TaxTMI Updates e-Newsletter
Apr 30,2020

Stay of operation - provisional attachment - release of funds for payment of GST liabilities - bank cooperation in attachment - withdrawal with liberty to initiate separate proceedings

Release of funds for payment of GST liabilities - bank cooperation in attachment - Permission to transfer part of the attached bank balances for payment of current GST liabilities and direction to banks to cooperate - HELD THAT: - The Court allowed the petitioner to implement the communication dated 20.03.2020 and authorised the transfer of a specified portion of the attached funds for payment of current GST liabilities. Respondent No.2 raised no objection to compliance with the said communication. The Court directed the concerned respondent banks to cooperate and ensure that a sum of Rs. 3,20,00,000/- is transferred for payment of the petitioner's GST liability payable with effect from August 2019 onwards, in accordance with law. The direction of transfer is subject to the petitioner's request and compliance with legal formalities. [Paras 2, 3, 4]

A sum of Rs. 3,20,00,000/- shall be transferred from the attached accounts for payment of current GST liabilities and the respondent banks are directed to cooperate.

Withdrawal with liberty to initiate separate proceedings - Disposition of the interim application and leave to challenge the impugned order in separate proceedings - HELD THAT: - The petitioner withdrew the application seeking stay and to set aside the orders dated 9.3.2020 and 20.03.2020 but sought liberty to initiate separate proceedings to challenge the impugned orders. The Court accepted the withdrawal and dismissed the application as withdrawn while granting the requested liberty to challenge the impugned order by initiating separate proceedings, subject to the direction permitting release of funds as recorded above. [Paras 2, 5]

The application is dismissed as withdrawn with liberty to institute separate proceedings to challenge the impugned orders.

Final Conclusion: The interim application is dismissed as withdrawn, with liberty to the petitioner to initiate separate proceedings to challenge the impugned orders; meanwhile the petitioner is permitted, and the respondent banks are directed, to effect transfer of Rs. 3,20,00,000/- from the attached accounts for payment of current GST liabilities (payable with effect from August 2019 onwards) in accordance with law.

Interim injunction against coercive action - deposit in fixed deposit as condition for grant of interim relief - legality of municipal tax levy vis-a -vis Central Goods and Services Tax Act, 2017 - vires of the Madhya Pradesh Outdoor Advertising Media Rules, 2017

Deposit in fixed deposit as condition for grant of interim relief - interim injunction against coercive action - Direction to deposit disputed tax amount in the form of a fixed deposit and grant of protection from coercive action pending adjudication. - HELD THAT: - The Court accepted the petitioner's offer to deposit the amount of tax being charged by the Municipal Corporation in the form of a fixed deposit with the Court and considered the same a reasonable interim measure. On that basis the Court directed the petitioner to deposit the amount before the Registry within thirty days and restrained the respondents from taking any coercive action against the petitioner pending further proceedings. The respondents/State were granted six weeks to file a detailed reply and the matter was listed for further hearing on the specified date. The order records the asserted challenge to the municipal levy as being made after enactment of the Central Goods and Services Tax Act, 2017 and an attack on the vires of the Madhya Pradesh Outdoor Advertising Media Rules, 2017, but those substantive questions were not decided at this interim stage.

Petitioner to deposit the disputed amount in fixed deposit within 30 days; respondents restrained from coercive action; respondents to file detailed reply within six weeks and matter listed for further hearing.

Final Conclusion: Interim relief granted on petitioner's undertaking: deposit in fixed deposit as condition for restraint against coercive measures; substantive questions regarding the municipal levy and vires of the State Rules left open for adjudication after respondents file their reply.

Doctrine of mutuality - Exemption from taxability - excess of income over expenditure - Common Identity - Oneness with the members / contributors - Completeness of Identity - Non-profiteering and Obedience to Mandate - assessee incorporated by YRIPL as its fully owned subsidiary after having obtained approval from the Secretariat for Industrial Assistance (for short “SIA”) for the purpose of economisation of the cost of advertising and promotion of the franchisees as per their needs - HELD THAT: - The Court applied the established three fold tests for mutuality - identity of contributors and recipients, treatment of the entity as an instrument obedient to members' mandate, and impossibility of profits - and found all three tests breached on the facts. The assessee received contributions from a non member (Pepsi Foods Ltd.) which did not have any entitlement to share in the surplus and no Brand Fund had been constituted for it; hence the required common identity and completeness of identity were absent. The Tripartite Agreement vested sole and absolute discretion in the parent (YRIPL) to contribute and to control management, contrary to the SIA approval which required fixed contributions and mutual control; clauses permitting retention or discretionary refund of surplus and disclaimers against any trust further negated entitlement of contributors to the surplus. These features introduced commerciality and permitted indirect profit to the parent without reciprocal obligations, breaching non profiteering and obedience to the mandate, so mutuality did not subsist. [Paras 31, 32, 33, 34, 35]

The assessee company did not qualify as a mutual concern; the doctrine of mutuality did not apply.

Doctrine of mutuality - diversion of income by overriding title - Whether the excess of income over expenditure (surplus) in the hands of the assessee was not taxable? - HELD THAT: - Having held that mutuality was absent, the Court concluded exemption of the surplus could not be granted on that ground. The alternative contention that the contributions were not the assessee's income because they were held or diverted under an overriding obligation (trust/ diversion before accrual) was noted but not decided on merits: the jurisprudence distinguishes amounts diverted before accrual (deductible/not assessable) from amounts applied after reaching the assessee (assessable). The Tribunal had not addressed this point and a rectification application raising it is pending; the Court therefore left the matter open for the assessee to pursue rectification and did not express any opinion on the tenability of that plea. [Paras 38, 39, 40, 41, 42]

The surplus is not exempt on the basis of mutuality and is taxable; the plea of diversion by overriding title was left open for consideration via the pending rectification process.

Final Conclusion: Appeal dismissed. The Court affirmed that the assessee did not qualify as a mutual concern and its surplus is not exempt from tax; the alternative contention of diversion by overriding title was not adjudicated and the assessee was granted liberty to pursue the pending rectification application.

Revenue expenditure vs capital expenditure - deferred revenue expenditure - continuing benefit test - allowability of advertisement and sales promotion expenditure in year of incurrence - precedential applicability of Madras Industrial Investment Corporation Ltd.

Deferred revenue expenditure - revenue expenditure vs capital expenditure - continuing benefit test - allowability of advertisement and sales promotion expenditure in year of incurrence - Whether the addition made by the Assessing Officer by treating advertisement, publicity and sales promotion expenses as deferred revenue (capitalised and spread over five years) was contrary to law and rightly deleted by the Tribunal. - HELD THAT: - The Tribunal found that identical advertisement and sales-promotion claims by the assessee in earlier scrutiny assessments had been admitted by the Department and those orders had attained finality; on the facts the expenditure was incurred wholly and exclusively for the purpose of business and was not for acquisition of any asset or right of a permanent character. The Court held that such expenditure is revenue in nature and therefore admissible in full in the year of incurrence. The Supreme Court decision in Madras Industrial Investment Corporation Ltd. was examined and held inapplicable: that case concerned discount on debentures giving benefit over the debenture period and therefore required spreading, whereas advertising and sales-promotion expenses form an integral part of carrying on the business and do not create a lasting asset requiring capitalization. The Court also noted consistent reasoning in other decisions (including the Division Bench of Punjab & Haryana High Court in Glen Appliances) that where no evidence shows a multiyear accruing benefit, advertising expenditure is revenue in nature and allowable in the year incurred. The Revenue did not point to any perversity or illegality in the Tribunal's findings to justify interference. [Paras 8, 9, 10, 11]

Tribunal's deletion of the addition was upheld; the expenditure was held to be revenue in nature and allowable in the year of incurrence.

Final Conclusion: Both Revenue appeals under Section 260A are dismissed; the substantial question of law is answered in favour of the assessee and against the Revenue, upholding the Tribunal's deletion of the addition and allowing the advertisement and sales-promotion expenditure in the year claimed.

Onus of proof - double addition - impounded loose papers - seized documents - estimation of income by application of GP/NP rate - affidavit under Rule 10 of Appellate Tribunal Rules, 1963 - appellate authority's factual findings and their affirmation by Tribunal

Double addition - impounded loose papers - onus of proof - affidavit under Rule 10 of Appellate Tribunal Rules, 1963 - appellate authority's factual findings and their affirmation by Tribunal - Deletion of the addition of Rs. 3,82,24,844/- made on the basis of impounded loose papers in assessment year 2010-11 was justified. - HELD THAT: - The Court accepted the finding that the addition in A.Y. 2010-11 was based on the same set of seized papers on which additions had been made and enhanced in A.Y. 2009-10, resulting in a double addition for a single project. The Assessing Officer had not made efforts to cross-check or conduct spot investigation to establish that seized papers pertained to projects other than Shanti Residency, nor had he rebutted the assessee's written submissions and affidavit filed under Rule 10. In absence of positive proof by the Department and having regard to the principle that the party asserting a fact bears the onus of proof, the CIT(A) concluded that the Department's case was not established; that conclusion was affirmed by the Tribunal and not shown to be perverse or illegal. The Supreme Court decision in Chuharmal (distinguishable on facts) did not assist Revenue where double addition and lack of positive proof were found. The appellate authorities' cumulative factual analysis therefore warranted deletion of the addition. [Paras 6, 7, 8, 11, 12]

Addition of Rs. 3,82,24,844/- deleted; findings of CIT(A) affirmed by Tribunal and upheld.

Seized documents - expenses outside books of account - impounded loose papers - appellate authority's factual findings and their affirmation by Tribunal - Deletion of addition of Rs. 3,13,166/- on account of expenses alleged to be incurred outside the books of account was justified. - HELD THAT: - The CIT(A) accepted the assessee's plea that the impounded papers relating to the alleged unrecorded expenses pertained to sub-contractors rather than to the assessee; written explanations earlier submitted and ITRs of sub-contractors showing applicable NP were considered. The Assessing Officer had merely reiterated the assessment finding without producing positive evidence to rebut these contentions. The Tribunal affirmed the CIT(A)'s factual conclusion after reviewing the material on record. In these circumstances the deletion of the addition was sustained. [Paras 10, 11]

Addition of Rs. 3,13,166/- deleted; CIT(A)'s finding affirmed by Tribunal and upheld.

Estimation of income by application of GP/NP rate - impounded loose papers - seized documents - appellate authority's factual findings and their affirmation by Tribunal - Deletion of addition of Rs. 10,81,612/- made on account of difference in sales (estimates) was justified. - HELD THAT: - The CIT(A) found that the seized papers relied upon by the Assessing Officer were captioned as estimates and were not established to pertain to any project other than Shanti Residency. Further, once income was estimated by applying NP/GP rates, incidental expenses and receipts were deemed to be accounted for. The Assessing Officer failed to prove that the impounded estimates related to other projects; these factual findings were affirmed by the Tribunal. On the record the deletion was not susceptible to interference. [Paras 10, 11]

Addition of Rs. 10,81,612/- deleted; CIT(A)'s finding affirmed by Tribunal and upheld.

Final Conclusion: The Revenue's appeal is dismissed. The factual findings of the CIT(A), affirmed by the Tribunal, that the three additions were not established (including that one was a double addition) are upheld and no substantial question of law arises.

Deduction under Section 80-IA - audit report in Form No.10CCB - mandatory versus directory condition for statutory compliance - reassessment proceedings under Section 147/148 and treatment of returns filed in response to notice - admissibility of documents presented before completion of assessment - separate unit with separate audited accounts

Deduction under Section 80-IA - audit report in Form No.10CCB - mandatory versus directory condition for statutory compliance - admissibility of documents presented before completion of assessment - Whether an assessee who did not file the audit report in Form No.10CCB with the original return could present the report during assessment or reassessment proceedings and thereby satisfy the condition in Section 80-IA(7) for claiming the deduction. - HELD THAT: - The Court held that the requirement in Section 80-IA(7) that the accounts be audited and the audit report furnished along with the return is not to be treated as an inflexible bar where the report is furnished before completion of assessment. The Full Bench decision in Commissioner of Income Tax vs. Punjab Financial Corporation dealing with an analogous provision was followed: an audit report presented during the course of assessment satisfies the condition. Reassessment proceedings under Sections 147/148 invoke the machinery of assessment and a return furnished in response to a notice under Section 148(1) is to be treated as a return under Section 139; accordingly, documents and audit reports filed before framing of reassessment cannot be ignored. In the present case the assessee filed Form No.10CCB before completion of reassessment, and there was no material to show the Assessing Officer doubted the audit report's correctness; therefore the condition in Section 80-IA(7) was satisfied and the deduction could not be denied solely because the report was not filed with the original return. [Paras 10, 11, 12, 13, 14]

The audit report in Form No.10CCB filed before completion of assessment/reassessment satisfies Section 80-IA(7); the deduction under Section 80-IA could not be denied on the ground that the report was not filed with the original return.

Deduction under Section 80-IA - separate unit with separate audited accounts - comparative proportion of raw material consumption and sales - Whether deduction under Section 80-IA was rightly allowed for Unit-II where the Assessing Officer considered the profit shown by Unit-II to be disproportionate when compared to combined Unit-I and Unit-II accounts based on raw material consumption ratios. - HELD THAT: - The Court accepted the reasoning of the CIT(A) and Tribunal that Unit-II was a separate and independent undertaking manufacturing different products (micronutrient fertilizers) and maintained separate audited accounts. Where separate accounts are maintained and products and raw-material requirements differ between units, it is impermissible to reconstitute Unit-II's sales and profits by applying ratios derived from Unit-I. The Assessing Officer's reliance on combined-account proportionality to impugn Unit-II's profit was therefore unsustainable. In these factual circumstances the allowance of the claimed deduction was upheld. [Paras 15]

The deduction under Section 80-IA in respect of Unit-II was correctly allowed where Unit-II maintained separate audited accounts and the products and raw-material consumption differed from Unit-I.

Final Conclusion: Both substantial questions of law were answered against the Revenue: filing of the audit report in Form No.10CCB before completion of assessment/reassessment satisfied Section 80-IA(7), and the deduction for Unit-II was properly allowed where Unit-II was a separate unit with separate audited accounts; the appeal is dismissed.

Capital expenditure versus revenue expenditure - non compete fee as an intangible asset - depreciation under section 32 of the Income tax Act - enduring benefit test for capitalisation - possession and control in determining capital nature - consistency of treatment in subsequent assessment years

Non compete fee as an intangible asset - capital expenditure versus revenue expenditure - depreciation under section 32 of the Income tax Act - enduring benefit test for capitalisation - Payment characterised as non compete fee held to be capital expenditure and not admissible as revenue deduction; depreciation not allowable under section 32. - HELD THAT: - The assessee claimed amortisation of a large payment described as non compete fee paid to bottlers for not competing and for non disclosure of confidential information over a five year period. The Assessing Officer and CIT(A) treated the payment as capital, observing that by the payment (together with consideration for purchase of business) the assessee had effectively acquired a new business or an asset yielding enduring benefit. The Tribunal applied the ratio of the jurisdictional High Court decision relied upon in earlier assessments and concluded that the payment constituted capital expenditure. In view of that precedent and the Tribunal's prior decision in the assessee's own case, the payment could not be allowed as a revenue expense and depreciation under section 32 was also not permissible on that capitalised expenditure. [Paras 7]

Grounds 2 to 2.6 dismissed; non compete fee held to be capital expenditure and depreciation not allowable.

Capital expenditure versus revenue expenditure - possession and control in determining capital nature - enduring benefit test for capitalisation - consistency of treatment in subsequent assessment years - Expenditure on ice boxes supplied to hawkers/dealers allowed as revenue deduction. - HELD THAT: - The Assessing Officer disallowed amounts paid for ice boxes and signages as capital, treating them as plant and machinery. While signages were allowed by the CIT(A) following Tribunal precedent, ice boxes were treated as capital in an earlier assessment. The assessee argued the ice boxes were not owned by it and merely facilitated sales by third party hawkers at required temperatures. The Tribunal noted reliance on the High Court's decision in Honda Siel and, having regard to subsequent treatment in later assessment years (where similar claims were allowed by the Assessing Officer or CIT(A)), applied a consistency approach. On the totality of facts and the pattern of allowance in later years, the Tribunal held the ice box expenditure to be revenue in nature and allowed the deduction in full. [Paras 13]

Grounds 3 to 3.2 allowed; expenditure on ice boxes treated as revenue expense and deducted.

Final Conclusion: The appeal is partly allowed: the disallowance of the non compete fee (grounds 2-2.6) is sustained and depreciation is not admissible; the disallowance of expenditure on ice boxes (grounds 3-3.2) is reversed and the claim is allowed.

Condonation of delay for filing appeal - admissibility of additional evidence under Rule 46A - jurisdiction to reopen completed assessments under section 153A in absence of incriminating material - rule of finality of assessment - binding precedent of the jurisdictional High Court

Condonation of delay for filing appeal - Whether the delay of twenty days in filing the appeal before the Commissioner of Income Tax (Appeals) should be condoned. - HELD THAT: - The Tribunal upheld the exercise of discretion by the Ld. CIT(A) in condoning the nominal delay of twenty days. The assessee had explained that multiple interlinked assessment orders of group companies were being finalised and a writ petition before the High Court was pending and thereafter deferred, which reasonably prevented timely filing. The Bench applied the pragmatic approach reflected in binding authorities and found no negligence or malafide in the assessee's conduct; therefore the condonation was justified and the Revenue's challenge was dismissed.

Delay of twenty days in filing the appeal was properly condoned; Revenue's grounds challenging condonation are dismissed.

Admissibility of additional evidence under Rule 46A - Whether the Ld. CIT(A) erred in admitting or considering additional evidence under Rule 46A when deciding the appeals. - HELD THAT: - The Tribunal observed that the Ld. CIT(A) did not base his decision on newly admitted evidence that altered substantive additions (substantive addition under section 68 was confirmed). As the legal issue regarding jurisdiction under section 153A could be raised at any stage and the CIT(A)'s decision referred to material already on record (including proceedings under section 264), there was no breach of Rule 46A warranting interference. Revenue's contention that Rule 46A exceptions were not satisfied was rejected.

No interference with the CIT(A)'s treatment of additional evidence; Revenue's challenge on Rule 46A grounds is dismissed.

Jurisdiction to reopen completed assessments under section 153A in absence of incriminating material - rule of finality of assessment - binding precedent of the jurisdictional High Court - Whether assessments already completed prior to search can be reopened and additions sustained under section 153A where no incriminating material pertaining to those assessment years was unearthed during the search. - HELD THAT: - Applying the binding decisions of the jurisdictional High Court (as discussed in the appellate order), the Tribunal held that completed assessments can be interfered with under section 153A only on the basis of incriminating material unearthed during the course of the search that pertains to the assessment year in question and was not already disclosed in the original assessment. The Tribunal found that the additions challenged in the lead appeal were based on items already disclosed in the original returns and balance-sheets and that the assessment for the relevant years had been completed on the date of search. The assessment orders under challenge did not refer to any incriminating documents or material relating to those years; therefore the A.O. lacked jurisdiction to make those additions. The Tribunal rejected Revenue's reliance on decisions from other High Courts to the extent they conflict with the binding jurisprudence of the Delhi High Court and noted that pendency of an SLP does not negate the binding effect of the jurisdictional High Court's decision.

Where no incriminating material relating to the assessment year was found during search and the original assessment was complete, the additions made under section 153A were not sustainable and are deleted; Revenue's appeals on this ground are dismissed and assessee appeals are allowed.

Final Conclusion: The Tribunal dismissed the Departmental appeals and allowed the appeals/cross objections of the assessees in the consolidated group of matters. The Ld. CIT(A)'s orders condoning delay, declining to admit improper additional evidence, and holding that completed assessments could not be reopened under section 153A without incriminating material pertaining to the relevant years were affirmed; the impugned additions (being based on items already disclosed in original returns and without nexus to seized incriminating material) were deleted and merits issues were left academic.

Computation of capital gains - adoption of actual sale consideration over registered consideration - proof of consideration by purchaser's statement - deduction for cost of improvement / development expenses - remand for fresh adjudication and evidentiary verification - exemption under Section 54F - investment in property in the name of spouse and entitlement to exemption

Computation of capital gains - adoption of actual sale consideration over registered consideration - proof of consideration by purchaser's statement - Adoption of Rs. 37,92,600 as full value of consideration for computation of capital gains in place of the lesser amount stated in the registered sale deed. - HELD THAT: - The assessee sold land after executing an agreement for sale fixing consideration at Rs. 37,92,600 while the registered sale deed recorded a lower consideration of Rs. 19,85,000. The Assessing Officer, supported by an on-oath statement from the purchaser confirming payment of Rs. 37,92,600 in cash in installments, substituted the registered consideration with the higher figure for computing capital gains. The Tribunal found no infirmity in the Assessing Officer's adoption of the higher consideration and upheld the Commissioner (Appeals) in doing so, treating the purchaser's sworn confirmation as material that the assessee could not effectively controvert. [Paras 3]

The higher sale consideration of Rs. 37,92,600 was held to be the correct full value of consideration for computing capital gains.

Deduction for cost of improvement / development expenses - remand for fresh adjudication and evidentiary verification - Claim of deduction of Rs. 5 lakhs towards cost of development was not accepted on the record and was remitted to the Assessing Officer for fresh adjudication and verification. - HELD THAT: - The assessee produced only a receipt from the purported mason and failed to furnish PAN, address or corroborative evidence; the Assessing Officer disbelieved the claim and denied the deduction, a position upheld by the Commissioner (Appeals). Before the Tribunal the assessee made only bald submissions without additional evidence. In the interests of justice the Tribunal directed a de novo consideration limited to the claimed development expenditure: the assessee must produce necessary supporting evidence and the Assessing Officer is to verify with the mason or other persons who executed the work to determine the veracity and quantum of the expenditure. [Paras 3, 4]

The claim for Rs. 5 lakhs as cost of improvement was remitted to the Assessing Officer for fresh adjudication and verification of evidence.

Exemption under Section 54F - investment in property in the name of spouse and entitlement to exemption - Assessee is entitled to exemption under Section 54F despite the new property being registered in the name of her husband. - HELD THAT: - There was no dispute that reinvestment in immovable property had been made; the sole controversy was that the property was purchased in the name of the assessee's husband. Applying the precedent of the jurisdictional High Court in C.I.T. v. V. Natarajan, the Tribunal held that acquisition in the name of the spouse does not disentitle the assessee to exemption under Section 54F where the factual reinvestment has been made. The Tribunal directed the Assessing Officer to allow the exemption accordingly. [Paras 5]

Exemption under Section 54F was allowed despite the new property being in the name of the assessee's husband.

Final Conclusion: The Tribunal upheld the Assessing Officer's adoption of the higher sale consideration for computing capital gains, remitted the claim for Rs. 5 lakhs as development cost to the Assessing Officer for fresh and verified adjudication, and granted exemption under Section 54F notwithstanding that the new property was purchased in the name of the assessee's husband; the appeal was allowed for statistical purposes.

Deemed dividend under section 2(22)(e) - conduit payment / intermediary transaction - substantial interest of shareholder - evidence to establish company loan

Deemed dividend under section 2(22)(e) - conduit payment / intermediary transaction - evidence to establish company loan - Whether the amount withdrawn by the assessee from M/s. Kasani Hotels and Resorts Pvt. Ltd. is taxable as a deemed dividend under section 2(22)(e) or is a payment routed through the company as a conduit for amounts due to the assessee from Amsri group. - HELD THAT: - The Tribunal examined the documents in the paper books, which were stated to have been before the lower authorities and were not controverted by the Revenue. The account statements and book entries show payments from Amsri Group to M/s. Kasani Hotels and Resorts Pvt. Ltd. and M/s. Kasani Constructions Pvt. Ltd., and inter-company entries within the Kasani group, while there is no material to establish any direct business relationship between Amsri Group and the Kasani companies. The Tribunal accepted the assessee's case that the assessee and his family had a development agreement and business dealings with Amsri Group and that amounts due to the assessee/family were routed through the Kasani companies. On this factual foundation the Tribunal held that the sums withdrawn by the assessee were not funds belonging to M/s. Kasani Hotels and Resorts Pvt. Ltd. and therefore did not constitute a distribution or loan by the company to the assessee liable to be treated as deemed dividend under section 2(22)(e). The Tribunal accordingly concluded that the addition made by the Assessing Officer under that provision was unsustainable and directed deletion of the addition. [Paras 6, 7]

Addition under section 2(22)(e) deleted and the appeal allowed.

Final Conclusion: On the materials placed before it, the Tribunal found that the amounts in question were payments routed through the Kasani companies to the assessee/family by Amsri Group and not loans or distributions by the companies; consequently the deemed dividend provision was inapplicable, the addition under section 2(22)(e) was deleted, and the appeal was allowed for AY 2008-09.

Scientific research and development - deduction under section 80IB(8A) - conditions of Rule 18DA - independence of research activity versus captive use of licensed technology - role of sub-licence and tripartite agreements in determining source of profit

Scientific research and development - deduction under section 80IB(8A) - conditions of Rule 18DA - role of sub-licence and tripartite agreements in determining source of profit - Whether the assessee carried out scientific research and development activities during the assessment year independent of the Monsanto technology so as to entitle it to deduction under section 80IB(8A). - HELD THAT: - The Tribunal reviewed the sublicence agreement with Mahyco Monsanto Biotech (MMB) and the tripartite arrangement with the marketing entity and recorded that the contractual terms show extensive control by MMB over the technology, testing, quality approval, prohibition on modification, and requirements for testing and packaging. The Tribunal noted that approval by the prescribed authority under Rule 18DA does not preclude fact finding by the AO and that the statutory test for deduction under section 80IB(8A) must be read conjointly with the conditions in Rule 18DA; carrying out scientific and industrial research and development independently is a sine qua non. The Tribunal observed that neither the AO nor the CIT(A) undertook an adequate fact finding exercise (including obtaining expert opinion or examining materials placed before the prescribed authority) to determine whether the assessee made independent value addition to the Monsanto technology or was effectively operating as a captive/unit of MMB. In the absence of specific scientific evidence demonstrating independent R&D or value addition, and given that substantial "trait value" payments were made to MMB (and routed outside the assessee's books under the tripartite arrangement), the question of entitlement to deduction could not be finally adjudicated on the existing record. For these reasons the Tribunal directed a limited remand to the Assessing Officer to examine afresh - with opportunity to the assessee to be heard - whether independent research and development was carried out during the year under assessment, including obtaining expert assistance and inspecting materials relied upon by the prescribed authority under Rule 18DA. [Paras 9, 29]

Matter remitted to the Assessing Officer for fresh examination and fact finding on whether the assessee carried out independent scientific research and development for AY 2010-11; appeals disposed of for statistical purposes.

Final Conclusion: The Tribunal remitted the matter to the Assessing Officer to examine afresh, after affording the assessee an opportunity of being heard (and obtaining expert assistance if necessary), whether the assessee carried out independent scientific research and development during AY 2010-11 so as to qualify for deduction under section 80IB(8A); appeals were disposed of for statistical purposes.

Addition under section 69A as unexplained money - verifiability of third-party confirmations - presumptive taxation under section 44AD - maintenance of books not required under section 44AD - deemed income and deemed expenditure - onus to establish genuineness of business transactions

Addition under section 69A as unexplained money - verifiability of third-party confirmations - onus to establish genuineness of business transactions - Deletion of the addition of Rs. 50,50,000 made as unexplained money under section 69A. - HELD THAT: - The Tribunal found that the receipts of Rs. 50,50,000 were reflected in the assessee's bank account and supported by confirmations from the payers. The payers responded to statutory notices and explained non-filing of ITRs by their foreign employment; bank statements of the payers (including NRE and foreign bank statements) and the assessee's bank entries corroborated payments. The assessee's bank showed payments for building materials and the assessee had earlier been in a business registered under Delhi VAT; on this evidence the revenue's reliance on non-filing of ITRs and on the assessee's past profession (teaching) to treat the receipts as unexplained was rejected. In view of verifiable third party confirmations, payer bank records and material purchase entries, the addition as unexplained money was not sustainable. [Paras 11, 13, 14, 15, 23]

Addition of Rs. 50,50,000 as unexplained money under section 69A deleted.

Presumptive taxation under section 44AD - maintenance of books not required under section 44AD - deemed income and deemed expenditure - Validity of assessing income under the presumptive scheme of section 44AD and whether non maintenance of books vitiates the claim. - HELD THAT: - The Tribunal analysed section 44AD and held that the provision deems a specified percentage of turnover to be income and, conversely, treats the remainder as deemed expenditure for tax purposes. An assessee opting for presumptive taxation under section 44AD is not obliged to maintain books of account unless other statutory conditions (e.g., sub section (5)) are triggered. Since the assessee declared income under section 44AD and produced corroborative evidence of receipts and payments, he could not be penalised for not maintaining books; the revenue's doubt about turnover and business genuineness was held untenable in light of the documentary and bank evidence. [Paras 16, 18, 19, 21, 22]

Assessee's declaration under section 44AD is valid; non maintenance of books does not, by itself, invalidate the claim and revenue's contention rejected.

Final Conclusion: The Tribunal allowed the appeal, deleted the addition of Rs. 50,50,000 treated as unexplained money and upheld the assessee's claim under the presumptive taxation scheme of section 44AD, directing deletion of the addition.

Treatment of stamp valuation as deemed sale consideration under section 50C - option to seek valuation by District Valuation Officer under section 50C(2) - bar on invoking section 50C where reference to DVO is claimed but not made - computation of long-term capital gain where circle rate exceeds declared sale consideration - deduction for reinvestment in residential property under section 54 - admissibility of section 54 claim where substantial payments/de facto ownership exist despite unregistered deed - remand to Assessing Officer for computation and verification

Treatment of stamp valuation as deemed sale consideration under section 50C - option to seek valuation by District Valuation Officer under section 50C(2) - bar on invoking section 50C where reference to DVO is claimed but not made - computation of long-term capital gain where circle rate exceeds declared sale consideration - remand to Assessing Officer for computation and verification - Whether the Assessing Officer could invoke section 50C to compute long-term capital gain despite the assessee's request for valuation by the District Valuation Officer and whether the matter requires remand for recomputation. - HELD THAT: - The Tribunal found that the Assessing Officer recorded the assessee's request for valuation by the District Valuation Officer but refused to refer the matter, treating the Sub Registrar's valuation as conclusive and declining the DVO reference as 'not maintainable'. Relying on the coordinate-bench view that where an assessee claims that the stamp valuation authority's value exceeds fair market value the Assessing Officer ought to refer the asset to the DVO under section 50C(2), the Tribunal held that non compliance with that procedure bars the Assessing Officer from invoking section 50C. Consequently, section 50C cannot be applied to substitute the sale consideration recorded in the sale deeds. The issue of long term capital gain is therefore to be recomputed by the Assessing Officer on the basis of the sale consideration declared in the deeds, after affording the assessee an opportunity of being heard. As the Tribunal rejected invocation of section 50C, the related grounds upheld by lower authorities were rendered academic and not adjudicated further. [Paras 9, 10]

Section 50C not invoked; computation of long term capital gain to be made on declared sale consideration and remitted to the Assessing Officer for computation and verification.

Deduction for reinvestment in residential property under section 54 - admissibility of section 54 claim where substantial payments/de facto ownership exist despite unregistered deed - remand to Assessing Officer for computation and verification - Whether the assessee's claim for deduction under section 54 is admissible and requires fresh consideration by the Assessing Officer. - HELD THAT: - The Assessing Officer had declined to admit the section 54 claim on two bases: that the return filed under section 139(4) precluded admitting the claim except by a revised return, and that the purchase of the new residential flat was not verifiable as a transfer within the statutory time because the agreement was unregistered and possession/registered deed were not produced. The Tribunal held that the claim for deduction under section 54 is admissible if the assessee satisfies the statutory conditions; where payments towards the new asset are substantial, principles recognizing de facto ownership may be relevant, but factual satisfaction of conditions must be examined. The Tribunal therefore restored the issue to the Assessing Officer to decide the claim in accordance with law after affording the assessee an opportunity of being heard. [Paras 13, 17]

Claim for deduction under section 54 remitted to the Assessing Officer for determination on merits and verification of conditions, with opportunity to the assessee to be heard.

Final Conclusion: The appeal is allowed for statistical purposes: invocation of section 50C is set aside and computation of long term capital gains is remitted to the Assessing Officer to compute on the declared sale consideration; the claim under section 54 is also remitted to the Assessing Officer for fresh adjudication in accordance with law.

Carry forward of balance additional depreciation - allowability of higher rate of depreciation on computer components and energy saving devices (UPS, printers, scanners) - application of section 40(a)(i) to payments to non residents and obligation to deduct tax at source - timing of deduction of employees' contribution to ESI vis a vis Income tax return filing - disallowance under section 14A read with Rule 8D and quantification of exempt income related disallowance - precedential effect of jurisdictional High Court and coordinate Bench ITAT decisions

Carry forward of balance additional depreciation - precedential effect of jurisdictional High Court and coordinate Bench ITAT decisions - Balance additional depreciation under the second clause of Section 32(1)(iia) carried forward to the subsequent year allowed. - HELD THAT: - The Tribunal followed the jurisdictional High Court decision which held that where additional depreciation was claimed in the preceding year for an asset used less than 180 days, the balance additional depreciation could be claimed in the following year. The CIT(A) had allowed the assessee on this basis and the Tribunal found no reason to interfere with that conclusion, applying the binding effect of the High Court's precedent in similar factual circumstances. [Paras 5]

The Revenue's grounds challenging refusal to allow carry forward of balance additional depreciation are dismissed.

Allowability of higher rate of depreciation on computer components and energy saving devices (UPS, printers, scanners) - precedential effect of coordinate Bench ITAT decisions - Higher rate of depreciation claimed on UPS, printers and scanners (grouped with computer assets) upheld. - HELD THAT: - Relying on earlier decisions of the Tribunal in the assessee's own case and coordinate Bench authority that treated UPS as an energy saving device and printers/scanners as components of computer equipment, the CIT(A) allowed higher depreciation. The Tribunal respectfully followed those precedents and declined to disturb the CIT(A)'s allowance. [Paras 7]

The Revenue's grounds disallowing higher depreciation on UPS, printers and scanners are dismissed.

Application of section 40(a)(i) to payments to non residents and obligation to deduct tax at source - precedential effect of coordinate Bench ITAT decisions - Disallowances under section 40(a)(i) in respect of payments to non residents were deleted where payments related to services rendered and utilised outside India and recipients had no PE in India. - HELD THAT: - The Tribunal and CIT(A) relied on earlier tribunal findings in the assessee's own case that payments for agency commission, warehousing, freight/logistics and similar services rendered and utilized outside India, to non residents without PE in India, were not chargeable to tax in India and therefore not subject to TDS under section 195; consequently section 40(a)(i) did not apply. On the facts and by application of those precedents, the disallowances were rightly deleted and required no interference. [Paras 9]

The Revenue's disallowance under section 40(a)(i) in respect of the specified payments to non residents is dismissed.

Timing of deduction of employees' contribution to ESI vis a vis Income tax return filing - precedential effect of jurisdictional High Court decisions - Amount claimed for employees' ESI contribution was allowable although remitted after the statutory period under the ESI Act, since it was remitted before the due date for filing the return under the Income tax Act and decision followed a jurisdictional High Court precedent. - HELD THAT: - The CIT(A) allowed the claim relying on the jurisdictional High Court decision which the Tribunal accepted. Having followed that precedent, the Tribunal found no reason to interfere with the allowance where the contribution, though remitted after the ESI Act's five day timeline, was paid before the Income tax Act's return filing due date and the controlling authority's decision was in favour of the assessee. [Paras 11]

The Revenue's ground disallowing the ESI contribution for AY 2012 13 is dismissed.

Disallowance under section 14A read with Rule 8D and quantification of exempt income related disallowance - precedential effect of Special Bench and High Court decisions on quantification (Vireet Investments; Chettinad Logistics) - Disallowance under section 14A/Rule 8D remanded to Assessing Officer for fresh examination and recomputation; certain quantification principles to be applied. - HELD THAT: - The Tribunal found that the assessee's contention about significant interest free funds (capital, reserves, surplus) and the method of computing average value of investments (considering only investments yielding exempt income) had not been examined by the lower authorities. In view of this unexamined material and relying on the Special Bench decision in Vireet Investments and the Madras High Court authority in Chettinad Logistics regarding computation methodology, the Tribunal remitted the matter to the AO for fresh adjudication. The assessee is to produce relevant material; the AO shall afford opportunity and recompute disallowance in accordance with law and the cited precedents. [Paras 14]

Assessee's appeals are partly allowed to the extent that the section 14A/Rule 8D disallowance is remitted for fresh examination and recomputation by the AO.

Final Conclusion: The Revenue's appeals for AYs 2012 13, 2013 14 and 2014 15 are dismissed in respect of the carry forward of balance additional depreciation, allowance of higher depreciation on UPS/printers/scanners, deletion of section 40(a)(i) disallowances for specified payments to non residents, and the ESI contribution issue; the assessee's appeals are partly allowed insofar as the section 14A/Rule 8D disallowance is remitted to the Assessing Officer for fresh examination and recomputation in accordance with the Tribunal's directions and applicable precedents.

Failure to adjudicate grounds of appeal - mistake apparent from the record - power to recall under section 254(2) of the Income Tax Act, 1961 - limited recall for adjudication of omitted grounds - posting of appeals for fresh hearing

Failure to adjudicate grounds of appeal - mistake apparent from the record - power to recall under section 254(2) of the Income Tax Act, 1961 - Whether non-adjudication of grounds of appeal and additional grounds by the Tribunal amounts to a mistake apparent from the record warranting recall of the Tribunal's order under section 254(2). - HELD THAT: - The Tribunal examined the impugned consolidated order and found that the grounds of appeal and additional grounds filed by the assessee were not adjudicated. It applied the settled proposition that such non-adjudication constitutes a mistake apparent on the record which is capable of being rectified by exercise of the Tribunal's powers under section 254(2) of the Income Tax Act, 1961. Having so concluded, the Tribunal held that recall of its earlier order was permissible for the limited purpose stated. [Paras 3]

Non-adjudication of the grounds constituted a mistake apparent from the record and justified recall of the Tribunal's order under section 254(2) for limited adjudication of those grounds.

Limited recall for adjudication of omitted grounds - posting of appeals for fresh hearing - What remedial step should be taken once recall is found permissible? - HELD THAT: - The Tribunal recalled the consolidated appeals (ITA Nos.689/CHNY/2012 and 495/CHNY/2014) for the limited purpose of adjudicating the grounds and additional grounds listed in the petitions. The appeals were directed to be listed for hearing on 20.04.2020 and the Tribunal specified that no separate notice was required because the hearing dates had been announced in open court. The Miscellaneous Petitions filed by the assessee were allowed to this extent. [Paras 3, 4]

The appeals were recalled for limited adjudication of the omitted grounds and posted for hearing on 20.04.2020; the miscellaneous petitions are allowed.

Final Conclusion: The Tribunal recalled its consolidated order for assessment years 2009-10 and 2010-2011 under section 254(2) as non-adjudication of grounds amounted to a mistake apparent on the record, directed the appeals to be listed for hearing on 20.04.2020 for adjudication of the omitted grounds, and allowed the miscellaneous petitions.

Proviso to section 54F(1) - ownership of more than one residential house - chargeability under the head Income from House Property - apparent mistake in tribunal order - recall of order for fresh decision

Proviso to section 54F(1) - ownership of more than one residential house - chargeability under the head Income from House Property - Whether the impugned Tribunal order omitted consideration of the condition in proviso (b) to section 54F(1) that the income from the other residential house must be chargeable under the head 'Income from House Property', and whether that omission requires fresh adjudication. - HELD THAT: - The Tribunal reproduced the proviso to section 54F(1) and applied proviso (a)(ii) but did not examine or record any finding on proviso (b) - namely whether income from the other residential house was chargeable under the head 'Income from House Property'. The appellate order (para 11 of the impugned order) treats the purchase of another residential house within the relevant period as automatically attracting the proviso, without deciding the separate statutory condition in proviso (b). The present Tribunal finds that there may be circumstances in which income from an additional residential house is not chargeable under the head 'Income from House Property', and since that factual-legal condition was neither considered nor decided, the omission is an apparent mistake in the impugned order requiring further consideration. Consequently the question whether the proviso to section 54F(1) applies in the assessee's case (given purchases on 25.04.2014 and 28.04.2014) cannot be finally determined without first deciding the chargeability under the head 'Income from House Property'. [Paras 5]

The matter is not finally adjudicated on merits; the omission to consider proviso (b) is an apparent mistake and requires fresh decision on whether income from the two houses is chargeable under 'Income from House Property'.

Apparent mistake in tribunal order - recall of order for fresh decision - Whether the Tribunal should recall the impugned ex parte order and direct a fresh hearing limited to the question of chargeability under 'Income from House Property' for the two properties. - HELD THAT: - Having identified the omission described above, the Tribunal exercises its power to rectify the apparent error by recalling the impugned ex parte order for the limited purpose of determining whether income from the two properties purchased on 25.04.2014 and 28.04.2014 is chargeable under the head 'Income from House Property' and thereafter deciding the applicability of the proviso to section 54F(1). The Registry is directed to list the appeal for fresh hearing on this limited aspect and issue notice to both parties. [Paras 5, 6]

The miscellaneous petition is allowed; the impugned Tribunal order is recalled and the appeal is restored for fresh hearing limited to the specified issue.

Final Conclusion: The Tribunal found an apparent omission in the impugned order for not addressing proviso (b) to section 54F(1) regarding chargeability of income under 'Income from House Property', recalled the ex parte order for fresh consideration of that limited issue (properties purchased on 25.04.2014 and 28.04.2014), and allowed the miscellaneous petition to that extent.

Inclusion of proceeds of sale of scrap in total turnover for computing deduction under section 80HHC - deduction under section 80HHC - treatment of various items of income and requirement of nexus with business profits - remand for fresh adjudication in light of binding Supreme Court precedent - disallowance under section 14A and applicability of contemporaneous funds test/availability of interest-free funds - allowability of depreciation on capitalised share issue expenses as attributable to acquisition of capital assets - allowability of bad debts written off where decision to write off relates to prior accounting period - computation of depreciation after adjusting written down value on slump sale transfer of undertaking - treatment of change in method of accounting for consumables (purchase basis v. consumption basis) - deduction under section 80IB for amalgamated unit - allocation of head office expenses - allowability of interest on Drug Price Equalization Account (DPEA) liability where demand crystallised and past precedents apply - treatment of advance licence benefit for inclusion in profits and eligibility for section 80HHC deduction - allowance only on actual utilized amount - transfer pricing adjustment - allocation of employee time, mark up on costs and correctness of TPO's adhoc uplift - procedural dismissal of appeal under section 154 where monetary threshold and CBDT Circular apply

Inclusion of proceeds of sale of scrap in total turnover for computing deduction under section 80HHC - remand for fresh adjudication in light of binding Supreme Court precedent - Income from sale of scrap and its inclusion in total turnover for computing deduction under section 80HHC - HELD THAT: - The Tribunal noted that earlier decisions in the assessee's own appeals had taken a contrary view, but the Supreme Court in CIT v. Punjab Stainless Steel Industry has held that income from sale of scrap cannot be included in total turnover. Following the Tribunal's approach in the assessee's Assessment Year 2001-02 (which was restored to the Assessing Officer for reconsideration in light of the Supreme Court decision), the matter is not finally adjudicated on merits in this appeal but is restored to the Assessing Officer for fresh adjudication, with directions to afford the assessee a reasonable opportunity of hearing and to consider the issue in the light of the binding Supreme Court ratio. [Paras 6]

Issue restored to the Assessing Officer for fresh adjudication in accordance with the Supreme Court's ratio; remand directed.

Deduction under section 80HHC - treatment of various items of income and requirement of nexus with business profits - Inclusion of various identified items of income in profits of business for computing deduction under section 80HHC (except miscellaneous income which is conceded) - HELD THAT: - The Tribunal observed this was a recurring issue between the parties. Having regard to its own earlier orders in the assessee's preceding assessment years and the fact that the Assessing Officer had given effect to those orders in past years (accepting the assessee's claim on the items except miscellaneous income), the Tribunal restored the matter to the Assessing Officer for fresh adjudication on the same lines. The miscellaneous income of Rs.3.47 lacs was not contested by the assessee and is excluded from restoration. [Paras 12]

Issue restored to the Assessing Officer for fresh adjudication except insofar as miscellaneous income is concerned (conceded by the assessee).

Disallowance under section 14A and applicability of contemporaneous funds test/availability of interest-free funds - Validity of disallowance under section 14A in respect of interest and administrative expenses attributable to exempt dividend income - HELD THAT: - On the facts, the Tribunal accepted that the investments yielding exempt dividend income were made earlier and that sufficient interest-free funds were available in the year under consideration; consequently no disallowance of interest was warranted. The Tribunal also noted the Tribunal's own approach in the assessee's Assessment Year 2001-02 where interest disallowance was deleted and administrative expenses were restricted, and it found the Commissioner (Appeals)'s restriction of disallowance to a specified modest amount to be justified. [Paras 16, 17]

Deletion/restriction of disallowance under section 14A upheld; Revenue's ground dismissed.

Allowability of depreciation on capitalised share issue expenses as attributable to acquisition of capital assets - Allowability of depreciation on share issue expenses capitalised in earlier years - HELD THAT: - The Tribunal noted the consistent view in favour of the assessee in earlier assessment years and that the jurisdictional High Court had upheld the Tribunal's decisions allowing depreciation. The Tribunal found no reason to interfere with the Commissioner (Appeals)'s allowance of depreciation on that basis. [Paras 20]

Allowance of depreciation on capitalised share issue expenses upheld; Revenue's ground dismissed.

Allowability of bad debts written off where decision to write off relates to prior accounting period - Allowability of claimed bad debts where decision to write off post-dated the accounting year but related to debts of the prior accounting period - HELD THAT: - The assessee followed the calendar year; the decision to write off certain debts pertaining to January-March 2002 was taken after March 2002 but related to the prior accounting period. This factual position was not controverted by the Assessing Officer and earlier Tribunal orders in the assessee's case (following relevant High Court authority) supported allowance of such bad debts. Accordingly, the Commissioner (Appeals)'s deletion of the disallowance was upheld. [Paras 23]

Deletion of the disallowance of bad debt upheld; Revenue's ground dismissed.

Computation of depreciation after adjusting written down value on slump sale transfer of undertaking - Whether written down value of assets belonging to a Family Product Undertaking sold on slump sale should be reduced from the block for computing depreciation - HELD THAT: - On identical facts in earlier assessment years the Tribunal directed reduction of the WDV of the transferred undertaking from the block and allowance of depreciation on the balance. The Tribunal followed that consistent view and upheld the Commissioner (Appeals)'s direction to compute depreciation after reducing the WDV of the transferred unit's assets. [Paras 26]

Order directing reduction of WDV of transferred unit from the block and computation of depreciation on the balance upheld.

Treatment of change in method of accounting for consumables (purchase basis v. consumption basis) - Allowability of closing stock claim for diesel, oil and coal after change in accounting method from consumption to purchase basis - HELD THAT: - The assessee had, from Assessment Year 1986-87 onwards, changed its method to claim expenditure on purchase basis due to difficulty in maintaining inventories; the Tribunal and the jurisdictional High Court had consistently accepted this change in prior years. Following those precedents, the Commissioner (Appeals)'s deletion of the disallowance was upheld. [Paras 29]

Deletion of disallowance relating to closing stock of diesel, oil and coal upheld; Revenue's ground dismissed.

Deduction under section 80IB for amalgamated unit - allocation of head office expenses - Whether head office general and administrative expenses of the transferee should be allocated to the New Iodex Plant (NIP) prior to formal approval of amalgamation - HELD THAT: - The Tribunal in the assessee's Assessment Year 2001-02 held that until the High Court approved the amalgamation (October 2001) the Bangalore unit functioned independently and head office expenses of the transferee could not be allocated to it; appropriate head office expenses of the transferor had already been allocated. Applying that co-ordinate bench decision to identical facts, the Commissioner (Appeals)'s allowance of the deduction on the assessee's working and direction not to allocate further administrative costs was sustained. [Paras 32]

Allowance of deduction under section 80IB on the assessee's working and non-allocation of additional head office costs to NIP upheld.

Allowability of interest on Drug Price Equalization Account (DPEA) liability where demand crystallised and past precedents apply - Allowability of interest on DPEA liability for the year where demand had crystallised and earlier Tribunal/High Court precedent applied - HELD THAT: - The Tribunal observed that earlier coordinate Bench and High Court decisions in the assessee's cases allowed interest on DPEA liability; the matter had attained finality to extent the demand was confirmed by the Supreme Court (petition dismissed and demand confirmed). Given the factual situation and precedents, the Commissioner (Appeals)'s allowance of interest for the year was supported. [Paras 36]

Allowance of interest on DPEA liability for the year upheld; Revenue's ground dismissed.

Treatment of advance licence benefit for inclusion in profits and eligibility for section 80HHC deduction - allowance only on actual utilized amount - Inclusion of closing balance of advance licence benefit in profits and eligibility for section 80HHC deduction - HELD THAT: - The Tribunal in the assessee's Assessment Year 2001-02 restored this issue to the Assessing Officer for fresh decision in light of the Supreme Court's decision in CIT v. Excel Industries Ltd.; previous years' practice showed inconsistent treatment. On identical facts the Tribunal restored the matter for fresh adjudication and directed that deduction under section 80HHC can be allowed only on the actual amount of advance licence benefit utilized and offered to tax. Following those directions, the present issue was restored to the Assessing Officer for fresh decision with opportunity to the assessee. [Paras 39]

Issue restored to the Assessing Officer for fresh adjudication; deduction under section 80HHC to be allowed only on actual utilized and taxed advance licence benefit.

Transfer pricing adjustment - allocation of employee time, mark up on costs and correctness of TPO's adhoc uplift - Validity of Transfer Pricing Officer's adjustment for global procurement services (additional staff cost, 25% adhoc indirect cost uplift and 25% mark-up) - HELD THAT: - The Commissioner (Appeals) found on the record that global procurement services were provided from 1 January 2002 and that prior to that date employees were engaged in the assessee's own procurement; only 60% of the eight employees' time post-1 January 2002 was for global sourcing and the assessee had already recovered full salaries from AEs, yielding an observed mark-up around 66%. The Revenue did not challenge the Commissioner (Appeals)'s factual findings (allocation of manpower, timing, or the higher effective mark-up) and the TPO's 15% mark-up was held to be an unsupported estimate. On this factual basis the Tribunal found no reason to interfere with the deletion of the TPO's adjustment. [Paras 43]

Deletion of the Transfer Pricing Officer's adjustment sustained; Revenue's ground dismissed.

Procedural dismissal of appeal under section 154 where monetary threshold and CBDT Circular apply - Maintainability of Revenue's appeal under section 154 given its tax effect falls below prescribed monetary limit in CBDT Circular No. 17/2019 - HELD THAT: - Parties conceded, and the Tribunal accepted, that the tax effect in dispute was below the monetary limit of Rs.50 lakhs specified in the CBDT Circular, there were no applicable exceptions, and therefore the appeal had to be treated as covered by the Circular and withdrawn. The Tribunal dismissed the appeal on that procedural ground. [Paras 46]

Revenue's section 154 appeal dismissed as covered by CBDT Circular No. 17/2019.

Final Conclusion: For Assessment Year 2002-03 the Tribunal partly allowed the assessee's appeal for statistical purposes and partly dismissed Revenue's grounds; specific issues (inclusion of scrap in turnover and treatment of advance licence benefit and certain 80HHC related items) were remanded to the Assessing Officer for fresh adjudication in light of binding precedent and earlier Tribunal directions, while the remaining contested adjustments raised by Revenue were disallowed or affirmed in favour of the assessee as recorded above; a separate Revenue appeal under section 154 was dismissed as covered by the CBDT monetary threshold circular.

Refund of special additional duty (SAD) under Notification No. 102/2007-Cus. - procedural requirement of invoice declaration regarding non credit of additional duty - unjust enrichment and evidentiary requirement for Chartered Accountant's certificate - consideration beyond scope of show cause notice

Refund of special additional duty (SAD) under Notification No. 102/2007-Cus. - procedural requirement of invoice declaration regarding non credit of additional duty - Whether non-declaration/stamping in the seller's invoice as envisaged by the notification is a ground to deny refund of SAD. - HELD THAT: - The Tribunal followed earlier decisions holding that omission to incorporate the declaration that no credit of additional duty is admissible is a procedural lapse. The declaration's purpose is to prevent undue Cenvat credit to buyers where SAD is not shown separately; it does not go to the substantive entitlement to refund. In view of precedents treating non-declaration as merely procedural, the appellant's refund claim could not be denied on that ground and the finding was therefore in favour of the assessee. [Paras 3]

Non-declaration in invoices is a procedural lapse and not a valid ground to refuse SAD refund; allowed in favour of the assessee on this ground.

Unjust enrichment and evidentiary requirement for Chartered Accountant's certificate - consideration beyond scope of show cause notice - Whether the Commissioner (Appeals) could deny refund on the ground of unjust enrichment despite no such ground in the show cause notice and whether the Chartered Accountant's certificate produced by the appellant sufficed. - HELD THAT: - The Commissioner (Appeals) relied on alleged absence of supporting documents to challenge the Chartered Accountant's certificate and invoked unjust enrichment. The Tribunal noted Board Circular No. 18/2010 requires the CA certificate to be accompanied by the assessee's self-declaration and recognised authorities holding that a CA certificate unsupported by other documents cannot be the sole basis for denial. Crucially, the Tribunal found that the ground of unjust enrichment was not raised in the original show cause notice nor considered by the original adjudicating authority; treating and deciding that ground at the appellate stage amounted to travelling beyond the scope of the show cause notice. Given the appellant had produced the Chartered Accountant's certificate and the objection was not part of the original notice, the appellate finding rejecting the refund on that ground could not be sustained, and the certificate had to be accepted for granting the refund. [Paras 4, 5]

Denial of refund on unjust enrichment-not raised in the show cause notice-was beyond the notice's scope; the CA certificate (with the required self-declaration) must be accepted and refund allowed on this ground.

Final Conclusion: The impugned order is set aside and the appeal is allowed: refund of SAD under Notification No. 102/2007-Cus. is granted, the invoice omission being a procedural lapse and the Commissioner (Appeals) having acted beyond the scope of the show cause notice in rejecting the CA certificate; consequential relief follows.

Retail selling price - intended for retail sale - Legal Metrology (Packaged Commodities) Rules - assessment on transaction value - assessment to additional duty of customs - confiscation for non compliance with labelling requirement

Retail selling price - intended for retail sale - Legal Metrology (Packaged Commodities) Rules - assessment on transaction value - assessment to additional duty of customs - Whether imported goods that undergo further labelling/processing but are required to have retail particulars affixed before clearance are mandatorily liable to additional duty of customs by reference to retail selling price or are to be assessed on transaction value. - HELD THAT: - The Tribunal concluded that the statutory mechanism which permits assessment of additional customs duty by reference to the retail selling price applies only where the goods are demonstrably intended for retail sale and the retail price is declared/affixed at the relevant time. The affixing of the retail selling price is the operative demonstration of intention to adopt the alternative assessment mechanism; absent such declaration at import/clearance, assessment must proceed on the transaction value. The Tribunal relied on its earlier decision in Starlite Components Ltd., which held that where imports are for repacking/label affixing and sale in bulk (i.e., not for retail sale as packaged commodities), the Legal Metrology (Packaged Commodities) Rules do not require declaration of MRP and therefore levy of additional duty by reference to MRP is not justified. The High Court of Madras decision in Sun Exports was distinguished as addressing redemption fine quantification under earlier rules, not the chain between import and central excise liability. Applying these principles, the Tribunal found the impugned assessment by reference to retail selling price to be not in accordance with law and therefore set aside the demand and connected consequences.

Assessment by reference to retail selling price was not legally justified; goods must be assessed on transaction value, and the impugned order is set aside.

Final Conclusion: Appeal allowed; the order upholding demand by reference to retail selling price, confiscation and penalties is set aside and the goods are to be assessed on transaction value.

Determination of transaction value for export - market enquiry for valuation in the country of export - mandate of section 14 regarding transaction value - confiscation and redemption fine - penalty under section 114 of the Customs Act, 1962 - drawback sanction and jurisdictional limitation

Determination of transaction value for export - market enquiry for valuation in the country of export - mandate of section 14 regarding transaction value - Whether the declared export value could be re determined by a domestic market enquiry despite bank realisation evidence of the declared transaction value. - HELD THAT: - The Tribunal recorded that the controversy was limited to declaration of value for export and noted the appellant's production of bank realisation evidence showing receipt of the declared amount. It referred to settled law that a market enquiry conducted in India is not a valid substitute for valuation in the country of destination, and accepted that nothing on record demonstrated deliberate misdeclaration by the exporter. The Tribunal also observed that the quantity misdeclared was negligible and the monetary consequence of the misdeclaration was small relative to the declared value. On this basis the Tribunal treated the realisation as the correct transaction value and rejected reliance on the domestic market enquiry to supplant the declared transaction value. [Paras 5, 6]

The declared transaction value evidenced by bank realisation was accepted and the domestic market enquiry was not treated as a valid substitute for determining transaction value.

Confiscation and redemption fine - penalty under section 114 of the Customs Act, 1962 - drawback sanction and jurisdictional limitation - Whether confiscation of goods and imposition of redemption fine and penalty were appropriate in the facts of the case. - HELD THAT: - Although the fact that goods differed from the shipping bill description was not disputed, the Tribunal found no evidence of deliberate misconduct and noted that the misdeclaration related to a small portion of the consignment with a minimal financial consequence (difference in drawback of about 2%). The Tribunal further took into account that sanction of drawback falls outside its jurisdiction to determine but confined its examination to penalties and confiscation. Given the limited nature of the misdeclaration and the appellant's bonafides as recorded, the Tribunal concluded that confiscation and the monetary punishments were disproportionate to the lapse. [Paras 6, 7]

Confiscation, redemption fine and penalty were set aside; appeal disposed of with this modification.

Final Conclusion: The Tribunal accepted the bank realisation as the transaction value and held that a domestic market enquiry could not supplant that evidence; finding the misdeclaration to be minor and not deliberate, it set aside the redemption fine and penalty and disposed of the appeal accordingly.

Right to cross-examination - appearance of witnesses - adjudicatory fairness - remand for fresh consideration

Right to cross-examination - appearance of witnesses - adjudicatory fairness - Cross-examination of the Panch witnesses was to be permitted and their appearance ensured by the Adjudicating Authority. - HELD THAT: - The Tribunal found the appellant's request for cross-examination of the Panch witnesses to be prima facie genuine and necessary for completing the adjudication judiciously. Although cross-examination of the Panch witnesses had been allowed earlier, it was recorded that the Panchas had not appeared on dates fixed for that purpose. The Tribunal therefore directed the Adjudicating Authority to ensure the attendance of the Panch witnesses on the next date of hearing so that their cross-examination can proceed and the adjudicatory process be carried forward fairly. This direction implements the appellant's entitlement to test the Panchanama and the identity/credibility of the Panch witnesses during adjudication.

Adjudicating Authority directed to ensure appearance of Panch witnesses and permit their cross-examination on the next date of hearing.

Right to cross-examination - remand for fresh consideration - adjudicatory fairness - Request for cross-examination of the DRI officers was not finally decided on merits and was remanded to the Adjudicating Authority for judicious consideration after examination of the Panch witnesses. - HELD THAT: - The Tribunal observed that the appellant sought cross-examination of the DRI officers who seized the goods, asserting that such cross-examination was necessary to establish allegations regarding the Panch witnesses and the circumstances of seizure. Rather than adjudicating the request on the merits at this appellate stage, the Tribunal held that after the Panch witnesses are examined, the appellant would be at liberty to seek cross-examination of the DRI officers. The Adjudicating Authority is directed to entertain and decide any such request in a judicious manner. Thus the question of permitting cross-examination of DRI officers was remanded for fresh consideration rather than being finally determined.

Appellant may request cross-examination of DRI officers after examination of Panch witnesses; Adjudicating Authority to consider and decide that request afresh and judiciously.

Final Conclusion: The appeal was disposed of by directing the Adjudicating Authority to ensure the Panch witnesses' attendance for cross-examination and by remanding any request to cross-examine the DRI officers for fresh, judicious consideration after the Panch evidence is taken.

Striking off of company under Section 248 of the Companies Act, 2013 - requirement under Section 248(6) for Registrar's satisfaction and undertakings before striking off - notice under Section 248(1) and publication of Form STK (public notice) - classification as dormant/inactive company and applicability of Section 455 of the Companies Act, 2013

Striking off of company under Section 248 of the Companies Act, 2013 - notice under Section 248(1) and publication of Form STK (public notice) - requirement under Section 248(6) for Registrar's satisfaction and undertakings before striking off - Validity of striking off petitioner company from Registrar of Companies under Section 248, having regard to issuance/publication of notices and compliance with Section 248(6). - HELD THAT: - The Registrar initiated action under Section 248 after the Ministry directed initiation for companies failing to file financial statements/annual returns for two immediately preceding financial years; notices in Form STK-I were issued and published (official Gazette, Ministry website and newspapers). Enquiries at the registered office address revealed no functioning company (only a small shed on barren land) and notices to the company were returned as undelivered or addressee not found; directors did not furnish undertakings contemplated by Section 248(6). Given the inability to locate the company at the registered address and absence of any undertaking or participation by directors, the Registrar's decision to approve striking off without further order under Section 248(6) was held to be justifiable on the facts. The Division Bench precedent invoked by the petitioner was distinguished because that case involved a company actually present at its registered office and thus different factual matrix. The court therefore found no legal infirmity in the Registrar's action in the circumstances of this case. [Paras 5, 9, 14, 15, 16]

Striking off under Section 248 was valid on the facts; writ petition challenging the striking off is dismissed, subject to the petitioner's liberty to approach the appropriate forum.

Classification as dormant/inactive company and applicability of Section 455 of the Companies Act, 2013 - Whether the procedure under Section 455 for placing a company in the register of dormant companies applied in the present case. - HELD THAT: - Section 455 and the dormant company procedure apply where a company itself makes an application seeking dormant/inactive status or where the statutory scheme for dormant companies is otherwise engaged. The records did not show any application by the petitioner seeking classification as a dormant or inactive company. Consequently the scheme under Section 455 was not attracted and could not be invoked to prevent striking off under Section 248 in the present factual matrix. [Paras 10, 11, 12]

Section 455 (dormant company provisions) is not applicable as petitioner did not apply for dormant/inactive status; the reliance on that provision does not avail the petitioner.

Final Conclusion: Writ petition challenging publication and striking off of the petitioner-company is dismissed on facts: notices were issued and published, the company could not be located at its registered address, directors did not give undertakings under Section 248(6), and no application under the dormant-company provisions was made; petitioner is at liberty to seek appropriate relief before the competent forum.

Determination of taxability or excisability of goods - appeal under Section 35L - definition of business auxiliary service - substantial question of law

Determination of taxability or excisability of goods - appeal under Section 35L - definition of business auxiliary service - Whether the appeal to the High Court was maintainable or whether the matter fell within Section 35L (requiring appeal to the Supreme Court) because the core question related to taxability/excisability of goods and the nature of the assessee's activity. - HELD THAT: - The Court examined Section 35L(1)(b) and Section 35L(2) of the Central Excise Act and held that questions relating to the rate of duty include the determination of taxability or excisability of goods. The determinative controversy in the present case is whether the appellant's activity falls within the concept of a business auxiliary service (Section 65(19) of the Finance Act, 1994) and thereby affects taxability and valuation. Because that question of taxability/excisability is involved, the appeal is within the scope of Section 35L and lies to the Supreme Court rather than being maintainable under Section 35G before the High Court. The Court further noted that the presence of other ancillary issues does not alter this conclusion; where a Section 35L question is involved, the proper appellate route is to the Supreme Court, consistent with the Division Bench decision in CEA No.18 of 2016 (Principal Commissioner of Central Excise and Service Tax v. M/s Raja Dyeing, Ludhiana). [Paras 4, 5, 6, 7]

The appeal before this Court is not maintainable as the dispute involves determination of taxability/excisability and therefore falls under Section 35L (appeal to the Supreme Court).

Final Conclusion: The appeal is dismissed as not maintainable because the core question involves taxability/excisability (whether the activity is a business auxiliary service), attracting Section 35L and the appellate route to the Supreme Court; pending miscellaneous applications are disposed of.

Limitation for refund claims under Section 11B - refund following appellate order in favour of the assessee - unjust enrichment - Business Auxiliary Service (BAS) classification

Limitation for refund claims under Section 11B - refund following appellate order in favour of the assessee - Whether the refund claims were barred by limitation. - HELD THAT: - The Tribunal had held that the appellants were not liable to pay service tax by its Final Order dated 21.10.2016 (issued 16.11.2016). The appellants filed refund claims on 02.11.2017. The Court treated the relevant date for computing the one-year period under Section 11B as the date of issuance of the Tribunal's order (16.11.2016). Because the refund claims were filed within one year from that date, the claims satisfy the statutory time-limit for filing refunds. The adjudicatory finding that the Tribunal's order extinguished liability made the appellate order the operative event from which limitation runs, and therefore the refund claims could not be rejected as time-barred. [Paras 5]

Refund claims were not barred by limitation and were filed within one year of the Tribunal's order.

Unjust enrichment - Business Auxiliary Service (BAS) classification - Whether the appellants failed the bar of unjust enrichment and were therefore disentitled to refund. - HELD THAT: - The appellants had paid service tax under protest and, at the time of issuing invoices, did not recover or charge any amount by way of service tax from the service recipients. Given that no tax was passed on to the recipients, the element of unjust enrichment was absent. In these circumstances, the statutory bar of unjust enrichment did not apply to deny the refund. The earlier proceedings concerning classification as Business Auxiliary Service resulted in the Tribunal finding no liability, which underpins entitlement to refund absent unjust enrichment. [Paras 6, 7]

Appellants have cleared the bar of unjust enrichment and are entitled to the refund claimed.

Final Conclusion: The appeals are allowed; the impugned order rejecting the refund claims is set aside and the refund claims are allowed with consequential relief in accordance with law.

Exemption of value of goods sold under Notification No.12/2003-ST - deemed sale under Article 366(29A)(b) of the Constitution - works contract and divisibility post-46th Constitutional Amendment - rejection of dominant-nature test for contracts covered by Article 366(29A) - valuation of taxable service excluding goods component

Valuation of taxable service excluding goods component - works contract and divisibility post-46th Constitutional Amendment - rejection of dominant-nature test for contracts covered by Article 366(29A) - Value of photography service must be determined excluding the value of photographic paper, consumables and chemicals which constitute the goods component liable to sales tax. - HELD THAT: - The Court held that photography services involve elements of both goods and services and, after the Forty sixth Constitutional Amendment, such composite transactions covered by Article 366(29A) can be bifurcated into a goods component and a service component. Reliance on the line of decisions culminating in M/s Pro. Lab (and related Supreme Court precedents) establishes that the dominant nature test is inapplicable where Clause (29A) applies and the goods element is separable. Consequently, where the goods component (photographic paper, chemicals, negatives etc.) can be identified as exigible to sales tax, that component must be excluded from the taxable value for service tax purposes and the value of photography service is to be determined in isolation of that goods component. [Paras 19]

Substantial question No.1 answered for the assessee: value of photography service excludes the goods component (photography paper, consumables and chemicals) and is to be determined separately.

Exemption of value of goods sold under Notification No.12/2003-ST - deemed sale under Article 366(29A)(b) of the Constitution - The term 'sale' in Notification No.12/2003 ST includes the deemed sale as defined by Article 366(29A)(b) of the Constitution. - HELD THAT: - Having held that the goods component of photography may amount to a transfer of property in goods within the meaning of Article 366(29A)(b) (i.e., a deemed sale in execution of a works contract), the Court concluded that the exemption under Notification No.12/2003 ST applies to such deemed sale provided the assessee satisfies the documentary and other conditions of the Notification. The Court rejected the view that the Notification must be restricted to only literal sales in the sense of Section 2(h) of the Central Excise Act and held that the Notification's reference to 'sold' would include transfers falling within Article 366(29A)(b). [Paras 20]

Substantial question No.2 answered for the assessee: 'sale' in Notification No.12/2003 ST includes the deemed sale under Article 366(29A)(b).

Final Conclusion: Impugned orders set aside; appeals allowed. Photographic goods component (paper, consumables, chemicals, negatives) is segregable from photography service and excluded from service tax valuation under Notification No.12/2003 ST, which also covers deemed sale under Article 366(29A)(b), subject to fulfillment of the Notification's conditions.

Change in Rule 6(3)(i) of Cenvat Credit Rules, 2004 w.e.f. 1.3.2008 - Requirement to maintain separate accounts for inputs used in exempted and dutiable goods - Payment of an amount equal to ten per cent of the value of exempted goods as alternative to separate accounts - Distinction between 'sale' and 'removal' for exempted goods after amendment - Remand for fresh decision by the Tribunal

Change in Rule 6(3)(i) of Cenvat Credit Rules, 2004 w.e.f. 1.3.2008 - Requirement to maintain separate accounts for inputs used in exempted and dutiable goods - Payment of an amount equal to ten per cent of the value of exempted goods as alternative to separate accounts - Whether the Tribunal was justified in ignoring the amendment to Rule 6(3)(i) w.e.f. 1.3.2008 and whether the matter requires reconsideration in light of that amendment - HELD THAT: - The Court found that the Tribunal did not appreciate the significant change effected by Notification No.10/2008 C.E.(N.T.) dated 1.3.2008, by which the emphasis shifted to payment of an amount equal to ten per cent of the value of exempted goods (and from reference to 'sale' to 'removal'). The Tribunal also failed to examine whether the post-amendment requirements of Rule 6 (including maintenance of separate accounts or payment in lieu thereof) had been complied with for the period from March 2008. In the absence of any findings on compliance with the amended Rule 6(3)(i), the Court concluded that the issue was not finally adjudicated and therefore remitted the matter to the Tribunal for fresh decision taking the amendment into account. [Paras 10, 11, 14]

Matter remitted to the Tribunal for fresh decision in accordance with the changes to Rule 6(3)(i) w.e.f. 1.3.2008

Distinction between 'sale' and 'removal' for exempted goods after amendment - Scope of dropping demand prior to amendment - Whether the dropping of the demand by the adjudicating authority was correct for periods prior to the amendment - HELD THAT: - The Court held that the adjudicating authority's dropping of demand was correct only for the period upto February,2008 when the earlier formulation of Rule 6(3)(b) applied. For the period from March, 2008 onward the amended provision governs and requires fresh examination under the amended test (including the shift from 'sale' to 'removal'). [Paras 12]

Dropping of the demand sustained only upto February,2008; demands for March, 2008 onward to be re-examined under the amended rule

Final Conclusion: Appeals allowed in part; matters remitted to the Tribunal for reconsideration in light of the amendment to Rule 6(3)(i) w.e.f. 1.3.2008; the earlier dropping of demand is upheld only upto February, 2008, while claims for March, 2008 onward require fresh adjudication under the amended provision.

Cost recovery charges - Merchant Overtime (MOT) charges - validity of Board Circular dated 07.04.2003 (ultra vires challenge) - place of service / Customs area and territorial scope of officers' duty - Customs (Fees for Rendering Services by Customs Officers) Regulations, 1998

Cost recovery charges - Merchant Overtime (MOT) charges - validity of Board Circular dated 07.04.2003 (ultra vires challenge) - place of service / Customs area and territorial scope of officers' duty - Levy of cost recovery charges from the appellant EOU for supervision carried out by Customs/Central Excise officers in the factory premises during normal working hours and whether such levy is sustainable in law when MOT regime or Regulations govern the charging of fees for services. - HELD THAT: - The Tribunal found that the appellant had paid disputed cost recovery charges for the period which was audited (April, 2009 to March, 2014) and had sought refund after deposit. Having considered earlier authoritative decisions - including the Delhi High Court decision in Sigma Corporation, the Madras High Court decision in Transworld Garnet India (which held the Board's Circular No. 31/2003 ultra vires Regulation (3) of the Customs (Fees for Rendering Services by Customs Officers) Regulations, 1998), and this Tribunal's Division Bench decision in PML Industries - the Tribunal concluded that MOT principles and the statutory/regulatory scheme govern recovery for services and that the Board circular could not be enforced to demand cost recovery charges in the circumstances. The Commissioner (Appeals) was found to have erred in factual findings that the appellant had not raised the issue earlier; the record showed payment under protest and a refund claim. Applying the settled position that supervision by departmental officers within their normal place of work or within their territorial jurisdiction does not attract MOT where conditions for overtime or place-beyond-duty do not arise, the Tribunal held that the demand of cost recovery charges as sustained below was contrary to law and liable to be set aside.

The levy of cost recovery charges as confirmed below is set aside and the amount found payable by the Assistant Commissioner is remitted for refund with interest; appeal allowed to that extent.

Final Conclusion: The Tribunal allowed the appeal insofar as it confirmed levy of cost recovery charges for the audited period (April, 2009 to March, 2014), set aside that levy in view of binding precedents and the regulatory scheme, and directed refund of the amount confirmed by the Assistant Commissioner with interest within thirty days.

Manufacture and manufactured goods - agricultural waste or residue - non-excisable goods - Rule 6(3) of the Cenvat Credit Rules, 2004 - explanatory amendment w.e.f. 01 March 2015 - liability to pay duty on waste by-products - binding precedent

Rule 6(3) of the Cenvat Credit Rules, 2004 - explanatory amendment w.e.f. 01 March 2015 - manufacture and manufactured goods - agricultural waste or residue - liability to pay duty on waste by-products - Whether the explanations inserted in Rule 6(3) w.e.f. 01 March 2015 impose a legal obligation to pay duty on clearances of bagasse and press mud (cleared at nil rate) during March 2015 to December 2016. - HELD THAT: - The Tribunal held that the explanations to Rule 6(3) do not alter the legal character of bagasse and press mud as non-excisable waste. Relying on the view adopted in the cited authorities, including the Supreme Court's finding that bagasse is an agricultural waste or residue and that press mud is a waste and not a manufactured product, there is no manufacturing activity giving rise to excisable goods. Consequently, the amendment effected in Rule 6 does not convert these waste by-products into goods liable to duty. In view of the binding precedent and the factual characterisation of the materials as waste, the Revenue's contention that duty at the prescribed rate was payable was rejected.

The Revenue's appeal is dismissed and the order of the Commissioner (Appeals) setting aside the demand in respect of bagasse and press mud is upheld.

Final Conclusion: Appeal dismissed; explanations to Rule 6(3) w.e.f. 01 March 2015 do not impose duty on bagasse and press mud cleared at nil rate for the period March 2015 to December 2016, and the Commissioner (Appeals) order setting aside the demand is maintained.