific items and, if those items are held to fall under CETA 4901, to exclude their turnover from taxable turnover for SSI purposes. If, after such exclusion, the taxable turnover falls within the SSI threshold for the relevant period, the existing duty demand will stand extinguished. The Tribunal therefore did not decide the classification on merits itself but ordered re adjudication applying the established precedents.

Impugned order set aside and matter remanded to the original authority to apply cited case law and re adjudge classification and exclusion of turnover for SSI exemption; consequent duty demand to be extinguished if taxable turnover falls within SSI limits.

Non imposability of penalty where liability is mired in litigation - Whether penalty can be imposed in respect of any remnant duty found after re adjudication - HELD THAT: - The Tribunal recorded that the classification and liability issues have been the subject of litigation and therefore, even if a remnant duty liability arises following the directed re adjudication, no penalty shall be imposable. This conclusion follows the Tribunal's exercise of discretion in view of the contested nature of the legal question and ongoing precedent based dispute.

No penalty will be imposable on any remnant duty liability arising after re adjudication.

Final Conclusion: The appeal is allowed by setting aside the impugned order and remanding the matter to the original authority to re adjudge classification of the impugned goods by applying the ratios of the cited authorities and to exclude turnover of items held to be under CETA 4901 for SSI notification purposes; if taxable turnover thereafter falls within SSI limits, the duty demand will be extinguished, and in any event no penalty shall be imposed on any remnant duty liability.

Cenvat credit on Goods Transport Agency service - Place of removal / sale at buyer's premises - Definition of input service and its amendment w.e.f. 01/04/2011 - Admissibility of Cenvat credit on CHA (customs house agent) services - Admissibility of Cenvat credit on insurance services (general health v. marine) - Extended period of limitation and penalty for suppression with intent to evade duty

Cenvat credit on Goods Transport Agency service - Place of removal / sale at buyer's premises - Definition of input service and its amendment w.e.f. 01/04/2011 - Cenvat credit on GTA services for transport from place of removal to buyer's premises is not admissible. - HELD THAT: - The Tribunal applied the ratio of the Supreme Court in Ultra Tech Cement which held that, after the amendment to the definition of input service (w.e.f. 01/04/2011), cenvat credit on GTA services availed for transport from the place of removal to the buyer's premises is not permissible. The Board's earlier circulars (pre-amendment) and subsequent field guidance cannot override the Apex Court's authoritative pronouncement. The factual position showing outward freight included in price and delivery to buyer's premises does not alter the legal effect of the amended definition; accordingly credit claimed on GTA was rightly disallowed. [Paras 6]

Claim for cenvat credit on GTA services disallowed in accordance with Ultra Tech Cement; impugned demand in respect of GTA sustained.

Admissibility of Cenvat credit on CHA (customs house agent) services - Definition of input service - Cenvat credit on CHA services is admissible as these services fall within the definition of input service. - HELD THAT: - The Tribunal found that services rendered by CHA fall within the definition of input service and therefore the appellants are entitled to cenvat credit on CHA services. This conclusion follows the application of the statutory definition to the nature of the CHA services availed by the appellant. [Paras 6]

Credit on CHA services allowed.

Admissibility of Cenvat credit on insurance services (general health v. marine) - Definition of input service and its amendment w.e.f. 01/04/2011 - Cenvat credit on general health insurance is not admissible; marine insurance of goods is not excluded but general health insurance is excluded from definition of input service w.e.f. 01/04/2011. - HELD THAT: - On examining the amendment to the definition of input service effective from 01/04/2011, general health insurance was held to be excluded and therefore credit claimed for such insurance is not allowable. The Tribunal accepted the Commissioner(Appeals)'s conclusion denying credit on insurance services that pertain to general health insurance, while acknowledging that marine insurance of goods is not similarly excluded. [Paras 6]

Credit on insurance services relating to general health denied; marine insurance treatment remains distinct and not disallowed on that ground.

Extended period of limitation and penalty for suppression with intent to evade duty - Demand raised beyond normal period and penalties imposed cannot be sustained for want of proof of willful suppression with intent to evade duty. - HELD THAT: - The Tribunal observed that divergent judicial views existed during the period in dispute on the issues involved, and therefore the element of deliberate suppression with intent to evade duty was not made out. In consequence, invocation of the extended period of limitation and imposition of penalty were held to be unsustainable. The demand for the normal period (with interest) was, however, upheld. [Paras 6]

Demand limited to the normal period upheld; extended period demand and penalties set aside for lack of suppression with intent.

Final Conclusion: The appeal is partly allowed: cenvat credit on GTA services disallowed in accordance with the Supreme Court's decision in Ultra Tech Cement; credit on CHA services allowed; credit on general health insurance denied; demand for the normal period is sustained with interest, but demand beyond the normal period and the penalties are set aside.

Exemption for goods donated for relief and rehabilitation - eligibility for exemption where the final product is exempted - reversal of Cenvat credit on inputs attributed to exempted clearances - discharge of obligation under Rule 6(1) of the Cenvat Credit Rules

Exemption for goods donated for relief and rehabilitation - eligibility for exemption where the final product is exempted - Clinker contained in cement cleared as donation for earthquake relief is eligible for exemption under Notification No. 02/2001-CE. - HELD THAT: - The Tribunal held that where cement is cleared as donation for earthquake relief under Notification No. 02/2001-CE, the clinker contained in that cement must be treated as supplied for the same exempt purpose. Consequently, even if clinker was not separately removed, the exemption available to the final product (cement) extends to the constituent clinker for the periods in question. The Tribunal therefore concluded that the appellant is entitled to exemption under Notification No. 02/2001-CE for the clinker used in cement cleared as donations.

Entitlement to exemption under Notification No. 02/2001-CE in respect of clinker contained in cement cleared for earthquake relief is upheld.

Reversal of Cenvat credit on inputs attributed to exempted clearances - discharge of obligation under Rule 6(1) of the Cenvat Credit Rules - Grant of exemption under Notification No. 16/2001-CE (and continued eligibility under Notification No. 02/2001-CE) is conditional on reversal of Cenvat credit attributed to exempted clearances, in particular credit on fuel, and remand was ordered for verification of such reversal. - HELD THAT: - The Tribunal found that the appellant had availed and retained Cenvat credit on fuel and thereby had not discharged the obligation mandated by Rule 6(1) of the Cenvat Credit Rules. The counsel for the appellant agreed to reverse the credit on fuel. The Tribunal directed that upon reversal of the Cenvat credit attributable to goods cleared under the exemption notifications, the appellant would become eligible for exemption under Notification Nos. 02/2001-CE and 16/2001-CE. The matter was remanded to the Adjudicating Authority to ensure compliance and proper reversal of credit and to give effect to the exemption once the reversal is verified.

Exemption under Notification No. 16/2001-CE (and continued entitlement under Notification No. 02/2001-CE) is made conditional on reversal of Cenvat credit on fuel; the matter is remanded to the Adjudicating Authority to verify and give effect to the reversal and grant exemption.

Final Conclusion: The impugned order is set aside and the appeal is allowed in part: exemption under Notification No. 02/2001-CE is recognised for clinker contained in donated cement, and exemption under Notification No. 16/2001-CE (and continuing entitlement under Notification No. 02/2001-CE) is directed to be given subject to reversal of Cenvat credit on fuel; the matter is remanded to the Adjudicating Authority for verification and compliance.

CENVAT credit - Reverse Charge Mechanism - Export Policy - option between refund and credit - trading activity exclusion from credit

CENVAT credit - Reverse Charge Mechanism - Export Policy - option between refund and credit - Admissibility of CENVAT credit on service tax paid under reverse charge on overriding commission paid to an overseas trading partner used in export of goods. - HELD THAT: - The Tribunal found as a fact that the appellant received services from an overseas trading partner, used those services for export of goods, and paid service tax under the Reverse Charge Mechanism. The appellant did not seek refund under any exemption notification but availed CENVAT credit. Applying the Export Policy and following binding Tribunal and Supreme Court precedents cited by the appellant, the Tribunal held that where services are used in relation to export and the assessee has paid service tax (including under reverse charge), the assessee may either claim refund under the relevant notification or avail credit; denial of credit in such circumstances is not justified. The Tribunal relied on the ratio that an assessee has the option to choose credit over refund and that such choice does not disentitle the assessee to credit when the services relate to export, concluding that the impugned demand for irregular credit was unsustainable.

The impugned order rejecting the appellant's claim of CENVAT credit is set aside and the appellant's appeal is allowed with consequential relief, if any.

Final Conclusion: The Tribunal allowed the appeal, setting aside the order denying CENVAT credit on service tax paid under reverse charge for commission paid to an overseas trading partner used in export, applying the Export Policy and relevant precedents and granting consequential relief.

Penalty for wrongful availing of CENVAT credit under Rule 15(2) of the CCR, 2004 - suppression of facts with intent to evade payment of duty - burden of proof on the Revenue to establish suppression - reversal of CENVAT credit and pre SCN payment of duty and interest - inadmissible CENVAT credit on imports and inputs from 100% EOU

Penalty for wrongful availing of CENVAT credit under Rule 15(2) of the CCR, 2004 - suppression of facts with intent to evade payment of duty - burden of proof on the Revenue to establish suppression - reversal of CENVAT credit and pre SCN payment of duty and interest - Validity of imposition of penalty under Rule 15(2) of the CCR, 2004 for alleged availment of ineligible CENVAT credit and whether suppression with intent to evade duty was established. - HELD THAT: - The Tribunal examined whether the Revenue proved suppression of facts with intent to evade payment of duty, a prerequisite for sustaining the extended penalty contemplated by Rule 15(2). The appellant had reversed the disputed CENVAT credit and paid the duty with interest prior to issuance of the show cause notice; the Department did not produce material demonstrating deliberate concealment or willful misstatement by the appellant. Reliance was placed on the settled principle that mere omission, negligence or incorrect statement does not amount to suppression unless accompanied by deliberate intent to evade duty, and that the burden to prove suppression rests on the Revenue. Applying these principles to the material on record, the Tribunal found the essential ingredient of suppression with intent to evade duty was not established and, on that basis, the imposition of a 50% penalty was not justified.

Penalty imposed under Rule 15(2) CCR, 2004 set aside; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the Revenue failed to prove suppression with intent to evade duty and accordingly set aside the penalty of 50% imposed under Rule 15(2) of the CCR, 2004.

Sanction of refund claims in cash - credit to Cenvat credit account - applicability of Section 142 of the Central Goods and Services Tax Act, 2017

Sanction of refund claims in cash - credit to Cenvat credit account - applicability of Section 142 of the Central Goods and Services Tax Act, 2017 - Whether refund claims arising from unutilised Cenvat credit on exports, which had been partly sanctioned by credit to the Cenvat account, must instead be sanctioned in cash after the introduction of the Central GST Act, 2017. - HELD THAT: - The Tribunal noted that upon enactment of the Central Goods and Services Tax Act, 2017, Section 142 governs the treatment of refund claims and directs that refund claims are to be sanctioned in cash. Given this statutory direction, the Tribunal held that no authority is competent to sanction refund claims by crediting them to the Cenvat credit account. Consequently, the impugned orders which had allowed refund partly by credit to the Cenvat account were modified so that the refunds are to be allowed and sanctioned in cash.

Impugned orders modified to the extent that the refund claims shall be sanctioned in cash instead of being credited to the Cenvat credit account; the appellant is entitled to the refunds in cash.

Final Conclusion: The appeals are allowed; refund claims earlier credited to the Cenvat credit account are to be sanctioned in cash in accordance with Section 142 of the Central GST Act, 2017.

Summary order. Civil appeals dismissed in terms of the signed reportable judgment; pending application(s), if any, disposed of.

Liability of person getting goods manufactured as assessee under Rule 12B - aggregate value of clearances as determinant of exemption - application of Circular dated 30.10.2003 illustrations - job work in textiles and textile articles - legal fiction and its consequences

Liability of person getting goods manufactured as assessee under Rule 12B - aggregate value of clearances as determinant of exemption - application of Circular dated 30.10.2003 illustrations - legal fiction and its consequences - Whether the trader (person getting fabrics manufactured on job work) is liable to pay duty on the entire aggregate clearances when the clearances of one job worker exceed the exemption limit. - HELD THAT: - Rule 12B treats a person who gets specified textile goods produced on his account on job work as an assessee, fixing liability on that person "as if he is an assessee." The Exemption Notification exempts "first clearances for home consumption, upto an aggregate value" and its conditions repeatedly emphasise aggregate value of clearances rather than individual clearances. The Circular dated 30.10.2003 illustrations clarify that where a job worker's total clearances exceed the prescribed limit, the whole of that job worker's clearances become dutiable and the trader's liability arises on the aggregate clearances. The Court rejected the appellant's construction that liability would be limited to the individual job worker's excess clearances or only to that job worker, observing that such a construction would render the emphasis on aggregate clearances in the Notification and the legal fiction created by Rule 12B meaningless. Applying the principle that a statutory fiction must be taken to its logical conclusion, and relying on the second illustration in the Circular, the Court held that once the limit is crossed, liability fastens in respect of the aggregate clearances made by the trader under Rule 12B and the Exemption Notification as amended. [Paras 14, 15, 16, 17, 18]

The trader is liable to duty in respect of the entire aggregate clearances where a job worker's clearances have crossed the exemption limit; the Tribunal's view affirming demand was correct.

Final Conclusion: Appeals dismissed; the Tribunal's orders confirming duty liability on the aggregate clearances (where one job worker exceeded the prescribed limit) are affirmed; no order as to costs.

CENVAT credit reversal under Rule 6(3) of CCR 2004 - manufacture as joint product - exemption notification and non-excisable goods cleared for consideration - retrospective operation of Explanation 1 to Rule 6(1) w.e.f. 01.03.2015

CENVAT credit reversal under Rule 6(3) of CCR 2004 - manufacture as joint product - Whether iron ore fines emerging during manufacture are goods 'manufactured' by the appellant and attract reversal of CENVAT credit under Rule 6(3) of CCR 2004 for the period in question. - HELD THAT: - The Tribunal examined whether the fine particles (iron ore fines) that emerge during the appellant's process of making pig iron amount to a manufactured, excisable product necessitating reversal of common input/input service credit under Rule 6(3) of CCR 2004. Coordinated decisions of the Tribunal in identical matters were considered, which held that such fines emerging incidentally in the process of manufacture are not to be treated as manufactured goods for the purpose of reversing CENVAT credit. Applying those ratios, the Bench concluded that for the period under adjudication the iron ore fines that emerged during the appellant's process were not to be treated as manufactured excisable goods requiring reversal under Rule 6(3). Because the matter was decided on merits, the Court refrained from addressing limitation or penalty questions. [Paras 6, 7]

Iron ore fines emerging during manufacture are not treated as manufactured excisable goods for the period under adjudication; no reversal under Rule 6(3) CCR 2004 is required in respect of those clearances.

Exemption notification and non-excisable goods cleared for consideration - retrospective operation of Explanation 1 to Rule 6(1) w.e.f. 01.03.2015 - Whether the Explanation 1 inserted to Rule 6(1) by notification dated 01.03.2015 has retrospective effect so as to require reversal in respect of non excisable goods cleared for consideration prior to 01.03.2015. - HELD THAT: - The Tribunal accepted the Revenue's contention that Explanation 1 to Rule 6(1) (by notification of 01.03.2015) makes non excisable goods cleared for consideration fall within the rule's scope from the effective date. However, the Bench rejected the submission that the Explanation operates retrospectively in the absence of a clear intention for retrospective application in the notification. Consequently, the Tribunal held that reversal is required from 01.03.2015 onwards but the Explanation cannot be read as having retrospective effect to periods prior to that date. [Paras 6]

Explanation 1 to Rule 6(1) applies from 01.03.2015 and does not have retrospective effect; reversal under the Explanation is required only for clearances on or after that date.

Final Conclusion: The impugned order confirming demand for reversal of CENVAT credit in relation to iron ore fines cleared during September 2011 to March 2015 is set aside and the appeal is allowed; the Explanation to Rule 6(1) notified w.e.f. 01.03.2015 is prospective and will govern reversal only from that date.

CENVAT credit - deemed manufacture - reversal of CENVAT credit - payment of duty on higher value accepted by Department - trading versus manufacture - penalty and interest on credit reversal - precedential binding of tribunal and high court decisions

CENVAT credit - deemed manufacture - reversal of CENVAT credit - payment of duty on higher value accepted by Department - trading versus manufacture - Whether CENVAT credit availed on purchases of finished gases is liable to be reversed where the activity does not amount to manufacture, despite repacking/labeling, when duty on a higher value has been paid and accepted by the Department. - HELD THAT: - The Tribunal found on the material on record that the appellant had paid duty on the value addition and that such higher duty had been accepted by the Department; invoices and other documents placed on record before the Commissioner(Appeals) were held to constitute sufficient proof of payment of higher duty. Applying settled precedent relied upon by the appellant, the Tribunal held that where duty is paid on a higher value (or the assessee has reversed credit by paying duty on clearance as traded goods), the Department cannot thereafter deny CENVAT credit by characterising the activity as non-manufacture and ordering reversal of credit. The Tribunal noted that this legal position is supported by earlier decisions which establish that Modvat/Cenvat credit cannot be denied retrospectively where duty has been levied/paid on the clearances and accepted by the Department. In view of these conclusions, the demand, interest and penalty confirmed by the lower authorities on the ground of absence of manufacture were unsustainable and liable to be set aside. [Paras 6, 7]

The impugned order rejecting the appellant's claim was set aside and the appeal allowed, with consequential relief.

Final Conclusion: Appeal allowed. The Commissioner(Appeals) order dated 05/06/2018 is set aside; CENVAT credit sustained for the period August 2009 to December 2012, with consequential relief, following the finding that duty on higher value was paid and accepted by the Department and therefore credit could not be denied.

Computation of period of limitation - exclusion of day of receipt under Section 12 of the Limitation Act - exclusion of days when office/Court is closed under Section 4 of the Limitation Act - appeal held within limitation after exclusion of holidays and day of receipt - remand for adjudication on merits

Computation of period of limitation - exclusion of days when office/Court is closed under Section 4 of the Limitation Act - exclusion of day of receipt under Section 12 of the Limitation Act - Whether the appeal filed 93 days after receipt of the order is barred by limitation or is within time after excluding weekend holidays and the day of receipt. - HELD THAT: - The Tribunal recorded that the order under challenge was announced on 30th January, 2018, received by the appellant on 25th March, 2018 and the appeal was filed on 25th June, 2018, i.e., 93 days after receipt. Applying Section 4 of the Limitation Act, the two days immediately preceding filing (23rd and 24th June, 2018) fell on Saturday and Sunday when the office was closed and therefore must be excluded. Further, Section 12 mandates exclusion of the day of receipt of the order in computing limitation. Exclusion of these three days reduces the effective period to 90 days, and the appeal thus stands filed on the 90th day from receipt. The Tribunal rejected the Department's contention that the appeal was time-barred and held the contrary decisions relied upon by parties inapplicable to the facts; it also relied on a CESTAT Chennai precedent (Sapna Packaging Industries ) for the proposition that an appeal filed immediately after holidays may be treated as timely where holidays are excluded. Consequently, the Commissioner (Appeals) erred in dismissing the appeal as barred by time. [Paras 3, 5, 6, 7]

The appeal was held to be within limitation after excluding the days when the office was closed and the day of receipt; the impugned order dismissing the appeal as time-barred was set aside and the matter remanded for adjudication on merits.

Final Conclusion: Impugned order dismissed for being time-barred set aside; appeal held within limitation after excluding weekend holidays and the day of receipt; matter remanded to the adjudicating authority for adjudication on merits.

Inclusion of subsidy in assessable value - transaction value - actual payment of sales tax/VAT - deduction under Section 4(3)(d) of the Central Excise Act, 1944 - remission/subsidy schemes and their effect on assessable value

Inclusion of subsidy in assessable value - actual payment of sales tax/VAT - deduction under Section 4(3)(d) of the Central Excise Act, 1944 - Whether subsidy amounts disbursed in the form of VAT Challan Form 37B required to be included in the assessable value of goods for excise purposes - HELD THAT: - The appellants, covered by Rajasthan's Investment Promotion Schemes, initially remit VAT to the State and subsequently receive a portion back as subsidy in the form of VAT 37B challans which may be utilised to discharge VAT liability in subsequent periods. The determinative question is whether such utilisation amounts to VAT 'actually paid' so as to be deductible from transaction value under the statutory concept of transaction value effective from 01/07/2000. The Tribunal examined the nature of the Rajasthan scheme and concluded that the scheme does not exempt payment of VAT but mandates initial payment, followed by sanctioned disbursement as subsidy recorded in Form 37B; such challans operate as a lawful mode of payment for future VAT liabilities. Distinguishing the Apex Court's ruling in Super Synotex to the extent it requires actual payment to the State treasury, the Tribunal followed its earlier treatment in Welspun Corporation Ltd. where remission/subsidy under a statutory scheme was treated as not requiring inclusion in transaction value. Applying that reasoning here, the Tribunal found no justification for treating amounts discharged by utilisation of VAT 37B challans as additions to the assessable value, since those challans represent legally sanctioned, effective payments for VAT liabilities.

Subsidy amounts disbursed and utilised via VAT 37B challans are not required to be included in the assessable value; the impugned orders adding such amounts are set aside.

Final Conclusion: Appeals allowed; impugned orders demanding differential duty by including subsidy amounts (VAT 37B) in assessable value, with consequential interest and penalties, are set aside as such challans represent lawful payment methods and the subsidy amounts need not be included in transaction value.

Time-bar of appeal - deemed date of service by dispatch through RPAD - deemed service under Section 37C(i) of the Central Excise Act, 1944 - condonation of delay beyond the two-month period under Section 35B - precedent in Singh Enterprises on limits of condonation power

Time-bar of appeal - deemed date of service by dispatch through RPAD - deemed service under Section 37C(i) of the Central Excise Act, 1944 - condonation of delay beyond the two-month period under Section 35B - precedent in Singh Enterprises on limits of condonation power - Validity of dismissal of the appeal as time-barred on the ground of service by RPAD and the limits of the Commissioner (Appeals)'s power to condone delay. - HELD THAT: - The Original Authority's order dated 31 December 2015 was dispatched by Registered Post Acknowledgement Due and post-office records show delivery on 13 January 2016. That delivery date is to be treated as the date of service of the order-in-original in view of dispatch by RPAD and the statutory scheme embodied in Section 37C(i) of the Central Excise Act, 1944. The appeal against that order was filed on 19 September 2016, which is beyond the two-month period prescribed and beyond the further condonable period of one month. The Tribunal applied the binding decision of the Hon'ble Supreme Court in Singh Enterprises to hold that the Commissioner (Appeals) has no power to condone delay beyond the one-month extension following the two-month limitation; consequently the appeal was correctly held to be time barred and liable to be dismissed. [Paras 7, 8, 9]

The Commissioner (Appeals)'s order dismissing the appeal as time-barred is upheld.

Final Conclusion: The appeal is rejected; the order-in-original dispatched by RPAD is deemed served on 13 January 2016 and, applying Singh Enterprises, the Commissioner (Appeals) could not condone the delay beyond the prescribed period, rendering the appeal time-barred.

Reopening of assessment - suppression and misrepresentation of facts - stock transfer vs inter State sale - enquiry under Section 6A of the Central Sales Tax Act and Form F declarations - penalty under Rule 12(4)(c) of the Central Sales Tax (Orissa) Rules - reliance on Tax Evasion Case Report (TECR) - inter State adjustment/refund between States (Section 22(1B) of the CST Act)

Reopening of assessment - suppression and misrepresentation of facts - reliance on Tax Evasion Case Report (TECR) - Validity of reopening the audit assessment under Rule 12(4) of the Central Sales Tax (Orissa) Rules in view of TECR alleging projection of inter State sales as stock transfers. - HELD THAT: - The reassessment was upheld because the Vigilance TECR disclosed material indicating suppression and misrepresentation by the appellant, and the Assessing Authority conducted an independent verification of documents rather than blindly relying on the TECR. The Assessing Authority examined sale patties, Sale Order Acceptances, ledger entries and bank receipts, and recorded several telltale circumstances (pre identified buyers in Sale Order Acceptances, manufacture as per purchase orders, direct dispatch from factory to ultimate buyers in same lots/vehicles) which collectively supported a finding of suppression of material facts. Given such findings of misrepresentation, reopening under Rule 12(4) was held permissible; the mere completion of an earlier audit assessment did not bar reassessment when fraud, suppression or misrepresentation is shown.

Reopening of assessment dated 24.01.2011 under Rule 12(4) was valid and the reassessment stands confirmed.

Stock transfer vs inter State sale - enquiry under Section 6A of the Central Sales Tax Act and Form F declarations - Whether the transactions claimed as stock transfers (supported by Form F declarations) were genuine or were inter State sales subject to CST. - HELD THAT: - The Assessing Authority rejected the Form F declarations after conducting an enquiry of the kind contemplated by the Supreme Court in Ashok Leyland II: verification of the particulars in the declarations and related documents. The Sale Order Acceptances indicated pre existing contracts identifying ultimate buyers, specified quantities and rates, and were prepared/approved by head office personnel and communicated to customer and agent. Documentary and ledger evidence showed dispatches matching specific sale orders and immediate resale by the agent to identified buyers. These concurrent circumstances were held to show an integrated inter State sale process rather than bona fide branch transfers; therefore the presumption in favour of stock transfer was rebutted and the Form F declarations were properly rejected.

The stock transfer claim was rejected; the transactions were held to be inter State sales.

Penalty under Rule 12(4)(c) of the Central Sales Tax (Orissa) Rules - Validity of imposition of penalty under Rule 12(4)(c) consequent to reassessment. - HELD THAT: - The reassessment found suppression and deliberate misrepresentation of material facts projecting CST liable sales as stock transfers. Having sustained the finding of suppression and misrepresentation after independent verification of documents, the Tribunal and this Authority held that imposition of penalty under Rule 12(4)(c) was within jurisdiction and justified by the confirmed findings.

Penalty imposed under Rule 12(4)(c) in the reassessment order is sustained.

Inter State adjustment/refund between States (Section 22(1B) of the CST Act) - Apportionment/adjustment of taxes collected in the transferee State and directions for payment between States and net payment by the appellant. - HELD THAT: - Although the State of Maharashtra had collected VAT from the appellant's agent, this Authority concluded that the underlying transactions were inter State sales and directed the State of Maharashtra to return the amount collected (as recorded in the proceedings). Taking into account amounts already deposited by the appellant pursuant to an interim order, the Authority computed the net amount payable by the appellant to the State of Odisha and directed payment accordingly. The appellant's belated plea of reversal of ITC was raised for the first time on appeal and lacked documentary proof, and could not be considered to alter the result.

State of Maharashtra directed to return VAT collected; appellant directed to pay the specified net amount to the State of Odisha in terms of the assessment.

Final Conclusion: The appeal is dismissed. The reassessment dated 24.01.2011 (tax period 01.04.2007 to 30.09.2007) and the Tribunal's confirmation thereof are upheld: Form F declarations and stock transfer claim rejected as transactions were inter State sales; reopening under Rule 12(4) and imposition of penalty sustained. Directions given for refund by the State of Maharashtra to the State of Odisha and for payment by the appellant of the net assessed amount.

Refund of tax paid under protest - retrospective exemption - prohibition on refund in subordinate legislation - Article 265 of the Constitution - binding effect of a later Supreme Court decision

Refund of tax paid under protest - retrospective exemption - prohibition on refund in subordinate legislation - Article 265 of the Constitution - Claim for refund of taxes paid for the period 2000-01 to 2004-05 after a Government notification granting retrospective exemption from the year 2000. - HELD THAT: - The petitioner paid taxes for the years specified under protest and did not challenge the assessment orders. Subsequently the State issued a notification granting retrospective exemption to K&VI units from 2000, whereafter the petitioner sought refund. The petitioner relied on Corporation Bank v. Saraswati Abharansala, where the Supreme Court had held that a subordinate instrument could not bar refunds of tax already paid and that such a prohibition would amount to unjust enrichment of the State. The State relied on a later Supreme Court decision in Yesyem Arecanut Co., which, within a narrowly framed issue, sustained a clause in a retrospective notification that prohibited refund of tax already paid. The High Court found that the later Supreme Court decision is directly on point and governs the matter. In those circumstances the Court declined to accede to the petitioner's contention based on Article 265 and related submissions and did not allow the refund claim.

Claim for refund dismissed on the ground that the later Supreme Court decision upholding a prohibition on refunds in a retrospective notification governs the case.

Binding effect of a later Supreme Court decision - Whether the High Court could follow the earlier Supreme Court reasoning in Saraswati Abharansala instead of the later co ordinate Bench decision in Yesyem Arecanut Co. - HELD THAT: - The Court observed that where there are two Supreme Court decisions by co ordinate Benches on the same subject-matter, the High Court must follow the later decision. Although the petitioner submitted that the later decision was confined to a narrow compass and that earlier reasoning was more comprehensive, the High Court held that it would not depart from the later ruling of the Supreme Court and therefore could not allow the writ petition on the basis of the earlier decision.

High Court bound to follow the later Supreme Court decision and therefore refused to apply the earlier authority in favour of the petitioner.

Final Conclusion: Writ petition dismissed in view of the later Supreme Court decision upholding the prohibition on refunds in a retrospective notification; parties to bear their respective costs.