TaxTMI Updates e-Newsletter
May 03,2023

Cancellation of GST registration - suspension of registration - show cause notice - opportunity of hearing - quashing and setting aside of order - restoration of show cause notice - attachment of bank account - remedy under Rule 159(5) of the Central Goods and Services Tax Rules, 2017

Cancellation of GST registration - suspension of registration - show cause notice - opportunity of hearing - quashing and setting aside of order - restoration of show cause notice - Validity of the order cancelling the petitioner's GST registration and restoration of the show cause notice with continuation of suspension. - HELD THAT: - The Court found that the final order of cancellation dated 15 September 2022 was passed without adequately considering the petitioner's reply and on a ground on which the petitioner had not been given an opportunity. In view of that procedural infirmity, the Court quashed and set aside the impugned cancellation order and directed that the show cause notice dated 5 September 2022 be restored to the file. The Court ordered that suspension of registration, which had been effected by the show cause notice, shall continue until the final order is passed. The petitioner was directed to appear before the authority on a specified date, permitted to file a reply affidavit, and the authority was directed to give a suitable date for hearing and to pass a final order within two weeks of that hearing. The Court also recorded that observations in the impugned order and the reply affidavit should be treated only as the prima facie opinion of the authority. [Paras 6, 7, 8, 9]

Impugned cancellation order quashed and set aside; show cause notice restored and suspension of registration to continue pending fresh final order after hearing.

Attachment of bank account - remedy under Rule 159(5) of the Central Goods and Services Tax Rules, 2017 - Whether any separate order was required in respect of attachment of the petitioner's bank account. - HELD THAT: - The Court observed that the petitioner has an available remedy under Rule 159(5) of the Central Goods and Services Tax Rules, 2017 to seek relief in relation to attachment of bank accounts. Consequently, the Court declined to pass any separate order concerning attachment and left the matter to be pursued through the statutory remedy. [Paras 10]

No separate order regarding bank account attachment; petitioner to avail remedy under Rule 159(5) CGST Rules, 2017.

Final Conclusion: The writ petition is disposed of: the cancellation order dated 15 September 2022 is quashed and set aside, the show cause notice dated 5 September 2022 is restored and suspension of registration continues pending a fresh hearing and final order to be completed within two weeks; no separate order is made on bank account attachment as the petitioner may seek relief under Rule 159(5) of the CGST Rules, 2017.

Rectification of returns - GSTR-1 amendment - representation for rectification - opportunity of hearing - administrative consideration of representation - direction to decide representation within time

Representation for rectification - GSTR-1 amendment - administrative consideration of representation - opportunity of hearing - Respondent to consider and decide the petitioner-firm's representation seeking rectification of incorrect entries in GSTR-1 for 2019-20 and 2020-21 and to grant opportunity of hearing before passing any order. - HELD THAT: - The petitioner-firm filed a representation dated 01.10.2022 requesting rectification of inadvertent incorrect entries in its GSTR-1 for the years 2019-20 and 2020-21. The Court observed that where such a representation has been submitted, the respondent authority ought to consider it. In the exercise of supervisory jurisdiction the Court directed respondent No.3 to consider and decide the representation strictly in accordance with law and to afford the petitioner an opportunity of hearing prior to passing any order. The direction is temporal and procedural: it does not decide the merits of the requested rectification but mandates adjudicative consideration and procedural fairness within a specified timeframe.

The respondent No.3 is directed to consider and decide the representation filed on 01.10.2022 strictly in accordance with law and after granting the petitioner an opportunity of hearing, within six weeks from the date of the order.

Final Conclusion: Writ petition disposed of by directing respondent No.3 to consider and decide the petitioner's representation for rectification of GSTR-1 entries relating to 2019-20 and 2020-21, with an opportunity of hearing, within six weeks from the date of the order.

Place of supply of intermediary services - place of supply of services determined by location of recipient where services are not intermediary services - export of services under definition of Section 2(6) of the IGST Act - refund of unutilised Input Tax Credit for export of services

Place of supply of services determined by location of recipient where services are not intermediary services - export of services under definition of Section 2(6) of the IGST Act - refund of unutilised Input Tax Credit for export of services - Whether the services rendered by the petitioner for and on behalf of foreign entities qualify as export of services and entitle the petitioner to refund of unutilised Input Tax Credit for the period April, 2020 to March, 2021 - HELD THAT: - The Court held that the question is governed by its earlier decision in W.P.(C) 8600/2022 (delivered 23.03.2023) concerning identical services, wherein it was determined that the petitioner's services are not intermediary services. Consequently, the place of supply is to be ascertained by reference to the location of the recipient. As the recipients are located outside India, the professional services fall within the definition of 'export of services' under Section 2(6) of the IGST Act. The Appellate Authority's contrary conclusion-classifying the services as 'intermediary services' and treating the place of supply as the supplier's location-was found inconsistent with the Court's prior ruling and therefore inapplicable to the facts of the present case. Since the services qualify as export of services, the petitioner's claim for refund of unutilised Input Tax Credit stands upheld.

The petitioner's services for the period April, 2020 to March, 2021 qualify as export of services; the claim for refund of unutilised ITC is allowable and the Appellate Authority's order disallowing the claim is set aside.

Final Conclusion: The petition is allowed; the impugned order dated 24.02.2023 is set aside and the petitioner's refund claim for unutilised Input Tax Credit for April, 2020 to March, 2021 is recognised as admissible in view of the services qualifying as export of services.

Advance ruling void ab initio - suppression of material facts - inadmissibility under Section 98(2) - declaration under Section 104(1) - opportunity of being heard

Advance ruling void ab initio - suppression of material facts - inadmissibility under Section 98(2) - declaration under Section 104(1) - Order issued in the 5th reference is declared void ab initio on the ground that the applicant obtained the advance ruling by suppression of material facts and the question was already pending in DGGI proceedings. - HELD THAT: - The Authority found that proceedings by the Directorate General of GST Intelligence, Hyderabad Zonal Unit, were initiated on 15/12/2021 and an incidence report was made on 08/04/2022 concerning the same question later raised by the applicant in its Form GST ARA-01 dated 24/06/2022. The applicant did not disclose these ongoing DGGI proceedings at any stage of the advance ruling process, including during the personal hearing dated 28/06/2022. Section 98(2) provides that an advance ruling application shall not be admitted where the question raised is already pending in any proceedings under the Act; Section 104(1) empowers the Authority to declare an advance ruling void ab initio if it is obtained by fraud, suppression or misrepresentation of material facts. Having given the applicant notice and an opportunity to be heard, the Authority concluded prima facie that the advance ruling was obtained by suppression of material facts and therefore the earlier order is liable to be declared void ab initio under Section 104(1).

The Order referred to in the 5th reference is declared void ab initio under Section 104(1) of the CGST/TGST Act, 2017 and all provisions of the Acts and rules shall apply as if such advance ruling had never been made.

Final Conclusion: The Authority declared the earlier advance ruling void ab initio under Section 104(1) on account of suppression of material facts relating to pending DGGI proceedings; the applicant's advance ruling application was inadmissible under Section 98(2) and the matter shall be treated as if no advance ruling had been made.

Input tax credit - blocked credit under Section 17(5)(a) of CGST/TGST Act, 2017 - inter State supply / IGST - rate of tax applicable to HSN 8703 - order of utilization of input tax credit - transaction value as the value of supply

Inter State supply / IGST - rate of tax applicable to HSN 8703 - Rate and nature of tax applicable on supply of modified vehicles (ambulances) to Government of Tripura. - HELD THAT: - The modified Maruti Suzuki Eeco vehicles, after conversion into ambulances (Mobile Common Service Centres) in Telangana and supply to Government of Tripura, constitute an inter State supply and attract tax under the IGST head. The vehicles supplied are seven seater vehicles falling under the description of motor vehicles principally designed for the transport of persons and correspond to tariff heading HSN 8703. The applicable rate for the commodity classified under HSN 8703 is 28% for transactions after 30.09.2021. The transaction does not fall under heading 8702 because the vehicles transport fewer than ten persons including the driver. [Paras 7, 8]

Supply attracts IGST and is taxable at 28% being classifiable under HSN 8703.

Scope of supply - transaction value as the value of supply - Determination of liability to pay tax and valuation of the supply. - HELD THAT: - The scope of 'supply' includes sale and transfer of goods in the course or furtherance of business, hence liability to pay tax arises on supply. For inter State supplies the liability is under IGST. The time and manner of determination of liability follows the provisions applicable to goods and services respectively (sections 12 and 13 as referenced). The value of supply is the transaction value - the price actually paid or payable for the supply to the Government of Tripura - as governed by the provisions on valuation. [Paras 7, 8]

Liability to pay tax arises under IGST for the inter State supply; value of supply is the transaction value as declared.

Input tax credit - blocked credit under Section 17(5)(a) of CGST/TGST Act, 2017 - order of utilization of input tax credit - Admissibility of input tax credit on purchase of vehicles and components used to make ambulances for further supply. - HELD THAT: - Section 17(5)(a) bars ITC on motor vehicles for transportation of persons with seating capacity not exceeding thirteen unless they are used for specified supplies, including further supply of such motor vehicles. Since the applicant purchases vehicles and modifies them for the purpose of making further supplies of those motor vehicles (ambulances) to the Government of Tripura, such purchases are not subject to the blocked credit prohibition and ITC is admissible, subject to compliance with conditions for availment of ITC under Section 16. The applicant must utilise ITC in the electronic credit ledger in accordance with the prescribed order of utilization under Section 49 and Rule 88A. [Paras 7, 8]

Input tax credit on purchase of vehicles and components used to modify and supply ambulances is admissible provided conditions of Section 16 are met; utilisation follows Section 49 and Rule 88A.

Final Conclusion: The Advance Ruling clarifies that the modified seven seater vehicles supplied as ambulances to Government of Tripura are inter State supplies liable to IGST at 28%; tax liability arises on supply with value determined as the transaction value; and input tax credit on the purchased vehicles and components is admissible for further supply of such motor vehicles, subject to statutory conditions and prescribed order of utilisation.

Assumption of jurisdiction under section 153A in search cases - requirement of incriminating material (including negative indicators) for exercise of jurisdiction under section 153A - treatment of purchases from bogus parties - taxation of embedded profit margin - estimation of suppressed profits as a percentage of alleged bogus purchases - consequential levy of interest under sections 234A and 234B

Assumption of jurisdiction under section 153A in search cases - requirement of incriminating material (including negative indicators) for exercise of jurisdiction under section 153A - Validity of assumption of jurisdiction under section 153A where no positive incriminating documents were found during search - HELD THAT: - The Tribunal upheld the appellate authority's finding that assumption of jurisdiction under section 153A could be sustained on the facts of this case. The CIT(A) found that absence of bills/vouchers pertaining to certain suppliers at the time of search and the subsequent inability to locate those parties in post-search enquiries constituted circumstances emanating from the search and amounted to incriminating material (including negative indicators). The Tribunal noted the assessee did not controvert the CIT(A)'s factual finding and therefore declined to interfere with the conclusion that jurisdiction under section 153A was rightly exercised. [Paras 5, 10]

Assumption of jurisdiction under section 153A sustained on the facts; ground challenging jurisdiction rejected.

Treatment of purchases from bogus parties - taxation of embedded profit margin - estimation of suppressed profits as a percentage of alleged bogus purchases - Whether the AO/CIT(A) could restrict addition to the profit element (estimated at 12.5%) of purchases alleged to be from bogus parties instead of disallowing the entire purchase amount - HELD THAT: - Relying on the CIT(A)'s application of precedents, the Tribunal accepted that where receipt/consumption of goods is not doubted and books are not found defective, purchases shown to be made from non-genuine parties may nonetheless represent actual purchases from other sources. In such circumstances the correct approach is to tax the profit element embedded in those purchases rather than the entire purchase amount. The CIT(A) estimated suppressed profits at 12.5% of the alleged bogus purchases after examining facts and distinguishing authorities relied on by the assessee. The Tribunal found no reason to interfere with the factual conclusion and the estimated percentage adopted by the CIT(A). [Paras 6, 11, 12]

Additions confirmed by treating only the profit element (estimated at 12.5%) of the alleged bogus purchases as taxable; grounds challenging quantum of addition dismissed.

Consequential levy of interest under sections 234A and 234B - Validity of levy of interest under sections 234A and 234B as consequential to the additions - HELD THAT: - The Tribunal treated the contention on levy of interest as consequential to the assessment additions. There is no separate interference with the levy where it arises from the sustained additions; the grounds attacking the interest were therefore rejected as consequential. [Paras 13]

Levy of interest under sections 234A and 234B upheld as consequential; related grounds dismissed.

Final Conclusion: All four appeals for AYs 2010-11, 2011-12, 2013-14 and 2014-15 are dismissed; the Tribunal affirms the exercise of jurisdiction under section 153A, the estimation of taxable profit element at 12.5% of alleged bogus purchases, and the consequential interest levies.

Ad-hoc disallowance for bogus purchases - estimation of profit element - principle of consistency - reliance on preceding assessments and binding precedent

Ad-hoc disallowance for bogus purchases - estimation of profit element - principle of consistency - reliance on preceding assessments and binding precedent - Extent of income to be taxed on alleged bogus purchases and the appropriate method of estimation - HELD THAT: - The Tribunal found that the addition confirmed by the AO and CIT(A) was founded on information from investigation agencies without independent verification and amounted to guesswork rather than a conclusive finding that purchases were bogus; the AO had not examined books or established the bills to be bogus (paras 6). In earlier assessments the profit element on such purchases had been estimated by the Revenue at 6.5% (paras 7-8). The Tribunal noted a subsequent direction in the assessee's own case for A.Y. 2012-13 and the Bombay High Court's pronouncement that where purchases are held to have been made the proper approach is to tax the profit element only, with reasonable estimation of gross profit ordinarily ranging between 5% and 12.5% depending on facts (paras 9-10). Applying the principle of consistency and following the assessee's earlier years and the cited High Court view, the Tribunal directed that the addition be limited to the gross profit rate of 6.5% on the alleged bogus purchases of Rs.3,70,79,423/- and remitted the matter to the AO to charge accordingly (para 11). [Paras 7, 8, 9, 10, 11]

Addition reduced and limited to gross profit at 6.5% of the alleged bogus purchases; appeal partly allowed and AO directed to charge income accordingly.

Final Conclusion: The Tribunal held that the addition made without independent verification was unsustainable as full disallowance; applying consistency and the High Court's approach, the addition is to be restricted to 6.5% of the alleged bogus purchases for A.Y. 2011-12 and the AO is directed to give effect accordingly.

Deductibility of provision for standard assets under section 36(1)(viia) - permissible limit of deduction under section 36(1)(viia) - deductibility of statutory provisions/transfers to funds as business expenditure under section 37(1) and section 36(1)(viii) - overriding statutory appropriation and loss of control test for reserve funds - remand for verification of factual/computational limits

Deductibility of provision for standard assets under section 36(1)(viia) - permissible limit of deduction under section 36(1)(viia) - Provision made for standard assets in accordance with RBI guidelines is allowable as deduction under section 36(1)(viia), but the claim must be verified to be within the permissible limit prescribed by that provision. - HELD THAT: - The Tribunal, following several coordinate Benches including the Indore Bench, held that a contingency provision for standard assets made as per RBI guidelines is in substance a provision for bad and doubtful debts and is therefore allowable under section 36(1)(viia). The revenue was unable to point to any contrary authoritative decision. However, the Tribunal observed that section 36(1)(viia) prescribes numerical limits for deduction; the assessment and first-appeal records did not show that the claimed total deduction was verified to be within those statutory limits. As the lower authorities made no finding on whether the total claim fell within the permissible ceiling, the Tribunal directed a limited remand to the assessing officer to verify and allow the deduction only to the extent permissible under the section, calling upon the assessee to furnish necessary information/calculations. [Paras 9, 10]

Provision for standard assets is allowable under section 36(1)(viia), subject to verification by the AO that the claimed amount is within the statutory limit; matter remitted to AO for that limited purpose.

Deductibility of statutory provisions/transfers to funds as business expenditure under section 37(1) and section 36(1)(viii) - overriding statutory appropriation and loss of control test for reserve funds - remand for verification of factual conditions (actual expenditure or statutory diversion) - The question whether various provisions/transfers to funds are deductible as business expenditure (and not subject to the 20% limit under section 36(1)(viii)) is not finally decided on merits and is remanded to the assessing officer for factual verification. - HELD THAT: - The Tribunal analysed precedent and concluded that transfers or provisions are deductible as business expenditure (and hence not restricted by the 20% ceiling) only if one of two factual conditions is satisfied: (i) an overriding statutory provision causes the transferred amount to be outside the assessee's control (the 'loss of control' test), or (ii) the amounts were actually spent in the previous year for the stated business purposes. The Tribunal found no material on the record to show either condition was met in respect of the items comprising the claimed provisions; the Paper-Book did not permit reaching a conclusion. Consequently, rather than adjudicating on merits, the Tribunal remanded the issue to the AO to examine and verify the existence of these conditions after calling for relevant details from the assessee and to take a final decision accordingly. [Paras 17, 18]

Disallowance deleted by CIT(A) set aside for verification; issues remitted to AO to verify whether (a) amounts were actually spent in the relevant year, or (b) an overriding statutory appropriation placed the funds outside the assessee's control, and to decide allowance within law.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes: it held that provision for standard assets is in principle allowable under section 36(1)(viia) but remitted verification of statutory limits to the AO; and it remanded the claim for various provisions/transfers to funds to the AO for factual verification whether they qualify as deductible business expenditure (either actually spent or diverted by overriding statute) before taking a final view.

Remand for fresh consideration - right to be heard / audi alteram partem - rectification of erroneous filing of appeal - ex parte order set aside - appeal filed under provisions of the Income Tax Act to appellate authority

Rectification of erroneous filing of appeal - right to be heard / audi alteram partem - ex parte order set aside - Whether the appellate authority erred in dismissing the appeal as being preferred against a rectification order and in passing an ex parte order without affording the assessee an opportunity to rectify the mistake in the appeal form and to present her case. - HELD THAT: - The Tribunal found that the assessee had inadvertently filed the appeal against the rectification order instead of the original assessment order and that no demand arose from the assessment order, the demand having flowed from the rectification. Given this factual matrix, the omission in Form No.35 was a bona fide, rectifiable mistake. The appellate authority should have afforded the assessee an opportunity to rectify the filing error and to be heard on the merits before deciding the appeal. In the interests of justice the Tribunal directed that the appellate authority shall allow the assessee to correct the mistake in the appeal form, permit production of necessary documents and oral submissions, and thereafter decide the appeal in accordance with law, thereby setting aside the ex parte dismissal and remanding the matter for fresh consideration. [Paras 5]

The matter is remanded to the appellate authority with directions to permit rectification of the appeal filing, to give the assessee opportunity to furnish documents and to be heard, and to decide the appeal afresh in accordance with law.

Remand for fresh consideration - statistical disposal - Whether the Tribunal's directions in the lead appeal apply to the other captioned appeals and the appropriate administrative outcome for those appeals. - HELD THAT: - The Tribunal noted that the other appeals involve identical facts and issues. It therefore applied the same remedial directions mutatis mutandis to those appeals. For administrative finality and record purposes the Tribunal allowed all the captioned appeals 'for statistical purposes', while directing the appellate authority to comply with the remand directions in each appeal. [Paras 6, 7]

The directions given in the lead appeal are applied to the other captioned appeals and all appeals are allowed for statistical purposes while being remitted for fresh consideration by the appellate authority.

Final Conclusion: The Tribunal set aside the ex parte dismissal, remitted the appeals to the appellate authority with directions to permit rectification of the appeal filing, to afford the assessee an opportunity to produce documents and be heard, and to decide the appeals in accordance with law; the appeals are disposed of as allowed for statistical purposes.

Taxability of compensation for premature termination of lease - characterisation as income from house property - residuary head of income from other sources - inclusive definition of income - restricted meaning of annual value under section 23 - principle against assessing a receipt under a residuary head when it falls under a specific head

Taxability of compensation for premature termination of lease - characterisation as income from house property - residuary head of income from other sources - restricted meaning of annual value under section 23 - Compensation and forfeited security deposit received on premature termination of a leave and license agreement are not assessable as income from other sources. - HELD THAT: - The Tribunal examined whether amounts received on termination of the leave and license agreement, described in the termination instrument as "penalty/compensation" and comprising a payment plus forfeited security deposit, were taxable as income from other sources. Relying on the settled principle that receipts must be classified under the specific heads in Chapter IV and that a receipt which falls within a specific head cannot be assessed under the residuary head, the Tribunal held that the compensation has its origin in the letting of immovable property and therefore assumes the character of income from house property. The Tribunal noted the limited ambit of taxable income under the head "income from house property", governed by the concept of "annual value" under section 23, and followed earlier Tribunal decisions which held that compensation for premature termination, though a revenue receipt, is not exigible to tax where it cannot be computed as annual value. The Tribunal considered and distinguished decisions relied upon by parties, and applied the line of authority represented in Datar & Co. and Rama Leasing Co. , to conclude that the amount could not be shifted to the residuary head merely because it was not computable as annual value; accordingly the assessing officer's addition under "income from other sources" was not sustainable. [Paras 9, 24]

Compensation and forfeited security deposit arising from premature termination of the lease are not taxable as income from other sources and the addition is deleted.

Final Conclusion: The Tribunal partly allowed the appeal by deleting the assessment of the termination-related receipts, holding that those receipts, though revenue in nature, fall within the character of income from house property and cannot be taxed under the residuary head when they are not computable as annual value.

Levy of fee under section 234E for delay in furnishing TDS returns - prospective effect of amendment to section 200 introduced by Finance Act, 2015 - interpretive principle that where two reasonable constructions are possible the construction favoring the assessee must be adopted

Levy of fee under section 234E for delay in furnishing TDS returns - prospective effect of amendment to section 200 introduced by Finance Act, 2015 - precedential weight of divergent High Court decisions and applicability of the rule favouring the assessee - Whether late fee under section 234E could be levied in respect of delayed TDS returns for periods prior to 01-06-2015 - HELD THAT: - The Tribunal examined the amendment effected by the Finance Act, 2015 which came into force on 01-06-2015 and the conflicting High Court decisions on whether the enabling provisions for charging fee under section 234E operated retrospectively or only prospectively. Having noted competing authorities, including decisions upholding levy and those disallowing it for periods before 01-06-2015, the Tribunal applied the settled principle from CIT v. M/s. Vegetables Products Ltd. that where two reasonable constructions of a taxing provision are possible the construction favourable to the assessee must be adopted. In the absence of any contrary binding decision of the jurisdictional High Court, and following the view of the Karnataka High Court in Fatheraj Singhvi & Ors. which held that the substitution to section 200A and consequent computation/intimation for fee under section 234E could not be applied to periods before 01-06-2015, the Tribunal concluded that section 234E could not be invoked to levy late fee for TDS returns relating to periods prior to that date. Applying that reasoning to the admitted fact that the impugned fees related to the financial year 2012-13 (AY 2013-14), the Tribunal found the levy unsustainable and deleted the late fee affirmed by the Commissioner. [Paras 5, 6]

Late fee under section 234E cannot be levied for delayed TDS returns pertaining to periods prior to 01-06-2015; the late fee levied for FY 2012-13 (AY 2013-14) is deleted and the appeal is allowed.

Final Conclusion: Appeal allowed: late fee levied under section 234E for TDS returns relating to financial year 2012-13 (AY 2013-14) deleted because the amendment enabling such levy operates prospectively from 01-06-2015 and the construction favouring the assessee is to be adopted in absence of a contrary decision of the jurisdictional High Court.

Reimbursement of expenditure at cost - treatment of pass-through reimbursements - arm's length price determination - characterisation of trade advances and benchmarking - retrospective amendment to definition of international transaction (lending and borrowing) - corporate guarantee as international transaction requiring benchmarking - ALP for corporate guarantee fixed at 0.53% - disallowance of interest on TDS

Reimbursement of expenditure at cost - treatment of pass-through reimbursements - arm's length price determination - Whether reimbursement of salary and travel expenses recovered on cost to cost basis from an associated enterprise constitutes the assessee's business receipt liable to transfer pricing adjustment. - HELD THAT: - The Tribunal held that where an assessee incurs expenditure on behalf of an associated enterprise and recovers the same on cost basis such receipts do not, as a matter of principle, constitute the assessee's business receipts giving rise to income. The factual question whether the amounts were routed through the profit and loss account (thus forming operating receipts) or remained only as balance sheet entries is verifiable and determinative. Absent evidence of a markup or income component, an addition cannot be sustained on the mere assumption that an independent party would have charged a markup. [Paras 9, 10]

Directed the Assessing Officer to verify whether the reimbursements were not routed through the P&L but remained balance sheet entries; if so, the transfer pricing addition is to be deleted.

Characterisation of trade advances and benchmarking - retrospective amendment to definition of international transaction (lending and borrowing) - arm's length price determination - Whether trade advances given to associated enterprises are to be treated as international transactions attracting benchmarking for interest and, if so, at what stage and on what basis the ALP ought to be determined. - HELD THAT: - The Tribunal noted the TPO treated the amounts as lending and applied an internal CUP at 12%, while the DRP reduced the ALP to 5%. The assessee maintained the advances were for business expediency and not lending in the sense requiring benchmarking. Given the factual nature of whether the advances arose from regular business transactions and the potential impact on the necessity for adjustment, the Tribunal considered it appropriate to obtain factual verification rather than adjudicate on merits on the record before it. [Paras 17]

Restored the issue to the file of the Assessing Officer/TPO for verification whether the trade advances resulted from regular business transactions for business expediency; if so, the adjustment is to be deleted.

Corporate guarantee as international transaction requiring benchmarking - ALP for corporate guarantee fixed at 0.53% - arm's length price determination - Whether issuance of a corporate guarantee to an associated enterprise is an international transaction requiring benchmarking and what is the appropriate ALP for the guarantee fee. - HELD THAT: - Applying precedent, including the decision of the Hon'ble Madras High Court that corporate guarantees fall within the scope of international transactions, and having regard to authorities considered by the Hon'ble Bombay High Court in Glenmark Pharmaceuticals Ltd., the Tribunal concluded that corporate guarantee fees require benchmarking. On comparative consideration of the authorities and facts, the Tribunal found 0.53% to be a just and proper ALP for the corporate guarantee. [Paras 21, 23]

Directed the Assessing Officer/TPO to adopt ALP of 0.53% for corporate guarantee; the challenge to benchmarking is rejected.

Disallowance of interest on TDS - Whether interest on TDS paid by the assessee is disallowable as interest paid on income tax. - HELD THAT: - Relying on a coordinate Bench decision, the Tribunal treated interest on TDS as not being interest paid on income tax per se and, therefore, not subject to disallowance under the reasoning applied in that precedent. [Paras 24]

Directed the Assessing Officer/TPO to delete the disallowance of interest on TDS.

Final Conclusion: The appeal is partly allowed: reimbursements determined not to be business receipts are to be deleted if verified as balance sheet passthroughs; trade advance issue is remanded to the Assessing Officer/TPO for factual verification as to business expediency and resultant deletion if found so; corporate guarantee is held to be an international transaction and ALP is fixed at 0.53%; disallowance of interest on TDS is deleted.

Limitation for penalty under section 275(1)(c) of the Income Tax Act - penalty under section 271D and section 271E - provisions of section 269SS and section 269T regarding cash receipts and repayments - reasonable cause under section 273B - rule of consistency in tax assessment and past treatment

Limitation for penalty under section 275(1)(c) of the Income Tax Act - penalty under section 271D and section 271E - Whether the penalty orders dated 24.04.2017 under section 271D and 271E are time barred as being passed after the expiry of the limitation prescribed by section 275(1)(c). - HELD THAT: - The Tribunal examined the chronology of the proceedings and the communication by the Assessing Officer referring the matter for initiation of penalty. Applying the principle that the date of initiation of penalty proceedings is the date on which the Assessing Officer wrote to the JCIT recommending issuance of a show cause notice (PCIT vs. Mahesh Wood Products (P) Ltd.), the Tribunal found that the first referral dated 28.04.2016 and the consequential show cause notice(s) dated 04.05.2016 (and subsequent notices of 26.07.2016 and 29.09.2016) were valid and were acted upon by the assessee. A later referral dated 28.11.2016, and the JCIT's order sheet entry of 29.11.2016 which recorded that earlier notices suffered from defects in the name and PAN, could not be treated as re commencing the initiation date where the initial valid referral and notices had already been issued and responded to. The Tribunal therefore held that penalty proceedings should have been completed within the period prescribed by section 275(1)(c) calculated from the first referral of 28.04.2016 and that initiation by reliance on the later dated reference resulted in the impugned penalty orders being beyond the permissible period and not in accordance with law. [Paras 15]

Impugned penalty orders dated 24.04.2017 under section 271D and 271E are time barred and are quashed.

Provisions of section 269SS and section 269T regarding cash receipts and repayments - reasonable cause under section 273B - rule of consistency in tax assessment and past treatment - Whether, on merits, penalty under section 271D and 271E could be sustained having regard to the assessee's case of bonafide belief, genuineness of transactions and past practice of departmental acceptance. - HELD THAT: - On the merits the Tribunal considered the nature and history of the assessee - a long standing co operative society engaged in thrift and credit activities - and the legislative purpose of sections 269SS/269T to curb circulation of unaccounted money. The Tribunal noted there was no allegation that the cash transactions were a device to introduce unaccounted income, no adverse finding in the assessment order, and a historical practice by the Department of accepting the assessee's treatment (including allowance of section 80P deductions) without invoking sections 269SS/269T in earlier years. The Tribunal also took into account administrative guidance and earlier Tribunal decisions acknowledging that credit co operative societies may have a bona fide belief about applicability of the provisions and that section 273B permits exoneration where reasonable cause is shown. Finding the assessee's explanation - mutuality, genuineness of transactions, past treatment and bona fide belief - to satisfy the preponderance of probabilities and to constitute reasonable cause, the Tribunal concluded that imposition of penalty was not warranted. The Tribunal observed that the JCIT/CIT(A) had taken a rigid approach by treating breach as necessarily attracting penalty without applying the mitigating discretionary provision under section 273B. [Paras 25]

Penalty under section 271D and 271E is cancelled on merits as the assessee established reasonable cause; grounds challenging imposition of penalties are allowed.

Final Conclusion: Both appeals are allowed: the penalty orders under section 271D and 271E for AY 2013 14 are quashed as time barred and, on merits, are cancelled because the assessee demonstrated reasonable cause and bona fide belief supported by its past treatment and the preponderance of probabilities.

Bogus accommodation entries - surrounding circumstances - test of human probabilities - appellate interference for non-consideration of material - remand for fresh consideration

Bogus accommodation entries - surrounding circumstances - test of human probabilities - Whether the order of the CIT(A) could be sustained where the appellate order did not address critical factual discrepancies noted by the AO concerning large derivative losses routed through a broker alleged to be operating accommodation entries. - HELD THAT: - The Tribunal found that the CIT(A) granted complete relief to the assessee without making any observations on several critical points recorded by the AO: (a) the assessee, a civil-construction contractor, incurred an unusually large loss of over Rs. 7 crores on MCX-SX within about one month; (b) these trades were routed through a broker based in Calcutta having no office in Ahmedabad and the assessee did not explain how this broker was engaged nor produce correspondence; (c) investigation material and AO's appraisal reported that the broker provided accommodation entries and a list of beneficiaries recovered from the broker's premises included the assessee's name; and (d) the CIT(A) did not confront these surrounding circumstances or apply the test of human probabilities as laid down in Sumati Dayal and followed in subsequent authorities. The Tribunal observed that the CIT(A)'s reliance on contract notes and bank payments, and on retraction/non-specificity of statements attributed to the broker, was insufficient because the appellate order remained silent on the AO's determinations that reasonably pointed to accommodation operations. For these reasons the Tribunal concluded that the CIT(A) failed to analyse material facts and surrounding circumstances which were determinative of the genuineness of the claimed loss, and therefore the matter required fresh consideration. [Paras 6]

The Tribunal set aside the CIT(A)'s order and remanded the issue to the CIT(A) for a fresh decision after considering the discrepancies and surrounding circumstances pointed out by the AO.

Appellate interference for non-consideration of material - remand for fresh consideration - Whether the appeal should be disposed of by remitting the matter to the CIT(A) for fresh adjudication. - HELD THAT: - Having found that the CIT(A) omitted consideration of crucial facts and investigative findings relied upon by the AO, the Tribunal directed that the issue be set aside to the file of the CIT(A) to pass a fresh order in the light of the observations and discrepancies recorded in the assessment order. The Tribunal thereby did not decide the substantive question of genuineness of the loss on merits but required the appellate authority to re-examine the matter taking into account the surrounding circumstances, the AO's material including the appraisal report and beneficiary list, and the applicability of the test of human probabilities. [Paras 6, 7]

The appeal is allowed for statistical purposes and the matter is remitted to the CIT(A) for fresh adjudication as directed.

Final Conclusion: The Tribunal set aside the CIT(A)'s order and remitted the issue to the CIT(A) for fresh consideration in light of the AO's recorded discrepancies and surrounding circumstances; the Revenue's appeal is allowed for statistical purposes.

Rejection of books of account under section 145 and computation of income by applying a percentage of turnover - Disallowance under section 40A(3) - Protective additions - Accommodation entries and assessment of commission on bogus turnover - Assessing Officer's power to make separate disallowances after income is determined by estimation

Rejection of books of account under section 145 and computation of income by applying a percentage of turnover - Disallowance under section 40A(3) - Assessing Officer's power to make separate disallowances after income is determined by estimation - Whether a disallowance under section 40A(3) can be sustained where the books are rejected under section 145 and the assessee's income is determined by applying a percentage of turnover. - HELD THAT: - The Tribunal found on facts that the CIT(A) had rejected the assessee's books under section 145 and estimated net income at 5% of the genuine turnover. The Assessing Officer had earlier made additions treating certain purchases/sales as bogus and, on a protective basis, applied section 40A(3) to part of the cash purchases. The Tribunal held that once income is determined by applying a gross/net profit percentage after rejecting books of account, that estimation subsumes expense disallowances and there is no scope for separate disallowance under section 40A(3). Relying on and following authoritative precedents where the application of a gross/net profit rate was held to obviate further separate disallowances, the Tribunal set aside the CIT(A)'s sustainment of part of the section 40A(3) disallowance and directed deletion of the addition made under section 40A(3). [Paras 12, 13]

Addition under section 40A(3) set aside and deleted where income had been determined on percentage of turnover after rejection of books of account.

Accommodation entries and assessment of commission on bogus turnover - Protective additions - Whether the commission imputed by the CIT(A) at 1% of the alleged bogus sales turnover was justified and at what reasonable rate commission should be assessed. - HELD THAT: - The CIT(A) estimated that the assessee, being a supplier providing accommodation entries, must have received commission and assessed it at 1% of the bogus sales turnover. The Tribunal, noting identical factual matrix and relying on the jurisdictional High Court and Tribunal precedents addressing similar accommodation-entry cases, observed that accepted practice in such cases places a reasonable commission much lower (the Tribunal/High Court had treated 0.1%-0.25% as the usual range and accepted 0.15% in comparable matters). Applying that precedent and parity of reasoning to the present facts, the Tribunal directed that the commission be reduced from 1% to 0.15% of the implicated turnover. [Paras 14, 15]

Imputed commission reduced from 1% to 0.15% of the bogus sales turnover.

Disallowance under section 40A(3) - Assessing Officer's power to make separate disallowances after income is determined by estimation - Whether the revenue's cross-appeals against the reduction/deletion of section 40A(3) disallowance by the CIT(A) are sustainable. - HELD THAT: - The Tribunal observed that its finding deleting the section 40A(3) addition in the assessee's appeals (on the ground that income was estimated by percentage after rejection of books) rendered the revenue's grounds against the CIT(A)'s reduction/dismissal of the section 40A(3) disallowance infructuous. Consequently, having admitted the cross-appeals on procedural grounds, the Tribunal dismissed the revenue's cross-appeals as unsustainable in view of its primary decision on estimation of income. [Paras 21, 22, 23]

Revenue's cross-appeals dismissed as infructuous in view of deletion of section 40A(3) addition where income was determined by estimation.

Final Conclusion: The assessee's appeals are partly allowed: the protective addition under section 40A(3) is deleted where income was determined by applying a percentage of turnover after rejection of books, and the imputed commission on alleged accommodation-entry turnover is reduced from 1% to 0.15%. The revenue's cross-appeals are dismissed as infructuous in view of these decisions.

Penalty under section 271C for failure to deduct TDS - Applicability of TDS on External Development Charges (EDC) paid to statutory/state authorities - No contractor/contractee privity - non-applicability of section 194C-type levy where payment is not pursuant to contract for work - Bona fide belief / absence of contumacious conduct as defence to penalty

Penalty under section 271C for failure to deduct TDS - Applicability of TDS on External Development Charges (EDC) paid to statutory/state authorities - Whether the penalty under section 271C can be sustained for non-deduction of TDS on payments of External Development Charges (EDC) made to HUDA. - HELD THAT: - The Tribunal held that the payments of EDC were not made pursuant to a contractual or statutory liability to HUDA by the assessee but were levied/determined by the Government (DTCP) and routed to HUDA for execution of development works. Coordinate Bench decisions were examined which concluded that such payments were not in the nature of payments for execution of specific work by HUDA to the assessee and therefore did not attract deduction at source. Applying those precedents and the reasoning that there was no privity of contract with HUDA and the payments were made pursuant to directions of a Governmental authority, the Tribunal concluded that levy of penalty under section 271C for non-deduction of TDS on EDC could not be sustained and deleted the penalty. [Paras 4, 5]

Penalty under section 271C deleted as levy could not be sustained for non-deduction of TDS on EDC paid to HUDA.

No contractor/contractee privity - non-applicability of section 194C-type levy where payment is not pursuant to contract for work - Bona fide belief / absence of contumacious conduct as defence to penalty - Whether absence of contractual relationship and bona fide belief that no TDS was required precluded imposition of penalty under section 271C. - HELD THAT: - The Tribunal accepted the view in earlier decisions that where payments arise from a governmental licensing condition and are routed through a Government department (DTCP) to HUDA, they are not payments under a works contract attracting section 194C; there was no contractor/contractee relationship between the assessee and HUDA. Further, in view of contemporaneous lack of clarity and governmental clarifications indicating that TDS need not be deducted, the assessee acted under a bona fide belief. In such circumstances, there was no contumacious conduct warranting penalty under section 271C. The Tribunal followed precedent law recognising bona fide belief/absence of contumacious conduct as a bar to imposing penalty. [Paras 4]

Assessee's absence of contractual privity with HUDA and bona fide belief that TDS was not payable disentitled the Revenue from sustaining penalty under section 271C.

Final Conclusion: Following co-ordinate Tribunal decisions and on the facts that EDC payments were made pursuant to governmental directions, not under a contract with HUDA, and in view of a bona fide belief that TDS was not required, the appeal is allowed and the penalty under section 271C for AY 2014-15 is deleted.

Condonation of delay - advancement of substantial justice over technicalities - failure or negligence of counsel as sufficient cause for delay - compensation for hardship/rehabilitation on redevelopment as capital receipt - taxability of alternate-accommodation rent/rehabilitation allowance

Condonation of delay - failure or negligence of counsel as sufficient cause for delay - advancement of substantial justice over technicalities - Whether the delayed filing of the appeal should be condoned. - HELD THAT: - The Tribunal examined the assessee's affidavit explaining the delay, which attributed the laches to advice and omission by the assessee's then counsel and to further reliance on legal advice while contesting related proceedings. The Revenue filed no counter-affidavit disputing those averments. Relying on established principles that the cause of substantial justice ought to prevail over mere technical bar and that counsel's inadvertence can constitute sufficient cause, the Tribunal followed coordinate-bench authority and Supreme Court dicta to condone the delay despite its length. The Tribunal therefore admitted the appeal for adjudication on merits. [Paras 5]

Delay in filing the appeal is condoned and the appeal is admitted for adjudication.

Compensation for hardship/rehabilitation on redevelopment as capital receipt - taxability of alternate-accommodation rent/rehabilitation allowance - Whether the amount received from the builder as compensation for alternate accommodation/hardship is taxable as revenue or is a capital receipt not chargeable to tax. - HELD THAT: - The Tribunal found that the assessee received a payment from the developer because the flat went for redevelopment and that the payment represented hardship/rehabilitation/alternate-accommodation compensation. Although the assessee did not utilise the amount for alternate accommodation, he was displaced and adjusted elsewhere, establishing the payment's character as hardship compensation. The Tribunal followed coordinate-bench decisions which treat such payments on redevelopment as capital in nature and not taxable as revenue. Applying those precedents to the facts, the Tribunal held that the amount is a capital receipt and deleted the addition made by the Assessing Officer. [Paras 13]

The receipt from the builder is a capital receipt (hardship compensation) and the addition is deleted.

Final Conclusion: The Tribunal condoned the delay in filing the appeal and, on the merits, held that the amount received from the builder as hardship/rehabilitation/alternate-accommodation compensation is a capital receipt not chargeable to tax; the addition is deleted and the appeal is allowed.

Timely filing of Form 15G/15H within the relevant financial year prevents TDS liability - reversal of TDS upon receipt of Form 15G/15H - non-deduction of tax on interest where valid declaration is furnished by the payee - verification of declarations by the Assessing Officer and remand for fresh consideration - CBDT instruction on non-enforcement of demand where tax has been paid by the deductee

Timely filing of Form 15G/15H within the relevant financial year prevents TDS liability - reversal of TDS upon receipt of Form 15G/15H - Acceptance of claim for non-deduction/reversal of TDS where Form Nos.15G/15H were submitted before the end of the relevant financial year - HELD THAT: - The Tribunal found it to be common banking practice that TDS is deducted when interest exceeds threshold but reversed when depositors submit Form Nos.15G/15H. On the materials, there was no dispute that the bank deducted TDS where required and reversed such deduction within the same financial year upon receipt of the declarations. The Tribunal held that if the relevant declaration in Form Nos.15G/15H is submitted before the end of the relevant financial year, the question of deduction of TDS on such interest payments does not arise and the Assessing Officer ought to have accepted the assessee's claim. [Paras 6]

Assessee's claim that TDS need not be treated as short-deducted where valid Forms 15G/15H were submitted within the same financial year is accepted in principle; the matter requires verification by the AO.

Verification of declarations by the Assessing Officer and remand for fresh consideration - CBDT instruction on non-enforcement of demand where tax has been paid by the deductee - Direction to the Assessing Officer to re-examine and verify the claim in light of Forms 15G/15H and decide in accordance with law - HELD THAT: - Having accepted that submission of Forms 15G/15H within the relevant financial year negates the obligation to deduct TDS, the Tribunal nevertheless observed that the AO must verify the declarations and supporting particulars. In view of factual gaps in respect of some payees, the Tribunal set aside the orders below and restored the issue to the file of the AO with a direction to re-verify the claim and decide on the short-deduction computation in accordance with law, applying relevant instructions where applicable. [Paras 6]

Issue remitted to the Assessing Officer for verification of the Forms and fresh adjudication in accordance with law.

Final Conclusion: Appeal allowed for statistical purposes; order of the CIT(A) set aside and the issue remanded to the Assessing Officer to re-verify the Form Nos.15G/15H submitted by the assessee and decide the question of short deduction of TDS for Assessment Year 2013-14 in accordance with law.

Opportunity of hearing - ex parte decision - remand to the Assessing Officer for fresh consideration - admission of additional evidence in the interest of justice - explanation for source of cash deposits

Opportunity of hearing - ex parte decision - explanation for source of cash deposits - admission of additional evidence in the interest of justice - remand to the Assessing Officer for fresh consideration - Whether the matter should be restored to the Assessing Officer for fresh adjudication after affording the assessee an opportunity to place evidence and explanation regarding cash deposits that were added to his income. - HELD THAT: - The Tribunal found that the appeal before the CIT(A) was decided ex parte and that the email provided in Form No.35 belonged to the assessee's friend, resulting in a genuine miscommunication about service of notices (para 5). The assessee had earlier filed a written explanation before the AO stating that the deposits derived from compensation received on compulsory acquisition of land and partly from his wife's funds, but thereafter furnished no further material during assessment (para 6). Having considered the affidavit explaining the non-appearance and the consistent stand on source of funds, the Tribunal concluded that the assessee was denied adequate opportunity to present and substantiate his case before both the AO and the first appellate authority. In the interest of justice and permitting the assessee to place supporting evidence, the Tribunal directed restoration of the issue to the file of the AO for fresh consideration after affording due opportunity of hearing and requisite cooperation from the assessee. [Paras 5, 6]

The issue is remitted to the Assessing Officer for fresh adjudication after affording the assessee an opportunity of hearing to substantiate the source of cash deposits; grounds of appeal allowed for statistical purposes.

Final Conclusion: The appeal is allowed for statistical purposes and the matter is restored to the file of the Assessing Officer for fresh consideration of the cash-deposit issue for Asstt.Year 2017-18 after providing the assessee an opportunity to be heard and to produce relevant evidence.

Penalty under section 271B - tax audit report under section 44AB - availability of tax audit report before completion of assessment proceedings - reasonable cause for delay - venial technical breach without mala fide intention

Penalty under section 271B - tax audit report under section 44AB - availability of tax audit report before completion of assessment proceedings - reasonable cause for delay - venial technical breach without mala fide intention - Deletion of penalty under section 271B for delayed filing of tax audit report where the audit report was furnished before completion of assessment proceedings and delay was attributable to matters beyond assessee's control. - HELD THAT: - The Tribunal found that although the assessee filed the tax audit report beyond the due date, the report was made available to the Assessing Officer during the course of assessment under section 143(3). The delay arose from circumstances not within the assessee's control (appointment and acceptance of statutory auditor by the C & AG), and there was no mala fide intention. Following coordinate-bench decisions on identical facts, the Tribunal held that where the tax audit report is placed before the AO before completion of assessment, the omission to file within the due date is a venial technical breach amounting to reasonable cause under section 271B and does not justify levy of penalty. Accordingly, the penalty levied was deleted. [Paras 6, 7]

Penalty under section 271B deleted.

Final Conclusion: The appeal is allowed and the penalty imposed under section 271B for delayed filing of the tax audit report for assessment year 2018-19 is deleted, the Tribunal applying the principle that delay which results in the audit report being available to the AO before completion of assessment and which arises from causes beyond the assessee's control constitutes reasonable cause and a venial technical breach not attracting penalty.

Disciplinary proceedings - withholding of pension - reconsideration in light of subsequent adjudicatory orders - effect of setting aside adjudication order on disciplinary penalty - supervisory duty of a senior officer - Rule 9 of the CCS (Pension) Rules, 1972 - collusive conduct as basis for disciplinary action

Disciplinary proceedings - supervisory duty of a senior officer - Validity of the inquiry findings and conclusion of guilt in the disciplinary proceedings against the petitioner. - HELD THAT: - The High Court found that, although the petitioner as Assistant Commissioner of Central Excise was not required to personally examine exported goods, his senior position imposed supervisory obligations. The Court held that the unusual practice of exporters routing goods to Miraj for examination ought to have put the petitioner on notice, and he ought to have taken supervisory steps such as examining samples or referring them to experts/labs. On the material before it the Court did not find the disciplinary findings to be perverse and rejected petitioner's reliance on earlier authorities. Consequently, the finding of guilt in the disciplinary inquiry was not set aside. [Paras 8]

The disciplinary finding of guilt is not vitiated by perversity and is sustained.

Effect of setting aside adjudication order on disciplinary penalty - reconsideration in light of subsequent adjudicatory orders - collusive conduct as basis for disciplinary action - Rule 9 of the CCS (Pension) Rules, 1972 - Whether the disciplinary authority's order imposing withholding of pension must be reconsidered because it relied on an adjudication penalty which was subsequently set aside. - HELD THAT: - The Disciplinary Authority expressly relied on the Adjudicating Authority's earlier penalty order as evidencing 'collusive conduct'. At the time the disciplinary order was passed that adjudication appeal was pending; subsequently CESTAT remanded and the Adjudicating Authority dropped proceedings. The Court held that because the imposition of the adjudicatory penalty was a factor in imposing pension-withholding, the disciplinary order must be reconsidered in the light of the CESTAT and Adjudicating Authority orders. The Disciplinary Authority is required to examine whether any loss to the public exchequer was in fact caused given the dropping of adjudication proceedings, and to determine whether the threshold of 'grave misconduct' necessary for invoking Rule 9 of the CCS (Pension) Rules, 1972 is established, taking into account the petitioner's retirement. If consultation with UPSC is required, it must be carried out expeditiously. [Paras 9, 10, 11]

The order imposing withholding of pension is set aside and the matter is remanded to the Disciplinary Authority for fresh consideration in light of the CESTAT and Adjudicating Authority orders; fresh decision (including UPSC consultation if needed) to be completed within six months.

Final Conclusion: The Tribunal's dismissal and the disciplinary order withholding 30% of pension for five years are set aside. The matter is remanded to the Disciplinary Authority to reconsider penalty afresh in light of the CESTAT and Adjudicating Authority orders, with any necessary consultation with UPSC to be completed and a final order passed within six months; consequential refund issues to follow depending on the fresh decision.

Transaction value - genuineness of agreement/addendum - variation in quantity/specification (LDT) and its effect on customs valuation - acceptance of reduced price agreed prior to delivery - assessment under Section 14(1) and Rule 4(1) - transaction value principle

Transaction value - genuineness of agreement/addendum - variation in quantity/specification (LDT) and its effect on customs valuation - acceptance of reduced price agreed prior to delivery - Whether the transaction value for customs assessment is the price stated in the original MoA or the reduced price in the subsequent MoA executed between the same seller and the appellant, where the later MoA reflects a lower LDT and its genuineness is not disputed. - HELD THAT: - The Tribunal applied the statutory transaction value principle under Section 14(1) read with Rule 4(1), which requires acceptance of the price actually paid or payable unless exceptions apply. Relying on Chaudhary Ship Breakers and Jai Bharat Steel Industries, the Court recognised that parties may validly alter the contract price by mutual agreement and that a reduced price (or addendum) must be scrutinised for genuineness and necessity, but cannot be ignored if real and genuine. In the present case the surveyor reports established a reduction in LDT from 4999.20 MT (original MoA) to 4485.20 MT (MoA dated 22.11.2012) attributable to cement concrete of about 507 MT; the later MoA was not found to be fabricated or impugned by Revenue. Decisions relied upon by Revenue were distinguished on facts (they involved no change in specification or concerned tariff valuation). Given the undisputed genuineness of the later MoA and the material variation in the specification (net LDT), the Tribunal held that the reduced price agreed before delivery is the transaction value and must be accepted for assessment. [Paras 4, 8]

The Tribunal allowed the appeal, set aside the provisional assessment based on the earlier MoA and directed acceptance of the transaction value as declared in the genuine MoA dated 22.11.2012 reflecting the lower LDT.

Final Conclusion: Provisional assessment finalized on the basis of the earlier MoA was set aside; where a genuine subsequent MoA executed before delivery reflects a reduced price due to a material variation in the goods (reduced LDT), that price constitutes the transaction value and must be accepted for customs assessment.

Penalty under Section 112(a) of the Customs Act, 1962 - mens rea and penalty under Section 114A of the Customs Act, 1962 - natural justice in modification under Section 128A(3) - redemption fine and market inquiry for determination of quantum - confiscation and action in rem

Mens rea and penalty under Section 114A of the Customs Act, 1962 - penalty under Section 112(a) of the Customs Act, 1962 - natural justice in modification under Section 128A(3) - Whether imposition of penalty under Section 112(a) by the Commissioner (Appeals), after declining to uphold penalty under Section 114A for lack of mens rea, was proper without affording a fresh opportunity to the appellant. - HELD THAT: - The Tribunal found that the adjudicating authority originally imposed penalty under Section 114A which required mens rea, but the Commissioner (Appeals) rejected that finding for lack of mens rea and, without providing the appellant an opportunity to be heard on the substituted charge, imposed a lesser penalty under Section 112(a). Such modification, under Section 128A(3), necessarily requires a fair opportunity and an inquiry consistent with principles of natural justice before imposing a new penalty head or quantum. In the facts of this case there is no record that the appellant was afforded requisite opportunity to rebut or justify the penalty under Section 112(a). Accordingly, imposing that penalty in these circumstances was improper and has been set aside. [Paras 9, 10]

Penalty of Rs. 4 Lakhs imposed under Section 112(a) is set aside for breach of natural justice in the modification process.

Redemption fine and market inquiry for determination of quantum - confiscation and action in rem - Whether the redemption fine imposed should be sustained and whether confiscation of the offending goods should be upheld. - HELD THAT: - The Tribunal accepted that the goods were mis-described and that action in rem remains legally maintainable, therefore upholding confiscation. However, the record shows no market inquiry was conducted to ascertain market price reduced by duty as contemplated while fixing the upper limit of redemption fine under the statutory scheme. Given the practical difficulty of undertaking a market inquiry at this belated stage, the Tribunal examined accepted transaction value (the value accepted by the department and by the appellants at release) and the surrounding circumstances, including lack of deliberate misdeclaration and subsequent acceptance of the goods by the appellant. Applying the guiding principle that redemption fine should not be arbitrary and should nullify illegitimate profit, the Tribunal reduced the redemption fine to a reasonable amount while maintaining confiscation of the goods. [Paras 9, 10]

Confiscation of offending goods is upheld; redemption fine reduced to Rs. 4 Lakhs.

Final Conclusion: The appeal is partly allowed: the confiscation of the offending goods is confirmed; the redemption fine is reduced to Rs. 4 Lakhs; and the penalty of Rs. 4 Lakhs imposed under Section 112(a) by the Commissioner (Appeals) is set aside for want of opportunity and natural justice in the modification process.

Exemption under Notification No. 21/2002-Cus. as amended by Notification No. 61/2007-Cus. - Condition No. 104 - non-scheduled (passenger) services - non-scheduled (charter) services - air transport service - public transport and private aircraft - requirement of published tariff - undertaking to pay duty on failure to use - jurisdiction of Customs to determine violation of the exemption - demand under Section 28 of the Customs Act - precedential effect of the Larger Bench interim order dated 08.08.2022

Non-scheduled (passenger) services - non-scheduled (charter) services - Condition No. 104 - precedential effect of the Larger Bench interim order dated 08.08.2022 - Whether an importer holding DGCA approval/permit for non-scheduled (passenger) services is barred from using the aircraft for charter operations and thereby disentitled to the exemption under the notification. - HELD THAT: - Following the Larger Bench interim order dated 08.08.2022, the Tribunal held that Condition No. 104 and the definitions adopted from the Aircraft Rules do not prohibit a non-scheduled (passenger) permit holder from conducting charter operations. The definition of "air transport service" covers carriage of persons for any kind of remuneration and does not mandate seat-wise operation or a published tariff; CAR 1999 expressly permits non-scheduled (passenger) operators to conduct charter/non-scheduled operations. Clause (c) defining non-scheduled (charter) services pertains to operators registered specifically as charter operators and does not operate to exclude chartering by non-scheduled (passenger) operators from the ambit of non-scheduled (passenger) services. Consequently, carrying passengers by charter by a non-scheduled (passenger) permit holder does not, by itself, disentitle the importer to the exemption when other conditions are met.

A non-scheduled (passenger) permit holder may lawfully conduct charter operations and such use does not, per se, defeat entitlement to the exemption under Condition No. 104.

Requirement of published tariff - non-scheduled (passenger) services - Condition No. 104 - Whether absence of a published tariff disentitles an importer to the exemption under Condition No. 104. - HELD THAT: - The Tribunal (following the Larger Bench) distinguished the requirement of a published tariff as part of the definition of non-scheduled (charter) services from the broader definition of non-scheduled (passenger) services in clause (b). Clause (b) contains no stipulation requiring publication of tariff. Rule 135 of the Aircraft Rules requires publication of tariff only for scheduled air transport undertakings. Where the operator provides non-scheduled (passenger) services, the absence of a published tariff does not amount to a breach of Condition No. 104 and is not a ground for denial of exemption.

Non-publication of a tariff does not, by itself, invalidate entitlement to the exemption for non-scheduled (passenger) operators under Condition No. 104.

Public transport and private aircraft - air transport service - undertaking to pay duty on failure to use - Whether flights without direct remuneration and carriage of personnel of group companies render the aircraft a "private aircraft" and thereby breach the undertaking attached to the exemption. - HELD THAT: - The Tribunal adopted the Larger Bench reasoning that the classification of an aircraft as public transport or private depends on whether the operator is an "air transport undertaking" and whether carriage is effected for remuneration or by an air transport undertaking. Where an operator's business includes carriage by air for hire or reward, carriage without direct remuneration still falls within the definition of public transport. Personnel of group companies are members of the public and carriage of such personnel does not ipso facto convert the operation into private use. The Court also noted documentary evidence (invoices, advertisements) showing that the operators made the aircraft available for hire for remuneration, supporting their status as air transport undertakings.

Use of aircraft for some non-remuneration flights or carriage of group-company personnel does not, in the circumstances shown, convert the aircraft into a private aircraft or breach the exemption undertaking.

Jurisdiction of Customs to determine violation of the exemption - precedential effect of the Larger Bench interim order dated 08.08.2022 - undertaking to pay duty on failure to use - Whether Customs authorities have jurisdiction to determine violations of the conditions of the exemption or whether such monitoring lies exclusively with the Civil Aviation Ministry/DGCA. - HELD THAT: - The Tribunal, following the Larger Bench, held that the exemption notification incorporates conditions to be satisfied in terms of DGCA approvals and Civil Aviation Ministry requirements; primary monitoring and interpretation of those aviation conditions lie with the competent authorities under the Civil Aviation Ministry. Customs may act on the basis of the undertaking executed by the importer, but action to call for repayment of exemption (or invoke consequences) is sustainable only upon a finding by the competent Civil Aviation authority that the permit-holder has violated the aviation conditions. Pre-import compliance having been satisfied and permits having been renewed by DGCA without objection, Customs cannot, independently of the DGCA, treat those conditions as contravened for the purpose of denying the exemption absent a contrary finding by the Civil Aviation authority.

Customs lacks plenary jurisdiction to re-evaluate DGCA/Civil Aviation findings; enforcement against the exemption is permissible only when the Civil Aviation authority has determined breach of the aviation conditions.

Demand under Section 28 of the Customs Act - undertaking to pay duty on failure to use - Whether demands for differential duty, confiscation and penalties founded on Section 28 (and interest under Section 28AA) are sustainable where the notification contains no post-import condition and pre-import conditions were complied with. - HELD THAT: - The Tribunal relied on precedent (including Sameer Gehlot and Jagdish Cancer reasoning) to observe that where exemption is granted after fulfilment of pre-import conditions and the notification contains no express post-import condition, invoking Section 28 (short-levy/non-levy/erroneous refund) to demand duty is not sustainable. Section 28 is narrowly applicable and cannot be used to convert alleged post-import breaches of an undertaking into cases of short levy. The record showed DGCA renewals and no DGCA finding of breach; accordingly demands and penalties predicated on Section 28 and related confiscation were unsustainable.

Demands under Section 28 and connected penalties/interest are not sustainable in the absence of post-import condition breach or a DGCA finding; accordingly such demands were set aside.

Precedential effect of the Larger Bench interim order dated 08.08.2022 - exemption under Notification No. 21/2002-Cus. as amended by Notification No. 61/2007-Cus. - Whether the impugned orders denying exemption should be set aside in light of the Larger Bench answers and relevant High Court decisions distinguished/applied. - HELD THAT: - The Tribunal found that the Larger Bench had examined and answered the contested questions comprehensively, and that subsequent High Court authorities (East India Hotels Ltd. and Global Vectra decisions) were considered and distinguished on their facts where appropriate. On the present facts - including documentary proof of remuneration and DGCA renewals without objection - the appellants satisfied Condition No. 104 and related aviation requirements. Consequently, the impugned orders confirming differential duty, confiscation and penalties could not be sustained.

Impugned orders denying the exemption are set aside and the appeals are allowed; appellants held eligible for the exemption.

Final Conclusion: Applying and following the Larger Bench interim order dated 08.08.2022 and on the facts before it (including DGCA renewals and evidence of remuneration), the Tribunal held that non scheduled (passenger) permit holders may conduct charter operations, absence of a published tariff or some non remuneration flights do not ipso facto convert use into private aircraft, Customs cannot deny exemption absent a DGCA finding of breach, and demands under Section 28 were unsustainable; the impugned orders are set aside and the appeals are allowed.

Classification beyond show cause notice - Fresh show cause notice for reclassification - Tariff classification first raised in appeal - Assessee's declared classification to prevail where revenue's proposed classification is incorrect - Applicability of safeguard duty dependent on classification in show cause notice

Classification beyond show cause notice - Fresh show cause notice for reclassification - Tariff classification first raised in appeal - Adjudicating authority cannot, in adjudication on a show cause notice, classify goods under a tariff heading different from that proposed in the show cause notice so as to impose a duty unless a fresh show cause notice is issued. - HELD THAT: - The Tribunal applied the ratio of the Supreme Court in Warner Hindustan Limited, where it was held impermissible for an adjudicatory forum to decide a classification that was first raised in appeal; instead the correct course is to dismiss the revenue's plea and permit issuance of a fresh show cause notice so that the assessee may meet the new case. The Tribunal noted consistent decisions of coordinate benches adopting the same principle and observed that where the classification proposed by the revenue is incorrect, the assessee's declared classification cannot be disturbed in proceedings initiated on the original show cause notice. The consequence is that an adjudicating authority which goes beyond the classification specified in the notice cannot sustain a demand based on a different tariff heading and, where the revenue seeks to rely on a different classification (and thereby seek to impose safeguard duty), it must issue a fresh notice within the law providing the assessee an opportunity to respond.

Appeal dismissed; adjudicating authority cannot classify the goods under a different tariff heading than that specified in the show cause notice and revenue must issue a fresh show cause notice if it wishes to seek reclassification.

Final Conclusion: Revenue's appeal dismissed: the adjudicating authority exceeded the scope of the show cause notice by reclassifying goods under different headings to attract safeguard duty; reclassification for levy of duty requires issuance of a fresh show cause notice so the respondent may be heard.

Refund of Special Additional Duty (SAD) - limitation period for refund claims - crystallization of right to claim - limitation cannot start to run prior to crystallization of the claim - subordinate legislation introducing limitation - time-barred

Refund of Special Additional Duty (SAD) - limitation period for refund claims - subordinate legislation introducing limitation - Validity of introducing a one year limitation for SAD refund claims by amending Notification No. 102/2007 through a subsequent subordinate notification. - HELD THAT: - The Tribunal examined the sequence in which the original Notification No. 102/2007 (which prescribed refund on resale subject to conditions) contained no time limit and the subsequent Notification No. 93/2008 introduced a one year limitation from the date of deposit. Relying on the reasoning accepted in Sony India (as followed by the Delhi High Court and applied by this Tribunal), the Tribunal held that limitation for the first time cannot be introduced by subordinate legislation so as to defeat a right which was originally created without a temporal bar. The impugned order in appeal, which allowed the refund in part on this basis, was found to be in accordance with that principle and not erroneous. The Tribunal noted contrary decisions and the different treatment by other benches or courts, but concluded that the position adopted in Sony India and followed by this Tribunal and the Delhi High Court governs the present facts. [Paras 3, 4, 8]

The one year limitation introduced subsequently cannot preclude the refund where the original notification contained no time limit; the Commissioner (Appeals) rightly allowed the refund on that ground.

Crystallization of right to claim - limitation cannot start to run prior to crystallization of the claim - time barred - Whether the period of limitation begins to run from the date of deposit of SAD or from the date when the right to claim crystallizes on resale and payment of VAT/sales tax. - HELD THAT: - The Tribunal accepted the legal proposition that an importer's entitlement to claim refund of SAD arises only upon resale of the imported goods and payment of VAT/sales tax thereon. Accordingly, limitation cannot begin to run before the right to claim has crystallized. Applying this principle to the facts, the Tribunal found that the rejection of the refund for bill of entry No. 3185706 on the ground that the claim was filed beyond 12 months from deposit was unsustainable where the right to claim had not yet crystallized within that period. [Paras 4, 8]

Limitation runs from crystallization of the right to claim (on resale and VAT/Sales Tax payment); therefore the refund claim could not be time barred on the cited ground.

Final Conclusion: Revenue's appeal is dismissed; the Commissioner (Appeals) correctly allowed the refund in part by applying the principle that limitation cannot be introduced by subordinate legislation for the first time and that limitation runs only from crystallization of the refund right.

Refund of SAD - Limitation prescribed by Notification - Notification No.93/2008 prescribing one year limitation for SAD refund - Section 27 of the Customs Act, 1962 - Preclusive effect of subordinate legislation vis-a -vis substantive statutory rights

Refund of SAD - Limitation prescribed by Notification - Notification No.93/2008 prescribing one year limitation for SAD refund - Section 27 of the Customs Act, 1962 - Whether rejection of the SAD refund claim as time-barred by relying upon the one year limitation prescribed by Notification No.93/2008 is sustainable. - HELD THAT: - The Tribunal examined the conflict between the earlier decision in Sony India Pvt. Ltd. and subsequent amendment by Notification No.93/2008 which introduced a one year limitation for filing SAD refund claims. The Tribunal noted that Section 27 of the Customs Act, 1962 deals with refunds and provides the statutory framework for refund claims. The recent decision of the Hon'ble High Court of Delhi in Commissioner of Customs v. Thermoking (order dated 18.08.2022) reaffirmed the legal principle that limitation for substantive rights cannot be imposed by subordinate legislation and held that the limitation prescribed by Notification No.93/2008 is impermissible. In view of that binding decision of the jurisdictional High Court, and applying the principle that a later authoritative ruling of the High Court governs, the Tribunal concluded that the refund of SAD could not be rejected on the ground of limitation prescribed by the Notification and followed the Thermoking ruling rather than the earlier Tribunal decisions upholding the Notification.

The order rejecting the SAD refund claim as time barred under Notification No.93/2008 is set aside and the appeal is allowed.

Final Conclusion: Appeal allowed; the rejection of the SAD refund claim on the ground of limitation under Notification No.93/2008 is set aside in view of the decision of the Hon'ble High Court of Delhi in Thermoking, and the refund claim cannot be rejected solely on that limitation ground.

Maintainability of appeal - jurisdiction of appellate tribunal - compounding order - remand for fresh consideration - principles of natural justice - application of departmental guidelines

Remand for fresh consideration - compounding order - principles of natural justice - application of departmental guidelines - The Appeal is remitted to the Chief Commissioner/Principal Chief Commissioner for fresh adjudication of the Compounding Order with opportunity to the appellant to make oral and written submissions and adduce documentary evidence. - HELD THAT: - The Tribunal, having considered the Telangana High Court direction that maintainability be decided by the Tribunal and the then-operative Gujarat High Court decision in Commissioner of Central Excise v. Girish B. Mishra, concluded that the appellant ought to be afforded an opportunity before the Chief Commissioner/Principal Chief Commissioner. The remand requires the adjudicating authority to follow principles of natural justice and to have regard to CBIC guidelines set out in Circular No. 15/2022-CUS dated 23.08.2022 while re-deciding the compounding matter. The Tribunal expressly refrains from expressing any view on the merits and confines its order to providing the appellant a fresh hearing and consideration in accordance with the stated procedural and departmental norms. [Paras 5, 6]

Matter remanded to the Chief Commissioner/Principal Chief Commissioner to rehear and decide afresh, observing natural justice and the CBIC Circular No.15/2022-CUS.

Maintainability of appeal - jurisdiction of appellate tribunal - The Tribunal does not decide the question of the Tribunal's jurisdiction or the ultimate maintainability of an appeal against the Chief Commissioner's compounding order on merits at this stage. - HELD THAT: - The Telangana High Court left the question of maintainability to the Tribunal to decide. Having noted the Gujarat High Court decision which was in force and an SLP filed but not stayed, the Tribunal declined to adjudicate jurisdiction or the merits of the compounding order now. Instead, it remitted the matter for fresh consideration by the adjudicating authority and reserved any opinion on jurisdiction and merits for later determination as appropriate. [Paras 4, 5, 6]

No determination on jurisdiction or maintainability is made; Tribunal refrains from expressing any opinion on merits or jurisdiction at present.

Remand for fresh consideration - Time-bound completion of the remand process. - HELD THAT: - The Tribunal directed that because the dispute relates to 2014, the Chief Commissioner/Principal Chief Commissioner shall complete the entire rehearing and decision process within four months from receipt of communication of this order. [Paras 7]

Rehearing and decision to be completed within four months from communication of this order.

Final Conclusion: The Tribunal remits the matter to the Chief Commissioner/Principal Chief Commissioner for fresh adjudication of the compounding order, directing compliance with principles of natural justice and CBIC Circular No.15/2022-CUS, without expressing any view on the merits or the Tribunal's jurisdiction; the rehearing is to be completed within four months.

Forfeiture of earnest money - liquidator's power to fix terms of sale - Liquidation Process Regulations - terms and conditions of sale - Section 74 Indian Contract Act - penalty and reasonable compensation - as is where is clause and caveat emptor - disclosure obligations and defect in title

Forfeiture of earnest money - liquidator's power to fix terms of sale - Liquidation Process Regulations - terms and conditions of sale - Validity of the Liquidator's cancellation of sale and forfeiture of the EMD and part consideration under the tender terms and Liquidation Process Regulations. - HELD THAT: - The Tribunal held that the Liquidator is statutorily empowered to frame the terms and conditions of sale under the Liquidation Process Regulations and the tender document executed by bidders binds them to those terms. The tender contained express clauses permitting forfeiture of EMD and amounts paid on default (clauses 4.6(f), 4.10(b) and 4.11) and Schedule I of the Liquidation Process Regulations authorises the liquidator to set such terms. Given the statutory scheme and the bidder's unqualified undertaking to abide by the process document, cancellation of the sale and forfeiture on the purchaser's default were lawful. The Tribunal also relied on precedent that the 90 day period is mandatory and non-payment within that period warrants cancellation. The Appellants' contention that the Liquidator should have instituted a separate suit to forfeit amounts was rejected as inconsistent with the statutory liquidation sale regime and the terms of the process document. [Paras 14, 15, 20, 21]

Liquidator validly cancelled the sale and forfeited the EMD and part consideration in accordance with the tender terms and the Liquidation Process Regulations.

Section 74 Indian Contract Act - penalty and reasonable compensation - forfeiture of earnest money - Applicability of Section 74, Indian Contract Act to forfeiture in the liquidation e auction context. - HELD THAT: - The Tribunal considered Section 74 and authoritative precedents including decisions summarised in paragraph 43 of Kailash Nath Associates. It accepted that while Section 74 normally governs contractual stipulations in the nature of penalties and forfeiture, the Supreme Court has held that Section 74 does not apply where forfeiture occurs under the terms and conditions of a public auction before agreement is reached. Applying that principle, the Tribunal concluded that an e auction conducted by a liquidator under the statutory Liquidation Process Regulations falls within that exception and Section 74 is not applicable to the present forfeiture. [Paras 9, 19, 20]

Section 74 of the Indian Contract Act does not apply to the forfeiture effected under the liquidation e auction process and the liquidator's forfeiture is not governed by Section 74 in this case.

As is where is clause and caveat emptor - disclosure obligations and defect in title - Whether there was a defect in title or suppression by the Liquidator that vitiated the sale or justified non payment by the Appellant. - HELD THAT: - The Tribunal examined the Appellant's claim that revenue records showed the land in the earlier name and that property tax dues or attachments rendered title defective. The tender expressly sold the land on an 'as is where is' and 'buyer beware' basis and required bidders to conduct independent due diligence. The record showed the change of corporate name and that title continued with the corporate debtor; Deputy Collector's permission and corrections to revenue entries were obtained or were in process and the adjudicating authority had facilitated registration. The Tribunal found these contentions to be a pretext to delay payment; there was no material defect in title or nondisclosure by the Liquidator that excused the Appellant's failure to pay within the prescribed period. [Paras 27, 28, 29, 31, 32]

No defect in title or suppression by the Liquidator was established; these arguments did not justify the Appellant's failure to make the balance payment.

Final Conclusion: The Adjudicating Authority's rejection of the application was upheld: the Liquidator lawfully cancelled the sale and forfeited the amounts deposited under the tender and Liquidation Process Regulations, Section 74 is not applicable to the forfeiture in this liquidation e auction, and no title defect or suppression excused the purchaser's default; the appeal is dismissed.

Regular bail under Section 439 Cr.P.C. - production warrants and formal arrest - infructuous bail applications - recollection of production warrants - rigour of Section 45 of the PMLA Act - custody in predicate offences and effect on release

Regular bail under Section 439 Cr.P.C. - production warrants and formal arrest - infructuous bail applications - custody in predicate offences and effect on release - recollection of production warrants - Whether the bail applications of the petitioners are maintainable when they have not been taken into formal custody by the Enforcement Directorate despite production warrants having been issued - HELD THAT: - The court found as an admitted fact that although production warrants were issued after the filing of the complaint, the petitioners have not been formally arrested or taken into custody by the Enforcement Directorate. The petitioners were earlier in custody in predicate offences and have since been admitted to bail in those matters but continued to remain confined only on account of the production warrants in the present proceedings. Because the petitioners had not been brought into formal custody by the ED in the present case, the applications for regular bail under the Cr.P.C. were rendered infructuous. For this reason the court declined to adjudicate the merits of bail on the basis of custodial rigours or the applicability of the PMLA provision urged by the respondent, and instead proceeded to recall any production warrants issued so that, if the petitioners are not required in any other case, they be released from jail. [Paras 8, 9]

Bail applications dismissed as infructuous; production warrants, if any, recalled; accused to be released if not required in any other case.

Final Conclusion: The bail petitions were dismissed as infructuous because the petitioners had not been formally arrested by the Enforcement Directorate; production warrants were recalled and the accused directed to be released if not wanted in any other matter.

Construction of residential complex - works contract service - service simpliciter - self service (service rendered prior to completion certificate and transfer) - exclusion in the definition of "residential complex"

Construction of residential complex - works contract service - self service (service rendered prior to completion certificate and transfer) - exclusion in the definition of "residential complex" - Whether Service Tax was payable on the appellant's construction services for the period April 2009 to June 2010 - HELD THAT: - The Tribunal examined the nature of the appellant's activity and the agreements and found the appellant to be a builder constructing flats for allottees, i.e., carrying out works contract activity (para 7). Applying the settled position followed by coordinate Benches and the Apex Court in Larsen & Toubro, the Tribunal recalled the legal position applicable in the relevant periods: after 1-6-2007 and prior to 1-7-2010 a service rendered before issue of the completion certificate and transfer to the customer is treated as self service and is not taxable; further, services rendered for completion of a flat for the personal use of the recipient fall within the exclusion in the definition of residential complex (para 8). On the facts, the completion certificate for the project in question was obtained on 09.06.2010, and the disputed period is April 2009 to June 2010; accordingly the construction service was rendered prior to completion/transfer and therefore was not exigible to Service Tax for that period (para 9). The Tribunal set aside the adjudicating authority's order following these principles and granted consequential relief. [Paras 7, 8, 9]

No Service Tax was exigible on the appellant for the construction services rendered during April 2009 to June 2010; the impugned order is set aside and the appeal is allowed with consequential benefits.

Final Conclusion: The appeal is allowed. The adjudicating authority's demand for Service Tax in respect of construction services rendered by the appellant for April 2009 to June 2010 is set aside on the ground that such services fell within the non-taxable self service/exclusion for residential complex for the period in dispute; consequential benefits to be given as per law.

Inclusion of reimbursable expenses in the gross amount charged for valuation of taxable service - validity of Rule 5 for determining taxable value under the Service Tax valuation regime - requirement of suppression with intent to evade for invoking the extended period of limitation under the proviso to Section 73(1) - classification of services as business support service or development and supply of content service for levy of service tax

Classification of services as business support service or development and supply of content service for levy of service tax - inclusion of reimbursable expenses in the gross amount charged for valuation of taxable service - Demand on the appellant for the period specified under the heads 'business support service' (01.05.2006-31.05.2007) and 'development and supply of content service' (from 01.06.2007) is sustainable. - HELD THAT: - The Tribunal held that the differential demand was computed by treating royalty payments as part of the gross amount chargeable under Section 67 read with Rule 5 of the Valuation Rules. In view of the Supreme Court's decision in Union of India v. M/s. Intercontinental Consultants and Technocrats Pvt. Ltd., Rule 5 goes beyond the mandate of Section 67 and cannot be applied to widen valuation by including amounts that are not consideration for the taxable service. Since the impugned demand was arrived at by applying Rule 5 to include royalty payments, it runs counter to the ratio of the Apex Court and therefore cannot be sustained on merits. The consequence is that the demand founded on such valuation is unsustainable. [Paras 13, 14]

Demand cannot be sustained on merits as it rests on the impermissible application of Rule 5 to include royalty payments in the taxable value; impugned demand set aside.

Inclusion of reimbursable expenses in the gross amount charged for valuation of taxable service - validity of Rule 5 for determining taxable value under the Service Tax valuation regime - Royalty charges received and paid by the appellant are not includible in the taxable value for the purpose of service tax under the computation applied by the Revenue. - HELD THAT: - The Tribunal applied the Supreme Court's analysis that valuation for service tax must be the gross amount charged 'for such service' and that Rule 5 cannot be used to expand valuation beyond consideration paid as quid pro quo for rendering the taxable service. The differential tax demanded was based on treating royalty as expenditure incurred on behalf of the service recipient and thereby includible; that mode of computation is contrary to the Apex Court's ratio and cannot sustain. Accordingly, royalty payments cannot be treated as part of the gross amount charged for the appellant's taxable service in the manner adopted by the Revenue. [Paras 13]

Royalty payments are not includible in the taxable value under the valuation principle applied by the Revenue; demand based on such inclusion is set aside.

Requirement of suppression with intent to evade for invoking the extended period of limitation under the proviso to Section 73(1) - extended period of limitation under proviso to Section 73(1) - Revenue was not justified in invoking the extended period of limitation under the proviso to Section 73(1) in this case. - HELD THAT: - The Tribunal found that the audits by Revenue in 2009 and 2010 had already revealed the alleged non-payment of service tax on royalties and that the differential demand was computed from the assessee's books and ST-3 returns. The proviso to Section 73(1) permits invocation of the extended period only where there is fraud, collusion, wilful mis-statement or suppression of facts with the intent to evade payment of service tax. Given that the Revenue had the relevant facts from audits and the demand was based on records available in the books and returns, there was no finding of suppression with intent to evade. Thus, the extended limitation could not be invoked. [Paras 9, 10, 11, 12]

Invocation of the extended five-year limitation was not justified; extended period cannot be applied.

Final Conclusion: The appeal is allowed. The impugned Order in Original is set aside: the demand is unsustainable both on limitation grounds (no suppression with intent to evade) and on merits (Rule 5 cannot be used to include royalty payments in taxable value in view of the Apex Court's ratio); consequential relief to the appellant as per law.

CENVAT credit admissibility based on invoices/debit notes - Limitation (time-bar) in service tax demands - Audit reliance and absence of suppression - Penalty vitiated where suppression not established - Classification of services - Business Support Services vs Transport of Goods - Taxability of incentives/excess-yield receipts as Business Auxiliary Services

CENVAT credit admissibility based on invoices/debit notes - Admissibility of CENVAT credit of Rs 1,23,90,055/- claimed on the basis of debit notes and subsequently issued invoices - HELD THAT: - The Tribunal examined the debit notes and invoices produced by the appellant and found that they contained the particulars required under the CENVAT Credit Rules, 2004, including service tax particulars and registration details of the service provider. Although some documents were initially recorded as debit notes, the service provider later issued invoices with the same serial numbers. On the basis that the documentary requirements for taking credit were satisfied, the Tribunal held that the CENVAT credit was properly availed and allowed the appeal on merits in respect of this claim. [Paras 9]

CENVAT credit claim allowed on merits

Limitation (time-bar) in service tax demands - Audit reliance and absence of suppression - Penalty vitiated where suppression not established - Validity of confirmed demands under heads (1) Business Support Services, (2) Business Auxiliary Service for excess-yield incentives, (3) Transportation charges, and (4) Short payment on business auxiliary services on the ground of limitation and consequential penalties - HELD THAT: - The Tribunal recorded that an audit of the appellant's unit for the period 2005 to 2007 had been conducted in 2007 during which the audit team had noted and accepted the appellant's treatment of CTA charges and excess-yield consideration. The appellant maintained statutory records and filed returns; there was no allegation of failure to file returns. In view of the audit having recorded the treatment and the absence of any finding of suppression by the appellant, the Tribunal found no basis to fasten suppression. By consent of the parties, the Tribunal confined its consideration of these heads to limitation and, on that basis, allowed the appeal in respect of the confirmed demands under Sl. Nos. (1) to (4) on limitation alone. Because suppression was not established, the penalties imposed were set aside. The Department was directed to compute any balance payable for the normal period with interest. [Paras 11, 12, 13]

Appeal allowed on limitation for demands under heads (1)-(4); penalties set aside; department to compute any normal-period liability with interest

Classification of services - Business Support Services vs Transport of Goods - Taxability of incentives/excess-yield receipts as Business Auxiliary Services - Whether the services rendered fall within Business Support Services or as Transport of Goods in container by road, and whether excess-yield incentives are taxable - decision on merits deferred for want of earlier CTA agreement - HELD THAT: - The appellant contested the classification of certain receipts (CTA charges and related matters) arguing they constituted transport services; furthermore, issues were raised on whether incentives for excess yield were taxable as business auxiliary services. The Tribunal observed that an earlier CTA agreement executed between KPCL and the then CTA (pre-2005) was essential for an adjudication on merits, but the appellant, now non-functional, could not produce that document. Given the absence of the material contract, the Tribunal indicated that it may not be possible to decide the classification and related taxability issues on merits and therefore did not determine these questions in the present order. [Paras 10]

Merits of classification and taxability deferred for want of the earlier CTA agreement (decision not reached)

Final Conclusion: Appeal partially allowed: CENVAT credit of Rs 1,23,90,055/- upheld on merits; confirmed demands under the other four heads (Business Support Services, excess-yield incentives, transportation charges, short payment on business auxiliary services) allowed on the ground of limitation and penalties set aside; classification/taxability issues tied to the earlier CTA agreement were not decided for want of that document.

Reversal of Cenvat credit for exempted services - extended period of limitation - trading in derivatives versus mutual funds - pro-rata reversal under Rule 6(3A)(b) of the Cenvat Credit Rules, 2004 - assessment of short payment and interest under Section 75 read with Rule 14 - penalty under Rule 15(3) read with section 78

Trading in derivatives versus mutual funds - reversal of Cenvat credit for exempted services - Whether the decision in respect of trading in mutual funds applies to trading profits from derivatives and whether the appellant's derivative transactions attract the regime of reversal of Cenvat credit as exempted service activity - HELD THAT: - The Tribunal examined the submissions comparing mutual fund transactions with trading in derivatives and observed that although both fall within the broad statutory definition of "securities", the nature of transactions in mutual funds and derivatives differ. The Tribunal held that the precedent relied upon concerning mutual fund trading did not automatically govern trading profits from derivatives. It was recorded as an admitted fact that the appellant carried out trading in derivatives during October 2011 to March 2016 and did not maintain separate accounts for Cenvat credit availed against taxable and exempted activity. The Tribunal therefore treated the transactions as trading activity for the purposes of the dispute and rejected the contention that the mutual-fund decisions were directly applicable to the appellant's derivative trading. [Paras 2, 4, 5, 6]

Mutual fund decisions are not directly applicable to trading profits from derivatives; the appellant's derivative transactions are to be treated as trading activity and the absence of separate records is noted.

Extended period of limitation - assessment of short payment and interest under Section 75 read with Rule 14 - Whether the Department can invoke the extended period of limitation to demand service tax for the appellant's derivative trading for the period October 2011 to March 2016 - HELD THAT: - The Tribunal found on the record that the appellant had been regularly submitting ST-3 returns and there was no allegation of suppression or omission in those returns. Having considered the material placed before the adjudicating authority, the Tribunal concluded that the revenue's case arose from returns and balance-sheet information and, therefore, the extended period of limitation could not be invoked. Consequently the demand framed for the extended period was set aside. The Tribunal directed that any short payment and interest be re-assessed for the normal period under the statutory provisions (Section 75 read with Rule 14) and that the adjudicating authority undertake fresh computation accordingly. [Paras 6, 7, 8]

Extended period of limitation is not invokable; demand for extended period set aside and re-assessment limited to the normal period with interest to be determined under Section 75 read with Rule 14.

Pro-rata reversal under Rule 6(3A)(b) of the Cenvat Credit Rules, 2004 - penalty under Rule 15(3) read with section 78 - Quantum and ancillary consequences: extent of pro rata reversal payable for the normal period and the validity of penalty imposed - HELD THAT: - The Tribunal recorded that the adjudicating authority had not given a finding on the precise amount payable for the normal period, although the appellant had furnished breakup figures for pro rata reversal for specified financial years. In the absence of any finding of suppression, and having set aside the extended period demand, the Tribunal remitted the matter to the adjudicating authority for de novo determination of the short payment for the normal period, assessment of pro rata reversal as per Rule 6(3A)(b), and computation of interest under Section 75 read with Rule 14. Because there was no allegation of suppression, the penalty imposed by the impugned order was set aside. [Paras 8, 9]

Matter remanded for fresh computation of pro rata reversal for the normal period under Rule 6(3A)(b) and interest under Section 75/Rule 14; penalty set aside.

Final Conclusion: The appeal is partially allowed: the order invoking the extended period of limitation and the penalty are set aside; the matter is remanded to the adjudicating authority for de novo determination of the short payment, pro rata reversal for the normal period under Rule 6(3A)(b) and interest under Section 75 read with Rule 14, with opportunity of hearing and completion within three months.

Finality of earlier appellate finding on compliance with Rule 3(2)(b) of the Export of Service Rules, 2005 - realisation of export proceeds through Indian rupees versus Foreign Inward Remittance Certificate (FIRC) - nexus between input services and export of output services for refund of accumulated CENVAT credit - remand for verification and rectification of computation of refund claims

Finality of earlier appellate finding on compliance with Rule 3(2)(b) of the Export of Service Rules, 2005 - realisation of export proceeds through Indian rupees versus Foreign Inward Remittance Certificate (FIRC) - Earlier appellate finding that realisation of export proceeds in Indian rupees through FIRC does not satisfy Rule 3(2)(b) of the Export of Service Rules, 2005 has attained finality and cannot be reopened in these appeals. - HELD THAT: - The Tribunal noted that the Commissioner (Appeals) in Order-in-Appeal No.1687 to 1688/2016 dated 25.11.2016 had categorically held that realisation of export proceeds in Indian currency through FIRC does not meet the requirement of Rule 3(2)(b) of the ESR. No appeal was preferred by the appellant against that finding before the appropriate forum. The Tribunal therefore held that the question is concluded between the parties and is not reopenable in the present round of litigation. The remand earlier directed to the original adjudicating authority was confined to ascertaining nexus between input services and exported output services and did not authorize re litigation of the FIRC/Rule 3(2)(b) issue before the Tribunal. [Paras 6]

The Tribunal declined to entertain the challenge to the FIRC/Rule 3(2)(b) finding, treating that issue as finally settled.

Nexus between input services and export of output services for refund of accumulated CENVAT credit - remand for verification and rectification of computation of refund claims - The matter is remanded to the original adjudicating authority to consider and verify the documents establishing nexus between input services and exported output services and to correct calculation errors in the refund computation, with directions to conclude the de novo proceedings within three months. - HELD THAT: - The appellant produced sample extracts of the CENVAT Credit Register and sample invoices for the specified periods and asserted that full records are available and were produced in earlier proceedings. The Revenue raised no objection to remanding the matter for verification. The Tribunal directed the adjudicating authority to consider all relevant documents on record and those to be produced by the appellant, to determine admissibility of refund of credit attributable to export of services (excluding the FIRC issue already held final), and to rectify any glaring calculation errors. The adjudicating authority was directed to afford a reasonable opportunity to the appellant and to complete the de novo proceedings as far as practicable within three months from communication of the order. [Paras 6, 7]

Appeals allowed to the extent of remanding the claims for verification of nexus and correction of computation, with a three month timeline for completion of de novo adjudication.

Final Conclusion: The Tribunal held that the earlier appellate finding regarding non compliance with Rule 3(2)(b) of the ESR in cases of realisation through Indian rupees/FIRC is final and not open to challenge, and remanded the claims to the adjudicating authority for verification of nexus between input services and exported output services and for rectification of calculation errors, directing completion of the de novo proceeding within three months.

Works Contract Service - Composition scheme for works contracts - Levy of service tax on construction services with effect from 01.06.2007 - Requirement of opting into works contract service - Characterisation of transactions subject to VAT

Works Contract Service - Composition scheme for works contracts - Levy of service tax on construction services with effect from 01.06.2007 - Requirement of opting into works contract service - Whether the appellant's activity of constructing residential complexes with supply of material qualified as Works Contract Service and was liable to service tax only with effect from 01.06.2007 under the composition scheme, notwithstanding the adjudicating authority's denial of benefit for failure to 'opt' for Works Contract Service. - HELD THAT: - The Tribunal found as an established fact that the appellant carried out construction of residential complexes along with the supply of materials and had been paying VAT to the State Government; VAT returns were placed on record. The appellant was providing Works Contract Service prior to 01.06.2007 and therefore, in view of the principle that the levy on works contracts became effective only from 01.06.2007, service tax could not be levied on such transactions prior to that date. The Tribunal accepted the appellant's submission that the requirement to 'opt' for Works Contract Service arises only where an assessee seeks to switch from a distinct construction service to the works contract classification; it is not a precondition where the assessee has always provided works contract services. Reliance was placed on the Supreme Court decision in L & T LTD. as laying down that works contract services prior to 01.06.2007 were not leviable to service tax; applying that principle, the Tribunal held that the appellant correctly obtained registration and commenced payment of service tax under the Works Contract composition scheme from 01.06.2007, and that the departmental demand for service tax for periods before 01.06.2007 (and the differential demand post 01.06.2007 premised on denial of composition benefit for lack of an 'option') was unsustainable.

The demand raised by the department was set aside and the appeal was allowed on the ground that the appellant's services constituted Works Contract Service and were liable to service tax only from 01.06.2007 under the composition scheme; absence of a formal 'option' did not disentitle the appellant to that classification.

Final Conclusion: The adjudication and appellate orders confirming a demand of service tax were set aside; the appellant's liability to service tax was held to arise from 01.06.2007 as Works Contract Service and the appeal was allowed.

Penalty under section 77 of the Finance Act - Waiver of penalty for absence of mens rea - Business Auxiliary Service - empanelment fee treated as consideration - Deposit of confirmed demand and interest as mitigation

Penalty under section 77 of the Finance Act - Waiver of penalty for absence of mens rea - Deposit of confirmed demand and interest as mitigation - Whether the penalty imposed on the appellant for non payment of service tax on empanelment fees for the period 2014 15 should be sustained or set aside. - HELD THAT: - The Tribunal noted that the substantive demand for service tax on empanelment fees (treated as consideration for Business Auxiliary Services) had been confirmed and the appellant has deposited the entire demand along with interest. The Tribunal relied on its earlier detailed findings recorded in its order dated 10.04.2017 that the appellant had cooperated with the Department, acted under bona fide doubt regarding taxability, and there was no evidence of suppression or malafide intention to evade tax. Those findings established absence of mens rea and constituted reasonable cause for non payment. In view of these circumstances and precedents where penalties were waived for government/defence organisations in similar situations, the Tribunal found it appropriate to modify the Commissioner (Appeals) order by setting aside the penalty imposed on the appellant. [Paras 8, 9]

Penalty imposed upon the appellant is set aside and the appeal is partly allowed.

Final Conclusion: The Tribunal modified the Commissioner (Appeals) order by setting aside the penalty imposed for the period 2014 15, observing absence of mens rea and noting that the appellant has deposited the confirmed demand and interest; appeal partly allowed.

Renting of immovable property service - taxability of exhibition agreements versus rental arrangement - levy of service tax on declared services under the Finance Act, 1994 - taxability where no consideration is received by the alleged service provider - penalty under the Finance Act, 1994

Renting of immovable property service - taxability of exhibition agreements versus rental arrangement - taxability where no consideration is received by the alleged service provider - penalty under the Finance Act, 1994 - Demand of service tax and consequential penalties under 'renting of immovable property' in respect of agreements with film distributors held unsustainable and set aside. - HELD THAT: - The Tribunal found the facts of the present case to be identical to earlier decisions (notably Moti Talkies) where agreements with film distributors conferred exhibition or screening rights on the exhibitor and were not contracts for hiring or renting of the cinema premises. The adjudicating authorities erred in treating such agreements as provision of the service of renting immovable property because the appellant did not receive any payment from distributors as consideration for a purported renting service; on the contrary the exhibitor paid distributors for screening rights. The Tribunal applied the legal position that, even though renting of immovable property is a declared service, taxability requires the provision of a service for consideration received by the service provider; absent any consideration received by the appellant from distributors, no service can be said to have been provided and no service tax liability arises. The decisions relied upon by the appellant were accepted by the Revenue and no distinguishing facts were shown. Consequential penalties imposed under the Finance Act, 1994 were also held to be unsustainable and set aside along with the demand. [Paras 8, 9, 10]

Demand of service tax under 'renting of immovable property' and the penalties imposed are set aside; the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that agreements with film distributors granting screening rights do not constitute renting of immovable property for which the appellant received consideration, and accordingly set aside the service tax demand and the penalties imposed for the stated financial years.

Exemption from service tax on specified taxable services used for export - refund by exporter versus availing CENVAT credit - option to avail CENVAT credit in lieu of refund - eligibility to claim CENVAT credit for input services used in export - definition and treatment of input services for credit

Option to avail CENVAT credit in lieu of refund - eligibility to claim CENVAT credit for input services used in export - exemption from service tax on specified taxable services used for export - Whether the appellant was entitled to avail CENVAT credit of service tax paid on specified services used for export instead of claiming refund under Notification No. 41/2007 ST. - HELD THAT: - The proviso to Notification No. 41/2007 ST requires that refund of service tax paid on specified services used for export shall be provided by way of refund and that no CENVAT credit of such service tax shall be taken where refund is claimed. The Tribunal construed clause (d) of the proviso as recognizing an option: a manufacturer/exporter may either claim refund under the notification (in which case no CENVAT credit must be taken) or forego the refund and avail CENVAT credit. Applying that construction, and following the Tribunal decisions in Monarch Catalyst Pvt. Ltd. and Save Industry, the appellants who had availed credit (and not earlier challenged on this point by the department) were held entitled to retain the CENVAT credit. The Tribunal noted the characterisation of the services as input services and observed no valid basis to displace the prior acceptance in records or to sustain demand. On that reasoning the impugned order disallowing credit was set aside and the appeals were allowed with consequential relief. [Paras 7, 8]

Appeals allowed; impugned order set aside and CENVAT credit availed by the appellants upheld.

Final Conclusion: The Tribunal held that Notification No. 41/2007 ST permits an exporter/manufacturer to elect to avail CENVAT credit instead of claiming refund for specified services used in export; following earlier Tribunal precedents, the appellants' availing of credit was upheld and the departmental demand set aside.

Manufacturer versus agent - liability to pay excise duty - control and supervision test - job worker as independent contractor - remand for rehearing and reasoned determination

Manufacturer versus agent - control and supervision test - liability to pay excise duty - job worker as independent contractor - Whether the job workers engaged by the assessee were independent manufacturers or agents of the assessee and, accordingly, who is liable to pay excise duty on the goods manufactured. - HELD THAT: - The Tribunal, on remand from the High Court, re-examined evidence bearing on whether the job workers performed manufacture under the supervision and control of the assessee or acted as independent contractors. The adjudicating authority's reproduction of cross-examination of seven job workers (recorded in the original order) showed that the job workers had their own men and machinery, undertook the manufacturing process without supervision except limited checks such as counting of materials and post-production quality verification, and informed the assessee only after completion. The Tribunal held that such limited visits and checks did not amount to control or supervision of the whole manufacturing process. The Tribunal applied the legal principle articulated by the Supreme Court in Collector of Central Excise, Baroda v. M.M. Khambhatwala, that where outside workers carry out manufacture without supervision and with their own resources they are the real manufacturers and attract liability for excise duty. Having found on the materials that the job workers were independent manufacturers, the Tribunal concluded that the assessee (and its directors) could not be saddled with liability for excise duty or consequential penalties for goods manufactured by those job workers.

Findings that the job workers were independent manufacturers having little or no supervision by the assessee; assessee not liable to pay excise duty or consequential penalties for manufacture by those job workers; appeals of the assessee allowed and Revenue appeals rejected.

Final Conclusion: On rehearing, the Tribunal upheld the finding that the job workers were independent manufacturers (not agents), applied the control and supervision test and the authority in M.M. Khambhatwala, and accordingly allowed the assessee's appeals and rejected the Revenue's appeals, relieving the assessee and its directors of liability for excise duty and consequential penalties in respect of goods manufactured by the job workers.

Conditional exemption notification - optional availment of exemption - Cenvat credit admissibility where duty has been paid by supplier - non-reviewability of supplier's assessment for denying recipient's credit - power to grant exemption under Section 5A of the Central Excise Act, 1944 - irrelevance of DGFT Policy Circular No.16 (RE-2012) for Cenvat credit entitlement

Conditional exemption notification - power to grant exemption under Section 5A of the Central Excise Act, 1944 - optional availment of exemption - Notification No. 44/2001-CE (NT) is a conditional notification and assessees are not compulsorily required to avail the exemption thereunder. - HELD THAT: - The Tribunal held that Notification No. 44/2001-CE (NT) is indisputably conditional. Construing Section 5A(1) and (1A) of the Central Excise Act, 1944, the court observed that the mandatory compulsion to avail exemption under sub-section (1A) applies only to exemptions granted absolutely and does not extend to conditional notifications. Consequently, a supplier may elect whether to follow the procedure under the conditional notification or to clear goods on payment of duty.

Notification No. 44/2001-CE (NT) is conditional and its benefit is optional for the supplier.

Cenvat credit admissibility where duty has been paid by supplier - non-reviewability of supplier's assessment for denying recipient's credit - Cenvat credit is allowable to the recipient where the supplier has cleared inputs on payment of duty even if the supplier could have availed exemption; the recipient cannot be denied credit on that ground. - HELD THAT: - Relying on the Cenvat Credit Rules and consistent Tribunal and judicial precedents, the Tribunal held that once duty has been paid by the supplier and the recipient has received duty-paid inputs, the recipient is entitled to avail Cenvat credit. The assessment or correctness of duty at the supplier's end cannot be re-opened by authorities at the recipient's end to deny credit unless there is evidence of refund or reversal of duty at the supplier's end. The Tribunal cited earlier consistent decisions to support the principle that the quantum of duty recorded at the supplier's end is not open to challenge by the recipient's adjudicating authorities for the purpose of credit entitlement.

Where inputs are received duty paid by the supplier, the recipient may legitimately avail Cenvat credit and such credit cannot be denied because the supplier did not avail the conditional exemption.

Irrelevance of DGFT Policy Circular No.16 (RE-2012) for Cenvat credit entitlement - DGFT Policy Circular No.16 (RE-2012)/2009-14, dated 15-3-2013 (addressing refund of terminal excise duty) does not curtail or govern the entitlement to Cenvat credit of duty paid by a supplier. - HELD THAT: - The Tribunal examined the DGFT circular relied upon by the Commissioner and observed that the circular deals with refund of terminal excise duty where exemption is mandated, and does not address the question of availability of Cenvat credit to a recipient who has received duty-paid inputs. Thus the Commissioner's reliance on the circular to deny credit was held to be misplaced.

The DGFT Policy Circular No.16 is not applicable to deny Cenvat credit to the recipient and could not justify departing from the Tribunal's settled view.

Cenvat credit admissibility where duty has been paid by supplier - penalty on responsible person - Personal penalty on Shri Omdev R. Mishra is not imposable in view of the finding that Cenvat credit was allowable to the appellants. - HELD THAT: - Since the Tribunal concluded that the appellants were entitled to Cenvat credit because the inputs were received duty paid and there was no basis to deny credit, any consequential personal penalty founded on denial of credit was also found to be unsustainable. Accordingly, the impugned orders imposing personal penalty were set aside along with the substantive demands.

The personal penalty on Shri Omdev R. Mishra was held not imposable and is set aside.

Final Conclusion: The impugned orders were set aside; the Tribunal allowed the appeals holding that Notification No. 44/2001-CE (NT) is conditional and optional, that Cenvat credit is admissible to the recipient where inputs were received duty paid by the supplier, the DGFT circular relied upon did not affect credit entitlement, and the consequent personal penalty was not imposable.

Requirement of recording satisfaction under proviso to Section 35(7) - determination of value of goods under Section 35(7) - turnover escaping assessment and penalty under Section 40(1) and initiation under Section 40(2) - principle that sales tax is leviable on agreed consideration and not on notional market additions - principles of natural justice - opportunity to be heard before passing orders under Section 35(7)

Requirement of recording satisfaction under proviso to Section 35(7) - principles of natural justice - opportunity to be heard before passing orders under Section 35(7) - Assessing officer was bound to record reasons of satisfaction under the proviso to Section 35(7) before initiating proceedings and no order under that sub-section could be passed without giving the dealer an opportunity of being heard. - HELD THAT: - The Court examined Section 35(7) and its proviso and held that two pre-conditions are mandatory: (i) the prescribed authority must record reasons for being satisfied that goods were sold at a price higher than shown by the dealer; and (ii) the dealer must be given an opportunity of being heard before any order is passed. The record in this case shows that, although the opportunity to be heard was afforded, there is no document demonstrating that the assessing officer recorded the requisite satisfaction before initiating proceedings under Section 35(7). The assessing officer's subsequent characterization of the case as one of "underpricing" and reliance on I.B.M. rates did not cure the absence of the initial recorded satisfaction. Because the proviso's recording requirement is a sine qua non for invoking Section 35(7) (and consequential proceedings under Section 40), the Court found the initiation defective and held that the Tribunal erred in upholding the revised assessment without addressing this failure. [Paras 11, 12, 15, 18]

Recording of satisfaction under the proviso to Section 35(7) is a mandatory prerequisite; absence of such recorded reasons vitiates the initiating of proceedings under Section 35(7).

Determination of value of goods under Section 35(7) - turnover escaping assessment and penalty under Section 40(1) and initiation under Section 40(2) - principle that sales tax is leviable on agreed consideration and not on notional market additions - In the absence of the mandatory recorded satisfaction under Section 35(7), the Tribunal's affirmation of the revised assessment and imposition of tax and penalty under Section 40(1) could not be sustained and the matter must be remanded for fresh action in accordance with law. - HELD THAT: - The Court refrained from adjudicating the merits of whether the IBM average rates or other materials could validly determine sale price or sustain the penalty under Section 40(1). Instead, because the procedural prerequisite for invoking Section 35(7) was not complied with, the Court quashed the Tribunal's orders and remanded the matter to the assessing officer. On remand the assessing officer is directed to record reasons (if satisfied on tangible materials that goods were sold at a higher price than invoiced), afford opportunity of hearing, and then proceed strictly in accordance with law; the petitioner is at liberty to raise all grounds before the assessing officer. The Court noted that only if the statutory requirement of recording satisfaction is met and supported by tangible materials, can assessment under the cited provisions be proceeded with. [Paras 15, 16, 17, 18]

Tribunal orders upholding the revised assessment are quashed and the matter is remanded to the assessing officer to record reasons under Section 35(7), afford hearing and proceed thereafter in accordance with law; merits of tax/penalty left open for fresh consideration.

Final Conclusion: The common orders of the Commercial Taxes Tribunal are quashed for failure to recognise that the assessing officer did not record the mandatory satisfaction required by the proviso to Section 35(7); the matter is remanded to the assessing officer to record reasons, afford the dealer an opportunity of hearing and, if supported by tangible material, proceed thereafter in accordance with law. Petitioner is at liberty to raise all available grounds on remand.

Interim injunction - status quo - prima facie case - balance of convenience - irreparable injury - bona fides of litigation - maintainability of suit under Section 92 of the Code of Civil Procedure - injunction cannot overturn an event that occurred by operation of law - lifting the corporate veil

Interim injunction - status quo - prima facie case - balance of convenience - irreparable injury - Whether the ad interim status quo order restraining the 9th respondent should be continued or vacated and whether the petitioners were entitled to interim injunction - HELD THAT: - The Division Bench examined the material placed before the learned Single Judge and the counter affidavits and found no prima facie case in favour of the petitioners. The Court relied on the learned Judge's detailed findings (including examination of the Advocate Commissioner's report) that plaintiffs had not produced documents to substantiate alleged diversion of Trust funds, had not sought interim steps to protect the Trust's asserted interests, and had conduct inconsistent with clean hands. The Court further considered the prejudice to the 9th respondent - inability to manage sale proceeds, comply with regulatory and corporate formalities and other operational consequences - and held that the balance of convenience and the risk of irreparable injury favoured vacating the status quo. On these grounds the petition for interim relief was dismissed and the petition to vacate the status quo was allowed. [Paras 40, 44, 45, 46, 47]

CMP.No.7981/2022 dismissed and CMP.No.13117/2022 allowed; the ad interim status quo was vacated as petitioners failed to show a prima facie case, balance of convenience or risk of irreparable injury in their favour.

Maintainability of suit under Section 92 of the Code of Civil Procedure - bona fides of litigation - lifting the corporate veil - Whether the suit under Section 92 CPC was maintainable and whether the plaintiffs had come to court with clean hands - HELD THAT: - The Court endorsed the learned Judge's conclusion that the suit was not maintainable as against the public Trust because leave under Clause 12 of the Letters Patent had not been obtained against the Trust whose registered office was in Madurai, and the plaintiffs had misdescribed the Trust's address to bring the matter before the Original Side. The learned Judge had also examined the documentary record and the Advocate Commissioner's report and found collusion between family members, observing that the litigation appeared to be engineered; the Division Bench found these conclusions convincing and noted they detracted from the plaintiffs' bona fides. [Paras 32, 33, 38]

The Court held that the suit (and the interim application based on it) was not maintainable as framed and the plaintiffs had not come with clean hands; this absence of bona fides undermined entitlement to interim relief.

Injunction cannot overturn an event that occurred by operation of law - prima facie case - Whether an injunction could be granted to restrain transfer of control of the 9th respondent when control had already passed to a foreign investor by operation of law - HELD THAT: - The Court accepted the factual account that proxies were revoked and board composition changed in 2011, resulting in change of control in favour of the foreign investor well before the interim application; those events were by operation of law. The Court observed that an injunction cannot be used to undo a change of control that has already occurred and therefore the prayer in the interlocutory application was illusory and unsustainable even on the date it was filed. That factual and legal posture contributed to absence of a prima facie case for the plaintiffs. [Paras 34, 36, 37]

The Court held that an injunction to reverse a change of control effected by operation of law could not be granted and that the plaintiffs failed to establish a prima facie case on this ground.

Final Conclusion: The Division Bench found no merit in the petitioners' claim for interim relief: the suit and the impugned interim application were not maintainable as framed, the plaintiffs lacked bona fides and a prima facie case, and an injunction could not lawfully reverse a change of control that had occurred by operation of law; consequently the status quo order was vacated (CMP.No.7981/2022 dismissed and CMP.No.13117/2022 allowed) and related interim petitions were disposed accordingly.