TaxTMI Updates e-Newsletter
Apr 08,2019

Application for advance ruling withdrawn by the applicant and disposed of as withdrawn by the Authority for Advance Rulings.

Summary order. The application for advance ruling filed by the applicant is disposed of as withdrawn.

Classification in terms of the Harmonized System of Nomenclature - composite machines to be classified according to the heading appropriate to their clearly defined function - Explanatory Note - motors remain classified in 8501 even when equipped with gears or gear boxes - Explanatory Note - heading 8483 does not cover gear boxes combined with a motor - application of section and chapter notes of the Customs Tariff Act for GST classification

Composite machines to be classified according to the heading appropriate to their clearly defined function - Explanatory Note - motors remain classified in 8501 even when equipped with gears or gear boxes - Explanatory Note - heading 8483 does not cover gear boxes combined with a motor - classification in terms of the Harmonized System of Nomenclature - Classification of the combined product 'Geared Motor' manufactured and supplied by the applicant - HELD THAT: - The Authority applied the HSN regime and the section and chapter notes of Section XVI. Note 4 (Section XVI) provides that a combination of components intended to contribute together to a clearly defined function covered by a heading in Chapter 84 or 85 is to be classified in the heading appropriate to that function. The Explanatory Note to heading 8501 states that motors remain classified in 8501 even when equipped with gears or gear boxes. Conversely, the Explanatory Note to heading 8483 expressly excludes gear boxes combined with a motor from that heading. Reading these provisions harmoniously, the geared motor - being an electric motor fitted with a gearbox to provide a speed controlling/torque function as a single machine - falls within the description and inclusion under heading 8501. The contrary view that attachment of a gearbox converts the product into a mechanical device classifiable under 8483 was rejected as inconsistent with the exclusion and inclusion notes and the scheme of HSN adopted for GST classification.

Geared Motors supplied by the applicant are classifiable under Tariff Heading 8501.

Final Conclusion: The Authority ruled that 'Geared Motors' supplied by the applicant are classifiable under HSN heading 8501 and therefore attract the rate applicable to electric motors under that heading.

Reverse charge mechanism - exemption from reverse charge - retrospective operation of amending notification - presumption against retrospective effect for substantive changes

Reverse charge mechanism - exemption from reverse charge - retrospective operation of amending notification - presumption against retrospective effect for substantive changes - Applicability of Notification No.8/2017 read with Notification No.38/2017 to supplies received from unregistered persons during the period 1.7.2017 to 12.10.2017 - HELD THAT: - The Authority examined Section 9(4) (RCM) and the notifications. Notification No.8/2017 (effective 1.7.2017) granted exemption from tax on supplies from unregistered persons subject to a proviso prescribing a Rs.5,000 per day threshold. Notification No.38/2017 (13.10.2017) omitted that proviso and extended the exemption period till 31.3.2018, but did not expressly state retrospective effect. Applying the ordinary rule of construction and the settled principle that a statute or amending instrument affecting substantive rights is presumed prospective unless a contrary intention is clear, the Authority found no indication that the omission operated retrospectively to 1.7.2017. Therefore the RCM under Section 9(4) remained applicable (i.e., exemption subject to threshold did not cease ab initio) for transactions effected from 1.7.2017 until 12.10.2017.

Answered in the negative; RCM under Section 9(4) applies to transactions effected from 1.7.2017 to 12.10.2017.

Withdrawal of questions - Whether recovery proceedings for non-payment of tax for the period 01-07-2017 to 12-10-2017 can be initiated - HELD THAT: - The applicant withdrew this question and the Authority did not decide it on merits. No adjudication or ruling was given on initiation of recovery proceedings under Section 9(4) in respect of the specified period.

Not answered since the question was withdrawn by the applicant.

Withdrawal of questions - Whether interest on delayed payment is applicable where tax liability was kept on hold by subsequent notification till 30-09-2019 - HELD THAT: - The question was withdrawn by the applicant and therefore the Authority did not examine or rule on the applicability of interest in the circumstances described.

Not answered since the question was withdrawn by the applicant.

Withdrawal of questions - Whether Circular dated 2nd May 2018 affects taxation or interest for the transaction dated 31st August 2017 - HELD THAT: - The applicant withdrew this question; the Authority accordingly refrained from adjudicating on the effect of the Circular dated 2nd May 2018 on the specified transaction.

Not answered since the question was withdrawn by the applicant.

Final Conclusion: The Advance Ruling holds that the exemption omitted by Notification No.38/2017 does not operate retrospectively to 1.7.2017; accordingly reverse charge under Section 9(4) applied to transactions effected from 1.7.2017 up to 12.10.2017. Questions on recovery, interest and the effect of the 2 May 2018 circular were withdrawn and left unanswered.

Revision of FORM GST TRAN-1 - extension of time to file revised declaration - power of the Commissioner to extend time under Rule 120A of the CGST Rules, 2017 - electronic credit ledger

Power of the Commissioner to extend time under Rule 120A of the CGST Rules, 2017 - revision of FORM GST TRAN-1 - Authority competent to extend the time for submission of a revised declaration in FORM GST TRAN-1 - HELD THAT: - Rule 120A permits a registered dealer who submitted FORM GST TRAN-1 within the prescribed time to revise that declaration once and submit the revised declaration electronically within the time specified or such further period as may be extended by the Commissioner. The Court held that, in view of Rule 120A, any extension of time for submitting a revised FORM GST TRAN-1 must be granted by the Commissioner and not by a subordinate authority. The reasoning flows from the express provision that the Commissioner may extend the time, thereby making the power to extend time a decision reserved to the Commissioner and incapable of being exercised by subordinate officers.

Extension of time for filing a revised FORM GST TRAN-1 is to be decided by the Commissioner and not by any subordinate authority.

Extension of time to file revised declaration - electronic credit ledger - Disposal of the petitioner's pending application for extension of time to submit a revised FORM GST TRAN-1 - HELD THAT: - The petitioner had submitted FORM GST TRAN-1 within time but, due to an inadvertent error, the eligible CENVAT credit was entered in the wrong column and consequently did not reflect in the electronic credit ledger. The petitioner filed an application before the Nodal Officer seeking onward consideration by the Commissioner. The Court directed that the Commissioner call for the application already submitted before the Nodal Officer and pass appropriate orders in accordance with law. The Court imposed a timeline, requesting that, if possible, the Commissioner decide the application within one month from the production of a certified copy of the order, and made clear that if time is extended by the Commissioner the petitioner shall submit the revised FORM GST TRAN-1.

The petitioner's application before the Nodal Officer is to be called for by the Commissioner and decided expeditiously; if the Commissioner extends time, the petitioner may submit the revised FORM GST TRAN-1.

Final Conclusion: Petition disposed of by directing the Commissioner to consider and decide the petitioner's application for extension of time to submit a revised FORM GST TRAN-1 (so that CENVAT credit may be reflected in the electronic credit ledger), with a request to decide, if possible, within one month of production of a certified copy of this order.

Summary order. Petition disposed by granting petitioner liberty to file a detailed representation within 15 days from receipt of certified copy; on such filing the authority shall afford an opportunity of hearing and decide the representation by passing a speaking order within 15 days of receipt.

Summary order. Application for advance ruling disposed of as withdrawn.

Reimbursement of expenses - pure agent - value of supply - composite supply - principal supply - Rule 33 of CGST Rules (Value of supply in case of pure agent) - Section 15 (transaction value)

Reimbursement of expenses - pure agent - Rule 33 of CGST Rules (Value of supply in case of pure agent) - value of supply - Whether GST is leviable on reimbursements of expenses recovered by the lessor from the lessee at actuals - HELD THAT: - The Authority examined the contract terms and factual matrix and applied Rule 33 and Section 15. Rule 33 permits exclusion of expenditure incurred by a supplier as a pure agent only if all conditions are satisfied, including (i) payment to the third party on authorization of the recipient, (ii) separate indication in the invoice, and (iii) supplies procured as a pure agent being in addition to services supplied on own account. On facts the lessor had the main electric connection, sub meters, DG and RO facilities and provided utilities from its own installations; there was no authorization from the recipient to the lessor to make payments to third parties; and the supplies (electricity from DG/HVAC, RO water) were made by the applicant on its own account and were integral to the theatre operation. Consequently the conditions of Rule 33 were not fulfilled and the reimbursements could not be excluded from the value of supply. The Authority therefore held that the amounts recovered as reimbursements are taxable and form part of the value for levy of GST.

GST is leviable on the reimbursements - the applicant is not a pure agent and the reimbursed amounts cannot be excluded from the value of supply.

Composite supply - principal supply - Section 2(30) composite supply - rate applicable to principal supply - If GST is leviable on such reimbursements, the rate at which GST is payable - HELD THAT: - The Authority analysed whether the utilities formed separate taxable supplies or part of a composite supply with renting of immovable property as the principal supply. Applying the definition of composite supply and the facts in the lease agreement, the Authority found that renting of the theatre is the principal supply and utilities (electricity, water etc.) are ancillary and naturally bundled to enable operation of the theatre. Therefore the reimbursements form part of a composite supply and taxability is determined by the rate applicable to the principal supply. As a consequence, GST on the reimbursed expenses is payable at the rate applicable to the principal supply (renting of immovable property) rather than separate rates for each reimbursed component.

Reimbursed expenses constitute a composite supply with renting as the principal supply; GST is payable at the rate applicable to the principal supply.

Final Conclusion: The Authority rules that reimbursements of expenses recovered by the lessor from the lessee at actuals are taxable; the applicant does not qualify as a pure agent and the reimbursed amounts form part of a composite supply governed by the rate applicable to the principal supply (renting of immovable property).

Clubbing of minor's income - Representative-assessee liability of guardian - Liability of legal representative under Chapter XV - Charging provisions versus machinery provisions - Reassessment proceedings to tax escaped income

Clubbing of minor's income - Representative-assessee liability of guardian - Liability of legal representative under Chapter XV - Charging provisions versus machinery provisions - Whether the income of the minor for the years under consideration was taxable in the hands of the minor or in the hands of the surviving guardian (grandfather) under the scheme of the Act. - HELD THAT: - The Court held that income of a minor has always been within the charge of the Act and that Chapter XV (Sections 159 and 160(1)(ii)) renders the guardian a representative-assessee liable to return and discharge tax on income accruing to the minor. Section 64(1A) is an anti-evasion/machinery provision to club minor's income with a parent where applicable, but its insertion did not create for the first time a charge on minor's income; it did not oust the operation of Chapter XV where parents are not alive. Thus, where parents are deceased the guardian (here the grandfather) is the representative-assessee obliged to account for and pay tax on the minor's income for the period of minority. The Tribunal erred in treating the income as untaxed by concluding that, in absence of parents, the income could neither be clubbed nor assessed in the hands of any guardian; and the Assessing Authority and CIT(A) erred in assessing the income in the hands of the minor instead of the guardian. [Paras 28, 31, 32, 34, 35]

Income of the minor for AY-1995-1996 to 1999-2000 is taxable in the hands of the guardian (grandfather) as representative-assessee under Chapter XV; Section 64(1A) is a machinery/anti-evasion provision and does not displace the guardian's representative liability when parents are deceased.

Reassessment proceedings to tax escaped income - Representative-assessee liability of guardian - Whether reassessment proceedings under Sections 147/148 were justified for certain assessment years. - HELD THAT: - The Court found that the Assessing Authority legitimately invoked reassessment to bring to tax income that had escaped assessment, particularly where the grandfather had filed a NIL return on behalf of the minor and assessment under Section 143(1)(a) had been intimated. Given that the guardian is the representative-assessee liable to account for the minor's income, reopening under Sections 147/148 to assess the escaped income was justified. [Paras 36, 37]

Reassessment proceedings under Sections 147/148 were valid and rightly invoked to assess the minor's escaped income in the guardian's representative capacity.

Final Conclusion: The Tribunal's orders holding the minor's income untaxed were set aside. The income for AY-1995-1996 to 1999-2000 is taxable in the hands of the guardian (grandfather) as representative-assessee and the reassessment proceedings were valid; the appeals by the assessee are dismissed and the Revenue's appeals are allowed, and consequential recovery may proceed for the period when the assessee was a minor.

Genuineness of purchases - appellate fact finding power of the Tribunal - direction to verify supplier's assessment status - remand for fresh adjudication

Genuineness of purchases - direction to verify supplier's assessment status - appellate fact finding power of the Tribunal - Whether the Tribunal erred in quashing the Commissioner (Appeals)'s direction to verify suppliers' filing/status and in not deciding the addition of Rs. 3,38,72,852/- on non genuine purchases on merits. - HELD THAT: - The Assessing Officer made an addition on account of purchases aggregating Rs. 3,38,72,852/- from two suppliers whose enquiry letters were returned unserved. The Commissioner (Appeals) directed verification with the Assessing Officer having jurisdiction over the suppliers' PAN to ascertain whether those suppliers had filed returns disclosing turnover sufficient to support the purchases. The Tribunal set aside that direction. The High Court held that the Tribunal, as the appellate authority and final fact finder, could not ignore material on record indicating that the suppliers had not filed returns; having regard to the record (including orders in which it was brought on record that returns were not filed), the Tribunal erred in quashing the verification direction and in failing to decide the addition on the merits or otherwise properly order fresh adjudication. In consequence, the Tribunal's order was set aside to that extent and the matter remanded to the Tribunal for fresh hearing and decision on merits.

Impugned ITAT order set aside to the extent it quashed the verification direction; matter remitted to the Tribunal for rehearing and decision on merits.

Final Conclusion: The appeal is allowed; the question of law is answered in favour of the Revenue. The impugned Tribunal order is set aside insofar as it quashed the verification direction and the matter is remanded to the Tribunal for fresh adjudication on the merits.

Reopening of assessment - reason to believe - tangible material - change of opinion - reassessment under section 147/148 - assessment completed under section 143(3) - income from house property versus income from other sources

Reopening of assessment - reason to believe - tangible material - change of opinion - assessment completed under section 143(3) - income from house property versus income from other sources - Validity of reopening assessment for AY 2007-08 by issuance of notice under section 148/147 in respect of license fees declared as income from house property - HELD THAT: - The Tribunal examined the reasons recorded for reopening which relied on the licence-fee figure already declared and assessed under the head 'Income from house property' and did not disclose any new tangible material to form a fresh belief that income had escaped assessment. Relying on the settled principle that the jurisdiction to reopen requires a 'reason to believe' predicated on tangible material and that reassessment cannot be a mere change of opinion, the Tribunal found no jurisdictional basis for reopening an assessment already completed under section 143(3). The Tribunal applied the reasoning in the jurisdictional and higher court decisions reproduced in the order - emphasising that where the assessing officer has no fresh material and the reassessment flows only from disagreement with the earlier treatment (here, classification of licence fees), reopening would amount to an impermissible review/change of opinion. Because the reasons recorded do not point to any new information beyond what was available and considered in the original assessment, the reopening was held invalid and the consequent reassessment orders unsustainable. [Paras 9, 10, 11, 12, 13]

Reopening notice and reassessment for AY 2007-08 quashed; appeal allowed on this ground.

Final Conclusion: The Tribunal allowed the appeal by quashing the reopening and reassessment proceedings for assessment year 2007-08 on the ground that no new tangible material or valid 'reason to believe' was recorded and that the action amounted to a change of opinion regarding classification of licence fees.

Deduction under section 80IB(10) for approved housing projects - pro rata deduction for completed units - completion certificate and date of application - unauthorised construction and exclusion from statutory benefit

Deduction under section 80IB(10) for approved housing projects - pro rata deduction for completed units - completion certificate and date of application - Assessee entitled to pro rata deduction under section 80IB(10) for units of the approved housing project completed within the stipulated period despite delayed grant of completion certificate where application for completion was filed within time. - HELD THAT: - The Tribunal accepted the appellate finding that the assessee had obtained commencement approval in 2005 and completed the originally approved portions of the project by 31.03.2011. Documentary evidence established that the application for completion/occupancy certificate was submitted within the stipulated time (application dated 25.03.2011 submitted in PMC office on 30.03.2011). The delay in formal issuance of the completion certificate until 2012 resulted from unauthorised additional construction, not from non-completion of the originally sanctioned units. The Assessing Officer had not specifically verified the end-use of labour/materials referred to by him. Consequently, the Tribunal held that completed sanctioned units satisfy the temporal and approval conditions of section 80IB(10) and the assessee is entitled to claim deduction on a pro rata basis for those units. [Paras 6, 8]

Claim of deduction under section 80IB(10) allowed pro rata in respect of units completed as per approved plan and within the prescribed time where application for completion was filed within time.

Unauthorised construction and exclusion from statutory benefit - deduction under section 80IB(10) for approved housing projects - No deduction under section 80IB(10) is available in respect of additional seven floors constructed without prior approval; profits attributable to those unauthorised floors must be excluded. - HELD THAT: - The Tribunal upheld the appellate finding that seven additional floors in building-B were constructed without prior approval and were regularised only later after payment of compounding fees. Such unauthorised construction falls outside the ambit of the approved housing project as eligible under section 80IB(10). The Tribunal therefore limited the allowance of deduction to the profits attributable to the originally approved and timely completed portions, directing exclusion of profits relating to the additional unauthorised floors. [Paras 6, 8]

Deduction under section 80IB(10) disallowed in respect of the additional seven unauthorised floors; profits on those floors to be excluded from the deduction.

Final Conclusion: Revenue appeals dismissed; CIT(A)'s order upheld insofar as pro rata deduction under section 80IB(10) is allowed for units completed as per approved plan and within time, and denied for additional unauthorised floors which were regularised only subsequently.

Limited scrutiny under CASS - extension of scope of scrutiny / conversion to complete scrutiny - approval of Pr.CIT / CIT required for wider scrutiny - binding nature of CBDT instructions on Assessing Officer - jurisdictional validity of scrutiny assessment

Limited scrutiny under CASS - extension of scope of scrutiny / conversion to complete scrutiny - approval of Pr.CIT / CIT required for wider scrutiny - jurisdictional validity of scrutiny assessment - Whether additions/disallowances on issues beyond those specified in the CASS-limited scrutiny could be sustained where no prior written approval of Pr.CIT/CIT for conversion to complete scrutiny was obtained - HELD THAT: - The Tribunal examined the CBDT instruction that cases selected for limited scrutiny under CASS must be confined to the issue(s) for which they were selected and that any conversion to complete or wider scrutiny requires prior written approval of the Principal Commissioner/CIT. Relying on the Board instruction and on precedents of the Pune Bench, the Tribunal found no record of such written approval in the assessment file and no explanation by the Assessing Officer for omission of that procedural requirement. Where the Assessing Officer extended scrutiny to non-CASS issues without obtaining the required administrative approval, he acted contrary to binding CBDT guidelines and therefore lacked jurisdiction to make additions on such non-CASS issues. Consequently the assessment passed by the AO extending scope beyond the CASS-limited issue without the prescribed approval was held to be void/invalid and quashed; once the jurisdictional defect was established, adjudication on merits of other grounds became academic. [Paras 9, 10, 11]

Assessment proceedings which extended scrutiny beyond the CASS-limited issue without prior written approval of Pr.CIT/CIT are void for want of jurisdiction and the assessment order is quashed.

Final Conclusion: The appeals are allowed: in the absence of prior written approval from the Pr.CIT/CIT for conversion of a CASS-limited scrutiny to wider scrutiny, additions on non-CASS issues cannot be sustained and the assessment order is quashed; other grounds are academic.

Approval under section 80G - Registration under section 12AA - Charitable purpose of an educational society - Requirement of evidence of donations for 80G approval - Reconsideration and remand for fresh decision

Approval under section 80G - Registration under section 12AA - Charitable purpose of an educational society - Requirement of evidence of donations for 80G approval - Impugned rejection of the assessee-society's application for approval under section 80G was set aside and remitted to the Ld. CIT(E) for fresh consideration. - HELD THAT: - The Tribunal noted that the assessee-society had already been granted registration under section 12AA, which recorded that the society's objects are charitable and that it is an educational society. The Ld. CIT(E) rejected the 80G application on the ground that no activities had been carried out and no instance of donations was produced. The Tribunal observed that non-performance of activities, by itself, does not automatically disentitle an entity-already registered under section 12AA as charitable-to consideration for 80G approval. The Tribunal also accepted the submission that the absence of evidence of donations is not a conclusive reason for rejection where approval itself may be a precondition for receiving donations. Consequently, the Tribunal found that the application and the material filed required fresh examination by the Ld. CIT(E). The matter was therefore remitted for re-decision after affording the assessee a reasonable opportunity of being heard and after considering the material on record.

Impugned order rejecting approval under section 80G is set aside and the matter is remitted to the Ld. CIT(E) for fresh consideration after giving the assessee opportunity of hearing.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes, set aside the CIT(E)'s order refusing 80G approval, and directed reconsideration of the application by the CIT(E) in light of the record and observations of the Tribunal, after affording the assessee a reasonable opportunity to be heard.

Disallowance under Section 14A of the Income tax Act and Rule 8D of the Income Tax Rules - computation of book profit for minimum alternate tax under Section 115JB - allowability of expenditures wholly and exclusively for business (Section 37) - reasonableness test and application of Section 40A(2) to related party payments - deduction under Section 80G for donations - statutory deduction under Section 43B and classification of provisions

Disallowance under Section 14A of the Income tax Act and Rule 8D of the Income Tax Rules - Extent and manner of disallowance under Section 14A/Rule 8D in respect of exempt income and the method of recomputation where investments actually yielding exempt income differ from gross investments. - HELD THAT: - The Tribunal held that disallowance under Section 14A read with Rule 8D cannot exceed the exempt income and that proportionate interest disallowance under Rule 8D(2)(ii) is not warranted where sufficient interest free funds are available vis a vis investments giving rise to exempt income; consequently the interest component disallowance was deleted. However, disallowance under Rule 8D(2)(iii) towards administrative/general expenses must be recomputed with reference to investments which have actually yielded exempt income rather than on gross investments; accordingly the matter was remitted to the AO for recomputation. These conclusions were applied to the assessment years before the Tribunal and directed to be given effect. [Paras 3, 18, 25, 32, 33]

Disallowance under Section 14A/Rule 8D restricted in part: delete proportionate interest disallowance where interest free funds suffice; restrict disallowance to the extent of exempt income; remit to AO for recomputation of Rule 8D(2)(iii) with reference to investments actually yielding tax free income.

Computation of book profit for minimum alternate tax under Section 115JB - Whether disallowance under Section 14A/Rule 8D should result in an addition to book profit under Section 115JB. - HELD THAT: - Relying on precedents including the Special Bench in Vireet Investments Ltd., the Tribunal held that adjustments arising from Section 14A disallowance should not be added back in computing book profit under Section 115JB where such disallowance is deleted; the AO was directed to delete the adjustment to book profit made on account of Section 14A disallowance. [Paras 4]

Adjustments to book profit under Section 115JB on account of Section 14A disallowance deleted.

Statutory deduction under Section 43B and classification of provisions - Allowability of provisions for leave encashment and gratuity under Section 43B. - HELD THAT: - The Tribunal observed that the liabilities in question were contended to be non statutory and not within the spirit of Section 43B. Given parallel treatment in coordinate bench authorities and pending relevant Supreme Court consideration in related matters, the Tribunal set aside the grievance to the file of the AO for fresh consideration in parity with the outcome of the main appeal in Exide Industries Ltd.; the matter was not finally adjudicated on merits by the Tribunal and was returned for appropriate order by the AO. [Paras 5]

Ground remitted to the AO for fresh consideration; disposed for statistical purposes.

Delayed employer contribution to provident fund and disallowance - Whether delayed payment of employees' provident fund contributions is allowable expenditure. - HELD THAT: - The Tribunal declined the assessee's plea and held that the question had been decided against the assessee by the Gujarat High Court; accordingly the disallowance of delayed provident fund contribution was affirmed. [Paras 6]

Disallowance on account of delayed employees' provident fund contribution sustained against the assessee.

Treatment of provision for wealth tax in computation of book profit - Whether provision for wealth tax should be added back in computing book profit under the relevant provisions. - HELD THAT: - Following coordinate bench precedent, the Tribunal held that provision for wealth tax is not a 'tax' for the purposes of the relevant explanation to Section 115JA and directed the AO to exclude the provision for wealth tax while computing book profit. [Paras 7]

Provision for wealth tax excluded from book profit computation.

Reasonableness test and application of Section 40A(2) to related party payments - Whether large interest payments to Sun Pharma (an alleged related party) can be disallowed as non business expenditure under Section 40A(2) or on the ground of routing benefits to claim deductions. - HELD THAT: - The Tribunal followed earlier Tribunal and High Court decisions in the assessee's own case and held that neither the absence of interest charged to debtors nor payment of interest to Sun Pharma by itself justifies disallowance. The onus to invoke Section 40A(2) lies on the Revenue; where payments are at reasonable market rates and commercially justified (as found by earlier fora), disallowance cannot be sustained. The Tribunal declined to interfere with the CIT(A)'s deletion of the interest additions across the assessment years considered. [Paras 10, 16, 23]

Disallowance of interest paid to Sun Pharma as non business expenditure/under Section 40A(2) dismissed; CIT(A)'s deletions upheld.

Allowability of expenditures wholly and exclusively for business (Section 37) - Whether discounts/incentives paid to customers of C&F agents (including doctors, dealers, stockists, distributors and retailers) are allowable as business expenditure. - HELD THAT: - Applying the commercial expediency test, the Tribunal held that discounts paid to ultimate customers through C&F agents are integrally connected to the assessee's business and have a direct bearing on turnover; such payments are incurred to further trade and are 'wholly and exclusively' for business. The Tribunal therefore allowed the discounts paid to stockists/distributors/dealers and set aside the CIT(A)'s distinction in excluding doctors; it directed the AO to allow discount payments to all such customers including doctors. [Paras 11, 14, 28]

Discounts paid to customers of C&F agents, including doctors, are allowable business expenditure; disallowances deleted.

Deduction under Section 80G for donations - Whether donation paid by the company is allowable under Section 80G where payment was made on instruction of a director and certain acknowledgements were addressed to him. - HELD THAT: - The Tribunal endorsed the CIT(A)'s finding that the decisive facts were that the assessee company made the payment from its bank account and the donation receipt/tax exemption certificate were in the name of the company; surrounding facts of payment being at the donor's instruction or acknowledgements addressed to an individual are irrelevant. Consequently, the deduction under Section 80G was sustained. [Paras 12]

Donation deduction under Section 80G allowed to the assessee; AO's disallowance reversed.

Final Conclusion: The Tribunal partly allowed the assessee's appeals and dismissed the Revenue's appeals. Core rulings: Section 14A/Rule 8D disallowance is restricted (interest component deleted where own funds suffice; disallowance limited to exempt income; Rule 8D(2)(iii) to be recomputed with reference to investments actually yielding exempt income); book profit adjustments under Section 115JB based on deleted Section 14A additions were ordered deleted; interest payments to Sun Pharma were not disallowed where reasonableness and prior judicial findings in the assessee's favour apply; discounts paid to customers of C&F agents (including doctors) are allowable business expenditure; donation claim under Section 80G upheld; certain Section 43B issues remitted to the AO for fresh consideration.

International transaction - advertisement, marketing and promotion (AMP) expenses - bright line test - arm's length price (ALP) - transfer pricing adjustment - separate entity concept - economic ownership of brand - burden on Revenue to establish existence of international transaction

International transaction - advertisement, marketing and promotion (AMP) expenses - burden on Revenue to establish existence of international transaction - separate entity concept - Whether AMP expenditure incurred unilaterally by the assessee amounts to an international transaction subject to transfer pricing adjustment - HELD THAT: - The Tribunal examined the functions, assets and risks (FAR) of the assessee and found it to be a full fledged manufacturer undertaking local production, distribution and market penetration activities and bearing material market, credit, capacity, manpower, inventory and foreign exchange risks. The agreements did not evidence any arrangement obligating the assessee to incur AMP expenditure on behalf of AEs. Applying the separate entity concept, the Tribunal held that mere expenditure by an Indian entity to promote sales in India does not ipso facto create an international transaction with the foreign AE. The Revenue bears the onus to demonstrate, by tangible material, an arrangement, understanding or action in concert that establishes an international transaction within the meaning of the statute; in the absence of such evidence the AMP spend cannot be characterised as an international transaction subject to Chapter X. [Paras 6]

AMP expenditure incurred unilaterally by the assessee in the facts of this case does not constitute an international transaction; Revenue failed to discharge the burden to show an arrangement or concerted action with the AEs, and the invocation of transfer pricing provisions in respect of AMP is not sustainable.

Bright line test - arm's length price (ALP) - transfer pricing adjustment - quantitative adjustment - Whether the bright line test and resultant quantitative adjustment (addition of excess AMP and application of mark up) is a permissible method under Chapter X to determine ALP and make a transfer pricing adjustment - HELD THAT: - The Tribunal followed the jurisdictional High Court authorities which have negatived the bright line test as a statutory or machinery mandated means to discern an international transaction or to compute the ALP for AMP expenditure. Chapter X contemplates substitution of the transaction price with the ALP determined by methods in section 92C; it does not provide a machinery for treating excess AMP (determined by a bright line comparison) as an assumed international transaction nor for making a quantitative addition by that route. Absent an ascertainable transaction price between AEs, resort to BLT and a quantitative adjustment would be beyond Chapter X. The Tribunal therefore rejected the TPO's application of the bright line test and the consequent adjustment. [Paras 6]

The bright line test and the quantitative adjustment based on it are not permissible under Chapter X; the TPO's methodology is rejected and its ALP adjustment based on BLT is disallowed.

Final Conclusion: The transfer pricing adjustment in respect of AMP expenses was set aside: the Tribunal held that (a) the AMP expenditure, on the facts, did not constitute an international transaction as Revenue failed to show any arrangement or concerted action with AEs, and (b) the bright line test and the quantitative adjustment founded upon it are not authorised by Chapter X. Consequential penalty ground was not adjudicated separately. The appeal is allowed.

Comparability analysis - exclusion of comparables - transactional net margin method (TNMM) - capacity utilization adjustment - reasonably accurate adjustments under Rule 10B(3) - exercise of powers under section 133(6) - treatment of foreign exchange loss on restatement of loan liability - adjustment restricted to consumption of raw material - application of proviso to section 92C(2) - prematurity of penalty initiation

Exclusion of comparables - comparability analysis - transactional net margin method (TNMM) - Validity of excluding specific comparables from the comparable set in Business Support Services and Engineering Design Services segments. - HELD THAT: - The Tribunal examined the functional profiles, turnover and service revenue filters and contemporaneous records (annual reports) of the companies challenged. It held that Global Procurement Consultants Ltd. is functionally dissimilar for Business Support Services because it is promoted by Export Import Bank of India and mainly undertakes World Bank sponsored projects; the Ld. DRP's exclusion of this comparable is upheld. In the Engineering Design Services segment the Tribunal upheld the Ld. DRP's exclusions of Certification Engineers International Ltd., RITES Ltd., and REC Power Distribution Company Ltd. on the grounds that they perform predominantly government contracts and/or fail the turnover or service revenue filters adopted for comparability. Further, after examination of the financials and accounting methods, the Tribunal directed exclusion of Ashok Leyland Project Services Ltd., Bengal SREI Infrastructure Development Ltd., IBI Chematur (Engineering & Consultancy) Ltd., Mahindra Consulting & Engg. Services Ltd., Mitcon Consultancy & Engg. Services Ltd., TCE Consulting Engineers Ltd., and HSCC (India) Ltd. from the comparable set for reasons including divergent functional profile, substantial non service revenue, differing revenue recognition methods and turnover mismatches. The Tribunal applied the comparability criteria and precedent to conclude these entities were not good comparables. [Paras 3]

The exclusions of the identified comparables are upheld and the AO/TPO is directed to exclude the specified companies from the comparable sets.

Capacity utilization adjustment - reasonably accurate adjustments under Rule 10B(3) - exercise of powers under section 133(6) - Whether the assessee is entitled to an adjustment for under utilisation of manufacturing capacity and the appropriate procedure to determine such adjustment. - HELD THAT: - The Tribunal found the assessee's low capacity utilisation (41.18%) undisputed and concluded that where differences materially affect margins, Rule 10B(3) requires elimination of material effects by reasonably accurate adjustments. It rejected the TPO's approach of proceeding without adjustment merely because comparable companies' capacity data were not publicly available, observing that the TPO must use powers under section 133(6) to obtain requisite information. The Tribunal held that if reasonably accurate adjustments cannot be made on comparables due to absence of public data, adjustments may be made on the tested party after the TPO collects data. The Tribunal directed the TPO to call for installed capacity, actual production, break up of fixed and variable costs and segmental information from comparables, share obtained data with the assessee and then grant capacity under utilisation adjustment by identifying fixed costs (including depreciation and repairs) and adjusting them proportionately in the ratio of capacity utilised. [Paras 3]

Matter remitted to the TPO to obtain necessary data under section 133(6), make reasonably accurate capacity utilisation adjustments (identifying fixed costs including depreciation and repairs), share results with the assessee and grant the appropriate adjustment.

Treatment of foreign exchange loss on restatement of loan liability - comparability analysis - Whether foreign exchange loss arising on restatement of loan liability for capital asset acquisition should be excluded from computation of operating margin for transfer pricing purposes. - HELD THAT: - The Tribunal noted that the exchange loss of Rs. 2,04,92,202 arose from restatement of loan liability and not from purchases or sales. It held that although foreign exchange loss may be allowable for taxable income computation, this particular loss is extraordinary in nature and should be excluded while computing the Profit Level Indicator for the manufacturing segment. The Tribunal also agreed that only foreign exchange loss pertaining to the manufacturing segment should be considered for that segment's margin computation and directed the AO to exclude exchange losses pertaining to other segments when computing the manufacturing segment margin. The Tribunal relied on the factual finding that the assets were purchased in India and section 43A did not apply, and upheld the DRP's deletion of the addition under the cited precedent. [Paras 3]

The exchange loss on restatement of loan liability shall be excluded from the PLI computation for the manufacturing segment; the DRP's deletion is upheld.

Adjustment restricted to consumption of raw material - Whether transfer pricing adjustment in respect of import of raw material from an associate enterprise should be restricted to the value of material actually consumed during the year. - HELD THAT: - The Tribunal observed it was undisputed that a portion of purchases from the AE remained as closing stock at year end. It held that any adjustment to profits in respect of such purchases for the year should be limited to the raw material consumed during the year, since the cost of closing stock is already recorded at purchase cost and the impact on profit arises when the material is consumed. The Tribunal directed the TPO that any adjustment, after giving effect to capacity and other issues, should be restricted to the portion of material purchased from the AE and consumed in the year; if a full year adjustment is made, the valuation of closing stock must reflect that adjustment. [Paras 3]

Adjustment in respect of raw material purchased from the AE is to be restricted to the value of material consumed during the year; TPO to give effect accordingly.

Reasonably accurate adjustments under Rule 10B(3) - non cenvatable customs duty - Whether non cenvatable customs duty on imported raw material should be excluded from operating margin computation as materially affecting comparability. - HELD THAT: - The Tribunal held that if non cenvatable customs duty materially affects the profit level indicator vis a vis comparables, Rule 10B(3) requires elimination of that material effect by suitable adjustment. As the TPO had not examined this issue, and because the matter is connected to the capacity adjustment remitted to the TPO, the Tribunal restored the issue to the TPO to examine whether the customs duty materially affects the assessee's PLI and, if so, to make appropriate adjustment. [Paras 3]

Issue remitted to the TPO to examine materiality of non cenvatable customs duty and to make adjustment if it materially affects the PLI.

Application of proviso to section 92C(2) - Claim for allowance of the +/-5% range benefit under the proviso to section 92C(2). - HELD THAT: - The Tribunal held this claim to be consequential to the transfer pricing determination and directed the AO to allow the benefit under the proviso to section 92C(2) as per law consistent with the outcome of the transfer pricing exercise. [Paras 3]

AO directed to allow the +/-5% benefit under the proviso to section 92C(2) as applicable.

Prematurity of penalty initiation - Maintenability of penalty proceedings under section 271(1)(c) initiated by the AO. - HELD THAT: - The Tribunal found initiation of penalty proceedings premature in the circumstances of the case and dismissed the ground challenging initiation as premature. [Paras 3]

The challenge to initiation of penalty proceedings is dismissed as premature.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal for statistical purposes in part. It upheld the exclusion of specified comparables, directed remand to the TPO to determine capacity utilisation and related adjustments (exercising powers under section 133(6)), allowed exclusion of the exchange loss on restatement of loan liability from PLI, directed restriction of any raw material adjustment to actual consumption, remitted the customs duty issue to the TPO for examination, directed allowance of the +/-5% proviso benefit as applicable, and held the penalty initiation to be premature.

Treatment of brand licence fee as revenue expenditure - disallowance under section 14A read with Rule 8D (expenditure in relation to exempt income) - matching concept in relation to exempt income and related expenditure - precedential effect of earlier Tribunal order in assessee's own case - computation of book profit under section 115JB

Treatment of brand licence fee as revenue expenditure - precedential effect of earlier Tribunal order in assessee's own case - Deletion of the disallowance of brand licence fee was upheld. - HELD THAT: - The Tribunal affirmed the order of the CIT(A) deleting the disallowance of brand licence fee, following its earlier decision in the assessee's own case for an earlier assessment year which held that payments for use of the logo/brand (belonging to Shriram Ownership Trust) were in the revenue field. As there was no change in the facts or circumstances between the years, the Tribunal found no reason to interfere with the appellate authority's conclusion and rejected the Revenue's contention that the expenditure conferred an enduring intangible asset. [Paras 5, 6]

The disallowance of brand licence fee was deleted and the Revenue's ground challenging that deletion was rejected.

Disallowance under section 14A read with Rule 8D (expenditure in relation to exempt income) - matching concept in relation to exempt income and related expenditure - precedential effect of earlier Tribunal order in assessee's own case - Deletion of the disallowance made under section 14A/read with Rule 8D was upheld. - HELD THAT: - The Tribunal accepted the reasoning in its earlier decision reproduced by the CIT(A) and the view of the Madras High Court in Redington (India) Ltd. that the matching concept applies: in a year where no exempt income (dividend) was earned, disallowance of expenditure under section 14A cannot be sustained. Applying that principle and noting no material change in facts, the Tribunal found no reason to interfere with the appellate authority's deletion of the section 14A disallowance. [Paras 5, 6]

The deletion of the section 14A/Rule 8D disallowance was confirmed and the Revenue's challenge thereto was dismissed.

Computation of book profit under section 115JB - precedential effect of earlier Tribunal order in assessee's own case - The deletion of the addition in computing book profit under section 115JB was confirmed. - HELD THAT: - The Tribunal noted that the CIT(A) followed the Tribunal's earlier order in the assessee's own case and, since the appellate authority had reproduced that Tribunal order, there was no valid grievance for the Revenue. Consequently, the Tribunal did not interfere with the deletion made by the CIT(A) in computing book profit under section 115JB. [Paras 5, 6]

The deletion in computation of book profit under section 115JB was confirmed and the Revenue's appeal on that ground was dismissed.

Final Conclusion: Following its earlier decision in the assessee's own case and the applicable Madras High Court authority on the matching concept and Rule 8D, the Tribunal dismissed the Revenue's appeal for AY 2014-15, confirming deletion of the brand licence fee disallowance, the section 14A/Rule 8D disallowance, and the addition in computing book profit under section 115JB.

Stay of demand - valuation of unquoted shares - application of section 56(2)(viia) read with rule 11UA - balance of convenience - verifiability of Rule 11UA calculations - adjournment for non-compliance with ITAT Rule 18 (paper book filing)

Stay of demand - valuation of unquoted shares - application of section 56(2)(viia) read with rule 11UA - verifiability of Rule 11UA calculations - balance of convenience - financial incapacity to pay - Grant of stay of the outstanding tax demand pending adjudication of the appeal - HELD THAT: - The Bench examined the stay application in light of the large addition made by the Assessing Officer under the impugned invocation of section 56(2)(viia) read with Rule 11UA and competing arithmetic presented by the assessee. The assessee produced detailed Rule 11UA computations showing that (i) the AO excluded four companies from aggregate valuation because their individual valuations were negative, a stance contested by the assessee, and (ii) if the assessee's application of the Rule 11UA formula is accepted the net result would be a negative aggregate value. The Tribunal found a prima facie material dispute on valuation methodology and on the AO's calculations such that the assessments could be verified or re-examined on the appeal. The assessee also placed before the Bench contemporaneous financial information and the audited results for the year ending 31 March 2018, demonstrating lack of liquid means to meet the demand. Balancing the prima facie strength of the assessee's contention on misapplication/miscalculation under Rule 11UA against the assessee's inability to furnish the demand, the Tribunal concluded that the balance of convenience favours granting a temporary stay. Although the Department's request for adjournment for non-compliance with Rule 18 (late paper book filing) was acceded to and the appeal was adjourned for hearing, the stay application was allowed on merits for a limited period. [Paras 5, 6, 7]

Stay of the outstanding demand of Rs. 59,61,35,380/- granted for six months or till passing of the order, whichever is earlier; appeal adjourned for hearing on the listed date.

Final Conclusion: The Tribunal allowed the assessee's stay application and granted an interim stay of the outstanding demand for six months (or until the appellate order), having found a prima facie dispute on valuation under section 56(2)(viia) read with Rule 11UA and in view of the assessee's demonstrated inability to pay; the appeal was adjourned for hearing on the scheduled date.

Opportunity of being heard - natural justice - registration under section 12A - remand for fresh consideration

Opportunity of being heard - registration under section 12A - remand for fresh consideration - Whether the order rejecting the application for registration under section 12A should be set aside and remitted for fresh consideration because the assessee did not receive the show cause notice in time and was thus denied a proper opportunity of being heard. - HELD THAT: - The Tribunal found on the material before it that the show cause notice dated 11.09.2017 was recorded by the assessee as having been received only on 12.12.2017. In these circumstances the assessee did not have a proper opportunity to comply with the notice or to be heard before the CIT(E) within the period specified in the notice. Because the denial of a timely opportunity to be heard engages the principles of natural justice, the Tribunal held that the CIT(E)'s order rejecting registration could not stand and directed that the matter be examined afresh after affording the assessee a proper opportunity of being heard.

The CIT(Exemptions) order rejecting the application for registration under section 12A is set aside and the matter is remanded to the CIT(Exemptions) for fresh consideration after affording the assessee a proper opportunity of being heard.

Final Conclusion: Appeal allowed for statistical purposes; the order of the CIT(Exemptions) rejecting the 12A registration application is set aside and the matter remitted for fresh consideration after giving the assessee a proper opportunity to be heard.

Validity of assumption of jurisdiction under section 147/148 of the Income tax Act - Assessment based on material impounded in survey under section 133A - Chargeability to interest under section 234B of the Income tax Act - Ad hoc assessment of undisclosed income from business (drama company) - Assessment of notional income from property/house property receipts (Kalyana Mantapa)

Chargeability to interest under section 234B of the Income tax Act - Assessee liable to interest under section 234B and AO to recompute interest after giving effect to this order - HELD THAT: - The Tribunal accepted the principle that charging interest under section 234B is consequential and mandatory where tax is found due, relying on settled law. The assessee's denial of liability was rejected. The Tribunal therefore upheld the charging of interest but directed recalculation of interest in the light of adjustments made by the Tribunal while giving effect to its order. [Paras 5]

Charging of interest under section 234B upheld; AO directed to recompute interest as necessary.

Ad hoc assessment of undisclosed income from business (drama company) - Assessment based on material impounded in survey under section 133A - Additions sustained by CIT(A) at an adhoc rate of 50% of income from the drama company deleted for Assessment Years 1996-97 to 1998-99 - HELD THAT: - On comparison of gross receipts as per the profit and loss accounts with the impounded material, the Tribunal found no understatement of gross receipts for AYs 1996 97 to 1998 99. The Tribunal observed that the net income percentages upheld by the CIT(A) were unreasonably high and noted that a Coordinate Bench of the Tribunal in earlier proceedings had held that no addition was called for. In absence of any comparable case or justification by the authorities below, the adhoc addition of 50% was held unsustainable and deleted for the specified years. [Paras 6]

Additions on account of income from the drama company for AYs 1996 97 to 1998 99 deleted.

Assessment of notional income from property/house property receipts (Kalyana Mantapa) - Additions sustained by CIT(A) @ 30% on receipts of Kalyana Mantapa deleted for Assessment Years 1995-96 to 1998-99 - HELD THAT: - The Tribunal accepted the factual finding in the appellate order that all donations/receipts relating to the Kalyana Mantapa were received and expended by the Someshwara Temple Committee and that the assessee neither collected those receipts nor incurred related expenditure. The Tribunal held that if any inclusion were warranted it should be on the basis of notional annual let able value of the property, and that making additions based on the Temple Committee's receipts was incorrect. Accordingly the addition sustained at 30% was deleted. [Paras 7]

Additions on account of receipts from Kalyana Mantapa deleted.

Validity of assumption of jurisdiction under section 147/148 of the Income tax Act - Assessee's challenge to the validity of assumption of jurisdiction under sections 147/148 dismissed - HELD THAT: - The Tribunal noted that the assessee had been provided the reasons recorded for reopening following a request and had not objected to them. On the material before it, the Tribunal found that the Assessing Officer had validly and correctly assumed jurisdiction to reopen assessments for AYs 1995 96 to 1998 99. There was no substantive violation of procedural provisions such as section 151 that would vitiate the reopening. [Paras 8]

Assumption of jurisdiction under sections 147/148 held valid; ground dismissed.

Final Conclusion: The assessee's appeals for Assessment Years 1995 96 to 1998 99 are partly allowed: additions relating to the drama company (AYs 1996 97 to 1998 99) and to receipts from the Kalyana Mantapa (AYs 1995 96 to 1998 99) are deleted; the reopening under section 147/148 is upheld; interest under section 234B is sustained but to be recomputed by the AO in accordance with this order.

Indexation of cost of acquisition and cost of improvement - interpretation of 'held by the assessee' in Explanation (iii) to section 48 - application of cost of acquisition of previous owner under section 49 - treatment of inherited/ancestral property for computation of long term capital gain

Interpretation of 'held by the assessee' in Explanation (iii) to section 48 - application of cost of acquisition of previous owner under section 49 - indexation of cost of acquisition and cost of improvement - treatment of inherited/ancestral property for computation of long term capital gain - Whether the period of holding for computing indexed cost of acquisition includes the period during which the previous owner held the asset. - HELD THAT: - The Tribunal accepted the view in CIT v. Manjula J. Shah that the phrase 'held by the assessee' in Explanation (iii) to section 48 must be read harmoniously with the definition of cost of acquisition in section 49. Since section 49 recognises the cost at which the previous owner acquired the property, the period for computing indexation includes the period during which the previous owner held the asset. The Tribunal noted that the Revenue's Special Leave Petition against Manjula J. Shah was dismissed by the Supreme Court on 18.09.2018 on account of tax effect falling below the threshold specified in CBDT circulars, and that the Delhi High Court in Arun Shungloo Trust reached a like conclusion allowing indexation of cost of improvement by previous owners in cases under section 49. Respectfully following these precedents, the Tribunal upheld the view that indexation benefits are to be computed from the year the previous owner acquired the asset and not merely from the year the assessee became the registered owner by inheritance. [Paras 6, 7]

Order of the CIT(A) allowing indexation from the period the previous owner held the asset is upheld and the revenue appeal is dismissed.

Final Conclusion: Appeal dismissed; indexation for computation of long term capital gain on inherited/ancestral property is allowable by reference to the period the previous owner held the asset, in accordance with Manjula J. Shah and related decisions.

Incriminating material - assessment under section 153A read with section 143(3) - unabated (completed) assessment - reassessment jurisdiction under section 153A - statements recorded during search or survey - right to cross-examination - cash trail prepared from disclosed bank statements

Incriminating material - assessment under section 153A read with section 143(3) - unabated (completed) assessment - reassessment jurisdiction under section 153A - Whether additions can be made in an assessment completed prior to search (an unabated assessment) under section 153A r.w.s. 143(3) in absence of incriminating material found during search. - HELD THAT: - The Tribunal applied and followed the consistent line of High Court and Tribunal precedents (including Kabul Chawla and decisions of the Jurisdictional High Court) that where an assessment for a year had attained finality prior to search (i.e. unabated), additions in proceedings under section 153A r.w.s. 143(3) in respect of that year may be made only on the basis of incriminating material found or unearthed during the course of search or requisition of documents in the search. If no such incriminating material is found, the Assessing Officer cannot, by invoking section 153A, make additions over and above the originally assessed income for an unabated year. Applying these principles to the facts, the Tribunal found that the impugned additions (share application money and disallowance of donation) were not supported by any incriminating material discovered in the search, and therefore could not be sustained. [Paras 8, 9, 10, 11]

Additions in the unabated Assessment Year 2011-12 could not be sustained in absence of incriminating material; the CIT(A)'s deletion of the additions is upheld.

Statements recorded during search or survey - right to cross-examination - Whether reliance on statements recorded from third parties (entry operators/brokers) that were not furnished to the assessee and which were retracted can form a valid basis for additions. - HELD THAT: - The Tribunal held that the Assessing Officer did not demonstrate that additions were founded upon such statements; the alleged statements were not placed before the assessee, many were retracted, and no opportunity was given to the assessee to cross-examine the declarants. The Tribunal reiterated that the opportunity to cross-examine witnesses adverse to the assessee is a fundamental facet of natural justice and that reliance on undisclosed or untested statements cannot sustain additions. Further, it observed uncertainty as to whether some statements were recorded under section 132 (search) or during survey (section 133A), and noted that statements recorded during survey cannot be used as evidence. [Paras 9, 10]

Statements not confronted to the assessee, retracted, or recorded in survey could not validly support the additions; the Assessing Officer's reliance on such statements is unsustainable.

Cash trail prepared from disclosed bank statements - incriminating material - Whether a 'cash trail' prepared by the Assessing Officer from bank statements of third parties and disclosed bank accounts constitutes incriminating material sufficient to support additions under section 153A. - HELD THAT: - The Tribunal found that the bank statements used to construct the alleged cash trail were part of disclosed records and were not confronted to the assessee as incriminating material; there was no evidence that any cash deposits in third parties' accounts were in fact funds of the assessee or flowed from the assessee. The statements and bank records forming the cash trail were not placed on record in a manner that would establish nexus to the assessee or qualify as incriminating material discovered in the search. Consequently, the cash trail could not furnish the requisite basis for making additions. [Paras 10]

The alleged cash trail based on disclosed bank statements of third parties did not amount to incriminating material and could not support the additions.

Final Conclusion: The Tribunal upheld the CIT(A)'s order deleting the additions for Assessment Year 2011-12 and dismissed the revenue's appeal; the additions could not be sustained in absence of incriminating material discovered in the search, undisclosed statements were not relied on or confronted to the assessee, and the alleged cash trail did not establish a nexus to the assessee.

Writ under Articles 226/227 - judicial review of executive action - liberty to file representation - direction to decide representation expeditiously - speaking order - opportunity of hearing

Liberty to file representation - direction to decide representation expeditiously - speaking order - opportunity of hearing - Petition disposed by granting liberty to the petitioner to file a detailed representation and directing the appropriate authority to consider and decide it within a specified timeframe after affording hearing and passing a speaking order. - HELD THAT: - The Court, without expressing any opinion on the merits of the challenge to the notification dated 16.2.2019 or the revised assessment shown in the EDI status, granted procedural relief. The petitioner was permitted to file a comprehensive representation within 15 days from receipt of the certified copy of the order. The authority concerned was directed to decide the representation in accordance with law by passing a speaking order and after affording the petitioner an opportunity of hearing, within 15 days from the date of receipt of the representation. The Court limited its intervention to mandating expeditious and reasoned administrative consideration and did not adjudicate the substantive controversy between the parties. [Paras 4]

Writ petition disposed by granting liberty to file representation; authority to decide the representation by a speaking order after hearing within the prescribed timelines.

Final Conclusion: The petition is disposed of by granting the petitioner leave to file a representation within 15 days and by directing the appropriate authority to hear the petitioner and decide the representation by a speaking order within 15 days of receipt; no adjudication on merits was undertaken.

Retrospective operation of delegated administrative notifications - Duty Exemption Pass Book (DEPB) scheme - entitlement to benefit - interpretation and applicability of para 7.50 of the Handbook of Procedures - limits on delegated legislation - absence of express power to enact retrospectively - policy decisions and judicial non-interference

Duty Exemption Pass Book (DEPB) scheme - entitlement to benefit - retrospective operation of delegated administrative notifications - Petitioners are not entitled to have the DEPB credit rate of 15% (notified w.e.f. 1st April, 2000) applied retrospectively from 1st April, 1997. - HELD THAT: - The petitioners' final product was listed in the Input Output norms but the DEPB credit rates for that product were first notified on 5th July, 1997 and subsequently revised (to 8% w.e.f. 31st March, 1999 and to 15% w.e.f. 31st March, 2000). The Public Notice fixing the 15% rate was not expressed to be retrospective and there was no clarification or ruling altering the earlier position that would justify retrospective operation. The petitioners' contention that the 15% rate should be backdated to 1st April, 1997 was therefore unsustainable and the impugned administrative order rejecting retrospective application was maintained. [Paras 12, 13, 14]

Retrospective application of the 15% DEPB rate from 1st April, 1997 is refused and the impugned order is upheld.

Interpretation and applicability of para 7.50 of the Handbook of Procedures - exports in anticipation of credit rate - Paragraph 7.50 of the Handbook did not entitle the petitioners to retrospective benefit in the present facts. - HELD THAT: - Paragraph 7.50 (as originally framed) permitted exporters to export products for which a credit rate was not yet notified and to claim DEPB if application was made within specified time limits; it applied only where no credit rate had been notified. In the present case, DEPB rates for the petitioners' product had been notified and subsequently revised on multiple dates, so the precondition for para 7.50 (no notification of rate) was not satisfied. Further, para 7.50 was subsequently substituted for the period commencing 1st April, 2000 to disallow exports unless the DEPB rate was notified. The petitioners therefore could not rely on para 7.50 to obtain retrospective fixation of the higher rate. [Paras 11, 12, 13, 14, 15]

Para 7.50 does not operate to confer retrospective DEPB benefit on the petitioners under the facts of this case.

Limits on delegated legislation - absence of express power to enact retrospectively - policy decisions and judicial non-interference - The Director General of Foreign Trade (delegate) lacked power to make the DEPB rate retrospective in the absence of an express enabling provision; judicial interference with policy decisions fixing such rates is inappropriate. - HELD THAT: - Fixation of DEPB rates and the date from which they operate is an exercise of delegated, policy oriented authority. In the absence of an express statutory provision empowering the delegate to make retrospective delegated legislation, retrospective operation cannot be inferred and is beyond the delegate's competence. Moreover, the determination of such rates involves expertise and policy considerations in which courts should not normally interfere. Applying these principles, the Court upheld the administrative decision not to give retrospective effect to the 15% rate. [Paras 17, 18]

Delegated authority cannot confer retrospective DEPB rates without express statutory power; policy decisions of this nature are not to be disturbed by the Court.

Final Conclusion: The petition is dismissed; the order refusing retrospective application of the public notice fixing the DEPB rate at 15% is upheld and no retrospective benefit is granted.

Seizure of goods in transit - release of seized goods on furnishing security and undertaking - seizure under Section 110 of the Customs Act, 1962 - determination of foreign origin of goods - interplay between custody under state GST enforcement and transfer to Customs

Release of seized goods on furnishing security and undertaking - seizure of goods in transit - Consignment of Supari (Betel Nuts) and the vehicle seized on 17-10-2018 are to be released in favour of the petitioner forthwith subject to conditions. - HELD THAT: - The Court found that the consignment, which had been transported from Kolkata to New Delhi and was duly purchased from a registered dealer in Mizoram, was detained and initially checked under the U.P. GST regime and ordered released when no document discrepancy was found. Although the Customs passed a seizure order, the Court observed that the allegation of foreign origin rested upon information from unidentified businessmen and that naked-eye inspection cannot authoritatively establish foreign origin; no recognised government institute for such certification had been identified. In view of these circumstances and in the absence of a conclusive finding of unlawful importation, the Court directed immediate release of the consignment and vehicle subject to the petitioner furnishing security other than cash or bank guarantee for the value stated in the tax invoice and executing an affidavit undertaking to cooperate with any future Customs inquiry. [Paras 5, 6, 7, 8, 12]

Consignment and vehicle released forthwith in favour of the petitioner on furnishing non-cash security of the invoice value and an undertaking to cooperate with future inquiry.

Interplay between custody under state GST enforcement and transfer to Customs - seizure under Section 110 of the Customs Act, 1962 - Respondents directed to explain and justify the legal basis for handing over goods ordered released under the GST regime to the Customs Department; respondents to file counter affidavit and the Special Counsel to obtain instructions and state under which provision the transfer occurred. - HELD THAT: - The Court required the respondents to file a counter affidavit within one month addressing the factual and legal basis for transferring custody of goods - ordered released under the U.P. GST regime - to Customs, and permitted the Special Counsel for respondent No.4 to procure instructions and file a reply specifying the provision of law relied upon for such handing over. The petitioner was granted two weeks thereafter to file a rejoinder. This directs fresh consideration and verification by the respondents of the legality of the custody transfer and the grounds for the Customs seizure. [Paras 9, 11]

Respondents to file counter within one month and respondent No.4 to state legal basis for transfer; matter listed after statutory filings for further adjudication.

Final Conclusion: The Court ordered immediate release of the seized consignment and vehicle subject to specified security and an undertaking, while directing the respondents to file pleadings explaining the legal basis for transfer of custody to Customs so that the legality of the seizure and transfer may be examined on the next hearing.

Unjust enrichment - Refund of CVD paid under protest - Incidence of duty not passed on

Unjust enrichment - Refund of CVD paid under protest - Accounting treatment in profit and loss account - Refund of CVD paid under protest could not be denied on the ground of unjust enrichment merely because the amount had been debited to the profit and loss account and not shown as recoverable from the department. - HELD THAT: - The Tribunal found that payment of CVD under protest was undisputed. It also found, from the invoices, that no CVD had been charged or recovered from the buyers and that the invoices themselves recorded exemption of excise duty on the goods. The chartered accountant's certificate further confirmed that the incidence of CVD had not been passed on to customers. In these circumstances, the determinative test for unjust enrichment stood satisfied in favour of the appellants, and mere accounting treatment of the duty amount as expenditure in the profit and loss account was held to be irrelevant for raising a presumption that the burden had been passed on. [Paras 8, 9, 10, 11, 12]

The appellants were held to have passed the bar of unjust enrichment and were entitled to refund of the CVD paid under protest.

Final Conclusion: The Tribunal held that the refund claims were not hit by unjust enrichment, since the CVD paid under protest had not been recovered from the buyers and the accounting entry in the profit and loss account was not decisive. The impugned orders were set aside and the appeals were allowed with consequential relief.

Confiscation under Section 111(l) of the Customs Act, 1962 - penalty under Section 112(a)(ii) of the Customs Act, 1962 - penalty under Section 114AA of the Customs Act, 1962 - undeclared/unspecified baggage as smuggled goods - burden of passenger to declare baggage - evidence of export/declaration at exit - disciplinary action against investigating/adjudicating officers - effect of transfer/change of adjudicating officer

Confiscation under Section 111(l) of the Customs Act, 1962 - penalty under Section 112(a)(ii) of the Customs Act, 1962 - penalty under Section 114AA of the Customs Act, 1962 - undeclared/unspecified baggage as smuggled goods - Validity of confiscation of gold bangles and imposition of penalties for non-declaration - HELD THAT: - The Tribunal found on the record that the appellants arrived with five gold bangles which were not declared under the baggage declaration regime and were recovered by Customs officers. The passenger bears the responsibility to declare goods brought into the country and to produce evidence of any declaration or lawful export on exit; no such evidence was produced. Consequently the gold could not be treated as bona fide baggage and was held to be smuggled goods. The impugned first appellate order, which upheld confiscation under Section 111(l) and penalties under Section 112(a)(ii) and (as reduced) Section 114AA, was held to be reasonable and not interfered with. [Paras 5, 7, 8, 9]

Confiscation and the penalties imposed were upheld and the appeal dismissed on merits.

Burden of passenger to declare baggage - evidence of export/declaration at exit - Claim that the bangles were lawfully taken out of India and thus not smuggled rejected for lack of proof - HELD THAT: - The appellants contended the bangles had been taken out of India earlier and therefore their return did not amount to smuggling. The Tribunal observed that if the bangles had genuinely been taken out, the fact would have been recorded in passport or by declaration to Customs at exit; no such documentary evidence or declaration was produced. The assertion that blank declaration forms signed by the appellant and found in her husband's pocket supported innocence was held insufficient. The claim was therefore rejected. [Paras 4, 5]

The appellants' assertion of prior lawful export was not accepted for want of evidence.

Effect of transfer/change of adjudicating officer - Objection to two separate Orders-in-Appeal being passed by different officers not a ground for setting aside the order - HELD THAT: - The Tribunal noted that officers (and judges) may be transferred and the incoming incumbent may decide matters remanded to the first appellate authority. Such change in the officer deciding the appeal did not vitiate the appellate process or the order passed on merits. [Paras 4]

The fact that two different officers passed appellate orders did not invalidate the impugned order.

Disciplinary action against investigating/adjudicating officers - Prayer for departmental/disciplinary action against Customs officers dismissed - HELD THAT: - The Tribunal rejected appellants' requests to initiate disciplinary proceedings against the officers who investigated, adjudicated or heard appeals, observing that officers had merely discharged their duties in detecting the undeclared gold, investigating the matter, issuing show cause notices and adjudicating under the Customs law. There was no basis to penalise officers for performing lawful official functions. [Paras 6]

Requests for disciplinary action against Customs officers were refused.

Final Conclusion: The first appellate authority's order (as varied on remand) was held to be balanced and reasonable; confiscation and penalties for importation without declaration were upheld, factual defenses based on prior export were rejected for lack of proof, objections to different officers deciding successive appeals were dismissed, and requests for disciplinary action against officers were refused; the appeal is rejected.

Retrospective application of exemption notification - Classification of marble slabs under CTH 68022190 - Limitation for refund claims - Unjust enrichment

Retrospective application of exemption notification - Classification of marble slabs under CTH 68022190 - Appellants entitled to benefit of Notification No. 04/2006-CE dated 01.03.2006 with retrospective effect in respect of marble slabs falling under CTH 68022190. - HELD THAT: - The Tribunal examined the departmental levy of countervailing duty at 10% ad valorem on imported marble slabs and the subsequent inclusion of CTH 68022190 by Notification No. 12/2012-CE dated 17.03.2012 along with Board clarification dated 16.03.2012. Having considered decisions relied upon by the appellant and the practice of earlier adjudications allowing benefit of the notification to polished marble slabs, the Tribunal held that the appellants are entitled to the benefit of Notification No. 04/2006-CE dated 01.03.2006 retrospectively. The Tribunal recorded that other issues (besides limitation and unjust enrichment) were to be treated in favour of the appellant and that classification and applicable rate/benefit as pleaded by the appellant stand accepted.

Benefit of Notification No. 04/2006-CE dated 01.03.2006 allowed retrospectively for marble slabs classified under CTH 68022190.

Limitation for refund claims - Issue of limitation in respect of the refund claims remanded to the Commissioner (A) for fresh examination. - HELD THAT: - The Tribunal found that the Commissioner (A) recorded that the appellant had not contested limitation for certain Bills of Entry while the appellant asserted that it had strongly contested limitation and that the Commissioner (A) had not considered all pleas properly. In view of these material disputes and prior remand directions in the appellant's own case, the Tribunal considered it appropriate that the Commissioner (A) re-examine the limitation pleas in light of the appellant's submissions and decisions relied upon by the appellant, after providing an opportunity to be heard and to produce supporting documents.

Limitation issue remanded to the Commissioner (A) for fresh consideration and verification.

Unjust enrichment - Issue of unjust enrichment remanded to the Commissioner (A) for fresh examination. - HELD THAT: - The Tribunal noted that the Commissioner (A) concluded that duty burden was passed on to buyers and therefore transactions were hit by unjust enrichment, whereas on remand in the appellant's own earlier proceeding the Commissioner (A) had subsequently held the opposite. The appellant relied upon balance sheets, credit notes, bank statements and judicial decisions to show the duty burden was borne by it. Given these contested factual and evidentiary matters and the need to consider the appellant's evidences and authorities, the Tribunal directed a fresh examination of unjust enrichment by the Commissioner (A) with fair opportunity to the appellant to produce documents.

Unjust enrichment issue remanded to the Commissioner (A) for fresh consideration and verification.

Final Conclusion: Appeal allowed in part by way of remand: benefit of Notification No. 04/2006-CE dated 01.03.2006 granted retrospectively for marble slabs under CTH 68022190; issues of limitation and unjust enrichment remitted to the Commissioner (A) for fresh consideration after hearing and on production of relevant documents.

Confiscation of exported goods - export prohibition under Drugs and Cosmetics regime - requirement of No Objection Certificate for export - distinction between export goods and exported goods - confiscation of sale proceeds as proceeds of smuggled goods

Export prohibition under Drugs and Cosmetics regime - Whether the Gazette Notification No GSR 82(E) dated 10.02.2011 prohibited export of Cisapride Monohydrate BP during the relevant period - HELD THAT: - The Tribunal accepted the clarification issued by the Central Drugs Standard Control Organisation dated 30.12.2011 that the Notification prohibited manufacture, sale and distribution within the country but did not prohibit export of the drug. Although a textual doubt could arise whether 'sale' includes export, the administering authority's contemporaneous clarification showed that export was not prohibited during the relevant period. [Paras 6]

Export of the drug was not prohibited during the relevant period.

Requirement of No Objection Certificate for export - Whether the appellant was required to obtain a No Objection Certificate (NOC) from the Drugs Controller General of India before export - HELD THAT: - The Tribunal held that notwithstanding that export was not prohibited, the appellant was required to obtain an NOC prior to export. The appellants did not obtain the NOC, and the Tribunal observed that the Customs officer issuing the Let Export Order is expected to verify documents and could have stopped the exports if the NOC was absent. The failure to obtain the NOC was therefore a lapse on the part of the appellant (and a concurrent lapse by the Customs officers who cleared the consignments). [Paras 6]

Obtaining an NOC was required and the appellant failed to obtain it.

Distinction between export goods and exported goods - confiscation of exported goods - Whether goods already exported can be confiscated under Section 113 of the Customs Act - HELD THAT: - The Tribunal analysed Section 113 read with the definition of 'export goods' in Section 2(19) and concluded that Section 113 applies to 'export goods' (goods which are to be taken out of India) and not to goods after exportation. Once export is complete, the goods cease to be 'export goods' and are outside the territorial operation of the Act for the relevant period; if brought back they would be treated as imports governed by the provisions applicable on re-import. Consequently, confiscation under Section 113 of goods already exported is not sustainable. [Paras 6]

Goods already exported cannot be confiscated under Section 113; the confiscation order is unsustainable.

Confiscation of sale proceeds as proceeds of smuggled goods - Whether the sale proceeds of the exported drug were liable to confiscation under Section 121 as sale proceeds of smuggled goods, and whether penalties under Sections 114 and 114AA were sustainable - HELD THAT: - The show-cause and impugned order were founded on the premise that the exports were prohibited and therefore amounted to smuggling attracting confiscation of sale proceeds and penalties. Having held that export was not prohibited and that confiscation of goods under Section 113 was not permissible once export was complete, the Tribunal concluded the foundational basis for confiscation of sale proceeds and the imposition of penalties failed. The impugned order (confiscation of sale proceeds and penalties) was set aside on this basis. [Paras 6, 7]

Confiscation of sale proceeds under Section 121 and penalties under Sections 114 and 114AA, being founded on the unsustainable premise of prohibited export/confiscation under Section 113, are set aside.

Final Conclusion: The appeal is allowed. The Tribunal set aside the impugned order: export was not prohibited for the drug during the relevant period; although an NOC was required and not obtained, goods already exported cannot be confiscated under Section 113, and consequently the confiscation of sale proceeds and penalties imposed in the impugned order were quashed.

Summary order. Application for out-of-turn hearing allowed; Registry directed to list the appeal for disposal on 27.02.2019.

Interpretation of authorised alternative penalties - forfeiture of security - revocation of licence - penalty under the Customs Brokers Licensing Regulations, 2013 - standard of due diligence of a customs broker

Interpretation of authorised alternative penalties - penalty under the Customs Brokers Licensing Regulations, 2013 - forfeiture of security - revocation of licence - Whether the CESTAT could impose a combination of penalties (forfeiture of security together with a monetary penalty) when the Regulations prescribe alternative penal courses including revocation with forfeiture or imposition of a penalty. - HELD THAT: - The Court held that Regulations afford two alternative categories of penal orders - revocation of the licence with forfeiture of security (or part thereof) on the one hand, and imposition of a penalty on the other. The appellate authority is not authorised to pick an element from the first alternative (forfeiture together with revocation) and combine it with the second alternative. On that basis the Tribunal's course of merely forfeiting the security while also imposing a penalty went beyond the options permitted by the Regulations. Nevertheless, the Court declined to set aside the Tribunal's order in its entirety for reasons explained separately concerning proportionality and the standard of conduct expected of a customs broker. [Paras 3]

The Tribunal exceeded the Regulations by combining penal elements not authorised in combination, but this defect did not lead the Court to overturn the Tribunal's order in toto.

Standard of due diligence of a customs broker - penalty under the Customs Brokers Licensing Regulations, 2013 - Whether the customs broker's conduct warranted revocation of licence and forfeiture of security, having regard to the degree of due diligence reasonably expected of a customs broker. - HELD THAT: - The Court found that the role ascribed to the customs broker amounted to carelessness and negligence rather than conduct warranting the most severe penal consequence. The authorities - both the Commissioner and the Tribunal - had effectively imposed extraordinarily high standards on the broker, expecting verification comparable to independent investigation and public-trustee-like functions which the broker, as a private intermediary, cannot reasonably be required to perform. Taking the overall conspectus of circumstances into account, the Court was not persuaded to restore the Commissioner's order of revocation and full forfeiture. [Paras 3, 4]

The broker's lapses amounted to negligence but did not justify restoring the Commissioner's order of revocation and full forfeiture; on that basis the appeal was dismissed.

Final Conclusion: Although the Tribunal exceeded the Regulations by combining penal measures not authorised in combination, the High Court declined to set aside the Tribunal's order because the broker's lapses were of negligence and the authorities had imposed unrealistically high standards; the appeal is dismissed.

Forfeiture of security deposit - revocation of customs broker licence - liability of customs broker for importer being benami - scope of due diligence / KYC obligations of a customs broker - facilitation by customs broker versus active participation in misdeclaration - proof required to infer clandestine goods or misdeclaration - application of Customs Broker Licensing Regulations, 2013

Forfeiture of security deposit - revocation of customs broker licence - scope of due diligence / KYC obligations of a customs broker - liability of customs broker for importer being benami - Whether the findings of violation of the Customs Broker Licensing Regulations, 2013 and consequent forfeiture of the security deposit and revocation of licence were sustainable against the appellant - HELD THAT: - The Court found that the record did not establish clandestine importation, misdeclaration of goods, or that the documents/KYC produced to the customs broker were fraudulent or irregular. The appellant had filed the Bill of Entry using the correct documents of an existing firm; the authorities' material showed that the person named as proprietor and another person claiming control of the importing firm were different, but there was no evidence imputing to the broker an obligation to carry out independent investigations into the true ownership or to detect a purported benami relationship. Expectation that the customs broker should verify beyond the presented KYC and ascertain the 'real owner' was held to exceed the regulatory mandate. On these findings the Court held that the inference of breach of the CBLR, 2013 was not sustainable and that the concurrent orders of the Commissioner and the Tribunal upholding forfeiture and revocation could not stand. [Paras 2, 3, 4, 5]

Concurrent findings of breach of the CBLR, 2013, including forfeiture of the security deposit and revocation of licence, were set aside and the appeal allowed.

Final Conclusion: The Court allowed the appeal, set aside the concurrent findings of the Commissioner and the CESTAT, and held that in the absence of fraudulent or irregular KYC or evidence of misdeclaration/clandestine goods, the customs broker could not be penalised for matters going to the true ownership of the importer beyond the broker's regulatory duties.

Applicability of amended notification to goods procured after amendment - date of procurement as the relevant date for application of conditions - requirement to install or use capital goods within one year (extendable up to five years) - liability to pay customs duty for capital goods not installed or used - bonded obligation to prove use of goods in manufacture for export

Applicability of amended notification to goods procured after amendment - date of procurement as the relevant date for application of conditions - The amended Notification No. 65/99 dated 19-5-1999 applies to capital goods that were procured (rewarehoused) after the amendment, even if originally imported before the amendment. - HELD THAT: - The court held that the amendment introduced by Notification No. 65/99/99 made the requirement of installation or use within one year (with a possible extension up to five years) applicable to capital goods that are either imported or procured from a warehouse. Although the appellant's initial import took place in November 1997, the rewarehousing/procurement at the Raipur unit occurred on 17-4-2000, i.e., after the amendment dated 19-5-1999. Therefore the amended condition governed the appellant's conduct. The court rejected the contention that applying the amended notification in these circumstances amounted to retrospective operation, observing that the relevant act was the procurement/rewarehousing which took place after the amendment and thus the amendment was not being given retrospective effect. [Paras 10, 12, 14]

Amended Notification No. 65/99 applies because the goods were procured (rewarehoused) after 19-5-1999; the date of procurement is the relevant date for application of the installation/use condition.

Requirement to install or use capital goods within one year (extendable up to five years) - liability to pay customs duty for capital goods not installed or used - bonded obligation to prove use of goods in manufacture for export - Even under the pre-amendment notification the appellant had the obligation to satisfy authorities that the duty-free capital goods were used in manufacture for export, and failure to demonstrate installation/use within the prescribed period (or its extension) renders the goods liable to duty. - HELD THAT: - The court noted that Condition No. 6 of Notification No. 53/97 already imposed a bonded obligation on the importer to prove use of the goods in manufacture or in connection with export-related activities, and the amended notification only clarified and specified the temporal requirement for capital goods. The machinery was found uninstalled and unused as of March 2005, which was beyond the one-year period and even beyond the maximum five-year extension. Consequently, irrespective of whether the amendment is invoked, the appellant failed to discharge the statutory/bonded obligation and is liable for the duty demand affirmed by the authorities. [Paras 8, 11, 13]

The appellant failed to satisfy the bonded obligation to prove use; the machinery being uninstalled and unused beyond the permissible period attracts liability to pay customs duty.

Final Conclusion: The substantial question is answered against the appellant: the amended notification governs goods procured after its commencement and the appellant, having rewarehoused the capital goods after 19-5-1999 and having failed to install or use them within the prescribed/extended period, is liable to the duty demand; the appeal is dismissed.

Anti-dumping duty - margin of dumping - normal value - duties of the designated authority - initiation and termination of anti-dumping investigation - causal link between dumped imports and injury - scope of investigation including threat of injury and material retardation - remand for fresh consideration

Initiation and termination of anti-dumping investigation - causal link between dumped imports and injury - remand for fresh consideration - Impugned termination of the investigation under Rule 14(b) despite recorded findings of dumping and injury and consequent remand to the designated authority. - HELD THAT: - The Court found that the designated authority had recorded sufficient evidence of dumping by exporters/producers from Saudi Arabia and material injury to the domestic industry (including quantified market share, dumping margins and adverse injury parameters) yet proceeded to terminate the investigation under Rule 14(b) on the ground that the imports were confined to the last three months of the period of investigation. Rule 14(b) permits termination only where there is not sufficient evidence of dumping or, where applicable, injury to justify continuation. Having itself determined dumping margins and noted injury-related indicators, the designated authority could not validly rely on the short temporal span of imports as a basis for terminating the investigation. The court observed that none of the termination clauses in Rule 14 applied and that the authority's volte face was unsupported by the Rules of 1995. In view of these infirmities, the Final Findings dated 28-11-2017 were set aside and the matter remitted to the designated authority for fresh consideration in accordance with the Rules and the observations made by the Court. [Paras 24, 27]

Final Findings dated 28-11-2017 set aside and investigation remitted to the designated authority for fresh consideration.

Scope of investigation including threat of injury and material retardation - duties of the designated authority - Whether the scope of the designated authority's inquiry is confined by the petition or includes assessment of threat of injury and material retardation. - HELD THAT: - The Court held that the Rules of 1995 (notably Rule 4(1)(c) and Rule 11) require the designated authority to submit findings not only on injury but also on threat of injury and material retardation to establishment of industry consequent upon imports. The authority's narrow view that it could not examine threat of injury because the petition prayed only for determination of material injury was contrary to the statutory scheme. The scope of investigation is not circumscribed by the applicant's phrasing; the designated authority has a statutory duty to consider all relevant aspects set out in the Rules, including threat and material retardation. [Paras 23]

Designation's restriction of scope to the petition's prayer was incorrect; authority must consider threat of injury and material retardation as mandated by the Rules.

Normal value - margin of dumping - Whether the Rules of 1995 require a minimum duration of dumped imports (e.g., six months) during the period of investigation before injury can be evaluated. - HELD THAT: - The Court rejected the contention that Annexure-I or any provision of the Rules mandates a minimum duration of dumping (such as six months) for the purpose of assessing injury. Annexure-I's six-month reference concerns determination of normal value with respect to domestic or third-country sales and does not prescribe any fixed temporal threshold for injury assessment. In the present case the designated authority had been able to determine normal value, export price and dumping margins for Saudi exporters, and there is no rule-based requirement that dumping persist for a specified number of months before injury can be assessed. [Paras 26]

No rule requires a minimum duration of dumped imports for evaluation of injury; the designated authority erred in treating a three-month import span as a per se bar.

Final Conclusion: The High Court set aside the designated authority's Final Findings dated 28-11-2017 and remitted the matter for fresh consideration, holding that the authority erred in terminating the investigation on the ground of a short import span, wrongly restricted the scope of inquiry to the petition, and misapplied the Rules; the authority must re-examine the matter in accordance with the Rules of 1995 and the Court's observations within two months.

Appellate tribunal's duty to decide appeals on merits - requirement of speaking and reasoned order - setting aside non-speaking order - right to effective adjudication on merits - remand for fresh consideration

Appellate tribunal's duty to decide appeals on merits - setting aside non-speaking order - The impugned common CESTAT order was unreasoned and could not stand. - HELD THAT: - The Court held that the CESTAT, though confronted with appellants' merits-based arguments, disposed of the appeals summarily in two paragraphs on an assumed basis of culpability and reliability without addressing the merits. An appellate forum is required to consider and deal with the legal and factual contentions presented; a mere assumption without reasoned findings renders the order non-speaking and unsustainable. Accordingly the impugned orders were set aside for lack of adequate reasoning. [Paras 5]

The common impugned CESTAT order is set aside as unreasoned.

Requirement of speaking and reasoned order - right to effective adjudication on merits - remand for fresh consideration - The appeals are remitted to the CESTAT for fresh hearing and passing of a speaking and reasoned order addressing all appellants' contentions on merits. - HELD THAT: - Having set aside the non-speaking impugned orders, the Court remitted the matters to the CESTAT to afford the appellants an opportunity to have their arguments on merits adjudicated. The CESTAT is directed to hear the appellants, consider the submissions addressed in each appeal, and pass a reasoned order dealing with the contentions. The Court also gave ancillary directions for compliance and listing before the CESTAT. [Paras 6, 8, 9]

Matters remitted to the CESTAT for fresh hearing and a speaking and reasoned order; parties to appear before the CESTAT as directed and Registry to transmit the order.

Final Conclusion: Appeals partly allowed to the extent that the impugned CESTAT orders are set aside and the matters remitted to the CESTAT for fresh hearing and disposal by a speaking and reasoned order; consequential directions issued for compliance and listing.

Wilful defaulter - non-fund based facility (letter of credit) - lender-borrower relationship by operation of bank payment under LC - personal hearing before Identification Committee - representation by advocate/chartered accountant before Identification Committee - review by Wilful Defaulter Review Committee - identification procedure under RBI Master Circular

Wilful defaulter - non-fund based facility (letter of credit) - lender-borrower relationship by operation of bank payment under LC - interpretation of Master Circular - Declaration of petitioners as 'wilful defaulter' on the basis of payments made by the bank under letters of credit and withdrawal/diversion of funds by the company. - HELD THAT: - The court applied the judicial interpretation of the RBI Master Circular (as explained in Kotak Mahindra Bank Ltd. v. Hindustan National Glass & Industries Ltd.) that the Master Circular covers defaults arising out of non fund based facilities such as letters of credit and derivative/guarantee transactions. Where the bank pays foreign suppliers under LC on behalf of a constituent, the constituent remains legally bound to repay the bank and such transactions can create a lender-borrower obligation for purposes of the Master Circular. The petitioners had opened LC facilities and the bank paid exporters; subsequently the company was shown to have withdrawn a substantial part of its stated equity funds, and thus, having defaulted in repayment while possessing capacity to pay (and having siphoned/diverted funds), the petitioners fell within the definition of wilful default under Clause 2.1.3(c) of the Master Circular. The court therefore endorsed the identification of the company and its director as wilful defaulters on those factual and legal bases. [Paras 20, 21]

The petitioners were rightly declared as 'wilful defaulter' under the Master Circular insofar as the bank paid under the letters of credit and the petitioners defaulted despite capacity to pay, including findings of diversion/withdrawal of funds.

Personal hearing before Identification Committee - representation by advocate/chartered accountant before Identification Committee - Whether the alleged default unit has a right to be represented by an advocate or professional during the personal hearing before the Identification Committee. - HELD THAT: - The court followed the coordinate bench precedent of this High Court (Surender) and held that the Master Circular grants personal hearing to the borrower, promoter or full time director but does not confer a right to representation by an advocate or external professional before the Identification Committee. The Identification Committee is an internal banking committee and not a court or tribunal; the clause granting personal hearing was interpreted narrowly to permit direct hearing of the borrower/representative only. The court noted that similar questions are pending before larger benches/higher fora but declined to take a different view in the present petition. [Paras 22]

Representation by an advocate or external professional at the Identification Committee hearing is not a right under the Master Circular and denial of such representation did not vitiate the identification process.

Review by Wilful Defaulter Review Committee - identification procedure under RBI Master Circular - Whether the Review Committee must separately afford an opportunity of hearing or give independent reasons when it affirms the Identification Committee's finding. - HELD THAT: - The court observed that the Master Circular envisages a two tier internal mechanism wherein the Identification Committee's order is liable to be reviewed by a higher Review Committee as a systemic double check. The Review Committee's role is to cross check and confirm the Identification Committee's finding; it is not a statutory appellate forum requiring de novo rehearing or independent reason giving when it affirms the identification. Therefore, no separate opportunity of hearing before the Review Committee was held to be mandatory in these circumstances and absence of further reasons on affirmation did not invalidate the process. [Paras 23]

No separate hearing or fresh reasons are required from the Review Committee when it affirms the Identification Committee's decision under the Master Circular's internal review mechanism.

One time settlement - recourse to recovery proceedings before DRT - Whether the court should direct the bank to consider the petitioners' One Time Settlement offer before forwarding their names as wilful defaulters or before recovery proceedings. - HELD THAT: - The court noted that the bank had already initiated recovery proceedings before the DRT and that settlement offers in relation to pending recovery proceedings are matters for the DRT or the parties to negotiate. The court declined to direct the bank to consider the OTS prior to forwarding the petitioners' names to the Central Information Committee, observing that if the petitioners genuinely wished to settle, they could pursue offers before the DRT in the pending recovery application; no interim relief was warranted from this writ petition on that ground. [Paras 24]

No direction was issued to the bank to consider the One Time Settlement; the petitioners may pursue settlement before the DRT where recovery proceedings are pending.

Final Conclusion: Writ petition dismissed. The High Court upheld the bank's identification of the petitioners as wilful defaulters under the RBI Master Circular based on payments made under letters of credit and subsequent withdrawal/diversion of funds; the court held that representation by an advocate before the Identification Committee is not a right under the Master Circular, and that the Review Committee need not grant fresh hearing or give independent reasons when it affirms the Identification Committee; no direction was given regarding the One Time Settlement, the petitioners remaining free to pursue settlement in the pending DRT proceedings.

Restoration of company name under section 252 - requirement to establish company as a going concern / just ground for restoration - objection or no-objection of the Registrar of Companies not substituting compliance with section 252 - compliance with rule 87A(4) of the National Company Law Tribunal (Amendment) Rules, 2017 - expunction of adverse judicial observation

Restoration of company name under section 252 - requirement to establish company as a going concern / just ground for restoration - Application for restoration under section 252 was rightly dismissed for failure to plead or prove that the company was a going concern or that any just ground existed for restoration. - HELD THAT: - The appellant's sole document filed before the Tribunal was a one-page letter which did not set out the grounds required by section 252 nor annex the supporting particulars. The Tribunal correctly observed that neither records nor filings were produced to show that the company was carrying on business or was a going concern at the time of striking off. Repeated non-compliance over several years could not be treated as accidental or inadvertent without supporting material; statements of prepared but unfiled accounts cannot be accepted on their face without prior filing or corroboration. The National Company Law Appellate Tribunal found that the appellant had not made out the statutory case for restoration and therefore dismissal was warranted. [Paras 4]

Appeal dismissed insofar as restoration under section 252 is concerned; impugned order of dismissal is maintained on merits.

Objection or no-objection of the Registrar of Companies not substituting compliance with section 252 - compliance with rule 87A(4) of the National Company Law Tribunal (Amendment) Rules, 2017 - Registrar of Companies' letter of 'no objection' does not absolve the applicant from satisfying the requirements of section 252 before the Tribunal. - HELD THAT: - Although the Registrar's reply indicated no objection subject to compliance with prescribed rules, the appellate court held that such a reply recording the steps taken before striking off and offering conditional non-objection cannot replace the necessity for the applicant to plead and prove the statutory prerequisites for restoration before the Tribunal. The Registrar's stance is therefore not determinative of the statutory requirement to demonstrate a going concern or justifiable grounds for revival. [Paras 3, 4]

The Registrar's conditional no-objection is not a substitute for establishing the requirements of section 252; the applicant must independently satisfy the Tribunal.

Expunction of adverse judicial observation - The adverse observation in the Tribunal's order branding the company as a 'shell company' was expunged. - HELD THAT: - While upholding the dismissal, the Appellate Tribunal found that the phrase 'The company is a shell company' required more material to be retained in the record as a judicial finding. Absent sufficient material to support that characterization, the appellate court expunged that sentence from the impugned order. [Paras 5]

The specific observation calling the company a 'shell company' is expunged; the remainder of the impugned order is maintained.

Final Conclusion: The appeal is dismissed and the impugned order refusing restoration under section 252 is maintained for lack of pleadings and proof that the company was a going concern or that just grounds existed; the Registrar's conditional no-objection does not relieve the applicant of proving statutory requirements, and the adverse remark describing the company as a 'shell company' is expunged.

Limitation - initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016 - debt settlement agreement as affecting limitation - pre-existing dispute - remand to Adjudicating Authority for admission after notice

Limitation - debt settlement agreement as affecting limitation - The claim presented in the Section 9 application is not barred by limitation. - HELD THAT: - The Appellate Tribunal examined the record, including the Debt Settlement Agreement dated 01 March 2017 and the order of the High Court of Gujarat noting the settlement, and concluded that a prima facie case had been made out that the claim was within limitation. The Adjudicating Authority (NCLT) had dismissed the Section 9 application on the ground of limitation without appreciating these documents. The Tribunal observed that the debt settlement agreement and the High Court's notice of the settlement negatived the finding that the claim was time barred and therefore set aside the impugned order.

The finding of the Adjudicating Authority that the claim was barred by limitation is set aside and the Section 9 claim is held not to be time barred.

Initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016 - pre-existing dispute - remand to Adjudicating Authority for admission after notice - The matter is remitted to the Adjudicating Authority with directions to admit the Section 9 application if there is no pre existing dispute and the papers are complete, after giving notice to the Corporate Debtor. - HELD THAT: - Having held that the claim is not barred by limitation, the Tribunal directed that the impugned order be set aside and the matter remitted to the NCLT, Ahmedabad Bench. The NCLT is to consider admission of the Section 9 application in accordance with law, on the basis that there be no pre existing dispute and that the application is otherwise complete, and after notice to the Corporate Debtor so that the respondent has an opportunity to settle the matter prior to admission. The Tribunal recorded that notices had been served but the Corporate Debtor did not appear; nonetheless, the remand was made to enable the Adjudicating Authority to proceed with statutory safeguards.

The appeal is allowed and the matter is remitted to the Adjudicating Authority to admit the Section 9 application in absence of a pre existing dispute and subject to completeness of papers, after notice to the Corporate Debtor.

Final Conclusion: The Appellate Tribunal set aside the NCLT order dismissing the Section 9 application as barred by limitation, held that the claim is not time barred in view of the debt settlement and related High Court record, and remitted the matter to the NCLT, Ahmedabad Bench to consider admission of the Section 9 application after notice and in the absence of any pre existing dispute; appeal allowed, no costs.

Search and seizure under PMLA - Section 17 PMLA mandatory conditions - Reason to believe - Application of CrPC to PMLA - Section 65 PMLA as residuary application of CrPC - Overriding effect of PMLA - Inapplicability of section 102 CrPC for PMLA seizures

Search and seizure under PMLA - Section 17 PMLA mandatory conditions - Reason to believe - Inapplicability of section 102 CrPC for PMLA seizures - Whether an officer of the Directorate of Enforcement can employ the seizure/freeze power under section 102 CrPC instead of complying with the conditions prescribed by section 17 of the PMLA when interdiction of property is sought under PMLA. - HELD THAT: - Section 65 of the PMLA makes provisions of the CrPC applicable only insofar as they are not inconsistent with the PMLA; section 71 gives PMLA overriding effect over inconsistent laws; and section 5 CrPC preserves special statutes. Section 17 of the PMLA prescribes specific and stringent conditions for search, seizure and freezing including that the officer act on information in his possession and must have "reason to believe" with reasons recorded in writing and forwarding of such reasons and material to the Adjudicating Authority. The phrase "reason to believe" carries a higher threshold than mere "suspicion" and must be strictly complied with, as informed by section 26 IPC and binding precedents interpreting similar statutory phrasing. Where a special statute prescribes the manner and conditions for exercise of powers, those conditions must be followed and the general provisions of CrPC (such as section 102 which permits seizure on mere suspicion) cannot be invoked to circumvent the mandatory requirements of section 17. CrPC provisions therefore operate only as a residuary fallback where PMLA is silent; they cannot be used to dilute or override express procedural safeguards in PMLA. [Paras 13, 20, 21, 30, 31]

The Directorate of Enforcement cannot rely on section 102 CrPC to effect seizure/freeze in matters under the PMLA; the mandatory conditions of section 17 PMLA must be scrupulously complied with and section 102 CrPC is inapplicable for that purpose.

Application of CrPC to PMLA - Overriding effect of PMLA - Whether assets acquired prior to the enactment of the PMLA can never fall within the definition of "proceeds of crime" under the PMLA. - HELD THAT: - The single Judge rejected the contention that assets acquired before the PMLA's enactment could never be treated as "proceeds of crime" under section 2(1)(u) of the PMLA. That conclusion was not challenged before this court and the appellant did not press any cross-challenge to that observation; nor was any appellate argument advanced to disturb the single Judge's view. [Paras 9, 32]

The single Judge's conclusion that assets acquired prior to the enactment of the PMLA are not ipso facto excluded from the definition of "proceeds of crime" stands unchallenged.

Final Conclusion: The appeal is dismissed. The impugned order is upheld insofar as the Directorate of Enforcement cannot invoke section 102 CrPC in lieu of section 17 PMLA for seizure/freeze; the single Judge's view on pre-enactment assets remains unchallenged. No order as to costs.

Refund of service tax paid under mistake of law - limitation for refund claims under Section 11B of the Central Excise Act, 1944 - applicability of Section 11B to service tax by virtue of Section 83 of the Finance Act, 1994 - Article 265 of the Constitution - Mafatlal Industries precedent on statutory regime for refund claims

Refund of service tax paid under mistake of law - limitation for refund claims under Section 11B of the Central Excise Act, 1944 - applicability of Section 11B to service tax by virtue of Section 83 of the Finance Act, 1994 - Mafatlal Industries precedent on statutory regime for refund claims - Whether a refund claim of service tax paid under a mistake of law filed beyond the one-year period prescribed by Section 11B is maintainable. - HELD THAT: - Section 83 of the Finance Act, 1994 makes the provisions of Section 11B of the Central Excise Act, 1944 applicable to service tax. The binding decision in Mafatlal Industries establishes that, except where a levy provision has been declared unconstitutional, all refund claims must be preferred and adjudicated under the statutory refund regime (Section 11B), and claims filed beyond the prescribed period are not admissible. While constitutional writ jurisdiction remains available, courts must have due regard to the legislative scheme and cannot override the limitation imposed by Section 11B. Consequently, a refund claim for service tax paid by mistake of law is subject to the one-year limitation in Section 11B and is barred if filed after that period, absent the limited exception recognised in Mafatlal. [Paras 5]

The refund claim filed beyond the one-year period prescribed in Section 11B is barred and the Commissioner (Appeals) order upholding rejection is sustainable.

Final Conclusion: The appeal is dismissed and the order of the Commissioner confirming rejection of the refund claim as time-barred under Section 11B is upheld.

Threshold exemption - option to pay service tax - revised ST-3 return - renting of immovable property service

Threshold exemption - option to pay service tax - revised ST-3 return - Whether the appellant was precluded from claiming the threshold exemption for the relevant period by having initially paid service tax and filed an ST-3 return, given the provision that an option to pay tax, once exercised, cannot be withdrawn in the same financial year. - HELD THAT: - The Tribunal found that the appellant had not originally exercised the option to forgo the exemption as a deliberate and irrevocable choice but had filed an ST-3 return and subsequently, within the permissible period, filed a revised ST-3 return claiming the exemption. The filing of the revised return was treated as an exercise to claim the exemption and the fact that the appellant had earlier paid service tax proactively on advice did not operate as an irrevocable exercise of the option foreclosing entitlement to the Notification benefit. The Tribunal therefore held that the proviso against withdrawal of the option could not be invoked to deny the exemption where the claimant had corrected the return within the statutory window and had not effectively and finally elected to forgo the exemption for the financial year. [Paras 5, 6]

The appellant was not precluded from claiming the threshold exemption by his earlier payment; the revised return claiming exemption was acceptable.

Threshold exemption - renting of immovable property service - financial year - Whether the appellant's aggregate rental receipts for the relevant financial period entitled him to the threshold exemption. - HELD THAT: - The Tribunal noted the appellant's statement of rental receipts for the two properties for the period June 2007 to March 2008 and observed that the total net rental income for that period was below the threshold limit specified in the exemption Notification. In view of the admitted figures and the eligibility criteria of the Notification, the appellant satisfied the condition for claiming the threshold exemption for the financial year concerned. [Paras 5, 6]

The appellant's aggregate rental receipts for the period June 2007 to March 2008 were below the threshold and he was eligible for the exemption.

Final Conclusion: The impugned orders demanding service tax for June-September 2007 were set aside: the appellant's revised ST-3 return claiming threshold exemption was accepted and, on the Tribunal's finding that his aggregate rental receipts for the stated period were below the threshold, the appeal was allowed.

Refund of unutilised CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 - mandatory registration of premises as condition for claiming refund - time limit for refund claims under Section 11B of the Central Excise Act, 1944 - relevant date for export of services - end of quarter extension - safeguards and conditions for refund prescribed by Notification No.5/2006 (NT) dated 14.3.2006

Mandatory registration of premises as condition for claiming refund - refund of unutilised CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 - safeguards and conditions for refund prescribed by Notification No.5/2006 (NT) dated 14.3.2006 - Registration of the premises is not a mandatory pre-condition for entitlement to refund of unutilised CENVAT credit under Rule 5 where export of services and receipt of foreign exchange are otherwise established. - HELD THAT: - The Tribunal upheld the Commissioner (A)'s finding, following the Karnataka High Court in mPortal India Wireless Pvt. Ltd., that no provision in the CENVAT Credit Rules prescribes registration of premises as a pre-condition for claiming refund. While Notification No.5/2006 (NT) frames safeguards, the absence of a statutory requirement for prior registration means rejection of refund on that ground is not sustainable. However, entitlement remains subject to proof that input service tax was actually paid and verification of invoices, bills and receipts as required by the original authority. [Paras 6, 7]

The finding that registration of premises was mandatory was set aside; respondent is entitled to pursue refund subject to substantiation of payment of input service tax and documentary verification.

Time limit for refund claims under Section 11B of the Central Excise Act, 1944 - relevant date for export of services - end of quarter extension - refund of unutilised CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 - The three refund claims are not time-barred as they were filed within the period as construed with reference to Section 11B and the Larger Bench holding that, for export of services, the one-year period is to be reckoned with reference to the end of the quarter in which payment is received. - HELD THAT: - The Tribunal relied on the Larger Bench decision in Commissioner, Bangalore vs. Span Infotech India Pvt. Ltd. which construed Section 11B as requiring refund claims to be filed within one year but treating the relevant date for export of services so as to permit consideration up to the end of the quarter in which payments were received. Applying that principle, the Tribunal found the three claims (covering the stated periods) were filed within the extended time and therefore not barred by limitation; the claim for January-March 2009 had already been allowed by the Commissioner (A). [Paras 9]

All three refund claims are within time as per the Larger Bench interpretation of Section 11B and are not time-barred.

Final Conclusion: The appeal of the Revenue is dismissed and the Commissioner (A)'s order is sustained: registration of premises is not a pre-condition for refund under Rule 5, and the three refund claims for the periods stated are not time-barred when Section 11B is construed in light of the Larger Bench decision; entitlement remains subject to usual documentary verification of payment of input service tax.

Service tax on cable operator services w.e.f. 16.08.2002 - condonation of delay in filing appeal - sufficient cause for condonation - receipt of order as triggering limitation period - ex parte adjudication for non appearance and non filing of reply - duty to intimate change of address under Rule 4(2) of the Central Excise Rules

Condonation of delay in filing appeal - receipt of order as triggering limitation period - Whether the delay in filing the appeal could be condoned - HELD THAT: - The Tribunal upheld the Commissioner (Appeals) decision refusing to condone the delay. The appellant admitted that knowledge of the Order in Original arose in 2012 (from a published recovery notice) and that the service tax demand was deposited in July 2013, yet the appeal was filed only in January 2016. The Tribunal held that the statutory limitation for condonation could not be extended by the Commissioner (Appeals) beyond the prescribed period and that the explanation offered did not constitute sufficient cause for a delay of about six years. The Tribunal treated the appellant's subsequent assertions (telephone information about being declared untraceable and an application dated 6.8.2015) as unsupported by cogent evidence and insufficient to rebut the running of limitation from the time the appellant became aware of the adjudication. The decision notes that receipt of the Order in Original or knowledge thereof triggers the period for filing an appeal and that substantial unexplained delay and lack of active inquiry by the appellant amounted to negligence, disentitling him to condonation.

Delay in filing the appeal not condoned; appeal dismissed as barred by limitation.

Ex parte adjudication for non appearance and non filing of reply - sufficient cause for condonation - duty to intimate change of address under Rule 4(2) of the Central Excise Rules - Whether non service of the show cause notice / Order in Original and the appellant's conduct furnished sufficient ground to set aside the ex parte adjudication - HELD THAT: - The Tribunal observed that the appellant had participated in the departmental scrutiny and had not alleged any change of address communicated to the Department as required under Rule 4(2). The record indicated that the appellant failed to appear on several adjourned dates and did not file a reply to the show cause notice, leading to an ex parte order for lack of evidence. The appellant's claim of not receiving the show cause notice was undermined by his own admissions: knowledge of the adjudication in 2012 and payment of the tax demand in 2013. The Tribunal held that there was no proof that the Order in Original was returned unserved or that the Department had notice of any address change; consequently, the appellant's conduct did not justify setting aside the ex parte order or amount to sufficient cause for condonation.

Allegation of non service and subsequent conduct did not establish sufficient cause; ex parte adjudication was not set aside.

Final Conclusion: The appeal is dismissed: the Tribunal found no sufficient cause to condone the prolonged delay in preferring the appeal and no basis to overturn the ex parte adjudication given the appellant's participation in scrutiny, failure to appear or file replies, admitted knowledge of the order in 2012 and subsequent inaction.

Imposition of penalty under the Finance Act, 1994 - waiver of penalty under Section 80 of the Finance Act, 1994 - penalties under Sections 77 and 78 of the Finance Act, 1994 - payment of service tax and interest during investigation - cooperation with investigation as ground for waiver - confirmation of service tax demand

Imposition of penalty under the Finance Act, 1994 - penalties under Sections 77 and 78 of the Finance Act, 1994 - cooperation with investigation as ground for waiver - payment of service tax and interest during investigation - waiver of penalty under Section 80 of the Finance Act, 1994 - Whether penalties under Sections 77 and 78 should be sustained in view of the assessee's conduct during investigation and payment of tax and interest. - HELD THAT: - The Tribunal observed that the assessee fully cooperated with the investigation by providing information and a Chartered Accountant's certificate when called upon, and, whenever pointed out that differential service tax was payable, paid the differential tax along with interest promptly, even before issuance of the show cause notice. On these facts the Tribunal concluded that the assessee had made out a case for waiver of penalty and invoked the provisions of Section 80 to set aside the penalties. The decision rests on the assessee's bona fide conduct during the investigation and immediate compliance by payment of tax and interest. [Paras 5, 6]

Penalties imposed under Sections 77 and 78 are set aside by invoking Section 80 of the Finance Act.

Confirmation of service tax demand - payment of service tax and interest during investigation - Whether the demand for service tax and interest as raised in the Order-in-Original should be upheld. - HELD THAT: - Although the assessee contested the demands in the appeal, counsel conceded at hearing that the assessee was not contesting the liability for service tax or interest. The Tribunal noted that the assessee had paid the entire service tax and interest as and when pointed out. On that basis the Tribunal upheld the demand of service tax and interest while separately setting aside the penalties. [Paras 5, 6]

The demand of service tax and interest is upheld.

Final Conclusion: The appeal is partly allowed: the demand for service tax and interest is sustained, while penalties under Sections 77 and 78 of the Finance Act, 1994 are set aside by invoking Section 80.

Charge of Service Tax on services received from outside India - Taxable service - Technical inspection and certification - Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 - Rule 3(ii) - Proviso to Rule 3(ii) - treatment of services partly performed in India - Interpretation of competing Division Bench precedents

Proviso to Rule 3(ii) - treatment of services partly performed in India - Charge of Service Tax on services received from outside India - Technical inspection and certification - Whether the question of law concerning the interpretation of Section 66A read with Rule 3(ii) - particularly the proviso treating services partly performed in India as performed in India - could be authoritatively resolved by this Division Bench. - HELD THAT: - The Tribunal examined Section 66A of the Finance Act, 1994 and Rule 3(ii) of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, in the context of services described under clause (zzi) (technical inspection and certification). Division Bench decisions in Crompton Greaves Ltd. and Total Oil India Ltd. were considered, which construed the proviso to Rule 3(ii) to mean that only where a service is partly performed in India it must be treated as performed in India, and on their facts held services wholly performed outside India were not taxable. Noting that the issue turns on the correct interpretation and application of the proviso and that conflicting appellate pronouncements require authoritative resolution, the Bench concluded that the question is one fit for a Larger Bench. The Tribunal therefore declined to finally decide the legal controversy and referred the matter for consideration by a Larger Bench so that the interpretative conflict can be settled. [Paras 12, 13]

The question of law on interpretation of Section 66A read with Rule 3(ii) (and its proviso) is referred to a Larger Bench for authoritative determination; Registry to place the matter before the President.

Final Conclusion: The Division Bench did not decide the substantive tax liability but referred the interpretative question concerning Section 66A and Rule 3(ii) (including the proviso on services partly performed in India) to a Larger Bench for authoritative determination; Registry directed to place the matter before the President.

Classification of product as Fly Ash Bricks - extended period of limitation under Section 11A - right to cross-examine expert/chemical examiner - admission as evidence - concessional exemption under Notification No. 5/2009-C.E. - wilful evasion of duty

Classification of product as Fly Ash Bricks - admission as evidence - Whether the bricks manufactured and cleared by the assessee are to be classified as Fly Ash Bricks for central excise levy. - HELD THAT: - The Court accepted the finding of the adjudicating authority and the Tribunal that the assessee sold the goods as "Fly Ash Bricks" and had admitted that the bricks contained more than 48% ash by weight. The Commissioner noted the manufacturing process, the use of ESP-collected ash, and the description in accounts and sale bills. The Court treated the assessee's own commercial descriptions and account entries, together with admissions in communications, as decisive; having been settled as a question of fact by the authorities below, the classification is not open to re-agitation in these appeals. [Paras 3, 4, 5, 6, 10]

Bricks are to be treated as Fly Ash Bricks and the factual finding of the authorities recording this classification is upheld.

Extended period of limitation under Section 11A - wilful evasion of duty - Whether the demand was barred by limitation or the extended period under Section 11A could be invoked. - HELD THAT: - The Court agreed with the authorities that the assessee had neither maintained records nor filed returns regarding sale of fly ash bricks and had not disclosed manufacture of the product to the Department. On these facts the Court held that the extended period of limitation under Section 11A was rightly invoked as the case amounted to wilful evasion of duty. Reliance was placed on precedent holding that non-disclosure and absence of accounting supports invocation of extended limitation. [Paras 2, 8, 9]

Extended period of limitation under Section 11A was correctly invoked and the demand is not time-barred.

Right to cross-examine expert/chemical examiner - admission as evidence - Whether the assessee was denied the right to cross examine the chemical examiner and whether such denial vitiated the decision. - HELD THAT: - The Court observed that the adjudicating authority did not base its adverse conclusion on the chemical examiner's report but on the assessee's own admissions and accounts that described the product as fly ash bricks and acknowledged ash-content. Because the order was founded on the assessee's admissions rather than an expert report, there was no requirement to afford an opportunity to cross examine the chemical examiner. The right to cross examine becomes relevant only when the decision is founded on the expert's report. [Paras 10]

No illegality in not permitting cross examination of the chemical examiner where the order was not based on that report; no prejudice to the assessee is shown.

Concessional exemption under Notification No. 5/2009-C.E. - Whether the assessee was entitled to concessional duty rate or exemption under Notification No. 5/2009-C.E. - HELD THAT: - The Tribunal had left the question of exemption to the jurisdictional authority to verify the assessee's accounts and to determine fulfilment of conditions for grant of exemption under the notification. The High Court noted that entitlement to exemption depends on on record verification of records and compliance with the notification's conditions and did not grant automatic relief. [Paras 7]

Entitlement to concessional duty or exemption under Notification No. 5/2009-C.E. is to be considered and verified by the competent authority on production and satisfaction of prescribed conditions.

Final Conclusion: All substantial questions of law raised were answered against the assessee; the factual findings of classification and suppression were upheld, extended limitation was properly invoked, no right to cross examine arose from the record, entitlement to any concessional exemption remains subject to verification by the jurisdictional authority, and the appeals are dismissed.

Refund of unutilised cenvat credit under Rule 5 of CCR, 2004 - closure of unit and surrender of central excise registration - unjust enrichment - distinction between refund of duty on exports and refund of unutilised cenvat credit - binding precedents and stare decisis

Refund of unutilised cenvat credit under Rule 5 of CCR, 2004 - closure of unit and surrender of central excise registration - unjust enrichment - entitlement to refund of accumulated unutilised cenvat credit on closure of the manufacturing unit - HELD THAT: - The Tribunal examined the claim for refund of unutilised cenvat credit filed on account of closure of the unit. The adjudicating authority had rejected the claim for failure to demonstrate that the credit related to inputs/input services used in manufacture of goods exported without payment of duty. The Appellate Commissioner allowed the refund relying on earlier Tribunal and High Court decisions (including Slovak India Trading Co.) and subsequent Supreme Court consideration. The Tribunal found as factual and determinative that the accumulated credit arose inter alia because the assessee had been required to pay duty from PLA (cash) despite having credit balances and because of the imposition/availability of additional SAD credit, so that the credit could not be adjusted and remained unutilised when manufacturing ceased. The Tribunal held that the revenue's contention of potential unjust enrichment was not made out on the material before it, noting that finished goods had been costed net of cenvat and earlier case-law recognised refund in similar circumstances. The Tribunal further observed it was bound by the consistent line of Tribunal and higher court decisions permitting refund in such cases and found no reason to interfere with the Appellate Commissioner's order allowing refund.

Appeal by the revenue dismissed; impugned order allowing refund of unutilised cenvat credit on closure of unit upheld

Final Conclusion: The Tribunal dismisses the revenue's appeal and upholds the Appellate Commissioner's order allowing refund of the accumulated unutilised cenvat credit on closure of the manufacturing unit, applying the consistent line of judicial authority and finding no unjust enrichment on the material before it.

Conditional exemption notification - Rule 11(3)(i) of CCR, 2004 - lapse of CENVAT credit on opting exemption - allowability of credit on capital goods and for payment of duty during conditional exemption - switching between dutiable and exemption schemes

Conditional exemption notification - Rule 11(3)(i) of CCR, 2004 - lapse of CENVAT credit on opting exemption - Characterisation of Notification No. 30/2004-CE and applicability of Rule 11(3)(i) to the credit balance on opting the exemption - HELD THAT: - The Tribunal found that Notification No. 30/2004-CE is a conditional exemption issued under Section 5A, containing the condition of non-availment of CENVAT credit. The sub rules (3)(i) and (ii) of Rule 11 of the CCR, 2004 are distinct; in the facts of this case sub rule (3)(i) applies. Under sub rule (3)(i) the manufacturer is required to pay an amount equivalent only to the CENVAT credit in respect of inputs used in the manufacture of the final product and lying in stock, in process or contained in final product lying in stock. The record showed that the conditions enumerated under sub rule (3)(i) were followed by the appellant. Consequently the adjudicating authority was not justified in directing reversal of the entire credit balance as on the date of opting the exemption. [Paras 6]

Balance CENVAT credit as on opting Notification No. 30/2004-CE is not liable to be entirely reversed; Rule 11(3)(i) governs and was correctly applied in favour of the appellant.

Allowability of credit on capital goods and for payment of duty during conditional exemption - switching between dutiable and exemption schemes - Validity of utilisation of CENVAT credit for payment of duty on finished goods, clearance of capital goods and wastage while operating under Notification No. 30/2004-CE and during switching between notification schemes - HELD THAT: - The Tribunal examined the periods when the appellant availed benefits under Notification No. 30/2004-CE and when they switched between the dutiable and exemption notifications. It held that, having applied the tests under Rule 11(3)(i) and on the material showing compliance with its conditions, the credit utilised for payment of duty on finished goods, capital goods and for clearance of wastage was allowable. The Tribunal also noted consistency with earlier CESTAT decisions on the point and found no error in allowing the credit to the manufacturer. [Paras 6]

Credit availed on capital goods and utilised for payment of duty on finished goods, wastage and capital goods during the relevant periods is allowable; demands based on disallowance are not sustainable.

Final Conclusion: Appeals allowed and the demands confirmed by the adjudicating authority set aside with consequential reliefs; Revenue's appeal dismissed under the Government litigation policy for amounts below the prescribed threshold.

Denial of input credit on the basis of uncorroborated statements of transporters - Relevancy and admissibility of statements under Section 9D of the Central Excise Act, 1944 - Clandestine removal allegation based solely on transporter records without independent corroboration - Remand for compliance with statutory evidence procedure versus final disposal where prosecution delay renders remand futile

Denial of input credit on the basis of uncorroborated statements of transporters - Relevancy and admissibility of statements under Section 9D of the Central Excise Act, 1944 - Whether input credit could be denied because transporters stated they did not transport the goods when the appellants produced contemporaneous factory records - HELD THAT: - The adjudication was founded solely on statements attributed to transporters asserting non-transport; no other corroborative material was produced by Revenue. The Tribunal held that, where the Department relies on such statements, the statutory and evidentiary requirement of examination-in-chief (and opportunity for cross-examination) under Section 9D must be complied with before those statements can be acted upon. The adjudicating authority did not produce the transporters for examination-in-chief nor allow cross-examination, and therefore the transporter statements could not be relied upon. Further, given the long delay since investigation and adjudication, remanding the matter for fresh proof would be of little utility in the circumstances of this case. [Paras 10, 11, 12, 13]

Input credit denied solely on the basis of transporter statements was not sustainable; credit cannot be denied on that ground.

Clandestine removal allegation based solely on transporter records without independent corroboration - Relevancy and admissibility of statements under Section 9D of the Central Excise Act, 1944 - Whether demand for duty on account of alleged clandestine removal, based primarily on transporter documents and statements, was sustainable - HELD THAT: - The allegation of clandestine receipt/use and removal was based on transporter records and the statement of a transporter whose cross-examination was denied. The record also contained material indicating that some consignors received invoices without physical delivery. No independent or corroborative evidence was produced by Revenue to show clandestine manufacture, receipt of consideration, or how unaccounted goods were used and cleared. In absence of corroboration and with denial of cross-examination in breach of natural justice and Section 9D procedure, the clandestine removal demand could not be sustained. The Tribunal applied precedents holding that retracted or uncorroborated departmental statements warrant caution and require independent corroboration. [Paras 15, 16, 17]

Demand on account of alleged clandestine removal is not sustainable and is set aside.

Final Conclusion: By majority decision the impugned adjudication order confirming duty, interest and penalties was set aside; the appeals are allowed and the demands based on non-receipt and clandestine removal (being founded on unexamined transporter statements and lacking corroboration) are not sustainable.

Refund of CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 - transfer of CENVAT credit as Input Tax Credit under Section 140 of the CGST Act, 2017 - proviso to Section 142(3) of the CGST Act, 2017 - rejected CENVAT amounts lapse - jurisdiction of CESTAT in transitional cases limited to interpretation of Central Excise and Finance Act as modified by CGST - requirement that lower authority follow Tribunal's decision (judicial discipline)

Refund of CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 - requirement that lower authority follow Tribunal's decision (judicial discipline) - Whether the lower authority could grant the cash refund after CESTAT had rejected the appellant's refund claim under Rule 5 CCR 2004. - HELD THAT: - The Tribunal observed that once this Bench has finally held that the appellant is not entitled to refund of a portion of CENVAT credit under Rule 5, the lower authority cannot thereafter sanction such refund in cash as that would amount to judicial indiscipline. The Assistant Commissioner correctly rejected the appellant's renewed request for cash refund after the Tribunal's adverse decision; the lower authority must follow the Tribunal's determination. [Paras 5, 11]

The lower authority was correct in rejecting the request for cash refund after CESTAT had rejected the claim.

Transfer of CENVAT credit as Input Tax Credit under Section 140 of the CGST Act, 2017 - proviso to Section 142(3) of the CGST Act, 2017 - rejected CENVAT amounts lapse - Whether the appellant, having not taken CENVAT credit into their accounts prior to the appointed day, could now seek transfer of that credit as Input Tax Credit under GST or obtain cash refund. - HELD THAT: - Section 140 allows transfer only of CENVAT credit lying in the assessee's balance just before the CGST Act came into force; it does not cover CENVAT amounts which had accrued but were not taken into account. Further, the proviso to Section 142(3) provides that where a claim for refund of CENVAT credit is fully or partially rejected, the amount so rejected shall lapse. There is no provision permitting cash refund or transfer under GST of CENVAT amounts that were not reflected as balance prior to the appointed day. [Paras 3, 10, 11]

Appellant cannot now seek transfer as Input Tax Credit or cash refund for CENVAT amounts not taken into account before the CGST Act; rejected amounts lapse under Section 142(3) proviso.

Jurisdiction of CESTAT in transitional cases limited to interpretation of Central Excise and Finance Act as modified by CGST - To what extent CESTAT has jurisdiction to decide issues straddling the old enactments and the CGST Act in transitional matters. - HELD THAT: - CESTAT's statutory jurisdiction derives from Customs, Central Excise and Finance Act, 1994; it may interpret and apply those laws. In transitional cases the Tribunal may interpret provisions of the CGST Act only insofar as they modify or affect the application of the Central Excise Act and Finance Act. Purely GST provisions, such as the standalone mechanism for transfer of CENVAT balances under Section 140, fall outside CESTAT's role to the extent they are exclusively matters under the CGST appellate scheme. [Paras 11]

CESTAT's role in transitional matters is limited to interpreting CGST provisions only as they affect the Central Excise Act and Finance Act; it has no role in applying standalone GST transfer provisions beyond that scope.

Refund of CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 - proviso to Section 142(3) of the CGST Act, 2017 - rejected CENVAT amounts lapse - Whether the appellant is entitled to refund of the disputed CENVAT credit in the facts of this case. - HELD THAT: - The appellant's refund claim under Rule 5 was partially rejected by the original authority, that rejection was upheld on appeal and by this Bench. The proviso to Section 142(3) provides that a CENVAT refund claim which is fully or partially rejected shall result in the rejected amount lapsing. The appellant could have taken back the rejected credit under Notification No. 27/2012-CE(NT) before the appointed day, but having failed to do so and with the Tribunal's adverse decision final, there is no legal basis to grant cash refund now. [Paras 4, 5, 10, 11]

Appellant is not entitled to refund of the disputed CENVAT credit; the impugned order is correct.

Final Conclusion: The impugned order is upheld; the appeal is rejected as the Tribunal's prior decision denying part of the Rule 5 CENVAT refund is binding, CENVAT amounts not taken into account before the appointed day cannot be transferred under Section 140 or refunded in cash, rejected CENVAT amounts lapse under the proviso to Section 142(3), and CESTAT's jurisdiction in transitional matters is confined to interpretation of the old laws as affected by CGST.

Manufacture of goods - entitlement to exemption under Notification No. 56/2002-CE dated 14.11.2002 - reliance on investigation conducted by another Commissionerate - documentary proof of movement of goods (toll entries, GRs, transport records) - admissibility of cenvat credit to recipient purchasers - penalty liability in absence of proven wrongdoing

Manufacture of goods - reliance on investigation conducted by another Commissionerate - documentary proof of movement of goods (toll entries, GRs, transport records) - entitlement to exemption under Notification No. 56/2002-CE dated 14.11.2002 - Whether M/s Abhay Chemicals manufactured the menthol products during the impugned period and was entitled to the exemption/refund claimed under Notification No. 56/2002-CE dated 14.11.2002. - HELD THAT: - The Tribunal found that the allegation of non-manufacture rested solely on the investigation by the Commissionerate, Merrut-II, which concluded that farmers and commission agents were non-existent. The adjudication did not include independent investigation at the appellants' premises. Documentary evidence on record - including certified entries at toll barriers, GRs, Form 21, Form VAT-58, periodic preventive visits, certificates from District Industries Centre and other departmental verifications, permission/approvals for factory operations and machinery, and audited financial records - supported that raw material entered and finished goods exited and that manufacturing activity was being carried out. The jurisdictional Commissioner's report (dated 21.05.2010) also noted that most consignments were found entered at toll barriers, District Industry Centre and range staff had verified purchases and plant/machinery, and no adverse findings emerged during periodic checks; on identical facts earlier decisions of the Tribunal set aside demands where the Revenue relied on the Merrut investigation alone. In absence of concrete corroborative evidence displacing the material on record, the demand of recovery of refund based on the premise that the appellant did not manufacture was unsustainable. [Paras 9, 10, 11, 12]

Held that M/s Abhay Chemicals was a manufacturer during the impugned period and entitled to the benefit of Notification No. 56/2002-CE; demand of recovery of refund set aside.

Admissibility of cenvat credit to recipient purchasers - documentary proof of movement of goods (toll entries, GRs, transport records) - Whether cenvat credit availed by M/s Siddhant Chemicals and M/s Neeru Enterprises on purchase of menthol products from M/s Abhay Chemicals was rightly denied. - HELD THAT: - The Tribunal held that denial of cenvat credit to the recipients was predicated on the same unsustained conclusion that the J&K supplier did not manufacture the goods. Given the finding that the supplier was a manufacturer and that documentary and departmental verifications supported movement and manufacture, there was no basis to deny cenvat credit to bona fide recipients located in U.P. The Revenue relied on the Merrut-II investigation without independent evidence to displace the recipients' entitlement. [Paras 12]

Held that cenvat credit could not be denied to M/s Siddhant Chemicals and M/s Neeru Enterprises; the denial set aside.

Penalty liability in absence of proven wrongdoing - reliance on investigation conducted by another Commissionerate - Whether penalties imposed on the appellants were sustainable. - HELD THAT: - Penalties were imposed on the premise that appellants did not manufacture and had claimed refunds/availed credit improperly. The Tribunal found the foundational allegation unsupported by independent evidence and that the Revenue had not established culpable conduct. Where demand itself is unsustainable, and no concrete adverse material was produced against the appellants, penalty imposition could not be sustained. [Paras 12]

Penalties imposed on the appellants set aside.

Final Conclusion: The Tribunal set aside the impugned orders, holding that M/s Abhay Chemicals was a manufacturer entitled to the exemption/refund claimed for the period 2005-2006 to 2008-2009, that cenvat credit to the U.P. recipients could not be denied, and that penalties imposed on the appellants were not sustainable; appeals allowed with consequential relief.

Manufacturer status and entitlement to exemption/refund - sustainability of demand based solely on third party investigation - record based adjudication and corroborative evidence - rejection of generalized allegations without local inquiry - consequential relief on set aside of adjudication

Manufacturer status and entitlement to exemption/refund - record based adjudication and corroborative evidence - rejection of generalized allegations without local inquiry - Appellant was a manufacturer during the impugned period and is entitled to benefits under the exemption Notification No. 56/2002-CE and refund of duty paid through PLA; the demand based on the Merrut-II investigation is unsustainable. - HELD THAT: - The Tribunal found that the demand and penalties rested solely on an investigation by the Commissioner, Central Excise, Merrut II which generalized that consignments and farmers were non existent, without conducting any direct investigation at the appellant's premises. The adjudication ignored multiple pieces of corroborative evidence on record - toll barrier entries showing movement of raw material and finished goods, certificates and periodic verifications by District Industry Centre and departmental range staff, preventive staff reports, factory visits by other Departments (Pollution Control, Electrical, etc.), statutory returns and audited financial statements, and sanctioned refund claims previously examined by the jurisdictional range officer. The Tribunal relied on an internal report (dated 21.05.2010) and consistent precedent where identical allegations based on the Merrut investigation were held unsustainable, observing that assessment and adjudication under excise are record based and cannot be premised on generalized assumptions without concrete, corroborative evidence. In the absence of such evidence and given the contemporaneous verifications and entries, the Tribunal held the show cause proceedings to be founded on presumption and set aside the demand, allowing consequential relief. [Paras 10, 11, 12]

Impugned order set aside; appeal allowed and appellant held to be a manufacturer entitled to the exemption/refund claimed, with consequential relief.

Final Conclusion: The Tribunal held that the demand and penalties based on the Merrut II investigation, without concrete corroborative evidence or local inquiry, were unsustainable; the impugned order is set aside, the appellant is held to be a manufacturer for 2005-2006 to 2008-2009 and entitled to the exemption/refund under Notification No. 56/2002-CE, and the appeal is allowed with consequential relief.

CENVAT credit admissibility - nexus requirement for input services - Input Service Distributor (ISD) distribution of credit - liability of recipient of ISD invoices - recovery under Rule 14 of CENVAT Credit Rules, 2004 - time-bar/limitation on recovery

Input Service Distributor (ISD) distribution of credit - liability of recipient of ISD invoices - recovery under Rule 14 of CENVAT Credit Rules, 2004 - time-bar/limitation on recovery - Whether the recipient of ISD invoices (field unit) can be proceeded against for reversal/recovery of CENVAT credit allegedly wrongly distributed by the head office ISD, and whether the demand is time barred. - HELD THAT: - The Tribunal held that where credit has been distributed by a registered head office acting as an ISD, the field unit which merely received ISD invoices cannot be expected to explain or correct an error committed by the ISD. The scheme of the CENVAT Credit Rules contemplates head office distribution of credits for services used at head office but attributable to manufacture in field units. If the ISD wrongly avails or distributes ineligible credit, the field unit having accepted ISD invoices in good faith cannot be saddled with malafide. In these circumstances extended period of limitation cannot be invoked against the field unit and the demand is time barred. Applying these principles to the record, the Tribunal found the first appellate authority erred in holding the recipient liable and in treating the matter as within time. [Paras 8, 9, 10, 11]

Recipient of ISD invoices (field unit) cannot be held liable for wrongful availing/distribution of credit by the head office ISD; recovery against the field unit is time barred and therefore unsustainable.

CENVAT credit admissibility - nexus requirement for input services - Whether the impugned credits shown on ISD invoices lacked the requisite nexus to manufacture so as to be disallowed from the recipient's hands. - HELD THAT: - The Tribunal analysed the statutory definition of input service under the CENVAT Credit Rules and the inclusive meaning of 'manufacture' by reference to the Central Excise Act, observing that Rule 2(l) casts a wide net and expressly includes services used 'in or in relation to manufacture' including services rendered at head office which are integrally connected with manufacture. The scheme permits ISD distribution to field manufacturing units for services consumed at head office but attributable to manufacture. The appellate authority's finding that documentary proof was not furnished was held to be erroneous on the record, since the show cause itself was based on ISD invoices and ER 1 returns submitted by the appellant. Applying the legal test of nexus and the evidence, the Tribunal found the denial of credit to the recipients was unsustainable. [Paras 8, 9, 10, 11]

Denial of CENVAT credit for lack of nexus was not sustainable on the facts and record; the impugned order confirming demand on that ground is set aside.

Final Conclusion: The appeal is allowed; the impugned order confirming recovery of CENVAT credit and imposing penalty on the appellant (recipient of ISD invoices) is set aside on the grounds that the field unit cannot be held liable for wrongful distribution by the head office ISD and that the denial of credit for lack of nexus was unsustainable on the record.

CENVAT credit on inputs - definition of "input" w.e.f. 01.04.2011 - exclusion for goods used in construction or works contract - remand for verification of invoices for excess credit

CENVAT credit on inputs - definition of "input" w.e.f. 01.04.2011 - exclusion for goods used in construction or works contract - entitlement to CENVAT credit on SS plates, corrugated sheets, wire mesh, welding electrodes, spares and OSM projects - HELD THAT: - The Tribunal found that all disputed goods were received in and used within the factory after 01.04.2011 and therefore fall within the expanded definition of "input" under the CENVAT Credit Rules, 2004 as amended w.e.f. 01.04.2011. The departmental contention that the goods are excluded under the clause relating to construction, laying of foundation or works contract was rejected because the goods in question were not part of any works contract or foundation/structure-making activity. Applying the revised definition and excluding the applicability of the construction/works-contract exclusion, the Tribunal held that the appellant was entitled to CENVAT credit on the listed items. [Paras 8, 10]

Appeal allowed in respect of credit taken on SS plates, corrugated sheets, wire mesh, welding electrodes, spares and OSM projects.

Remand for verification of invoices for excess credit - limited verification of alleged excess CENVAT credit - excess credit allegedly availed against specified invoices to be verified - HELD THAT: - The Tribunal noted an alleged excess CENVAT credit in respect of Invoice No.1062 dated 13.03.2014 and Invoice No.219 dated 19.03.2015 as reflected in the impugned order's table. The appellant contended that the credit was taken against multiple invoices though only one invoice number was recorded in the CENVAT register. As the existence and accounting of the additional invoices could explain the differential credit, the Tribunal did not decide the excess-credit allegation on merits but remitted the matter to the original authority for limited verification whether the additional invoices relied upon by the appellant are available and, if so, whether they explain the excess credit. If verified, the appellant would be entitled to the credit notwithstanding the incorrect invoice entry in the register. [Paras 9, 10]

Matter remitted to the original authority to verify the additional invoices and, if found, to allow the credit accordingly.

Final Conclusion: The appeal is allowed insofar as CENVAT credit on the specified goods is concerned; the question of alleged excess credit on specified invoices is remitted to the original authority for limited verification and consequential relief if the additional invoices are found to explain the credit.

CENVAT credit eligibility - definition of input service - capital goods - hiring of capital goods as taxable service - cargo handling service eligible for credit - extended period of limitation - suppression with intent to evade

CENVAT credit eligibility - definition of input service - capital goods - hiring of capital goods as taxable service - cargo handling service eligible for credit - CENVAT credit taken on hiring of excavators, wheel loaders and tippers (and cargo handling service) is allowable for the period in question. - HELD THAT: - The Tribunal found that the authorities below did not consider the full definition of input service under Rule 2(l) of the CCR, 2004 as applicable during the relevant period and therefore erred. Excavators and loaders fall under Chapter 84 and tippers/dumpers are covered as capital goods under the definition of capital goods; hiring of such capital goods constitutes a taxable service and is eligible for CENVAT credit under Rule 2(l)(B) during the relevant period. The Tribunal also observed that the amount included for cargo handling service was indisputably eligible and its denial was erroneous. Reliance was placed on earlier Tribunal and judicial decisions recognizing excavators, loaders and tippers as capital goods and permitting credit on hiring when used for providing the taxable service of mining of minerals. Applying these principles to the material on record, the demand on merits was held unsustainable. [Paras 6]

Demand on account of disallowance of CENVAT credit in respect of hiring of excavators, loaders and tippers and denial of credit for cargo handling service is set aside and credit is held allowable.

Extended period of limitation - suppression with intent to evade - Invocation of extended period of limitation is not sustainable for the impugned demand. - HELD THAT: - The show-cause notice issued on 07/11/2014 related to the period May 2011 to May 2012 and was based on an audit report dated 07/05/2012. The Department did not place any evidence that the appellant suppressed material facts with intent to evade duty. Transactions and invoices were recorded in the books and verified during audit. In absence of any proof of suppression or mala fide conduct, the Tribunal held that reliance on the extended period of limitation was impermissible and the demand is therefore time-barred. [Paras 6]

Extended period of limitation cannot be invoked; the entire demand is barred by limitation.

Final Conclusion: The impugned order is set aside: the CENVAT credit disallowance (including cargo handling service) is reversed on merits and the demand is held time barred for the period May 2011 to May 2012; the appellant's appeal is allowed with consequential relief.

Applicability of Rule 6 of CENVAT Credit Rules, 2004 to supplies to SEZ units - Demand equivalent to 8% or 10% of value on supplies to SEZ developers - Supply to SEZ unit not within the ambit of Rule 6

Applicability of Rule 6 of CENVAT Credit Rules, 2004 to supplies to SEZ units - Demand equivalent to 8% or 10% of value on supplies to SEZ developers - Validity of the demand equivalent to 8% or 10% of the value of cement cleared to SEZ developers for the period November, 2008 to December, 2008, in view of Rule 6 of the CENVAT Credit Rules, 2004. - HELD THAT: - The Tribunal, following the decision of the Hon'ble High Court of Andhra Pradesh in CCCE, Hyderabad vs Sujana Metal Products Ltd [2015 (3) TMI 781 (AP-HC)], which upheld the Tribunal's view that Rule 6 of the CENVAT Credit Rules, 2004 is not applicable to supplies made to SEZ units, held that the impugned demand based on that Rule is unsustainable. Applying that authoritative precedent, the Tribunal concluded that the levy sought (an amount equivalent to 8% or 10% of the value of cement cleared to SEZ developers) could not be sustained under Rule 6 insofar as supplies to SEZ units are concerned and therefore the Order-in-Original imposing such demand was liable to be set aside.

The demand founded on application of Rule 6 of the CENVAT Credit Rules, 2004 in respect of supplies to SEZ developers for the stated period is unsustainable; the impugned order is set aside and the appeal is allowed.

Final Conclusion: Appeal allowed; impugned Order-in-Original set aside because Rule 6 of the CENVAT Credit Rules, 2004 does not apply to supplies to SEZ units as affirmed by the cited High Court decision.

Abatement of appeal on death of a sole proprietor - continuance of proceedings by successor-in-interest or legal representative - no recovery or initiation of proceedings against a dead person - Rule 22 of CESTAT Procedure Rules - continuance after death - tribunal's discretion to allow delayed application for continuance

Abatement of appeal on death of a sole proprietor - continuance of proceedings by successor-in-interest or legal representative - Rule 22 of CESTAT Procedure Rules - continuance after death - no recovery or initiation of proceedings against a dead person - The effect of death of the sole proprietor during the pendency of the appeal and whether the appeal abates or may be continued and the incidental consequence for recovery or prosecution. - HELD THAT: - The Tribunal found that the appellant was a sole proprietorship and that the sole proprietor died during the pendency of the appeal. Rule 22 of the CESTAT Procedure Rules provides that an appeal shall abate on the death of a party unless an application for continuance is made by the successor-in-interest, executor, administrator or other legal representative within sixty days (with power to extend for sufficient cause). The legal representative did not seek continuance; the son of the deceased filed an affidavit disclaiming succession to the business and no one came forward to prosecute the appeal. The Tribunal applied settled authority that no proceedings can be initiated or continued against a deceased person and relied on precedent including the decision of the Apex Court in Shabina Abraham v. Collector of Central Excise and Customs to hold that recovery proceedings cannot be pursued against the dead. The Tribunal also explained that abatement terminates the appeal but does not extinguish the original demand; continuance to pursue the appeal is a privilege contingent on timely application by a proper successor which was not exercised here. The Tribunal therefore proceeded to decide the appeal on record materials and held that the appeal abates on the death of the sole proprietor. [Paras 1, 3, 4]

The appeal abates on the death of the sole proprietor and is disposed of; no continuance was sought by any successor and recovery proceedings cannot be initiated against the deceased.

Final Conclusion: The Tribunal held that, in the absence of any application by a legal successor within the statutory period and in view of the proprietor's death, the appeal abates under Rule 22; the appeal is disposed of and proceedings against the deceased cannot be pursued.

Interest under Section 11BB of the Central Excise Act - refund of excise duty to 100% EOU - consequential refund - remand for verification - unjust enrichment - natural justice

Interest under Section 11BB of the Central Excise Act - remand for verification - consequential refund - entitlement to interest on the refunded excise duty under Section 11BB - HELD THAT: - The Tribunal found that the refund of duty deposited on stock at the time of debonding was ultimately allowed following verification pursuant to the Tribunal's remand. The court recorded that the documents relied upon by the appellant - stock registers, invoices, shipping bills, packing lists and related export records - were already on the record when the refund claim was filed and that no fresh evidence was produced after remand. The Commissioner (Appeals) erred in rejecting interest on the ground that the refund was allowed only after documents were examined pursuant to remand. Since the refund was held admissible on the basis of the same materials that were on record earlier, the appellant is entitled to interest under Section 11BB for the period from 18.07.2009 until the date of sanction of the refund. The Tribunal therefore directed payment of interest and gave a timeline for sanction. [Paras 5, 10]

Interest under Section 11BB is payable from 18.07.2009 to the date of sanction of the refund; interest to be granted within 45 days of receipt of the order.

Final Conclusion: The appeal is allowed: the appellant is entitled to interest on the refunded excise duty under Section 11BB for the period from 18.07.2009 to the date of sanction; interest shall be paid within 45 days from receipt of the copy of this order.

Deduction from taxable turnover - separately charged freight excluded from taxable turnover - interpretation of Rule 6(c) of the Tamil Nadu General Sales Tax Rules, 1959 - binding effect of earlier tribunal order in the assessee's own case - judicial discipline in following prior unchallenged orders

Deduction from taxable turnover - separately charged freight excluded from taxable turnover - interpretation of Rule 6(c) of the Tamil Nadu General Sales Tax Rules, 1959 - Whether freight charges shown and charged separately in the invoice are to be excluded from the taxable turnover under Rule 6(c) and whether the Assessing Officer was justified in revising assessment to include such charges. - HELD THAT: - Rule 6 provides that certain amounts, when specified and charged separately and not included in the price of goods, shall be deducted from total turnover. Clause (c) expressly lists freight and charges for delivery as heads deductible when specified and charged separately. The language of Rule 6 contemplates deduction prior to determination of taxable turnover rather than first including the amounts and thereafter claiming exemption. In the present case the freight charges were shown separately in invoices - a fact acknowledged by the Assessing Officer - yet the Assessing Officer proceeded to revise the assessment and include such charges. Given the plain statutory mandate to deduct separately charged freight from total turnover, the Revenue's contention that the assessee must first include freight in the return and then claim exemption is incorrect. The Assessing Officer's revision rejecting the assessee's separate charging of freight was therefore not sustainable. [Paras 9, 10]

Freight charges shown and charged separately in the invoice are deductible from total turnover under Rule 6(c); the Assessing Officer's inclusion of such charges in the taxable turnover was erroneous.

Binding effect of earlier tribunal order in the assessee's own case - judicial discipline in following prior unchallenged orders - Whether the Tribunal was justified in allowing the State's appeal notwithstanding an earlier unchallenged Tribunal order in the assessee's own case on identical facts. - HELD THAT: - The Tribunal's earlier common order dated 11.01.1999 in the assessee's own case, dealing with identical invoices and facts, had attained finality as the Revenue did not challenge it. When a later Tribunal bench confronts the same parties and identical transactions, judicial discipline requires adherence to the earlier unchallenged order unless the later decision records factual distinctions. In the impugned order the Tribunal referred to the earlier order but did not distinguish it on facts and instead faulted the First Appellate Authority for alleged inadequate verification. Absent any finding that the prior decision was factually distinguishable, the Tribunal was bound to follow the earlier final order in the assessee's favour. The Tribunal erred in allowing the State's appeal and setting aside the First Appellate Authority's order. [Paras 11, 12]

The Tribunal was bound by its earlier unchallenged order in the assessee's own case on identical facts; its reversal without distinguishing the prior order was erroneous.

Final Conclusion: Tax Case Revision allowed; the Tribunal's order is set aside, the order of the First Appellate Authority is restored and the substantial questions of law are answered in favour of the assessee.

Principles of natural justice - assessment order - notice of proposal - opportunity of personal hearing - remand for fresh assessment - independent application of mind

Assessment order - notice of proposal - principles of natural justice - Validity of the assessment order passed without issuing a notice of proposal and without affording the petitioner an opportunity of hearing - HELD THAT: - The impugned order is an order of assessment rendered following inspection by Enforcement Officials but was not preceded by any notice of proposal. The respondent does not dispute absence of such notice. An assessment order passed in breach of the principles of natural justice by omitting to issue a notice of proposal and to afford the assessee a hearing cannot be sustained. Accordingly, the order was set aside. [Paras 4, 5, 6, 7]

Impugned assessment order set aside for having been passed without notice of proposal and without affording an opportunity of hearing.

Remand for fresh assessment - opportunity of personal hearing - independent application of mind - Relief and directions following setting aside of the assessment order - HELD THAT: - The matter was remitted to the Assessing Officer to redo the assessment after issuing a notice of proposal and giving the petitioner an opportunity of personal hearing. The Assessing Officer is directed to make the proposal, consider the petitioner's objections to that proposal independently, and thereafter pass a fresh assessment order on merits and in accordance with law with independent application of mind. The entire exercise is to be completed within six weeks from receipt of a copy of the order. [Paras 7, 8]

Matter remitted to the Assessing Officer to redo the assessment after issuing notice of proposal, hearing the petitioner, and passing a fresh order within six weeks.

Final Conclusion: Writ petition allowed; impugned assessment order for assessment year 2016-2017 set aside and matter remitted to the Assessing Officer to redo the assessment after issuing a notice of proposal, affording personal hearing, and applying independent mind, to be completed within six weeks; no costs.

Monetary limits for filing of appeals - extension of CBDT Circular to Wealth Tax matters - tax effect - dismissal for low tax effect - exceptions to monetary limits

Extension of CBDT Circular to Wealth Tax matters - tax effect - monetary limits for filing of appeals - Extension of CBDT Circular No.3/2018 to wealth tax appeals and the meaning of 'tax effect' for such appeals. - HELD THAT: - The Tribunal held that CBDT Circular No.3/2018 prescribing monetary limits for filing of appeals was extended to wealth tax appeals by CBDT Circular No.5/2019. The circulars apply mutatis mutandis to wealth tax matters and are operative for pending appeals. For wealth tax appeals, 'tax effect' is the difference between the tax on Net Wealth assessed and the tax that would have been chargeable had such Net Wealth been reduced by the amount of wealth in respect of the issues against which appeal is intended to be filed; interest is excluded except where chargeability of interest itself is in dispute, and in penalty orders the tax effect is the quantum of penalty deleted or reduced in the order to be appealed against. The Tribunal applied these definitions and limits as governing the present appeals. [Paras 4, 5]

CBDT Circular No.3/2018, as extended by Circular No.5/2019, governs wealth tax appeals and defines 'tax effect' for determining monetary limits.

Dismissal for low tax effect - exceptions to monetary limits - Whether the Revenue's appeals should be dismissed for low tax effect and the consequence for the assessee's cross objections. - HELD THAT: - Applying the extended circulars, the Tribunal found that the tax effect in the Revenue's appeals is below the prescribed monetary threshold. Consequently, the appeals filed by the Revenue are dismissed on account of low tax effect without adjudicating the merits of the underlying additions. The assessee's cross objections to those appeals accordingly became infructuous and were dismissed. The Tribunal also recorded that the Revenue remains at liberty to seek restoration of the appeals by producing material to show that the appeals are covered by exceptions in paragraph 10 of Circular No.3/2018 or for other tenable reasons. [Paras 5, 6, 7]

Revenue appeals dismissed for low tax effect; cross objections dismissed as infructuous; Revenue may apply for restoration on grounds of exceptions or other tenable reasons.

Final Conclusion: The Tribunal dismissed the Revenue's wealth tax appeals for assessment years before it on account of low tax effect in terms of the CBDT circulars extended to wealth tax matters; the assessee's cross objections became infructuous and were dismissed, subject to the Revenue's liberty to seek restoration by showing applicability of prescribed exceptions or other valid grounds.

Maintainability of an application under Section 20 of the Arbitration Act, 1940 - unregistered partnership and bar under Section 69(3) of the Partnership Act - precedential effect of Supreme Court decisions - remand for fresh consideration in light of binding precedent

Maintainability of an application under Section 20 of the Arbitration Act, 1940 - unregistered partnership and bar under Section 69(3) of the Partnership Act - precedential effect of Supreme Court decisions - remand for fresh consideration in light of binding precedent - Whether the High Court was justified in dismissing the writ petition and upholding the Civil Judge's order holding the application for appointment of an arbitrator to be maintainable without applying this Court's decision in Krishna Motor Service v. H.B. Vittala Kamath. - HELD THAT: - The Supreme Court found that the High Court did not decide the core question in the writ petition having regard to the law laid down by this Court in Krishna Motor Service (supra). The High Court failed to notice and apply that decision when adjudicating the preliminary objection that the application under Section 20 was founded on an unregistered partnership and hence hit by the bar under Section 69(3) of the Partnership Act. Because the High Court did not consider the binding precedent, the Supreme Court set aside the impugned order and remitted the matter for fresh decision. The Supreme Court expressly refrained from deciding the merits of the maintainability question itself and directed the High Court to decide the writ petition afresh strictly in accordance with the law laid down in Krishna Motor Service (supra), uninfluenced by observations in the impugned order or this order. [Paras 12, 13, 14, 15, 16]

Impugned order set aside and the writ petition remitted to the High Court for fresh consideration on merits in light of Krishna Motor Service (supra); Supreme Court declined to decide the issue on merits.

Final Conclusion: The appeal is allowed, the High Court's order is set aside and the matter is remitted to the High Court to decide the writ petition afresh on merits strictly in accordance with the binding decision of this Court in Krishna Motor Service (supra).