TaxTMI Updates e-Newsletter
May 03,2018

Power to levy advertisement tax - pre-emption by Goods and Services Tax - effect of omission of municipal provisions on levy of local tax - scope of Section 173 of the U.P. Goods and Service Tax Act, 2017 - interim stay of administrative proceedings

Power to levy advertisement tax - pre-emption by Goods and Services Tax - effect of omission of municipal provisions on levy of local tax - scope of Section 173 of the U.P. Goods and Service Tax Act, 2017 - Validity of the impugned tender notice dated 31.03.2018 for realising advertisement tax in view of alleged omission of provisions of the U.P. Municipal Corporation Act, 1959 and the applicability of GST. - HELD THAT: - The Court recorded that petitioners contend that clause (b) of sub Section (2) of Section 172 and Sections 192 and 193 of the U.P. Municipal Corporation Act, 1959 have been omitted in view of Section 173 of the U.P. GST Act, 2017, and that consequently the Municipal Corporation lacks power to levy advertisement tax and the tender impugned is bad in law. The Court observed that the matter prima facie requires scrutiny and has not been finally determined. Respondents were permitted time to file a counter affidavit and petitioners to file a rejoinder, so that the controversy on the legal competence of the Municipal Corporation and the effect of the GST enactment can be considered on merits after pleadings and submissions.

The question of the validity of the tender and the Municipal Corporation's power to levy advertisement tax is not finally adjudicated and is left for fresh consideration after the filing of counter and rejoinder affidavits.

Interim stay of administrative proceedings - power to levy advertisement tax - Whether further proceedings, including auction pursuant to the impugned tender dated 31.03.2018, should be stayed pending adjudication of the legal controversy. - HELD THAT: - On the material placed before it and in view of the prima facie need for scrutiny of the legal issue raised by the petitioners, the Court granted interim relief to preserve the status quo. The Court recorded service and allowed respondents a specified period to file a counter affidavit and afforded petitioners time for rejoinder, fixing the matter for further listing after those pleadings are exchanged. The interim order explicitly restrained further steps under the tender until the next date of listing.

Further proceedings, including the auction under the impugned tender dated 31.03.2018, are stayed until the next date of listing.

Final Conclusion: Proceedings under the impugned tender are stayed as an interim measure; the substantive question concerning the Municipal Corporation's authority to levy advertisement tax in the light of the U.P. GST Act, 2017 is deferred for adjudication after respondents file counter affidavit and petitioners file rejoinder.

Effect of U.P. Goods and Service Tax Act, 2017 on municipal power to levy advertisement tax - Interaction between central/state GST regime and municipal taxation powers - Maintainability of tender notice for recovery of local tax - Interim stay of auction and tender proceedings

Effect of U.P. Goods and Service Tax Act, 2017 on municipal power to levy advertisement tax - Interaction between central/state GST regime and municipal taxation powers - Maintainability of tender notice for recovery of local tax - Substantive question whether omission of certain provisions of the U.P. Municipal Corporation Act, 1959 by operation of the U.P. Goods and Service Tax Act, 2017 ousts the Nagar Nigam's power to levy advertisement tax and renders the impugned tender notice bad in law - HELD THAT: - The Court recorded the contention that, in view of the U.P. Goods and Service Tax Act, 2017 and the consequent omission of clauses of the U.P. Municipal Corporation Act, 1959, the Municipal Corporation has no power to levy advertisement tax and that the tender notice dated 24.03.2018 for realisation of advertisement tax is, therefore, legally vulnerable. The Court found that this substantive controversy requires scrutiny and is not ripe for summary disposal on the present pleadings. Consequently the respondents were granted time to file a counter-affidavit and the petitioners were given liberty to file a rejoinder, thereby directing further factual and legal elucidation before final adjudication on the merits.

Substantive issue not finally decided; matter reserved for consideration after exchange of affidavits and further judicial scrutiny.

Interim stay of auction and tender proceedings - Maintainability of tender notice for recovery of local tax - Whether further proceedings, including the auction pursuant to the impugned tender notice dated 24.03.2018, should be stayed pending further adjudication - HELD THAT: - Having found that the core legal question requires further scrutiny and an exchange of affidavits, the Court directed an interlocutory order to preserve the status quo. Notices were accepted for the respondents and specific time-limits were fixed for filing of counter and rejoinder affidavits. Pending the next date of listing after completion of the specified affidavits, the Court restrained the Nagar Nigam, Gorakhpur from proceeding with the auction or other steps under the impugned tender notice.

Interim stay granted on further proceedings, including the auction under the impugned tender notice, until the next date of listing.

Final Conclusion: Interim relief granted: further proceedings, including the auction under the impugned tender notice dated 24.03.2018, are stayed; substantive question regarding the effect of the U.P. GST Act, 2017 on municipal power to levy advertisement tax is adjourned for determination after respondents file counter-affidavit and petitioners file rejoinder as directed.

Prior approval under Section 153D for assessment/reassessment under Section 153A - remand under Section 263 and compliance thereof - jurisdiction of the Assessing Officer on remand

Prior approval under Section 153D for assessment/reassessment under Section 153A - remand under Section 263 and compliance thereof - jurisdiction of the Assessing Officer on remand - Fresh approval under Section 153D was not required for the Assessing Officer to pass a fresh assessment in compliance with remand directions issued under Section 263 where the original assessment under Section 153A had been passed after obtaining approval under Section 153D. - HELD THAT: - The assessment dated 24.12.2010 had been framed under Section 153A read with Section 143(3) after obtaining approval under Section 153D. When the Commissioner in revision under Section 263 set aside that assessment and remitted the matter to the Assessing Officer to decide afresh, the earlier approval under Section 153D was not disturbed. Section 153D restricts the power to pass an assessment or reassessment under Sections 153A/153B without prior approval of the Joint Commissioner; it operates at the stage of assuming jurisdiction to pass such assessment. Compliance with remand directions issued by the revisional authority does not constitute a fresh assumption of jurisdiction under Section 153A such as would attract a new prior-approval requirement. The order dated 18.03.2014 was passed pursuant to the remand and in continuation of the earlier proceedings which had already received the requisite approval; therefore there was no legal requirement to seek fresh approval under Section 153D for complying with the remand. The Assessing Officer did not lose jurisdiction to frame the assessment while implementing the revisional directions.

Answer against the assessee: no fresh Section 153D approval required to comply with the remand; the Assessing Officer lawfully proceeded to pass the assessment on remand.

Final Conclusion: The substantial question is answered against the appellant; the Tribunal's order restoring the matter to the Commissioner for decision on merits was sustained and the appeal is dismissed.

Reopening of assessment - reasons recorded in support of notice u/s 148 - right to inspect relied upon material and to file objections - judicial review of disposal of objections to reasons - quashing and remand for fresh consideration - interim stay of notice

Reasons recorded in support of notice u/s 148 - right to inspect relied upon material and to file objections - judicial review of disposal of objections to reasons - Validity of the orders dated 17th November, 2017 disposing of the petitioners' objections to the reasons for reopening for A.Y. 2010-11. - HELD THAT: - The Court held that the orders disposing of the objections were unsustainable because the petitioners were not given an opportunity to consider and object to the material on which the Assessing Officer relied (the information/report from the Investigation wing) before their objections were rejected. Relying on the principle that reasons for reopening which refer to or rely upon another document require that document or relevant portions be made available so that the assessee can effectively meet the case, the Court found that the objections must be reconsidered in the context of the material relied upon by the Revenue. Consequently the orders disposing of the objections were quashed and set aside and the objections restored for fresh consideration by the Assessing Officer. [Paras 3]

The two orders dated 17th November, 2017 disposing of the objections are quashed and set aside; the objections are restored for fresh consideration in the light of the material relied upon by the Revenue.

Quashing and remand for fresh consideration - reopening of assessment - Procedure to be followed on remand and time-frames for filing objections and disposal by the Assessing Officer. - HELD THAT: - The Court directed that the petitioner may file fresh objections to the reasons in support of the impugned notice within the time specified, and directed the Assessing Officer to pass a fresh order disposing of those objections after independently applying his mind in accordance with settled principles. The Court specified that the petitioner would file fresh objections within two weeks and that the Assessing Officer would dispose of the objections within four weeks from the date of filing of the fresh objections. The Court emphasised that the Assessing Officer should consider the objections in the spirit of the authorities cited and not merely replicate the earlier order. [Paras 3, 4, 5]

Petitioner to file fresh objections within two weeks; Assessing Officer to dispose of objections within four weeks of filing, after independent consideration.

Interim stay of notice - non-action upon impugned notice pending reconsideration - Interim relief in respect of the impugned notice dated 30th March, 2017. - HELD THAT: - Having quashed the orders disposing of the objections and directed fresh consideration, the Court granted a further interim stay of the impugned notices. The Assessing Officer was restrained from acting upon the impugned notice for the period specified: not to act for four weeks from communication of the fresh order disposing of objections, and there shall be an overall stay of the impugned notice for ten weeks from the date of the order to accommodate the process directed by the Court. The Court recorded that earlier ad-interim relief had preserved the position and extended the protective embargo accordingly. [Paras 5, 6]

Further stay of the impugned notice for ten weeks from the date of the order; Assessing Officer shall not act upon the impugned notice for four weeks from communication of the fresh order disposing of objections.

Final Conclusion: The orders disposing of the petitioners' objections to the reasons for reopening for A.Y. 2010-11 are quashed; the objections are restored for fresh objections and fresh disposal by the Assessing Officer within specified short time-frames, and interim stay of the impugned notice is granted for the limited periods directed.

Interim stay - transfer pricing adjustment - expenditure on Advertisement, Marketing and Promotion (AMP) - observations tentative for interim relief - imposition of personal costs - frivolous writ petitions

Interim stay - transfer pricing adjustment - expenditure on Advertisement, Marketing and Promotion (AMP) - observations tentative for interim relief - Clarification that observations made by the Single Judge are tentative and relevant only for the purpose of consideration of interim relief and are not to be treated as final or prejudicial to proceedings before the Tribunal. - HELD THAT: - The Court held that the observations in the impugned order should be read as tentative observations confined to the exercise of discretion in granting or refusing interim relief. Having regard to the nature of the dispute concerning transfer pricing adjustment in respect of AMP expenditure and the fact that the Tribunal imposed a substantial deposit (Rs. 2 crores in addition to earlier deposits), it was not appropriate to treat the filing of the writ petition as entirely irresponsible. To avoid prejudicing the parties in the substantive adjudication, the observations of the Single Judge are to be limited to the context of interim relief and shall not be treated as determinative of merits before the Tribunal.

Observations in the order impugned are clarified to be tentative and relevant only for interim relief; they shall not operate as conclusions in the pending appeal before the Tribunal.

Imposition of personal costs - frivolous writ petitions - Whether the personal costs of Rs. 50,000 imposed on the officers who sanctioned and filed the writ petition should be sustained. - HELD THAT: - The Court recognised the need to discourage indiscriminate or frivolous filing of writ petitions, but on the facts of the present case-where substantial deposits had been made pursuant to the Tribunal's interim order and the transfer pricing issue was debatable-it was not shown that the petition was filed in an entirely irresponsible manner warranting personal monetary penalty on the officers. In the interest of justice and having regard to the totality of circumstances, the Court found it appropriate to waive the costs while reiterating that authorities should guard against filing frivolous petitions in future.

The personal costs of Rs. 50,000 imposed on the officers are waived.

Final Conclusion: The appeal is allowed to the extent indicated: the Single Judge's observations are clarified as tentative and confined to interim relief, and the personal costs imposed on officers are waived; the Tribunal's interim order is left undisturbed and all other aspects are left open for consideration by the Tribunal in accordance with law.

Rectification under Section 154 of the Income Tax Act, 1961 - intimation under Section 143(1) of the Income Tax Act, 1961 - rectification in view of appellate order - refund with interest - writ jurisdiction under Article 226 of the Constitution of India

Rectification under Section 154 of the Income Tax Act, 1961 - intimation under Section 143(1) of the Income Tax Act, 1961 - rectification in view of appellate order - refund with interest - Whether the orders rejecting the petitioner's application for rectification of the intimation for Assessment Year 1997-98 should be set aside and the rectification/refund ordered in accordance with the appellate material - HELD THAT: - The Commissioner of Income Tax (Appeals) order and the material on record establish that the Assessing Officer ought to have allowed the petitioner's rectification application relating to the intimation issued under Section 143(1) for Assessment Year 1997-98. The Principal Commissioner filed an affidavit accepting that position, recording regret for the inconvenience caused, and undertaking that the rectification would be carried out and the refund with interest granted in accordance with law, preferably within six weeks. In view of this concession and the admitted legal position, the High Court quashed the impugned orders rejecting the rectification application and directed compliance with the refund and interest undertaking.

Impugned orders dated 22nd February, 2012 and 4th October, 2017 quashed and set aside; respondent directed to grant rectification and refund with interest in accordance with law, preferably within six weeks.

Final Conclusion: Petition under Article 226 allowed; orders rejecting the rectification application for Assessment Year 1997-98 quashed and set aside and the Revenue directed to grant rectification and refund with interest in accordance with law within the timeframe indicated; no order as to costs.

Interim relief against tax recovery - conditional stay of recovery pending appeal - attachment of bank accounts - authorization to realize tax from bank accounts - protection of Revenue's interest while appeal is pending

Attachment of bank accounts - authorization to realize tax from bank accounts - interim relief against tax recovery - Interim direction for part-payment and withdrawal from petitioner's bank account and consequential lifting of attachment. - HELD THAT: - The Court noted that appeals in respect of the assessment years 2009-10 and 2010-11 were pending (one in SR stage before this Court and the other in the process of being filed) and that the Revenue did not dispute part-payment already made for 2009-10. Balancing the assessee's financial difficulty against safeguarding the Revenue's interest, the Court exercised its discretionary power to grant interim relief by directing a specific part-payment for the 2010-11 demand. The 1st respondent was authorised to withdraw the directed amount from any one of the petitioner's bank accounts maintained with the 2nd or 3rd respondents, and upon such withdrawal the existing attachments of both accounts were to be lifted, thereby giving the petitioner immediate partial relief while leaving the substantive disputes to be prosecuted before the appropriate fora. [Paras 7, 8]

Petitioner to pay Rs. 5,00,000 within six weeks; 1st respondent authorised to withdraw that amount from any one of the petitioner's accounts in the 2nd or 3rd respondent banks; upon withdrawal attachments of both accounts to be lifted.

Conditional stay of recovery pending appeal - protection of Revenue's interest while appeal is pending - interim relief against tax recovery - Stay of recovery of the balance of the demand subject to condition of filing a stay petition in the pending tax case appeal within a specified period. - HELD THAT: - The Court provided that, conditional upon compliance with the direction for part-payment and subject to the petitioner instituting a stay petition in the pending tax case appeal within six weeks from receipt of the order, the remaining amount of tax and penalty demanded by the Revenue would remain stayed. This condition both protects the Revenue by securing an immediate part-payment and affords the assessee an opportunity to obtain a formal stay from the appellate forum by timely prosecuting the appeal and filing the stay petition. [Paras 8]

Remaining amount of tax and penalty to remain stayed until the petitioner files a stay petition in the pending tax case appeal within six weeks of receipt of the order.

Final Conclusion: Writ petition disposed of on terms: petitioner directed to make a specified part-payment within six weeks with authorised withdrawal from bank account and attachments to be lifted on payment; balance of demand stayed subject to filing of a stay petition in the pending tax case appeal within six weeks; no costs.

Allowability of business expenditure - characterisation of payment as advance versus ascertained liability - mercantile system of accounting and crystallisation of liability - business expediency affecting deductibility

Allowability of business expenditure - Whether the excess amount paid to sugarcane growers in breach of the administered price is an allowable business expenditure for the assessee. - HELD THAT: - The appellate authority and the Tribunal were justified in viewing the payments from the assessee's commercial standpoint. The Court agreed with the CIT(A) that payments made in excess of the administered price, though beyond the government-fixed price, were incurred exclusively and necessarily for the purpose of the assessee's business of running a sugar mill. Given the nature of the business and the necessity of securing cane supplies, the excess payments constituted business expenditure deductible under the Act. The High Court affirmed the deletion of the disallowance made by the assessing officer and upheld the view that the payments were allowable. [Paras 5, 9]

Payments in excess of the administered price were allowable as business expenditure and the disallowance was rightly deleted.

Characterisation of payment as advance versus ascertained liability - mercantile system of accounting and crystallisation of liability - Whether the label 'advance' in the Sugarcane Growers Association's letter or the form of words used could alter the true character of the payment so as to deny deduction, and whether the liability had crystallised in the assessment year under the mercantile system. - HELD THAT: - The Court held that mere description of the sum as an 'advance' in the Association's letter did not alter the substantive character of the transaction. The assessee followed the mercantile system of accounting and the payments were made during the relevant accounting year; consequently the liability was an ascertained one in that year. The Court accepted the Tribunal's finding that, in commercial reality and in view of business necessity, the payments could not be avoided and had crystallised in the assessment year, permitting deduction. [Paras 4, 7, 9]

The term 'advance' in the Association's communication did not change the nature of the payment; under mercantile accounting the liability was crystallised in the assessment year and deductible.

Business expediency affecting deductibility - Whether business expediency and commercial compulsion to secure sugarcane supplies affect the deductibility of the excess payments. - HELD THAT: - The Tribunal's observation that the assessee could not avoid making the payments due to dependence of its business on cane supplies was upheld. The High Court agreed that business expediency, as a factor showing the payments were made exclusively and necessarily for business, supports their allowability. This commercial reality was a determinative consideration in allowing the deduction. [Paras 6, 9]

Payments made out of business expediency to ensure supplies were a relevant factor supporting their deductibility.

Final Conclusion: The appeal is dismissed. The substantial questions of law are answered against the Revenue and in favour of the assessee: the Tribunal and CIT(A) were right in treating the excess payments to cane growers as deductible business expenditure, notwithstanding the Association's description of the sums as advances, and in holding that the liability had crystallised in assessment year 1990-91.

Business income - treatment of job-work/machining receipts as business profit - use of plant and machinery to derive income - deduction under Section 80HHC of the Income Tax Act, 1961

Business income - treatment of job-work/machining receipts as business profit - use of plant and machinery to derive income - deduction under Section 80HHC of the Income Tax Act, 1961 - Whether machining charges and the other income of Rs.26,000/- are to be treated as business income for computation of deduction under Section 80HHC where machining was not the assessee's main business and such jobs were undertaken when its manufacturing machinery lay idle. - HELD THAT: - The Tribunal and the first appellate authority found, and the High Court records, that the assessee did not carry on machining as its principal business activity; machining jobs were undertaken only when the same plant and machinery used for manufacturing (including manufacturing for export) was idle. On these facts the courts concluded that income earned by employing the assessee's own plant and machinery for job work constituted income derived from use of its business assets and therefore qualified as business profit. The same factual and legal reasoning was applied to the separate item described as other income of Rs.26,000/-, which the authorities had earlier treated in the assessee's own case as business profit. Given that the receipts arose from deployment of business plant and machinery in the course of the assessee's commercial activities, they were correctly included in business income for the purpose of computing profit eligible for deduction under Section 80HHC.

The receipts from machining charges and the other income are business profits and were correctly treated as such for computing deduction under Section 80HHC; appeal dismissed.

Final Conclusion: The High Court dismissed the Revenue's appeal for AY 1995-96, upholding the Tribunal's and the CIT(A)'s conclusion that machining receipts and the other income were business profits and eligible to be treated as business income for computation of deduction under Section 80HHC.

Re-opening of assessment - Notice under Section 148 - escapement of income under Section 147 - Necessity of specific direction from appellate authority for reassessment - Sufficiency of reasons for re-opening - Burden of filing return and opportunity for verification

Necessity of specific direction from appellate authority for reassessment - Re-opening of assessment - Whether re-opening assessments for Assessment Years 2010-11 and 2011-12 required a specific direction from the Commissioner of Income Tax (Appeals). - HELD THAT: - The Court noted that the CIT(A) allowed the appeal for Assessment Year 2012-13 on the basis that the capital was introduced in earlier years and observed that the Assessing Officer could take cognizance of the matter by initiating suitable proceedings for 2010-11 and 2011-12. The Court recorded that, although there was no specific direction by the CIT(A) to re-open assessments, the absence of such an explicit direction did not preclude the Assessing Officer from initiating reassessment proceedings when material indicated that income may have escaped assessment in earlier years. The Court therefore rejected the contention that a formal direction from the appellate authority was a pre-condition to issuance of notices under Section 148 in the circumstances of the present case. [Paras 18]

A specific direction by the CIT(A) was not a prerequisite to re-opening the assessments for 2010-11 and 2011-12; initiation of proceedings by the Assessing Officer was permissible on the materials and observations in the appellate order.

Sufficiency of reasons for re-opening - Notice under Section 148 - Burden of filing return and opportunity for verification - escapement of income under Section 147 - Whether the reasons furnished by the Assessing Officer for re-opening the assessments satisfied statutory requirements and justified issuance of notices under Section 148 for Assessment Years 2010-11 and 2011-12. - HELD THAT: - The Court examined the reasons placed on record: the Assessing Officer noted non-filing of returns for 2010-11 and 2011-12, absence of verifiable proof of source of the alleged capital introduction, lack of bank account and documentary trail, and the fact that the appellate order for 2012-13 indicated that the capital was introduced in earlier years. On these facts the Court held that the reasons given by the Assessing Officer met the statutory threshold to form a belief that income chargeable to tax may have escaped assessment, and that the Assessing Officer would require opportunity to verify and examine the transactions in scrutiny proceedings. Accordingly the Court found no infirmity in the reasons and declined to interfere with the reassessment proceedings. [Paras 19]

The reasons furnished by the Assessing Officer were sufficient to satisfy statutory requirements and to justify re-opening the assessments for 2010-11 and 2011-12; the reassessment proceedings were upheld.

Final Conclusion: The intra-court appeals are dismissed and the order of the learned single Judge refusing to interfere with the Assessing Officer's initiation of reassessment proceedings for Assessment Years 2010-11 and 2011-12 is confirmed; connected petitions closed.

Computation of exemption under Section 10-A - treatment of expenses excluded from export turnover in computing total turnover - consistency of components in numerator and denominator of a statutory formula

Computation of exemption under Section 10-A - treatment of expenses excluded from export turnover in computing total turnover - consistency of components in numerator and denominator of a statutory formula - Expenses excluded from export turnover for computing the export turnover must also be excluded from total turnover when applying the formula in Section 10-A for deduction computation. - HELD THAT: - The Court applied the principle that where a statutory formula defines 'export turnover' (the numerator) and 'total turnover' includes export turnover (the denominator), components excluded from the export turnover cannot be treated differently when computing total turnover. Adopting the reasoning in COMMISSIONER OF INCOME TAX v. TATA ELXSI LTD., the Court held that including items excluded from the numerator in the denominator would produce inconsistent components and run counter to legislative intent. In consequence, amounts reduced from export turnover must likewise be reduced from total turnover for the purpose of calculating deduction under Section 10-A. The Court found no substantial question of law warranting admission of the appeal and saw no infirmity in the Tribunal's order which followed the cited authority.

The Tribunal's allowance of reducing from total turnover those expenses excluded from export turnover was upheld and the appeal dismissed.

Final Conclusion: The appeal is dismissed; the calculation under Section 10-A must exclude from total turnover those expenses that are excluded from export turnover, following the Court's earlier decision in TATA ELXSI LTD., and no substantial question of law arises for admission.

Deduction of tax at source under Section 194J - Income comprised therein - Reimbursement versus income - Assessee in default under Section 201 - Reimbursement not subjected to TDS as per administrative guidance

Deduction of tax at source under Section 194J - Income comprised therein - Reimbursement versus income - Payments made by the assessee to M/s. Hospet Steel Limited were reimbursements of expenses on a cost-to-cost basis and did not constitute income attractable to deduction under Section 194J. - HELD THAT: - The Court analysed Section 194J and held that the statutory requirement to deduct tax arises only on the "income comprised" in the sum paid. Reimbursements made on a cost-to-cost basis, not reflected as income in the payee's profit and loss account or balance sheet, do not acquire the character of income under Section 2(24). Therefore such payments cannot be treated as "fees for technical services" for the purpose of Section 194J. The Court relied on the principle that TDS is an alternative method of tax collection and cannot be applied to sums which are not taxable income, observing prior authority and administrative clarification that reimbursement is not to be treated as income for TDS purposes. [Paras 9, 11, 13, 14, 15]

Section 194J is not attracted as the payments were reimbursements and did not comprise income.

Assessee in default under Section 201 - Reimbursement versus income - The Assessing Officer's determination of assessee's default under Sections 201 and 201(1A) on the basis that TDS was required irrespective of whether the payment included an income component was erroneous. - HELD THAT: - The Court found the Assessing Officer's approach contrary to the statutory scheme because Sections 201/201(1A) operate only where tax is deductible under provisions such as Section 194J. Since the payments were held not to contain an income element, there was no obligation to deduct tax at source. The appellate authorities' factual conclusion that the payments were reimbursements was accepted and the imposition of interest and default under Section 201 were consequently unwarranted. [Paras 12, 16]

Orders under Sections 201 and 201(1A) cannot be sustained as the requirement to deduct did not arise.

Final Conclusion: Substantial questions of law answered in favour of the assessee; appeals dismissed as the payments to Hospet Steel Limited were reimbursements not constituting income, and therefore Sections 194J, 201 and 201(1A) were not attracted for the assessment years in question.

Recognition of income under mercantile system of accounting - non-performing asset - accrued interest on loans classified as non-performing assets - income recognition only on actual receipt for non-performing assets - effect of amendment to Section 43D on income recognition

Recognition of income under mercantile system of accounting - non-performing asset - accrued interest on loans classified as non-performing assets - income recognition only on actual receipt for non-performing assets - Whether additions of accrued interest on loans classified as non-performing assets could be sustained where the assessee followed mercantile accounting for Assessment Year 2012-13 - HELD THAT: - The Court applied the reasoning in Canfin Homes Limited as followed by a coordinate Bench and further explained in Shri Siddeshwar Co-Operative Bank Limited . The Court held that although under the mercantile system income is generally taxable when it accrues, an amount cannot be treated as accruing where the assessee's own accounts and objectively available classification show the asset to be a non-performing asset (NPA) and therefore not yielding income. By definition an NPA ceases to generate income; interest which has remained unpaid and become past due does not constitute income for tax purposes unless it is actually received or the assessee's accounts do not reflect its non-recoverability. The policy guidance cited (National Housing Bank) and the Tribunal's approach were accepted to the extent that income from NPAs is to be recognised only on actual receipt. Applying these principles to the facts of the case, the additions made by the assessing authority for accrued interest on loans classified as NPAs were not sustainable. [Paras 4, 6]

Additions on account of accrued interest on loans classified as non-performing assets deleted; substantial question answered against the Revenue.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal's deletion of additions of accrued interest on loans classified as non-performing assets for Assessment Year 2012-13 is upheld.

Deduction under Section 10AA - computation of gross total income under Chapter IV - application of Chapter IV and Chapter VI in computing income for purpose of deduction - stage of deduction - disallowance under Section 40(a)(ia) and its treatment for computation of deduction - revision under Section 263

Deduction under Section 10AA - computation of gross total income under Chapter IV - application of Chapter IV and Chapter VI in computing income for purpose of deduction - Whether the deduction under Section 10AA is to be computed at the stage of computing gross total income under Chapter IV or at the stage of computation of total income under Chapter VI - HELD THAT: - The High Court held that the question is no longer open in view of this Court's decision in The Principal Commissioner of Income Tax v. BTP Infoserve Private Limited, which placed reliance on the Supreme Court's decision in Commissioner of Income Tax v. Yokogawa India Limited. Those authorities establish that the deduction under Section 10A/10AA is to be allowed at the stage of computing the gross total income of the eligible undertaking under Chapter IV and not at the later stage of computing total income under Chapter VI. Applying that settled principle, the Court concluded that the Assessing Officer's allowance of the deduction at the Chapter IV stage was in consonance with law. The Court therefore answered the substantial question against the Revenue and in favour of the assessee. The question concerning computation after taking into account disallowance under Section 40(a)(ia) was considered by the Tribunal on merits and, in the light of the binding precedents, the High Court found no error warranting interference.

The substantial question of law is answered against the Revenue; the deduction under Section 10AA is to be applied while computing gross total income under Chapter IV and not at the Chapter VI stage; appeal dismissed.

Final Conclusion: The High Court dismissed the revenue appeal, holding that deduction under Section 10AA is to be computed at the stage of gross total income under Chapter IV (not at Chapter VI), and answered the substantial question of law against the Revenue for assessment year 2010-11.

Reopening of assessment under Section 147 - Validity of reassessment - Cross-objections on reopening - Academic adjudication - Substantial question of law - Liberty to agitate issues in future appeal

Cross-objections on reopening - Academic adjudication - Reopening of assessment under Section 147 - Whether the Tribunal's non-adjudication of the assessee's cross-objections on the validity of reopening entitled the assessee to maintain this appeal. - HELD THAT: - The Court noted that the Tribunal dismissed the revenue's appeal on merits and treated the cross-objections filed by the assessee on the legal question of reopening as academic and did not decide them on merits. The apprehension of the assessee that non-adjudication would prejudice it in the event the revenue preferred an appeal was held insufficient to sustain the present appeal. Mere possibility of future litigation or apprehension does not convert an academic or non-adjudicated issue into a subsisting substantial question of law warranting interference. The proper course is to permit the assessee to raise the non-adjudicated contentions in appropriate proceedings should the revenue file an appeal contesting the Tribunal's order. [Paras 6, 7]

Non-adjudication of the cross-objections on the validity of reopening was not a ground for the present appeal and did not give rise to a substantial question of law warranting interference.

Final Conclusion: The appeal is dismissed as not involving any substantial question of law at present, with liberty granted to the assessee to challenge the impugned order if the revenue files an appeal.

Penalty under Section 271(1)(c) for claiming carry forward of unabsorbed depreciation - carry forward of unabsorbed depreciation - reopening of assessment under Sections 147 and 148 - application of binding Division Bench precedent - remand for fresh consideration

Penalty under Section 271(1)(c) for claiming carry forward of unabsorbed depreciation - application of binding Division Bench precedent - remand for fresh consideration - Whether the levy of penalty under Section 271(1)(c) in respect of the claim of carry forward of unabsorbed depreciation in assessment year 2006-07 can be sustained, having regard to the earlier proceedings in assessment year 2001-02 and the Division Bench precedents relied upon. - HELD THAT: - The High Court did not decide the substantive question on the merits. The Tribunal had reopened the assessment under Sections 147 and 148 and levied penalty under Section 271(1)(c) on the ground of a wrongful double benefit in respect of carry forward of unabsorbed depreciation; the assessee's earlier claim for AY 2001-02 and its subsequent adjudication by the Tribunal formed part of the factual matrix. The Court observed that the contention raised by the assessee is required to be examined in the light of this Court's Division Bench decisions in Manjunath Cotton and Ginning Factory and Muninaga Reddy, which the parties accept are material. As no arguments were advanced before the Tribunal on this legal position and the Tribunal did not adjudicate the issue in the light of those precedents, the High Court found it appropriate to remit the matter for fresh consideration. The remand directs the Tribunal to reconsider the question afresh, applying the cited Division Bench authorities and passing reasoned orders in accordance with law and expeditiously.

The matter is remanded to the Tribunal to reconsider the levy of penalty under Section 271(1)(c) for AY 2006-07 in the light of the Division Bench precedents, with the impugned order set aside.

Final Conclusion: Appeal allowed; impugned order set aside and the matter remanded to the Tribunal to reconsider afresh in the light of the Division Bench judgments referred to by the High Court, to be decided expeditiously in accordance with law.

Prior-period expenditure - Mercantile system of accounting - Set-off / netting of interest on tax payments and refunds - Deduction under clause (iii) of section 57 - Disallowance under section 14A and computation under Rule 8D - Deduction of provision for leave encashment and applicability of Section 43B(f) - Transfer Pricing adjustments and CUP/TNMM benchmarking

Prior-period expenditure - Mercantile system of accounting - Deduction claimed in AY 2005-06 for royalty relating to sales in March 2004 - HELD THAT: - The royalty payment related to sales made in March 2004 and the liability crystallised in AY 2004-05. Under the mercantile system of accounting the deduction was allowable only in AY 2004-05. There was no justification for postponing claim to AY 2005-06. Consequently the claim in AY 2005-06 is disallowed. However, since the expenditure is a legitimate claim for AY 2004-05, the AO is directed to verify and consider the claim for AY 2004-05 and give consequential relief there. [Paras 3]

Grounds dismissed for AY 2005-06; claim remitted to AO for consideration in AY 2004-05

Set-off / netting of interest on tax payments and refunds - Deduction under clause (iii) of section 57 - Whether interest paid on income-tax demand can be netted against interest received on income-tax refunds for assessment in AY 2005-06 - HELD THAT: - The Tribunal followed coordinate and High Court authorities holding that where interest is both paid to and received from the same counterparty (the Government), the real income from interest is the net amount. The interest received was assessable under 'Income from other sources' and the statutory scheme of that head permits consideration of expenses falling under clause (iii) of section 57; earlier Tribunal and High Court decisions were held persuasive in allowing netting. Respectfully following those precedents, the addition was deleted to the extent of netting. [Paras 4]

Addition deleted by allowing netting of interest

Disallowance under section 14A and computation under Rule 8D - Disallowance under section 14A computed under Rule 8D for exempt income earned in AY 2005-06 - HELD THAT: - Assessee's shareholder funds substantially exceeded the investments yielding exempt income and opening investments were marginally different, indicating investments were out of own funds. On the facts the interest disallowance under Rule 8D was not justified. The Tribunal directed the AO to recompute the disallowance and allowed reduction of the impugned amount; the expenses disallowance (estimated at 0.5% or adjusted figure) was to be reworked by the AO in light of the decision. [Paras 5]

Partly allowed; AO directed to re-compute the section 14A/Rule 8D disallowance

Deduction of provision for leave encashment and applicability of Section 43B(f) - Claim for deduction of provision for leave encashment in AY 2005-06 pending decision of higher court on Section 43B(f) - HELD THAT: - The assessee initially disallowed the provision under section 43B(f) but later claimed it in assessment proceedings relying on a High Court judgment; the revenue's appeal against that judgment was pending before the Supreme Court which had stayed the High Court order. Both parties requested directions that the AO apply the Supreme Court ruling when rendered. The Tribunal restored the issue to the file of the AO with direction to apply the Supreme Court ruling; interim tax to be computed treating section 43B(f) as operative and assessee permitted to seek amendment in terms of the eventual Supreme Court ruling. [Paras 6]

Issue remanded to AO for decision in accordance with the Supreme Court ruling; interim tax computation directed

Transfer Pricing adjustments and CUP/TNMM benchmarking - Transfer pricing adjustment in respect of sales to associated enterprises and appropriate benchmark comparison for AY 2005-06 - HELD THAT: - The TPO applied an internal CUP using average rates of various countries to compute an adjustment. The assessee contended that sales were primarily to AEs in Hong Kong and CUP comparison should be limited to Hong Kong rates. Finding the assessee's submission plausible on the facts for this AY, the Tribunal accepted the country-specific benchmarking for the impugned year and reduced the TP adjustment accordingly to the computed figure placed before the Tribunal, observing that this approach was confined to the present AY. [Paras 8]

Partly allowed; TP adjustment reduced as per Tribunal computation for AY 2005-06

Final Conclusion: The appeal is partly allowed: the prior-period royalty claim in AY 2005-06 is disallowed but remitted for consideration in AY 2004-05; netting of interest on tax payments and refunds is allowed; section 14A/Rule 8D disallowance is directed to be recomputed in part in favour of the assessee; the leave-encashment provision issue is remitted to the AO for decision in accordance with the Supreme Court ruling (with interim computation); and the transfer pricing adjustment is reduced for the impugned AY. All other grounds disposed accordingly.

Penalty for use of false and incorrect material under Section 114AA of the Customs Act, 1962 - Use of false gate pass as a false declaration/document - Knowledge and intention as the basis of penal liability - Appellate tribunal's factual findings-no perversity - No substantial question of law

Penalty for use of false and incorrect material under Section 114AA of the Customs Act, 1962 - Use of false gate pass as a false declaration/document - Knowledge and intention as the basis of penal liability - Application of Section 114AA to the appellant for use of a false gate pass and imposition of penalty. - HELD THAT: - The Court held that Section 114AA is attracted where a person knowingly or intentionally makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular. The appellant used the gate pass which was a false or incorrect declaration and caused it to be used; he had prior knowledge of the mis-declaration and the actual contents of the consignment. On the factual findings recorded by the Tribunal and accepted by this Court, the statutory ingredients of Section 114AA were satisfied and the provision could be invoked against the appellant. [Paras 11]

Section 114AA applies to the appellant and invocation of penal liability under that provision is justified.

Appellate tribunal's factual findings-no perversity - No substantial question of law - Whether the Tribunal's factual findings (including reduction of penalty and exoneration from duty and other penalties) invite interference by this Court. - HELD THAT: - The High Court reviewed the Tribunal's findings that the appellant was not 'totally blemishless' given his possession and use of the gate pass, his admission regarding prior knowledge and involvement, and the investigative evidence. Those findings were treated as factual and not perverse. Having found no perversity or legal error in the Tribunal's assessment, and noting that the Tribunal adjusted penalties (deleting one penalty, reducing another to a lesser amount and setting aside duty liability), the Court found no substantial question of law arising from the record to warrant interference. [Paras 3, 7, 9, 11]

Tribunal's factual conclusions and its order stand; there is no ground for interference and no substantial question of law arises.

Final Conclusion: The appeal is dismissed; the Tribunal's findings that Section 114AA is attracted are upheld, its adjustment of penalties and exoneration from duty are not disturbed, and no substantial question of law is found.

Transaction value - onus on the Revenue to reject transaction value - enhancement of assessable value based on Departmental Valuation/DoV data or contemporaneous imports - clearance of goods by payment of duty on enhanced value not amounting to waiver of right to appeal - mis-declaration of description affecting rate of duty and valuation

Clearance of goods by payment of duty on enhanced value not amounting to waiver of right to appeal - filing of appeal constitutes protest - Whether payment of duty and clearance of imported goods on an enhanced assessable value precludes the importer from contesting valuation before the appellate forum - HELD THAT: - The Tribunal rejected the Commissioner (Appeals)'s conclusion that clearance of goods on payment of duty at the enhanced value and absence of contemporaneous protest precludes challenge on valuation. It observed that importers often pay duty to obtain delivery of essential goods to avoid demurrage and deterioration and that payment under protest and institution of appeals indicate dissatisfaction with enhancement. Precedents were cited to the effect that settlement in urgency does not bar an importer from disputing the assessment. Hence, clearance by payment alone cannot be treated as acceptance of the re-determined value. [Paras 6]

Clearance by payment of duty at the enhanced value does not bar the importer from challenging the valuation in appeal; filing an appeal constitutes protest.

Transaction value - onus on the Revenue to reject transaction value - enhancement of assessable value based on Departmental Valuation/DoV data or contemporaneous imports - Whether the Revenue can enhance assessable value on DoV data or contemporaneous import data without first rejecting the declared transaction value and adducing positive evidence - HELD THAT: - The Tribunal held that the transaction value agreed between importer and exporter must be accepted unless the Revenue discharges the burden of proving its incorrectness by positive and tangible evidence. Mere suspicion or expression of doubt by the Revenue is insufficient. Enhancement of value on the basis of DoV data or alleged contemporaneous imports, without rejecting the transaction value after producing evidence of contemporaneous imports or other exceptions under the Rules, is legally unsustainable. Cited authorities establish that price actually paid or payable must be accepted except where specific exceptions apply and are proved by the Revenue; no such proof was produced in these appeals. [Paras 7, 8, 9]

Transaction value must be adopted where the Revenue has not produced tangible evidence to reject it; enhancement without such evidence is unsustainable.

Mis-declaration of description affecting rate of duty and valuation - consent to enhancement of assessable value - Whether findings of mis-declaration of goods' description that materially affect rate of duty and valuation justify enhancement and dismissal of appeals in specific imported consignments - HELD THAT: - The Member (Technical) recorded that in three bills of entry the goods were mis-declared (importers accepted mis-declaration in their letters or on record) and that such mis-declaration directly affected applicable duty and valuation because re-rollable scrap carries higher duty and value than declared HMS. In respect of one appeal (C/60003/2016) the record showed the proprietor had accepted enhancement of assessable value; the third Member also found that where transaction value was not rejected the judicial view favouring the appellants applied. On majority view, however, only Appeal No. C/60003/2016 was found to involve consent/mis-declaration sufficient to uphold enhancement and dismiss the appeal, while the other appeals were allowed. [Paras 9, 14, 15, 16]

Where mis-declaration of description was accepted by the importer or there was consent to enhancement, the enhancement and penalties were justified; accordingly Appeal No. C/60003/2016 is dismissed, while the remaining appeals are allowed.

Final Conclusion: The Tribunal set aside the impugned valuations and allowed all appeals except Appeal No. C/60003/2016 which was dismissed on the finding of mis-declaration/consent to enhancement; the transaction value must be adopted where the Revenue fails to produce positive evidence to reject it, and payment/clearance on enhanced value does not preclude appellate challenge.

Penalty under Section 112(a) of the Customs Act, 1962 - Custom House Agent Licensing Regulations, 2004 - obligations and ancillary proceedings - Abetment liability - requirement of deliberate act or omission by CHA - Confiscation liability under Section 111 and derivative penal liability

Penalty under Section 112(a) of the Customs Act, 1962 - Custom House Agent Licensing Regulations, 2004 - failure to initiate regulatory proceedings - Abetment liability - requirement of evidence of deliberate act or omission - Whether imposition of penalty on the appellant (CHA) under Section 112(a) was sustainable in the absence of any proceedings under the CHALR 2004 and without clear establishment of abetment or act rendering goods liable to confiscation. - HELD THAT: - The Tribunal examined the scope of Section 112(a), which penalises a person who does or omits an act that would render goods liable to confiscation under Section 111 or who abets such an act. The Original Authority relied on Regulation 13 of the CHALR 2004 to criticise the appellant's conduct but the record showed that no proceedings under the CHALR 2004/CBLR 2013 had been initiated against the appellant. The CHALR set out regulatory obligations of a CHA and provides for distinct administrative action for their violation. Penalty under Section 112(a) is more comprehensive and severe and requires demonstration, by evidence, of a deliberate act or omission by the CHA amounting to abetment or causing confiscation liability. The impugned order did not articulate the basis for applying Section 112(a), nor did it set out findings establishing abetment or an act rendering the goods confiscable. In these circumstances, imposing the statutory penalty under Section 112(a) without initiation of CHALR proceedings or clear evidentiary findings of deliberate abetment was unsustainable.

Penalty under Section 112(a) set aside for want of justification and absence of CHALR proceedings or clear findings of abetment.

Final Conclusion: The appeal is allowed; the penalty imposed under Section 112(a) is quashed for being unsustainable in the absence of CHALR proceedings and without evidence establishing deliberate act or omission by the CHA amounting to abetment or confiscation liability.

Remand to original adjudicating authority - dependency on adjudication in connected proceedings - reliance on contemporaneous import values for valuation - valuation under Customs law - effect of Tribunal's prior order on connected cases

Remand to original adjudicating authority - dependency on adjudication in connected proceedings - effect of Tribunal's prior order on connected cases - Proceedings remitted to the original adjudicating authority for fresh decision in view of the prior Tribunal order in the connected DRI proceedings. - HELD THAT: - The adjudication in the present appeal depended on the outcome of separate DRI proceedings initiated by a show-cause notice dated 16.11.2007, which were decided by Order-in-Original No. 3/Commr/ICD-Valvada/JNPT/2012 dated 29.3.2012. Those connected proceedings were subsequently set aside and remanded to the original adjudicating authority by the Tribunal by Order No. A/11279 to 11288/2013 dated 10.10.2013. Given that the value determination in the instant case was founded on the determinations made in the connected proceedings, the Tribunal found it appropriate and prudent to remit the present matter to the original adjudicating authority so that it may be decided afresh in accordance with the Tribunal's directions in the K.C. Malkani matter. [Paras 4, 5]

Appeal allowed by way of remand to the original adjudicating authority for fresh decision in terms of the Tribunal's order dated 10.10.2013 in the connected proceedings.

Final Conclusion: The Revenue appeal is allowed to the extent that the matter is remitted to the original adjudicating authority for fresh adjudication in accordance with the Tribunal's earlier order in the connected DRI proceedings dated 10.10.2013.

Rectification of mistake apparent on the face of the record - review jurisdiction of the Tribunal - reassessment of evidence versus permissible rectification - binding precedent limiting review in RDC Concrete (India) Pvt. Ltd.

Rectification of mistake apparent on the face of the record - reassessment of evidence versus permissible rectification - review jurisdiction of the Tribunal - binding precedent limiting review in RDC Concrete (India) Pvt. Ltd. - MA (ROM) seeking rectification was not maintainable because allowing it would require reassessment of evidence and amount to impermissible review. - HELD THAT: - The Tribunal recorded that it had heard both parties, considered the evidence on record and arrived at the conclusion that the appeal was devoid of merit. The applicant's contention that reconsideration of all evidence and the written submissions would yield a different conclusion necessarily entails re examination and re appraisal of the evidentiary material. The Tribunal held that such reassessment would amount to a review of the order, which the Tribunal is not vested with power to undertake in light of the binding principle laid down by the Hon'ble Supreme Court in RDC Concrete (India) Pvt. Ltd. Consequently the application for rectification (MA (ROM)) could not be entertained and required rejection. [Paras 5, 6]

MA (ROM) rejected as it would impermissibly involve review by reassessing evidence contrary to the principle in RDC Concrete (India) Pvt. Ltd.

Final Conclusion: Application for rectification of the Tribunal's order dismissed on the ground that the relief sought would necessitate review by re examining evidence, which is not permissible under the cited Supreme Court precedent.

Entitlement to refund after finalization of assessment under Section 18(2) of the Customs Act - admissibility of refund to be examined by adjudicating authority in de novo proceedings - remand for fresh adjudication to apply precedent and settled law - direction to complete de novo proceedings within prescribed time

Entitlement to refund after finalization of assessment under Section 18(2) of the Customs Act - admissibility of refund to be examined by adjudicating authority in de novo proceedings - Whether the Commissioner (Appeals) order remanding the matter to the Adjudicating Authority for examination of the refund claim should be interfered with - HELD THAT: - The Tribunal applied its earlier reasoning that, under the statutory scheme, an importer is entitled to refund of duty after finalization of assessments and that the admissibility of refund must be examined by the Adjudicating Authority in accordance with law. The Commissioner (Appeals) had directed the Adjudicating Authority to examine admissibility of the refund; the Tribunal found that the Adjudicating Authority should consider the case laws relied upon and proceed in de novo proceedings. Having regard to settled decisions relied upon, the Tribunal declined to interfere with the Commissioner (Appeals) order remanding the matter for fresh adjudication. [Paras 3, 5]

Tribunal declined to interfere with the Commissioner (Appeals) order and remanded the matter to the Adjudicating Authority for de novo consideration of the refund claim in accordance with law.

Remand for fresh adjudication to apply precedent and settled law - direction to complete de novo proceedings within prescribed time - Whether the Adjudicating Authority should be directed to conclude de novo proceedings within a specified time - HELD THAT: - Following the precedent in respect of similar bills of entry, and noting the vintage of the matter, the Tribunal directed that the Adjudicating Authority should complete the de novo proceedings within three months from the date of receipt of the order. The Tribunal emphasised that the Adjudicating Authority must consider the cited case law while passing the order in the de novo proceedings. [Paras 5]

Adjudicating Authority directed to complete de novo proceedings within three months from receipt of the order.

Final Conclusion: The appeal is disposed of by remanding the matter to the Adjudicating Authority for de novo examination of the refund claim in accordance with settled law; the Commissioner (Appeals) order is not interfered with, and the Adjudicating Authority is directed to conclude proceedings within three months from receipt of this order.

Summary order. One week's time granted to HDFC Bank to file objections; objections already filed by Hero Fincrop Ltd. to be furnished to the RP's counsel and the successful resolution plan applicant; any response to be filed within one week with advance copy to opposite counsel; matter listed for arguments on 24.04.2018.

Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - competence of an authorised representative to file on behalf of a financial creditor - scope and effect of Power of Attorney versus corporate authorisation - delegation of authority by Chief Executive Officer or Board to authorise officers - commencement of Corporate Insolvency Resolution Process upon admission of one application

Competence of an authorised representative to file on behalf of a financial creditor - scope and effect of Power of Attorney versus corporate authorisation - delegation of authority by Chief Executive Officer or Board to authorise officers - Whether the persons who signed Form 1 (Mr. Pallav Sangal for Standard Chartered Bank and Mr. Pankaj Jain for DBS Bank) were competent to file the Section 7 applications on behalf of their respective banks. - HELD THAT: - The Tribunal examined the powers and authorisations conferred on the officers by the banks. In the case of Standard Chartered Bank, Mr. Pallav Sangal was authorised by a Power of Attorney executed by the Bank in favour of him and that Power of Attorney was itself executed by the Bank through its Chief Executive Officer who had been authorised to execute such instruments. In the case of DBS Bank, the Power of Attorney in favour of Mr. Pankaj Jain was executed under the Bank's common seal and evidenced authority by the Bank. Relying on the Tribunal's earlier decision in Palogix (Company Appeal (AT) (Insolvency) Nos. 30, 37 & 54 of 2017), the Court recognised that Form 1 contemplates an "authorised representative" acting for a juristic financial creditor and that corporate authorisation (including delegation by Board or an authorised officer such as the CEO) suffices to make an officer the authorised person for filing under Section 7. The Tribunal therefore treated the documented delegations and powers as constituting requisite authorisation to file the Section 7 applications in the present cases. [Paras 14, 15]

Both Mr. Pallav Sangal and Mr. Pankaj Jain were authorised to file the Section 7 applications on behalf of their respective banks and the applications were maintainable.

Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - commencement of Corporate Insolvency Resolution Process upon admission of one application - Whether, if one Section 7 application is admitted, it is necessary to admit the other filed by a different financial creditor. - HELD THAT: - The Tribunal observed that admission of one Section 7 application results in commencement of the Corporate Insolvency Resolution Process against the corporate debtor. Once CIRP has commenced by admission of one application, it is not necessary for the Adjudicating Authority to admit a second application for the same debtor; the second applicant remains entitled to submit its claim before the Resolution Professional appointed under the CIRP. [Paras 16]

Admission of one Section 7 application starts the CIRP; the other financial creditor may file its claim before the Resolution Professional and need not have its separate Section 7 application admitted.

Final Conclusion: The appeals are dismissed; both impugned Section 7 applications were held maintainable because the signatories were authorised officers of the respective banks, and admission of one application sufficed to commence the Corporate Insolvency Resolution Process, with no order as to costs.

Admission under Section 10 of the Insolvency and Bankruptcy Code, 2016 - Corporate insolvency resolution process - Default and debt due - Completeness of Form 6 under Rule 7 - Moratorium under Section 14 of the Code - Appointment of Interim Resolution Professional - Effect of assignment of debt and impleadment pending registration

Admission under Section 10 of the Insolvency and Bankruptcy Code, 2016 - Completeness of Form 6 under Rule 7 - Default and debt due - The application filed by the corporate debtor under Section 10 was complete and admission was warranted as default had occurred. - HELD THAT: - The Tribunal examined the Form No.6 and accompanying records and found that the corporate debtor satisfied the statutory prerequisites for filing under Section 10, namely existence of corporate debtor, occurrence of default and furnishing of required particulars and financial statements as mandated by Rule 7 and Form 6. The Tribunal applied the principle that where the application under Section 10 is complete and the corporate applicant is not ineligible under Section 11, the Adjudicating Authority is obliged to admit the application, and it cannot reject an application on extraneous grounds or facts beyond the scope of Section 10/Form 6. The fact of default was not disputed by the financial creditor and the financial statements and account particulars were held sufficient to demonstrate that the corporate debtor had fallen into insolvency, justifying initiation of the corporate insolvency resolution process. [Paras 22, 23, 24, 26, 28]

The petition under Section 10 is admitted.

Appointment of Interim Resolution Professional - The proposed Resolution Professional satisfied the Form 2 requirements and is to be appointed as Interim Resolution Professional. - HELD THAT: - The corporate debtor proposed a named insolvency professional who furnished written communication in Form 2, certified absence of pending disciplinary proceedings and disclosed requisite information. The Tribunal found the written communication in order and directed steps for formal appointment to be taken on the next listing, thereby permitting constitution of the interim insolvency machinery as contemplated by the Code. [Paras 27, 32]

The proposed Resolution Professional is acceptable and the formal appointment of the Interim Resolution Professional was directed to be passed on the next date.

Moratorium under Section 14 of the Code - Corporate insolvency resolution process - A moratorium under Section 14 was declared on admission, with its statutory scope specified. - HELD THAT: - On admitting the application, the Tribunal declared the moratorium and specified that, during its currency, institution or continuation of suits or proceedings against the corporate debtor, transfer or disposal of assets by the corporate debtor, actions to enforce security interests (including under SARFAESI), and recovery of property occupied by the corporate debtor are prohibited. The Tribunal further directed continuation of supply of essential goods and services and clarified the moratorium's duration as extending until completion of the corporate insolvency resolution process or until approval of a resolution plan or an order for liquidation. [Paras 29, 30, 31]

Moratorium as prescribed by Section 14 is in effect from the date of the order until completion of the CIRP or earlier statutory termination.

Effect of assignment of debt and impleadment pending registration - Application to implead the purported assignee was disposed of pending registration of the assignment; registration, if effected, to be notified to the Interim/Resolution Professional. - HELD THAT: - The Tribunal held that impleadment of ASREC (India) Ltd as a necessary party would not arise unless the assignment agreement was registered. The Tribunal disposed of the interlocutory application to implead the assignee and observed that, if the assignment is subsequently registered, the bank and assignee may inform the Interim Resolution Professional/Resolution Professional, who shall act on that information in accordance with the process. The Tribunal therefore did not effect any change in parties at this stage and left procedural consequences to the insolvency professionals if registration occurs. [Paras 13, 15]

CA No. 69/2018 disposed of; impleadment deferred until registration of the assignment is established.

Final Conclusion: The Tribunal admitted the corporate debtor's Section 10 application as complete and prima facie in default, directed initiation of the corporate insolvency resolution process, accepted the nominated Resolution Professional for appointment as Interim Resolution Professional, declared the statutory moratorium under Section 14, and disposed of the interlocutory application for impleadment of the assignee subject to registration of the assignment.

Admission of application under Section 10 of the Insolvency and Bankruptcy Code, 2016 - Existence of financial debt and occurrence of default - Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Appointment and duties of Interim Resolution Professional - Maintainability of intervention by an operational creditor at admission stage

Admission of application under Section 10 of the Insolvency and Bankruptcy Code, 2016 - Existence of financial debt and occurrence of default - Application filed by the corporate debtor under Section 10 of the I&B Code is admissible and deserves admission on satisfaction of existence of debt and default. - HELD THAT: - The Tribunal examined the Form No.6 particulars, annexed loan facilities, classification of financial debts as non-performing assets, operational creditor lists and provisional asset-liability figures. Having regard to the object and Preamble of the Code to enable time bound reorganisation and maximisation of asset value, the court held that the minimal statutory requirements for admission under Section 10 - demonstration of debt and occurrence of default - were satisfied. The Tribunal rejected the contention that a corporate debtor cannot invoke Section 10 merely because a corporate body is seeking resolution; Section 10 is to be used to facilitate restructuring and revival, not as a means of escape. On the materials before it the Tribunal concluded prima facie scope for revival and sufficient assets to address outstanding liabilities and therefore admitted the petition and directed commencement of the CIRP. [Paras 3, 6]

The petition under Section 10 is admitted; conditions under Section 10 (existence of debt and default) are fulfilled and CIRP is to commence.

Maintainability of intervention by an operational creditor at admission stage - An operational creditor is not entitled to be permitted as an intervener at the preliminary admission stage of a Section 10 application filed by the corporate debtor. - HELD THAT: - The Tribunal considered the challenge based on an interim order of the Delhi High Court restraining the group company from disposing assets and the contention that material facts were concealed. The Tribunal found the Delhi High Court order related to a different proceeding under the Arbitration and Conciliation Act and did not preclude a group company from filing a Section 10 application. Further, at the admission stage the role of third parties such as operational creditors is limited; intervention by an operational creditor is not permissible at this preliminary stage. The Tribunal recorded that the operational creditor remains entitled to pursue claims in the CIRP by lodging claims with the IRP or pursue other statutory remedies under the Code. [Paras 3, 10]

The request to intervene by the operational creditor at the admission stage is declined; the operational creditor may file claims before the IRP.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Appointment and duties of Interim Resolution Professional - On admission under Section 10, moratorium under Section 14 commences and an Interim Resolution Professional is to be appointed to carry out functions under the Code. - HELD THAT: - The Tribunal directed that, consequent to admission, the moratorium as prescribed by Section 14 shall operate immediately and specified the prohibitions during the moratorium (suits, transfer or disposition of assets, enforcement of security, recovery of property, and interruption of supply of essential goods/services), subject to exceptions in the statute. The Tribunal appointed the named IRP, noting his consent in Form No.2, and directed him to perform the duties under Sections 15 and 18 and to report compliance within 30 days. The Tribunal also recorded interim directions restraining promoters/directors from leaving the country without permission and confirmed that operational creditors are to lodge claims with the IRP. [Paras 8, 9, 11, 12, 14]

Moratorium is declared with immediate effect; Mr. Vijaykumar V. Iyer is appointed as Interim Resolution Professional and shall perform statutory duties and report progress.

Final Conclusion: The corporate debtor's Section 10 petition is admitted; the CIRP is commenced, the moratorium under Section 14 is declared, an IRP is appointed to conduct the process, operational creditors may lodge claims with the IRP, and interim restrictions on promoters/directors are imposed.

Refund of service tax - input services used for export - time limit for refund under Notification No. 41/2012-ST - date of Let Export Order (LEO) as relevant date - Section 94A of the Finance Act, 1994 - subordinate legislation cannot be modified by the Tribunal or officers - mandatory nature of statutory limitation

Time limit for refund under Notification No. 41/2012-ST - date of Let Export Order (LEO) as relevant date - subordinate legislation cannot be modified by the Tribunal or officers - mandatory nature of statutory limitation - Whether the one year limitation prescribed by Notification No. 41/2012 ST is to be computed from the date of Let Export Order (LEO) and whether that limitation can be altered by reckoning the date of receipt of supplier invoices instead of the LEO. - HELD THAT: - The Tribunal held that refund of service tax on services used in export is governed by Section 94A of the Finance Act, 1994 read with Notification No. 41/2012 ST and that the notification prescribes a one year limitation to be computed from the date of export, which the notification defines as the date of the Let Export Order (LEO) (see para 6). The claim filed after one year from the LEO is therefore time barred and the notification contains no provision permitting condonation of delay. The Tribunal emphasised that a notification is subordinate legislation made under delegated powers and that neither officers nor the Tribunal are empowered to modify the date of reckoning or the statutory time limit; such power to annul or alter subordinate legislation lies with the courts in exercise of their jurisdiction, not with the Tribunal (para 8). The decision rejected the appellant's reliance on judgments said to have altered the relevant date in other contexts, observing that those decisions do not empower the Tribunal or officers to rewrite the terms of Notification No. 41/2012 ST and are inapplicable to the present notification (para 9). The Tribunal therefore applied the binding principle that where a statute or subordinate legislation prescribes a period of limitation for refund, that period is mandatory and must be complied with (para 8). [Paras 6, 8, 9, 10]

Refund claim filed after one year from the date of LEO is time barred; the date of receipt of supplier invoices cannot be substituted for the date of LEO and the Tribunal cannot modify the notification; appeal dismissed.

Final Conclusion: The refund claim of the appellant, filed beyond one year from the date of Let Export Order as prescribed in Notification No. 41/2012 ST, is time barred; the Tribunal dismissed the appeal and upheld the rejection of the refund claim.

Characterisation as Goods Transport Agency under Section 65(50b) of the Finance Act, 1994 - Writ jurisdiction in revenue matters - Availability of alternative and efficacious remedy - Distinct assessment periods

Characterisation as Goods Transport Agency under Section 65(50b) of the Finance Act, 1994 - Writ jurisdiction in revenue matters - Availability of alternative and efficacious remedy - Distinct assessment periods - Maintainability of writ challenging assessment order dated 30.04.2014 treating the petitioner as a Goods Transport Agency for the period January 2008 to September 2011 - HELD THAT: - The court held that the controversy whether the petitioner is a Goods Transport Agency (GTA) or a Goods Transport Operator (GTO) for the impugned period involves disputed questions of fact and classification which are not amenable to adjudication in writ proceedings. The petitioner had an alternative and efficacious remedy under the statutory scheme which it did not exhaust; consequently, constitutional jurisdiction should not be invoked to circumvent the appellate or adjudicatory remedies provided by the Act. The court also observed that assessment years/periods are distinct and the favourable conclusion reached by authorities for a subsequent period (October 2011 to September 2012) does not render the earlier assessment non-justiciable in the appropriate forum. Given these factors, the writ petition seeking to set aside the order dated 30.04.2014 and to forbear recovery proceedings was not maintainable. [Paras 3, 4, 5]

Writ petition dismissed; petitioner granted liberty to pursue appropriate statutory remedies in accordance with law; no order as to costs.

Final Conclusion: The challenge to the assessment order dated 30.04.2014 for January 2008 to September 2011 was dismissed for want of maintainability on the ground that the dispute is factual/classificatory and alternative efficacious remedies exist; the petitioner is at liberty to pursue those remedies.

Refund of service tax - construction service for residential complexes - eligibility to refund - finality of judgment - unjust enrichment - remand for verification

Refund of service tax - construction service for residential complexes - finality of judgment - Appellant entitled to refund of service tax paid for 2005-2006 as service tax was not leviable on construction of residential complexes for that period. - HELD THAT: - The Tribunal held that the question of levy on construction of residential complexes for the period in issue has attained finality by the Gujarat High Court decision relied upon by the appellant. Given that service tax was not leviable for 2005-2006, the tax paid for that period is eligible for refund. The Tribunal noted that a departmental appeal was not preferred against the Commissioner (Appeals) order dated 07.03.2012 which had decided related demands in the appellant's favour, reinforcing the finality of the legal position on leviability.

Impugned order set aside and appellant held entitled to refund for 2005-2006 subject to verification on unjust enrichment.

Unjust enrichment - remand for verification - Claim for refund remanded to adjudicating authority for examination of the issue of unjust enrichment. - HELD THAT: - The Tribunal observed that the authorities below had not considered or decided the question of unjust enrichment in relation to the refund claim. As the entitlement to refund on the question of levy has been accepted, the limited factual and legal question of whether the appellant has been unjustly enriched must be examined afresh by the adjudicating authority before any refund is sanctioned.

Matter remanded to the adjudicating authority to examine and decide the issue of unjust enrichment and proceed accordingly.

Final Conclusion: Appeals allowed by setting aside the impugned orders; appellant held eligible for refund of service tax paid for 2005-2006, with the adjudicating authority directed to examine and decide the issue of unjust enrichment on remand.

Service Tax on SIM card - following Supreme Court decision in Idea Mobile Communication Ltd. - normal period of limitation - extended period of limitation - remand for verification of tax and interest

Service Tax on SIM card - following Supreme Court decision in Idea Mobile Communication Ltd. - Liability to pay Service Tax on the value of SIM cards during the relevant period. - HELD THAT: - The Tribunal applied and followed the decision of the Hon'ble Supreme Court in Idea Mobile Communication Ltd. and earlier Tribunal precedent, and accordingly decided the substantive question of liability against the appellant on merits. The Tribunal however limited the enforceable demand in conformity with the principle restricting exposure to the normal period of limitation.

Liability for Service Tax on SIM cards during the period was upheld against the appellant on merits, subject to limitation constraints.

Normal period of limitation - extended period of limitation - remand for verification of tax and interest - Whether the demand should be restricted to the normal period and the matter remitted for verification of the amount and interest payable for the normal period. - HELD THAT: - The Tribunal found that the demand had been restricted to the normal period of limitation. The appellant represented that Service Tax for the normal period has already been paid while the demand for the extended period remained unpaid. In view of these facts the Tribunal set aside the impugned order to the extent of the extended period and remitted the matter to the adjudicating authority for limited verification of the correct amount of Service Tax and interest payable for the normal period.

Impugned order set aside and appeal allowed by way of remand for limited verification of tax and interest for the normal period.

Final Conclusion: The appeal is allowed by way of remand: the substantive liability for Service Tax on SIM cards was decided against the appellant following the Supreme Court precedent, but the enforceable demand is confined to the normal period of limitation; the matter is remitted to the adjudicating authority for verification of the amount of Service Tax with interest payable for the normal period.

Business Auxiliary Service - promotion of services - taxability of commission for facilitating loans - identification of nature of transaction - penalty for suppression - bona fide belief

Business Auxiliary Service - promotion of services - taxability of commission for facilitating loans - identification of nature of transaction - The appellant's activities of promoting and facilitating loan disbursal for vehicle purchases fall within taxable "Business Auxiliary Service" and the demand of service tax is sustainable. - HELD THAT: - The Tribunal, applying its earlier decisions, accepted the factual finding that the appellants acted as direct selling agents for banks by promoting loan disbursal, facilitating documentation and obtaining loan amounts for customers in return for commission. Such activities constitute promotion and marketing of the services of the client banks and therefore fall within the tax entry of "Business Auxiliary Service." The Tribunal distinguished decisions where the activity was confined to mere verification of customer details, noting that where there is substantial activity of business promotion the service is taxable. In view of the recorded nature of the appellants' transactions and consistent precedent, there is no reason to interfere with the demand confirmed by the lower authorities. [Paras 4, 5]

Demand of service tax confirmed under the head "Business Auxiliary Service" is upheld and the appeal on this point is dismissed.

Penalty for suppression - bona fide belief - The penalty imposed on the appellant is sustainable because the appellant failed to establish a bona fide belief or ignorance of law to negate allegations of suppression. - HELD THAT: - The Tribunal noted that the appellants did not elaborate or substantiate any bona fide belief regarding non-liability to service tax. The impugned order records absence of material to support a claim of bona fide belief or ignorance of law. In the absence of pleaded or evidentiary grounds to justify relief from penalty, the Tribunal found no reason to interfere with the penalty imposed by the lower authorities. [Paras 4, 5]

Penalty sustained; appeal against imposition of penalty is dismissed.

Final Conclusion: Appeal dismissed in entirety; confirmed demand of service tax as "Business Auxiliary Service" and the penalty imposed on the appellant are upheld.

CENVAT credit on capital goods - Credit for towers and tower materials as capital goods - Interest on excess CENVAT credit taken in same financial year under Rule 4(2)(a) - Scope of show cause notice to include interest claim - Penalty under Rule 15(1) and Rule 15(3) of the CENVAT Credit Rules

Interest on excess CENVAT credit taken in same financial year under Rule 4(2)(a) - CENVAT credit on capital goods - Scope of show cause notice to include interest claim - Respondent liable to pay interest for having availed 100% of CENVAT credit on towers and tower materials in the same financial year instead of spreading 50% to the subsequent year - HELD THAT: - The Tribunal accepted that towers and tower materials were properly held to be capital goods and admissible for CENVAT credit by the Commissioner. However, the Commissioner did not address the obligation under Rule 4(2)(a) to spread credit on capital goods-50% in the year of receipt and 50% in the subsequent year. Since the demand originally arose from credits taken on capital goods, the Tribunal found that the Revenue's contention seeking interest on the 50% taken in advance falls within the ambit of the show cause notice. The Tribunal therefore held the respondents liable to pay interest on the portion of credit availed in advance and remanded the matter to the Commissioner for quantification of the interest payable. [Paras 7]

Liability to pay interest on 50% of credit availed in advance is upheld; matter remanded to Commissioner to ascertain quantum of interest.

Penalty under Rule 15(1) and Rule 15(3) of the CENVAT Credit Rules - Penalty is not sustainable under the circumstances and is not to be imposed - HELD THAT: - The Tribunal noted the Commissioner had imposed a penalty (under Rule 15(3) as recorded) but observed that the High Court has held in the cited Vodafone Essar Gujarat Ltd. decision that penalty under Rule 15(1) is not imposable in such circumstances. Applying that precedent, the Tribunal found no merit in the Revenue's plea for penalty and declined to sustain any penalty. The Tribunal therefore did not remit the penalty issue for fresh imposition. [Paras 8]

Penalty not upheld; no penalty to be imposed in view of the High Court decision relied upon.

Final Conclusion: The Revenue's appeal is partly allowed: the respondents are held liable to pay interest on the 50% of CENVAT credit availed in advance and the matter is remanded to the Commissioner for determination of the quantum of interest; the penalty is not sustained and the cross objection stands disposed of.

Double taxation - Business Auxiliary Service - Service tax liability on commission passed on by principal to agent - Precedent applicability in tax adjudication

Double taxation - Business Auxiliary Service - Service tax liability on commission passed on by principal to agent - Whether recovery of service tax from the authorised dealer on commission passed by the manufacturer is sustainable where the manufacturer has already discharged service tax on the gross commission. - HELD THAT: - The Tribunal noted that Maruti Udyog Ltd. had received commission from finance companies and paid service tax on the gross amount which included the portion subsequently passed on to the authorised dealer. Relying on the Tribunal's earlier reasoning in SAI Service Station Ltd. and related authority, it held that demanding service tax again from the dealer on the same amount would result in double taxation. Since the adjudicating authority itself recorded that the commission received by Maruti Udyog Ltd. had already suffered service tax, the principle in the precedents was held to be squarely applicable. On that basis the Revenue's demand against the dealer could not be sustained. [Paras 5, 6]

The impugned order allowing the dealer's appeal is upheld and the Revenue's appeal is dismissed as devoid of merit.

Final Conclusion: Where a principal has already discharged service tax on gross commission that includes the portion passed to an authorised dealer, a subsequent demand for service tax on the same amount from the dealer is barred as double taxation; Revenue's appeal dismissed.

Refund of excess service tax under Section 11B of the Central Excise Act, 1944 - adjustment/reduction of taxable value by service receiver for deficiency in service - no requirement to amend work orders to claim refund - certificate of Chartered Accountant as evidence of excess payment - application of Section 83 of the Finance Act, 1994 to service tax

Refund of excess service tax under Section 11B of the Central Excise Act, 1944 - adjustment/reduction of taxable value by service receiver for deficiency in service - no requirement to amend work orders to claim refund - certificate of Chartered Accountant as evidence of excess payment - Appellant entitled to refund of excess service tax paid for the period June 2013 to March 2014 where service receivers reduced billed values on account of deficiency in services and less taxable value was ultimately received. - HELD THAT: - The Tribunal found that the appellant initially paid service tax on the taxable values shown in the invoices but subsequently received reduced payments from the three service receivers on account of non-conformity/deficiency in services. That short receipt of taxable value resulted in an excess payment of service tax which the appellant claimed as refund under Section 11B of the Central Excise Act, 1944 (applicable to service tax by virtue of Section 83 of the Finance Act, 1994). The Commissioner (Appeals) had denied refund on the ground that the underlying work orders were not amended to reflect reduced amounts. The Tribunal held there is no basis or requirement to amend work orders in order to claim refund where the taxable value actually received is less because services did not conform to the work orders. The Chartered Accountant's certificate evidencing the excess payment was part of the record and the factual reduction by the service receivers justified the refund. Applying these principles, the impugned order was set aside and the refund claim allowed with consequential relief as per law. [Paras 6]

Impugned order set aside; appeal allowed and refund of excess service tax for the period June 2013 to March 2014 granted with consequential relief as per law.

Final Conclusion: The Tribunal allowed the appeal, set aside the Commissioner (Appeals) order and directed refund of the excess service tax paid for June 2013 to March 2014, holding that amendment of work orders was not a precondition to claim refund where receivers reduced billed value on account of deficient services.

Refund under Notification No. 41/2012 - limitation period from date of export - interpretation of a notification - reverse charge mechanism - Voluntary Compliance Encouragement Scheme (VCES)

Refund under Notification No. 41/2012 - limitation period from date of export - Voluntary Compliance Encouragement Scheme (VCES) - interpretation of a notification - Whether the refund claims filed on 29.12.2014 for service tax paid (discharged under VCES in 2013-14) in respect of services utilised for export of goods during 2008-2009 to 2012-2013 are barred by the one-year limitation prescribed by Notification No. 41/2012. - HELD THAT: - The Tribunal found that Notification No. 41/2012 prescribes filing of refund applications within one year from the date of export of the goods and does not provide for the limitation to run from the date of payment of tax. The appellants had exported goods during 2008-2009 to 2012-2013 but did not discharge the reverse charge service tax liability on commissions to foreign agents when due; the tax was thereafter paid under the VCES in 2013-14. The appellants' contention that limitation should run from the date of payment (i.e., the VCES payment) and that a harmonious construction would make limitation run from the later of export or payment was rejected. The Tribunal held that such an interpretation would require reading words into the notification beyond its clear wording and would be contrary to established principles of interpreting notifications. Following this reasoning, the refund claims filed on 29.12.2014 were held to be time barred under the notification. [Paras 6, 7, 8]

Refund claims are barred by the one year limitation in Notification No. 41/2012 measured from the date of export and the appeal is rejected.

Final Conclusion: The appellate order upholding rejection of the refund claims as time barred under Notification No. 41/2012 is affirmed; the Tribunal held that limitation runs from the date of export and not from subsequent payment under VCES.

Dismissal of special leave petition - Interference with High Court order - Reservation of question of law for future consideration

Dismissal of special leave petition - Interference with High Court order - The special leave petition against the High Court's order was dismissed and the Supreme Court declined to interfere with the High Court's decision. - HELD THAT: - The Court, after condoning delay, considered the matter and stated that it was not inclined to interfere with the order of the High Court. No substantive legal reasoning altering the High Court's decision was articulated; consequently the appeal was dismissed. The Court's action was confined to the refusal to grant relief sought by the petitioner in the special leave petition.

Special leave petition dismissed; Supreme Court declines to interfere with the High Court's order.

Reservation of question of law for future consideration - The Court expressly left open a question of law for determination in an appropriate case. - HELD THAT: - Although the petition was dismissed, the Court clarified that it did not decide a potentially broader legal question raised and accordingly reserved that question for consideration in a future matter where it may be properly argued and decided. This reservation indicates that no authoritative pronouncement on that legal point was made in the present order.

Question of law left open for consideration in an appropriate case.

Final Conclusion: Delay was condoned; the special leave petition was dismissed with the Supreme Court declining to interfere with the High Court's order, while expressly keeping the relevant question of law open for future determination.

Omission of a statutory provision and its effect vis-a -vis repeal - saving clause and applicability of the General Clauses Act, 1897 - validity of Rules 96ZO, 96ZP and 96ZQ of the Central Excise Rules, 1944 - compound levy scheme as a separate statutory scheme - application of a binding Supreme Court decision to pending and future cases

Omission of a statutory provision and its effect vis-a -vis repeal - saving clause and applicability of the General Clauses Act, 1897 - Whether omission of Section 3A of the Central Excise Act, 1944 (by Finance Act, 2001) without an express saving clause affects proceedings in respect of which decisions were taken prior to the date of omission. - HELD THAT: - The Court considered the ratio of the Supreme Court in Shree Bhagwati Steel Rolling Mills v. Commissioner of Central Excise and the interpretive approach to the words 'omit', 'delete' and 'repeal', and the operation of saving provisions. While the Supreme Court's reasoning (as set out in the cited decision) treats omission as tantamount to repeal for purposes of applying saving principles and also declared the interest and penalty provisions in Rules 96ZO, 96ZP and 96ZQ invalid insofar as they purported to levy interest/penalty not authorised by Section 3A, the High Court concluded that, on the facts of these appeals, the substantial questions framed were to be answered in favour of the department. The Court nevertheless noted that the tax amount involved in the present matters is covered by a departmental circular and clarified the effect of the Supreme Court decision for future cases. [Paras 7, 8]

Answered in favour of the department, subject to the clarification that the parties are to be governed by the Supreme Court decision in future and the tax amount in these cases is covered by the circular.

Validity of Rules 96ZO, 96ZP and 96ZQ of the Central Excise Rules, 1944 - compound levy scheme as a separate statutory scheme - application of a binding Supreme Court decision to pending and future cases - Whether the decision of the Supreme Court declaring the interest and penalty provisions in Rules 96ZO, 96ZP and 96ZQ invalid applies to the parties and how the present appeals should be disposed of in view of that decision and the departmental circular. - HELD THAT: - The High Court recorded and applied the Supreme Court's conclusions that the Rules could not validly impose interest/penalty beyond what the statute authorised and that the compound levy scheme is a distinct regime. Having done so, the High Court observed that, notwithstanding the legal position articulated by the Supreme Court, the tax amount in the present matters falls within the scope of a departmental circular. Consequently, although the substantial legal questions are answered in favour of the department on the facts before this Court, the Court expressly clarified that the parties and future litigants will be governed by the Supreme Court's decision. [Paras 6, 7, 8]

Appeals disposed of in favour of the department on the present facts but with the clarification that the Supreme Court's decision will govern the parties (and future cases) and that the tax amounts here are covered by the circular.

Final Conclusion: Both appeals are disposed of; the substantial questions were answered in favour of the department on the facts before the High Court, but the Court clarified that the parties (and future cases) will be governed by the Supreme Court's decision, and noted that the tax amount in these matters is covered by the departmental circular.

Power of Central Government to charge excise duty on the basis of capacity of production - Determination of annual capacity of production - Effect of amendment, repeal or omission on liabilities - saving of accrued liabilities - Abatement for periods of non-production

Effect of amendment, repeal or omission on liabilities - saving of accrued liabilities - Section 38A - effect of amendment etc. of rules, notifications or orders - Whether omission of Section 3A of the Central Excise Act and Rule 96ZO(3) after the relevant period extinguished the excise liability or proceedings for recovery - HELD THAT: - The Court found that the liability in question arose during the period 1-10-1999 to 31-3-2000 when Section 3A and the relevant rule were in force. Section 38A(c) provides that amendment or repeal of rules, notifications or orders shall not affect rights, privileges, obligations or liabilities acquired, accrued or incurred thereunder. Reliance on Supreme Court authorities led the Court to hold that omission/repeal does not wipe out liabilities which accrued while the charging provision was in force. Consequently the subsequent omission of Section 3A and Rule 96ZO(3) did not erase the appellant's liability and proceedings for recovery could be continued. [Paras 11, 12, 15, 16]

Omission of Section 3A and Rule 96ZO(3) did not extinguish the excise liability that accrued during the period when those provisions were in force; proceedings for recovery could be maintained.

Determination of annual capacity of production - Power of Central Government to charge excise duty on the basis of capacity of production - The correct method for determining the annual capacity of production of the appellant's induction furnaces for levy under the capacity-based charging scheme - HELD THAT: - The Court held that annual capacity must be determined in accordance with Rule 3 of the Induction Furnace Annual Capacity Determination Rules, 1997, applying the prescribed formula based on total installed furnace capacity (ascertained from invoices, comparable furnaces or technical measurement). The Commissioner's determination-arrived at after physical measurement and technical assistance-was found to be in accordance with Rule 3. The Court rejected the appellant's contention that capacity should be reckoned by reference to a single furnace actually run at any given time or by claimed load constraints; sealing/unsealing of furnaces was relevant only for claiming abatement for periods of non-production and did not alter the installed-capacity based computation under Rule 3. [Paras 13, 14, 15]

Annual capacity is to be computed as per Rule 3 on the basis of total installed furnace capacity using the prescribed formula; sealing/unsealing affects entitlement to abatement but does not change the installed-capacity determination.

Abatement for periods of non-production - Whether sealing or non-use of a furnace affects entitlement to abatement from duty for continuous non-production of at least seven days - HELD THAT: - The Court recorded that the rules and attendant instructions provide for abatement where a factory producing notified goods did not produce for a continuous period of not less than seven days, subject to prescribed conditions. The factual finding of the Tribunal-upholding that closure/sealing for prescribed periods entitles the appellant to abatement-was accepted. However, such sealing/unsealing was held not to alter the installed-capacity calculation for annual capacity determination under Rule 3. [Paras 3, 14]

Sealing/unsealing and periods of non-production may give rise to entitlement to abatement if conditions are met, but do not alter the installed-capacity based annual capacity determination.

Final Conclusion: The appeal is dismissed. The liability for the period 1-10-1999 to 31-3-2000 remains enforceable despite the subsequent omission of Section 3A and Rule 96ZO(3), and the annual capacity was correctly determined under Rule 3 of the 1997 Rules on the basis of installed furnace capacity; sealing/unsealing only bears on entitlement to abatement, not on the computation of installed capacity.

SSI exemption - brand name distinctiveness - use of another's brand to exploit goodwill - benefit of Notification No.8/2003-CE - trade mark registration evidence

SSI exemption - brand name distinctiveness - trade mark registration evidence - Entitlement of the respondent to SSI exemption under Notification No.8/2003-CE notwithstanding use of the brand name 'RIAT SONS' when 'RIAT' was owned by another party. - HELD THAT: - The Tribunal found on the material on record, including the respondent's trade mark registration certificate dated 24.9.2005 and the show cause notice, that the respondent used the brand name 'RIAT SONS' while M/s. RMT used the brand name 'RIAT'. The two brand names were registered and recognised as not similar and therefore distinct. In those circumstances the respondent cannot be held to be using the brand name of another person or to be connecting its goods to the goods of M/s. RMT to exploit their goodwill. The Tribunal noted precedent in Bhamber Engineers, where a similar distinction between brand names led to entitlement to SSI exemption, and applied the same reasoning here. Having so held, there was no infirmity in the Commissioner (Appeals) order which had upheld the adjudicating authority's dropping of the show cause notice. [Paras 5, 6, 7]

The respondent is entitled to SSI exemption under Notification No.8/2003-CE for the period in issue; the appellate order is upheld.

Final Conclusion: The departmental appeal is dismissed and the Commissioner (Appeals) order upholding the dropping of the show cause notice is affirmed, as the respondent's brand 'RIAT SONS' was held to be distinct from 'RIAT' and entitled to SSI exemption for the period 1.10.2003 to 31.3.2008.

Cenvat credit admissibility despite missing invoice number under Rule 9(2) - Input service eligibility for renting of residential accommodation prior to amendment of Rule 2(l) - Extended period of limitation not invokable

Cenvat credit admissibility despite missing invoice number under Rule 9(2) - Cenvat credit can be allowed despite invoices lacking printed or having handwritten invoice numbers where the officer is satisfied that the inputs or input services have been received and accounted for. - HELD THAT: - The adjudicating authority had denied credit on the ground that some invoices did not bear printed serial numbers or contained handwritten numbers. Rule 9(2) of the Cenvat Credit Rules, 2004 permits allowance of credit where the document does not contain all particulars, if the assessing officer is satisfied that the goods or services covered by the document have been received and accounted for. The Tribunal distinguished earlier High Court and Tribunal decisions relied upon by Revenue as factually inapposite (duplicate invoices or different statutory provisions). On the admitted facts the Commissioner (Appeals) was satisfied as to receipt and accounting of the input services and therefore correctly permitted the credit notwithstanding the defect as to invoice numbering. [Paras 4, 5, 6]

Credit allowed for invoices even if invoice number is missing or handwritten, where officer is satisfied about receipt and accounting under Rule 9(2).

Input service eligibility for renting of residential accommodation prior to amendment of Rule 2(l) - Renting of residential accommodation provided to the Technical Director was an eligible input service for Cenvat credit prior to the amendment of Rule 2(l) effective 1.4.2011. - HELD THAT: - The Revenue denied credit on the ground that rent for the Technical Director had no nexus with manufacture. The Tribunal accepted that the Technical Director was an employee who assisted in day-to-day manufacturing operations and that the rent was provided as part of employment terms and incurred in the course of business. Prior to the amendment of Rule 2(l) on 1.4.2011 such services were not excluded; accordingly, the assessee was entitled to avail credit. The Tribunal relied on the principle in the cited Bombay High Court decision that input services used in the course of manufacture are eligible for credit and applied it to the admitted facts. [Paras 2, 7]

Credit allowed for service tax paid on rent for residence of Technical Director for period prior to 1.4.2011.

Extended period of limitation not invokable - Extended period of limitation could not be invoked in respect of the show cause notice issued on 27.8.2015. - HELD THAT: - The Tribunal noted that the show cause notice dated 27.8.2015 sought to invoke the extended period of limitation. On the facts and in law applicable to the case, the Tribunal held that the extended period of limitation was not invokable and therefore could not be relied upon by Revenue to deny credit or to sustain any demand. [Paras 8]

Extended period of limitation not invokable; extended limitation cannot be relied upon by Revenue.

Final Conclusion: The appeal filed by Revenue is dismissed and the appeal filed by the assessee is allowed: Cenvat credit granted for invoices despite missing/handwritten invoice numbers under Rule 9(2), rent for the Technical Director allowed as eligible input service for the period prior to 1.4.2011, and the extended period of limitation held not invokable.

Cenvat credit of service tax - Interior decorator service - Application of Tribunal precedent - Consequential relief

Cenvat credit of service tax - Interior decorator service - Application of Tribunal precedent - entitlement to cenvat credit of service tax paid on interior decorator service during September 2012 - HELD THAT: - The Tribunal held that the appellants' claim for cenvat credit of service tax paid on interior decorator service for September 2012 is covered by the Tribunal's earlier decision in M/s V E Commercial Vehicles Ltd. Vs CCE & ST Indore 2018 (2) TMI 906 CESTAT-NEW DELHI. Applying that precedent, the impugned order of the Commissioner (Appeals) was set aside and the appeal was allowed. The Tribunal therefore recognised the right to claim cenvat credit in accordance with the reasoning and entitlement established by the cited Tribunal decision, and granted consequential relief as per law.

The appeal is allowed; the impugned order is set aside and the appellants are held entitled to cenvat credit of service tax paid on interior decorator service for September 2012 with consequential relief as per law.

Final Conclusion: Appeal allowed by applying the cited Tribunal precedent; impugned order set aside and entitlement to cenvat credit for the service-tax paid on interior decorator service in September 2012 recognised, with consequential relief as per law.

Admissibility of cenvat credit for air travel agent services used for employee travel for business purposes - Cenvat credit - Service tax credit for sales and marketing activities - Binding effect of Tribunal Division Bench precedent

Admissibility of cenvat credit for air travel agent services used for employee travel for business purposes - Service tax credit for sales and marketing activities - Binding effect of Tribunal Division Bench precedent - Admissibility of cenvat credit of service tax paid on air travel agent services used by employees for procurement of orders, marketing and attending legal issues. - HELD THAT: - The Tribunal held that cenvat credit of service tax on air travel agent services used for employee travel relating to procurement of orders, marketing and attending legal matters is admissible. The Appellate Tribunal applied the Division Bench decision in Keihin Fie Pvt. Ltd. Vs CCE Pune (2017-10-TMI-122-CESTAT-MUM) as covering the facts of the present case and dispositive of the issue. Having found the claim covered by the earlier Division Bench precedent, the Tribunal set aside the impugned orders of the Commissioner (Appeals) and allowed the appeals with consequential relief as per law. [Paras 5]

Impugned orders set aside and appeals allowed; cenvat credit claimed on air travel agent services held admissible in light of the Division Bench precedent, with consequential relief.

Final Conclusion: The Tribunal allowed the appeals, holding that service tax paid on air travel agent services for employee travel related to procurement, marketing and legal matters is eligible for cenvat credit in view of the cited Division Bench decision, and directed consequential relief as per law.

Eligibility of CENVAT credit - eligibility of inputs used for repair and maintenance for CENVAT credit - definition of "input" under Rule 2(k) of the Cenvat Credit Rules, 2004 - nexus between repair and maintenance activity and manufacture - used in or in relation to manufacture of final products

Eligibility of CENVAT credit - definition of "input" under Rule 2(k) of the Cenvat Credit Rules, 2004 - eligibility of inputs used for repair and maintenance for CENVAT credit - nexus between repair and maintenance activity and manufacture - CENVAT credit on MS Angles, MS Beam, SS Plate/Coil/Sheet, Round Bar, Scrap bar, Channel and similar items used for repair and maintenance of capital goods is admissible. - HELD THAT: - The Tribunal examined whether goods used within the factory for repair and maintenance of capital goods fall within the definition of "input" in Rule 2(k) of the Cenvat Credit Rules, 2004. Relying on precedents where High Courts and Tribunals have held that inputs used for repair and maintenance of plant and machinery are integrally connected to manufacture, the Tribunal accepted the principle that the expression "used in or in relation to manufacture of final products, whether directly or indirectly" covers activities that are commercially expedient for manufacture. The Tribunal followed the reasoning that repair and maintenance are activities without which smooth manufacturing cannot be carried out, and hence goods consumed in those activities have the requisite nexus with manufacture to qualify as inputs eligible for CENVAT credit. The appellant's materials were not disputed to have been used for repair and maintenance within the factory; on that basis the Tribunal set aside the adjudication upheld by the Commissioner (Appeals). The judgment cited several earlier decisions in support of this principle but the determinative legal proposition applied is that inputs used in repair and maintenance having a commercial nexus to manufacture are eligible for credit under Rule 2(k). [Paras 6, 7]

Impugned order set aside; appeal allowed and CENVAT credit on the disputed items held admissible with consequential relief, if any.

Final Conclusion: The Tribunal allowed the appeal, holding that duty-paid materials used for repair and maintenance of capital goods qualify as "input" under Rule 2(k) CCR, 2004 and are eligible for CENVAT credit for the period December 2011 to February 2014; the impugned order was set aside with consequential relief.

Cenvat credit on capital goods - captively consumed electricity - installation in premises of sister unit not a bar to credit - duty-paid nature of capital goods - electricity as an intermediate product

Cenvat credit on capital goods - captively consumed electricity - installation in premises of sister unit not a bar to credit - duty-paid nature of capital goods - electricity as an intermediate product - Entitlement to Cenvat credit on boilers and parts installed in Unit II for generation of electricity which is consumed in Unit I (sister unit). - HELD THAT: - The Tribunal found that the admitted facts show duty-paid capital goods were procured and put to use for generation of electricity which was consumed by the appellant in manufacture of dutiable final products. Relying on its earlier decision in OPG Metals Pvt. Ltd. , and on authoritative pronouncements that mere location of capital goods outside factory premises does not preclude credit and that electricity used as an intermediate product may be sourced externally (Vikram Cement ; Steel Authority of India Ltd. ; Indorama Textiles Ltd. ), the Tribunal held there is no justification to deny credit solely because the equipment is installed in premises of a sister unit. The duty-paid nature of the capital goods, their use for electricity generation and consumption in manufacture were not disputed; on that factual matrix the denial of credit was untenable. Applying these principles, the impugned orders were set aside. [Paras 5]

The impugned order is set aside and the appeals are allowed; the appellant is entitled to Cenvat credit on the capital goods used to generate electricity consumed in manufacture, with consequential relief as per law.

Final Conclusion: The Tribunal allowed the appeals, setting aside the adjudicating and appellate orders and holding that Cenvat credit on the boilers and related capital goods installed in Unit II is admissible since duty-paid capital goods were used to generate electricity which was captively consumed in manufacture, notwithstanding installation in premises of a sister unit.

CENVAT credit - service tax on courier service - admissibility of credit for input services - precedential reliance on earlier Tribunal decision

CENVAT credit - service tax on courier service - precedential reliance on earlier Tribunal decision - CENVAT credit of service tax paid on Courier Service is admissible for the period in question. - HELD THAT: - The Tribunal examined whether service tax paid on Courier Service qualified for CENVAT credit and found the question governed by the earlier decision in Haldyn Glass Ltd. & Ors. Vs CCE 2017 (8) TMI 1217 - CESTAT(AMD), which held such credit to be admissible. Applying that precedent, the Tribunal concluded that the impugned orders denying credit were unsustainable. Consequential relief, if any, was directed to follow as per law. [Paras 5]

Impugned orders set aside; appeals allowed and CENVAT credit of service tax on Courier Service held admissible with consequential relief.

Final Conclusion: Appeals allowed: Tribunal, following Haldyn Glass Ltd. 2017 (8) TMI 1217 - CESTAT(AMD), held that service tax paid on Courier Service was eligible for CENVAT credit and set aside the orders denying such credit, granting consequential relief as per law.

Eligibility of input tax credit for service tax on group medical insurance premium - mandatory requirement under labour laws - input service - ineligibility of credit for premium paid separately for family members - remand for factual verification

Eligibility of input tax credit for service tax on group medical insurance premium - mandatory requirement under labour laws - input service - Service tax paid on premium for group insurance policies covering employees/workmen is eligible as input credit where such insurance is mandated by labour laws. - HELD THAT: - The Tribunal noted that service tax paid on premiums relating to group insurance policies for employees/workmen is undisputedly eligible for credit in view of the mandatory requirements under labour laws which render such insurance an input service. The appeal accepts the appellant's contention that insurance coverage for employees, being required by statutory labour obligations, qualifies for input tax credit. [Paras 6]

Credit allowed for service tax on premium relating to employees/workmen insurance mandated by labour laws.

Ineligibility of credit for premium paid separately for family members - remand for factual verification - Whether the portion of premium attributable to coverage of family members is eligible for input credit or ineligible because a separate premium is payable for such coverage. - HELD THAT: - The Tribunal held that credit in respect of premium for coverage extended to family members would not be eligible if a separate premium is required to be paid for inclusion of family members. The record before the Tribunal did not clarify whether any additional/separate premium was paid for family members; consequently the matter requires factual verification by the adjudicating authority and is therefore remanded for that limited purpose. [Paras 6]

Remanded to adjudicating authority to verify whether separate premium was paid for family members; admissibility of credit to be determined accordingly.

Remand for factual verification - Whether premiums paid for employees stated to be working at Chennai relate to employees stationed at the Vadodara unit (and hence eligible for credit) or otherwise. - HELD THAT: - The Tribunal observed the appellant's contention that employees alleged to be at Chennai are in fact stationed at the Vadodara factory and were sent to Chennai temporarily, and that service tax on their insurance premiums should therefore be eligible. As this factual claim was not verified in the record, the Tribunal remanded the question to the adjudicating authority for determination of the factual position. [Paras 6]

Remanded to adjudicating authority to verify whether the Chennai-located employees are attributable to the Vadodara unit and to decide eligibility of credit accordingly.

Final Conclusion: The appeal is allowed in part by way of remand: the Tribunal affirms that service tax on group insurance premium for employees required by labour laws is eligible for input credit, but directs the adjudicating authority to verify (a) whether separate premium was paid for family members (to determine admissibility of credit for family coverage) and (b) the factual stationing of employees alleged to be at Chennai; matter remanded for limited factual verification and fresh decision.

Cenvat credit - Outdoor catering service (Canteen service) - eligibility of credit for employee welfare services - remand for fact verification

Cenvat credit - Outdoor catering service (Canteen service) - eligibility of credit for employee welfare services - Appellants are, in principle, eligible to avail Cenvat credit of service tax paid on outdoor catering (canteen) services provided to employees at the factory. - HELD THAT: - The Tribunal held that the question of entitlement to credit in respect of canteen services provided to employees at the factory is covered by the Division Bench decision in Reliance Industries Ltd (as cited in the order), and therefore, in principle, the appellants qualify for Cenvat credit of service tax paid on such services where the service is rendered in compliance with statutory requirements and for industrial purposes rather than for personal purposes. [Paras 5]

Entitlement to credit in principle upheld in line with the Division Bench precedent.

Remand for fact verification - Whether any amount was recovered from employees in respect of the canteen service is to be verified by the Adjudicating Authority. - HELD THAT: - The Tribunal found that the record did not clearly establish whether employees contributed towards the cost of the canteen service. Since recovery from employees would affect the eligibility or quantification of credit, the matter was remanded to the Adjudicating Authority for factual verification of whether any amount was recovered from employees and for consequential determination in accordance with law. [Paras 5]

Matter remanded to the Adjudicating Authority for verification of recovery from employees and consequential decision.

Final Conclusion: The impugned order is set aside; appeal allowed by way of remand - entitlement to Cenvat credit for canteen (outdoor catering) services provided at the factory is accepted in principle, but factual verification regarding recovery from employees is directed to be undertaken by the Adjudicating Authority.

Refund of duty paid against cancelled invoices - procedure under Para 12 of CBEC Manual - burden of proof on the assessee where procedural route is not followed - corroborative evidence of non-clearance of goods - remand for fresh adjudication and scrutiny of evidence

Refund of duty paid against cancelled invoices - procedure under Para 12 of CBEC Manual - Whether non-observance of the CBEC Manual procedure (Para 12) would automatically disentitle the assessee from claiming refund of duty paid on invoices said to be cancelled - HELD THAT: - The Tribunal held that mere non compliance with the procedural steps in Para 12 of the CBEC Manual does not automatically deprive the assessee of the right to claim refund. The Manual procedure is prescribed to avoid detailed scrutiny of movement of goods where timely declarations are filed; where that route is not followed, the consequence is not automatic denial but shifts the evidentiary burden. The adjudicating authority must not mechanically deny refund solely for procedural non observance without examining the evidence establishing whether the goods were in fact not cleared from the factory. [Paras 8]

Non following of Para 12 does not per se bar refund; entitlement must be determined after evidence scrutiny.

Burden of proof on the assessee where procedural route is not followed - corroborative evidence of non-clearance of goods - remand for fresh adjudication and scrutiny of evidence - Whether the matter requires remand for detailed scrutiny of evidence to ascertain if the goods were not cleared and whether refund is therefore admissible - HELD THAT: - The Tribunal found that the Commissioner (Appeals) had not undertaken detailed scrutiny or recorded findings on whether the goods were actually not removed from the factory and whether recovery of value had been effected. Where the Para 12 procedure was not followed, the assessee bears the burden of proving non clearance by adducing corroborative material. In the absence of such findings, the Tribunal remanded the matter to the Adjudicating Authority for a thorough examination of the evidence produced by the appellant and for a fresh conclusion on refund eligibility. [Paras 8, 10]

Matter remanded to the Adjudicating Authority to scrutinize evidence and decide admissibility of refund.

Final Conclusion: The Revenue appeal is allowed to the extent that the matter is remanded to the Adjudicating Authority for detailed scrutiny of the evidences produced by the appellant and for a fresh decision on the eligibility of refund of duty claimed against the cancelled invoices.

Recovery of central excise duty - shortages in stock of finished goods - clearance without payment of duty - interest on duty - penalty on the assessee company - personal penalty on director - quantum of penalty - reduction of penalty as disproportionate

Recovery of central excise duty - shortages in stock of finished goods - clearance without payment of duty - interest on duty - penalty on the assessee company - Whether the demand of excise duty with interest and the penalty imposed on the appellant company is sustainable. - HELD THAT: - Officers' visit revealed shortages in finished goods and the authorised signatory and the director admitted that goods were cleared in the open market without payment of duty. The duty involved was paid on the date of the visit. On these facts and the confirmation in the statements, the Appellate Tribunal found no reason to interfere with the adjudicating authority's confirmation of demand with interest and the penalty imposed on the company. The Tribunal therefore upheld the duty demand, the interest thereon and the penalty as confirmed by the Commissioner (Appeals).

The demand of duty with interest and the penalty imposed on the appellant company is upheld; the appeal on this aspect is dismissed.

Personal penalty on director - quantum of penalty - reduction of penalty as disproportionate - Whether the personal penalty imposed on the director is excessive and requires reduction. - HELD THAT: - Though the director's statement admitted clearance of goods without payment of duty, the Tribunal considered the quantum of personal penalty imposed to be excessive and disproportionate in the circumstances of the case. Exercising its appellate discretion, the Tribunal reduced the personal penalty imposed on the director to a moderated sum.

The personal penalty on the director is reduced to 25,000; the appeal is partly allowed to this extent.

Final Conclusion: Appeals dismissed insofar as the demand of duty with interest and penalty on the company is upheld; appeals partly allowed to the extent of reducing the personal penalty on the director to 25,000.

Clandestine removal - insufficiency of sole statements and internal records - need for corroborative evidence - requirement of further investigation into unaccounted purchases and abnormal consumption of inputs/utilities - confiscation and redemption fine

Clandestine removal - need for corroborative evidence - Whether the allegation of clandestine removal of M.G. Kraft paper from the factory premises was established - HELD THAT: - The Tribunal found that the adjudicating and first appellate authorities relied primarily on statements and an internal diary to conclude clandestine removal but failed to elicit or place on record any corroborative material to support the allegation. The buyers' statements relied upon in the show cause did not record receipt of the goods without documents; there was no material demonstrating unaccounted manufacture or diversion. In these circumstances the finding of clandestine removal was held unsustainable and the impugned order confirming demand and penalties was set aside. The Tribunal noted and followed earlier judicial decisions cited in the order - Saakeen Alloys Pvt. Ltd., Vishwa Traders Pvt. Ltd. and authorities including the High Court of Rajasthan in Tara Chand Naresh Chand - for the principle that clandestine removal must be supported by independent corroboration and cannot rest solely on isolated statements or internal records. [Paras 5, 7]

Finding of clandestine removal quashed for want of corroborative evidence; impugned order set aside.

Insufficiency of sole statements and internal records - reliance on statements and diary - Whether the statements of the managing director/authorized signatory and the internal diary alone could sustain confirmation of demand - HELD THAT: - The Tribunal held that reliance solely on the managing director's statement and an internal diary is not legally sufficient to confirm a demand for clandestine removal. The authorities had not tested or supplemented those materials by independent investigation or corroboration; absent such supporting evidence the diary and statements could not form a reliable basis for confirming duty and penalties. The Tribunal expressly applied the settled principle that corroborative material is necessary where clandestine activity is alleged. [Paras 5, 7]

Demand and penalties could not be sustained on the basis of statements and diary alone; the impugned confirmation was set aside.

Requirement of further investigation into unaccounted purchases and abnormal consumption of inputs/utilities - Whether additional investigative steps (such as enquiry into unaccounted purchases or abnormal consumption of inputs/utilities) were required to prove clandestine removal - HELD THAT: - The Tribunal observed that no further investigation was undertaken to demonstrate manufacture without accountability - for example, by establishing unaccounted purchases of raw materials or abnormal consumption of utilities during the period in question. It held that such enquiries are material and necessary to establish clandestine manufacture and removal, and the absence of any such probe rendered the allegation unproven. The Tribunal therefore found the adjudicatory process incomplete and insufficient to sustain the demand. [Paras 5]

Matter not proved due to absence of requisite investigative corroboration; adverse findings set aside.

Final Conclusion: The Tribunal set aside the impugned orders confirming demand and penalties for clandestine removal, holding that the case lacked independent corroborative evidence and that reliance solely on statements and an internal diary was legally insufficient; appeals allowed with consequential relief.

Principles of natural justice - opportunity to be heard - reassessment under Section 39(1) of the Karnataka VAT Act - fresh grounds in reassessment notice - remand for fresh consideration - maintainability of writ petition despite alternative remedy

Principles of natural justice - opportunity to be heard - fresh grounds in reassessment notice - Reassessment order and demand notice quashed for violation of principles of natural justice by issuing inadequate opportunity when fresh grounds were raised in the final notice. - HELD THAT: - The reassessment proceedings were initiated earlier (Form VAT-275 dated 13.02.2015 and proposition notice dated 14.06.2017). The final notice dated 24.03.2018 raised, for the first time, proposals disallowing sales returns and treating difference of excess tax collection as taxable-matters not adverted to in the earlier proposition notice. Only three days were afforded by the prescribed authority to comply or object to these fresh grounds and the petitioner's request for time till 30.03.2018 was refused on the ground of limitation, with the reassessment order being passed on 31.03.2018. A quasi-judicial authority must afford a reasonable opportunity so that the assessee can meet new contentions; three days in the circumstances could not be considered reasonable. The reassessment concluded without affording adequate opportunity on fresh grounds is contrary to the principles of natural justice and therefore prima facie null and void, warranting quashal of the reassessment order and demand notice. [Paras 10, 11, 12]

Impugned reassessment order dated 31.03.2018 and the demand notice are quashed for lack of reasonable opportunity when fresh grounds were raised in the final notice.

Remand for fresh consideration - maintainability of writ petition despite alternative remedy - Matter remitted to the prescribed authority for reconsideration after providing reasonable opportunity; writ maintainable notwithstanding alternative appellate remedy due to violation of natural justice. - HELD THAT: - Given the finding that principles of natural justice were violated, relegation to the appellate forum was not appropriate. The Court directed that the petitioner may file objections to the notice dated 24.03.2018 within ten days and that the prescribed authority (Respondent No.3) shall consider those objections in accordance with law and pass a reassessment order expeditiously after affording reasonable opportunity. The writ petition was entertained despite availability of alternative remedy because of the fundamental breach of fair hearing. [Paras 13, 14]

The matter is remitted to Respondent No.3 for fresh consideration after giving the petitioner reasonable opportunity; petitioner to file objections within ten days and reassessment to be decided expeditiously.

Final Conclusion: Writ petition allowed; reassessment order dated 31.03.2018 and the demand notice quashed for breach of principles of natural justice; matter remitted to the prescribed authority for fresh consideration after giving the petitioner reasonable opportunity and with directions to decide the reassessment expeditiously.

Inter-State sale under Section 3(a) of the Central Sales Tax Act, 1956 - works contract versus sale of goods - jurisdiction to levy tax under State VAT/KVAT Act vis-a -vis Article 286 and Article 265 of the Constitution - reassessment under Section 39(1) of the KVAT Act - divisibility of composite contracts

Reassessment under Section 39(1) of the KVAT Act - jurisdiction to levy tax under State VAT/KVAT Act vis-a -vis Article 286 and Article 265 of the Constitution - Validity of the reassessment order dated 28.02.2017 under Section 39(1) of the KVAT Act insofar as it levies tax on the petitioner for the contract in question - HELD THAT: - Challenge to jurisdiction was entertained despite existence of alternate remedies because the petitioner questioned the jurisdiction of the Authority. The court held that the reassessment order insofar as it levied tax under the KVAT Act on the transactions in issue is without jurisdiction, since the supply of elevators and components from the manufacturing unit at Thane occasioned movement of goods from Maharashtra to Karnataka and thus fell within the ambit of inter-State sales under Section 3(a) of the CST Act. Such inter-State sales are beyond the competence of the State VAT Authorities and cannot be subjected to levy under the KVAT Act, having regard to Articles 286 and 265 of the Constitution. The court therefore quashed the impugned reassessment order to the extent it levied KVAT on those transactions. [Paras 8, 16, 19]

Reassessment order quashed insofar as it levied tax under the KVAT Act on the contract; questions answered against the revenue.

Inter-State sale under Section 3(a) of the Central Sales Tax Act, 1956 - works contract versus sale of goods - divisibility of composite contracts - Whether movement of goods from Thane, Maharashtra to Karnataka in execution of the contract would be construed as local sale exigible to KVAT or as inter-State sale under Section 3(a) of the CST Act - HELD THAT: - Applying the authorities cited, including English Electric and Gannon Dunkerley, and having regard to the contractual documents (purchase orders, tax invoices, transporter challans and delivery documents) showing goods manufactured/procured in Maharashtra and moved to Karnataka pursuant to the contract, the court found that the supply of elevators/components occasioned the inter-State movement contemplated by Section 3(a) of the CST Act. The Constitution Bench decision in KONE was considered: while a composite contract for supply and installation may constitute a works contract, if the transaction results in movement of goods from one State to another in pursuance of the contract, it qualifies as an inter-State sale. The court held that even if the main contract were indivisible, transfer of property in execution of such a contract giving rise to a deemed sale would be an inter-State sale and could not be subjected to local sales tax. The alleged splitting of the contract into purchase order and work order to avoid tax did not empower the State to tax the inter-State transaction. [Paras 7, 11, 15, 16, 19]

Movement of goods from Thane to Karnataka in the transactions before the court constitutes inter-State sale under Section 3(a) CST and is not exigible to tax under the KVAT Act.

Final Conclusion: Writ petitions allowed; impugned reassessment order dated 28.02.2017 quashed insofar as it levied tax under the KVAT Act on the petitioner's transactions for the tax period April 2010 to March 2011; no order as to costs.

Jurisdiction to pass assessment beyond five years - principles of natural justice - proposition notice - limitation - retrospective amendment extending reassessment period - retention of books until assessment reaches finality - penalty requires mandatory notice and hearing

Principles of natural justice - proposition notice - Whether the assessment violated principles of natural justice by being concluded without issuance of a proposition notice. - HELD THAT: - The Court examined the records placed before it and found that the prescribed Authority had issued a proposition notice prior to fixing the tax liability. On that factual basis the petitioner's contention that the assessment was completed without providing an opportunity by way of a proposition notice was rejected. The Court therefore held that there was no breach of natural justice in the assessment process as challenged. [Paras 9]

Ground of violation of principles of natural justice fails; proposition notice was issued.

Limitation - retrospective amendment extending reassessment period - Whether the re-assessment for 2005-06 was barred by limitation. - HELD THAT: - The Court noted that Section 40 of the KVAT Act was amended retrospectively by Act No.54 of 2013 with effect from 01.04.2005 to extend the period for concluding reassessments and that the constitutional validity of that amendment has been upheld by this Court. In view of that authoritative ruling, the petitioner's plea that the reassessment was time-barred was held to be unsustainable. [Paras 10]

Limitation objection fails; reassessment held within extended/valid limitation period.

Retention of books until assessment reaches finality - Whether Section 32 of the KVAT Act entitled the dealer to destroy or avoid maintaining books because five years had expired. - HELD THAT: - The Court observed that Section 32 requires dealers to retain books of account and records until the expiration of five years after the end of the relevant year or for such other period as prescribed or until the assessment reaches finality, whichever is later. As the assessment for 2005-06 had not reached finality at the relevant time, the obligation to retain books continued. Consequently the petitioner's submission based on expiry of five years was negatived. [Paras 11]

Obligation to retain books continued until assessment reached finality; argument based on Section 32 rejected.

Penalty requires mandatory notice and hearing - Whether the penalty imposed for non furnishing of C Form (or related default) can be sustained in the absence of a specific notice for imposition of penalty. - HELD THAT: - The Court emphasized that imposition of penalty is not automatic and that the dealer must be afforded a right to be heard before a penalty is levied. The record showed that no notice for levying penalty had been issued by the prescribed Authority. Consequently, the penalty was held to be vitiated for want of the mandatory notice and opportunity to be heard and therefore void ab initio. [Paras 12]

Penalty quashed for want of mandatory notice and opportunity to be heard.

Final Conclusion: Writ petition allowed in part: levy of tax and interest for 2005-06 confirmed, but the penalty is set aside for want of mandatory notice and hearing.

Input tax refund - assessment revision on audit objection - obligation of assessing authority to consider statutory refund claims - entitlement to refund in accordance with statute and rules

Input tax refund - obligation of assessing authority to consider statutory refund claims - Whether the assessing authority could postpone consideration of the petitioner's refund application on the ground that confirmation from the Accountant General about steps taken on an audit objection was awaited. - HELD THAT: - The Court noted that the petitioner's application for refund had not been considered because the assessing authority was awaiting confirmation from the Accountant General regarding steps taken pursuant to an audit objection. The Court found that want of such confirmation could not justify delaying consideration of a refund claim. If an assessee is entitled to a refund under the Act and the Rules, the assessing authority is bound to consider and, where appropriate, allow the claim. The fact that the assessment had been revised on the basis of the audit objection and that the petitioner had satisfied the demand did not permit deferral of adjudication of the refund application pending administrative confirmation from the Accountant General.

The assessing authority cannot postpone consideration of the refund application for want of confirmation from the Accountant General; it must consider the application in accordance with law.

Input tax refund - entitlement to refund in accordance with statute and rules - Direction to the assessing authority to decide the pending refund application and timeframe for compliance. - HELD THAT: - Having concluded that awaiting confirmation from the Accountant General is not a valid reason to delay adjudication, the Court directed the first respondent to consider the petitioner's refund application on its merits and in accordance with the provisions of the Act and the Rules. The Court imposed a temporal limit to ensure prompt disposal of the claim.

The first respondent is directed to consider the refund application in accordance with law within six weeks from receipt of a copy of the judgment.

Final Conclusion: Writ petition disposed of by directing the assessing authority to consider and decide the petitioner's input tax refund application on merits and in accordance with the Act and Rules, within six weeks from receipt of a copy of the judgment.

Validity of delegated power to issue clarifications and advance rulings - Retrospectivity of quasi judicial clarifications - Classification by ejusdem generis / Trade parlance test for scheduled entries - Overriding power of Commissioner to modify Advance Ruling Authority's order

Validity of delegated power to issue clarifications and advance rulings - Overriding power of Commissioner to modify Advance Ruling Authority's order - Constitutional vires of Section 60(8) of the Karnataka VAT Act and the legality of the Commissioner s power to issue clarifications overriding the Advance Ruling Authority. - HELD THAT: - The Court considered the challenge to the amendment introducing sub section (8) permitting the Commissioner to clarify or suppress earlier clarifications made by the Authority for Clarifications and Advance Rulings. It held that constituting an Authority of Additional Commissioners and empowering the Commissioner to issue clarifications or modify such Authority's orders is within the legislative competence of the State and not ultra vires. The delegation to subordinate Commissioners to constitute the Authority and the overriding power vested in the Commissioner do not render the provision unconstitutional or inconsistent with the statutory scheme. The challenge to the vires of Sub section (8) is therefore rejected. [Paras 12]

Section 60(8) is constitutionally valid and the Commissioner's power to issue clarifications overriding the Authority is not ultra vires.

Retrospectivity of quasi judicial clarifications - Whether the Clarification dated 11.09.2014 could be given retrospective effect from 01.04.2005. - HELD THAT: - The Court examined whether the Commissioner, exercising delegated quasi judicial power under sub section (8), could make the clarification effective retrospectively. It found no express statutory power in sub section (8) to render such clarifications retrospective. In absence of specific legislative authority conferring retrospective effect on the Commissioner s clarification, a delegated quasi judicial clarification cannot be given retrospective operation beyond the powers conferred by the parent statute. Consequently the attempt to make the Clarification effective from 01.04.2005 exceeded the parameters of the provision and was legally unsustainable. [Paras 13]

The retrospective operation of the Clarification is quashed; the Commissioner lacked power under Section 60(8) to make the clarification effective from 01.04.2005.

Classification by ejusdem generis / Trade parlance test for scheduled entries - Retrospective upset of settled commercial arrangements and legitimate expectation - Whether the goods 'All in one Diapers, Underpads and Sanitary Napkins' are excluded from Entry 60 of Schedule III and properly taxable under the residuary entry at the higher rate. - HELD THAT: - Applying the ejusdem generis principle together with the Trade/Common Parlance test, the Court held that the listed heading 'Wadding gauze, bandages and similar articles for medical, surgical, dental or veterinary purpose' is broad enough to include products which, though not identical to gauze or bandages, serve similar medical and hygienic purposes. The physical characteristics and purpose of the assessee s products (absorbent, non woven under pads used by bedridden or incontinent patients and to maintain hygiene) bring them within the scope of Entry 60 as 'similar articles'. The Court found the Commissioner's contrary conclusion unsupported by cogent reasons and noted the long period during which the Department had accepted the Advance Ruling and the subsequent State Government notification reducing the rate for Adult Diapers, reinforcing that upsetting the earlier ruling after many years was unwarranted. On merits the impugned reclassification did not stand. [Paras 14, 15, 16, 17, 18]

On merits the goods fall within Entry 60 by ejusdem generis and trade parlance; the Commissioner's reclassification is unsustainable and the Clarification is quashed.

Final Conclusion: Writ petition allowed. The impugned Clarification dated 11.09.2014 is quashed: Section 60(8) is valid, but the Clarification cannot be given retrospective effect from 01.04.2005 and the Commissioner's reclassification of the assessee's products is set aside, the Advance Ruling in favour of the assessee being upheld on merits.

Writ of certiorari - stay application - interim protection against precipitative action - direction to decide appeals expeditiously - opportunity of hearing

Direction to decide appeals expeditiously - opportunity of hearing - Petitioner's appeals and stay applications before the Joint Commissioner of Commercial Taxes (Appeals), Mysore, shall be entertained and decided by the appellate authority within specified timeframes. - HELD THAT: - The Court directed that the petitioner may approach the Joint Commissioner of Commercial Taxes (Appeals) with the stay applications already filed or to be filed within one week and appear before the Authority on the specified date. The appellate authority was commanded to decide the stay application in accordance with law after giving the petitioner an opportunity of hearing, and to do so within a period of two weeks from the date the petitioner appears. The direction compels expeditious adjudication of the pending appellate proceedings relating to the reassessment and demand for the tax periods in question. [Paras 7]

The appeals and stay applications shall be taken up by the Joint Commissioner (Appeals) and the stay application decided in accordance with law after hearing, within two weeks.

Stay application - interim protection against precipitative action - Interim protection was granted to the petitioner restraining the Department from taking precipitative recovery action for a limited period. - HELD THAT: - In view of the pendency of the appeals and the stay applications and the fact that the appellate authority was to be given an opportunity to decide the stay application expeditiously, the Court directed that for a period of four weeks the Department should not take precipitative action against the petitioner. This interim protection is time-bound and contingent upon the appellate authority considering the stay application within the directed timeframe. [Paras 7]

For four weeks the Respondent Department shall not take precipitative action against the petitioner pending disposal of the stay application.

Final Conclusion: Writ petitions disposed of by directing the petitioner to approach the Joint Commissioner (Appeals) with stay applications within one week, to appear on the specified date, and by ordering the appellate authority to hear and decide the stay application in accordance with law within two weeks; interim protection granted for four weeks restraining precipitative action by the Department.

Examination of independent witnesses - chain of custody and condition of seized contraband - planting or foisting of narcotics - conviction under Section 20 read with Section 29 of the NDPS Act

Examination of independent witnesses - Non-examination of independent witnesses did not vitiate the prosecution case in the facts of this case. - HELD THAT: - The High Court faulted the prosecution for not examining independent witnesses given the alleged public location of recovery. The Supreme Court held that examination of independent witnesses is not an indispensable requirement and that non-examination is not necessarily fatal. The Court accepted the prosecution explanation that independent witnesses were not available because of extreme cold at the time and place of occurrence, and observed the absence of any animosity between the police and the accused and the large quantity of recovered contraband, making planting or foisting unlikely. On these factual findings the failure to produce independent witnesses did not impeach the prosecution case. [Paras 5, 6]

The omission to examine independent witnesses was not fatal and did not justify the High Court's reversal of conviction.

Chain of custody and condition of seized contraband - planting or foisting of narcotics - The torn condition of the contraband parcel did not create reasonable doubt as to origin or authenticity of the seizure. - HELD THAT: - The High Court relied on the torn condition of the contraband as casting doubt on its origin. The Supreme Court noted the prosecution evidence that the parcel was bulky and became torn when kept on a stool having nails, and that samples were taken and sent to the forensic laboratory without any suggestion of tampering. The forensic analyst (PW 16) was fully cross examined with no evidence that samples arrived in a doubtful condition. Coupled with the quantity recovered and lack of motive for police to plant contraband, the condition of the parcel did not discredit the seizure or justify acquittal. [Paras 5, 6]

The torn condition of the contraband did not vitiate the prosecution case or support the High Court's conclusion of doubt.

Conviction under Section 20 read with Section 29 of the NDPS Act - The conviction and sentence recorded by the Trial Court under Section 20 read with Section 29 of the NDPS Act are restored. - HELD THAT: - Having rejected the High Court's two principal grounds for acquittal - non examination of independent witnesses and condition of the contraband - the Supreme Court set aside the High Court's order of acquittal and restored the Trial Court's conviction and sentence as recorded. The Court directed that the accused surrender forthwith to serve the remaining part of their sentence and be taken into custody if they fail to do so. [Paras 7]

Order of acquittal set aside; Trial Court conviction and sentence restored and accused directed to surrender.

Final Conclusion: The appeals are allowed; the High Court's acquittal is set aside and the Trial Court's conviction and sentence under Section 20 read with Section 29 of the NDPS Act are restored, with the accused directed to surrender to serve the remaining sentence.

Section 52A procedure for disposal/destruction of seized contraband - preservation and production of bulk seized property - evidentiary value of samples drawn from bulk seized property - custodial confession - weight of hostile witnesses on prosecution case

Section 52A procedure for disposal/destruction of seized contraband - preservation and production of bulk seized property - evidentiary value of samples drawn from bulk seized property - Evidence was insufficient because the bulk quantity of seized contraband was not produced or shown to have been disposed of under the Magistrate's order as required, thereby undermining the samples' evidentiary value. - HELD THAT: - The Court accepted the High Court's finding that after samples of 30 g each were taken, the Executive Magistrate returned the remaining seized material to the Investigating Officer and no magistrate's order authorising destruction or disposal under the statutory procedure was produced. The proceedings of 14-10-2004 show samples were taken and sealed and the remaining seized stuff was handed back to the presenting officer. The absence of any application to or order by a Magistrate under the statutory scheme and the non-production of the bulk quantity at trial created a real doubt about whether the samples were in fact prepared from the alleged bulk seizure and diminished their probative value. The Court held that mere assertions of destruction without statutory authority or notice to the accused could not cure that defect, and that the High Court was justified in disbelieving the prosecution on this ground. [Paras 7, 8, 9, 10, 11]

The failure to follow the statutory disposal procedure and to produce the bulk seized property undermined the prosecution case and warranted acquittal on this ground.

Custodial confession - weight of hostile witnesses on prosecution case - The confessional statement under the Act was not proved to be voluntarily made and independent witnesses turned hostile, adversely affecting the prosecution's case. - HELD THAT: - The Court noted admissions in the record that the statement under Section 67 was recorded after arrest while the accused was in police custody and that the time was not mentioned, as conceded by a narcotics officer and supported by PW6. Independent witnesses (PWs 1 and 2) turned hostile and their signatures appeared to have been obtained at the investigating agency's behest. These facts led the High Court to conclude, and this Court agreed, that the confession could not be regarded as voluntary and that the hostility of pivotal witnesses further eroded the prosecution's evidence. [Paras 12]

The confession was not shown to be voluntary and hostile testimony further weakened the prosecution case, supporting acquittal.

Final Conclusion: The appeal is dismissed; the High Court's acquittal is upheld because (i) the statutory procedure for disposal/production of the bulk seized contraband was not followed or proved, rendering the samples' evidentiary value doubtful, and (ii) the recorded confession was not shown to be voluntary and key witnesses were hostile.