TaxTMI Updates e-Newsletter
Apr 06,2018

Determination of Lowest Bidder on combined bid - tender conditions govern selection criteria - quote inclusive of all taxes - modification of tender conditions by corrigendum - challenge under Article 226 - delay and laches in invoking writ jurisdiction

Determination of Lowest Bidder on combined bid - tender conditions govern selection criteria - Lowest bidder must be determined in the manner specified in clause 2 of the tender notice (combined consideration of Part A and Part B) and, applying that criterion, the petitioner is not the L 1 bidder. - HELD THAT: - Clause 2 of the Special Note expressly provided that the work would be carried out through one agency for both parts and that L 1 would be decided on the combined lowest cost for Part A + Part B. The court confined its review under Article 226 to whether the selection was made in accordance with the tender conditions. The petition did not challenge clause 2 and could not substitute an alternative criterion for selection. Even accepting the figures relied upon by the petitioner, the combined quoted amount of the fifth respondent is lower than that of the petitioner, and therefore the petitioner cannot be treated as L 1 when clause 2 is applied. [Paras 2, 4, 10, 12, 13]

The selection must follow clause 2's combined bid criterion and on that basis the petitioner is not L 1.

Quote inclusive of all taxes - modification of tender conditions by corrigendum - Corrigendum modifying condition No.38 required tenderers to quote inclusive of all taxes (including GST); the petitioner had signed the corrigendum and thus was bound by that requirement. - HELD THAT: - The corrigendum dated 10th August, 2017 amended condition No.38 to make clear that GST and other state levies not subsumed under GST were applicable but that tenderers must quote inclusive of all taxes and that MCGM would not bear additional tax liabilities. The petitioner does not dispute signing the corrigendum. That modification was material and ought to have been disclosed in the writ petition. Because the tender required inclusive quotes, the court could not rework quoted amounts by applying a different tax rate to alter the comparative ranking of bidders. [Paras 3, 8, 10, 11]

The petitioner was bound by the corrigendum's requirement to quote inclusive of all taxes and cannot seek re calculation of bids on a different tax basis to claim L 1 status.

Delay and laches in invoking writ jurisdiction - challenge under Article 226 - The petition was filed after the petitioner was informed of the Corporation's decision and delay/laches in approaching the court were noted as relevant to the exercise of Article 226 jurisdiction. - HELD THAT: - An email dated 3rd February, 2018 informed the petitioner of the Corporation's decision to award the tender to the fifth respondent. The petition was filed when the petitioner became aware the Standing Committee would consider the award on 9th March, 2018. The court observed that the petition should have disclosed the corrigendum and that the timing of filing (after knowledge of the decision) reflected delay which is a material consideration when exercising writ jurisdiction. The noted delay and failure to disclose material facts weighed against the petitioner. [Paras 8, 14]

Delay and laches were present and are relevant in denying the relief sought under Article 226.

Final Conclusion: Writ petition dismissed for lack of merit: the tenderer ranking must be determined in accordance with the tender conditions (combined bid and quotes inclusive of all taxes as per corrigendum), the petitioner was bound by the amended condition and had not shown entitlement to re calculation; delay/laches in seeking relief were also noted.

Detention and release of goods under Section 129 - Adjudication under Section 129 - Interim release of detained goods on compliance with Rule 140(1) of the Kerala Goods and Services Tax Rules, 2017 - Expeditious completion of adjudication

Adjudication under Section 129 - Expeditious completion of adjudication - Competent authority required to complete the adjudication under Section 129 of the Central Goods and Services Tax Act and the Kerala State Goods and Services Tax Act within a specified short period. - HELD THAT: - The Division Bench decision in W.A.No.1802 of 2017 was applied to the present petition. Having regard to that precedent, the High Court directed that the competent authority shall complete the adjudication contemplated by Section 129 of the statutes within one week from production of a copy of this judgment. The direction is aimed at prompt disposal of the statutory adjudicatory process and is mandatory in character for the authority to act within the stipulated period. [Paras 2]

Adjudication under Section 129 to be completed within one week from production of the judgment.

Detention and release of goods under Section 129 - Interim release of detained goods on compliance with Rule 140(1) of the Kerala Goods and Services Tax Rules, 2017 - Whether detained goods are to be released pending adjudication upon compliance with Rule 140(1) of the Kerala GST Rules, 2017. - HELD THAT: - Following the Division Bench's treatment in W.A.No.1802 of 2017, the Court ordered that if the petitioner complies with the conditions specified in Rule 140(1) of the Kerala Goods and Services Tax Rules, 2017, the goods detained under Section 129 shall be released forthwith pending completion of the adjudication. The release is conditional upon fulfilment of the procedural requirements laid down in Rule 140(1) and does not substitute the statutory adjudication process. [Paras 2]

Detained goods to be released forthwith on petitioner's compliance with Rule 140(1) of the Kerala GST Rules, 2017.

Final Conclusion: Writ petition disposed directing the competent authority to complete adjudication under Section 129 within one week and ordering immediate release of detained goods if the petitioner complies with Rule 140(1) of the Kerala GST Rules, 2017.

Detention and adjudication under Section 129 of the Central and State GST Acts - opportunity of hearing before adjudication - judicial restraint in writ proceedings on disputed adjudicatory facts - acceptance of documents produced after interception

Detention and adjudication under Section 129 of the Central and State GST Acts - opportunity of hearing before adjudication - acceptance of documents produced after interception - Detention of goods under Section 129 and the procedure to be followed for adjudication including hearing and consideration of documents later produced. - HELD THAT: - The High Court declined to adjudicate the correctness of the detention or the contention that documents, though not handed over by the driver at the time of interception but furnished later, were not accepted by the detaining authority. The court observed that such contested factual and adjudicatory issues cannot be decided in writ proceedings under Article 226. Instead, the court directed the detaining authority (first respondent) to complete the statutory adjudication under Section 129 of the Central and Kerala State Goods and Services Tax Acts after affording the petitioner an opportunity of hearing. The adjudication is to include consideration of the petitioner's contentions and any documents produced, and must be completed within one week from the date the authority is served with a copy of this judgment.

Writ petition disposed by directing the first respondent to afford hearing and complete adjudication under Section 129 within one week from production of a copy of the judgment; merits left to the statutory adjudication.

Final Conclusion: The High Court refrained from deciding the merits of the detention and directed the adjudicating authority to decide the matter afresh under Section 129 after hearing the petitioner and considering the documents, to be completed within one week from production of this judgment.

Failure to decide advance ruling application - advance ruling under section 97(1) of the Kerala State Goods and Services Tax Act - direction to decide after affording opportunity of hearing - mandamus to public authority to decide application within fixed time

Failure to decide advance ruling application - advance ruling under section 97(1) of the Kerala State Goods and Services Tax Act - direction to decide after affording opportunity of hearing - Writ petition seeking direction to the Authority for Advance Ruling to decide the petitioner's Ext.P1 application for advance ruling was allowed to the extent of directing the Authority to decide the application after affording an opportunity of hearing within a specified time. - HELD THAT: - The court noted inaction by the first respondent in taking a decision on the petitioner's Ext.P1 application for advance ruling under section 97(1) of the Kerala State Goods and Services Tax Act. Having regard to the facts and submissions, the court exercised its jurisdiction to issue a writ directing the Authority to proceed to decide the pending application. The court required that the petitioner be afforded an opportunity of hearing before such decision is taken and fixed a time limit of two months from receipt of a copy of the judgment for the Authority to pass its decision. No other relief was granted or considered. [Paras 3]

The first respondent is directed to decide the Ext.P1 application for advance ruling after affording the petitioner an opportunity of hearing, within two months from the date of receipt of a copy of this judgment.

Final Conclusion: Writ petition disposed by directing the Authority for Advance Ruling to decide the petitioner's advance ruling application after hearing the petitioner, within two months from receipt of the judgment.

Detention and release of goods pending adjudication under Section 129 - Release of detained goods on compliance with Rule 140(1) of the Kerala Goods and Services Tax Rules, 2017 - Expeditious completion of adjudication proceedings

Detention and release of goods pending adjudication under Section 129 - Release of detained goods on compliance with Rule 140(1) of the Kerala Goods and Services Tax Rules, 2017 - Expeditious completion of adjudication proceedings - Direction to complete adjudication under Section 129 and conditional release of detained goods on compliance with Rule 140(1) of the Kerala GST Rules, 2017. - HELD THAT: - The Court, having regard to the Division Bench decision in W.A.No.1802 of 2017, directed the competent authority to complete the adjudication contemplated under Section 129 of the Central Goods and Services Tax Act and the Kerala State Goods and Services Tax Act within one week from production of a copy of the judgment. The Court further directed that if the petitioner complies with Rule 140(1) of the Kerala Goods and Services Tax Rules, 2017, the goods detained shall be released forthwith. The order implements the principle of expeditious adjudication of detention cases and conditions release of goods on fulfillment of the procedural requirement prescribed by Rule 140(1).

Adjudication under Section 129 to be completed within one week from production of the judgment; detained goods to be released forthwith upon compliance with Rule 140(1) of the Kerala GST Rules, 2017.

Final Conclusion: Writ petition disposed directing expeditious completion of adjudication under Section 129 within one week and conditional release of detained goods on compliance with Rule 140(1) of the Kerala GST Rules, 2017.

Commission or brokerage - scope and inclusive definition - application of Section 194H - obligation to deduct tax at source on commission - principal-agent relationship - characterisation of payment - consequences for failure to deduct - applicability of Section 201

Commission or brokerage - scope and inclusive definition - principal-agent relationship - characterisation of payment - application of Section 194H - obligation to deduct tax at source on commission - Payments made by Prasar Bharati to accredited advertising agencies were in the nature of commission falling within the inclusive definition of commission and thus covered by the obligation to deduct tax at source under Section 194H. - HELD THAT: - The Court examined the agreement between Prasar Bharati and the advertising agencies and held that the parties themselves described and intended the 15% payment as "commission". The Explanation to the provision gives an inclusive and wide meaning to "commission or brokerage", encompassing payments received by a person acting on behalf of another for services rendered. The terms of the agreement showed an agency relationship rather than a principal-to-principal sale: the agencies canvassed advertisements on behalf of Doordarshan, adhered to Doordarshan's prescribed tariff and broadcasting discipline, and the contract expressly used the term "commission" and contained a clause regarding deduction of tax on trade discount. On these undisputed facts the payments fell squarely within the statutory definition and therefore attracted the TDS obligation under Section 194H. [Paras 29, 30, 31, 32]

The payments were rightly characterised as commission and Section 194H applied, obliging deduction of tax at source.

Consequences for failure to deduct - applicability of Section 201 - Non-compliance with the obligation to deduct tax under Section 194H drew consequences under Section 201. - HELD THAT: - Having held that the payments were commission within the scope of the relevant provision and that Prasar Bharati was obliged to deduct tax at source, the Court affirmed that the assessing authority correctly invoked the provisions dealing with failure to deduct or pay tax. The respondent's liability under the consequential provision arises from statutory non-compliance once the TDS obligation is established. [Paras 33, 34]

Invocation of the provisions imposing consequences for failure to deduct was proper once Section 194H was held applicable.

Final Conclusion: The High Court's judgment upholding that the payments to the advertising agencies were commission chargeable to tax deduction at source and that failure to deduct attracted the statutory consequences was affirmed; the appeals are dismissed.

Summary order. Special Leave Petition dismissed; delay condoned.

Summary order. Special leave petitions dismissed; delay condoned; pending applications, if any, disposed of.

Charitable purpose - educational institution - exemption under Section 11 of the Income-tax Act - registration under Section 12A - benefit to a section of the public as public utility - distinction between educational activity and running a coaching class - application of precedent

Charitable purpose - educational institution - exemption under Section 11 of the Income-tax Act - application of precedent - The Tribunal correctly held that the respondent-institute is a charitable educational institution and is eligible for exemption under Section 11 for Assessment Year 2008-09. - HELD THAT: - The Tribunal examined the Memorandum of Association and found that the institute was constituted for development of banking personnel, imparting education, maintaining library facilities, organising lectures, seminars and examinations to promote banking officers. On the facts before the revenue authorities the Tribunal concluded that the activities amount to advancement of learning in the field of banking. The Tribunal applied the decision of this Court in Samudra Institute of Maritime Studies Trust to treat such activity as educational and, relying on the ratio in Ahmedabad Rana Caste Association, held that benefit to a section of the public (here persons connected with banking) can constitute public utility and a charitable purpose within the meaning of the Act. The Court found no substance in the Revenue's contention that the institute is merely a coaching centre, noting that this objection was first raised before the Court and had not been taken previously by the Revenue before the authorities, and that nothing was shown to demonstrate why the precedent would not apply. [Paras 7, 9, 10]

The Tribunal's conclusion that the respondent is a charitable educational institution entitled to exemption under Section 11 is upheld.

Registration under Section 12A - exemption under Section 10(22) and Section 10(23C)(vi) - exemption under Section 11 of the Income-tax Act - Denial or grant of exemption under Sections 10(22) and 10(23C)(vi) does not determine the application of Section 11. - HELD THAT: - The Court observed that grant or refusal of exemption under Sections 10(22) and/or 10(23C)(vi) cannot govern the application of Section 11. The record indicated that appeals in respect of Sections 10(22) and 10(23C)(vi) were not pending, and in any event those matters do not preclude independent consideration under Section 11. Consequently, the Assessing Officer's refusal to consider the assessee's primary contention under Section 11 on the basis of pending or previous considerations under other provisions was not a sustainable basis to deny the Section 11 claim. [Paras 5, 9]

The Court held that prior or concurrent proceedings under Sections 10(22) / 10(23C)(vi) do not preclude entitlement to exemption under Section 11 and cannot, by themselves, justify denial of Section 11 relief.

Final Conclusion: The appeal is dismissed; the Tribunal's order allowing the respondent's claim for exemption under Section 11 for Assessment Year 2008-09 is affirmed.

Reopening of assessment - change of opinion - reasons for reopening and disposal of objections by a speaking order - consideration of material on record

Reopening of assessment - change of opinion - consideration of material on record - Validity of the order rejecting objections to reopening of assessment dated 22.08.2017 for Assessment Year 2012-13 - HELD THAT: - The Assessing Officer had completed scrutiny assessment on 13.03.2015 after considering materials, including the TANGEDCO commissioning certificate stating the wind generators were commissioned on 29.03.2012. The reasons furnished for reopening relied on invoices and an allegation that commissioning occurred after 31.03.2012, but the reopening authority had no fresh material to disbelieve the TANGEDCO certificate already on record and considered during the original assessment. In these circumstances the Court concluded that the attempt to reopen the assessment amounted to a mere change of opinion rather than being founded on new information or a valid formation of satisfaction warranting reassessment. Accordingly the order refusing the objections to reopening could not be sustained.

Impugned order dated 22.08.2017 rejecting objections to reopening set aside.

Final Conclusion: The writ petition is allowed; the order dated 22.08.2017 rejecting objections to reopening of assessment for Assessment Year 2012-13 is set aside and the reassessment proceedings initiated thereunder cannot be sustained.

Final hearing renders stay application infructuous - inherent powers of appellate authority - obligation to decide an appeal on merits without pre-deposit - power under Section 220(6) to stay demand by Assessing Officer - stay of demand - investigation by CBDT into conduct of revenue officers

Final hearing renders stay application infructuous - inherent powers of appellate authority - obligation to decide an appeal on merits without pre-deposit - Validity of CIT(A)'s hearing and disposal of the petitioner's stay application after the appeal had been finally heard on merits. - HELD THAT: - The Court held that an appeal filed under Section 246A is required to be entertained and disposed of on merits without regard to whether the amounts demanded have been paid or deposited. While a CIT(A) possesses inherent appellate powers, including the power to stay the effect of the impugned order in aid of hearing the appeal, that necessity ends once the appellant has been finally heard on the merits. There was no indication in the impugned order why disposal of the appeal would take time or any factual investigation necessary to justify taking up the stay application after conclusion of the hearing; the order shows only a legal dissonance with the case law relied upon. The Court found that the CIT(A)'s taking up of the stay application after the appeal was heard amounted to an impermissible retracing of steps apparently aimed at extracting revenue before the financial year end, and thereby rendered the stay order unsustainable. [Paras 8, 9, 12, 13, 14]

Order dated 23rd March, 2018 passed by the CIT(A) on the petitioner's stay application set aside; Respondent directed not to initiate recovery till the CIT(A) disposes of the appeal and for two weeks thereafter.

Power under Section 220(6) to stay demand by Assessing Officer - stay of demand - investigation by CBDT into conduct of revenue officers - Appropriate administrative action in relation to the petitioner's allegations that revenue officers coerced deposit and threatened enforcement measures. - HELD THAT: - The allegations that the Assessing Officer/CIT[Exemption] threatened attachment of bank accounts, reopening of assessments, and insisted on advance deposit were not denied by affidavit and were treated as serious. The Court noted that the statutory mechanism for staying recovery lies with the Assessing Officer under Section 220(6), and that coercive revenue collection contrary to law would render the statutory alternative remedy ineffective. The Court therefore directed that the Central Board of Direct Taxes (CBDT) inquire into the allegations and, if established, take corrective/coercive administrative measures to ensure officers act fairly and in accordance with law. [Paras 6, 11, 16]

Registry to serve a copy of the order on CBDT; CBDT directed to investigate the allegations and take corrective measures if allegations are found correct.

Final Conclusion: The High Court set aside the CIT(A)'s order dated 23rd March, 2018 on the stay application, restrained recovery until disposal of the appeal and for two weeks thereafter, and directed the CBDT to investigate the petitioner's allegations against revenue officers and take corrective action if warranted.

Reopening assessment - validity of notice under Section 148 - failure to disclose fully and truly all material facts - first proviso to Section 147 - deduction under Section 10B - Form 56G as disclosure evidence - prima facie want of jurisdiction

Reopening assessment - failure to disclose fully and truly all material facts - first proviso to Section 147 - validity of notice under Section 148 - Form 56G as disclosure evidence - deduction under Section 10B - prima facie want of jurisdiction - Validity of the notice dated 31.3.2017 issued under Section 148 to reopen assessment for Assessment Year 2010-11 - HELD THAT: - The impugned notice was issued beyond the four-year period and therefore could be sustained only if the first proviso to Section 147 was satisfied, i.e., there was a failure to truly and fully disclose all material facts. The reasons recorded in support of the notice merely recited the general phrase about failure to disclose without specifying any particular undisclosed fact, and thus do not prima facie meet the requirement of the proviso. The reassessment sought to revisit the allowance of deduction under Section 10B on account of alleged notional foreign exchange gain. However, during the original assessment the assessee had furnished Form 56G certified by a Chartered Accountant and responded to specific queries (including a communication dated 5.10.2012), which recorded the foreign exchange gain and the particulars supporting the Section 10B claim. In view of this prior disclosure and the absence of specific findings of nondisclosure in the reasons recorded, the notice to reopen appears prima facie to be without jurisdiction. [Paras 3, 4, 5]

Impugned notice is prima facie without jurisdiction and interim stay is granted in terms of prayer (d).

Final Conclusion: Rule made returnable; on prima facie consideration the reopening notice under Section 148/147 for AY 2010-11 is without jurisdiction for failure to specify any nondisclosure when the assessee had furnished Form 56G and answered assessment queries; interim stay granted in terms of prayer (d).

Computation of deduction under Section 10-A of the Income Tax Act - computation of export turnover and total turnover for Section 10-A - consistency of exclusions in numerator and denominator of statutory formula - interpretation of undefined term 'total turnover' in context of a prescribed formula

Computation of deduction under Section 10-A of the Income Tax Act - export turnover and total turnover - consistency of exclusions in numerator and denominator - Whether expenses excluded from export turnover must also be excluded from total turnover when computing deduction under Section 10-A. - HELD THAT: - The Court applied the principle that where a statute prescribes a formula and defines one component (export turnover) by excluding certain items, the same exclusions must be given effect when that component forms part of a larger composite (total turnover) used in the denominator. Treating the export turnover and total turnover as if different components could bear inconsistent treatment would defeat the legislative scheme and yield an impermissible result. In reliance on the Court's earlier decision in COMMISSIONER OF INCOME TAX v. TATA ELXSI LTD., the Court held that what is excluded in computing export turnover cannot nonetheless be included in total turnover when export turnover is a constituent of total turnover; the meaning ascribed to export turnover must be respected in the composite total turnover.

Expenses excluded from export turnover are to be excluded correspondingly from total turnover for the purpose of computing deduction under Section 10-A; the Tribunal's order allowing such exclusion is upheld.

Final Conclusion: The Revenue's appeals are dismissed; no substantial question of law arises as the Tribunal correctly followed the binding principle in Tata Elxsi that exclusions from export turnover must be reflected in total turnover when computing the Section 10-A deduction.

Definition of "local authority" under Section 10(20) - statutory functions of urban development as State functions - Clause (3) of the Explanation to Section 10(20) - inclusion of municipal committee and district board type authorities - effect of omission of Section 10(20A) on claims of exemption - Article 243 and State List Item 5 - urban planning and local self-government

Definition of "local authority" under Section 10(20) - Clause (3) of the Explanation to Section 10(20) - inclusion of municipal committee and district board type authorities - statutory functions of urban development as State functions - effect of omission of Section 10(20A) on claims of exemption - Whether the assessee (Urban Improvement Trust) is a 'local authority' within the Explanation to Section 10(20) and therefore entitled to treatment under that provision - HELD THAT: - The Court examined the Explanation to Section 10(20) and concluded that authorities possessing attributes akin to municipal committees or district boards, entrusted by statute with control or management of municipal or local funds and charged with urban development functions, fall within the Explanation. The assessee carries out statutory urban development and improvement functions for the State and its activities fall within the sphere of local self-government and urban planning under Article 243 and Entry 5 of the State List. The Court held that the omission of Section 10(20A) and other legislative changes did not negate the applicability of Clause (3) of the Explanation to Section 10(20) in the assessee's favour. Authorities relied upon by the department concerned commercial or profit oriented statutory corporations and were distinguishable on the facts. Because the core question of the assessee's character as a local authority was decided in favour of the assessee, the Court treated remaining contentions as academic and did not decide them on merits. [Paras 15, 16, 17, 18, 19]

The assessee is a 'local authority' for the purposes of the Explanation to Section 10(20); the departmental appeals are dismissed and the appeals of the assessee are allowed.

Final Conclusion: The High Court held that the Urban Improvement Trust qualifies as a 'local authority' under the Explanation to Section 10(20) and decided the appeals accordingly; other issues were rendered academic and were not adjudicated.

Minimum Alternate Tax under Section 115JB - Penalty under Section 271(1)(c) - Effect of assessment under MAT on levy of penalty for concealment of income - Concealment and tax evasion nexus for imposition of penalty

Minimum Alternate Tax under Section 115JB - Penalty under Section 271(1)(c) - Effect of assessment under MAT on levy of penalty for concealment of income - Liability to penalty under Section 271(1)(c) in respect of disallowances/additions where assessment was made under Section 115JB (MAT). - HELD THAT: - The Court applied the ratio in M/s Vardhman Acrylics Limited and the decision of the Delhi High Court in CIT v. Nalwa Sons Investments Ltd., holding that where tax liability is determined on the basis of book profits under Section 115JB and the income assessed under the normal provisions is not acted upon (because the deemed income under Section 115JB is higher), any concealment or wrong particulars in the regular computation do not affect the tax actually paid. Consequently, such concealment is irrelevant to tax liability when assessment proceeds under MAT, and therefore cannot furnish the requisite causal link to tax evasion for imposing penalty under Section 271(1)(c). The Tribunal's factual finding that the assessee was assessed under Section 115JB (with regular income computed as nil and tax paid on book profits) rendered the additions/disallowances made under the normal provisions immaterial for the purpose of levying penalty. The High Court found no illegality or perversity in the Tribunal's application of that precedent and its conclusion deleting the penalty. [Paras 6, 7, 8]

Penalty under Section 271(1)(c) deleted as the assessment was under Section 115JB and the concealment in regular income had no role in causing tax evasion.

Final Conclusion: Both appeals dismissed; no substantial question of law arises as the penalty under Section 271(1)(c) cannot be levied where assessment and tax determination are on the basis of book profits under Section 115JB.

Deduction under section 80IC - Disallowance of manufacturing expenses and depreciation - Carry forward of business losses - Admissibility of survey and inspection reports - Right to be confronted with adverse evidence and opportunity of hearing - Remand to Assessing Officer for fresh decision - Principle of res judicata not applicable to income-tax proceedings

Deduction under section 80IC - Principle of res judicata not applicable to income-tax proceedings - Whether the assessee was eligible for deduction under section 80IC for the assessment years under appeal and whether the matter requires fresh adjudication by the Assessing Officer in light of earlier Tribunal orders. - HELD THAT: - The Tribunal observed that the assessee had been allowed deduction under section 80IC for earlier assessment years by the Commissioner (Appeals) and that the Department's appeals against those orders were dismissed by the Tribunal on 26th July, 2016. The Assessing Officer relied on a survey conducted prior to the years under appeal and subsequent inspection reports which found the factory not in operation; however, the Tribunal found those facts and reports required reconsideration at the Assessing Officer's level for the years in issue. The Tribunal noted that res judicata does not operate in income-tax proceedings to the exclusion of fresh inquiry, but the prior favourable findings and dismissal of Departmental appeals weighed in favour of re-examination rather than summary confirmation of disallowance. For these reasons the Tribunal set aside the orders below and remitted the question of eligibility for section 80IC to the Assessing Officer for fresh decision in accordance with law and the earlier Tribunal direction. [Paras 7]

Issue remitted to the Assessing Officer for fresh adjudication of eligibility for deduction under section 80IC in accordance with law and the Tribunal's earlier order dated 26th July, 2016, after giving the assessee a reasonable opportunity of being heard.

Disallowance of manufacturing expenses and depreciation - Admissibility of survey and inspection reports - Right to be confronted with adverse evidence and opportunity of hearing - Whether the disallowance of manufacturing expenses and depreciation should be confirmed or reopened by the Assessing Officer in view of contested inspection reports and prior findings. - HELD THAT: - The Assessing Officer disallowed manufacturing expenses and depreciation on the basis that the factory was not in operation and plant and machinery were not in working condition, citing survey and inspection reports. The assessee contended those reports related to periods not strictly corresponding to the assessment years and that the reports were not confronted to the assessee for rebuttal. The Tribunal accepted that the admissibility and weight of such reports, and whether the assessee was given proper opportunity to meet them, required fresh consideration. Accordingly, the Tribunal set aside the confirmations and directed the Assessing Officer to re-decide these additions after affording the assessee sufficient opportunity to be heard and to test or rebut the adverse material. [Paras 3, 7]

Disallowances of manufacturing expenses and depreciation set aside and remitted to the Assessing Officer for fresh decision with opportunity to the assessee to meet adverse reports.

Carry forward of business losses - Remand to Assessing Officer for fresh decision - Whether the claim for carry forward of business losses should be sustained as allowed by the Commissioner (Appeals) and whether it requires fresh computation or reconsideration by the Assessing Officer. - HELD THAT: - The Commissioner (Appeals) had directed allowance of carry forward of business losses in the relevant and an earlier assessment year; no departmental appeal was pending against those specific directions. The Tribunal noted that the Commissioner (Appeals) in the impugned year allowed carry forward after computation and that similar allowances were made in other years, which supports the assessee's position that manufacturing/business activity existed. Nevertheless, because the Assessing Officer's findings on eligibility and the underlying factual picture are being reopened, the question of carry forward and its computation is remitted to the Assessing Officer for fresh adjudication in accordance with law. [Paras 4, 7]

Carry forward of business losses to be reconsidered by the Assessing Officer in the course of the remand and computed in accordance with law after fresh decision on eligibility and related facts.

Final Conclusion: The Tribunal set aside the orders of the authorities below and remitted the issues of eligibility for deduction under section 80IC, disallowance of manufacturing expenses and depreciation, and carry forward of business losses to the Assessing Officer for fresh decision in accordance with law (in the light of the Tribunal's earlier order dated 26th July, 2016), directing that the assessee be given reasonable and sufficient opportunity of being heard; both appeals are allowed for statistical purposes.

Nondeduction of tax at source (TDS) - disallowance under section 40(a)(ia) (nondeduction of TDS) - addition to income on conjecture, surmise and suspicion - verifiability of payments from bank records - payments to temporary data entry operators versus professional recipients - allowability of business expenditure wholly and exclusively laid out for business

Nondeduction of tax at source (TDS) - disallowance under section 40(a)(ia) (nondeduction of TDS) - addition to income on conjecture, surmise and suspicion - verifiability of payments from bank records - payments to temporary data entry operators versus professional recipients - allowability of business expenditure wholly and exclusively laid out for business - Whether the addition of Rs. 35,97,470/- on account of professional charges could be sustained on the ground of nondeduction of TDS and alleged cash payments, or whether the addition was correctly deleted by the CIT(A). - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the Assessing Officer's addition was founded on doubts, surmises and conjectures without concrete material. The record of original assessment proceedings showed that the AO had called for bank statements and details of payments capable of attracting TDS and the assessee had supplied those details. The CIT(A) found from the bank records that a portion of the payments (Rs. 10,23,470/-) were made by cheque and that the amounts in question were payments to temporary data entry operators engaged intermittently, not recurring professional retainers. Given the nature of the assessee's I.T./BPO business and the turnover, the tribunal accepted that such expenditure was incurred wholly and exclusively for business and that many payments were below the threshold for TDS; further, the AO did not verify the claim by bringing any evidence to rebut the assessee's explanation or by making efforts to examine the temporary workers. In these circumstances, an addition based merely on suspicion and without independent verification was unsustainable and the CIT(A)'s deletion of the addition was justified. [Paras 3, 6]

Addition of Rs. 35,97,470/- deleted; departmental appeal dismissed.

Final Conclusion: The Tribunal affirmed the CIT(A)'s deletion of the addition made on account of professional charges for A.Y. 2009-2010, holding that the Assessing Officer's disallowance under the nondeduction/TDS premise was based on conjecture and was not supported by the records or independent verification; departmental appeal dismissed.

Allowability of promotional expenditure as business expenditure - interpretation and scope of service agreement - reimbursement at cost plus mark up and Transfer Pricing Officer's acceptance - treatment of capital work in progress written off as revenue expenditure - deductibility under section 37 - remand for fresh adjudication by the Assessing Officer

Allowability of promotional expenditure as business expenditure - interpretation and scope of service agreement - reimbursement at cost plus mark up and Transfer Pricing Officer's acceptance - Deletion of addition disallowing promotional expenditure incurred for participation in Auto Expo 2010. - HELD THAT: - The assessee and its parent executed a service agreement subsequently amended to expressly include participation in exhibitions and trade fairs within the scope of services to be provided. The expenditure for Auto Expo 2010 was incurred pursuant to that agreement, invoiced to and compensated by the parent at cost plus mark up, and the Transfer Pricing Officer accepted the mark up on total operating expenses without adjustment. On these facts the Assessing Officer's disallowance - upheld by the CIT(A) - was unwarranted. The Tribunal therefore deleted the addition and allowed the corresponding grounds of appeal. [Paras 5]

Addition disallowing promotional expenditure deleted; grounds allowed.

Treatment of capital work in progress written off as revenue expenditure - deductibility under section 37 - remand for fresh adjudication by the Assessing Officer - Claim to treat amounts written off from CWIP as revenue expenditure remitted to Assessing Officer for fresh examination. - HELD THAT: - The assessee wrote off amounts classified as CWIP to the profit and loss account after abandoning plans to set up a manufacturing plant and sought allowability under the normal provisions and under section 115JB. The Assessing Officer did not adjudicate the claim and the CIT(A) dismissed it on the ground that the claim did not form part of the return. Relying on the authorities relied upon by the assessee, the Tribunal found that the matter requires adjudication on merits and accordingly remitted the issue to the Assessing Officer for fresh consideration after giving the assessee an opportunity of being heard. [Paras 6]

Issue remitted to the Assessing Officer for fresh examination and decision in accordance with law.

Final Conclusion: The appeal is partly allowed: the disallowance of promotional expenditure relating to Auto Expo 2010 is deleted; the claim relating to CWIP written off as revenue expenditure is remitted to the Assessing Officer for fresh adjudication. Appeal disposed of partly in favour of the assessee for statistical purposes.

Reopening of assessment - reason to believe - bogus accommodation entries - bogus purchases - credibility of information from Sales Tax Department - burden of proof under Indian Evidence Act - extent of disallowance for bogus purchases (100% v. limited disallowance)

Reopening of assessment - reason to believe - credibility of information from Sales Tax Department - Validity of reopening of assessments - HELD THAT: - The Assessing Officer reopened the assessments on receipt of tangible material and information from the Sales Tax Department and DGIT (Investigation) indicating that certain dealers were issuing bogus purchase bills as accommodation entries and that the assessee was a beneficiary of such entries. The Tribunal noted that at the stage of issuance of notice the test is 'reason to believe' based on relevant material and not proof of escapement; reliance on admissions and depositions recorded by the Sales Tax authority regarding issuance of bogus bills furnished cogent incriminating material. Applying the principle in Rajesh Jhaveri Stock Brokers P. Ltd. and authorities cited, the formation of a prima facie belief by the AO on such material justified reopening. The CIT(A) had carefully considered the material and the Tribunal found no infirmity in upholding the reopening. [Paras 7, 8, 9]

Reopening of the assessments for AYs 2010-11 and 2011-12 upheld.

Bogus accommodation entries - bogus purchases - burden of proof under Indian Evidence Act - extent of disallowance for bogus purchases (100% v. limited disallowance) - Validity and quantum of addition for alleged bogus purchases - HELD THAT: - On merits the AO made enquiries, issued summons to alleged suppliers (many returned unserved) and received corroborative information from Sales Tax enquiries that the suppliers issued bogus bills without delivery of goods. The assessee failed to produce parties, confirmations, proof of transportation of goods or satisfactorily rebut the statement of one supplier. In these circumstances the Tribunal held that purchase bills from non-existent or bogus parties cannot be accepted as genuine and reliance on mere books or bank routing is insufficient; the burden to prove genuineness lay on the assessee in view of sections 101 and 106 Indian Evidence Act as applied by the AO. While apex and High Court decisions were referenced for 100% disallowance when purchases are held bogus, the Tribunal applied judicial discretion on the facts and, noting precedents including jurisdictional authorities and the assessee's conduct, concluded that a restricted disallowance would meet the ends of justice. The Tribunal therefore modified the disallowance to 12.5% of the bogus purchases, a concession accepted by the assessee's representative. [Paras 10, 11, 12, 13, 14]

Addition for bogus purchases sustained in principle but reduced and made final at 12.5% of the identified bogus purchases for the years under appeal.

Final Conclusion: Reopening of assessments for AY 2010-11 and 2011-12 upheld; additions for bogus purchases sustained in principle but, on the facts and in exercise of discretion, reduced to 12.5% of the identified bogus purchases; appeals thereby partly allowed.

Provisional release of seized property on undertaking - modification of interim order to dispense bank guarantee - maintainability of writ against interim tribunal order - no expression on merits - direction to adjudicate show cause notice by authority

Maintainability of writ against interim tribunal order - Writ petition founded on challenge to an interim CESTAT order held maintainable. - HELD THAT: - The court observed that the order under challenge was an interim order of the tribunal directing furnishing of a bank guarantee as a condition for provisional release. Given the nature of the relief sought and the consequences asserted by the petitioner, the High Court concluded that a writ petition was maintainable to test the impugned interim direction. [Paras 3]

Writ petition held to be maintainable and permitted to proceed.

Provisional release of seized property on undertaking - modification of interim order to dispense bank guarantee - Seized vessel ordered to be released provisionally to the petitioner upon specific court undertakings, and the tribunal's requirement of furnishing a Rs. 10 crore bank guarantee dispensed with to that limited extent. - HELD THAT: - The petitioner furnished a written affidavit-cum-undertaking accepting that the platform supply vessel will be used only to discharge contractual obligations to ONGC, will not be taken outside Indian jurisdiction, and that the petitioner will abide by any adjudication order subject to legal remedies. Considering these undertakings and the potential prejudice to ONGC operations, the court modified the tribunal's interim condition by allowing provisional release without insisting on the bank guarantee, while expressly accepting the undertakings as court-ordered conditions. The court emphasised the limited and non-precedential nature of this modification. [Paras 6, 7]

Vessel to be released provisionally on the recorded undertakings; bank guarantee need not be furnished for release; order not to be treated as precedent.

Direction to adjudicate show cause notice by authority - no expression on merits - The court did not express any view on the merits and directed the revenue authority to adjudicate the show cause notice by passing a reasoned order after hearing the petitioner. - HELD THAT: - While granting provisional relief on undertaking, the High Court made it clear that it was not expressing any opinion on the merits of the dispute. The respondents were directed to proceed to adjudicate the pending show cause notice in accordance with law and to pass a reasoned order after hearing the petitioner, thereby preserving the adjudicatory process and the parties' legal remedies. [Paras 8, 9]

No opinion on merits; show cause notice to be adjudicated by the authority with a reasoned order on hearing the petitioner.

Final Conclusion: The High Court held the writ maintainable, accepted the petitioner's specific undertakings and ordered provisional release of the seized vessel without insisting on the bank guarantee imposed by the tribunal; the court refrained from expressing any view on merits and directed the authority to adjudicate the show cause notice by a reasoned order.

Substantive provision for levy of interest - Section 30 of the SEZ Act - Rule 12(8) SEZ Rules - Rule 25 SEZ Rules - Rule 34 SEZ Rules - Rule 47(4) SEZ Rules - Section 47 of the Customs Act, 1962 - assessment under the SEZ Act vis-a -vis assessment under the Customs Act

Substantive provision for levy of interest - Section 30 of the SEZ Act - Rule 34 SEZ Rules - Rule 47(4) SEZ Rules - Section 47 of the Customs Act, 1962 - assessment under the SEZ Act vis-a -vis assessment under the Customs Act - Whether interest is payable for the period 13.02.2007 to 23.10.2007 on duty-free goods imported into SEZ and later cleared to DTA on payment of duty assessed under Section 30 of the SEZ Act, 2005. - HELD THAT: - Section 30 of the SEZ Act requires payment of customs duties on removal of goods from SEZ to DTA at the rate in force on the date of removal or payment but contains no provision expressly providing for levy of interest. The settled principle, reiterated from J.K. Synthetics/India Carbon, is that interest on delayed payment can be levied only where the charging statute contains a substantive provision therefor. The Revenue sought to invoke Section 47 of the Customs Act by treating the duty as leviable from the date of import into the SEZ on the ground that the goods were not used for authorized operations. However, Section 47 prescribes payment timelines and interest where a bill of entry assessed under the Customs Act is returned and duty is not paid within the specified period; it is applicable where assessment under the Customs Act is the basis. In the present case the bill of entry for DTA clearance was assessed on 23.10.2007 and the duty was paid within five days thereafter, so no failure to pay within the period envisaged by Section 47 occurred. Neither the SEZ Act nor the SEZ Rules provide a substantive provision to levy interest from the date of initial import into SEZ, and the attempt to treat the duty as due ab initio for the purpose of invoking Section 47 is not supported by the statutory scheme. Accordingly interest for the period 13.02.2007 to 23.10.2007 cannot be levied. [Paras 10, 11, 12]

Interest for the period 13.02.2007 to 23.10.2007 is not payable; the demand and confirmation of interest under Section 47 of the Customs Act are set aside.

Final Conclusion: The appeal is allowed: as there is no substantive provision in the SEZ Act or Rules for charging interest on clearance from SEZ to DTA and the duty assessed on 23.10.2007 was paid within the period prescribed under Section 47, interest for the period 13.02.2007 to 23.10.2007 cannot be levied; the impugned order is set aside with consequential relief as per law.

Destruction of obsolete duty free inputs in bonded warehouse - entitlement under Foreign Trade Policy 2004 2009 para 6.15(b) - refund claim under Section 27 of the Customs Act, 1962 - validity and communication of administrative denial - principles of natural justice in adjudication

Entitlement under Foreign Trade Policy 2004 2009 para 6.15(b) - destruction of obsolete duty free inputs in bonded warehouse - refund claim under Section 27 of the Customs Act, 1962 - Claim for refund of customs duty paid in respect of unutilized imported inputs and entitlement to destroy such inputs under para 6.15(b) of FTP 2004 2009. - HELD THAT: - The Tribunal found that the appellant had fulfilled export obligations and achieved positive Net Foreign Exchange for the relevant period, and that para 6.15(b) of FTP 2004 2009 contemplates destruction of raw materials/spares/waste either after intimation to Customs or with Customs permission. It noted that the original authority did not consider the claim under Section 27 of the Customs Act, 1962 and reached conclusions beyond the scope of the proceedings, while material facts (renewal of Customs licence; goods remaining in bonded warehouse) militated against the demand for duty. In view of these infirmities, the Tribunal did not decide the refund claim on merits but directed that the original authority re examine the refund claim afresh in light of the FTP provision, the appellant's positive NFE, renewal of the customs licence and the bonded status of the goods. [Paras 6]

Refund claim not finally adjudicated; matter remitted to the original authority for fresh consideration of the refund claim under Section 27 and of entitlement under para 6.15(b) of FTP 2004 2009.

Validity and communication of administrative denial - principles of natural justice in adjudication - Whether the communication dated 09/04/2009 from the Range Officer amounted to a communicated, appealable denial of permission and whether adjudication complied with principles of natural justice. - HELD THAT: - The Tribunal observed that the document dated 09/04/2009 was a letter from the Range Officer conveying that the Assistant Commissioner had denied permission; it held that the impugned order's reliance on the appellant's failure to challenge that 'order' was unsustainable because the 09/04/2009 communication was only a letter and not an adjudicatory order. The Tribunal further noted that the original adjudication proceeded without issuing a show cause notice and without affording the appellant an opportunity to contest the basis for denial, thereby implicating principles of natural justice. Consequently the Tribunal directed that the original authority should ensure compliance with natural justice when re deciding the claim and should verify whether any formal order denying permission was ever communicated to the appellant. [Paras 6]

Finding that the 09/04/2009 communication was a letter and that the proceedings suffered from natural justice infirmities; directed verification of communication and compliance with natural justice on remand.

Destruction of obsolete duty free inputs in bonded warehouse - no duty payable while goods remain in bonded warehouse - Whether duty became payable while goods remained in bonded warehouse and whether renewal of Customs licence affected liability. - HELD THAT: - The Tribunal reiterated the settled position that no duty is payable while goods remain in a bonded warehouse and observed that the Customs licence of the appellant had been renewed and the goods continued to be in bonded custody on the date of the application for destruction. On this factual foundation the Tribunal concluded that the question of demand required fresh consideration by the original authority in light of the bonded status and licence renewal instead of being summarily rejected on warehousing period expiry. [Paras 6]

Issue of duty liability deferred to original authority to decide afresh, having regard to renewal of licence and bonded status of goods.

Final Conclusion: The impugned order is set aside and the appeal is remitted to the original authority for fresh adjudication: the original authority is directed to reconsider the refund claim under Section 27 in light of para 6.15(b) of FTP 2004 2009, to verify whether any formal denial was communicated to the appellant, to ensure compliance with the principles of natural justice (including issuance of notice and opportunity to be heard), and to decide the question of duty liability having regard to the renewal of the customs licence and the bonded status of the goods.

Mandatory time limit for decision under Customs Brokers Licensing Regulations - revocation of customs broker's licence for alleged involvement in attempted export of contraband - consequence of non-compliance with Regulation 20(7) of CBLR, 2013

Mandatory time limit for decision under Customs Brokers Licensing Regulations - consequence of non-compliance with Regulation 20(7) of CBLR, 2013 - Whether the adjudicating authority's order revoking the appellant's Customs Brokers Licence can be sustained where the order was passed after the 90-day period specified in Regulation 20(7) following receipt of the enquiry report. - HELD THAT: - Proceedings against the appellant arose from detection of an attempt to export contraband (Red Sanders) and an enquiry report was submitted on 25/01/2017. Regulation 20(7) required the Licensing Authority to decide the matter within 90 days of receipt of the enquiry report. The adjudicating authority passed the revocation order only on 26/09/2017, well beyond the 90-day period. The Tribunal examined consistent authority holding that the time limits prescribed in the Regulations are to be strictly adhered to and that violation renders orders of revocation unsustainable. The licensing authority's stated administrative explanation for delay (transfer of the incumbent Commissioner and assumption of charge by a successor) did not cure the breach of the mandatory time schedule. Applying the settled principle that procedural time limits in the Regulations cannot be diluted, the Tribunal concluded that non-compliance with Regulation 20(7) vitiated the impugned order of revocation.

Impugned order revoking the Customs Brokers Licence, passed after expiry of the 90-day period prescribed by Regulation 20(7) of CBLR, 2013, is set aside and the appeal is allowed.

Final Conclusion: The revocation order dated 26/09/2017 was set aside for failure to comply with the mandatory 90-day decision period under Regulation 20(7) of the Customs Brokers Licensing Regulations, 2013; the appeal is allowed.

Classification by predominant/principal function - customs classification of multimedia speakers - multifunctional goods classification - Interpretative Rules and Section Note 3 to Section XVI - binding precedent of the Supreme Court

Classification by predominant/principal function - customs classification of multimedia speakers - Interpretative Rules and Section Note 3 to Section XVI - Whether the imported 'Multimedia Speakers' are classifiable under CTH 8518 2200 or under CTH 8519 8100 / 8527 9990 - HELD THAT: - The Tribunal applied the principle that classification of multifunctional articles is governed by the principal or predominant function they perform. The goods were found to be speakers with additional features (USB playback and FM radio) but their main role remained amplifying sound; invoices, brochures and dealer affidavits showed the goods are marketed and sold as 'Multimedia Speaker'. The Tribunal relied on the ratio in the assessee's own case as affirmed by the Supreme Court, and on the reasoning in Xerox India Ltd v. Commissioner of Customs that multifunctional machines remain classifiable under the heading corresponding to their predominant function. Applying the Interpretative Rules and Section Note 3 to Section XVI, the Tribunal concluded that the articles are properly classifiable under Chapter Heading 8518 22 00 despite ancillary functionalities, and that the impugned reclassifications under 8519 and 8527 could not be sustained. [Paras 6, 7]

Impugned orders reclassifying the goods under CTH 8519 and 8527 are not sustainable; the goods are classifiable under CTH 8518 2200 and the appeals are allowed.

Final Conclusion: Appeals allowed; impugned orders set aside and classification under CTH 8518 2200 upheld, with consequential reliefs (if any).

Maintainability of winding up petition - self operative consent order reviving petition on default - third party defence based on insurer's payment - subrogation/assignment between creditor and insurer

Maintainability of winding up petition - self operative consent order reviving petition on default - Whether the company petitions were maintainable and properly admitted following default under the self operative consent order. - HELD THAT: - The Court held that the appellant companies had admitted liability by entering into a self operative consent order detailing an installment schedule and expressly providing that failure to pay any installment would automatically revive and admit the company petitions. The petitions were advertised and taken up for final hearing after default. Given the admitted debt and the clear self operative mechanism in the consent order, the Company Court rightly treated the petitions as revived and proceeded to admission and winding up. The appellants did not file a formal application to recall the consent order; their belated assertion of a defence did not negate the admitted liability or the effect of the consent order. [Paras 2, 3, 10, 11]

The petitions were maintainable and properly admitted on account of the company's default under the self operative consent order.

Third party defence based on insurer's payment - subrogation/assignment between creditor and insurer - Whether the appellants, as third party debtors, could defeat the winding up petitions by asserting that the respondent had been paid by its insurer and therefore ceased to be a creditor. - HELD THAT: - The Court rejected the contention that the companies could disown their liability on the basis of an insurance transaction between the respondent and its insurer. Being a stranger to the insurance contract, the companies could not interpose the insurer's receipt as a defence to their own liability; any rights of subrogation or assignment arising between the respondent and insurer would give rise to a separate dispute between them and, if necessary, between insurer and debtor, but did not extinguish the respondent's cause of action against the debtor. The Court relied on established principles that payment by insurer and the question of subrogation/assignment are matters inter se between creditor and insurer and do not absolve the original debtor of liability, and therefore the plea was untenable. The Court further noted prior case law to the same effect and found the appellants' affidavit assertion on this point to be unconvincing. [Paras 4, 5, 12, 16]

The companies cannot defeat the winding up petitions by relying on the respondent's receipt of payment from its insurer; the defence is not available to a third party debtor and does not render the petitions non maintainable.

Final Conclusion: The appeals are dismissed; the winding up orders were correctly made following default under the consent order, and the appellants cannot rely on the respondent's receipt of payment from its insurer to avoid their admitted liability. No costs.

Winding up petition for inability to pay debts - bona fide dispute - company court discretion to refuse winding up - liability for non-supply of C-Forms - full and final settlement by court-ordered payment

Liability for non-supply of C-Forms - consequence of non-supply leading to tax liability - Respondents' obligation to deliver C-Forms and resultant liability for tax assessed on petitioner for non-receipt of C-Forms. - HELD THAT: - The respondents admitted in their reply that they were ready to supply the due C-Forms and did not deny liability to supply them. Despite court directions (including orders dated 3.3.2014 and 13.5.2014) and placement of photocopies, the originals of the C-Forms were not delivered. The petitioner was assessed and fastened with a tax liability for non-filing of C-Forms for the relevant period, and that consequential liability falls on the respondents for their failure to supply the required forms. The court found the respondents' challenge to the asserted tax liability without merit in view of their non-compliance with orders to supply the forms. [Paras 7, 8, 9, 10, 15]

Respondents remain liable for the petitioner's tax liability arising from non-supply of C-Forms and the court directs settlement by release of deposited funds as set out in the order.

Winding up petition for inability to pay debts - bona fide dispute - company court discretion to refuse winding up - Maintainability of winding up petition in respect of claimed outstanding invoices and whether the claimed debt is payable or bona fide disputed. - HELD THAT: - The petition under sections invoking winding up lies only where a debt is due on the face of the record and not genuinely disputed. The respondents did not deny supply of goods but raised contentions as to manufacturing defects, non-delivery of certain items, and disputed rates. The court found these contentions to constitute a bona fide dispute over the claimed sum and observed that the company court is not to conduct a full trial on disputed facts. In the circumstances, there was no basis to conclude that the respondent company was unable to pay the debt, and the winding up petition could not be sustained in respect of the contested amount. [Paras 11, 12, 13, 14, 15]

Winding up petition dismissed insofar as it seeks relief for the disputed debt; the deposited sum is to be released as directed but the petitioner remains free to pursue a civil action for any remaining/unsettled monetary claim.

Final Conclusion: Petition disposed. Winding up petition dismissed insofar as it seeks enforcement of the disputed monetary claim (amount claimed for supplied goods) because a bona fide dispute exists; respondents held liable for the petitioner's tax liability arising from non-supply of C-Forms for the relevant periods and the court directed release of the Rs.1,10,000 deposited in court (with interest) to the petitioner as full and final settlement of the C-Form related dues upon filing of the specified affidavit, leaving the petitioner free to pursue any remaining monetary claims in a civil forum.

Extraordinary jurisdiction under Article 226 - Writ of certiorari to quash adjudication - Alternate and equally efficacious remedy - Waiver by voluntary submission to adjudicating authority - Delay and laches in raising jurisdictional objection - Successor legislation and effect of repeal

Extraordinary jurisdiction under Article 226 - Alternate and equally efficacious remedy - Whether the High Court should entertain a writ of certiorari to quash the show cause notice and adjudication orders despite the availability of an alternate and equally efficacious remedy by way of statutory appeal. - HELD THAT: - The Court held that although certiorari is available in appropriate cases even when an alternate remedy exists, the exercise of writ jurisdiction is discretionary and depends on facts and circumstances. The adjudicatory scheme under the successor legislation provides appellate remedies which the petitioner had at its disposal. Given that the petitioner had not raised the jurisdictional objections at the earliest opportunity and had availed itself of the adjudicatory process and appellate route, the court in the exercise of its prudence declined to entertain the writ petition. The presence of an alternate and efficacious remedy therefore militated against issuing certiorari in the peculiar facts of this case. [Paras 5, 25, 26]

Writ petition dismissed on discretionary grounds; court declines to exercise Article 226 jurisdiction in presence of alternate remedy.

Waiver by voluntary submission to adjudicating authority - Delay and laches in raising jurisdictional objection - Whether the adjudication was vitiated for lack of jurisdiction because prerequisites in the successor legislation were not complied with, and whether that issue could be raised before the High Court at this stage. - HELD THAT: - The Court found that the petitioner had, in the earlier adjudication and on appeal, voluntarily submitted to the jurisdiction of the adjudicating authority and had relied upon merits and available documentary proof before the tribunal. The petitioner did not earlier contest the competence of the authority; instead it sought remand to produce documents and thereafter participated in proceedings on remand. On these facts the objection to jurisdiction was raised belatedly as a tactical device to delay adjudication. Since the challenge involved mixed questions of fact and law and was not raised at the earliest opportunity, the Court was not inclined to entertain a collateral attack by way of writ; the matter was appropriately within the adjudicatory/appellate machinery where the petitioner could have raised and litigated the point earlier. [Paras 6, 23]

Petitioner's challenge to jurisdiction held to be belated and effectively waived; Court refused to quash the adjudication on that ground.

Final Conclusion: The writ petition under Article 226 seeking certiorari to quash the show cause notice and adjudication orders is dismissed on discretionary grounds, without costs, because the petitioner had available statutory appellate remedies and had not timely contested jurisdiction but had voluntarily submitted to the adjudicatory process.

Unjust enrichment - refund of service tax - incidence of tax passed on to customers - retrospective exemption - treatment of tax as expenditure in books of account - Chartered Accountant's certificate as evidence of non recovery

Unjust enrichment - treatment of tax as expenditure in books of account - Chartered Accountant's certificate as evidence of non recovery - incidence of tax passed on to customers - Whether the refund sanctioned to the appellants could be withheld and transferred to the Consumer Welfare Fund on the ground of unjust enrichment where the service tax paid had been shown as expenditure in the assessee's books and the assessee produced a Chartered Accountant's certificate asserting non recovery from customers. - HELD THAT: - The Tribunal held that the refund was correctly transferred to the Consumer Welfare Fund because the service tax, though claimed for refund consequent to a retrospective exemption, was shown by the appellants as an expenditure in their profit and loss account. That treatment implies the amount entered into the cost of services and was therefore recovered from customers. A mere Chartered Accountant's certificate asserting non recovery without reasoning or corroborative accounting entries (such as claims receivable) is inadequate to rebut the inference that the tax formed part of expenditure and thus was passed on. The Tribunal relied on earlier decisions addressing identical contentions and observed that uniformity of price before and after grant of exemption is not of itself decisive, and that where the claimant has treated the refund amount as current expenditure (and not as receivable), unjust enrichment is established. The decision observes that the authorities cited by the appellants did not hold that showing the tax as expenditure could nevertheless permit a finding of non recovery absent other supporting evidence. The impugned order was therefore upheld and the appeals dismissed. Paragraphs recording these findings and conclusions appear in the judgment's dispositive reasoning. [Paras 8, 9]

The transfer of the sanctioned refund to the Consumer Welfare Fund on the ground of unjust enrichment is upheld and the appeals are dismissed.

Final Conclusion: Appeals dismissed; refund, though sanctioned following retrospective exemption, was rightly treated as not payable to the appellants because the service tax was reflected as expenditure in their books and the CA certificate did not sufficiently establish that the incidence of tax was not passed on to customers.

Voluntary Encouragement & Compliance Scheme (VCES) - amnesty scheme - strict interpretation of amnesty schemes - time limit for deposit under the VCES - remedy for non-deposit under Section 110 of the VCES - recovery of declared dues under Section 87

Chartered accountant services liable to service tax - Appellant was engaged in providing chartered accountant services which are liable to payment of service tax. - HELD THAT: - The Tribunal recorded the uncontested factual position that the appellant provides chartered accountant services and therefore such services attract service tax liability. This factual-legal conclusion forms the basis for considering the appellant's application under the VCES and the subsequent proceedings. [Paras 1]

Appellant's services are taxable as chartered accountant services and attract service tax liability.

Time limit for deposit under the VCES - strict interpretation of amnesty schemes - remedy for non-deposit under Section 110 of the VCES - recovery of declared dues under Section 87 - Whether the application under VCES could be rejected for failure to deposit the balance by 31 December 2014 and whether Section 110 applies to the appellant's delayed payments. - HELD THAT: - The Tribunal noted that the VCES requires payment of the balance by 31 December 2014 and that the appellant deposited the balance only after delays of six to nine months. While recognising that amnesty schemes like VCES must be strictly construed and that prior authority (Kerala High Court) held time limits cannot be extended, the Tribunal observed that Section 110 separately contemplates recovery where declared tax is not paid and refers to recovery under Section 87. Section 110 was not considered by the Kerala High Court in the cited decision. Given that Section 110 is a stand-alone provision and does not expressly refer to the specific time-limited consequence in Section 107(4), the Tribunal held that the applicability of Section 110 and the relevance of the Supreme Court decision relied upon by the appellant require fresh examination by the lower authorities. [Paras 5, 6, 7]

Matter is remanded to the lower authorities for independent consideration of the applicability of Section 110 (and consequent recovery under Section 87) and for examination of the cited Supreme Court authority in the context of the appellant's delayed payments; appeal allowed by way of remand.

Final Conclusion: Appeal allowed by way of remand: the matter is sent back to the lower authorities to examine afresh the applicability of Section 110 of the VCES (and recovery under Section 87) to the appellant's delayed deposit and to consider the relevance of the cited Supreme Court decision, with the factual finding that the appellant provides taxable chartered accountant services remaining recorded.

Exemption under Notification No. 9/2009-ST dated 03.03.2009 - exemption for services used in SEZ - refund of service tax - beneficiary of refund limited to developer or unit in SEZ (service receiver) - service provider not entitled to refund unless service provider and service receiver are the same person - strict interpretation of exemption notification

Exemption under Notification No. 9/2009-ST dated 03.03.2009 - refund of service tax - beneficiary of refund limited to developer or unit in SEZ (service receiver) - Whether the service provider is entitled to refund of service tax paid on services consumed in SEZ under Notification No. 9/2009-ST dated 03.03.2009 when the refund claim is filed by the service provider instead of the service receiver. - HELD THAT: - The Notification exempts taxable services specified therein when received by a developer or units of a Special Economic Zone and provides that the exemption shall be provided by way of refund claimed by the developer or units of the SEZ. The notification expressly prescribes that the person liable to pay service tax shall pay service tax and shall not be eligible to claim exemption, except where the developer or unit and the person liable to pay service tax are the same person; only in that exception can the provider claim exemption. The Tribunal held that the notification must be strictly interpreted and, on the facts, the appellant was the service provider and not the service receiver (developer/unit in SEZ), and no exception applied. Therefore the appellant was not entitled to claim refund under the notification. [Paras 6, 7]

Refund claim by the service provider declined; refund under Notification No. 9/2009-ST is available to the developer or unit (service receiver) and not to the service provider unless they are the same person.

Final Conclusion: The impugned order rejecting the refund claim is upheld and the appeal is dismissed.

Section 80 - Penalty under Section 77 - Penalty under Section 78 - reasonable cause - non-collection and non-recovery of service tax

Section 80 - Penalty under Section 77 - Penalty under Section 78 - reasonable cause - benefit of Section 80 - Whether penalties under Sections 77 and 78 are liable to be invoked despite the existence of reasonable cause and the invocation of Section 80 in respect of penalty under Section 76. - HELD THAT: - The Tribunal found on the facts that the appellant was a small contractor, new to service tax procedures, had not charged or collected service tax from the customer and had paid service tax in excess of what was due. The Commissioner(Appeals) had already set aside the penalty under Section 76 by invoking Section 80, thereby recognising the existence of reasonable cause. Applying the same legal principle, and following the decision of the Karnataka High Court in Motor World, the Tribunal held that imposition of penalties under Sections 77 and 78 is not automatic where reasonable cause exists and Section 80 applies. On these facts, the Tribunal concluded that the conditions justifying relief under Section 80 were present and that the penalties under Sections 77 and 78 could be dropped as well.

Penalties under Sections 77 and 78 are dropped by invoking Section 80 in view of reasonable cause; appeal allowed to that extent.

Final Conclusion: The appeal is allowed insofar as the penalties under Sections 77 and 78 are dropped by applying Section 80 on the finding of reasonable cause (appellant being a small contractor, new to service tax, not having collected tax and having paid tax in excess); otherwise the impugned order is left intact.

Refund of CENVAT credit of service tax - requirement of original invoices for refund sanction - validity of consolidated Chartered Accountant certificate - computer-generated invoices and signature requirement - rejection of refund on technical grounds

Refund of CENVAT credit of service tax - requirement of original invoices for refund sanction - validity of consolidated Chartered Accountant certificate - rejection of refund on technical grounds - computer-generated invoices and signature requirement - Whether the Commissioner (Appeals) was justified in setting aside the original authority's grant of refund on the ground that original invoices were not produced and the Chartered Accountant's certificate was inadequate, including whether computer-generated invoices required signatures. - HELD THAT: - The Tribunal found that the Department did not dispute the nature of services rendered by the exporter or the fact of service tax payment, and that the original authority had granted refund after considering the documents produced including a Chartered Accountant's certificate and a consolidated statement of invoices certified by the auditor. The Commissioner (Appeals) set aside that order on technical grounds, holding that originals and individual certifications were not produced. The Tribunal accepted the appellant's submission, supported by precedent, that a consolidated statement of invoices duly certified by a Chartered Accountant satisfies the notification conditions and that computer-generated invoices do not require signatures. Given that the original authority examined the documents and the CA certificate certified that the services covered by the invoices were used for export in the relevant period, the rejection on mere technicalities was held unsustainable in law.

Impugned order setting aside the refund grant is not sustainable; appeal allowed and the Commissioner (Appeals) order is set aside.

Final Conclusion: The appeal is allowed; the Commissioner (Appeals) order setting aside the original refund sanction is set aside and the original authority's grant of refund is restored, the rejection being based on technical grounds which the Tribunal found unsustainable.

Unjust enrichment - captively consumed goods - admissibility of interest on delayed refund - remand for production of evidence to establish incidence of duty - precedential effect of earlier tribunal order / res judicata

Admissibility of interest on delayed refund - precedential effect of earlier tribunal order / res judicata - Interest on delayed refund for the period during which the refund was withheld and transferred to the Consumer Welfare Fund is payable to the appellant. - HELD THAT: - The Tribunal had earlier adjudicated in favour of the appellant by order dated 29.09.2016, holding that interest is admissible after expiry of three months from the date of filing the refund claim. The Revenue argued that the earlier tribunal order was sub-silentio and did not consider relevant facts and therefore was not binding on the present proceeding initiated by way of a demand notice. The Tribunal rejected this contention, noting that the refund was originally sanctioned but transferred to the Consumer Welfare Fund and later reversed on appeal. Having regard to the rule of law prevailing at the relevant time and to the decision of the Gujarat High Court in Purnima Advertising Agency Pvt. Ltd., the Tribunal held that denial of interest on the ground of transfer to the Consumer Welfare Fund cannot prevail where the appellate process ultimately establishes the appellant's entitlement. Consequently the impugned order confirming recovery of the interest was set aside and interest held payable as earlier determined by the Tribunal. [Paras 7]

Appeal allowed; interest on delayed refund held payable to the appellant as previously adjudicated by the Tribunal.

Unjust enrichment - captively consumed goods - remand for production of evidence to establish incidence of duty - Whether the principle of unjust enrichment precluded refund or interest where the appellant ultimately established that the incidence of duty was not passed on to others. - HELD THAT: - The Adjudicating Authority had initially transferred the refund to the Consumer Welfare Fund on the ground that the appellant had not produced evidence that the duty incidence was not passed on. The Commissioner (Appeals) had earlier held that the principle of unjust enrichment did not apply to goods captively consumed, following Solar Pesticides. After the Supreme Court's later pronouncement, the matter was remanded to afford the appellant an opportunity to adduce evidence. On remand the appellant produced Chartered Accountant certificates and balance sheets and the Adjudicating Authority accepted that the duty incidence was borne by the appellant. The Tribunal found that, having established on evidence that the incidence was not passed on, there was no basis to deny interest on delayed refund, and the Revenue's reliance on the earlier transfer to the Consumer Welfare Fund did not negate the entitlement once the evidentiary deficiency had been cured on remand. [Paras 7]

Finding of unjust enrichment set aside as the appellant, on remand, proved that the duty incidence was not passed on; refund and consequential interest therefore sustained.

Final Conclusion: The impugned order confirming recovery of the interest is set aside; appeal allowed and interest on the delayed refund granted to the appellant in accordance with the Tribunal's earlier decision and consequential reliefs to follow as per law.

CENVAT credit on capital goods - Rule 6(4) of CCR - disallowance only if used exclusively for exempted goods or services - refund of reversed CENVAT credit/pre-deposit during investigation - unjust enrichment - consequential relief following appellate tribunal order

CENVAT credit on capital goods - refund of reversed CENVAT credit/pre-deposit during investigation - unjust enrichment - consequential relief following appellate tribunal order - Whether transfer of the sanctioned refund to the Consumer Welfare Fund on the ground of unjust enrichment was sustainable where the assessee had reversed CENVAT credit during investigation and subsequently succeeded before the Tribunal and claimed refund. - HELD THAT: - The appellant had availed CENVAT credit on capital goods, reversed the credit during investigation and, following the Tribunal's order allowing the appellant's earlier appeal, filed for refund of the amount reversed. The original authority sanctioned the refund but directed its transfer to the Consumer Welfare Fund applying the principle of unjust enrichment on the ground that the duty amount had been shown as expenditure. The Tribunal and various precedents relied upon by the appellant establish that amounts deposited or reversed during investigation operate as pre deposits by the assessee and are not amenable to the bar of unjust enrichment when consequential refund is claimed after appellate relief. Applying those consistent decisions to the facts-where the credit reversal was made during investigation and subsequent adjudication in favour of the appellant entitled it to refund-the impugned order directing transfer to the Consumer Welfare Fund on unjust enrichment was unsustainable. The appellate order is therefore set aside and the appellant entitled to consequential relief.

Impugned order directing transfer of the refund to the Consumer Welfare Fund on the ground of unjust enrichment set aside; appeal allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeal and set aside the order transferring the sanctioned refund to the Consumer Welfare Fund, holding that a CENVAT credit reversal made during investigation constitutes a pre deposit and the principle of unjust enrichment does not bar consequential refund where appellate relief has been granted.

CENVAT credit on input services - definition of input service - credit on construction service for setting up factory building - retrospective effect of amendment excluding credit for setting up factory - binding judicial precedent

CENVAT credit on input services - definition of input service - credit on construction service for setting up factory building - Admissibility of CENVAT credit availed on construction services for setting up the factory building during the period March 2010 to September 2011. - HELD THAT: - The Tribunal found that the construction of the factory was completed in June 2009 and that the statutory definition of "input service" during the relevant period expressly included services for setting up, modernization or renovation of a factory used by the manufacturer directly or indirectly in or in relation to manufacture. The amendment excluding credit for setting up a factory came into effect only w.e.f. 01/04/2011 and thus did not apply to credits availed for the earlier period. The Tribunal followed earlier decisions in favour of the assessee, including AryaVaidya Pharmacy (Coimbatore) Ltd., Navaratna S.G. Highway Prop. Pvt. Ltd., and CCE vs. SaiSahmita Storages (P) Ltd., and held that denial of CENVAT credit on the construction service for the factory during the relevant period was not sustainable in law.

The impugned order denying CENVAT credit on construction service for setting up the factory building for the period March 2010 to September 2011 is set aside and the appeal is allowed with consequential relief, if any.

Final Conclusion: The Tribunal allowed the appeal holding that, for the period prior to the amendment effective 01/04/2011, construction services for setting up the factory fell within the definition of input service and CENVAT credit availed thereon cannot be denied; the impugned order is set aside with consequential relief.

CENVAT credit admissibility - courier bill of entry - interpretation of "bill of entry" for Cenvat Credit Rules - documents for availment of CENVAT credit under Rule 9 of the Cenvat Credit Rules - binding tribunal precedent

CENVAT credit admissibility - courier bill of entry - interpretation of "bill of entry" for Cenvat Credit Rules - binding tribunal precedent - Credit availed on courier bill of entry is admissible as a 'bill of entry' for the purpose of CENVAT credit and the disallowance made by the authorities is not sustainable. - HELD THAT: - The Tribunal held that there is no classification in the Cenvat Credit Rules which distinguishes a courier bill of entry from a regular bill of entry for purposes of claiming CENVAT credit. Applying and following earlier Tribunal decisions cited by the appellant, which hold that a courier bill of entry is to be treated as a bill of entry for availment of credit, the impugned denial of credit on the ground that the document was a courier bill of entry was contrary to settled precedent. The Tribunal therefore found the disallowance, interest and equal penalty confirmed by the authorities to be unsustainable and allowed the appeal with consequential relief.

Appeal allowed; impugned order set aside and CENVAT credit taken on courier bill of entry upheld with consequential relief.

Final Conclusion: The Tribunal allowed the appeal, holding that courier bill of entry qualifies as a bill of entry for claiming CENVAT credit under the Cenvat Credit Rules and setting aside the impugned demand, interest and penalty, with consequential relief to the appellant.

Exemption under Notification No. 10/97-C.E. - consumables used in scientific and technical instruments - certificate from research institutions as condition for exemption - application of coordinate-bench precedent

Exemption under Notification No. 10/97-C.E. - consumables used in scientific and technical instruments - certificate from research institutions as condition for exemption - application of coordinate-bench precedent - Entitlement of enzymes cleared to research institutions to exemption under Notification No. 10/97 as consumables and compliance with the notification's conditions. - HELD THAT: - The Tribunal examined the technical descriptions of the enzymes supplied by the appellant and the certificates furnished by the recipient research institutions and found that the enzymes (restriction enzymes, modifying enzymes, polymerases etc.) are used in research procedures and are consumed in the course of use - residues are removed and discarded during purification steps. The certificates issued by the institutions explicitly stated that the enzymes were to be used as consumables for research purposes. On these facts the Tribunal concluded that such enzymes qualify as consumables used in scientific and technical instruments and processes, and that the conditions of Notification No. 10/97 were complied with by the appellant. The Tribunal also relied on the ratio of the coordinate-bench decision in Inductotherm (India) Pvt. Ltd. to support the proposition that goods supplied to specified research institutions under a certificate by competent authorities fall within the scope of the Notification. Applying that reasoning to the present facts, the demand raised by the Revenue was unsustainable. [Paras 5, 6, 7, 8]

Enzymes cleared to research institutions on the strength of certificates are consumables within the scope of Notification No. 10/97 and eligible for exemption; the impugned order setting aside the adjudicating authority's finding is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the enzymes supplied to research institutions on the basis of certificates are consumables eligible for exemption under Notification No. 10/97; the impugned order of the Commissioner (Appeals) is set aside and consequential relief granted.

Reversal of CENVAT credit on removal of used capital goods - payment of duty on transaction value as alternative to reversal - partial reversal of CENVAT credit by prescribed periodic percentage - prevention of abuse of the CENVAT credit scheme

Reversal of CENVAT credit on removal of used capital goods - payment of duty on transaction value as alternative to reversal - partial reversal of CENVAT credit by prescribed periodic percentage - Whether the assessee was required to reverse the entire CENVAT credit when used capital goods, after years of use, were cleared and duty was paid on the transaction value - HELD THAT: - The Tribunal examined the position that capital goods procured and put to use for a substantial period, when subsequently cleared as used goods with duty paid on transaction value, do not attract reversal of the entire credit originally availed. The Larger Bench and High Court decisions surveyed indicate consensus that full reversal is not justified, though courts have differed on the quantum of partial reversal. Having regard to the object of spreading the cost of capital goods over years and to avoid abuse of the CENVAT credit scheme, the Tribunal followed the approach upheld by the Madras High Court in Rogini Mills Ltd., which implements a periodic percentage reversal (2.5% per quarter) rather than complete reversal. The Tribunal therefore found no justification to disturb the Commissioner (Appeals) order which accepted payment on transaction value and did not require total reversal of credit. [Paras 3, 4, 6, 10]

Full reversal of CENVAT credit was not required; the approach of partial reversal as adopted in Rogini Mills (periodic percentage) should be followed, and the Commissioner (Appeals) order is sustained; Revenue's appeal is dismissed.

Final Conclusion: The appeal is dismissed; the Tribunal upholds the view that used capital goods cleared after long use do not attract reversal of the entire CENVAT credit and follows the partial reversal approach reflected in Rogini Mills, thereby sustaining the Commissioner (Appeals) order.

CENVAT credit on endorsed Bills of Entry - allowability of credit where imported goods are cleared by Customs to buyer and directly shifted to manufacturer's factory - application of precedent and consistency with earlier appellate orders

CENVAT credit on endorsed Bills of Entry - shift of imported goods directly to factory - application of precedent and consistency with earlier appellate orders - Credit availed on endorsed Bills of Entry for imported inputs consigned to the buyer but directly shifted to the appellant's factory was allowable. - HELD THAT: - The Tribunal examined whether the appellant could legitimately avail CENVAT credit in respect of imported inputs which were imported under Bills of Entry endorsed to M/S Sanofi Synthelabo (India) Ltd. but were cleared from Customs and directly moved to the appellant's factory for manufacture on a loan licence basis. The Tribunal relied on the appellant's earlier favourable appellate orders and other judicial decisions cited by the appellant, concluding that those precedents squarely covered the present facts. Applying the ratio of those decisions, the Tribunal found no legal infirmity in the appellant having availed credit under the circumstances and held that the Commissioner's demand, interest and penalty could not be sustained.

Impugned order confirmed by the Commissioner is set aside; the appeal is allowed and consequential reliefs granted.

Final Conclusion: The appeal is allowed: the CENVAT credit availed on the endorsed Bills of Entry under the facts of this case is held to be permissible, the Commissioner's demand (including interest and penalty) is set aside and consequential reliefs are granted.

Classification of software as packaged/canned or customized - Excisability of Information Technology Software - Overlap between Central Excise duty and Service Tax (double taxation) - Exemption for customized software under exemption notification - Exemption of value attributable to transfer of right to use (software licence) - Cenvat credit / set-off in respect of excise duty vis-a -vis service tax - Limitation / time-bar of demand

Classification of software as packaged/canned or customized - Excisability of Information Technology Software - Finacle software supplied to banks is packaged/canned software and is exigible to Central Excise duty. - HELD THAT: - The Tribunal examined the nature of Finacle and the activities undertaken by the appellant. While acknowledging that the appellant carries out design, customization, installation and implementation for individual banks, the Tribunal found that Finacle is developed as a platform to meet the needs of a variety of users in the banking sector and is not developed ab initio for each individual customer. Applying the Chapter 85 Supplementary Note and Chapter Note 10 (which treat recorded representations of instructions/data as manufacture for heading 8523), the Tribunal concurred with the adjudicating authority that Finacle, sold in object code form on media with licence keys, falls within the scope of packaged/canned software and is therefore amenable to Central Excise levy under the relevant tariff heading. The Tribunal rejected the submission that these activities convert the product into a bespoke good exempt as customized software. [Paras 18, 20, 21]

Finacle is packaged/canned software and liable to Central Excise duty as a manufactured product under the tariff covering Information Technology Software.

Overlap between Central Excise duty and Service Tax (double taxation) - Cenvat credit / set-off in respect of excise duty vis-a -vis service tax - Effect of Service Tax liability (ITSS) from 16.05.2008 on Excise demand and availability of credit. - HELD THAT: - The Tribunal recognised that several activities performed by the appellant (design, customization, implementation, transfer of right to use) fall within the statutory definition of Information Technology Software Service (ITSS) introduced w.e.f. 16.05.2008 and that the appellant has been assessed and has paid service tax on such services. For the pre-16.05.2008 period the Tribunal held excise duty payable on the value of the packaged software (licence fee). For the period from 16.05.2008 onwards the Tribunal held that while the product remains exigible as packaged software, the excise duty paid (if any) on the software value could be availed as cenvat credit of input services for discharge of service tax on ITSS, thereby addressing the overlap between the two levies. [Paras 19, 22, 23]

Post-16.05.2008 service tax liability does not preclude excisability of the packaged software, but excise paid on the software value can be taken as cenvat credit against service tax on ITSS.

Exemption for customized software under exemption notification - Exemption of value attributable to transfer of right to use (software licence) - Availability of exemption notifications in respect of the value attributable to software licence and applicability of Notification No.6/2006 and successor notifications. - HELD THAT: - The Tribunal held that because Finacle is packaged software it is not eligible for exemption as 'customized software' under Notification No.6/2006. The Tribunal then examined Notification No.22/2009 (which exempted value attributable to transfer of right to use only for specified purposes) and concluded that that notification did not cover the appellant's case because the appellant's licence merely permitted use and did not involve the specified commercial exploitation. However, on consideration of the successor notifications (Notification Nos.17/2010, 14/2011 and 11/2016) which extended exemption for the value attributable to licence unconditionally, the Tribunal held that the benefit of those successor notifications would be available to the appellant and, accordingly, no excise duty would be leviable to the extent covered by those unconditional exemptions. [Paras 21, 24, 25]

Notification No.6/2006 is not available; Notification No.22/2009 is not applicable to the appellant's licence; successor notifications unconditionally exempt the licence value and their benefit is available to the appellant.

Limitation / time-bar of demand - Claim that excise demand is time-barred because the Department knew of service tax payment from 16.05.2008 is rejected. - HELD THAT: - The Tribunal considered the appellant's contention that the Department was aware of the service tax payments and that therefore excise demands should be time-barred. After reviewing the adjudicating authority's analysis, the Tribunal upheld those findings and dismissed the limitation/time-bar plea without acceding to the appellant's argument. [Paras 26]

The plea of time-bar/limitation is rejected.

Requantification of demand and penalties - Requantification of demand and reconsideration of penalties remanded to adjudicating authority. - HELD THAT: - Although the Tribunal reached conclusions on classification, applicability of notifications and the effect of service tax, it did not undertake final quantification of the excise demand or the penalties. The Tribunal therefore modified the impugned orders to the extent of the legal conclusions reached and remanded the matter to the adjudicating authority to requantify the demand in light of those observations and to decide the penalties after giving the appellant an effective hearing. [Paras 27]

Matter remanded to the adjudicating authority for requantification of demand and for fresh decision on penalties after hearing the appellant.

Final Conclusion: The Tribunal held that Finacle is packaged/canned software exigible to Central Excise; exemption for 'customized software' under the 2006 notification does not apply; successor notifications unconditionally exempting value attributable to software licence are available to the appellant; service tax paid from 16.05.2008 does not preclude excisability but excise paid may be availed as cenvat credit against ITSS; the limitation plea was rejected; the matter is remanded to the adjudicating authority for requantification of the demand and fresh consideration of penalties after giving the appellant an opportunity of hearing.

Availability of CENVAT credit - input service - outdoor catering service - exclusion clause - used primarily for personal use or consumption of any employee - legislative intent - definition of input service post amendment w.e.f. 1.4.2011

Outdoor catering service - input service - exclusion clause - used primarily for personal use or consumption of any employee - availability of CENVAT credit - CENVAT credit on "outdoor catering service" post amendment w.e.f. 1.4.2011 - HELD THAT: - The Larger Bench considered the amended definition of 'input service' effective from 1.4.2011 which expressly contains an exclusion clause and specifically excludes services provided in relation to "outdoor catering" when such services are used primarily for the personal use or consumption of any employee. The Bench noted that the exclusion would have been unnecessary unless the service otherwise fell within the main definition of 'input service', and that the legislative intent-ascertained from the Budget Speech and the Joint Secretary (TRU) clarification-was to narrow eligibility and reduce litigation by expressly excluding certain categories. The Bench held that the fact that the employer bears the cost or that the expenditure is booked in manufacturing cost does not negate the statutory exclusion. It further observed that canteen food is by its nature mainly for personal consumption and that interpreting the post-amendment definition to allow credit despite the explicit exclusion would defeat the clear legislative intent. On these grounds the Bench concluded that "outdoor catering service" is not eligible for input service credit after the amendment w.e.f. 1.4.2011. [Paras 7]

CENVAT credit on "outdoor catering service" is not admissible after the amendment effective 1.4.2011.

Final Conclusion: The reference is answered: "outdoor catering service" is not eligible for input service (CENVAT) credit post amendment w.e.f. 1.4.2011; the matter is returned to the regular Bench for disposal of the appeals.

CENVAT credit - recycling/reprocessing of rejected goods - double duty - requirement of verification/investigation before raising demand - accounting of returned/rejected goods in RG-I - penalty under Rule 15(2) of CENVAT Credit Rules, 2004

CENVAT credit - recycling/reprocessing of rejected goods - double duty - Validity of demand for reversal of CENVAT credit on account of alleged scrapping of rejected goods - HELD THAT: - The Tribunal found that the demand was confirmed on assumptions and by averaging past years without any departmental investigation or verification that the returned/rejected goods were in fact scrapped or removed. The appellant, a manufacturer, had discharged duty on clearances made after recycling the rejected goods. Requiring payment of duty again on the allegedly rejected goods would amount to double duty. The Tribunal relied on the ratio in Deepak Extrusion (as cited in the impugned order) that a demand cannot be sustained in the absence of a positive finding that the goods did not earlier suffer duty or were actually scrapped, and that there is no requirement that rejected goods be separately accounted for in RG-I if facts establish they were reused/recycled.

Demand for reversal of CENVAT credit on the ground that rejected goods were scrapped is set aside and the appeal is allowed.

Requirement of verification/investigation before raising demand - accounting of returned/rejected goods in RG-I - penalty under Rule 15(2) of CENVAT Credit Rules, 2004 - Sustainability of penalties and ancillary findings confirmed by lower authorities in absence of verification and contrary to Board instructions and precedent - HELD THAT: - The Tribunal observed that the Commissioner(Appeals) did not consider Board instructions (F. No. 267/44/2009 dated 25/11/2009) nor the precedent relied upon by the appellant, and that the original confirmation was based on conjecture without verification that goods were scrapped or removed. Given that the impugned findings on irregular credit were unsustainable, the concomitant penalties and interest confirmed by the lower authorities could not stand as they flowed from the same unsupported conclusion.

Penalties and interest confirmed insofar as they arose from the demand set aside are not sustained; the impugned order is set aside and the appeal allowed.

Final Conclusion: The Tribunal set aside the impugned order, holding that the demand for reversal of CENVAT credit (and attendant penalties/interest confirmed on that basis) was based on assumptions without verification; since the appellant had discharged duty on clearances effected after recycling the returned goods, requiring duty again would amount to double duty, and the appeal is allowed.

Classification of goods as packing material versus advertising material - Chargeability to excise duty on packaging items - Inclusion of packaging cost in assessable value and entitlement to MODVAT credit

Classification of goods as packing material versus advertising material - Chargeability to excise duty on packaging items - Hanging cards carrying sample blades and razors are packaging material liable to excise duty and not merely advertising/printed material exempt under a different classification. - HELD THAT: - The Tribunal considered competing authorities including Ajanta Print Arts (which treated certain advertising prints as Chapter 49 items) and subsequently relied on the Calcutta High Court decision in CCE, Kolkata-III v. Harbans Lal Malhotra which distinguished Ajanta Print Arts on facts. The High Court found that the hanging cards before it, which carried blades fitted on them, reproduced product particulars and were intended for hanging with the product - characteristics of packing rather than mere advertising material. The Tribunal accepted that factual and legal conclusion: reproduction of product quality on a container or hanging card and its use as part of the product presentation does not convert it into advertising material; its cost is added to the assessable value of the final product and hence it is chargeable to excise as packing material. On that basis the impugned order treating the hanging cards as packing material and sustaining duty was upheld. [Paras 7, 8]

Impugned order sustained; appeal dismissed.

Final Conclusion: The Tribunal upheld the classification of the hanging cards (with sample blades/razors fitted) as packing material liable to excise, following and applying the ratio of the Calcutta High Court, and dismissed the appeal.

Issuance of Form C for inter state purchases - entitlement to concessional rate under Section 8(1) of the Central Sales Tax Act - registered dealer under Section 7(2) of the Central Sales Tax Act - definition of 'goods' including natural gas post amendment - continuance of CST applicability to goods covered by Entry 54 post GST - 'sales tax law' as an inclusive concept embracing State GST enactments - right to refund/adjustment for wrongful refusal to issue Form C

Issuance of Form C for inter state purchases - registered dealer under Section 7(2) of the Central Sales Tax Act - entitlement to concessional rate under Section 8(1) of the Central Sales Tax Act - definition of 'goods' including natural gas post amendment - continuance of CST applicability to goods covered by Entry 54 post GST - 'sales tax law' as an inclusive concept embracing State GST enactments - right to refund/adjustment for wrongful refusal to issue Form C - Respondents must issue Form C for inter state sales of natural gas purchased by the petitioner and used in generation/distribution of electricity even after implementation of the GST enactments. - HELD THAT: - The court held that the petitioner, though not liable to pay tax under the CST Act, is a "registered dealer" within the meaning of Section 7(2) as it is liable to pay tax under the State sales law (now HGST). The amended definition of "goods" in the CST Act expressly includes natural gas and, because no notification under Section 9(2) of the CGST/HGST Acts has been issued in respect of natural gas, inter state sales of natural gas continue to be governed by the CST Act. Section 8(1) entitles a dealer selling to a registered dealer goods specified in the purchaser's registration certificate and used in generation/distribution of power to charge the lower rate subject to the seller receiving a declaration in Form C. The term "sales tax law" in Section 2(i) of the CST Act is inclusive and extends to the HGST Act; hence registration under Section 7(2) remains available to a dealer liable to pay tax under the State law even after the advent of GST. The petitioner satisfied the statutory conditions: natural gas is a covered "good" in its registration certificate used for generation of electricity, the petitioner continues to be a registered dealer (the registration certificate was not amended or cancelled), and therefore the Haryana authorities were obliged to issue Form C which the oil companies could use to obtain the concessional charge. Finally, where the authorities wrongfully refused Form C and excess tax was paid, the petitioner is entitled to refund and/or adjustment and the competent authorities are directed to process such claims within twelve weeks on production of requisite documents. [Paras 22, 23, 24, 27, 28]

Writ allowed; respondents directed to issue Form C for the petitioner's inter state purchases of natural gas used in electricity generation/distribution; entitlement to refund/adjustment for any excess tax paid and direction to process claims within twelve weeks on production of requisite documents.

Final Conclusion: The High Court held that, in the absence of a notification bringing natural gas under State GST, the CST regime continues to apply to natural gas; a purchaser registered under Section 7(2) (including under the State GST law) and using natural gas for generation/distribution of electricity is entitled to Form C and the consequent concessional treatment, and may obtain refund or adjustment where Forms C were wrongly withheld.

Production of books of accounts at appellate stage - reliance on inspection admission versus subsequent accounting - best judgment assessment for suppressed turnover - penalty under Section 16(2) of the Tamil Nadu General Sales Tax Act for willful suppression

Production of books of accounts at appellate stage - best judgment assessment for suppressed turnover - Whether the Tribunal was correct in accepting the books of accounts produced at the time of appeal, though those books were not produced before the Assessing Officer, and in setting aside the best-judgment additions made for alleged suppressed turnover. - HELD THAT: - The High Court reviewed the factual findings of the Appellate Assistant Commissioner and the Tribunal that the purchase entries relating to the imported consignment were reflected in the purchase ledger for the year 2000-01. The appellate authorities examined the ledger entries, import documents and related bank/payment evidence and concluded that the turnover in question was accounted for in the impugned year. As both the Appellate Assistant Commissioner and the Tribunal are final fact-finding authorities, their analysis that the turnover was found in the books and that the best-judgment addition was therefore unjustified was held not to be perverse. The Court noted that the purchase statement relied upon by the assessing authority was prepared after inspection but the appellate findings, based on examination of accounts and supporting records, supported deletion of the additions. Consequently no substantial question of law arose warranting interference with the factual conclusion of the tribunals. [Paras 9, 10]

Appellate and Tribunal findings accepting the books produced at appeal and deleting the best judgment additions were upheld; no interference warranted.

Reliance on inspection admission versus subsequent accounting - penalty under Section 16(2) of the Tamil Nadu General Sales Tax Act for willful suppression - Whether the Tribunal was right in accepting the accounts without remanding the matter to the Assessing Officer for verification, and whether the penalty under Section 16(2) could be sustained. - HELD THAT: - The Court recorded that the inspecting officers had recorded admissions and recovered documents, but the Appellate Assistant Commissioner and the Tribunal independently examined the books, ledger entries and supporting bank/payment records and found the turnover accounted for in 2000-01. On that basis the appellate authorities set aside the levy of penalty under Section 16(2), treating the estimation and penalty as consequent upon the deleted suppression. Given that the appellate authorities performed the requisite factual appraisal and their conclusions were not perverse, the High Court found no merit in the contention that the matter required remand for verification or that the penalty should be sustained. [Paras 9, 10]

No remand required; deletion of penalty under Section 16(2) upheld as appellate fact-findings were sustainable.

Final Conclusion: Tax Case Revision dismissed; the orders of the Appellate Assistant Commissioner and the Tribunal deleting the additions and penalty for the assessment year 2000-01 are confirmed as not vitiated by perversity or substantial question of law.