TaxTMI Updates e-Newsletter
May 23,2018

Liquidated damages as consideration for toleration of an act - supply of services under Schedule II(5)(e) - classification under tariff heading 9997 (other services) - time of supply - liability established on determination of delay - application of section 13 and section 14 for time of supply issues

Liquidated damages as consideration for toleration of an act - supply of services under Schedule II(5)(e) - Whether GST is applicable on liquidated damages in terms of the agreement placed before the Authority - HELD THAT: - On the specific contract between the Owner (MahaGenco) and BHEL furnished to the Authority, the contract treats levy of liquidated damages as a distinct, recoverable liability triggered when delay in achieving trial operation is established. The agreement contemplates two separate events - the supply (performance) and a subsequent evaluation which, if delay is established, converts the contingent liability into an actual liability of liquidated damages. The Authority finds that the contractual empowerment to levy liquidated damages reflects toleration of delayed performance for a price and therefore, insofar as the furnished agreement is concerned, the impugned levy constitutes a supply of service falling within clause (e) of para 5 of Schedule II. Consequently, GST is leviable on liquidated damages under the terms of the agreement placed before the Authority.

In terms of the agreement placed before the Authority, GST would be applicable on the liquidated damages.

Classification under tariff heading 9997 (other services) - rate 18% for other services - Whether the levy of liquidated damages (as found to be a supply) is covered by Schedule II entry and the applicable tariff and rate - HELD THAT: - Restricted to the contract before it, the Authority refers to the Scheme of Classification of Services appended to Notification No.11/2017 and notes that services described as 'agreeing to tolerate an act' fall within Heading 9997 (Other services) and the taxable services entry under that Notification covers 'Other services' at 18% (9% CGST + 9% SGST/UGST). On the facts and contract examined, the impugned levy is within the ambit of that description and would attract the rate specified for Heading 9997 under the Notification in force.

In terms of the agreement placed before the Authority, the impugned levy of liquidated damages would be covered by the Notification entry for Heading 9997 (Other services) and attract the notified rate (18%).

Time of supply - liability established on determination of delay - application of section 13 and section 14 for time of supply issues - When the time of supply arises for GST on liquidated damages under the examined agreement - HELD THAT: - Having regard to the contractual wording, the Authority observes that the levy of liquidated damages does not arise continuously while delay occurs but crystallises when the delay in successful completion of trial operation is established on the part of the contractor. The agreement expressly states that the liability to pay liquidated damages will be established once such delay is established; accordingly, the Authority treats that point of crystallisation as defining the time of supply for the impugned levy under the specific contract. For factual permutations (e.g., part delay before and part after GST roll out, or capping/aggregation issues), the Authority directs reference to section 13(1) (time of supply) and, where necessary, section 14 for assessment on the particular facts as those were not precisely before the Authority.

In terms of the agreement placed before the Authority, the time of supply for liquidated damages is the point when liability is established on determination of delay; questions requiring precise factual application are to be determined with reference to section 13 (and, if needed, section 14) of the GST Act.

Application of pre GST receipts and transitional treatment - Whether GST is payable on liquidated damages attributable to periods before GST roll out or how capping affects allocation - HELD THAT: - The Authority did not undertake a determination of receipts collected under the earlier service tax regime; it records that amounts collected under the pre GST regime would be governed by the provisions then in force and declines to offer a view on historical service tax treatment. Where part of the facts implicate allocation between pre and post GST periods or capping that affects period wise computation, the Authority indicates that section 13 (time of supply) and section 14 may require reference on the precise facts and therefore such questions cannot be finally answered on the record before the Authority.

No definitive answer is given on allocation between pre and post GST periods or on capping effects; those matters require application of section 13 and section 14 to the precise facts and are not decided here.

Input tax credit entitlement - Whether the contractor/vendor can claim input tax credit on the amount of liquidated damages deducted by the owner - HELD THAT: - The Authority declined to decide this question in the applicant's advance ruling as the point is concerned with the contractor/vendor's entitlement. The Authority notes that the correct forum for such a question is the person who would seek input tax credit (i.e., the contractor/vendor) and therefore did not adjudicate entitlement to ITC on the facts before it.

The question of whether the contractor/vendor may claim input tax credit on liquidated damages is not answered and is left to be raised by the contractor/vendor in appropriate proceedings.

Final Conclusion: On the contract produced (MahaGenco v. BHEL for Chandrapur TPS expansion), liquidated damages are a distinct recoverable liability which, when crystallised, constitute a supply of service under Schedule II(5)(e) and - insofar as the submitted contract is concerned - fall under Heading 9997 (Other services) attracting the notified rate (18%); the time of supply is the point when liability is established on determination of delay; allocation or transitional questions involving pre GST periods, capping and the contractor's entitlement to input tax credit were not decided and require factual application of section 13/14 or must be raised by the contractor/vendor as appropriate.

Conditional stay - requirement to deposit as condition for stay - duty to record reasons when granting conditional stay - quash and remand for fresh hearing - stay of recovery pending fresh orders

Conditional stay - duty to record reasons when granting conditional stay - requirement to deposit as condition for stay - Ext.P4 conditional order of stay requiring deposit was unsustainable for want of recorded reasons and is quashed. - HELD THAT: - The Court observed that Ext.P4 directed the petitioner to deposit 20% of tax and interest as a pre-condition for grant of stay but contains no reasons explaining why deposit was necessary. Reliance was placed on the principle in Archana Agencies v Commercial Tax Officer that an authority considering a stay petition must record reasons even when granting a conditional stay. In the absence of such reasons the exercise of discretion was held to be legally infirm, warranting interference.

Ext.P4 is quashed for failure to record reasons for imposing the deposit condition.

Quash and remand for fresh hearing - stay of recovery pending fresh orders - Matter remitted to the 2nd respondent for fresh decision after hearing; recovery proceedings to be kept in abeyance until fresh orders are passed. - HELD THAT: - The High Court directed the 2nd respondent to pass fresh orders on the stay application after affording the petitioner an opportunity of hearing. To facilitate this, the petitioner was directed to appear before the 2nd respondent on a specified date and the 2nd respondent was given one month thereafter to decide afresh. Meanwhile, any recovery steps already initiated against the petitioner were ordered to be kept in abeyance until the fresh orders are communicated to the petitioner.

Proceedings remitted for fresh hearing and decision within a month; recovery stayed until such fresh orders are communicated.

Final Conclusion: Ext.P4 is quashed for want of reasons; the stay application is remitted for fresh consideration after hearing, with recovery proceedings kept in abeyance until the fresh orders are passed and communicated.

Detention of goods under Section 129(3) of the CGST/SGST Act, 2017 - mandatory e-way bill requirement - vehicle details not updated in the e-way bill in terms of Rule 138(2) of the CGST/SGST Rules, 2017 - release of detained goods on furnishing bank guarantee as security - adjudication of penalty untrammelled by interim observations

Detention of goods under Section 129(3) of the CGST/SGST Act, 2017 - mandatory e-way bill requirement - vehicle details not updated in the e-way bill in terms of Rule 138(2) of the CGST/SGST Rules, 2017 - release of detained goods on furnishing bank guarantee as security - Release of detained consignment and vehicle to the petitioner on furnishing security by way of bank guarantee despite defect in the e-way bill - HELD THAT: - The detention notice (Ext.P3) recorded the defect as non-update of vehicle details in the e-way bill, a requirement under Rule 138(2) after the e-way bill became mandatory from 1.4.2018. While a mandatory document's defect may justify action under the Act, the Court, having regard to earlier Division Bench precedent that goods detained under the CGST/SGST Act cannot be released unless security equal to the amount demanded is furnished, directed a pragmatic remedy. To secure the revenue and protect the petitioner's rights, the Court ordered release of the goods and vehicle on the petitioner furnishing a bank guarantee for the security amount demanded in Ext.P3 before the detaining authority. The order balances enforcement of mandatory e-way bill requirements with the availability of an interlocutory security mechanism to obtain release pending final adjudication.

Goods and vehicle released to the petitioner on production of a bank guarantee for the security amount demanded in Ext.P3 detention notice.

Adjudication of penalty untrammelled by interim observations - release of detained goods on furnishing bank guarantee as security - Proceedings for imposition of penalty to be adjudicated by the detaining authority within a stipulated outer time limit - HELD THAT: - The Court required the 1st respondent to proceed to adjudicate the question of imposition of penalty against the petitioner. The adjudication was directed to be completed within an outer limit of two weeks from receipt of a copy of the judgment. The Court expressly ordered that the adjudication shall be conducted untrammelled by the observations made in the judgment, thereby remitting the substantive penalty determination to the detaining authority for fresh consideration on merits.

1st respondent to adjudicate the penalty issue within two weeks from receipt of this judgment, untrammelled by the observations in the judgment.

Final Conclusion: The writ petition is disposed by directing release of the detained consignment and vehicle on furnishing a bank guarantee for the security amount specified in the detention notice, and by remitting the penalty adjudication to the detaining authority to be completed within two weeks, without being influenced by the Court's interim observations.

Reassessment under Section 147 read with Section 143(3) of the Income-tax Act, 1961 - Disposal of objections filed pursuant to notice under Section 148 - Requirement of a speaking order disposing objections before completion of reassessment (GKN Driveshafts principle) - Setting aside reassessment order and demand notice for non-disposal of objections - Assessing officer's liberty to proceed afresh in accordance with law on remand

Disposal of objections filed pursuant to notice under Section 148 - Requirement of a speaking order disposing objections before completion of reassessment (GKN Driveshafts principle) - Setting aside reassessment order and demand notice for non-disposal of objections - Validity of the reassessment order passed under Section 147 r/w 143(3) and the consequent demand notice where objections filed after issuance of notice under Section 148 were not disposed of by a speaking order. - HELD THAT: - The Court accepted the challenge that objections filed by the petitioner pursuant to the Section 148 notice were not disposed of by the tax authority prior to passing the reassessment order. Relying on the principle in GKN Driveshafts that a speaking order disposing objections is mandatory before completion of reassessment, and following earlier decisions of this Court, the impugned assessment order and demand notice were held to be untenable insofar as they were passed without adjudication of those objections. The Court therefore set aside the reassessment order and the demand notice. The decision leaves open the rights and contentions of the parties and does not adjudicate the merits of the reassessment itself. [Paras 4, 5]

Impugned assessment order and demand notice set aside for failure to dispose objections filed pursuant to the Section 148 notice.

Assessing officer's liberty to proceed afresh in accordance with law on remand - Reassessment under Section 147 read with Section 143(3) of the Income-tax Act, 1961 - Consequences and further proceedings following setting aside of the reassessment order. - HELD THAT: - While quashing the impugned order and demand notice, the Court expressly permitted the Assessing Officer to proceed with the matter in accordance with law. This authorises fresh consideration consistent with statutory requirements, including disposal of any objections by a speaking order before any fresh completion of reassessment, but does not pre-judge the merits of any reassessment or demand. [Paras 5]

Assessing Officer permitted to proceed afresh in accordance with law; all rights and contentions left open.

Final Conclusion: Writ petition allowed; reassessment order and demand notice for AY 2009-10 set aside for non-disposal of objections filed after issuance of notice under Section 148, with liberty to the assessing officer to proceed afresh in accordance with law.

Validity of reopening of assessment under section 147 proviso - Requirement of failure to disclose fully and truly all material facts for reopening beyond four years - Sanction for issuance of notice under section 151(1) - requirement of proper authority and application of mind - Non-application of mind by Assessing Officer and reliance on information/directions from Investigation wing

Validity of reopening of assessment under section 147 proviso - Requirement of failure to disclose fully and truly all material facts for reopening beyond four years - Reopening of assessment beyond four years was invalid for want of the proviso condition that escapement of income must arise from failure by the assessee to disclose fully and truly all material facts. - HELD THAT: - The Tribunal examined the reasons recorded by the Assessing Officer for issuance of notice under section 148 and found no allegation or material demonstrating that the assessee had failed to disclose fully and truly all material facts necessary for assessment. Judicial authorities were applied to hold that mere existence of a reason to believe, without any whisper that the escapement arose from the assessee's failure to disclose material facts, cannot sustain reopening beyond four years. The record showed that no new tangible material came into AO's possession after completion of assessment under section 143(3); the reopening was based on the same material and amounted to change of opinion or arbitrary exercise of power. Consequently the proviso to section 147 bars action and the reopening was quashed.

Reopening beyond four years was quashed as the proviso to section 147 was not satisfied.

Sanction for issuance of notice under section 151(1) - requirement of proper authority and application of mind - Approval for issuing notice under section 151(1) was invalid because it was not granted by the authority prescribed by law and lacked application of mind. - HELD THAT: - The Tribunal noted that approval recorded was by an Additional/Joint Commissioner (or mechanical/borrowed satisfaction) whereas the statutory scheme requires satisfaction by the specified authority; judicial decisions were cited establishing that where statute designates a particular functionary the satisfaction must be of that authority and must result from independent application of mind. The approval in the present case was therefore not in accordance with section 151(1) and rendered the reopening invalid.

Reopening was invalid for non-compliance with the mandatory sanction requirement under section 151(1).

Non-application of mind by Assessing Officer and reliance on information/directions from Investigation wing - Reopening was invalid for non-application of mind where reasons were vague and based merely on directions or information from the Investigation wing without independent evaluation by the AO. - HELD THAT: - On review of the reasons recorded, the Tribunal found them to be vague, unspecific and constituted merely compliance with directions from the DDIT (Investigation). Citing authoritative precedents, the Bench emphasized that reasons must disclose the AO's mind and a discernible link between material in possession and belief that income escaped assessment. Reasons devoid of particulars and dependent on unexamined information do not furnish the requisite basis for resort to section 147. Applying these principles, the Tribunal held the AO had not applied his mind and quashed the reopening.

Reopening was quashed for want of application of mind by the AO and reliance on vague information/directions.

Final Conclusion: The Tribunal allowed the assessee's appeal, quashed the reassessment proceedings for Assessment Year 2008-09 on the grounds that (i) the proviso to section 147 was not satisfied as there was no failure by the assessee to disclose material facts, (ii) the sanction under section 151(1) was not validly or properly granted, and (iii) the Assessing Officer failed to apply independent mind, the reopening being based on vague information from the investigation wing.

Reopening of assessment - proviso to Section 147 - failure to disclose fully and truly all material facts - reasons to believe - evidentiary value of statements recorded under Section 131(1A) - denial of statement versus retraction - application of mind by the Assessing Officer

Proviso to Section 147 - failure to disclose fully and truly all material facts - reasons to believe - application of mind by the Assessing Officer - Validity of reopening the assessment for Assessment Year 2009-10 under the proviso to Section 147 - HELD THAT: - The Tribunal held that the reopening dated 22.03.2016 was beyond four years from the end of the Assessment Year and therefore the proviso to Section 147 applied. The recorded reasons did not allege any failure by the assessee to disclose fully and truly all material facts necessary for assessment; accordingly the mandatory condition in the proviso was not satisfied. The letter from DDIT (Inv.) and the reasons recorded on the same day were based on information already available and did not constitute new tangible material coming into the Assessing Officer's possession after completion of the original assessment. Further, the Assessing Officer recorded reasons on the same day he received the DDIT (Inv.) communication without any prima facie verification or independent application of mind to the material; the reasons were therefore held to be vague and conclusory and insufficient to sustain a bona fide belief that income had escaped assessment. Applying settled authorities, the Tribunal concluded that the conditions for valid reopening beyond four years were not met and that the reopening was bad in law.

Reopening held invalid and quashed as the proviso to Section 147 was not satisfied and the Assessing Officer failed to apply independent mind to the material.

Evidentiary value of statements recorded under Section 131(1A) - denial of statement versus retraction - Reliability and voluntariness of statements of two persons recorded by the investigation wing and their effect on the reopening - HELD THAT: - The Tribunal accepted the First Appellate Authority's finding that the statements relied upon by the revenue (recorded on 11/03/2016) were rendered non-effective by the witnesses' denials during cross-examination before the Assessing Officer. The witnesses stated on oath that they were not associated with the companies, that they were made to sign statements without reading them and under threat, and denied ownership of the mobile number relied upon; these denials went uncontroverted by the revenue and no further investigation or corroborative evidence was produced. The court distinguished denial of contents from formal retraction and found that, where the very basis of the DDIT(Inv.) communication ceases to exist because the statements are disowned and uncontroverted, such material cannot sustain a reopening. Applying precedent, the Tribunal held that reliance on such statements without corroboration rendered the reopening unsustainable.

Statements held to lack evidentiary value in the circumstances; denial by the witnesses (unrebutted) vitiated the basis for reopening.

Final Conclusion: The revenue's appeal is dismissed. The reassessment proceedings for Assessment Year 2009-10 were quashed because the proviso to Section 147 was not satisfied, the Assessing Officer failed to apply independent mind to the material relied upon, and the statements relied on by the revenue were disowned by the deponents and remained uncontroverted, rendering the basis for reopening non-existent.

Conversion of capital asset into stock-in-trade - application of section 45(2) - fair market value as consideration on date of conversion - non-applicability of section 50C to stock-in-trade - derivative/forex futures transactions not speculative

Conversion of capital asset into stock-in-trade - application of section 45(2) - fair market value as consideration on date of conversion - non-applicability of section 50C to stock-in-trade - Taxability of profit on sale of building space sold out of converted stock - whether to be assessed as long term capital gain or as business income and whether section 50C applies - HELD THAT: - The Tribunal found on the documentary record and audited accounts that the assessee had converted a substantial portion of the building into stock-in-trade with effect from 01.04.2005 and reflected the same in the accounts for the year ended 31.03.2006; sales in the impugned years were from the opening stock. Applying the overriding mechanism of section 45(2), the Tribunal held that on conversion the fair market value as on the date of conversion is to be treated as the full value of consideration for computing capital gain up to the date of conversion and indexation is to be allowed up to that date. Thereafter, sales out of stock-in-trade are business receipts and must be assessed as business income, the cost of such stock being the fair market value taken on conversion. Consequently, where the asset has become stock-in-trade, the deeming of consideration under section 50C (which applies to transfer of capital assets) is not attracted; the Assessing Officer was therefore incorrect to invoke section 50C to compute long-term capital gains for the impugned years. The Tribunal relied on precedents recognizing conversion valuation and the Groz-Beckert principle that market value at conversion is the relevant cost for subsequent sales, and applied consistency with earlier acceptance in AY 2007-08. [Paras 7, 8, 9, 10, 11]

Profit on sale of the building space sold from the converted stock is assessable as business income post-conversion with capital gain (if any) chargeable under section 45(2) up to the date of conversion; section 50C does not apply to sales of stock-in-trade in the impugned years.

Derivative/forex futures transactions not speculative - Allowability of loss incurred on forex futures trading - whether such loss is a speculative loss or an allowable business loss - HELD THAT: - The Tribunal upheld the First Appellate Authority's finding that losses on futures trading in foreign exchange are not speculative in nature and are transactions in derivatives/derivative markets. Relying on instructive decisions and the CBDT instruction referenced by the CIT(A), the Tribunal treated the loss on forex futures as an allowable business loss rather than a speculative loss, following precedents of coordinate benches which recognized derivatives trading as non-speculative. [Paras 13, 14]

The loss on forex futures trading is allowable as a business/trading loss and not to be disallowed as a speculative loss.

Final Conclusion: Revenue's appeals for the assessment years 2008-09 and 2010-11 are dismissed: the Tribunal upheld treatment of sales as arising from stock-in-trade with section 45(2) applied at conversion and section 50C held inapplicable, and affirmed allowance of the forex futures trading loss as a business loss.

Negative cash balance - common cash pool and common management as justification for treating balances collectively - block assessment under section 158BC requires incriminating material seized in search for additions - addition based on assumption, suspicion or general CAG findings without specific evidence not sustainable - reliance on arbitration award and contemporaneous records to rebut departmental allegations

Negative cash balance - common cash pool and common management as justification for treating balances collectively - Deletion of additions made on account of peak negative cash balance in the cash book. - HELD THAT: - The Tribunal upheld the factual conclusion of the ld. CIT(A) that the proprietor concerns and the partnership concern were run by the same persons from the same premises and maintained a common cash pool, supported by a date-wise chart and cash-flow showing that apparent negative balances in one concern were covered by positive balances in the related concern. On this factual basis the peak negative cash balance additions in the respective years were rightly deleted; the Department did not controvert those factual findings. [Paras 12, 13, 14]

Additions on account of negative peak cash balance deleted.

Addition based on assumption, suspicion or general CAG findings without specific evidence not sustainable - reliance on arbitration award and contemporaneous records to rebut departmental allegations - block assessment under section 158BC requires incriminating material seized in search for additions - Deletion of additions relating to alleged undisclosed transportation charges and undisclosed sale of bitumen (bitumen scam allegations). - HELD THAT: - The Tribunal agreed with the ld. CIT(A) that the AO's additions were premised on a general presumption from the CAG report and allegations of the Oil Companies, whereas no specific adverse finding against these assessees appeared in the cited reports. The assessees produced arbitration awards and contemporaneous material rebutting non-delivery/misappropriation and demonstrating performance of contractual distances; one arbitration award was in favour of the assessee. The ld. CIT(A) correctly held that in block assessment under the cited regime additions must be founded on incriminating material found in course of search and cannot rest on general allegations. The Department failed to produce material to controvert these findings, and the Tribunal found no infirmity in deleting the additions. [Paras 15]

Additions relating to transportation charges and alleged undisclosed sale of bitumen deleted.

Block assessment under section 158BC requires incriminating material seized in search for additions - addition based on assumption, suspicion or general CAG findings without specific evidence not sustainable - Deletion of additions made on account of alleged bogus sundry creditors and undisclosed purchases (purchase of bitumen from K.K. Kedia). - HELD THAT: - The ld. CIT(A) found, and the Tribunal agreed, that no incriminating material recovered in the search established that the creditors were bogus; the transactions were recorded in the books at the time of search. Block assessment is limited to incriminating material, and enquiries into regular books cannot lawfully result in block additions. Further, the AO's reliance on a presumption that 55% of expenses were bogus (based on the CAG report) was legally untenable without specific evidence. The Department did not controvert these factual and legal conclusions. [Paras 16]

Additions on account of bogus creditors and alleged undisclosed purchases deleted.

Final Conclusion: Both revenue appeals are dismissed and the orders of the ld. CIT(A) deleting the contested additions are upheld for the block period 01.04.1988 to 21.04.1998.

Assessment under section 153A - Requirement of nexus between additions and seized material - Reopening of assessments following search - Assess/re-assess total income versus undisclosed income - Application of principles in CIT v. Kabul Chawla regarding reliance on search material

Requirement of nexus between additions and seized material - Application of principles in CIT v. Kabul Chawla regarding reliance on search material - Whether additions confirmed by the Assessing Officer and sustained by the CIT(A) can stand where no incriminating material was seized in the course of search. - HELD THAT: - The Tribunal held that the specific legal ground raised before it - that additions were made without reference to any seized material - was not examined by the AO or the CIT(A). The Tribunal summarised the principles laid down in CIT v. Kabul Chawla and subsequent authorities: although Section 153A mandates issuance of notices and bars/opens assessments for specified years after a search, it does not permit making additions arbitrarily without relevance or nexus to incriminating material unearthed during the search or other post-search material. Completed assessments can be revisited under Section 153A only on the basis of incriminating material discovered in the course of search or related material not previously before the AO. Since the AO and the CIT(A) failed to apply these principles to examine whether any proceedings were pending or abated on the date of search and whether any incriminating material justified each addition for each assessment year, the Tribunal could not uphold their orders on the legal ground set aside to the AO/ CIT(A). Consequently, the Tribunal set aside the CIT(A)'s orders and restored the appeals to the file of the CIT(A) with directions to examine the additions in light of the cited principles, determine for each assessment year and each addition whether incriminating material existed or proceedings were pending/abated, and decide the merits accordingly. [Paras 5, 6, 7]

The matter is remanded to the CIT(A) to examine and decide, following the principles in CIT v. Kabul Chawla and related authorities, whether each addition was supported by incriminating material or related post-search material; the CIT(A) must give the assessee opportunity of being heard and observe principles of natural justice.

Assessment under section 153A - Reopening of assessments following search - Principles of natural justice and opportunity to be heard - Procedural directions governing remand and further adjudication of additions made under Section 153A. - HELD THAT: - The Tribunal noted there was no dispute about initiation of proceedings under Section 153A/153C. However, because the specific question whether additions were based on seized material was not examined, the Tribunal directed that the CIT(A) should examine both legal and merits aspects of the additions. The CIT(A) is to verify whether any proceedings were pending or abated on the date of search, whether incriminating material was found for each addition and each assessment year, and, if necessary, afford the AO and the assessee opportunity to place material and submissions. The Tribunal emphasised strict observance of principles of natural justice in the re-consideration. [Paras 7]

CIT(A)'s orders are set aside on this issue and the appeals are restored to the CIT(A) for fresh disposal in accordance with the Tribunal's directions, with opportunity to the assessee and adherence to natural justice.

Final Conclusion: The Tribunal set aside the CIT(A)'s orders and restored the appeals to the file of the CIT(A) for fresh examination of the additions in the light of the principles in CIT v. Kabul Chawla and allied decisions, with directions to determine, for each assessment year and each addition, whether incriminating material or relevant post-search material justified the addition and to afford the assessee a hearing; appeals are allowed for statistical purposes.

Prior period expenses - crystallization of liability - allowability of deduction - interest on BOT asset - allocation of indirect/head office expenses - deduction under section 80IA(4) - remand to the Assessing Officer for verification

Prior period expenses - crystallization of liability - allowability of deduction - Allowability of prior period general overhead and plant running expenses claimed in the year - HELD THAT: - The assessee claimed prior period general overhead and plant running expenses assertedly approved during the year and therefore crystallized. The Tribunal observed that the assessee advanced similar contentions before the lower authorities but there is no finding on record demonstrating that these expenses were approved and crystallized during the year. In absence of such evidentiary finding, the Tribunal set aside the matter to the file of the Assessing Officer for examination of the claim and permitted the assessee to raise the contentions and rely on authorities before the AO. [Paras 7]

Matter set aside to the file of the Assessing Officer to examine the claim of prior period general overhead and plant running expenses; ground allowed for statistical purposes.

Interest on BOT asset - crystallization of liability - allowability of deduction - remand to the Assessing Officer for verification - Allowability of prior period interest on BOT asset claimed after change in method of depreciation/amortization - HELD THAT: - The assessee contended that following amendment to recognition/amortization rules the prior period interest crystallized and was allowable when matched against prior period toll income assessed in the year. The CIT(A) accepted the premise of revision but disallowed the claim in absence of details and proof of actual payment. The Tribunal held that where interest may fall within the scope of payment-based provisions (as in section 43B) proof of actual payment would be relevant; however, specific details were not on record. Consequently the Tribunal remanded the issue to the Assessing Officer to examine particulars, including whether the interest related to loans to create toll assets and whether it was actually paid, for fresh adjudication. [Paras 8]

Matter set aside to the file of the Assessing Officer for fresh examination of the claim of prior period interest on BOT asset; ground allowed for statistical purposes.

Allocation of indirect/head office expenses - deduction under section 80IA(4) - allowability of deduction - remand to the Assessing Officer for verification - Whether establishment and administrative expenses incurred at head office/other units must be proportionately allocated against income qualifying for deduction under section 80IA(4) - HELD THAT: - The Assessing Officer apportioned a proportion of head office employee and administrative expenses to BOT toll projects on a turnover basis, reducing the assessee's 80IA claim. The assessee asserted that it maintains unit wise/project wise accounts, that contractors bear most toll collection expenses, and that the eligible profit computation already accounted for direct and indirect expenses, obviating further allocation. The Tribunal noted the Coordinate Bench's earlier order on identical issues which set aside findings for verification of figures. Finding that the record lacks working details showing allocation of eligible profits and related accounting, the Tribunal remanded the matter to the Assessing Officer to verify whether the assessee has properly allocated expenses and to recompute the deduction if warranted. [Paras 9, 10, 13, 15]

Matter remanded to the Assessing Officer to verify the assessee's allocation of expenses and to recompute deduction under section 80IA(4) as appropriate; ground allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the impugned findings and remanded the three contested matters (prior period general overhead and plant running expenses; prior period interest on BOT asset; allocation of head office and employee/administrative expenses for deduction under section 80IA(4)) to the Assessing Officer for fresh examination and verification; the appeal is allowed for statistical purposes.

Annual Letting Value - Annual Rateable Value by Municipal Corporation - Separate legal entity - Disallowance under section 14A read with rule 8D - Apportionment principle for expenses relatable to exempt income - Self-occupied property

Annual Letting Value - Annual Rateable Value by Municipal Corporation - Separate legal entity - Self-occupied property - Validity of estimating Annual Letting Value (ALV) at 8% of investment where properties owned by the assessee were used for business by separate private limited companies promoted by him - HELD THAT: - The Tribunal recorded that the assessee owned nine properties, two flats and a native house being self-occupied, while seven properties were used by private limited companies promoted by the assessee without payment of rent. The authorities below had applied 8% of the value recorded in the balance sheet to compute ALV and added resultant income. The Tribunal distinguished partnership-law authorities (where firm occupancy is treated as partner's business) on the ground that companies are separate legal entities; thus occupancy by the companies does not ipso facto convert the occupation into the assessee carrying on business. However, the Tribunal found merit in the assessee's alternative contention that in absence of any rent receipts the ALV could not be computed simply as 8% of investment and ought to be determined on the basis of the Annual Rateable Value fixed by the Municipal Corporation. Considering co-ordinate-bench precedents relied upon by the assessee, the Tribunal did not adjudicate the ALV on merits but restored the matter to the file of the Assessing Officer to determine ALV on the basis of Annual Rateable Value by the Municipal Corporation. [Paras 10]

Issue restored to the Assessing Officer to determine ALV on the basis of Annual Rateable Value by the Municipal Corporation; ground allowed for statistical purposes.

Disallowance under section 14A read with rule 8D - Apportionment principle for expenses relatable to exempt income - Sustainability of disallowance under section 14A read with rule 8D where assessee did not incur any expenses in earning exempt income - HELD THAT: - The Assessing Officer applied rule 8D and made a disallowance after noting exempt income. The Tribunal examined the return and the statement of total income and observed that the assessee had not incurred any expenses in the year except nominal bank charges. Relying on the principle that apportionment under section 14A applies only where the assessee has incurred composite or indivisible expenses or where actual expenditure relating to exempt income cannot be determined, the Tribunal held that rule 8D(2)(iii) could not be applied to make a notional disallowance in absence of any actual expenditure. The Tribunal followed the coordinate-bench precedent to delete the disallowance. [Paras 13]

Disallowance under section 14A read with rule 8D is deleted as no expenses were incurred to earn the exempt income.

Final Conclusion: The appeal is partly allowed: the ALV issue is remitted to the Assessing Officer to determine ALV on the basis of the Municipal Annual Rateable Value; the disallowance under section 14A read with rule 8D is deleted for lack of incurred expenses.

Addition on account of unexplained purchases/unexplained expenditure - verification under summons issued u/s 133(6) - consequence of non reply to summons u/s 133(6) - application of gross profit percentage for quantification of disallowance - compliance with Rule 46A of the Income tax Rules

Addition on account of unexplained purchases/unexplained expenditure - verification under summons issued u/s 133(6) - application of gross profit percentage for quantification of disallowance - Addition of Rs. 66,09,022/- made by AO on account of discrepancies between assessee's purchases and replies received from creditors and the manner of quantifying any allowable addition - HELD THAT: - The Tribunal held that the AO could not treat the entire difference of Rs. 66,09,022/- as unexplained expenditure solely on the basis of discrepancies in replies to summons under section 133(6). The creditors might not have reflected corresponding sales in their books and the AO's addition, being made only on the basis of those replies, was unsustainable as a full disallowance. However, even if purchases were treated as inflated/bogus to some extent, the whole amount need not be added; a reasonable quantification by applying the assessee's gross profit rate is appropriate. Considering the assessee's declared GP of 3.75%, the Tribunal directed the AO to apply a rounded GP of 4% on the difference of Rs. 66,09,022/- for assessment of income in respect of that discrepancy. [Paras 9]

Addition of Rs. 66,09,022/- cannot be sustained in full; AO directed to compute taxable effect by applying 4% GP on Rs. 66,09,022/-.

Consequence of non reply to summons u/s 133(6) - compliance with Rule 46A of the Income tax Rules - application of gross profit percentage for quantification of disallowance - Deletion by CIT(A) of addition of Rs. 1,14,16,135/- made by AO in respect of six suppliers (four served but non responsive; two not served) and whether acceptance of confirmations at appellate stage without confronting AO violated Rule 46A - HELD THAT: - The Tribunal agreed with the principle that mere non reply to a summons under section 133(6) is not a conclusive basis for treating creditors as bogus where other evidence establishes their identity and the genuineness of transactions. The assessee produced bank records, sales tax documents and income tax details to prove existence, and payments were routed through bank, which supported the genuineness of transactions. As to Rule 46A, the Tribunal found no violation because the CIT(A) called for and examined confirmations and copies of accounts from the assessee before accepting them. On merits, deletion of additions in respect of four suppliers (amounting to Rs. 94,53,800/-) was upheld. For two suppliers where summons could not be served, the Tribunal did not allow full deletion but directed a reasonable quantification by applying a GP of 5% (higher than the declared GP) on purchases from those two parties, sustaining an addition of 5% of Rs. 19,62,335/-. [Paras 10, 11]

Deletion upheld for purchases from four suppliers; for two suppliers where notices were not served, AO directed to assess income by applying 5% GP on purchases of Rs. 19,62,335/-, resulting in sustained addition of Rs. 98,117/-. No breach of Rule 46A found.

Final Conclusion: The Department's appeal and the assessee's cross objection are partly allowed: the AO's full additions were disallowed in part; the AO is directed to quantify tax effect by applying 4% GP on the Rs. 66,09,022/- discrepancy and to apply 5% GP on purchases of Rs. 19,62,335/- (sustaining an addition of Rs. 98,117/-); deletions in respect of the other suppliers are upheld.

Characterisation of receipts as royalty under Article 13 of the India-UK DTAA - business income taxable under Article 7 of the India-UK DTAA - permanent establishment - effect of Article 3(2) of the DTAA and domestic explanation to section 9(1)(vi) - treaty override by operation of section 90(2) of the Income tax Act - retrospective effect of domestic amendment to the definition of royalty

Characterisation of receipts as royalty under Article 13 of the India-UK DTAA - business income taxable under Article 7 of the India-UK DTAA - Consideration received on sale/offshore supply of software is not royalty under Article 13 of the India-UK DTAA and is business income not chargeable in India in absence of a permanent establishment. - HELD THAT: - The Tribunal accepted the assessee's case that transactions were offshore supplies effected on a principal to principal basis, governed by distribution and end user licence agreements which did not transfer copyright or grant rights envisaged by the treaty definition of royalty. The Tribunal followed the reasoning in the referred High Court authorities that incidental acts necessary to run the software (such as loading or making archival copies) do not amount to transfer of copyright or grant of rights of the kind contemplated by Article 13. Consequently, the receipts represent business income arising outside India and, in absence of a permanent establishment in India, are not taxable here under Article 7 of the India-UK DTAA. [Paras 6, 7, 8]

Addition treating the receipts as royalty set aside; receipts treated as business income arising outside India and not taxable in India for the stated years.

Effect of Article 3(2) of the DTAA and domestic explanation to section 9(1)(vi) - treaty override by operation of section 90(2) of the Income tax Act - retrospective effect of domestic amendment to the definition of royalty - Whether the explanation/amendment to the domestic definition of royalty (section 9(1)(vi)) could be applied to alter the meaning of 'royalty' in the DTAA or be read retrospectively. - HELD THAT: - The Tribunal held that where the assessee has elected the benefit of the India-UK DTAA under section 90(2), the treaty definition governs and domestic explanatory/amending provisions altering the domestic definition of 'royalty' cannot be read across to change the treaty meaning. The Tribunal relied on the principle that a unilateral domestic amendment does not affect treaty interpretation, and on the cited High Court precedents to conclude that the post enactment amendment to section 9(1)(vi) does not apply to override the treaty nor convert the receipts into royalty for the assessment years under consideration. [Paras 6, 8]

Domestic amendment/explanation to section 9(1)(vi) does not alter the treaty meaning of 'royalty' nor affect the result for the assessment years; treaty definition prevails.

Permanent establishment - business income taxable under Article 7 of the India-UK DTAA - Whether, even if characterised as business income, the receipts could be taxed in India by reason of activities in India. - HELD THAT: - On the facts accepted by the Tribunal, the assessee had no permanent establishment in India. The agreements showed that distributors acted as independent contractors and sales/licences were concluded offshore with payments made to an overseas account. In that factual matrix, business income arising outside India cannot be taxed in India under Article 7 in the absence of a PE. The Tribunal therefore upheld the CIT(A)'s conclusion that the income was not taxable in India. [Paras 6, 8, 10]

Receipts are business income arising outside India and not taxable in India for want of a permanent establishment.

Condonation of delay - Condonation of delay in filing the appeal for assessment year 2013 14. - HELD THAT: - The Tribunal examined the affidavit filed by the assessee explaining the delay and found the reasons satisfactory. The delay of 72 days in filing the appeal for AY 2013 14 was therefore condoned and the appeal admitted for adjudication on merits, which were identical to earlier years decided in favour of the assessee. [Paras 11]

Delay condoned; appeal admitted and allowed on merits in line with other assessment years.

Final Conclusion: The Tribunal dismissed the Revenue's appeals and allowed the assessee's appeals for the assessment years 2008 09, 2009 10, 2010 11, 2011 12 and 2013 14, holding that consideration from offshore sale/supply of software did not constitute royalty under the India-UK DTAA, but was business income arising outside India not taxable here in absence of a permanent establishment; the domestic amendment to the definition of royalty did not alter the treaty meaning for these years, and the short delay in filing the 2013 14 appeal was condoned.

Capitalization of pre-operative interest - allowability of depreciation on capitalized interest - verification of loan utilisation - apportionment of business and personal expenditure - vouching and evidentiary sufficiency for business expenses

Capitalization of pre-operative interest - allowability of depreciation on capitalized interest - verification of loan utilisation - Disallowance of interest of Rs. 16,81,057 as revenue expenditure by treating it as capital expenditure and claim for depreciation on that amount. - HELD THAT: - The Assessing Officer found, on the assessee's own submissions and the assessee's prior year treatment, that the mortgage loan from HDFC Bank was taken for building construction and interest for the period April-August 2012 ought to be capitalized until the new building was put to use in September 2012. The assessee failed to produce verifiable evidence to rebut the AO's finding that the loan was utilized for construction, and the earlier capitalization in AY 2012 13 increased the onus on the assessee. Consequently the AO's disallowance of the interest as revenue expenditure is upheld. However, since the AO capitalized that interest in the building account, the assessee is entitled to claim depreciation at the applicable rate (10%) on the capitalized interest amount. [Paras 6]

Disallowance of interest as revenue expenditure upheld; alternative claim for depreciation on the capitalized interest allowed.

Apportionment of business and personal expenditure - vouching and evidentiary sufficiency for business expenses - Disallowance of 10% of telephone, travelling, conveyance expenses and 10% disallowance of depreciation on cars. - HELD THAT: - The AO disallowed 10% as representative of personal/non business use where verification was incomplete or personal use could not be ruled out. On appeal, the assessee produced vouched evidence for travel (majority being air, hotels and supported by ledgers), and the Tribunal found no specific instances to sustain the travel disallowance, therefore deleting it. Telephone expenditure lacked any allocation or basis to quantify personal use, and in absence of such material the 10% disallowance on telephone expenses was upheld as reasonable. Conveyance disallowance was confirmed as no specific contrary case was made. Depreciation on cars, being a statutory allowance and uncontested as assets of the firm, cannot be disallowed on account of personal use; therefore the disallowance in respect of depreciation was deleted, subject to the Revenue's right to tax personal use of vehicles by other routes if established. [Paras 9]

Travel disallowance deleted; 10% disallowance on telephone expenses upheld; conveyance disallowance confirmed; disallowance of depreciation on cars deleted.

Vouching and evidentiary sufficiency for business expenses - apportionment of business and personal expenditure - Disallowance of 10% of entertainment and staff refreshment expenses. - HELD THAT: - The AO disallowed 10% on the ground that vouchers and supporting evidence were incomplete. The assessee explained the nature of the expenditure as refreshments offered to customers and staff, and demonstrated the quantum relative to turnover. Having regard to the nature of the business and the modest proportion of such expenditure to turnover, the Tribunal found the expenditure reasonable and the AO's addition unsustainable. [Paras 12]

10% disallowance of entertainment and staff refreshment expenses deleted.

Final Conclusion: The appeal is partly allowed: the disallowance of interest as revenue expenditure is upheld but depreciation on the capitalized interest is allowed; telephone and conveyance disallowances are treated differently (telephone 10% upheld; conveyance confirmed); travel and depreciation on cars disallowances are deleted; entertainment and staff refreshment disallowance is deleted.

Penalty under section 271(1)(c) for concealment of income or furnishing inaccurate particulars - validity of notice under section 274 and requirement to specify the limb of section 271(1)(c) - non-application of mind in initiation of penalty proceedings - invalidity of a draft penalty order - principles of natural justice - prejudice from an ambiguous notice

Validity of notice under section 274 and requirement to specify the limb of section 271(1)(c) - non-application of mind in initiation of penalty proceedings - invalidity of a draft penalty order - principles of natural justice - prejudice from an ambiguous notice - Whether the penalty proceedings and penalty order initiated and passed by the Assessing Officer under section 271(1)(c), when the notice did not clearly specify which limb of section 271(1)(c) was invoked and a proforma/draft order was used, are valid in law. - HELD THAT: - The Tribunal examined the notice and the draft penalty order and found that the Assessing Officer had proceeded without clearly specifying whether proceedings were initiated for 'concealment of income' or for 'furnishing inaccurate particulars', and had used a proforma in which inapplicable portions were not struck out. Reliance was placed on Dilip N. Shroff v. JCIT and the decision of the Bombay High Court in Samson Perincherry which require that the assessee be given notice of the specific ground on which penalty proceedings are initiated so as to enable a meaningful opportunity to be heard; initiation and imposition of penalty on a ground different from that on which the notice was issued, or where there is non-application of mind in framing the notice, is impermissible. The Tribunal observed that mere linguistic or clerical errors will not invalidate proceedings where no prejudice is caused, but on the facts the AO's use of the unmodified proforma and the imposition of penalty for concealment when the proceedings had not been properly and distinctly framed demonstrated non-application of mind and deprived the assessee of a proper opportunity to meet the case. Following the cited precedents, the Tribunal concluded that the penalty proceedings were vitiated on this preliminary ground, rendering the penalty order invalid without needing to adjudicate the merits of the additions. [Paras 9]

Penalty proceedings initiated by the AO are bad in law for non-application of mind and for failing to specify the limb of section 271(1)(c) in the notice; the penalty order is invalid.

Final Conclusion: The appeal by the Revenue is dismissed and the assessee's cross-objection is allowed: the penalty proceedings/order under section 271(1)(c) are held invalid for the preliminary defect in initiation (failure to specify the applicable limb and non-application of mind), rendering further merits adjudication academic.

Rejection of books of account under Section 145(3) - estimation of turnover on information from Excise Department - taxation of suppressed sales by applying net profit rate - application of a fair and reasonable net profit rate based on past history and comparable cases - direction to apply net profit rate of 2.7% after deducting interest and salary subject to minimum returned income

Rejection of books of account under Section 145(3) - estimation of turnover on information from Excise Department - Validity of rejection of assessee's books and of estimation of turnover by the Assessing Officer - HELD THAT: - The Tribunal upheld the finding that the Assessing Officer was justified in rejecting the books of account under Section 145(3) because sales were unsupported by required day-to-day/shop-wise records, and the Assessing Officer's reliance on information procured from the Excise Department for estimating turnover was proper. The CIT(A)'s concurrence with the AO on rejection of books and estimation of turnover was held to be in conformity with law and supported by the record. [Paras 10, 11]

Rejection of books under Section 145(3) and estimation of turnover by the AO on the basis of Excise Department information upheld.

Taxation of suppressed sales by applying net profit rate - application of a fair and reasonable net profit rate based on past history and comparable cases - Whether the entire estimated suppressed sales can be treated as income or only the net profit part is taxable - HELD THAT: - Relying on the jurisdictional High Court precedents and Tribunal decisions, the Tribunal held that the entire estimated sales cannot be taxed as income where books are rejected; instead, only the net profit component is taxable. The Tribunal emphasised that estimation of profit is a question of fact and that past history of the assessee and comparable cases on parity of facts are the appropriate guides for fixing net profit rate. Consequently, the department's contention that the difference in sales be treated as income was rejected. [Paras 15, 16, 33]

Only the net profit part of the estimated suppressed sales is taxable; the AO cannot treat the entire estimated turnover as income.

Application of a fair and reasonable net profit rate based on past history and comparable cases - direction to apply net profit rate of 2.7% after deducting interest and salary subject to minimum returned income - Appropriate net profit rate to be applied on estimated sales for the assessment years in issue - HELD THAT: - The Tribunal found the 3% net profit rate adopted by the CIT(A) to be on the higher side in view of the assessee's past declared net profit rates and comparable decisions of the jurisdictional High Court and other ITAT Benches which indicated lower NP rates. The Tribunal noted that the CIT(A) had not recorded reasons for selecting 3% over the comparable precedents and the assessee's own history. Applying the principle that past history and comparable cases are the best guide, the Tribunal held that a net profit rate of 2.7% on the AO's estimated sales (after deducting interest and salary to partners) is just and reasonable, subject to the safeguard that income shall not fall below returned income. [Paras 13, 14]

AO directed to apply a net profit rate of 2.7% on estimated sales after deducting interest and salary to partners, subject to minimum returned income.

Final Conclusion: The assessee's appeals are partly allowed and the department's appeals are dismissed: the AO's rejection of books and estimation of turnover are upheld, but only the net profit portion is taxable and the AO is directed to compute income by applying a 2.7% net profit rate on the estimated sales after deducting interest and salary to partners, subject to the minimum returned income.

Transfer pricing - aggregation of transactions - Most appropriate method - TNMM and use of external comparables - Profit level indicator - net profit to sales vs net profit to cost - Range +/-5% tolerance under Section 92C(2) proviso - Benchmarking of procurement support services aggregated with manufacturing activity - Deduction under section 80IB - allocation of common / head office expenses - Section 14A disallowance and Rule 8D methodology - Additional claim not made in return - appellate consideration of bad debts and application of section 36(1)(vii) r.w.s. 36(2) - Weighted deduction under section 35(2AB) - approval of in house R&D facility by prescribed authority (DSIR) and role of Form No.3CM / Form No.3CL - Distinction between role of prescribed authority and Assessing Officer in allowing weighted deduction under section 35(2AB)

Transfer pricing - aggregation of transactions - Aggregation of international transactions under the manufacturing activity for transfer pricing benchmarking - HELD THAT: - The Tribunal applied its earlier decisions in the assessee's own cases (AYs 2007 08 and 2008 09) and the principles in Sony Ericsson to hold that where various activities are interlinked with export of manufactured IC engines, those international transactions must be aggregated for benchmarking. Following that parity, the Tribunal allowed the assessee's challenge to the rejection of the aggregation approach and directed that the aggregation be accepted for the year under appeal. [Paras 10]

Aggregation approach accepted; ground No.1.2 allowed.

Most appropriate method - TNMM and use of external comparables - Distinction between controlled and uncontrolled transactions - Application of TNMM after aggregation and requirement to compare assessee's margins with external comparables - remand for quantification - HELD THAT: - Following its earlier orders, the Tribunal held that once aggregation of related transactions is accepted, the transactional net margin method (TNMM) requires comparison of the assessee's margins with those of external (uncontrolled) comparables. The TPO had not verified comparison with external comparables; accordingly the matter was directed back to the Assessing Officer/TPO to consider the assessee's case, determine arm's length price and recompute any adjustment in accordance with law. [Paras 11, 12]

Decision on methodology: margins to be compared with external comparables under TNMM; remanded to Assessing Officer/TPO for determination and recomputation.

Profit level indicator - net profit to sales vs net profit to cost - Appropriate Profit Level Indicator (PLI) to be net profit to sales - HELD THAT: - Relying on precedents in the assessee's prior years, the Tribunal accepted the assessee's contention that for manufacture of components whose profitability is sales driven, PLI should be net profit to sales rather than net profit to total cost. The Tribunal directed the Assessing Officer to adopt net profit to sales for benchmarking the international transactions. [Paras 13, 14, 15]

PLI to be net profit to sales; ground No.4.1 allowed.

Range +/-5% tolerance under Section 92C(2) proviso - Availability of +/-5% tolerance from arithmetic mean for transfer pricing comparability - HELD THAT: - The Tribunal, following its previous decisions for earlier assessment years, held that the tolerance range of +/-5% around the arithmetic mean is available and the benefit must be given where variation does not exceed that margin. [Paras 16]

Benefit of +/-5% tolerance available; ground No.5 allowed.

Benchmarking of procurement support services aggregated with manufacturing activity - Whether procurement support services must be aggregated with manufacturing international transactions for benchmarking - HELD THAT: - The Tribunal followed its prior reasoning that technical know how fees and procurement support services are to be aggregated along with other international transactions under the head 'manufacturing activity'. Consequently such services are to be benchmarked as part of the aggregated manufacturing transactions. [Paras 17, 19]

Procurement support services to be aggregated and benchmarked with manufacturing transactions; grounds No.6.1 and 6.2 allowed.

Deduction under section 80IB - allocation of common / head office expenses - Allocation of common expenses to eligible unit for section 80IB deduction - HELD THAT: - Applying parity with earlier tribunal orders, the Tribunal upheld the lower authorities' allocation of head office expenses and director's salary to the Daman unit and the consequent recomputation of deduction under section 80IB. The assessee's challenge was dismissed following prior precedent. [Paras 21]

Grounds No.7.1 and 7.2 dismissed; allocation upheld.

Section 14A disallowance and Rule 8D methodology - Disallowance under section 14A and application of Rule 8D; first step satisfaction requirement - HELD THAT: - The Tribunal followed its earlier order for AY 2008 09. It held that in absence of the Assessing Officer recording the requisite satisfaction under section 14A(2), the mechanical disallowance was not justified. Having considered the assessee's submissions and documentary working, the Tribunal sustained a limited Rule 8D disallowance (as per the assessee's working) and refrained from making any interest disallowance given the assessee's cash position. The appeal was partly allowed in respect of section 14A. [Paras 25, 26]

Section 14A disallowance partly allowed; disallowance sustained to the limited extent directed by the Tribunal.

Additional claim not made in return - appellate consideration of bad debts and application of section 36(1)(vii) r.w.s. 36(2) - Claim of bad debts inadvertently not made in return - remit to Assessing Officer for verification - HELD THAT: - Relying on High Court authority allowing additional claims before appellate authorities, the Tribunal held that the assessee's additional claim for bad debts (not originally in the return) merits consideration. The Tribunal directed the Assessing Officer to verify the claim and decide allowability in accordance with law (section 36 provisions), after affording opportunity of hearing. Noting some amounts already allowed, the remaining claim is to be adjudicated afresh. [Paras 30, 32]

Ground No.9.1 allowed for consideration; matter remanded to Assessing Officer for verification and decision.

Weighted deduction under section 35(2AB) - approval of in house R&D facility by prescribed authority (DSIR) and role of Form No.3CM / Form No.3CL - Distinction between role of prescribed authority and Assessing Officer in allowing weighted deduction under section 35(2AB) - Allowability of weighted deduction under section 35(2AB) where facility is approved by DSIR though Form No.3CL did not quantify expenditure pre amendment - HELD THAT: - The Tribunal examined statutory provisions and Rule 6 and held that under the pre 2016 regime approval of the facility by the prescribed authority (DSIR) and related agreement/recognition is the key condition for entitlement to weighted deduction. Prior to the 2016 amendment, Form No.3CL did not require DSIR to quantify year to year expenditure; quantification was introduced only by IT (Tenth Amendment) Rules w.e.f. 01.07.2016. Therefore, Assessing Officer had no warrant to curtail the weighted deduction on the basis that DSIR had certified only part of the expenditure in Form No.3CL. Once facility recognition and requisite agreement/approval exists, the Assessing Officer's role is to allow expenditure in accordance with section 35(2AB). The Tribunal accordingly reversed the reduction made by the Assessing Officer. [Paras 40, 41, 42, 45, 46]

Grounds No.10.1, 10.2 and 10.3 allowed; Assessing Officer's curtailment of weighted deduction reversed and full entitlement under section 35(2AB) acknowledged in accordance with DSIR facility approval.

Final Conclusion: The appeal is partly allowed. Aggregation of manufacturing related international transactions accepted; TNMM is to be applied comparing assessee's margins with external comparables and the matter remanded to the Assessing Officer/TPO for determination and recomputation. PLI is to be net profit to sales; +/-5% tolerance is available; procurement support services are to be aggregated with manufacturing. Section 80IB allocation was upheld against the assessee; section 14A disallowance was partly sustained in the limited manner directed; the additional bad debts claim not in the return is remitted for verification; and the Assessing Officer's curtailment of weighted deduction under section 35(2AB) is reversed and the deduction allowed in accordance with DSIR facility approval.

Capital contribution by a partner - loan or deposit within the meaning of section 269SS of the Act - penalty under section 271D of the Act

Capital contribution by a partner - loan or deposit within the meaning of section 269SS of the Act - penalty under section 271D of the Act - Whether penalty under section 271D was leviable for cash receipt of capital contributed by a partner to the partnership firm. - HELD THAT: - The Tribunal upheld the conclusion of the Ld. CIT(A) that introduction of funds by a partner as capital in the partnership firm does not amount to a loan or deposit within the meaning of section 269SS of the Act. The Ld. CIT(A) noted that the partner had reflected the amount introduced as capital in his individual balance sheet and the firm had treated the receipts as capital contribution. On that basis the Tribunal found no basis for treating the cash receipt as a prohibited loan or deposit attracting penalty under section 271D, and therefore there was no infirmity in deleting the penalty. [Paras 4, 5]

Penalty under section 271D cancelled as the cash receipt was a capital contribution by the partner and not a loan or deposit within the meaning of section 269SS; revenue's grounds dismissed.

Final Conclusion: The appeal by the revenue is dismissed; the deletion of penalty under section 271D for Asst Year 2009-10 is sustained.

Confiscation for non-compliance with compulsory registration scheme of the Bureau of Indian Standards - confiscation for misdeclaration of value - sequential application of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - reliance on contemporaneous imports for valuation - application of the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 - invocation of section 11 of the Customs Act, 1962 in the context of IPR enforcement - requirement of notice and indemnity by local right holder under the IPR Enforcement Rules - redeption of confiscated goods subject to re-export

Confiscation for non-compliance with compulsory registration scheme of the Bureau of Indian Standards - confiscation for misdeclaration of value - sequential application of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - reliance on contemporaneous imports for valuation - Validity of confiscation and value enhancement in respect of SONY television sets - HELD THAT: - The Tribunal found that the SONY television sets were procured from sources supplying M/s Sony India Ltd and that registration for import by M/s Sony India Ltd was approved; accordingly confiscation under the compulsory registration scheme (section 111(d)) was not tenable. Separately, although the original authority relied on prices furnished by M/s Sony India Ltd, the adjudicating authority was required to apply the Customs Valuation Rules sequentially and to consider contemporaneous imports and any factors reducing the intimation value before rejecting declared value. The record showed contemporaneous bills of entry produced by the appellants were disregarded without proper application of the mandated sequence of valuation rules and without evidence of comparable contemporaneous imports supporting the enhancement. For these reasons the finding of misdeclaration and confiscation under section 111(m) was held incorrect and the assessable value enhancement set aside; assessment is to proceed on the declared value. [Paras 6, 7, 14, 15]

Confiscation of SONY television sets and re-determination of their value set aside; assessment to proceed on declared value.

Confiscation for non-compliance with compulsory registration scheme of the Bureau of Indian Standards - redeption of confiscated goods subject to re-export - Validity of confiscation and redemption condition in respect of SAMSUNG television sets - HELD THAT: - There was no evidence of registration for the SAMSUNG sets under the compulsory registration scheme; non-registration being a pre-requisite for import into the domestic market and necessary to secure consumer safety and compliance with the Foreign Trade Policy, confiscation under section 111(d) was sustained. Because the goods are not to be permitted entry into the domestic market, conditional redemption subject to re-export was appropriate. However, considering the circumstances and that the goods will not be cleared into domestic market, the Tribunal reduced the magnitude of the redemption fine from that imposed by the adjudicating authority. [Paras 6, 7, 15]

Confiscation of SAMSUNG television sets upheld; redemption allowed subject to re-export with reduced fine.

Application of the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 - invocation of section 11 of the Customs Act, 1962 in the context of IPR enforcement - requirement of notice and indemnity by local right holder under the IPR Enforcement Rules - scope of customs jurisdiction under the IPR Enforcement Rules - Validity of absolute confiscation and penalty in respect of SONY panels imported by M/s Ideal Impex under IPR enforcement - HELD THAT: - The Tribunal held that the IPR Enforcement Rules operate to permit border intervention only within the limits and procedures they prescribe. Those Rules require participation of the local right holder, notice to customs and indemnification (security/bond) before customs may proceed to interdiction and confiscation under section 11. The record did not show compliance with these pre-requisites by the local right holder; consequently invocation of section 11 and imposition of absolute confiscation and penalties without following the required procedure amounted to excess of jurisdiction. The Rules are directed at counterfeits detected through the prescribed process; absent that process the goods could not be treated as infringing for customs confiscation. [Paras 9, 10, 11, 12, 13]

Absolute confiscation of SONY panels and the enhancement of their assessable value set aside; penalties tied to such confiscation set aside.

Final Conclusion: Appeals allowed in part: confiscation and value enhancement in respect of SONY television sets and SONY panels are set aside and assessment is to proceed on declared values; confiscation of SAMSUNG television sets is upheld but conditional redemption subject to re-export is permitted with the redemption fine reduced to Rs. 5,00,000/-. Appeals disposed to this extent.

Classification of projectors as "Projectors solely or principally used with Automatic Data Processing Machines" - Entitlement to customs duty exemption under Notification No. 24/2005-Cus. and successor notifications for goods classifiable under CTH 85286100 - Classification under alternative CTH 85286900 where goods have additional video features - Central Value Determination under Section 4A of the Central Excise Act - CVD on MRP versus transaction value - Applicability of Standards of Weights and Measures (Legal Metrology) exclusions to supplies to institutional consumers and warranty replacements - Requirement to pay Special Additional Duty (SAD) on imported goods

Classification of projectors as "Projectors solely or principally used with Automatic Data Processing Machines" - Entitlement to customs duty exemption under Notification No. 24/2005-Cus. and successor notifications for goods classifiable under CTH 85286100 - Imported projectors are classifiable under CTH 85286100 and are entitled to benefit of Notification No. 24/2005-Cus. and successor notifications - HELD THAT: - The Tribunal examined technical specifications (native resolution, contrast ratio, aspect ratio and other literature) and earlier decisions on identical products and found that the projectors are principally used with ADP machines despite video compatibility. Prior CESTAT pronouncements, including decisions in appellant's own matters and other benches, support classification under sub-heading 8528.61 where the description covers goods "solely or principally used" with ADP systems. The departmental classification under 85286900 was therefore set aside and the imported projectors were ordered to be classified under CTH 85286100 with the attendant entitlement to the exemption notifications for basic customs duty. [Paras 5]

Impugned classification under 85286900 set aside; projectors held under CTH 85286100 with benefit of Notification No. 24/2005-Cus. and successor notifications.

Central Value Determination under Section 4A of the Central Excise Act - CVD on MRP versus transaction value - Applicability of Standards of Weights and Measures (Legal Metrology) exclusions to supplies to institutional consumers and warranty replacements - Requirement to pay Special Additional Duty (SAD) on imported goods - CVD for projectors supplied as warranty replacements and those supplied to educational institutions is to be levied on transaction value (not on MRP); such consignments are not required to bear MRP under Legal Metrology rules; SAD remains payable - HELD THAT: - The Tribunal noted that bills of entry specifically declared certain consignments as warranty replacements and others as supplies to educational institutions. Under the Standards of Weights and Measures Rules (and the 2011 Rules), packages not for retail sale and supplies to institutional consumers are excluded from the requirement to declare MRP. Drawing on the Tribunal's reasoning in Bharti Telemedia (set top box warranty/supply context), warranty replacements and institutional supplies do not constitute sales requiring MRP declaration; therefore CVD under Section 4A based on MRP is not applicable. Instead, CVD must be paid on transaction value and SAD is required to be paid; the adjudicating authority was directed to verify whether CVD and SAD were paid accordingly. [Paras 5]

Demand for differential duty on account of charging CVD on MRP set aside for warranty replacements and institutional supplies; CVD payable on transaction value and SAD payable; adjudicating authority to verify compliance.

Final Conclusion: All impugned orders demanding differential customs duty and imposing penalties are set aside: projectors held classifiable under CTH 85286100 with entitlement to Notification No. 24/2005-Cus. and successors; CVD for warranty replacements and supplies to educational institutions to be on transaction value (not MRP) and SAD payable; adjudicating authority to verify payment as directed; appeals allowed.

Oppression and mismanagement - right of shareholders to intervene - status quo in shareholding and capital - right to transfer shares of a public limited company - modification/vacation of interim order

Right of shareholders to intervene - oppression and mismanagement - Applicants holding 12.5% of paid up share capital of Vadodara Stock Exchange Ltd. may be added as parties to the company petition and allowed to file pleadings. - HELD THAT: - The Tribunal found that the main petition alleges acts of oppression and mismanagement in the conduct of Vadodara Stock Exchange Ltd. The intervening applicants are shareholders and have sworn that their requisition for calling an Extra Ordinary General Meeting was rejected by the company's chairman. Given their stake and their interest in questioning alleged oppressive conduct, their right to participate in the proceedings cannot be denied merely because their cause of action overlaps with that of the original petitioner. Allowing intervention will not change the fundamental cause of action; the Tribunal will ultimately decide on the allegations of oppression and mismanagement on merits at final hearing. Consequently, the intervening applicants are proper and necessary parties and shall be added as respondents and permitted to file pleadings. [Paras 13, 15]

Intervening Petition No. 2 of 2017 allowed; applicants to be added as respondents No. 16 to 18 and to file pleadings.

Status quo in shareholding and capital - right to transfer shares of a public limited company - modification/vacation of interim order - Applicants not yet parties may be permitted, to a limited extent, to sell their shares despite the interim status quo order, subject to regulatory approvals and without altering the company's authorised or paid up share capital. - HELD THAT: - The Tribunal examined the interim order of the Company Law Board directing maintenance of status quo in respect of the shareholding and capital. Relying on the principle that shares of a public limited company remain transferable, the Tribunal held that the CLB order related to maintaining the authorised and paid up share capital and the shareholding pattern, and did not constitute a blanket prohibition on individual shareholders selling their shares. Even allegations of collusion or acquisition of majority do not justify restraining shareholders from selling if they have bona fide offers. Therefore, applicants in the batch IAs are permitted to sell their shares to any person of their choice, subject to any approvals required by regulatory authorities, provided there is no change to the authorised share capital or paid up share capital and the overall shareholding pattern remains unaffected. For these limited purposes the applicants' intervention is necessary and is allowed. [Paras 24, 26, 27]

IA 291, 293, 295 to 297, 299, 300, 302 to 311 of 2017 disposed of permitting the applicants to sell their shares subject to regulatory approval and with no change in authorised or paid up share capital; Intervening Petition No. 3 of 2017 allowed to the limited extent indicated.

Final Conclusion: The Tribunal allowed Intervening Petition No. 2 of 2017, directing addition of the intervening shareholders as parties; and allowed intervention and the batch IAs to the limited extent of permitting the applicants to sell their shares subject to regulatory approvals, while maintaining that there shall be no change in the authorised share capital, paid up share capital or the shareholding pattern of Vadodara Stock Exchange Ltd.

Financial debt - financial creditor - assured return - contractual debt versus financial debt - initiation of Corporate Insolvency Resolution Process under Section 7 - cessation of liability upon licensing and handing over possession

Assured return - financial debt - cessation of liability upon licensing and handing over possession - Whether the claim for 'assured return' asserted by the applicants till January 2018 constitutes a 'financial debt'. - HELD THAT: - The Tribunal examined the contractual scheme, reproduced Clause 9 of the MOU and noted that 'assured return' was contractually payable only up to the point the premises is constructed and licensed, after which the developer's liability ceases. The record shows the premises were licensed and possession given to the licensee in May 2016. Applicants conceded that assured returns were paid only up to November 2015 and claimed amounts thereafter up to January 2018 without satisfactorily explaining or proving entitlement for that period. The claim thus prima facie seeks payment after completion and licensing contrary to the contractual term; the debt claimed involves disputed, complex contractual questions (including allegations of applicant breaches and CAM charges) which cannot be treated as a simple 'financial debt' for the limited scope of a Section 7 application. Consequently the claimed assured return until January 2018 does not, on the material before the Tribunal, fall within the definition of 'financial debt'. [Paras 27, 28, 29, 30, 31]

The claim for assured return till January 2018 is not established as a 'financial debt' on the record and, prima facie, is inconsistent with the contractual cessation of liability upon licensing and possession.

Financial creditor - initiation of Corporate Insolvency Resolution Process under Section 7 - contractual debt versus financial debt - Whether the applicants qualify as 'financial creditors' entitled to maintain an application under Section 7 of the Code. - HELD THAT: - Section 7 permits only a 'financial creditor' to file for initiation of CIRP and the applicant must prove the existence of a 'financial debt'. Because the Tribunal found that the asserted assured return claim (the basis of the application) does not, on the available material, constitute a 'financial debt' and that the claim involves contested contractual issues and alleged breaches by the applicants, the applicants failed to establish that a financial debt was owed to them. The onus lay on the applicants to substantiate entitlement to assured return till January 2018, which they did not discharge. As they do not fall within the definition of 'financial creditor' for the disputed claim, they are not entitled to invoke Section 7. [Paras 29, 30, 31, 32, 33]

Applicants do not qualify as 'financial creditors' in respect of the disputed claim and therefore the Section 7 application is not maintainable.

Final Conclusion: The Section 7 petition is dismissed as not maintainable because the applicants have not established that the claimed assured return until January 2018 is a 'financial debt' and therefore are not 'financial creditors' entitled to initiate CIRP; the Tribunal's observations are confined to maintainability and do not prejudice parties' rights before other fora.

Exercise of appellate power to remand for fresh adjudication - refund claim under Notification No. 12/2013-ST - specified services approved by the Unit Approval Committee/Development Commissioner of SEZ - limitation for refund under Section 11B - computation in conformity with Rule 5 of CENVAT Credit Rules

Exercise of appellate power to remand for fresh adjudication - Validity of the Commissioner (Appeals)' order remanding the refund claims to the original adjudicating authority for fresh consideration. - HELD THAT: - The Commissioner (A) set aside the Orders-in-Original and remanded the refund claims to the original authority with observations and directions to decide the claims afresh in accordance with law as laid down by appellate authorities and the High Court. The Tribunal, after hearing the parties and perusing the record, found no infirmity in that course: the appellate authority was within its jurisdiction to remit the matter for fresh adjudication so that the original authority may examine the claim and relevant legal precedents and decide on merits. The Tribunal noted the submissions of the Revenue but did not disturb the remand since the Commissioner (A)'s direction to reconsider the refund claims in the light of applicable law warranted fresh adjudication rather than summary interference by the Tribunal.

Impugned order remanding the matter is upheld and the appeals filed by the Revenue are dismissed.

Refund claim under Notification No. 12/2013-ST - specified services approved by the Unit Approval Committee/Development Commissioner of SEZ - limitation for refund under Section 11B - computation in conformity with Rule 5 of CENVAT Credit Rules - Whether the refund claims (including eligibility of specific services as specified services and computation of limitation) should be finally adjudicated by the original authority or determined at the appellate stage. - HELD THAT: - The Revenue contended that refund allowed under the Notification is limited to specified services approved by the Unit Approval Committee/Development Commissioner and that the services claimed do not figure in that list; it also relied on precedent concerning computation of limitation under Section 11B by applying Rule 5 of CENVAT Credit Rules. The Commissioner (A) remitted the matter for fresh adjudication to enable the original authority to examine these contentions and the relevant legal position. The Tribunal did not decide the merits of these factual and legal contentions itself but directed that they be examined afresh by the original adjudicating authority in accordance with law. Accordingly, the questions of whether the services claimed are within the list of specified services and the proper computation of limitation remain to be finally decided by the original authority on remand.

Matters concerning eligibility of the claimed services under the Notification and the computation of limitation are remanded to the original adjudicating authority for fresh determination.

Final Conclusion: The Tribunal found no infirmity in the Commissioner (Appeals)' remand order; the remand is upheld, the Revenue's appeals are dismissed, and the original authority is directed to decide the refund claims for January 2016 to March 2016 afresh in accordance with law.

Imposition of penalty under Sections 77 and 78 of the Finance Act, 1994 - reverse charge mechanism for payment of service tax - payment of service tax with interest prior to issuance of show-cause notice - bar on issuing show-cause notice after payment under Section 73(3) of the Finance Act, 1994

Imposition of penalty under Sections 77 and 78 of the Finance Act, 1994 - payment of service tax with interest prior to issuance of show-cause notice - bar on issuing show-cause notice after payment under Section 73(3) of the Finance Act, 1994 - Whether penalty for non-payment of service tax under reverse charge could be imposed when service tax and interest were paid before issuance of the show-cause notice - HELD THAT: - The Tribunal found that the appellant had paid the service tax along with applicable interest before issuance of the show-cause notice and had furnished particulars of such payment to the authorities. Applying the statutory protection contained in Section 73(3) of the Finance Act, 1994 and following the ratio of the Karnataka High Court in CCE & ST, LTU Vs. Adecco Flexione Workforce Solutions Ltd., the Tribunal held that once tax and interest are paid and the authorities are so informed, a notice seeking imposition of penalty in respect of the amount paid ought not to be issued. The appellate authority's confirmation of penalty under Sections 77 and 78 was therefore held contrary to that principle and unsustainable in law.

Impugned order imposing penalty under Sections 77 and 78 set aside and appeal allowed.

Final Conclusion: The appeal is allowed: because the appellant paid the service tax with interest before the show-cause notice and informed the authorities, the penalty confirmed under Sections 77 and 78 was set aside under Section 73(3) of the Finance Act, 1994.

Proportionate reversal of CENVAT credit - Rule 6(3) of the CENVAT Credit Rules, 2004 - CENVAT credit treated as not availed ab initio upon reversal - demand of 6% of the value of exempted service - remand for verification and de novo adjudication

Proportionate reversal of CENVAT credit - CENVAT credit treated as not availed ab initio upon reversal - demand of 6% of the value of exempted service - Effect of reversal of proportionate CENVAT credit on liability to pay 6% of value of exempted service - HELD THAT: - The Tribunal found on the record that the appellant had reversed the proportionate CENVAT credit on 22/02/2016 prior to the adjudication order. Relying on the principle laid down in Chandrapur Magnet Wires (that reversal of CENVAT credit is to be treated as not availed ab initio) and consistent decisions of Tribunals and High Courts (including Jai Balaji Industries Ltd.), the Bench held that where a proportionate reversal has in fact been made, the appellant is not required to pay the 6% of the value of the exempted service as an alternative demand. The Tribunal observed that the facility of proportionate reversal is intended to mitigate difficulties where inputs/input services are commonly used for dutiable and exempted activities, and that substantial benefit of such reversal should not be denied merely for procedural imperfections if the reversal was already effected before adjudication.

Reversal already made by the appellant precludes a demand for 6% of the value of the exempted service, subject to verification that the reversal satisfies the statutory requirement.

Rule 6(3) of the CENVAT Credit Rules, 2004 - remand for verification and de novo adjudication - Whether the adjudicating authority must verify the adequacy and compliance of the proportionate reversal and pass fresh order - HELD THAT: - Although the appellant had effected a reversal, the lower authorities did not examine whether the quantum and manner of reversal met the requirements of Rule 6(3) of the CCR, 2004 or consider the worksheets and documents relied upon by the appellant. The Tribunal noted precedents where remand for verification was directed when lower authorities failed to determine if the reversal satisfied the statutory test. In view of the absence of any finding by the original authority on the adequacy of reversal and the Commissioner(Appeals)'s remark about non-submission of worksheet/CA certificate, the Tribunal considered it appropriate to remit the matter for verification. The original authority is to conduct de novo adjudication after affording the appellant opportunity to produce supporting documents and complying with principles of natural justice.

Matter remitted to the original adjudicating authority to verify whether the proportionate reversal satisfies Rule 6(3) and to pass a de novo order after providing opportunity to the appellant; appeal allowed to the extent of remand.

Final Conclusion: The appeal is allowed by way of remand: since the appellant effected a proportionate reversal prior to adjudication, no automatic demand for 6% is justified unless the original authority, upon de novo verification under Rule 6(3) and after affording opportunity to the appellant, finds the reversal inadequate; the matter is sent back for such verification and fresh adjudication.

Entitlement to Cenvat Credit on inputs and input services used for providing output services - Eligibility of Cenvat Credit on capital goods used for providing output services - Interpretation of 'input service' under the Cenvat Credit Rules, 2004 - Availability of Cenvat Credit for renting of immovable property service - Consequential relief upon successful appeal

Entitlement to Cenvat Credit on inputs and input services used for providing output services - Availability of Cenvat Credit for renting of immovable property service - Interpretation of 'input service' under the Cenvat Credit Rules, 2004 - Appellant entitled to avail Cenvat Credit of Central Excise duty and service tax paid on inputs and input services for discharge of Service Tax on renting of immovable property - HELD THAT: - The Tribunal held that inputs (cement, glass, steel) and input services (architect and works contract services) used in construction which is subsequently let out and taxed under the category 'Renting of Immovable Property' qualify for Cenvat Credit. The conclusion follows the interpretation of 'input service' under the Cenvat Credit Rules, 2004 which, during the relevant period, encompassed services used by a provider of taxable service for providing an output service, including services relating to setting up or renovation of premises. The Tribunal relied on earlier decisions, including the High Court ruling that goods and services used in relation to production or provision of an output service are eligible for credit unless expressly excluded, and prior single-member Bench orders applying that principle to letting/renting activities. Applying those precedents, the impugned denial of credit in respect of the specified inputs and input services was set aside and the appeal allowed with consequential relief. [Paras 4, 5]

Impugned Order-in-Original set aside; appellant entitled to Cenvat Credit on the specified inputs and input services for the period April, 2007 to March, 2012 and granted consequential relief.

Eligibility of Cenvat Credit on capital goods used for providing output services - Entitlement to Cenvat Credit for capital goods in renting of immovable property service - Appellant entitled to avail Cenvat Credit on capital goods used for providing renting of immovable property service - HELD THAT: - The Tribunal, following its earlier decisions, held that capital goods used in relation to provision of output services such as renting of immovable property are eligible for Cenvat Credit. The reasoning emphasises that where capital goods and input services are employed to bring into existence premises which are thereafter used to render taxable output services, such inputs and capital goods fall within the scope of the definition of inputs/input services under the Cenvat Credit Rules, 2004. The adjudicating authority's reliance on Board circulars that went beyond the statutory definition was rejected, and the Tribunal applied precedent which recognised credit in similar factual settings. [Paras 6, 7]

Impugned order insofar as it denied Cenvat Credit on capital goods is set aside; appellant entitled to avail Cenvat Credit on capital goods used for renting of immovable property.

Final Conclusion: The impugned Order-in-Original is set aside and the appeal is allowed; the appellant is entitled to Cenvat Credit on the inputs, input services and capital goods used for providing the renting of immovable property service for the period April, 2007 to March, 2012, and shall receive consequential relief as per law.

Taxability of construction services under affordable housing schemes - taxability of construction of educational and institutional buildings - taxability of construction of hostels and hospitals as taxable service - exemption for works executed on behalf of government/Ministry of Defence - reliance on binding tribunal precedents in tax adjudication

Taxability of construction services under affordable housing schemes - reliance on Tribunal precedent - Construction of 254 EWS flats under Manyawar Sh. Kanshiram Sahari Gareeb Awas Yojna is not liable to service tax. - HELD THAT: - The Tribunal applied its earlier decision in NCR Builders Pvt. Ltd. vs. CCE & ST, Ghaziabad [2017 (3) GSTL 198 (Tri-All)] which held that construction of flats under the Manyawar Sh. Kanshiram Sahari Gareeb Awas Yojna is not taxable. Having regard to that precedent and the material on record, the impugned finding of the Commissioner (Appeals) that service tax is not applicable to the MKSGAY flats was affirmed. The Court found no reason to depart from the Tribunal's earlier reasoning and therefore upheld the non-taxability determination.

Finding of non-taxability in respect of MKSGAY EWS flats upheld; no service tax payable.

Taxability of construction of educational and institutional buildings - taxability of construction of hostels and hospitals as taxable service - Construction of mess, hostel blocks, auditorium and school buildings for educational institutions is not subject to service tax. - HELD THAT: - The Tribunal's decision in M/s. Jatan Construction P Ltd. vs. CCE, Jaipur II (Final Order No. 58135/2017 dated 21.11.2017) was followed, wherein construction of PG hostel and certain institutional buildings were held not subject to service tax. Applying that precedent to the facts before it, the Court upheld the Commissioner (Appeals) finding that the construction works for the educational institutions listed in the order are not taxable services. The decision rests on the reasoning and conclusions drawn in the cited tribunal authority and the record now before the Court.

Impugned order holding construction for educational institutions non-taxable sustained.

Exemption for works executed on behalf of government/Ministry of Defence - reliance on Tribunal precedent - Services rendered to NKG Infrastructure in relation to a project for the Armed Forces (Ministry of Defence) are not subject to service tax. - HELD THAT: - The Tribunal's view in Commissioner of Central Excise, Raipur vs. P D Agrawal [2017 (49) STR 231 (Tri-Del)]-which exempted a Ministry of Defence project from service tax-was followed. On application of that precedent to the services provided to NKG Infrastructure for the Armed Forces project, the impugned order's conclusion of non-taxability was sustained. The Court found the earlier tribunal authority directly applicable and declined to interfere with the Commissioner (Appeals) order.

Finding of exemption/non-taxability for work related to the Armed Forces project upheld.

Final Conclusion: The departmental appeal is dismissed and the impugned order of the Commissioner (Appeals), holding the cited construction services and services related to the Armed Forces project not liable to service tax, is upheld.

Eligibility to CENVAT credit on courier services - refund claim within limitation under Section 11B of the Central Excise Act, 1944 - voluntary payment and absence of protest as bar to refund - remand for verification of payment and documents

Eligibility to CENVAT credit on courier services - refund claim within limitation under Section 11B of the Central Excise Act, 1944 - voluntary payment and absence of protest as bar to refund - Entitlement to refund of CENVAT credit (service tax) and interest paid on courier services where payment was made during audit and refund claim was filed within the statutory limitation - HELD THAT: - The Tribunal recorded that the refund claim was filed within one year from the relevant date of payment and therefore within the limitation prescribed by Section 11B of the Central Excise Act. The Department did not dispute the eligibility to CENVAT credit on courier services, and the Tribunal noted that courier services have been consistently held to be input services in earlier decisions. The Commissioner(Appeals) had rejected the refund solely on the ground that the amount was paid voluntarily without protest. The Tribunal held that, given the timely filing and absence of dispute on eligibility, rejection of the refund on the ground of voluntary payment was not sustainable in law and the appellants are entitled to refund of the service tax component and interest paid on the courier services. The appellants did not press for refund of any penalty paid and confined the claim to service tax and interest.

Refund of service tax and interest paid on courier services is allowable despite the payment having been made during audit, since the refund claim was within the statutory limitation and eligibility to CENVAT credit was not contested.

Remand for verification of payment and documents - Scope and manner of granting relief and direction for verification - HELD THAT: - While allowing the appeal on the legal entitlement to refund of service tax and interest, the Tribunal directed a remand to the original authority for verification of records concerning the payment of service tax and interest. The remand is limited to verification of documents and records to satisfy the claim and to effect the refund of service tax and interest only; the Tribunal did not decide on penalty which the appellant did not press for refund.

Matter remanded to the original authority to verify payment records and thereafter allow refund of service tax and interest; appeal allowed to that extent.

Final Conclusion: The appeal is allowed in part: refund of the service tax component and interest paid on courier services is permitted as the claim was within limitation and eligibility was not disputed; the matter is remanded to the original authority solely for verification of the payment records and to grant the refund accordingly.

Penalty under Rule 209A - clandestine removal - physical control doctrine - strict evidence requirement for clandestine clearance - accommodation/duplicate bills - fraud on banks by documentary manipulation - natural justice - right to cross examination - corporate liability for penalty

Penalty under Rule 209A - clandestine removal - physical control doctrine - strict evidence requirement for clandestine clearance - Validity of imposition of penalty under Rule 209A in the absence of evidence of clandestine removal where manufacturing units were under departmental physical control - HELD THAT: - The Tribunal examined the imposition of penalty under Rule 209A which requires that a person who deals with excisable goods known or believed to be liable to confiscation is liable to penalty. Applying the established principle that units under strict physical control of the Excise Department cannot be held to have clandestinely manufactured or removed goods except on unimpeachable evidence, the Tribunal found no material had been collected to prove clandestine removal: suppliers' and purchasers' bills were not verified, no evidence of unaccounted raw material or excess consumption was produced, and no transportation or seizure of goods was shown. Having regard to the Cigarette Manual regime of physical control prevailing in the period in question, and the absence of the required strict evidence of clandestine clearance, the Tribunal concluded that the charge of clandestine removal was not established and, consequently, penalty under Rule 209A could not be sustained. [Paras 18, 19, 20, 26, 28]

Impugned order imposing penalty under Rule 209A set aside and penalties dropped for lack of evidence of clandestine removal.

Accommodation/duplicate bills - fraud on banks by documentary manipulation - natural justice - right to cross examination - corporate liability for penalty - Characterisation of duplicate bills and related consequences, and whether failure to allow cross examination warranted remand - HELD THAT: - The Tribunal found on the record that duplicate invoices and photocopies of gate passes were used to obtain bill discounting from banks though the goods were not actually received by the buyer; bank officers admitted discounting on documents of title without physical verification. The Tribunal treated this as a financial fraud against banks (documentary manipulation/accommodation bills) and observed that the Department remains at liberty to initiate appropriate proceedings under the relevant law for that misconduct. The Tribunal also noted a breach of natural justice because departmental witnesses were not cross examined; however, considering the long lapse of time, prior remand, and the improbability of obtaining relevant additional evidence after decades, it declined to remand the matter for further inquiry. [Paras 21, 22, 23, 24, 25]

Duplicate/accommodation bills held to constitute fraud on banks but did not establish clandestine movement of goods; Department may pursue other proceedings; no remand ordered despite natural justice lapse given elapsed time.

Final Conclusion: The appeals are allowed: penalties imposed under Rule 209A are set aside for want of evidence of clandestine removal where units were under departmental physical control; the duplicate bill transactions are characterised as accommodation/documentary fraud against banks (for which the Department may take separate action), and no remand is ordered despite procedural lapses because of the long delay and absence of prospect of additional relevant evidence.

Abatement of duty - proportionate calculation of duty where factory operates for part of a year - continuous period of 15 days or more - entitlement to abatement - sealed machine not to be treated as an installed/operational machine for the period it remains sealed - refund under the Pan Masala Packing Machine (Collection of Duty and Determination of Capacity) Rules, 2008 read with Section 11B - calculation of interest payable under Rule 9 of the PMPM Rules, 2008 - Section 3A - levy of duty on unit of production and proviso for abatement

Abatement of duty - continuous period of 15 days or more - entitlement to abatement - sealed machine not to be treated as an installed/operational machine for the period it remains sealed - Pan Masala Packing Machine (Collection of Duty and Determination of Capacity) Rules, 2008 - Section 3A - proviso for abatement - entitlement to abatement/refund for the period 1st June to 7th June, 2013 on account of cessation of production - HELD THAT: - The Tribunal applied the principle in the Division Bench decision in Shree Pouches v. CCE, Jaipur-I that where production on a particular machine ceases (including by sealing) the machine cannot be treated as installed/operational for that period and duty need not be paid for that machine for the period of non-production. The statutory scheme under Section 3A and the PMPM Rules contemplates abatement of duty for a continuous period of non-production of 15 days or more, and the composite scheme permits pro rata treatment where not all machines operate. On the facts, the appellant had one machine continuously working while the other machine was not operating for the period 1st June to 7th June, 2013; the facts were held to be squarely covered by the cited Tribunal precedent. Accordingly the rejection of abatement for 1st June to 7th June, 2013 was set aside and the adjudicating authority was directed to grant the refund.

Appeal allowed; impugned rejection of refund for 1st June to 7th June, 2013 set aside and refund directed.

Calculation of interest under Rule 9 of the PMPM Rules, 2008 - refund of excess interest deposited - recalculation of interest payable for late payment and refund of any excess interest deposited - HELD THAT: - The Tribunal directed the Adjudicating Authority to recalculate interest under Rule 9 in light of the allowed abatement and to refund any excess interest paid by the appellant. This is a remedial direction flowing from the grant of refund for the closure period.

Adjudicating Authority directed to recalculate interest under Rule 9 and refund excess interest within the time directed.

Final Conclusion: The appeal is allowed; the order rejecting abatement for 1st June to 7th June, 2013 is set aside, the adjudicating authority is directed to grant the refund and to recalculate and refund any excess interest under Rule 9 within 60 days.

Recovery of CENVAT credit wrongly taken or erroneously refunded - Chargeability of interest on wrongly availed CENVAT credit from date of taking credit - Liability under Section 11AB of the Central Excise Act as applied by Rule 14 of Cenvat Credit Rules - Penalty under Rule 15(3) of Cenvat Credit Rules read with Rule 25 of Central Excise Rules - Mala fide intention as requisite for imposition of penalty

Chargeability of interest on wrongly availed CENVAT credit from date of taking credit - Recovery of CENVAT credit wrongly taken or erroneously refunded - Liability under Section 11AB of the Central Excise Act as applied by Rule 14 of Cenvat Credit Rules - Interest is payable on the wrongly availed CENVAT credit from the date of taking the credit until its reversal. - HELD THAT: - The court examined the wording of Rule 14 which mandates recovery of CENVAT credit wrongly taken or erroneously refunded along with interest and specified that the provisions of Section 11A and 11AB shall apply mutatis mutandis. The Tribunal relied on the Supreme Court decision in Ind-Swift Laboratories Ltd., which interprets Rule 14 to mean that interest is chargeable from the date the credit was taken even if the credit was not utilized. The appellant admitted wrong availment of credit and reversed the amount only after audit detection. In view of Rule 14 and the authoritative interpretation, the appellant is liable to pay interest on the wrongly availed credit from the date of taking the credit up to its reversal.

Interest confirmed and payable from date of taking the wrongly availed credit until reversal.

Penalty under Rule 15(3) of Cenvat Credit Rules read with Rule 25 of Central Excise Rules - Mala fide intention as requisite for imposition of penalty - Penalty imposed under Rule 15(3) read with Rule 25 is set aside on facts, as there was no mala fide intention to evade duty. - HELD THAT: - The Tribunal found that the double availment of credit arose from inadvertence and not from any deliberate intention to evade duty. The appellant is a public sector undertaking which had substantial legitimate credit balances and promptly paid the wrongly availed amount once detected by audit. Applying the principle that penal action requires culpability and mala fide intention, the Tribunal concluded that the case did not warrant imposition of penalty and therefore quashed the penalty imposed under the cited rules.

Penalty set aside for lack of mala fide intention.

Final Conclusion: Appeal partly allowed: interest on wrongly availed CENVAT credit upheld and payable from date of taking credit until reversal; penalty under Rule 15(3) read with Rule 25 set aside for absence of mala fide intention.

Ownership of trade/brand name and market connection - entitlement to small scale exemption - clubbing of clearances - evidentiary value of affidavits and oral statements - family or common brand usage - burden of proof on Revenue to substantiate allegation

Ownership of trade/brand name and market connection - entitlement to small scale exemption - burden of proof on Revenue to substantiate allegation - Whether the Revenue established that the brand name 'BRACO' belonged exclusively to M/s. Braco Electricals so as to deny M/s. Braco Sales Corporation the benefit of small scale exemption. - HELD THAT: - The Tribunal found that both M/s. Braco Electricals and M/s. Braco Sales Corporation used the brand name 'BRACO' in the market and that the Revenue's case rested principally on a classification list filed by M/s. Braco Electricals and customer statements relied upon in the show cause notice. The respondent produced affidavits asserting earlier and continuous use of the brand by the proprietor and family concerns dating back to 1977; those affidavits were considered and accepted by the Commissioner (Appeals) and were not challenged in the Revenue's grounds of appeal. The Tribunal held that mere statements of customers or a classification list were insufficient to establish exclusive ownership of the brand by M/s. Braco Electricals. Absent independent, credible evidence displacing the affidavits or otherwise proving exclusive ownership, the Revenue failed to discharge the burden of proof necessary to deny the small scale exemption. [Paras 7]

Revenue failed to substantiate that the 'BRACO' brand belonged exclusively to M/s. Braco Electricals; benefit of small scale exemption to M/s. Braco Sales Corporation upheld.

Evidentiary value of affidavits and oral statements - family or common brand usage - Whether the affidavits and evidence produced by the respondent and the contention of family/common use of the brand were sufficient to rebut the Revenue's allegation of exclusive ownership. - HELD THAT: - The Tribunal noted that affidavits were filed before the adjudicating authority and Commissioner (Appeals), who accepted their contents; the Revenue did not challenge the correctness of those affidavits in its grounds of appeal. The respondent also produced affidavits from buyers and documentary assertions of prior use. The Tribunal held that, in these circumstances, the affidavits and associated evidence could not be ignored and the Revenue could not rely solely on customer statements or a classification list to counter them. The Tribunal further observed that where a brand is used within a family or by related proprietary concerns over an extended period, that circumstance may negate a claim of exclusive ownership by one entity unless convincingly disproved by the claimant. [Paras 7]

Affidavits and evidence produced by the respondent were sufficient to rebut Revenue's allegation; Revenue's reliance on customers' statements and classification list was inadequate.

Final Conclusion: The Revenue appeal is dismissed: the Revenue failed to prove exclusive ownership of the 'BRACO' brand by M/s. Braco Electricals and did not rebut the affidavits and evidence presented by M/s. Braco Sales Corporation; accordingly the small scale exemption benefit granted to the respondent stands.

Sequential application of Valuation Rules (Rule 4 and Rule 8) - Valuation under Rule 8 of the Valuation Rules where entire production is captively consumed - valuation based on price to unrelated buyers - precedential weight of Larger Bench decision in Ispat Industries

Sequential application of Valuation Rules (Rule 4 and Rule 8) - Valuation under Rule 8 of the Valuation Rules where entire production is captively consumed - valuation based on price to unrelated buyers - precedential weight of Larger Bench decision in Ispat Industries - Applicability of Rule 8 vis-a -vis Rule 4 for valuation of cotton yarn cleared to a sister unit and the correct basis for assessable value. - HELD THAT: - The Tribunal held that Rule 8 applies only where the entire production of the commodity is captively consumed. Where both Rule 4 and Rule 8 could be invoked, a sequential application favouring Rule 4 is the reasonable construction, following the Larger Bench in Ispat Industries and subsequent authorities cited. Because the assessee sold yarn from the depot to unrelated buyers as well as to the sister unit, the market price at which yarn was sold to unrelated buyers must be adopted as the basis for valuation rather than invoking Rule 8. The Board circular of 13.2.2003 does not alter this conclusion where no exclusive captive consumption is shown. Applying these principles, the Tribunal found in favour of the assessee on the periods before 13.2.2003 and concluded that the portion of the adjudication confirming duty liability after 13.2.2003 could not be sustained.

Valuation must be based on price to unrelated buyers where goods are sold to independent purchasers; Rule 8 is not applicable absent exclusive captive consumption, and the part of the order confirming duty liability after 13.2.2003 is set aside; relief granted for the pre-13.2.2003 period.

Precedential weight of Larger Bench decision in Ispat Industries - Validity of dropping of penalty by the Commissioner (Appeals) as upheld by the Tribunal. - HELD THAT: - The Tribunal found no infirmity in the impugned order insofar as the Commissioner (Appeals) set aside the penalty imposed by the adjudicating authority. Having accepted the valuation approach favourable to the assessee and having applied the relevant precedents, the Tribunal agreed with the lower appellate authority's decision to drop the penalty, and the Revenue's challenge to that aspect was rejected.

Penalty set aside by Commissioner (Appeals) is upheld; Revenue appeal against the dropping of penalty is rejected.

Final Conclusion: The assessee's appeal is allowed to the extent of valuation and duty liability determined before 13.2.2003 and the part of confirmation after 13.2.2003 is set aside; the Commissioner (Appeals)'s order setting aside the penalty is upheld and the Revenue's appeal is rejected.

Exemption claimed under Notification No. 63/95-CE for supplies to vendors/intermediate manufacturers - extension of exemption to suppliers not specifically named in the notification - precedential value of a Supreme Court decision over Tribunal decisions - binding effect of an earlier Tribunal decision in the assessee's own case

Exemption claimed under Notification No. 63/95-CE for supplies to vendors/intermediate manufacturers - binding effect of an earlier Tribunal decision in the assessee's own case - precedential value of a Supreme Court decision over Tribunal decisions - Entitlement of the appellant to exemption under Notification No. 63/95-CE in respect of goods supplied to M/s Bharat Earth Movers Ltd for use in manufacture of defence supplies, although the appellant was not one of the units specifically named in the notification. - HELD THAT: - The Tribunal found the issue squarely covered by its earlier decision in the appellant's own case (Final Order No. A/61787/2017-EX[DB] dated 08.09.2017 in Appeal No. E/734/2009-EX[DB]), where it examined rival authorities and held that the notification, as interpreted by precedents including the decision in Vulcan Gears (confirmed by the Hon'ble Supreme Court), applied to vendors and intermediate manufacturers. The Tribunal placed the Supreme Court-confirmed decision above contrary Tribunal precedents relied upon by Revenue and recorded that, on that basis, the impugned demand and penalty could not be sustained. Applying that determinative reasoning to the present appeal, the impugned order was found unsustainable and was set aside. [Paras 6, 7]

Impugned order set aside; appeal allowed and appellant granted consequential relief.

Final Conclusion: The appeal is allowed; the demand and penalty confirmed by the lower authorities are set aside in view of the Tribunal's earlier decision in the appellant's own case and the binding precedential position arising from the Supreme Court-confirmed authority.

Manufacture - excisability of goods manufactured at site - demand under Section 11A for erroneously granted refund - interest under Section 11AB - binding precedent of the jurisdictional High Court - refund erroneously granted

Manufacture - excisability of goods manufactured at site - refund erroneously granted - demand under Section 11A for erroneously granted refund - interest under Section 11AB - Appellant liable to repay the refund and interest because cutting, grooving and related operations on aluminium sheets amounted to manufacture, making the goods dutiable and the refund erroneously granted. - HELD THAT: - The Tribunal examined the judgment of the jurisdictional High Court which held that the process of cutting, grooving and routing aluminium sheets produces a new product and therefore amounts to manufacture, rendering the product dutiable. In view of that finding, the refund earlier sanctioned pursuant to the Tribunal's order stood correctly characterised as an erroneously granted refund. The adjudicating authority validly invoked the statutory mechanism to recover the erroneously refunded amount under the provision for recovery of such refunds and also demanded interest under the applicable provision. The appellate authority's confirmation of that recovery was held to be without infirmity, having regard to the High Court's substantive finding that the operations effected a change of identity/character making the product excisable. [Paras 6, 7]

Impugned order upholding demand of erroneously granted refund and interest is affirmed and the appeal dismissed.

Binding precedent of the jurisdictional High Court - principle of stare decisis - Whether the appellant could ignore the jurisdictional High Court's decision as per incuriam or otherwise avoid repayment while its appeal to the Supreme Court was pending. - HELD THAT: - The Tribunal noted that the High Court allowed the Revenue's appeal and answered the substantial question in favour of the Revenue. The appellant's contention that the High Court acted beyond competence or that the decision was per incuriam was rejected. Further, the appeal to the Supreme Court did not carry a stay; the absence of any stay meant the High Court's decision remained binding on the Tribunal. Consequently, the appellant could not retain the refund in the face of the High Court's adverse decision. [Paras 4, 7]

Contentions that the High Court judgment was per incuriam or beyond competence are rejected; absence of stay renders the High Court decision binding.

Show-cause notice - natural justice - Validity of the show-cause notice and the adjudicatory process followed in demanding recovery. - HELD THAT: - The Tribunal observed that the adjudicating authority proceeded after following principles of natural justice and issued the demand by reference to the High Court's conclusion on excisability. The appellant's plea that the show-cause notice was void ab initio was not accepted in view of the regular adjudicatory procedure followed and the legal basis for recovery established by the High Court's finding that manufacture had occurred. [Paras 2, 3, 7]

Show-cause notice and subsequent adjudication are valid; the demand based thereon is sustainable.

Final Conclusion: The appeal is dismissed; the Tribunal affirms the Commissioner(Appeals) order upholding recovery of the erroneously granted refund and interest, holding the High Court's finding that the activities amounted to manufacture to be binding in the absence of any stay.

Modvat/Cenvat credit on inputs - Modvat/Cenvat credit on capital goods - captive mine as integrated unit

Modvat/Cenvat credit on inputs - Credit availed on inputs (explosives and lubricants) is allowable to the appellant. - HELD THAT: - The Tribunal applied the binding decision of the Hon'ble Supreme Court in Vikram Cement v. CCE which squarely permits Modvat/Cenvat credit on inputs such as explosives and lubricating oils. In light of the cited precedent and the identical nature of the inputs claimed, the Tribunal concluded that the disallowance of credit on these inputs was unsustainable and the appeal in respect of input credit must be allowed. [Paras 6, 7]

Credit on explosives and lubricants allowed; appeal allowed on this ground.

Modvat/Cenvat credit on capital goods - captive mine as integrated unit - Credit availed on capital goods and spares used in the mines is allowable because the mines are captive. - HELD THAT: - Relying on the Supreme Court's pronouncement that Modvat/Cenvat credit on capital goods is available where the mines are captive and thereby constitute an integrated unit with the cement factory, the Tribunal found that in the present case the mines are not in dispute as captive. Applying that ratio, the disallowance of credit on capital goods and spares used in the mines could not be sustained. The Tribunal therefore set aside the impugned order and allowed the appeal with consequential relief. [Paras 6, 7]

Credit on capital goods/spares used in the captive mines allowed; appeal allowed on this ground.

Final Conclusion: The appeal is allowed; Cenvat/Modvat credit on inputs (explosives, lubricants) and on capital goods/spares used in the captive mines is permitted following the binding Supreme Court authorities relied upon, and the impugned order is set aside with consequential relief.

Cenvat credit admissibility where duty paid by supplier and valid invoice issued - Recipient not required to investigate supplier's status as manufacturer - Reopening supplier's manufacture question at recipient's end impermissible - Reliance on binding tribunal precedent for entitlement to credit

Cenvat credit admissibility where duty paid by supplier and valid invoice issued - Recipient not required to investigate supplier's status as manufacturer - Whether the appellant was entitled to avail CENVAT credit on inputs supplied by M/s. Pan Synthetics Pvt. Ltd. - HELD THAT: - The Tribunal applied its earlier rulings and those relied upon by the Commissioner in a co-pending decision, holding that when the supplier has paid duty and issued a valid invoice and the inputs are received and used in manufacture by the recipient, the recipient is entitled to take CENVAT credit. The question whether the inputs resulted from a process of manufacture by the supplier cannot be reopened at the recipient's end; the recipient is not obliged to probe the supplier's legal status as a manufacturer. The Tribunal followed the ratio in CCE, Rajkot v. Advance Diesel Engines Ltd. and CCE v. Deepti Formulations Pvt. Ltd., and noted departmental action in related cases where demands were dropped or appeals allowed, reinforcing that credit cannot be denied at the recipient's end where duty has been collected from the supplier and valid documents exist. [Paras 6, 7]

The appellant was entitled to the CENVAT credit claimed on inputs supplied by M/s. Pan Synthetics Pvt. Ltd.; the denial of credit was incorrect.

Reopening supplier's manufacture question at recipient's end impermissible - Reliance on binding tribunal precedent for entitlement to credit - Whether the impugned Order in Original and the Commissioner(Appeals) order upholding it were sustainable. - HELD THAT: - Upon applying the legal principle that the recipient need not examine disputes regarding the supplier's status as manufacturer where duty has been paid and a valid invoice issued, the Tribunal found the impugned orders unsustainable. The Tribunal observed that the same Commissioner had allowed a similar appeal and that parallel proceedings resulted in demands being dropped or set aside, supporting the conclusion that the demand and penalty confirmed against the appellant were not maintainable. Consequently the impugned orders were set aside. [Paras 7]

Impugned orders confirming demand and penalty were set aside and the appellant's appeal was allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned Order in Original and the Commissioner(Appeals) order, and granted consequential reliefs, holding that the appellant was entitled to the CENVAT credit for the period January 2013 to November 2013 as the supplier had paid duty and issued valid invoices and the recipient was not required to probe the supplier's manufacturer status.

Cenvat credit as admissible on input service - classification of services as input service for manufacture - effect of binding precedent and consistency in departmental orders - post amendment inadmissibility of outdoor catering services - limitation of adjudication to grounds in the show cause notice

Cenvat credit as admissible on input service - classification of services as input service for manufacture - effect of binding precedent and consistency in departmental orders - Cenvat credit allowed on specified services which the Tribunal and Commissioner have held to be input services. - HELD THAT: - The Tribunal accepted the appellant's submissions and precedent relied upon and held that Event Management, Credit Card charges of directors/MD, Repair and Maintenance of vehicles used by company employees, medi claim insurance for employees and dependents, club membership (where used for business meetings and industry membership), and survey services for purchase of land (used in setting up the factory) fall within the definition of 'input service' and are therefore eligible for cenvat credit. The order follows the appellant's own final Tribunal order and other judicial decisions relied upon, applying consistency in departmental treatment and the established principle that services used in relation to setting up of factory or for business purposes qualify as input services where supported by record and precedent.

Credit allowed on Event Management, Credit Card charges, Repair & Maintenance, medi claim insurance, relevant Club Memberships, and survey for purchase of land.

Post amendment inadmissibility of outdoor catering services - classification of services as input service for manufacture - Cenvat credit on Outdoor Catering service post 01.04.2011 rejected. - HELD THAT: - The Tribunal applied the Larger Bench decision in Wipro Ltd. (Interim Order No.1/2018 dated 09.02.2018) holding that Outdoor Catering Service is not eligible for cenvat credit following the amendment effective 01.04.2011. Consequently, any credit claimed for outdoor catering services availed after that amendment date was held inadmissible despite the appellant's contention regarding statutory canteen obligations.

Credit rejected for Outdoor Catering services availed post 01.04.2011.

Cenvat credit as admissible on input service - classification of services as input service for manufacture - Cenvat credit on security at the residence of CMD/JMD rejected. - HELD THAT: - The Tribunal found that security services provided at the residence of the CMD/JMD do not fall within the definition of 'input service' used for manufacture or in relation to business, and therefore the credit claimed on those services was not allowable. The finding distinguishes between services integrally connected to business/manufacture and those of a personal nature.

Credit rejected for security services at the residence of CMD/JMD.

Limitation of adjudication to grounds in the show cause notice - scope of original order vis a vis matters not pleaded in show cause notice - Impugned disallowance relating to execution of work at the factory set aside as being beyond the scope of the show cause notice and original order. - HELD THAT: - The Tribunal observed that the show cause notice contained no allegation to deny cenvat credit for the execution/work at the factory; the amount was only included in computation. There was also no finding on this service by the original authority. Since the Commissioner confirmed a denial on this service without it having been proposed in the show cause notice or considered in the Order in Original, such finding was held to be beyond the scope of adjudication and therefore unsustainable. The impugned order on this service was set aside, necessitating appropriate consideration consistent with the scope of the notice and principles of fair adjudication.

Impugned denial insofar as it relates to execution/work at the factory set aside for being beyond the show cause notice and original order.

Final Conclusion: The appeal is partly allowed: cenvat credit is permitted on Event Management, Credit Card charges, Repair & Maintenance, medi claim insurance, certain Club Memberships, and survey for purchase of land; credit is rejected for security at the CMD/JMD residence and for Outdoor Catering services availed after 01.04.2011; the denial concerning execution/work at the factory is set aside for being beyond the show cause notice.

Limitation and extended period of limitation - knowledge of department - service tax registration and classification as Business Auxiliary Service - invocation of subsection (4) of section 11A - fraud, collusion, willful misstatement or suppression - availability of exemption under Notification No.214/86-CE vis-a -vis area-based exemption availed by principal

Limitation and extended period of limitation - knowledge of department - service tax registration and classification as Business Auxiliary Service - Whether the show cause notice dated 02.04.2012 (demand for 2007-08 to 2010-11) invoking extended period is time-barred in view of the department's prior knowledge of the job-work activity and Service Tax registration. - HELD THAT: - The Tribunal found that the documents relied upon for issuing the show cause notice dated 02.04.2012 included 92 job work challan books covering April 2007 to March 2011 and that Revenue had issued Service Tax registration to the appellants for galvanization. The activity therefore stood within the knowledge of the department from the date of such registration and from the records relied upon. On that basis the extended period of limitation could not be invoked for the period 2007 08 to 2010 11 and the show cause notice dated 02.04.2012 was held to be hit by limitation. The impugned order dated 23.05.2013 confirming duty and imposing penalties arising out of that notice was set aside and the appeals were allowed. [Paras 6]

Show cause notice dated 02.04.2012 is time barred; impugned order dated 23.05.2013 set aside and appeals allowed.

Limitation and extended period of limitation - precedent on multiple invocations of extended limitation - Whether the show cause notice dated 28.03.2013 (demand for 2011-12 to 20112-13) invoking extended period is sustainable where an earlier notice had already been issued invoking extended limitation. - HELD THAT: - The Tribunal applied the principle stated by the Supreme Court in Nizam Sugar that where an earlier show cause notice has invoked the extended period of limitation, a subsequent show cause notice invoking the extended period in respect of the same matter is not sustainable. On this ground the show cause notice dated 28.03.2013 was held unsustainable. The impugned order in original dated 30.12.2015 based on that notice was set aside and the appeals arising therefrom were allowed. [Paras 6]

Show cause notice dated 28.03.2013 is not sustainable; impugned order dated 30.12.2015 set aside and appeals allowed.

Invocation of subsection (4) of section 11A - fraud, collusion, willful misstatement or suppression - Whether the show cause notice dated 24.01.2014 invoking section 11A(4) (January-December 2013) is maintainable in the absence of pleaded or established fraud, collusion, willful misstatement or suppression. - HELD THAT: - The Tribunal examined the contents of the show cause notice dated 24.01.2014 and found that the necessary ingredients for invoking subsection (4) of section 11A of the Central Excise Act, 1944 - namely fraud, collusion, willful misstatement or suppression - were not set out or established. In the absence of such material, the extended provisions under section 11A(4) could not be resorted to. Consequently the show cause notice was held not sustainable and the impugned order dated 30.06.2014 confirming demand and imposing penalties was set aside. [Paras 6]

Show cause notice dated 24.01.2014 invoking section 11A(4) is not sustainable; impugned order dated 30.06.2014 set aside and appeals allowed.

Final Conclusion: All six connected appeals are allowed; the impugned orders arising out of the three show cause notices dated 02.04.2012, 28.03.2013 and 24.01.2014 are set aside and the appellants are entitled to consequential relief as per law.

Denial of cenvat credit on grounds not raised in the show-cause notice (principle of fair hearing) - Definition of under Rule 2(a) of the Cenvat Credit Rules, 2004 - Immovability of fabricated components and entitlement to cenvat credit - User test for entitlement to cenvat credit - Adjudication must not travel beyond the allegations in the show-cause notice

Denial of cenvat credit on grounds not raised in the show-cause notice (principle of fair hearing) - Adjudication must not travel beyond the allegations in the show-cause notice - Validity of denying cenvat credit by applying the user test when the show-cause notice only alleged immovability of fabricated steel items. - HELD THAT: - The appeal court found that the show-cause notice strictly alleged that MS Angles, MS Bars, Channels and similar items, being embedded to earth as part of bunkers, conveyors, kilns etc., had become immovable property and therefore could not be treated as capital goods under the definition in Rule 2(a). The Commissioner accepted that immovability could not be a ground to deny credit but nevertheless rejected credit on the basis of the user test, a contention which was not raised in the show-cause notice. The Tribunal held that adjudication which invokes a new basis of denial not articulated in the notice travels beyond the scope of the notice and breaches the principle of fair hearing; such a change of basis is not permissible where the affected party was not put to notice on that ground.

Impugned denial of credit based on the user test (not pleaded in the show-cause notice) is unsustainable; the adjudication travelled beyond the allegations and cannot stand.

Definition of under Rule 2(a) of the Cenvat Credit Rules, 2004 - Immovability of fabricated components and entitlement to cenvat credit - User test for entitlement to cenvat credit - Whether cenvat credit on MS Angles, MS Bars, Channels etc., used in fabrication of equipment and embedded to earth, could be denied on the ground that they became immovable property. - HELD THAT: - Relying on precedent including the decision in Mahindra & Mahindra Ltd., the Tribunal held that eligibility for cenvat credit must be determined at the relevant stage and that the mere fact that fabricated components later become embedded or form part of immovable installations does not automatically disentitle the assessee to credit. The Tribunal noted that the Commissioner had accepted that immovability alone could not be a ground for denial; having found the denial on immovability to be unsustainable, and with no admissible basis in the notice to invoke the user test, the Tribunal followed the consistent line of authorities favouring credit for such fabricated steel items when used as components of capital goods or structural supports.

Credit on the impugned iron and steel items cannot be denied merely because they became embedded or formed immovable property; the appeal is allowed and the impugned order set aside.

Final Conclusion: The appeal is allowed: the Tribunal set aside the impugned order, holding that the adjudication impermissibly travelled beyond the show-cause notice by applying the user test, and that cenvat credit on the specified fabricated steel items could not be denied solely on the ground of later immovability.

Valuation of samples for demonstration - application of Rule 4 of the Central Excise Valuation Rules - application of Rule 8 of the Central Excise Valuation Rules - revised CBEC clarification altering valuation position - time bar/limitation for demanding differential duty

Valuation of samples for demonstration - application of Rule 4 of the Central Excise Valuation Rules - application of Rule 8 of the Central Excise Valuation Rules - revised CBEC clarification altering valuation position - Valuation basis for goods cleared as samples/demonstration to own showroom or service centres - HELD THAT: - The Tribunal noted that an earlier CBEC clarification (01.07.2002) had directed valuation under Rule 8 but that CBEC subsequently revised its view by circular dated 25.04.2005, specifying valuation of samples under Rule 4. The jurisdictional High Court examined both circulars and held that valuation of samples cleared for demonstration is correctly done under Rule 4. The Tribunal found the authorities below had adopted the same view and, on the facts, saw no reason to interfere with that conclusion. [Paras 5]

Valuation of samples cleared for demonstration is to be determined under Rule 4; the impugned demand based on the valuation position adopted by authorities is sustained.

Time bar/limitation for demanding differential duty - Whether the demand for differential duty was time barred - HELD THAT: - The Tribunal observed that the impugned order records the appellant's failure, after shifting jurisdiction, to inform authorities regarding clearances for replacement where Rule 8 values had been adopted. The Tribunal agreed with the finding of the authorities below that this omission justified continuation of proceedings and that the time bar contention did not succeed on the record. [Paras 6]

The claim of time bar is rejected; the demand is not barred by limitation on the facts found.

Final Conclusion: The appeal is dismissed; the Tribunal upholds the authorities' view that samples cleared for demonstration are to be valued under Rule 4 in light of the revised CBEC clarification and related High Court decision, and rejects the appellant's time bar defence.

Reversal of Cenvat credit on sale of scrap of capital goods - presumptive show cause notice - burden of proof on revenue to establish prior availment of credit - application of Rule 3(5) and Rule 3(5A) of Cenvat Credit Rules, 2004 - depreciation reducing reversal liability

Presumptive show cause notice - burden of proof on revenue to establish prior availment of credit - Maintainability of the show cause notice alleging non-payment of duty on sale of scrap of capital goods where Revenue proceeded on presumption that Cenvat/Modvat credit had been taken. - HELD THAT: - The Tribunal found that the Revenue did not allege that the appellant failed to maintain records required under the scheme or that required information was withheld. The appellant produced an affidavit from a responsible officer stating that no Modvat/Cenvat credit had been availed on the items sold as scrap. Those submissions and the affidavit were not found to be wrong and were rejected without reason. In these circumstances the show cause notice was held to be presumptive and not maintainable because the Department had not discharged the evidentiary burden of proving that credit had been availed on the specific capital goods cleared as scrap. The Tribunal relied on the principle that where the allegation depends on prior availment of credit the burden lies on the Department to adduce evidence to support that allegation; absent such evidence duty cannot be demanded merely by presumption. [Paras 6]

The show cause notice was held to be presumptive and not maintainable; the appeal against confirmation of duty was allowed and the impugned order set aside.

Application of Rule 3(5) and Rule 3(5A) of Cenvat Credit Rules, 2004 - depreciation reducing reversal liability - Effect of depreciation and age of capital goods on liability to reverse Cenvat credit under Rule 3(5)/3(5A) when old plant is sold as scrap. - HELD THAT: - The Tribunal took note of the statutory scheme under Rule 3(5) and Rule 3(5A) which contemplates reversal subject to prescribed adjustments including depreciation (2.5% on straight line basis per quarter). On the facts the plant sold as scrap was found to be very old (definitely more than ten years) and, as observed by the Tribunal, the depreciated value would in course of time become nil. Accordingly, even on application of the Rules the depreciated value would call for no reversal of Cenvat credit. This formed part of the Tribunal's factual and legal conclusion in allowing relief to the appellant. [Paras 6]

Given the age and depreciation of the capital goods, no reversal of Cenvat credit was called for under the Rules as applied to the facts.

Final Conclusion: The Tribunal allowed the appeal, set aside the orders confirming duty and penalty because the show cause notice was presumptive and not supported by evidence that Cenvat/Modvat credit had been availed on the specific capital goods; additionally, having regard to the age and depreciation of the plant, no reversal under Rule 3(5)/3(5A) was exigible and the appellant is entitled to consequential benefits in accordance with law.

Interim stay of recovery pending appellate stay petition - abeyance of recovery proceedings - expeditious adjudication of stay applications by appellate tribunal

Interim stay of recovery pending appellate stay petition - abeyance of recovery proceedings - expeditious adjudication of stay applications by appellate tribunal - Petition for interim restraint of recovery proceedings until the Appellate Tribunal decides the stay applications filed by the petitioner. - HELD THAT: - The Court noted that the petitioner had filed first appeals and corresponding stay applications before the Appellate Tribunal and that recovery under the assessment orders had been initiated by issuance of a demand notice. Observing that analogous orders had been made in similar circumstances, the Court exercised its equitable jurisdiction to afford temporary relief by staying recovery steps only until the Appellate Tribunal disposes of the pending stay petitions. The Court directed the Appellate Tribunal to take up and decide the stay petitions within one month from receipt of a copy of this judgment, and required the petitioner to place a certified copy of the judgment and the writ petition before the Tribunal so that the prescribed time-frame would commence from that date. Until the Tribunal passes and communicates its order on the stay petitions, all recovery steps pursuant to the demand notice shall be kept in abeyance. The Court left open the possibility of conditions being imposed by the Tribunal in view of the respondents' contention about the quantum involved, by limiting its interim relief to the period prior to the Tribunal's decision. [Paras 4, 5]

Recovery steps pursuant to the demand notice are to be kept in abeyance until the Appellate Tribunal determines the petitioner's stay applications; the Tribunal is directed to decide those applications within one month from the date it receives a certified copy of this judgment and the writ petition, which the petitioner must place before the Tribunal.

Final Conclusion: Writ petition allowed to the extent of directing the Appellate Tribunal to decide the pending stay applications within one month and ordering that recovery proceedings under the demand notice remain in abeyance until the Tribunal communicates its decision.

Natural justice - pre-revision notice - service of proposals - opportunity to file objections - confirmation of additional proposals without notice - remand for fresh consideration

Natural justice - service of proposals - confirmation of additional proposals without notice - Confirmation of additional proposals without serving revised proposals and materials violated principles of natural justice and rendered the assessment orders unsustainable. - HELD THAT: - The pre-revision notice dated 19.08.2014 originally communicated five proposals. Thereafter the assessing authority, having retrieved further data from the web-site and identified additional defects, confirmed additional proposals without issuing a revised proposal notice that incorporated those additional grounds or without serving the materials relied upon. The Court held that where fresh or additional proposals are made after the initial notice, the proper procedure is to issue revised proposals and call for objections; waiting for the dealer to seek materials or relying on the dealer's presumed knowledge does not cure the failure to communicate specific proposals. Relying on the precedent cited, the Court concluded that imposing tax on proposals not communicated to the dealer goes to the root of the assessment and amounts to a breach of the rules of natural justice. [Paras 5, 6]

Impugned assessment orders confirming additional, uncommunicated proposals are set aside as violative of natural justice.

Pre-revision notice - opportunity to file objections - remand for fresh consideration - Matter remanded to the assessing authority with directions to issue fresh notice incorporating all proposals and materials, and to afford the dealer an opportunity to file objections and personal hearing. - HELD THAT: - Given the defect in procedure, the Court directed that fresh pre-revision notice be issued within 15 days of receipt of the order, incorporating all proposals and the materials relied upon. Upon service of that notice, the dealer is to file objections within 15 days, and the assessing authority is to afford a personal hearing and pass orders after considering the objections within 15 days of receipt of those objections. The remand is for fresh consideration in accordance with principles of fair procedure, not for re-adjudication of issues on the merits by this Court. [Paras 7]

Assessment remanded for fresh consideration with directions to issue comprehensive notice, supply materials, receive objections and afford personal hearing within specified timeframes.

Final Conclusion: Writ petitions allowed to the extent of setting aside the impugned assessment orders for 2007-2008 and 2009-2010 and remanding the matters to the assessing authority to issue fresh pre-revision notices incorporating all proposals and materials, permit objections and afford personal hearing before passing fresh orders within the timelines specified by the Court.

Levy of penalty for submission of incorrect or incomplete return - assessment based on books of account versus best judgment assessment - Explanation to Section 12(3)(b) excluding book turnover from penalty computation - bona fide belief as a defence to penalty - requirement of specific concealment for invoking penal provision

Assessment based on books of account versus best judgment assessment - Explanation to Section 12(3)(b) excluding book turnover from penalty computation - Whether penalty could be levied where the assessment was drawn from the dealer's books of account and there was no specific concealment of turnover in the accounts. - HELD THAT: - The Court applied the established principle that penalty under the penal provision for incorrect or incomplete returns can be imposed only where the assessing authority makes a best-judgment assessment based on estimation and not where the assessment is founded on the books of account accepted by the authority. The Explanation to the penal provision requires that turnover representing additions related to book turnover be excluded for the purpose of computing the turnover on which penalty is leviable; only turnovers estimated by reference to specific concealment attract penalty. In the present case the appellate authority had recorded that there was no suppression in the books and the assessment figures were drawn from the accounts; consequently the condition for invoking the penal provision did not exist. [Paras 10]

Penalty was not leviable because the assessment was based on the dealer's books of account and there was no specific concealment warranting a best-judgment addition for penalty computation.

Bona fide belief as a defence to penalty - levy of penalty for submission of incorrect or incomplete return - Whether the Tribunal was justified in deleting the penalty on the basis that the dealer had a bonafide belief that the goods were exempt and had not wilfully concealed turnover. - HELD THAT: - The Court noted that where the assessing/appellate authority accepts that the dealer acted under a bonafide belief as to exemption and there is no evidence of wilful non-disclosure or suppression in the books, the exercise of discretion to delete penalty is permissible. Earlier precedents and the statutory scheme were held to support the view that mere filing of an incorrect return does not automatically attract penalty where the books and bona fides negate concealment. [Paras 10, 11]

The Tribunal was justified in deleting the penalty on the basis of bonafide belief and absence of suppression; the revision petition challenging that deletion is dismissed.

Final Conclusion: The Tax Case (Revision) is dismissed: penalty under the penal provision could not be sustained because the assessment was based on the assessee's books and there was no specific concealment; deletion of penalty on the basis of bona fide belief and absence of suppression is upheld.

Exemption from sales tax for old newspapers - old newspapers sold as waste paper - character of a newspaper - news content versus sale by weight - Entry 54 of List II and Entry 92 of List I of the Seventh Schedule - constitutional exemption - precedential rule - later co-ordinate Bench decision of the Supreme Court prevailing over earlier decision

Exemption from sales tax for old newspapers - old newspapers sold as waste paper - Entry 54 of List II and Entry 92 of List I of the Seventh Schedule - constitutional exemption - Whether sales of old newspapers effected by the assessee, although sold in the course of trade in waste paper, are exempt from sales tax under the constitutional entries and therefore not liable to assessment. - HELD THAT: - The Tribunal held, following the Supreme Court decision in Sait Rikhaji Furtarnal, that old newspapers when sold as such remain "newspapers" within the scope of the constitutional entries and are beyond the competence of the State to tax. The High Court, after reviewing earlier authorities including Indian Express and Sait Rikhaji Furtarnal, found no manifest illegality in the Tribunal's conclusion that the sales turnover of old newspapers was covered by the constitutional exemption and hence not taxable. The Court accepted the Tribunal's view that the character of the commodity sold - being old newspapers sold as such - attracted the exemption, notwithstanding that the parties primarily dealt in waste paper; consequently the assessment and levy of tax on the sales turnover of old newspapers was not sustainable and was rightly set aside by the Tribunal. [Paras 4, 8, 10]

The Tribunal's conclusion that the sales turnover of old newspapers is exempt from sales tax was upheld and the corresponding assessment deleted.

Character of a newspaper - news content versus sale by weight - exemption from sales tax for old newspapers - precedential rule - later co-ordinate Bench decision of the Supreme Court prevailing over earlier decision - Whether the earlier decision holding that surplus or old newspapers sold by weight lose the character of "newspaper" is distinguishable or overridden by the later Supreme Court decision recognising old newspapers as "newspapers" for exemption purposes, and which precedent governs. - HELD THAT: - The Court contrasted Indian Express, which held that newspapers sold by weight as surplus copies may lose the characteristic of "newspaper," with the later Supreme Court decision in Sait Rikhaji Furtarnal which held that old newspapers retain news value and fall within the constitutional exemption. Applying settled precedent rules, the High Court observed that where there are conflicting Supreme Court decisions of equal strength, the later decision prevails unless the earlier was a larger Bench decision or the later decision is merely assumptive. On that basis the Court treated Sait Rikhaji Furtarnal as the governing authority and endorsed the Tribunal's reliance thereon in allowing exemption for old newspapers sold as such. [Paras 7, 8, 9]

The later Supreme Court decision in Sait Rikhaji Furtarnal governs and justifies the Tribunal's conclusion; the Tribunal's reliance on that precedent is sustained.

Final Conclusion: Tax Case (Revision) dismissed. The Tribunal's order allowing exemption for the sale of old newspapers (and deleting the assessment) is sustained, the High Court finding no manifest illegality in the Tribunal's decision and applying the later Supreme Court authority as the governing precedent.