TaxTMI Updates e-Newsletter
May 06,2019

Confiscation and option to redeem - redemption under Section 125(2) of the Customs Act, 1962 - recovery of differential customs duty from purchaser v. importer - bona fide purchaser - goods vesting in the Central Government under Section 126 - penalty for abetment of import under Section 112(a) of the Customs Act, 1962

Confiscation and option to redeem - redemption under Section 125(2) of the Customs Act, 1962 - recovery of differential customs duty from purchaser v. importer - bona fide purchaser - goods vesting in the Central Government under Section 126 - Whether differential customs duty could be recovered from the second buyer of the imported car where the importer had cleared the car on payment of duty and the car was later seized and confiscated with an unexercised option to redeem. - HELD THAT: - The court found that the importer had filed the bill of entry and cleared the vehicle on payment of customs duty and that the appellant was a subsequent bona fide purchaser. The confiscation order contained an option to redeem, which the appellant did not exercise; consequently the vehicle remained in custody and vested in the Central Government. The obligation to pay duty under the scheme of the Act, as interpreted in earlier authorities relied upon by the court, is triggered only when a person entitled to redeem the confiscated goods exercises the option to do so. Absent exercise of that option, Section 125(2) does not come into play and there is no basis to fasten the differential duty on a subsequent purchaser when the importer remains the person primarily liable under Section 28. Applying these principles, the Tribunal's demand of differential duty from the appellant was held unsustainable. [Paras 11]

Demand of differential customs duty from the appellant (second buyer) quashed; recovery limited to the importer and not from the bona fide purchaser where option to redeem was not exercised.

Penalty for abetment of import under Section 112(a) of the Customs Act, 1962 - financing of import - bona fide purchaser - Whether penalty under Section 112(a) could be imposed on the appellant on the ground that he financed or abetted the illegal import of the car. - HELD THAT: - The court noted absence of any finding or allegation that the appellant committed an act or omission causing the goods to be confiscated, and that the record establishes the appellant obtained a loan in 2005 to purchase the car from the immediate seller - long after the import in 2002. The Tribunal's conclusion that the appellant had financed the import was contrary to the factual record and therefore unsustainable. In view of these facts, there was no basis to hold that the appellant abetted the importation or rendered the goods liable to confiscation so as to attract penalty under Section 112(a). [Paras 12]

Penalty of Rs. 3,00,000 imposed under Section 112(a) set aside as unsustainable on the facts that the appellant did not finance or abet the import.

Final Conclusion: The Tribunal's order sustaining demand of differential customs duty and penalty is set aside: differential duty cannot be recovered from the second buyer where the importer remains liable and the option to redeem was not exercised; and the penalty under Section 112(a) is quashed for lack of basis that the appellant financed or abetted the import.

Eligibility for customs duty exemption under notification by reference to Condition No.40 - threshold eligibility versus continuing deployment condition - entitlement of consortium members / special purpose vehicle to import duty-free road construction machinery - effect of administrative clarification on prior judicial precedents - strict interpretation of exemption provisions in tax law

Eligibility for customs duty exemption under notification by reference to Condition No.40 - entitlement of consortium members / special purpose vehicle to import duty-free road construction machinery - Appellant, a member of a bidding consortium which formed an SPV to execute the awarded road project, was eligible to claim the duty exemption under the notification despite not being expressly named as a sub-contractor in the concession agreement at the time of importation. - HELD THAT: - The dispute turned on the threshold requirement in Condition No.40(a) of the exemption notification that the goods be imported by specified entities, including a person named as a subcontractor in the contract referred to in clause (ii). Earlier judicial decisions (including the Gammon line of authorities) had denied exemption where the importer was not specifically named as contractor/sub-contractor in the concession agreement, treating an MOU or later EPC as inadequate to qualify. Subsequent to those decisions, the Central Government issued a clarification (letter dated 10 July 2014) which explained that constituents of a consortium whose names appear in the contract can import goods under the notification and that such machinery can be sold within five years on payment of duty on depreciated value. The Tribunal found that the procurement process in the present project required shortlisting, award to a consortium and creation of an SPV to implement the project; the SPV mechanism is part of the contractual and commercial architecture contemplated by the tendering process. Restricting eligibility to only the artificial person (the SPV) created post-award would frustrate the contractual structure and the policy intent underlying the notification. The earlier case law relied upon by the respondent predated the administrative clarification and did not consider the declared Governmental intent; to disregard the clarification would be to substitute policy judgment for the administrative intent expressed by the Government. Applying the clarification and construing Condition No.40 in that light, the appellant, as a constituent entitled under the bidding and award process and the SPV structure, met the threshold eligibility for the exemption. The Tribunal therefore held that denial of the exemption was not in accordance with law. [Paras 6, 7, 8]

Denial of exemption was set aside and the appeal allowed on the ground that the appellant qualified for the exemption in view of the administrative clarification and the contractual SPV structure.

Final Conclusion: The impugned order denying exemption under the notification is set aside and the appeal is allowed on the ground that the appellant, as a member of the consortium/SPV structure and in light of the Government's clarification, was eligible for the duty exemption.

Refund of excess customs duty by way of cash where payment made in cash due to technical non-reflection of licence debit - recredit of duty to duty scrip versus cash refund - validity and applicability of CBEC Circular No.6/2008 in relation to refund/recredit - department cannot take advantage of its own error

Refund of excess customs duty by way of cash where payment made in cash due to technical non-reflection of licence debit - recredit of duty to duty scrip versus cash refund - Assessee entitled to refund in cash of the excess customs duty paid in cash where a licence debit was not reflected in the system and appellant was compelled to deposit cash - HELD THAT: - The Tribunal found that the appellant had deposited cash when required licence debit did not reflect in the system and that the refund claim in the record sought return of the excess duty paid, not recredit. The Commissioner(Appeals)'s observation that the appellant had sought refund by way of recredit was factually incorrect. The circumstances arose from a system error and subsequent failure by authorities to correct it, compelling the appellant to pay cash; equity and settled law preclude the Department from taking advantage of its own wrong. On these facts the excess amount paid in cash was properly refundable in cash rather than only by recredit to the licence. [Paras 6, 7]

Appeal allowed and refund in cash granted in respect of the excess duty paid in cash; impugned order set aside.

Validity and applicability of CBEC Circular No.6/2008 in relation to refund/recredit - CBEC Circular No.6/2008 could not be relied upon to deny cash refund in the present case as it has been held ultra vires the Customs Act by a binding decision relied upon by the appellant - HELD THAT: - The Tribunal noted that the Commissioner(Appeals) relied on Circular No.6/2008 which directed recredit of duty paid through DEPB scrip instead of cash refund. However, the Tribunal recorded that this Circular has been held ultra vires the Customs Act in the cited case of Allen Diesels India Pvt. Ltd., and therefore the Circular could not validly operate to preclude a cash refund where facts warranted it. [Paras 6]

Circular No.6/2008 could not be used to deny the cash refund in the facts of this case.

Application and distinguishing of precedents relied upon by the Department - department cannot take advantage of its own error - Decisions cited by the Department holding recredit where payment was entirely through scrip are not applicable where payment included cash due to system non-reflection; Department cannot benefit from its mistake - HELD THAT: - The Tribunal distinguished the decisions relied upon by the Department (where the entire customs duty was paid through scrip) from the present facts in which part of the duty was paid in cash because the scrip debit did not reflect. The Tribunal also invoked settled principles that an authority cannot take advantage of its own wrong, citing established case law to support refusing reliance on the Department's error to deny relief. [Paras 6]

Precedents cited by the Department were held inapplicable on the facts; the Department cannot benefit from its procedural/systemic error.

Final Conclusion: The appeal was allowed; the Commissioner(Appeals) order setting aside the original refund was quashed and the appellant granted consequential relief, holding that the excess duty paid in cash due to non-reflection of licence debit is refundable in cash and that the Circular relied upon could not be invoked to deny such refund.

Payment of tax before issue of show cause notice - effect of Section 73(3) of the Finance Act, 1994 - Non-obstante clause - applicability of Section 73(4) where suppression or mis-declaration with intent to evade tax - Penalty under Section 78 of the Finance Act, 1994 for suppression with intent to evade tax - Cenvat Credit on goods/services used for trading as distinct from inputs - Finding of fact standard - perversity review

Payment of tax before issue of show cause notice - effect of Section 73(3) of the Finance Act, 1994 - Non-obstante clause - applicability of Section 73(4) where suppression or mis-declaration with intent to evade tax - Penalty under Section 78 of the Finance Act, 1994 for suppression with intent to evade tax - Cenvat Credit on goods/services used for trading as distinct from inputs - Finding of fact standard - perversity review - Whether the Tribunal was justified in upholding imposition of penalty despite payment of Cenvat credit and interest before issuance of show cause notice - HELD THAT: - The Court examined the effect of payment of tax and interest prior to issuance of a show cause notice under Section 73(3) of the Finance Act, 1994 and the exception created by the non-obstante provision in Section 73(4) where there is suppression or mis-declaration with intent to evade tax. The authorities below found on facts that the assessee had repeatedly availed Cenvat credit on software purchased for trading and not for use as inputs, and that such conduct amounted to suppression with intent to evade tax rather than a one-time clerical mistake. Because those concurrent findings of suppression were not shown to be perverse, Section 73(4) operated to remove the protection of Section 73(3), permitting issuance of the show cause-cum-demand notice and the imposition of penalty under Section 78 read with the Cenvat Credit Rules. In view of the factual finding of deliberate suppression, the payment of the credit and interest before the notice did not preclude penal consequences. [Paras 8, 9, 10]

Concurrent factual finding of suppression with intent to evade tax upheld; issuance of show cause notice and imposition of penalty sustained.

Final Conclusion: Appeal dismissed; the Tribunal's affirmation of penalty stands as the factual finding of suppression was not shown to be perverse and the statutory exception to pre notice payment protection applies.

CENVAT credit on outdoor catering services - eligibility of input service prior to statutory exclusion w.e.f. 01.04.2011 - binding precedent of the Larger Bench on input service classification

CENVAT credit on outdoor catering services - eligibility of input service prior to statutory exclusion w.e.f. 01.04.2011 - binding precedent of the Larger Bench on input service classification - Entitlement to avail CENVAT credit on outdoor catering services for the period April, 2007 to March, 2011. - HELD THAT: - The Tribunal examined whether outdoor catering services availed by the appellant between April 2007 and March 2011 qualified as admissible input service for CENVAT credit. The Larger Bench decision in Wipro Ltd. Vs. CCE, Bangalore-III was held to be determinative: such services were acknowledged as covered by the definition of input service prior to the legislative amendment effective 01.04.2011 which thereafter excluded certain services from credit. Applying that binding precedent, the Tribunal concluded that the appellant was entitled to CENVAT credit for the disputed April 2007-March 2011 period and therefore the demands, interest and penalties confirmed by the lower authorities could not be sustained for that period.

Appeal allowed; order of the Commissioner set aside and CENVAT credit on outdoor catering services for April, 2007 to March, 2011 held admissible.

Final Conclusion: The appeal is allowed and the order-in-appeal dated 16.03.2018 is set aside; CENVAT credit on outdoor catering services is held admissible for the period April, 2007 to March, 2011 in view of the Larger Bench precedent.

Commercial training and coaching services - recognition by law of course/certificate - DGCA approval of training institutes - exemption under notification dated 25th April, 2011 - vocational/recreational training exemption - levy of service tax on flying training

Commercial training and coaching services - levy of service tax on flying training - Whether flying training imparted by the appellant is exigible to service tax under the category of Commercial Training and Coaching Services. - HELD THAT: - The Tribunal held that flying training imparted by an institute approved by the DGCA does not fall within the ambit of taxable Commercial training and coaching services. The conclusion follows a consistent line of judicial decisions (including the Delhi and Allahabad High Courts and this Tribunal) which examined the regulatory scheme under the Aircraft Act, the Rules and Civil Airworthiness Requirements (CAR) and found that such regulated training is distinguishable from ordinary commercial coaching. The Tribunal accepted the reasoning that DGCA approval and the CAR confer regulatory recognition and confer legal value on the Course Completion Certificate, thereby taking the activity outside the statutory sweep of taxable commercial coaching. Reliance on the precedents and the regulatory framework led to setting aside the demand made in the adjudication order. [Paras 4]

Impugned demand under the head Commercial Training and Coaching Services in respect of flying training is set aside; the service is not exigible to service tax on the facts before the Tribunal.

Recognition by law of course/certificate - DGCA approval of training institutes - exemption under notification dated 25th April, 2011 - Whether Course Completion Certificates and training issued by DGCA approved institutes are 'recognized by law' and thus covered by the exemption scheme. - HELD THAT: - The Tribunal endorsed the view in the cited authorities that the Aircraft Act, Rules and CAR provide for approval, regulate course content, require issuance of prescribed Course Completion Certificates and afford statutory consequences (such as relaxation in eligibility). Such regulatory framework amounts to recognition by law of the qualification afforded by approved institutes. Consequently, training leading to such recognized certificates falls within the exemption envisaged by the Notification dated 25th April, 2011 and related vocational/recreational training exemptions relied upon in earlier judgments. The Tribunal found this legal characterization decisive and followed the precedents accordingly. [Paras 4]

Course Completion Certificates and training by DGCA approved institutes are recognized by law and attract the exemption relied upon; the training is not taxable as commercial coaching.

Final Conclusion: Following binding and consistent judicial authorities and on the basis that DGCA approved flying training is recognized and regulated by law, the Tribunal set aside the adjudication demand and allowed the appeal, holding that the flying training provided by the appellant is not exigible to service tax under the category of Commercial Training and Coaching Services.

Representative Office Agreement - Management or Business Consultant - Management Consultancy Services - reverse charge mechanism - revenue neutrality - extended period of limitation - suppression with intent to evade

Representative Office Agreement - Management Consultancy Services - Whether the amount paid under the Representative Office Agreement (US$ 20 lakhs) was exigible to service tax as Management Consultancy Services. - HELD THAT: - The Tribunal held that the agreement in question is a Representative Office Agreement and not a Management Consultancy Agreement. The preamble and terms show the parties intended Vedanta to act as the appellant's overseas representative to deal with lawyers, bankers, consultants and authorities; the fixed fee of US$ 20 lakhs was consideration for performing representative duties. Clause 1.1's reference to providing "technical and commercial materials" was interpreted in context as provision of materials by the overseas representative, not as rendition of advice or consultancy. A separate Consultancy Agreement, for which service tax was paid on US$ 30 lakhs, confirms that advisory/strategic services were contracted and taxed separately. The department erred in isolating clauses to recharacterise the Representative Office Agreement as management consultancy; on a reading of the agreement as a whole, the services under the Representative Office Agreement do not fall within the statutory concept of management consultancy which requires rendition of advice, consultancy or technical assistance in relation to management of an organisation. [Paras 6, 7, 8]

Demand of service tax on US$ 20 lakhs under the head Management Consultancy Services is unsustainable and is set aside.

Reverse charge mechanism - revenue neutrality - extended period of limitation - suppression with intent to evade - Whether invocation of the extended period of limitation and imposition of penalties could be sustained given the revenue neutral position and audit history. - HELD THAT: - The Tribunal found the case to be revenue neutral because service tax, if paid by the appellant under reverse charge, would have been eligible for input credit. Earlier audits of the appellant's records had not objected to the Representative Office Agreement and the audit report did not take up this specific representative agreement for short-payment; this indicated lack of suppression or deliberate concealment. In these circumstances, invocation of the extended period of limitation proviso on the ground of suppression with intent to evade was without basis. Consequently, the demand confirmed under the extended period and penalties could not be sustained on limitation grounds. [Paras 9, 10]

Invocation of the extended period of limitation and consequent penalties is not sustainable; appeal succeeds on limitation and revenue-neutrality grounds.

Final Conclusion: The appeal is allowed. The impugned order confirming demand of service tax and imposing interest and penalties is set aside; the amount paid is to be adjusted and consequential reliefs granted as applicable.

Condonation of delay - limitation for filing appeal before Commissioner (Appeals) - statutory bar to condoning delay beyond 30 days - interpretation of the proviso to Section 35 of the Central Excise Act - exclusion of Section 5 of the Limitation Act

Condonation of delay - limitation for filing appeal before Commissioner (Appeals) - statutory bar to condoning delay beyond 30 days - exclusion of Section 5 of the Limitation Act - Whether the Commissioner (Appeals) had power to condone the delay of 15 days beyond the maximum condonable period for filing the appeal against the Order in Original. - HELD THAT: - The Tribunal found an admitted delay of 15 days beyond the 90 day period (60 days prescribed period plus 30 days condonable period) for filing the appeal before the Commissioner (Appeals). Relying on the ratio in Singh Enterprises v. CCE, the Tribunal held that the proviso to Section 35 permits the Commissioner (Appeals) to extend time only for a further period of 30 days beyond the initial 60 days and that this statutory scheme excludes reliance on Section 5 of the Limitation Act for further extension. Consequently, the appellate authority has no jurisdiction to condone any delay beyond the additional 30 days prescribed by the proviso to Section 35.

The appeal was rightly held to be time barred and dismissal of the appeal by the Commissioner (Appeals) is upheld.

Final Conclusion: Appeal dismissed as time barred; the Commissioner (Appeals) had no power to condone the 15 day delay beyond the statutory 30 day extension and the impugned order is upheld.

Classification of composite contracts as Works Contract Service - Erection, Commissioning or Installation service versus Works Contract Service - Non-applicability of Works Contract Service before 1 June 2007 - Requirement of correct service-head in Show Cause Notice

Non-applicability of Works Contract Service before 1 June 2007 - Erection, Commissioning or Installation service versus Works Contract Service - Whether service tax could be sustained for the period prior to 1 June 2007 on the appellant's activities - HELD THAT: - The Tribunal accepted the adjudicating authority's factual finding that the contracts were composite, involving supply of goods and services, and were accordingly classifiable as Works Contract Service. The Court then applied the settled legal position that Works Contract Service was not a taxable service prior to 1 June 2007. On that basis, any demand framed as service tax by treating the activities as Works Contract Service for the period before 1 June 2007 could not be sustained. [Paras 4, 8]

Demand for service tax for the period prior to 1 June 2007 is unsustainable.

Requirement of correct service-head in Show Cause Notice - Classification of composite contracts as Works Contract Service - Whether service tax could be sustained after 1 June 2007 where the Show Cause Notice alleged Erection, Commissioning or Installation service but the adjudication proceeded on the basis of Works Contract Service - HELD THAT: - The Court held that even assuming Works Contract Service was taxable after 1 June 2007, a demand cannot be sustained where the Show Cause Notice pleads a different head of service than that under which the demand is finally confirmed. Reliance was placed on Tribunal precedents to the effect that a demand raised under a wrong head of service (when the correct classification is different) cannot be maintained. Therefore, the levy for the post-1 June 2007 period could not be upheld in the present proceedings because the notice alleged Erection, Commissioning or Installation service while the adjudication confirmed demand as Works Contract Service. [Paras 5, 8]

Demand for the post-1 June 2007 period cannot be sustained on the basis of the Show Cause Notice issued under a different service-head.

Final Conclusion: The impugned order confirming service tax and imposing penalty (for the period 1 April 2005 to 31 March 2010, as dealt with up to 31 May 2007 and with effect from 1 June 2007) is set aside and the appeal is allowed.

Voluntary Compliance Encouragement Scheme (VCES) - initiation of audit - date of visit of auditors to the Unit as date of initiation of audit - audit register of visits - burden of proof to establish audit visit - Section 106(2) of the Finance Act, 2013 (VCES exclusion for initiated inquiries, investigations or audits pending on 1-3-2013)

Initiation of audit - date of visit of auditors to the Unit as date of initiation of audit - audit register of visits - burden of proof to establish audit visit - Whether an audit was initiated against the appellant prior to 1-3-2013 by virtue of an alleged visit on 26.11.2012. - HELD THAT: - The Board's clarification treats the date of physical visit of auditors to the taxpayer's unit as the event constituting initiation of audit and requires maintenance of a register of such visits. The department's case rested on correspondence calling for documents and an internal communication allegedly stating that auditors visited the premises on 26.11.2012. The appellant denied any such visit and pointed to the office being closed for part of November 2012. The Revenue was directed to produce documentary proof of the visit; no audit register entry or other material was produced to substantiate the alleged visit. A mere request for documents does not amount to initiation of audit under the Board's clarification; the department therefore failed to discharge the onus of proving that a visit occurred on 26.11.2012 and that an audit had been initiated before 1-3-2013. [Paras 6, 7]

No initiation of audit was established as the department did not produce evidence of the audit team's visit on 26.11.2012.

Voluntary Compliance Encouragement Scheme (VCES) - Section 106(2) of the Finance Act, 2013 (VCES exclusion for initiated inquiries, investigations or audits pending on 1-3-2013) - Whether rejection of the appellant's VCES declaration on the ground that an audit had been initiated is sustainable. - HELD THAT: - Section 106(2) mandates rejection of a VCES declaration where an audit has been initiated and remains pending as on 1-3-2013. Because the department failed to prove that the audit had been initiated (no evidence of visit or audit register entry), the factual foundation for invoking Section 106(2) did not exist in this case. Consequently the lower authority's order rejecting the VCES declaration for initiation of audit was contrary to the established Board clarification and unsupported by evidence. [Paras 5, 8]

Rejection of the VCES declaration on the ground of initiated audit is set aside and the appeal is allowed.

Final Conclusion: The Tribunal held that the department failed to prove initiation of audit (no visit proved or audit register produced), therefore Section 106(2) could not be invoked to reject the appellant's VCES declaration for the period Apr.'08 to Dec.'12; the impugned order is set aside and the appeal is allowed with consequential reliefs, if any.

Refund of service tax - period of limitation - date of assent of the President - condonation of delay - beneficial notification - jurisdictional division

Refund of service tax - period of limitation - date of assent of the President - jurisdictional division - condonation of delay - Validity of rejection of the refund claim as time barred under Notification No.41/2016 ST and whether the delay in filing could be condoned - HELD THAT: - The notification required that an application for refund be made within six months from the date on which the Finance Bill, 2017 received the assent of the President (01.04.2017), i.e., on or before 30.09.2017. The claim was received by the correct divisional office on 04.10.2017 and rejected as barred by limitation. The appellant produced a letter dated 12.09.2017 from SIPCOT showing that SIPCOT delayed informing the appellant to file a refund claim and evidence that the appellant first approached their divisional office (Alandur) on 03.10.2017 and were directed to file before the Egmore office (the office which had collected the tax). The Tribunal noted that 29th and 30th September and 1st and 2nd October 2017 were government holidays/non working days, making the next working day 03.10.2017, when the appellant took steps to file. In these peculiar facts - delay in communication from SIPCOT, initial approach to the wrong divisional office on the first available working day, and the intervening holidays - the Tribunal exercised its discretion to treat the one day delay as excusable and condoned it. The Tribunal emphasised that the decision to condone delay is limited to the peculiar facts of the case and set aside the orders rejecting the refund claim.

The one day delay in filing the refund claim was condoned on the peculiar facts (delay in SIPCOT's communication and intervening holidays); the order rejecting the refund claim as time barred is set aside and the appeal is allowed with consequential reliefs.

Final Conclusion: On the peculiar facts - delayed intimation by SIPCOT, approach to the divisional office on the first working day after holidays and subsequent direction to the collecting division - the Tribunal condoned the one day delay and allowed the refund claim, setting aside the orders rejecting it as time barred.

Classification of Erection, Commissioning or Installation Service vis-a -vis Works Contract Service - taxability of indivisible works contracts prior to 01.06.2007 - taxability of installation/laying of electrical cables beyond the distribution point of residential complexes - remand for factual verification of point of supply/point of distribution - penalty under Section 78 - deletion where issue was one of interpretation and settled by higher authority with benefit of Section 80 - penalty under Section 77 - upholding of penalty

Classification of Erection, Commissioning or Installation Service vis-a -vis Works Contract Service - taxability of indivisible works contracts prior to 01.06.2007 - Whether demands levied by treating the appellant's works as Erection, Commissioning or Installation Service prior to 01.06.2007 are sustainable - HELD THAT: - The Tribunal applied the Supreme Court decision in CCE, Kerala v. Larsen & Toubro Ltd. and held that indivisible works contracts prior to 01.06.2007 were not taxable as services. The adjudicating authority had classified contracts (which included supply of materials) under works contract but sought to tax them under Erection, Commissioning or Installation Service for the period prior to 01.06.2007. In view of the binding Apex Court authority, the liability to tax on this ground for the period before 01.06.2007 is set aside.

Demand insofar as works contracts were taxed as Erection, Commissioning or Installation Service prior to 01.06.2007 is set aside.

Taxability of installation services for educational and institutional clients - application of precedents (SRM Engineering Construction Ltd.) to similar facts - Whether services provided to NIT, Bharathidasan University and BHEL for construction of school/hospital are taxable - HELD THAT: - The Tribunal found the demands relating to services provided to NIT, Bharathidasan University and BHEL for construction of school/hospital unsustainable in law, noting that the issue is covered by the Bench's earlier decision in SRM Engineering Construction Ltd. and by the principles in L&T (supra) for the relevant pre-01.06.2007 period. Accordingly, the demands in respect of these activities were set aside.

Demands in respect of services to NIT, Bharathidasan University and BHEL for school/hospital are set aside.

Taxability of laying of electrical cables beyond the distribution point of residential complexes - remand for factual verification - Whether conversion of single phase to three phase connections and laying of HT cables at the residential township are taxable and to what extent - HELD THAT: - The Tribunal observed that Board Circular No.123/2010 and earlier Bench decisions indicate that laying of cables up to the distribution point of residential/commercial localities is not taxable, while laying beyond the distribution point may attract service tax. The impugned order did not analyse the actual factual position regarding whether the laying of high-tension cables and the conversion of single to three phase connections were done beyond the distribution point. For this reason, the matter was remanded to the adjudicating authority to ascertain the factual position from the assessee and determine tax liability limited to instances where work is beyond the distribution point of residential complexes.

Part of the demand relating to laying of cables and conversion of single to three phase connections is remanded for factual verification; tax liability will only sustain for work beyond the distribution point of residential complexes.

Penalty under Section 78 - deletion as issue was one of interpretation - penalty under Section 77 - upholding - Whether penalties imposed under Sections 77 and 78 should be sustained - HELD THAT: - The Tribunal held that the question underlying the penalty under Section 78 was one of interpretation which was subsequently settled by the Supreme Court; accordingly the assessee is entitled to the benefit (by reference to Section 80) and the penalty under Section 78 is deleted. However, the penalty imposed under Section 77 was not interfered with and is upheld.

Penalty under Section 78 deleted; penalty under Section 77 upheld.

Remand for consideration of appellant's activity with TDCL - Additional point raised concerning services to TDCL which was not pleaded in grounds of appeal - HELD THAT: - Although the grounds of appeal did not include the point regarding the appellant's activity for TDCL, the Bench, having noted the point in the order sheet and with assent of the appellant's counsel, remanded the issue to the original authority for consideration.

Issue relating to services to TDCL is remanded to the original authority for consideration.

Final Conclusion: The appeal is partly allowed: demands taxing works contracts as Erection, Commissioning or Installation Service prior to 01.06.2007 and demands relating to NIT/Bharathidasan University/BHEL school-hospital are set aside; aspects relating to laying of cables and conversion to three phase that may be beyond the distribution point and the TDCL issue are remanded for factual determination; penalty under Section 78 is deleted while penalty under Section 77 is upheld.

Therapeutic massage - health and fitness service - medical supervision - exclusion of therapeutic services from taxable health club services - maintenance of treatment records/case sheets

Therapeutic massage - medical supervision - maintenance of treatment records/case sheets - exclusion of therapeutic services from taxable health club services - Whether the ayurvedic massage services provided by the appellant's health centre (Ayurmana) are therapeutic in nature and therefore not liable to service tax as health and fitness services. - HELD THAT: - The Tribunal held that the massages offered by the appellant constitute therapeutic treatment and are excluded from taxable "health and fitness service". The conclusion rests on documentary and factual findings: services are provided under the supervision of qualified ayurvedic doctors; the Centre is certified as an Ayurvedic Center by the District Medical Officer and holds relevant registrations and tourism certification; full-time qualified therapists and doctors are employed; pre-medical examinations are conducted and treatment records/case sheets are maintained. The Tribunal applied the CBEC Circular distinguishing "massage (excluding therapeutic massage)" from "therapeutic massage" and identified therapeutic massage as massage provided by qualified professionals under medical supervision for curing diseases/ailments. The Tribunal also followed its earlier decision in the adjoining Coconut Lagoon Kumarakom matter, where similar credentials, patient case-sheets, treatment schedules and supervisory involvement of ayurvedic doctors led to the conclusion that the treatments are therapeutic and fall within the exclusion. The Tribunal rejected the Revenue's contention that location within a resort, optional nature of massages, ambience or package pricing convert therapeutic treatment into taxable general well-being services, observing that duration, ambience or fees do not negate the therapeutic character where medical supervision, prescriptions and documented treatment for specific ailments exist. [Paras 5, 6]

Impugned order confirming service tax demand set aside; appeal allowed and the ayurvedic massage services held to be therapeutic and not taxable for the period in question.

Final Conclusion: The Tribunal allowed the appeal, set aside the Commissioner(Appeals) order, and held that the ayurvedic massages provided by the appellant during 01/10/2002 to 31/12/2007 are therapeutic in nature and not liable to service tax, following the reasoning applied in the related Coconut Lagoon Kumarakom decision.

Valuation of taxable service - reimbursable expenditure forming part of taxable value - gross amount charged - inclusion of reimbursements in service tax valuation - Rule 5(2) of Service Tax (Determination of Value) Rules, 2006 - precedent of Intercontinental Consultants & Technocrats Pvt. Ltd.

Reimbursable expenditure forming part of taxable value - valuation of taxable service - gross amount charged - precedent of Intercontinental Consultants & Technocrats Pvt. Ltd. - Whether amounts received by the appellant as reimbursements for payments made to third party service providers in the course of Customs House Agent (CHA) services formed part of the taxable value for the period April 2006 to September 2007. - HELD THAT: - The Tribunal applied the ratio of the Supreme Court in Intercontinental Consultants & Technocrats Pvt. Ltd., which held that prior to the 2015 amendment to the Finance Act valuation provisions, reimbursable expenses incurred by the service provider did not automatically form part of the taxable value and that valuation must conform to the consideration paid as quid pro quo for the service. The Tribunal observed that Rules cannot extend the mandate of the statute and that the legislative amendment in 2015 was the means by which reimbursable expenditure was thereafter made chargeable. On this basis the Tribunal found the Commissioner's inclusion of reimbursed third party charges in the CHA service valuation to be unsustainable and set aside the demand, following the Apex Court's precedent.

Demand confirmed by the Commissioner was set aside and the appeal allowed, with consequential relief.

Final Conclusion: Following the Supreme Court's decision in Intercontinental Consultants & Technocrats Pvt. Ltd., the Tribunal held that reimbursed third party expenses were not includable in the taxable value of CHA services for April 2006 to September 2007; the Commissioner's order confirming the demand was set aside and the appeal allowed with consequential relief.

Cargo handling service - reverse charge mechanism - Goods Transport Agency (GTA) - composite/bundled services - exemption under Notification No. 10/2002-ST - classification of services

Classification of services - cargo handling service - reverse charge mechanism - Whether the transportation component in the consolidated H&T contract could be vivisected and treated as a separate taxable GTA service attractable to service tax on reverse charge for the period January, 2005 to March, 2009. - HELD THAT: - The Tribunal held that the contract between the appellant and the H&T contractor was a consolidated one covering handling at rail head, transportation to warehouse, handling at warehouse and ancillary activities, and that Revenue could not split the contract to treat transportation as a separate GTA service for imposing service tax on the appellant under RCM. The Tribunal relied on the characterisation of the appellant's services as cargo handling service, observed that the appellant charged its client with a margin and treated the activity as cargo handling, and referred to precedents and Board clarification treating such activities of a warehousing keeper as cargo handling. Consequently the transportation element was treated as incidental to the principal cargo handling service and not susceptible to vivisection for RCM liability. [Paras 8, 9]

The transportation activity could not be severed from the cargo handling contract to attract service tax on reverse charge; the contract must be treated as provision of cargo handling service.

Exemption under Notification No. 10/2002-ST - cargo handling service - Whether the appellant's services fell within the exemption conferred by Notification No. 10/2002-ST and therefore were not liable to service tax for the period in dispute. - HELD THAT: - The Tribunal applied the Commissioner's earlier order which had held that the activities carried out by the appellant were covered by the exemption for cargo handling in relation to agricultural produce. The Tribunal observed that the Commissioner's order had attained finality and that CBEC guidance also treated storage/warehousing keeper's handling services as cargo handling. On this basis the Tribunal concluded that the benefit of Notification No. 10/2002-ST was available to the appellant for the concerned period and that no service tax was leviable. [Paras 9]

The appellant's services qualified for the exemption under Notification No. 10/2002-ST and were not liable to service tax for the period in question.

Goods Transport Agency (GTA) - consignment note - Whether the H&T contractor amounted to a Goods Transport Agency so as to attract RCM on the appellant where no consignment note was issued. - HELD THAT: - The Tribunal noted that the H&T contractor had not issued any consignment note to the appellant and relied on Tribunal decisions to the effect that in absence of consignment note the transporter cannot be treated as a GTA. Given that no consignment note as contemplated in the GTA definition/Rules was issued, the activity could not be taxed as GTA for purposes of imposing reverse charge on the appellant. This finding supported the conclusion that the transportation was ancillary to cargo handling and not a distinct GTA service. [Paras 9]

In absence of issuance of a consignment note, the H&T contractor did not qualify as a GTA and RCM could not be invoked on that basis.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned order, and held that the consolidated H&T contract constituted cargo handling service (exempt under Notification No. 10/2002-ST) with transportation being incidental and not severable as GTA for reverse charge liability for January, 2005 to March, 2009.

Classification of services between Business Auxiliary Service and Management, Maintenance and Repair Service - service tax liability on re-trading of old and used tyres - precedential effect of Central Board of Excise and Customs circular - reliance on judicial precedent for classification

Classification of services between Business Auxiliary Service and Management, Maintenance and Repair Service - precedential effect of Central Board of Excise and Customs circular - service tax liability on re-trading of old and used tyres - Re trading of old and used tyres is classifiable under Management, Maintenance and Repair Service and not under Business Auxiliary Service, and the impugned order holding otherwise is unsustainable. - HELD THAT: - The Tribunal found that the Central Board of Excise and Customs had, by circular dated 27/07/2012, clarified that re trading of tyres falls within the ambit of Management, Maintenance and Repair Service and is liable to service tax. That circular predated the Commissioner (Appeal)'s order and the adjudication order; therefore the Commissioner (Appeal) was obliged to take the circular into account. The Tribunal also noted supporting judicial authority in Safety Retrading Company Pvt. Ltd. (Supreme Court) and this Tribunal's earlier decision in Unique Precured Retreaders, which favour classification under Management, Maintenance and Repair Service. In view of the CBEC clarification and the cited precedents, there was no justification for classifying the appellant's activity as Business Auxiliary Service. For these reasons the impugned order was set aside and the appeal allowed with consequential benefits, if any.

Impugned order set aside; appeal allowed and appellant held to be engaged in Management, Maintenance and Repair Service with consequential benefits, if any.

Final Conclusion: The appeal succeeds on the ground that re trading of old and used tyres is governed by Management, Maintenance and Repair Service as clarified by the CBEC circular and supported by precedent; the contrary classification in the impugned order is quashed and the appeal is allowed with consequential benefits.

Assessable value - inclusion of passenger service fee and airport taxes in taxable value - double taxation - statutory levy under Airport Authority (passenger service fee) - service tax on air transport services - verification of remittance by Airport Authority

Inclusion of passenger service fee and airport taxes in taxable value - double taxation - statutory levy under Airport Authority (passenger service fee) - verification of remittance by Airport Authority - Whether fuel surcharge, administrative charge, passenger service fee (PSF) and airport taxes must be included in the assessable value for service tax on international air transport services - HELD THAT: - The Tribunal held that the question is no longer res integra and was previously decided in favour of airlines. The reasoning followed earlier decisions which recognised that PSF and airport taxes are statutory levies related to airport services and, where shown by documents, do not form part of the assessable value for air travel service so as to attract service tax again at the hands of the carrier. Inclusion of PSF and similar airport charges in the taxable value at the hands of the airline may result in double taxation where service tax attributable to such charges has been remitted by the Airport Authority. The Tribunal noted that the Original Authority may verify records and documents (invoices, certificates, challans) to satisfy itself that service tax on PSF or airport taxes has in fact been remitted by the Airport Authority; however, the revenue reasoning not raised in the show cause notice cannot be entertained afresh at this stage. Following earlier precedents in the appellant's own and other airline cases, the impugned demand confirming inclusion of these charges in assessable value was held unsustainable.

The impugned order confirming demand for inclusion of PSF and airport taxes (and similar charges) in assessable value is set aside; the appeal is allowed, subject to verification by the Original Authority of remittance of tax by the Airport Authority.

Final Conclusion: Appeal allowed. Following earlier Tribunal decisions, passenger service fee and airport taxes (and like statutory airport levies) are not includible in the assessable value for air travel service where documents show such charges are statutory and tax attributable thereto has been remitted by the Airport Authority; the adjudicating authority may verify remittance, but the demand as confirmed is set aside.

Rectification of mistake - typographical error - correction of final order - operative part pronounced in open court

Rectification of mistake - typographical error - correction of final order - Application for rectification of typographical errors in the Final Order dated 08.02.2019 was maintainable and ten listed textual errors were to be corrected. - HELD THAT: - Both parties accepted that the errors identified in the Final Order dated 08.02.2019 were typographical in nature and did not alter the outcome of that order. On consideration of the submissions and the record, the Tribunal found the errors to be clerical/typographical and authorised their rectification. The specific corrections were set out in a tabulated form in the order, showing for each textual passage the text as it appeared and the text to be read after rectification. The Tribunal therefore directed that the Final Order be read with the stated corrections; the operative part of this order was pronounced in open court.

Application for rectification allowed; the identified typographical errors in the Final Order dated 08.02.2019 are rectified as tabulated and the application is disposed of.

Final Conclusion: The Tribunal allowed the application for rectification, ordered the specified textual corrections to the Final Order dated 08.02.2019, and disposed of the application; the operative part was pronounced in open court.

Clandestine removal - presumption of suppression from production-return mismatch - proof beyond reasonable doubt for clandestine clearance - reconciliation by Chartered Accountant - suspicion cannot take place of proof

Clandestine removal - presumption of suppression from production-return mismatch - proof beyond reasonable doubt for clandestine clearance - suspicion cannot take place of proof - Mismatch between production figures in ER1 returns and financial statements does not, by itself, establish clandestine removal or suppression. - HELD THAT: - The Tribunal held that mere difference in production figures shown in statutory returns and annual accounts cannot be treated as conclusive proof of clandestine clearance. Adjudication rested on the proposition that clandestine removal must be established by evidence and not by assumption or presumption; grave suspicion alone is insufficient. The judgment refers to the established mode of proving clandestine removal by evidence such as inputs/raw material usage, extra electricity consumption, sales of final product, transport records, realization of sale proceeds and flow-back of funds, and rejects the adjudicating authority's finding that clandestine removal need not be otherwise proved. Consequently, the presumption of suppression arising from a mismatch was not held to be determinative in the absence of supporting evidence. [Paras 6]

Finding of clandestine removal based solely on mismatch was set aside.

Reconciliation by Chartered Accountant - captive consumption - reprocessing adjustments - Appellant's explanation of captive consumption and reprocessing, supported by a reconciliation certified by a Chartered Accountant, warranted acceptance and undermined the confirmed demand. - HELD THAT: - The Tribunal noted that the appellant consistently explained that higher production figures in the annual report arose from non-accounting of captive consumption and quantities sent for reprocessing; a reconciliation statement certified by a Chartered Accountant was filed during the appellate proceedings. The adjudicating authority ignored these explanations and disbelieved claimed captive consumption for lack of records, yet the Tribunal found such disbelief unsustainable in view of the reconciliation and the legal requirement that clandestine removal be proved by evidence beyond suspicion. The appellate order which affirmed the demand without properly considering the reconciliatory evidence was set aside. [Paras 5]

Reconciliation and explanation accepted; demand confirmed by lower authorities set aside.

Final Conclusion: Appeal allowed; order of Commissioner (Appeals) confirming duty demand on alleged clandestine clearance during financial year 2004-05 set aside for lack of proof beyond suspicion and in view of reconciliation supported by a Chartered Accountant.

Right to cross-examination - Principles of natural justice - Admissibility of CENVAT credit - Reliance on oral statement of witness - Remand for fresh adjudication

Right to cross-examination - Principles of natural justice - Reliance on oral statement of witness - Denial of opportunity to cross-examine the job-worker whose statement was relied upon in confirming the demand. - HELD THAT: - The authorities below relied materially upon the statement of the job-worker Shri Chhail Singh Deora, who purportedly explained entries in the appellant's private records and supported the conclusion that inputs were not received and credit was inadmissible. The appellant had specifically sought cross-examination of that witness to rebut his statement. Given that the job-worker's evidence was vital and formed a basis for confirmation of the demand, refusal to allow his cross-examination resulted in a breach of the principles of natural justice. The Tribunal, applying the established jurisprudence referred to by the parties, holds that where a witness's statement is relied upon to reach an adverse conclusion, the affected party must be permitted to cross-examine that witness before final adjudication. [Paras 5]

The denial of cross-examination amounted to a violation of natural justice and cannot stand.

Remand for fresh adjudication - Admissibility of CENVAT credit - Appropriate remedial course where cross-examination was denied and the witness's statement was relied upon. - HELD THAT: - Because the job-worker's statement was a determinative piece of evidence and the appellant was not permitted to cross-examine that witness, the proper course is to set aside the impugned orders and remit the matter to the adjudicating authority. On remand the adjudicating authority is to permit cross-examination of Shri Chhail Singh Deora and thereafter decide the admissibility of the CENVAT credit afresh in accordance with law and evidence. The Tribunal's decision is grounded on the need for a fair opportunity to test material evidence before confirming a demand. [Paras 6]

Impugned orders are set aside and the appeals are remanded for cross-examination of the witness and fresh adjudication.

Final Conclusion: The impugned order confirming demand is set aside; appeals are allowed by way of remand to the adjudicating authority to permit cross-examination of Shri Chhail Singh Deora and to decide the matter afresh on the evidence.

Eligibility for SSI exemption under Notification No.8/2003-CE - packing material - exclusion from aggregate value of clearance - exemption under Section 11C by Notification No.24/2009-CE for packing material

Packing material - exclusion from aggregate value of clearance - eligibility for SSI exemption under Notification No.8/2003-CE - The value of clearances of 'catch covers' is not to be included in the aggregate value of clearance for determining entitlement to SSI exemption under Notification No.8/2003-CE for the relevant period. - HELD THAT: - The Tribunal followed its earlier reasoning in Kajal Print & Packaging Pvt. Ltd. and subsequent consistent order in M/s Beauty Art, holding that 'catch covers' are packaging by common industry understanding and fall within the scope of packaging material covered by the exemption granted under Section 11C by Notification No.24/2009-CE. The exclusion in the exemption regime was interpreted not to bar packaging manufacturers in the small-scale sector whose products (such as catch covers) are ancillary and commonly understood as printed cartons/packaging. Accordingly, such clearances cannot be aggregated for denying SSI exemption.

Value of 'catch covers' excluded from aggregate value for SSI exemption computation.

Packing material - eligibility for SSI exemption under Notification No.8/2003-CE - Clearances of 'diaries' are not packing material and their value must be included in the aggregate value of clearance for determining entitlement to SSI exemption under Notification No.8/2003-CE for the relevant period. - HELD THAT: - The Tribunal rejected the appellant's contention that diaries are packing material. The nature of diaries does not accord with the industry understanding of 'packaging' as interpreted for catch covers, and therefore diaries do not fall within the exclusion applicable to packaging material when computing aggregate clearances for the SSI exemption.

Value of 'diaries' to be included in aggregate clearance for SSI exemption computation.

Exclusion from aggregate value of clearance - eligibility for SSI exemption under Notification No.8/2003-CE - Remand to the Adjudicating Authority to determine the aggregate value of clearance and to recompute the demand, interest and penalty in light of the exclusion of catch covers and inclusion of diaries. - HELD THAT: - Having determined that catch covers are excluded and diaries included for aggregation purposes, the Tribunal directed that the matter be sent back to the Adjudicating Authority to quantify the aggregate value of clearances for the period April 2006 to June 2009 and to recompute any demand, interest and penalty accordingly. The remand is for calculation and consequential adjustment only, not for re-adjudication of the legal characterisations already decided.

Matter remanded to Adjudicating Authority for recomputation of aggregate value, demand, interest and penalty.

Final Conclusion: Appeal partly allowed: 'catch covers' held to be packing material and excluded from aggregate clearance for SSI exemption, 'diaries' held not to be packing material and included; matter remanded to the Adjudicating Authority to determine aggregate value of clearance for April 2006 to June 2009 and to recompute demand with interest and penalty.

Manufacture - excisability of waste and residues - by-products converted into final products - application of Rule 6(3) of CENVAT Credit Rules, 2004 - CENVAT credit reversal and presumptive levy for exempted clearances - deeming provision in Section 2(d)/2(f) regarding manufacture

Manufacture - excisability of waste and residues - by-products converted into final products - application of Rule 6(3) of CENVAT Credit Rules, 2004 - CENVAT credit reversal and presumptive levy for exempted clearances - Whether organic manure obtained by physical mixing of press mud and spent wash amounts to manufacture attracting excise duty and the applicability of Rule 6(3) requiring reversal or presumptive amount. - HELD THAT: - The Tribunal examined prior decisions and statutory amendments concerning the scope of 'manufacture' and excisability of wastes and residues. Applying the principle that mere physical mixture of agricultural or manufacturing residues does not constitute manufacture where no process creating a new excisable product is prescribed, the Tribunal relied on precedents holding that wastes not resulting from a process specified in the tariff cannot be treated as manufactured goods for excise purposes. Further, it followed the reasoning that if the intermediate waste is not a final excisable product, rules imposing presumptive reversal or deeming credit reversal (analogous to Rule 6(3) / presumptive provisions) cannot be invoked merely because the waste is subsequently mixed or further processed into an exempted product. On the facts, organic manure emerged by physical mixing of two by-products (press mud and spent wash) and therefore did not attract excise duty; consequently the obligation to reverse CENVAT credit or to pay a presumptive amount under the relevant rule did not arise. [Paras 6, 7, 8]

The organic manure produced by physical mixing of press mud and spent wash is not manufacture for excise purposes; Rule 6(3) CENVAT Credit Rules, 2004 is not applicable and no reversal/presumptive liability arises; the impugned order is set aside and the appeal allowed.

Final Conclusion: Impugned order of the Commissioner (Appeals) set aside; appeal allowed with consequential relief, the organic manure not held to be an excisable manufactured product and requirements of CENVAT reversal/presumptive levy do not apply.

Definition of "input" under Cenvat Credit Rules, 2004 - Cenvat credit admissibility for goods used in the factory of production - Exclusion of civil structure from input - Technological requirement for manufacture as connecting test for input - Extended period of limitation for recovery invoking suppression with intent to evade - Reflection of credit in returns/RG-23A and consequences for allegation of suppression

Definition of "input" under Cenvat Credit Rules, 2004 - Cenvat credit admissibility for goods used in the factory of production - Exclusion of civil structure from input - Technological requirement for manufacture as connecting test for input - Classification of profile sheets used by the appellant as 'input' eligible for Cenvat credit - HELD THAT: - The Tribunal found that after the amendment to the definition of 'input' effective 01.04.2011, 'input' includes goods used in the factory of production by the manufacturer. The profile sheets were used to cover the manufacturing area and to meet statutory pollution-control and safety requirements so that machinery and molten iron are not exposed, establishing a non-remote connection with manufacture. The appellant produced a structural engineer's certificate stating that the roof sheets are removable, can be re-laid without damage, and that the supporting steel structure is bolted and dismantlable. On these factual findings the sheets were held not to form part of a permanent civil structure excluded from 'input', and therefore the conclusion of the lower authorities denying credit on the ground of exclusion from the definition was held to be untenable. [Paras 5]

Profile sheets used to cover and enable the manufacturing process are 'input' within Rule 2(k) and Cenvat credit on them is admissible.

Extended period of limitation for recovery invoking suppression with intent to evade - Reflection of credit in returns/RG-23A and consequences for allegation of suppression - Validity of invoking extended period of limitation on ground of suppression and whether demand is time-barred - HELD THAT: - The Tribunal found that the appellant had reflected the cenvat credit in statutory returns and had furnished bill-wise details and the cenvat register to the jurisdictional officer (evidenced by postal acknowledgement and audit verification in July 2012). The show-cause notice was issued on 28.10.2014 invoking extended limitation for alleged suppression. Having regard to the contemporaneous filing of returns, supply of details to the department and audit verification, the Tribunal applied the principle that reflection of credit in returns/RG-23A negates a finding of mala fide suppression. The appellant's reliance on the Tribunal decision M/s. MSP Steel and Power Ltd. V. CCE, Raipur was noted and, on the material before it, the Tribunal concluded that the Department had the requisite information earlier and failed to issue notice within the normal limitation period. [Paras 5]

Extended period of limitation invoking suppression cannot be sustained; the demand is time-barred.

Final Conclusion: The appeal is allowed: the Tribunal set aside the impugned order, holding that the profile sheets are admissible as 'input' and that the demand is barred by limitation, and granted consequential relief.

Allowability of cenvat credit on outward transportation to job-worker premises as input service - Interpretation and application of Board Circular No. 97/8/2007 ST dated 23.08.2007 - Effect of stock transfer against Form F on transfer of title and cenvat eligibility - Ineligibility of cenvat credit for transportation beyond place of removal under Cenvat Credit Rules

Allowability of cenvat credit on outward transportation to job-worker premises as input service - Effect of stock transfer against Form F on transfer of title and cenvat eligibility - Assessee was entitled to claim cenvat credit of service tax paid on transportation of goods from factory to job-worker's premises. - HELD THAT: - The Tribunal accepted the Commissioner (Appeals) finding that the outward freight up to the job-worker's premises constituted an eligible input service. The invoices recorded the dispatch as a stock transfer against Form F and there was no transfer of title to the job-worker; on that factual basis the transportation up to the job-worker did not amount to an outward transportation beyond the place of removal which would render the service ineligible. The Tribunal also relied on consistent authorities cited by the Commissioner (Appeals) to support the view that such outward transportation to job-worker premises qualifies for cenvat credit.

Allowed the cenvat credit claimed on transportation to the job-worker's premises and set aside the demand on this ground.

Interpretation and application of Board Circular No. 97/8/2007 ST dated 23.08.2007 - Ineligibility of cenvat credit for transportation beyond place of removal under Cenvat Credit Rules - Reliance on Board Circular No. 97/8/2007 and earlier decisions for the post-01.03.2008 period was appropriate and the Commissioner (Appeals) did not err in applying them. - HELD THAT: - The Tribunal found that the Commissioner (Appeals) correctly applied Board Circular No. 97/8/2007 to hold the freight up to the job-worker as eligible for cenvat credit. The Revenue's contention that the circular or earlier favourable decisions were inapplicable for the period in question or were not subject to appeal on merit was rejected. The Tribunal noted that the earlier tribunal decision relied upon was decided on merits in favour of the assessee and therefore supported the Commissioner (Appeals)'s conclusion rather than being rendered inapplicable by any procedural limitation.

Upheld the Commissioner (Appeals)'s reliance on the circular and precedents and rejected Revenue's challenge to that reliance.

Final Conclusion: The appeal filed by the Revenue is dismissed; the impugned order of the Commissioner (Appeals) allowing the assessee's claim of cenvat credit for transportation to the job-worker's premises is upheld.

CENVAT Credit eligibility - distribution of input service credit / Input Service Distributor - KYC norms and bank account address for PAN-linked Customer ID - disallowance and recovery of credit - limitation/limitation defence

CENVAT Credit eligibility - KYC norms and bank account address for PAN-linked Customer ID - distribution of input service credit / Input Service Distributor - disallowance and recovery of credit - Whether credit of service tax availed by the appellant on banking services provided by Andhra Bank, Chennai Branch was rightly disallowed on the ground that the bank account reflected the address of the Srikakulam unit and therefore the credit was ineligible - HELD THAT: - The Tribunal found on the material on record, including the certificate issued by the Andhra Bank, Chennai Branch, that the account in question related to the appellant's Gummidipoondi unit despite the account carrying the Srikakulam address because RBI KYC norms require the PAN-linked Customer ID to show the PAN address. The technical difficulty in showing a different address for the same Customer ID does not render the service tax credit ineligible. When the appellant furnished the bank certificate clarifying that the advices from the account pertained to the Gummidipoondi unit, the Department ought to have accepted that explanation. There was therefore no illegality in availing the CENVAT credit and no justification for recovery of the credit, interest or penalties on that basis. [Paras 6, 8]

Credit availed by the appellant on the banking services was not liable to be disallowed; recovery of the credit was unjustified and set aside.

Limitation/limitation defence - disallowance and recovery of credit - Whether the Show Cause Notice dated 27.06.2016 seeking recovery, interest and penalties for credits expunged earlier was barred by limitation or otherwise unsustainable - HELD THAT: - The Tribunal recorded that the audit took place from 22.05.2014 to 29.05.2014 and the Show Cause Notice was issued only after about two years. The appellant had explained the technical difficulty relating to bank KYC and the audit had noted the issue in 2014. In those circumstances the allegation of suppression with intent to evade duty and the invocation of penal provisions were without factual foundation. The Tribunal therefore held that the case did not attract the ingredients of the penal provision relied upon and that the appeal succeeded on the ground of limitation as well. [Paras 7, 8]

The Show Cause Notice and the demand, interest and penalties based on it were unsustainable on limitation and related grounds and are set aside.

Final Conclusion: The appeal is allowed. The demand, interest and penalties confirmed by the authorities are set aside and the impugned order is quashed, with consequential reliefs, if any, as per law.

Eligibility of input tax credit on input services - scope of "input services" prior to 01.04.2011 - nexus between input services and manufacturing activity - place of removal for eligibility of input credit - remand for determination of place of removal

Eligibility of input tax credit on input services - scope of "input services" prior to 01.04.2011 - nexus between input services and manufacturing activity - Credit on Event Management Services - HELD THAT: - For the period prior to 01.04.2011 the definition of "input services" had a wide ambit including activities relating to business. The invoices and facts show the events were for promotion of the finished product and service tax was paid by the appellant. In light of the pre-2011 definition and precedents allowing such credit, the Tribunal finds the Event Management Services to have sufficient nexus with the business of manufacture and allows the credit. [Paras 5]

Credit allowed for Event Management Services.

Eligibility of input tax credit on input services - nexus between input services and manufacturing activity - Credit on Housekeeping Services - HELD THAT: - Housekeeping/cleaning services were availed for factory, marketing office and depots to maintain cleanliness and hygiene. Such services are necessary for the appellant's operations and have the requisite nexus with manufacturing activity; therefore the disallowance by the department is held to be incorrect and credit is permitted. [Paras 5]

Credit allowed for Housekeeping Services.

Eligibility of input tax credit on input services - nexus between input services and manufacturing activity - Credit on Renting of Immovable Property Services used for marketing office - HELD THAT: - Input services need not be availed within factory premises; services used for marketing of finished products (office on rent) are integrally connected to the business of manufacture. The Tribunal concludes that service tax paid on rent for marketing offices used for marketing finished products is eligible for credit. [Paras 5]

Credit allowed for Renting of Immovable Property Services used for marketing office.

Eligibility of input tax credit on input services - nexus between input services and manufacturing activity - Credit on Business Auxiliary Services (maintenance/training for fire safety and AC) - HELD THAT: - Business Auxiliary Services were used for training and maintenance of fire safety equipment and air-conditioning systems necessary for factory safety and employee welfare. These services are connected to the appellant's manufacturing operations and the disallowance is therefore unjustified; credit is allowed. [Paras 5]

Credit allowed for Business Auxiliary Services.

Eligibility of input tax credit on input services - nexus between input services and manufacturing activity - Credit on Brokerage Commission paid to real estate brokers for locating marketing premises - HELD THAT: - Commission paid to real estate brokers to find suitable marketing offices is an input service connected with marketing of finished products. Such services are essential for the appellant's business and the service tax paid thereon is eligible for input credit. [Paras 5]

Credit allowed for Brokerage Commission.

Eligibility of input tax credit on input services - place of removal for eligibility of input credit - remand for determination of place of removal - Credit on Clearing and Forwarding Agency Services - HELD THAT: - The Tribunal notes the rule that credit for outward transportation is eligible only up to the place of removal and that where goods are cleared on F.O.R. basis the place of removal may be the buyer's premises. In view of precedent and a Board circular, the Tribunal finds that the factual determination of the place of removal is material to eligibility and remands this issue to the adjudicating authority to determine the place of removal and reconsider credit accordingly. [Paras 5]

Issue remanded to adjudicating authority for determination of place of removal and fresh decision on eligibility of credit.

Eligibility of input tax credit on input services - nexus between input services and manufacturing activity - Credit on Auctioneering Services used to procure Rent-a-Cab services - HELD THAT: - Records show auctioneers were engaged to obtain Rent-a-Cab services used in the appellant's business. Given that these services were availed for business use and service tax paid, the Tribunal holds there is sufficient nexus with the manufacturing business and allows the credit. [Paras 5]

Credit allowed for Auctioneering Services.

Eligibility of input tax credit on input services - nexus between input services and manufacturing activity - Credit on Cleaning Services (pest control) for factory, depots and marketing offices - HELD THAT: - Cleaning services were procured to keep premises pest-free, which is necessary because the finished products are for human consumption and inputs/storage must be protected. The Tribunal finds the services have requisite nexus with manufacturing operations and allows the credit. [Paras 5]

Credit allowed for Cleaning Services.

Eligibility of input tax credit on input services - nexus between input services and manufacturing activity - Credit on Supply of Man-power and Recruitment Services used for loading/unloading - HELD THAT: - Man-power supplied for loading and unloading of final products at depots and marketing offices is directly used in the movement/handling of the appellant's goods. The Tribunal holds such services are connected with the manufacturing business and that the disallowance is incorrect; credit is allowed. [Paras 5]

Credit allowed for Supply of Man-power and Recruitment Services.

Final Conclusion: The appeal is allowed in part and remanded in part: input tax credit is allowed on Event Management Services, Housekeeping Services, Renting of Immovable Property for marketing offices, Business Auxiliary Services, Brokerage Commission, Auctioneering Services, Cleaning Services and Supply of Man power Services; the question of credit in respect of Clearing and Forwarding Agency Services is remanded to the adjudicating authority for determination of the place of removal and fresh decision on eligibility, with consequential reliefs if any.

Inconsistency in seizure memo and show cause notice - duty to issue fresh show cause notice and afford personal hearing - prohibition on reliance upon materially divergent seizure descriptions - pro rata refund of licence fee and return of security deposit - limitation of relief where licence year has expired - award of costs for harassment by licensing authority - non-compliance with appellate and High Court directions

Inconsistency in seizure memo and show cause notice - duty to issue fresh show cause notice and afford personal hearing - prohibition on reliance upon materially divergent seizure descriptions - Where the description of seized liquor and cash in the seizure memo differs materially from the description in the show cause notice and in the cancellation order, the licensing authority ought to have issued a fresh show cause notice and afforded personal hearing before taking a fresh decision. - HELD THAT: - The Court found admitted and material inconsistencies between the seizure memo, the show cause notice and the order of cancellation regarding the description and quantity of seized liquor and the amount of cash recovered. Once such inconsistency was apparent, the proper course for the licensing authority was to issue a fresh show cause notice addressing the actual seized material and to seek the licencee's response and personal hearing rather than proceed on the basis of divergent records. The record also showed that the petitioner was not afforded a proper personal hearing on some occasions, and the licensing authority had in practice ignored appellate and High Court directions to treat the petitioner as a licencee while re-examining the matter. Having regard to these findings, the Court held the licensing authority's continued reliance on materially inconsistent descriptions unsustainable and that fresh proceedings should have been initiated.

Inconsistency warranted fresh show cause proceedings with personal hearing; reliance on divergent descriptions was improper.

Pro rata refund of licence fee and return of security deposit - limitation of relief where licence year has expired - The petitioner is entitled to refund of the basic licence fee for the unutilised portion of the Excise year and return of the security deposit after deducting the licence fee for the period the licence was in force (1.4.2017 to 18.5.17); restoration of the licence is not available because the Excise year has expired. - HELD THAT: - The Court noted that the petitioner lawfully held the country liquor shop licence from 1.4.2017 until the seizure on 18.5.2017 and that the Excise year 2017-18 has since ended and fresh licences for subsequent years were issued. Consequently, the appropriate relief was monetary restitution rather than restoration of the licence. The licensing authority was directed to calculate and refund the basic licence fee for the unutilised period and to return the security deposit after deducting the licence fee attributable to the period from 1.4.2017 to 18.5.2017, to be completed within one month from production of a certified copy of the order.

Refund of licence fee for unutilised period and return of security deposit after deducting fee for 1.4.2017-18.5.2017; licence restoration not granted.

Award of costs for harassment by licensing authority - non-compliance with appellate and High Court directions - Respondents were held liable for harassment and non-compliance with higher authorities' directions and were ordered to pay costs to the petitioner. - HELD THAT: - The Court recorded that the licensing authority had repeatedly acted contrary to the orders of the appellate authority and this Court, including reiterating the cancellation order and refusing to treat the petitioner as a licencee, thereby causing harassment. In consequence, the Court imposed an exemplary cost to compensate the petitioner for the harassment and to mark the misconduct. The respondents were directed to pay the specified costs within the timeframe fixed for the refund.

Respondents directed to pay costs to the petitioner for harassment and non-compliance.

Final Conclusion: Writ petition allowed: the licensing authority shall refund the basic licence fee for the unutilised part of Excise year 2017-18 and return the security deposit after deducting licence fee for 1.4.2017 to 18.5.17 within one month of production of certified copy; respondents to pay costs to the petitioner for the harassment caused.

Limitation for reassessment under Section 16(1) of the Tamil Nadu General Sales Tax Act, 1959 - retrospective application of procedural (adjectival) law of limitation - effect of amendment to computation of limitation from expiry of assessment year to date of final assessment - initiation of reassessment proceedings by issuance of pre-revision notice

Effect of amendment to computation of limitation from expiry of assessment year to date of final assessment - retrospective application of procedural (adjectival) law of limitation - Applicability of the amendment to Section 16(1) of the TNGST Act (w.e.f. 01.07.2002) to the reassessment proceedings - HELD THAT: - The Court applied the well settled principle that the law of limitation is essentially procedural and ordinarily operates retrospectively, subject to the caveat that the claim must not have been time barred on the date the amendment came into force. Drawing on binding authorities, the Court held that where the limitation under the pre amendment law had not expired as of 01.07.2002, the amended method of computing limitation (five years from the date of the final assessment order) applies to surviving causes of action. Applying this principle to the present facts, the Court found that the amendment was operative for the reassessment proceedings in the present matters because the pre amendment limitation had not produced a vested, time barred claim as of the amendment date; consequently the amended computation governs. [Paras 21]

The amended Section 16(1) applies to the reassessment proceedings in these matters.

Limitation for reassessment under Section 16(1) of the Tamil Nadu General Sales Tax Act, 1959 - initiation of reassessment proceedings by issuance of pre-revision notice - Whether issuance of pre revision notices before expiry of the pre amendment limitation is sufficient to save the reassessment proceedings in W.P. Nos. 36865 and 36866 of 2006 - HELD THAT: - The Court held that where a pre revision notice was issued within the period of limitation as per the pre amended Section 16(1), the reassessment proceedings are to be regarded as initiated within limitation even if the final revised order is passed later. Relying on authoritative precedents that treat the time limit as governing initiation of proceedings rather than completion of the final order, and having found that the original assessment orders in these two petitions were issued after the amendment came into force and the prerevision notices were dispatched before expiry under the pre amended provision, the Court concluded that the reassessment proceedings in W.P.Nos. 36865 and 36866 were within limitation. [Paras 14]

The issuance of pre revision notices within the pre amendment limitation period saved the reassessment proceedings in W.P. Nos. 36865 and 36866; those reassessments are not time barred.

Final Conclusion: The Writ Petitions are dismissed: the amendment to Section 16(1) applies to the surviving reassessment proceedings and, further, the prerevision notices in W.P.Nos. 36865 and 36866 were issued within limitation so the reassessments are not barred; no order as to costs.

Taxability of inputs used in job work - transfer of inherent property in works contract/job work - quantification of amount of inputs transferred - factual remand to Assessing Officer - prospective application of a judicial principle

Taxability of inputs used in job work - transfer of inherent property in works contract/job work - Materials (chemicals, dyes, colours and similar consumables) used in job work are taxable as their inherent property transfers to the fabrics. - HELD THAT: - The Court recorded that the question is concluded against the revenue by the recent decision in M/s Mittal Processors Private Limited (VATAP No. 182 of 2017) which, after considering statutory provisions and authorities, held that chemicals used in job work are taxable because their inherent property transfers to the goods. The present appeal proceeded in the face of that binding conclusion and accordingly could not be sustained. The High Court dismissed the appeal in terms of that precedent, adopting its legal conclusion on taxability. [Paras 4, 5]

Appeal dismissed insofar as it challenged the legal conclusion that chemicals, dyes and colours used in job work are taxable.

Quantification of amount of inputs transferred - factual remand to Assessing Officer - prospective application of a judicial principle - Determination of the quantity of dyes/chemicals that actually get transferred to the fabrics is a factual matter to be worked out by the Assessing Officer; the Tribunal's statement about prospective operation of its principle was noted but the practical quantification requires remand. - HELD THAT: - The Court noted that the precedential judgment (M/s Mittal Processors) held that while the inputs are taxable, the precise quantity taxable-i.e., how much of dyes/colours are transferred to the fabric when not all consumable is transferred-depends on factual inquiry. That question must be decided by the Assessing Officer, where parties can adduce evidence. The Tribunal had also indicated that its principle would operate prospectively; the High Court, applying the precedential decision, dismissed the appeal and left factual computation to the Assessing Officer as envisaged by the earlier judgment. [Paras 4, 5]

Quantification of the quantity of chemicals/dyes to be taxed remitted to the Assessing Officer for determination on facts; the Tribunal's prospective application remark was recorded but did not alter the need for factual adjudication by the Assessing Officer.

Final Conclusion: The appeal is dismissed in terms of the Court's earlier decision in M/s Mittal Processors Private Limited: chemicals, dyes and similar consumables used in job work are taxable, while the assessment of the exact quantity actually transferred must be determined by the Assessing Officer; the application for condonation of delay is left open.

Right of secured creditor to enforce security under SARFAESI Act - Opting out of insolvency or liquidation proceedings - Interaction between SARFAESI Act and Presidency-Towns Insolvency Act, 1909 - Role and involvement of the Official Assignee when secured creditor enforces security - Equitable restraint on enforcement to protect other creditors (rejection of restraint) - Proof by secured creditors under Second Schedule Rules 9-11

Right of secured creditor to enforce security under SARFAESI Act - Opting out of insolvency or liquidation proceedings - Interaction between SARFAESI Act and Presidency-Towns Insolvency Act, 1909 - Secured creditor entitled to stand outside insolvency proceedings and enforce its security under the SARFAESI Act. - HELD THAT: - Applying the reasoning of the Supreme Court in Pegasus Assets Reconstruction (as applied to liquidation), the court held that SARFAESI is a special and later enactment and a secured creditor's rights under it cannot be fettered by insolvency proceedings under the Presidency-Towns Insolvency Act, 1909. The Division Bench of Madras was noted to have taken a similar view that the power of a secured creditor is not affected by the Act of 1909. Consequently a secured creditor may opt to enforce its security through SARFAESI and stand outside the insolvency process. [Paras 11, 12]

Appellant entitled to proceed under the SARFAESI Act and to stand outside the insolvency proceedings.

Role and involvement of the Official Assignee when secured creditor enforces security - Proof by secured creditors under Second Schedule Rules 9-11 - Secured creditor exercising SARFAESI remedies must involve the Official Assignee and withdraw its claim before the Official Assignee if it opts to enforce its security outside insolvency proceedings. - HELD THAT: - The Official Assignee submitted, and the court accepted, that although the secured creditor may enforce its rights, it must engage the Official Assignee in the steps taken and withdraw the claim lodged before the Official Assignee. The judgment also considered the framework of proof by secured creditors under the Second Schedule (Rules 9-11) to the Act of 1909, indicating the statutory context in which secured creditors' choices (realize security, surrender security, or neither) affect proof and ranking. [Paras 6, 9, 14]

Appellant must involve the Official Assignee in the enforcement process and withdraw its proof placed before the Official Assignee when it elects to proceed under SARFAESI.

Equitable restraint on enforcement to protect other creditors (rejection of restraint) - Role and involvement of the Official Assignee when secured creditor enforces security - The Official Assignee (and the insolvency court) cannot, as an equitable principle, require a secured creditor to deposit title deeds or otherwise prevent realization of security under SARFAESI merely to protect other creditors. - HELD THAT: - The Single Judge's reasoning that equity requires the bank to deposit title deeds and be restrained from realising its security to protect other creditors was held unsustainable. The court affirmed that no fetters can be placed on statutory SARFAESI rights by such equitable restraint in insolvency proceedings; however, procedural involvement of the Official Assignee and withdrawal of proof are required when the creditor opts out. [Paras 7, 12]

Direction to deposit title deeds and the equitable restraint imposed by the Single Judge set aside; secured creditor not to be so restrained.

Role and involvement of the Official Assignee when secured creditor enforces security - Court accepted the appellant's procedural undertaking regarding timeframe and communication with the Official Assignee relating to the sale process under SARFAESI. - HELD THAT: - On receiving an affidavit stating the appellant's proposed timeline to initiate and complete the sale process and its undertaking to inform the Official Assignee and to withdraw and, if necessary, re-submit its claim for any shortfall, the court accepted these statements as adequate safeguards against the Official Assignee's apprehensions and permitted the appellant to proceed. [Paras 14, 15]

Appellant permitted to proceed under SARFAESI subject to the undertakings recorded in the affidavit.

Final Conclusion: Appeal allowed; impugned order dated 4th December 2018 quashed and set aside. Appellant bank permitted to enforce its security under the SARFAESI Act and stand outside the insolvency proceedings subject to involving the Official Assignee in the process, withdrawing its proof before the Official Assignee, and complying with the procedural undertakings accepted by the court.