TaxTMI Updates e-Newsletter
May 24,2018

Unit container - predetermined quantity or number indicated on package - taxability of frozen meat contingent on being put up in unit container - branding requirement for post-14-11-2017 taxability

Unit container - predetermined quantity or number indicated on package - Whether sheep/goat carcasses packed in LDPE (primary) and HDPE (secondary) bags supplied to the Army qualify as goods put up in a unit container - HELD THAT: - The Advance Ruling Authority applied the definition of 'unit container' in the rate/exemption notifications - a package (including a 'bag') designed to hold a predetermined quantity or number which is indicated on the package. The Authority examined the tender and supporting documents and visual evidence showing that each LDPE bag carries one carcass, HDPE bags typically carry two carcasses, bags are numbered, and the weight (aggregate of carcasses) is marked on the HDPE bag (e.g., "8 + 7.5 = 15.5 kg"). Although the LDPE bags were not sealed, the notification definition does not require sealing. The Authority held that the marking and the practice of one carcass per LDPE bag and two per HDPE bag establish that the bags are designed to hold a predetermined number and that such number is indicated on the package. Reliance placed by the applicant on prior excise decisions was found inapposite on facts and on differences in the earlier definitions (which did not require the predetermined quantity/number to be indicated on the package). On these facts, the packaging used by the applicant satisfies the definition of 'unit container'.

The packaging used for supply to the Army qualifies as goods put up in a 'unit container'.

Taxability of frozen meat contingent on being put up in unit container - branding requirement for post-14-11-2017 taxability - Whether the impugned goods are taxable under the notifications for the periods 1-7-2017 to 13-11-2017 and from 14-11-2017 onwards or fall under the exemption entries - HELD THAT: - Having held that the supplies are put up in 'unit containers', the Authority applied the relevant notification entries. For the period 1-7-2017 to 13-11-2017, Notification No.1/2017 (Schedule II, entry 4) subjects 'Meat of sheep or goats, frozen and put up in unit containers' to 12% IGST; the exemption entry (Notification No.2/2017, entry 10) covers 'Meat of sheep or goats [other than frozen and put up in unit containers]' and thus does not apply. From 14-11-2017 onwards, the amended notifications impose tax at reduced rate subject to an additional branding condition: Schedule I (Notification No.43/2017, entry 1) taxes 'other than fresh or chilled' goods put up in a unit container and bearing a registered/claimable brand at 5%, while the exemption entry (Notification No.44/2017, entry 9) exempts only those put up in unit containers that bear a registered/claimable brand. The Authority found the impugned supplies fall within the taxable entries applicable to their respective periods (1-7-2017 to 13-11-2017: taxable under entry 4; from 14-11-2017 onwards: taxable under entry 1), subject to the branding condition for the later period.

For 1-7-2017 to 13-11-2017 the supplies are covered by Schedule II entry 4 (taxable); from 14-11-2017 onwards they are covered by Schedule I entry 1 (taxable subject to branding condition).

Final Conclusion: The Authority ruled that the frozen whole sheep/goat carcasses supplied in LDPE/HDPE bags to the Army qualify as goods put up in a 'unit container'; consequently, such supplies are taxable under the cited IGST rate notifications - under Schedule II entry 4 (1-7-2017 to 13-11-2017) and under Schedule I entry 1 (from 14-11-2017 onwards, subject to the branding condition).

Judicial review of High Court order - Special Leave Petition dismissed - Interference with impugned order of the High Court - Proceedings under Section 130 of the Uttar Pradesh Goods and Service Tax Act, 2017 - Right to assail final order in tax proceedings

Special Leave Petition dismissed - Interference with impugned order of the High Court - Whether this Court should interfere with the impugned order of the High Court. - HELD THAT: - The Supreme Court declined to interfere with the impugned order passed by the High Court of Judicature at Allahabad, Lucknow Bench, Lucknow. Having considered the matter, the Court found no grounds to grant relief in the special leave petition and accordingly dismissed the petition without disturbing the High Court's order.

The special leave petition is dismissed and the impugned High Court order is not interfered with.

Proceedings under Section 130 of the Uttar Pradesh Goods and Service Tax Act, 2017 - Right to assail final order in tax proceedings - Whether the petitioner may challenge the final order in the Section 130 proceedings. - HELD THAT: - Although the special leave petition is dismissed, the Court expressly left open the petitioner's right to assail the final order passed in the proceedings under Section 130 of the Uttar Pradesh Goods and Service Tax Act, 2017. Any challenge to that final order will be considered on its own merits in accordance with law, thereby permitting future adjudication of the substantive tax dispute arising from the Section 130 proceedings.

Petitioner is permitted to assail the final order in the Section 130 proceedings; such challenge will be decided on merits in accordance with law.

Final Conclusion: The Supreme Court dismissed the special leave petition and declined to interfere with the High Court's order, while leaving open the petitioner's entitlement to challenge the final order in the Section 130 UP GST proceedings for adjudication on merits.

Interim injunction restraining compliance with statutory summons - exemption for transmission or distribution of electricity - incidental or connected services - retrospective applicability of administrative clarification

Interim injunction restraining compliance with statutory summons - exemption for transmission or distribution of electricity - incidental or connected services - retrospective applicability of administrative clarification - Petitioners relieved from the obligation to respond to the departmental summons dated 28.3.2018 until further orders. - HELD THAT: - The petitioners, electricity transmission and distribution utilities, contend that the exemption for transmission or distribution of electricity granted under the earlier service tax regime continued under the GST heading 9969 and that the Government's clarification of 1.3.2018, which treats certain incidental services as taxable, cannot be given retrospective effect to compel disclosure for periods prior to GST. The High Court noted these contentions but did not adjudicate the merits of the substantive legal questions concerning the scope of the exemption or retrospective operation of the clarification. Instead, on the interlocutory application, the Court granted interim relief restraining the petitioners from replying to the summons dated 28.3.2018 pending further orders and listed the matter for consideration on the returnable date.

Petitioners need not reply to the summons dated 28.3.2018 until further orders; matter posted to 3.5.2018.

Final Conclusion: Interim relief granted restraining enforcement of the summons dated 28.3.2018 against the petitioners; substantive disputes regarding the scope of exemption and retrospective effect of the clarification were recorded but left open for adjudication on the returnable date.

Summary order. Notice issued returnable on 3rd May 2018; direct service permitted.

Penalty under section 271(1)(c) - discretion in quantum of penalty - minimum and maximum penalty limits - tribunal's jurisdiction to alter penalty quantum - reduction of penalty by assessing profit element in deposits - monetary limits of CBDT circular for filing departmental appeals - maintainability of writ petition despite departmental circular

Monetary limits of CBDT circular for filing departmental appeals - maintainability of writ petition despite departmental circular - Whether the Revenue's writ petition should be entertained despite the CBDT circular limiting filing of appeals below a specified tax effect. - HELD THAT: - The Court acknowledged that the CBDT circular seeks to reduce litigation by prescribing monetary thresholds for filing departmental appeals, and recognised that those limits may not be absolutely binding on initiation of writ proceedings. However, the Court exercised discretion not to grant liberty lightly to the Revenue to bypass the circular. It held that writ petitions by the Revenue in defiance of the monetary limit may be entertained only in rare and exceptional cases - for example, where the Tribunal's judgment would have long-term or cascading effects or would result in gross miscarriage of justice. Applying that standard to the present matter, the Court found no exceptional circumstance warranting departure from the policy underlying the circular and declined to entertain the petition. [Paras 4]

Petition not entertained as the case does not qualify as a rare or exceptional circumstance to override the CBDT circular's monetary limits.

Penalty under section 271(1)(c) - discretion in quantum of penalty - minimum and maximum penalty limits - tribunal's jurisdiction to alter penalty quantum - reduction of penalty by assessing profit element in deposits - Whether the Tribunal validly reduced the penalty imposed under section 271(1)(c) by treating a portion of cash deposits as the profit element and applying a lower base for calculating penalty. - HELD THAT: - The Court recorded disapproval of the Tribunal's approach. It observed that section 271(1)(c) contemplates a penalty ranging from an amount equivalent to the tax sought to be evaded up to three times that amount, and that the Tribunal could not, by adopting a different yardstick, bypass the statutory minimum by treating only the profit element of deposits as the base for penalty. The Court noted that the Tribunal's reduction, effected by assuming a 10% profit element in the deposits, effectively circumvented the statutory scheme and ignored the final conclusions reached in the assessment proceedings. Although critical of the Tribunal's reasoning and method, the Court did not grant substantive relief in the petition because it declined to entertain the matter on maintainability grounds. [Paras 5]

Tribunal's mode of reducing the penalty by applying a profit-element yardstick is disapproved as impermissible in light of the statutory penalty limits; nonetheless, no further relief was granted in the petition.

Final Conclusion: Petition disposed of without entertaining the challenge to the Tribunal's order on merits; the Court declined to permit the Revenue to bypass the CBDT circular's monetary threshold in the absence of exceptional circumstances, and recorded disapproval of the Tribunal's method of reducing the penalty under section 271(1)(c).

Income Declaration Scheme, 2016 - Eligibility for declaration scheme - Exclusion for prosecution under Chapter IX or Chapter XVII of the Indian Penal Code - Offence under Section 420 IPC - Prosecution under the Prevention of Corruption Act, 1988 - Denial of benefit due to pending prosecution

Income Declaration Scheme, 2016 - Exclusion for prosecution under Chapter IX or Chapter XVII of the Indian Penal Code - Offence under Section 420 IPC - Denial of benefit due to pending prosecution - Whether the petitioner is eligible to obtain benefit under the Income Declaration Scheme, 2016 despite prosecution pending for an offence falling under Chapter XVII of the IPC. - HELD THAT: - The Scheme expressly disqualifies persons in respect of whom prosecution is pending for offences punishable under Chapter IX or Chapter XVII of the Indian Penal Code. The record shows that a chargesheet was filed and charges were framed against the petitioner under Sections including Section 420 of the IPC. Section 420 is an offence falling within Chapter XVII of the IPC. Although the Income Tax Authorities' order refers to prosecution under the Prevention of Corruption Act, the determinative fact is that prosecution is pending for an offence falling under Chapter XVII of the IPC. Consequently the petitioner is not entitled to the benefit of the Income Declaration Scheme, 2016. [Paras 4]

Petitioner is ineligible for benefit under the Income Declaration Scheme, 2016 because prosecution is pending for an offence under Chapter XVII of the IPC; writ petition dismissed.

Final Conclusion: Writ petition dismissed; petitioner not entitled to benefit under the Income Declaration Scheme, 2016 in view of pending prosecution for an offence under Chapter XVII of the Indian Penal Code.

Reopening of assessment where return accepted under section 143(1) - Reason to believe for reopening based on tangible and prima facie material - Use of seized documents from search operations to form belief for reassessment - Change of opinion inapplicable where no prior scrutiny assessment was framed - Validity of reopening to be judged on reasons recorded and not on post hoc material

Reopening of assessment where return accepted under section 143(1) - Reason to believe for reopening based on tangible and prima facie material - Use of seized documents from search operations to form belief for reassessment - Change of opinion inapplicable where no prior scrutiny assessment was framed - Validity of reopening to be judged on reasons recorded and not on post hoc material - Validity of notice under section 148/147 to reopen assessment for A.Y. 2010-2011 where the return was accepted under section 143(1). - HELD THAT: - The Court held that even where a return is accepted under section 143(1) without scrutiny, the Assessing Officer must have a "reason to believe" that income chargeable to tax has escaped assessment before issuing a notice under section 148/147. That reason to believe need not be a finally ascertained fact; it suffices that there is tangible or prima facie material on which a reasonable person could form such belief. The court applied settled precedents (including Rajesh Jhaveri Stock Brokers and Raymond Woollen Mills) that the sufficiency or correctness of the material is not to be gone into at the threshold of reopening and that the validity of reopening is to be judged on the basis of the reasons recorded. On the facts, the Assessing Officer had analysed voluminous seized material from searches on the Venus Group, including summary sheets, cash-book entries and vouchers showing continuous, coded cash entries (with ante-dated dates and figures recorded as one-hundredth) and correlated those entries with registered sale deeds for land transactions. The Assessing Officer reasonably apportioned the large cash receipts found in the seized material to the parcels of land purchased by the petitioners and formed a prima facie belief of unaccounted investment for the relevant year. The Court found that such material was sufficient to permit reopening and that the Assessing Officer had not impermissibly relied on extraneous material beyond the reasons recorded; accordingly the reopening notice was valid.

The reopening notice under section 148/147 for A.Y. 2010-2011 was validly issued and the petitions challenging the reopening are dismissed.

Final Conclusion: The High Court dismissed the petitions and upheld the Assessing Officer's reopening of assessment for A.Y. 2010-2011, holding that the seized and correlated documents furnished sufficient prima facie material to constitute a reason to believe that income chargeable to tax had escaped assessment.

Reopening assessment beyond four years under Section 147/148 of the Income tax Act - Failure to disclose fully and truly all material facts - Reason to believe that income chargeable to tax has escaped assessment - Change of opinion - Assessment concluded under Section 143(3) - Jurisdictional limitation - four year bar

Reopening assessment beyond four years under Section 147/148 of the Income tax Act - Failure to disclose fully and truly all material facts - Assessment concluded under Section 143(3) - Change of opinion - Validity of the notice dated 26th March 2017 under Section 148 insofar as it seeks reopening of assessment for AY 2010-2011 after expiry of four years - HELD THAT: - The return for AY 2010-2011 was scrutinised, s.142(1) notices were issued and requisite particulars in support of claims (including depreciation and deduction under s.80IB(11A)) were furnished and examined, and assessment was framed under s.143(3). The proviso to s.147 permits reopening after four years only where income has escaped assessment by reason of failure to make a return or failure to disclose fully and truly all material facts in response to statutory notices. The record shows no failure by the assessee to disclose the primary facts; all necessary particulars were placed on file during original assessment. Mere change of opinion by the Assessing Officer or re interpretation of the same material cannot furnish jurisdiction to reopen beyond four years. Reliance on decisions where reassessment was quashed on similar grounds supports that once primary facts are before the AO and examined in a s.143(3) assessment, reopening after the four year period is impermissible unless there was non disclosure of material facts. Applying this principle, the notice under s.148 issued after the four year period was without jurisdiction and therefore liable to be quashed.

The notice dated 26th March 2017 under Section 148 insofar as it seeks reopening of assessment for AY 2010-2011 is without jurisdiction and is quashed.

Final Conclusion: Reassessment proceedings initiated by the notice dated 26th March 2017 are illegal and bad in law; the notice under Section 148 for AY 2010-2011 is quashed and the reassessment proceedings are to be dropped.

Notice requiring production or attendance for assessment proceedings under section 143(2) - Addition as unexplained expenditure under section 69C - Remand for verification and fresh enquiry into genuineness of receipts

Notice requiring production or attendance for assessment proceedings under section 143(2) - Validity of the assessment proceedings in the absence of a formal notice under section 143(2) of the Act. - HELD THAT: - The Tribunal examined the notices and correspondence on record and found that the questionnaire/notice dated 08/10/2010 called for various information, books of account and documents necessary for completing the assessment and thereby served the substance and purpose of a notice under section 143(2). The adjudicatory test is whether the assessee was given an opportunity to produce evidence and attend for assessment; the form or label of the notice is immaterial if in substance it requires attendance or production of evidence before completion of assessment. On the facts, the assessee had responded to the notices and furnished audited accounts and query-wise replies, demonstrating awareness of and participation in the assessment proceedings. The Tribunal upheld the first appellate authority's conclusion that there was no infirmity in the assessment for want of a section 143(2) notice. [Paras 9]

Assessee's challenge to validity of assessment for want of a section 143(2) notice rejected; notice dated 08/10/2010 held to satisfy requirements of section 143(2).

Addition as unexplained expenditure under section 69C - Remand for verification and fresh enquiry into genuineness of receipts - Whether the addition of Rs. 53,75,370 as unexplained expenditure under section 69C was sustainable on the materials on record. - HELD THAT: - The Tribunal noted contradictions in the parties' submissions and absence of proper verification by the Assessing Officer or the Commissioner (Appeals). While the Assessing Officer had treated the amount as unexplained expenditure and the Commissioner (Appeals) had confirmed that addition in part, the material on record also showed that the amount was received from M/s Virat Exim Pvt. Ltd. and that no conclusive inquiry had been made into the nature and genuineness of that receipt. The Tribunal observed that the amount, as presented in the appellate proceedings, appeared to be a receipt rather than an expenditure and that neither corroboratory investigation nor confrontation of statements and documents had taken place. In view of these lacunae, the Tribunal concluded that the matter required fresh verification: the Assessing Officer should call for submissions from both parties, confront the assessee with statements/documents of M/s Virat Exim, conduct necessary enquiries and thereafter determine the correct nature of the amount in the assessee's hands. [Paras 11, 18]

Addition under section 69C set aside and remitted to the Assessing Officer for fresh verification and enquiry into the genuineness and nature of the amount received, with opportunity to assessee to meet evidence of M/s Virat Exim.

Final Conclusion: The assessee's challenge to the assessment's validity for want of a section 143(2) notice is dismissed; the addition under section 69C is not upheld on the record and is remanded to the Assessing Officer for detailed verification and fresh determination of the nature of the receipt.

Bogus purchases - disallowance on account of unverifiable expenses - section 194C and applicability - section 40(a)(ia) - TDS/non-deduction consequences - substantiation of creditors by production of VAT registration and ledgers

Bogus purchases - disallowance on account of unverifiable expenses - Deletion of addition of Rs. 10,37,732/- made by AO treating 20% of material purchases as bogus - HELD THAT: - AO made an ad hoc 20% disallowance of purchases on the ground that supporting bills/vouchers were not furnished. On appeal and remand proceedings the assessee furnished details of parties, ledgers and VAT registration particulars; the CIT(A) found existence of the parties and that purchases were substantiated. Tribunal accepted that the details were properly provided before the AO and that the AO's statement that evidence was not furnished was not tenable. Consequently the adhoc percentage disallowance treating the claimed expenses as bogus was unjustified. [Paras 8]

Addition of Rs. 10,37,732/- on account of materials purchased is deleted and the CIT(A) order is confirmed.

Section 194C and applicability - section 40(a)(ia) - TDS/non-deduction consequences - Deletion of addition of Rs. 71,81,150/- by AO on account of labour charges for alleged failure to deduct TDS under section 194C/40(a)(ia) - HELD THAT: - AO held that no TDS was deducted on labour payments and disallowed the expense under section 40(a)(ia) treating payments as subject to section 194C. On appeal the CIT(A) found, and the Tribunal agreed, that the assessee directly engaged and paid daily labourers (no subcontract), produced weekly payment registers, ledger and cashbook showing payments and thumb impressions of recipients, and that labourers were migratory making service of notices inconclusive. As there was no contractual payment to a contractor/subcontractor, section 194C was not attracted and disallowance under section 40(a)(ia) was unwarranted. [Paras 14]

Addition of Rs. 71,81,150/- on account of labour charges is deleted and the CIT(A) order is confirmed.

Substantiation of creditors by production of VAT registration and ledgers - disallowance on account of unverifiable expenses - Deletion of addition of Rs. 53,15,886/- treated by AO as sundry creditors being bogus - HELD THAT: - AO treated sundry creditors as bogus for failure to furnish particulars and returned adverse remand report after issuing notices to creditors. Before the CIT(A) the assessee produced ledgers, VAT registration details and explanations for small balance differences (unreconciled entries). CIT(A) found existence of the creditors established and that AO had not doubted the genuineness of corresponding purchases; on these factual findings, uncontroverted on record, the Tribunal found no reason to interfere with CIT(A)'s conclusion that the creditors and related liabilities were genuine and that a blanket disallowance was unjustified. [Paras 19]

Addition of Rs. 53,15,886/- on account of sundry creditors is deleted and the CIT(A) order is confirmed.

Final Conclusion: All three additions made by the assessing officer for A.Y.2008-09 - in respect of material purchases, labour charges and sundry creditors - were held to be unwarranted on the facts and substantiation produced; the Tribunal upheld the CIT(A)'s deletions and dismissed the revenue's appeal.

Reopening of assessment - sanction for issue of notice under section 148 - failure to make full and true disclosure - change of opinion - void ab initio - allowability of remuneration under section 37(1)

Reopening of assessment - failure to make full and true disclosure - change of opinion - Validity of reassessment proceedings initiated after four years where no new information was discovered and the original assessment was completed after survey - HELD THAT: - The Tribunal affirmed the view taken by the Commissioner (Appeals) that the Assessing Officer reopened assessment more than four years after the end of the relevant assessment year without any fresh information coming to light and without any failure by the assessee to make full and true disclosure. The reassessment thus amounted to a mere 'change of opinion' because the matters (including remunerations reflected in the profit and loss account and examined in survey) were already within the knowledge of the Revenue and were considered at the original 143(3) assessment completed after survey. In such circumstances invoking section 147/148 to reopen assessment was impermissible and the reassessment was invalidated as being founded on change of opinion rather than on new material or nondisclosure. [Paras 3]

Reopening the assessment after four years in the absence of failure to disclose or fresh information was invalid and the reassessment was void as being based on change of opinion.

Sanction for issue of notice under section 148 - void ab initio - Effect of defective or improper approval for issuance of notice under section 148 when reopening occurs after four years - HELD THAT: - The Commissioner (Appeals) noted, and the Tribunal accepted, that statutory sanction required for issuance of notice under section 148 (in cases falling beyond four years) had not been properly obtained as envisaged by the proviso and the relevant scheme: the approval recorded did not conform to the required authority. Coupled with the absence of any fresh information or failure to disclose by the assessee, the defective sanction reinforced the conclusion that the reopening was not sustainable. Having regard to the statutory requirement for proper satisfaction by the competent authority before issuing a notice after four years, the improper sanction rendered the reassessment proceedings invalid and the assessment was treated as void ab initio. [Paras 3, 5]

Defective/insufficient sanction for issuing notice under section 148 (in a reopening beyond four years) contributed to invalidity of reassessment; the assessment was treated as void ab initio.

Final Conclusion: The Revenue's appeal is dismissed. The reassessment initiated after four years was invalid-being a change of opinion and undertaken without proper sanction-and the assessment is treated as void ab initio.

Reliance on statement recorded during survey - seized material as basis for assessment - rejection of books of account and estimation of income - remand for fresh determination - addition under section 41(1) on account of creditors - assessment year linkage of transactions

Seized material as basis for assessment - reliance on statement recorded during survey - rejection of books of account and estimation of income - remand for fresh determination - Validity of addition of Rs. 4.52 crores (surrendered during survey) in A.Y. 2010-2011 and whether AO properly accepted the surrender while rejecting books and without computing income from seized material - HELD THAT: - The Tribunal found contradictory factual and inferential treatment by the AO: the AO reproduced the seized diary and referred to the surrender but rejected the assessee's books under section 145(3) without computing income either from the seized material or from the books produced by the assessee. Given this inconsistent approach and absence of any quantification based on the seized material, the Tribunal held that the matter requires reconsideration. The AO must consider all evidence on record, including books of account (if produced), seized material and statements, give the assessee reasonable opportunity, and compute income in accordance with law rather than simultaneously rejecting books and simply accepting the earlier surrender recorded at survey. Consequently the Tribunal set aside the addition and restored the matter to the AO for fresh determination in accordance with law. [Paras 9]

Addition of Rs. 4.52 crores set aside and matter remanded to the AO for fresh determination in accordance with law (A.Y. 2010-2011).

Addition under section 41(1) on account of creditors - reliance on statement recorded during survey - assessment year linkage of transactions - Sustenance of additions under section 41(1) treating creditors as remitted/ceased liabilities (group appeals for A.Y. 2008-2009 and A.Y. 2009-2010) - HELD THAT: - The Tribunal followed earlier reasoning in the group and co ordinate bench decisions that the revenue must discharge the onus of proving that a trading liability, previously claimed, stood remitted or ceased in the assessment year. On the facts, ledgers, confirmations and explanations produced by the assessees showed that the amounts remained as outstanding in the books or related to earlier years; the revenue did not demonstrate cessation or remission. Following the Tribunal's prior decision in the same group of cases and the applicable High Court precedents relied upon therein, the Tribunal set aside the additions made under section 41(1) and deleted them. [Paras 16, 18, 19, 28, 29]

Additions under section 41(1) in the group appeals deleted (A.Y. 2008-2009 and A.Y. 2009-2010).

Assessment year linkage of transactions - reliance on statement recorded during survey - Whether addition of Rs. 37.90 lakhs (purported bogus purchases from M/s. S.R. Industrial Corporation) could be sustained in A.Y. 2008-2009 - HELD THAT: - The Tribunal accepted the assessee's ledger evidence and submissions that the transactions in question pertained to F.Y. 2005-06 (A.Y. 2006-07) and therefore were not taxable in the assessment year under appeal. The Tribunal observed that an admission made earlier can be disproved by evidence and explanation; since the material showed the transactions related to an earlier year, the addition for A.Y. 2008-2009 could not be sustained and was thereby deleted. [Paras 24]

Addition of Rs. 37.90 lakhs deleted as it related to an earlier assessment year (A.Y. 2008-2009).

Reliance on statement recorded during survey - reversal of entries / reconciliation with ledger - Deletion of addition of Rs. 1,08,003 (reconciliation with Graphite India Ltd.) in A.Y. 2010-2011 - HELD THAT: - The assessee produced reconciliation and supporting bill evidence showing that the disputed amount related to damaged goods and had been reversed in the books. On that basis the Tribunal found the addition unjustified and deleted it. [Paras 10]

Addition of Rs. 1,08,003/ deleted (A.Y. 2010-2011).

Final Conclusion: The Tribunal partly allowed ITA No.75/Del./2015 by remanding the addition of Rs. 4.52 crores to the AO for fresh determination in A.Y. 2010-2011 and deleted the addition of Rs. 1,08,003; the remaining appeals in ITA Nos.71, 73 and 74/Del./2015 were allowed by deleting the additions under section 41(1) and the contested bogus purchase addition for A.Y. 2008-2009.

Transfer Pricing - Arm's Length Price - Transactional Net Margin Method (TNMM) - Comparability Analysis - Selection and Rejection of Comparables - Operating vs Non-operating Income/Expenses - Foreign Exchange Fluctuation - Inclusion of Provision for Bad and Doubtful Debts in Operating Expenses - Remand for De novo Consideration - TDS Credit Verification

Transfer Pricing - Grounds Nos.1 to 4 (relating to rejection of TP documentation, use of single-year data, aggregation of distribution with services and related preliminary contentions) were not pressed and are rejected. - HELD THAT: - The assessee's counsel did not advance arguments in support of Grounds 1 to 4 at the hearing. The Tribunal therefore treated these grounds as not pressed and rejected them without adjudication on merits. [Paras 2]

Grounds 1 to 4 are rejected as not pressed.

Operating vs Non-operating Income/Expenses - Foreign Exchange Fluctuation - Whether abnormal foreign exchange fluctuation loss should be excluded from operating expenses for computing net margin under TNMM - rejected. - HELD THAT: - The assessee contended that a substantial foreign exchange loss was abnormal and non operating and therefore should be excluded. The Tribunal observed that foreign exchange gains or losses affect both the assessee and comparables when transactions are in the same currency, and that foreign exchange fluctuation is not peculiar to the assessee. Prior Tribunal decisions recognise foreign exchange fluctuation as part of operating revenue/cost unless distinct currency differences or abnormality vis-a -vis comparables are demonstrated. The assessee did not establish such distinction or currency mismatch with comparables. [Paras 5, 7]

Assessee's plea to exclude foreign exchange fluctuation loss from operating expenses is rejected.

Selection and Rejection of Comparables - Comparability Analysis - Exclusion of CompU Learn Tech India Ltd as not functionally comparable - allowed. - HELD THAT: - On examination of the company's activities and directors' report, CompU Learn Tech had substantial business in e governance, training and product sales which materially differed from the assessee's captive software development services. The Tribunal followed earlier coordinate-bench decisions which held the company functionally dissimilar and directed exclusion. [Paras 10, 11]

CompU Learn Tech India Ltd is to be excluded from the final list of comparables.

Selection and Rejection of Comparables - Comparability Analysis - Exclusion of E Infochips Bangalore Ltd as not comparable due to functional dissimilarity and absence of segmental data - allowed. - HELD THAT: - E Infochips undertakes software development as well as consultancy/ITES and reports only aggregate results without segmental break up. Consistent with earlier Tribunal rulings, absence of segmental information and diversified activities preclude its use as a comparable for the assessee's captive software services. The Tribunal therefore directed exclusion. [Paras 13, 14]

E Infochips Bangalore Ltd is to be excluded from the final list of comparables.

Selection and Rejection of Comparables - Comparability Analysis - E Zest Solutions Ltd is functionally comparable and is not excluded. - HELD THAT: - The Tribunal examined E Zest's profile and services, which cover the entire product development lifecycle and align with the assessee's software development activities. The Tribunal found no basis to treat E Zest as a KPO or otherwise functionally dissimilar and therefore retained it in the comparable set. [Paras 15, 16, 17]

E Zest Solutions Ltd shall remain in the final list of comparables.

Selection and Rejection of Comparables - Comparability Analysis - Exclusion of Kals Information Systems Ltd (Seg.) as not comparable - allowed. - HELD THAT: - Prior Tribunal decisions and the company's disclosures indicate Kals is engaged in software products and other activities; its functional profile differs from a pure software development services provider. Following coordinate bench precedent, the Tribunal directed exclusion of Kals. [Paras 18, 19]

Kals Information Systems Ltd (Seg.) is to be excluded from the final list of comparables.

Selection and Rejection of Comparables - Remand for De novo Consideration - Objection to Persistent Systems Ltd raised for the first time before the Tribunal - remanded to AO for de novo consideration. - HELD THAT: - The assessee had treated Persistent Systems Ltd as a comparable in its TP study but sought exclusion before the Tribunal for the first time. The Tribunal held that a new objection at this appellate stage requires fresh consideration and remitted the matter to the AO for de novo adjudication in accordance with law. [Paras 20, 21]

Issue as to Persistent Systems Ltd is remanded to the AO for de novo consideration.

Selection and Rejection of Comparables - Comparability Analysis - Exclusion of Tata Elxsi Ltd (Seg.) as not comparable - allowed. - HELD THAT: - Tata Elxsi carries out complex, multi segment activities with no available segmental data to extract software services margins; earlier Tribunal orders have consistently excluded Tata Elxsi on functional dissimilarity grounds. Applying the same reasoning, the Tribunal directed exclusion. [Paras 22, 23]

Tata Elxsi Ltd (Seg.) is to be excluded from the final list of comparables.

Transfer Pricing - Ground No.7 (seeking inclusion of certain comparables) is not adjudicated as unnecessary once exclusions directed will bring the assessee's margin within 5% of the final comparables' average - rejected. - HELD THAT: - The Tribunal observed that effecting the directed exclusions would render adjudication on the additional comparables unnecessary because the assessee's margin would fall within the statistical tolerance band. Consequently, the ground seeking inclusion of those companies was not entertained. [Paras 24]

Ground No.7 is rejected as unnecessary.

Inclusion of Provision for Bad and Doubtful Debts in Operating Expenses - Remand for De novo Consideration - Treatment of provision for bad and doubtful debts as operating expense for margin computation - remanded with direction to recompute margins including such provisions. - HELD THAT: - Relying on coordinate bench precedent (Kenexa and Sony India), the Tribunal held that bad debts and provisions for doubtful debts form part of operating expenses and directed the AO to recompute the margins of relevant comparable companies by including these items. The Tribunal found no contrary material from the Department and remitted the computation to the AO for compliance. [Paras 25, 26, 27]

Margins of comparable companies to be recomputed by including bad debts/provisions for bad and doubtful debts; issue remitted to AO/TPO.

Remand for De novo Consideration - Errors alleged in computation of CAT Technologies Ltd's margin and segmentation of unallocable costs for Kals Information Systems and Tata Elxsi - remanded to TPO/AO for de novo consideration. - HELD THAT: - The Tribunal found merit in re examination of (a) alleged error in CAT Technologies' margin computation and (b) segmenting of unallocable costs for Kals and Tata Elxsi. These technical and fact specific matters were remitted for fresh consideration by the TPO/AO in accordance with law. [Paras 28, 29]

Issues relating to CAT Technologies' margin computation and segmentation of unallocable costs for Kals and Tata Elxsi are remanded to AO/TPO for de novo consideration.

TDS Credit Verification - Remand for De novo Consideration - Claim for grant of TDS credit is referred to the TPO for verification and grant in accordance with law. - HELD THAT: - The Tribunal directed that the claim for TDS credit be verified by the TPO and, if found correct, credit be granted in accordance with applicable provisions, leaving the factual verification to the assessing authorities. [Paras 31]

Ground No.10 referred to TPO for verification and grant of TDS credit in accordance with law.

Final Conclusion: The appeal is partly allowed: certain specified comparables (CompU Learn Tech India Ltd, E Infochips Bangalore Ltd, Kals Information Systems Ltd (Seg.), Tata Elxsi Ltd (Seg.)) are directed to be excluded; E Zest Solutions Ltd is retained; a challenge to Persistent Systems Ltd is remanded for de novo consideration; margins are to be recomputed by including provisions for bad and doubtful debts and other specified computation issues are remitted to the AO/TPO; the TDS credit claim is referred to the TPO for verification and grant. Order accordingly.

Rectification under section 154 - revised return under section 139(5) - residence and scope of total income - exemption of salary of crew of foreign ship under section 5(1)(c) - appellate/tribunal power to entertain additional claims - CBDT guidance that officers should not take advantage of assessee's ignorance - Article 265 - taxes leviable only by authority of law

Rectification under section 154 - residence and scope of total income - exemption of salary of crew of foreign ship under section 5(1)(c) - Validity of the assessee's rectification petition under section 154 to exclude salary income claimed to be exempt by reason of non-resident status - HELD THAT: - The Tribunal examined whether the mistake alleged in the return (inclusion of salary of a crew member of foreign ships) was capable of correction in proceedings under section 154. The Tribunal noted that the assessee asserted non-resident status and produced passport, wages statements and TDS certificates in support. The question of residence (and hence whether the salary accrued/was received in India) is determinative of whether the income falls within total income under section 5 read with section 6. Having considered authorities and CBDT guidance, the Tribunal found that the factual question of actual days of stay and NRI status was not adjudicated by the lower authorities and that the material to verify the claim was on record. Consequently the Tribunal held that the matter required factual verification by the Assessing Officer and that, if the assessee substantiates stay abroad to the required extent, the income wrongly offered in the return should be excluded after appropriate adjudication and opportunity of hearing. [Paras 12, 25, 26, 27]

Issue remitted to the Assessing Officer for verification of actual NRI status, days of stay and fresh disposal of the rectification petition; if stay is substantiated, AO to exclude the salary income after giving opportunity of hearing.

Revised return under section 139(5) - appellate/tribunal power to entertain additional claims - CBDT guidance that officers should not take advantage of assessee's ignorance - Article 265 - taxes leviable only by authority of law - Whether the assessee's claim (not adjusted in original return) could be entertained at rectification/appeal stage without a revised return - HELD THAT: - The Tribunal considered the Revenue's reliance on the jurisdictional High Court decision that mistakes in a return must be corrected by filing a revised return under section 139(5). The Tribunal distinguished the present factual matrix because the assessee had filed a rectification application following CPC directions and had placed supporting material on record. Relying on precedent and CBDT Circulars, the Tribunal accepted that appellate and assessing authorities have power to consider additional claims or corrections where genuine material is available and the claim is tenable in law. The Tribunal emphasised the constitutional principle that tax can be levied only by authority of law (Article 265) and that Revenue officers should not take advantage of taxpayers' errors; accordingly, it applied authorities permitting consideration of fresh claims in appropriate cases and declined to treat the claim as barred merely because it was not the basis of the initial processing. [Paras 13, 15, 21, 22, 24]

Assessee's claim can be entertained for consideration; appellate/assessing authorities may examine the claim where material is on record and claim is bona fide, subject to factual verification.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes and restored the matter to the file of the Assessing Officer with directions to verify the assessee's actual NRI status and number of days of stay; if the assessee substantiates the claimed stay abroad, the AO is to exclude the salary income wrongly offered in the return after affording opportunity of hearing.

Addition on account of unverifiable purchases - onus of proof for genuineness of creditors and purchases - rejection of books of account under section 145(3) - estimation of profits by dissecting accounting period - application of industry average gross profit without comparative analysis - summons and enquiries under section 131 and letters under section 133(6) - confirmations and audited accounts as discharge of initial onus - best judgment assessment under section 144 and requirement of show-cause notice - admission of additional evidence and remand-report procedure

Addition on account of unverifiable purchases - onus of proof for genuineness of creditors and purchases - summons and enquiries under section 131 and letters under section 133(6) - confirmations and audited accounts as discharge of initial onus - Deletion of additions made by the Assessing Officer by disallowing purchases claimed from certain sundry creditors. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the AO was not justified in disallowing purchases and adding the credit balances. The AO's conclusion of non-existence of suppliers rested on returned notices and an Inspector's spot report, but the assessee produced postal-service evidence of service, summons responses, audited accounts and confirmations from the suppliers in remand proceedings, VAT returns/DVAT-30 forms and subsequent bank payments to those parties. One large addition related to an opening balance from the prior year which could not be disallowed in the current year. The AO produced no positive evidence of circular transactions or that amounts returned to the assessee. In the absence of contrary material and given that export sales were not disputed, the confirmations and other documents furnished discharged the assessee's initial onus and the AO's inferences based on suspicion and imperfect spot enquiries were held insufficient to sustain the additions. [Paras 9, 10, 11, 12, 17]

Additions disallowing purchases from the questioned sundry creditors were deleted.

Rejection of books of account under section 145(3) - estimation of profits by dissecting accounting period - application of industry average gross profit without comparative analysis - best judgment assessment under section 144 and requirement of show-cause notice - Validity of the Assessing Officer's rejection of the assessee's trading results and reconstruction of profit by various methods (consumption-based, stock-statement-based and industry-average-based) and consequent additions. - HELD THAT: - The Tribunal found that the AO's multiple methods for recasting profit were arbitrary and unsupported. The consumption-based method ignored reconciliations, wastage/shrinkage and consumables duly explained and documented by the assessee; the stock-statement method dissected the year and applied a short-period gross profit to the whole year using unexplained duty-drawback and direct-expense figures; and the industry-average approach lacked any comparative data or concrete examples. The accounts had been maintained consistently and accepted in earlier years; upon alleged rejection under section 145, no show-cause notice under the proviso to section 144 was issued before framing best-judgment assessment. In these circumstances the AO's re-computation and additions could not be sustained. [Paras 12, 13, 14, 15]

Rejection of accounts and the resultant trading additions were held unsustainable and the deletions affirmed.

Admission of additional evidence and remand-report procedure - confirmations and audited accounts as discharge of initial onus - Challenge to the CIT(A)'s admission of additional evidence in A.Y. 2010-11 and whether such admission was in breach of Rule 46A or procedurally improper. - HELD THAT: - The Tribunal observed that the CIT(A) had called for remand reports on the submissions and documents filed by the assessee, and the AO conducted extensive enquiries in remand proceedings. The Revenue did not specify which items of evidence were newly admitted or how Rule 46A was contravened. Given that remand enquiries were made and the AO investigated the material, the objection to admission of evidence lacked merit. [Paras 19]

Ground challenging admission of additional evidence was dismissed.

Final Conclusion: For all three assessment years the Tribunal affirmed the CIT(A)'s orders deleting the additions and dismissed the Revenue's appeals, holding that the Assessing Officer's disallowances and reconstructed profits were unsupported by adequate evidence or proper procedure.

Deemed dividend and sham transaction - service of notice under section 143(2) - bar under section 124(3)(a) against challenging jurisdiction

Deemed dividend and sham transaction - Addition of Rs. 1,28,52,217 as deemed dividend under the provisions invoked by the Assessing Officer was sustainable and the Commissioner (Appeals) erred in deleting the addition. - HELD THAT: - The Tribunal examined the factual matrix including the assessee's shareholding and directorship in the two companies, the entries in the companies' books (showing the amounts as receivables/other liabilities), the Agreements to Sell, market practice on earnest money, absence of usual protective clauses in the agreements, correspondence between the parties and the assessee's investments after receipt of the amounts. The Tribunal found the Agreements to Sell to be sham and collusive, observed that the companies did not record the payments as earnest money, and noted lack of a credible explanation that the amounts were bona fide earnest money rather than advances diverted for investments. Applying these findings, the Tribunal concluded that the funds were effectively used by the assessee and fell within the mischief of the deeming provision relied upon by the Assessing Officer, and therefore restored the assessment addition. [Paras 20]

Addition of Rs. 1,28,52,217 treated as deemed dividend is restored and the order of the Commissioner (Appeals) deleting the addition is reversed.

Service of notice under section 143(2) - bar under section 124(3)(a) against challenging jurisdiction - Assessee's challenge to the assessment on the ground of jurisdictional defect for alleged invalid service of notice under section 143(2) is not maintainable. - HELD THAT: - The Tribunal noted that the first statutory notice was issued by a different Circle and that the assessment record was subsequently transferred to the jurisdictional Assessing Officer, before whom the assessee participated in proceedings without raising the jurisdictional objection within the statutory time. Relying on the statutory bar in section 124(3)(a), the Tribunal held that a taxpayer cannot question the jurisdiction of the Assessing Officer after the expiry of the specified period if she had been served with the notice and continued to participate without timely objection. The Tribunal also observed that no prejudice was shown to have resulted from the notice issued by the non jurisdictional officer and that issuance by registered/speed post raised a presumption of service. In these circumstances the Commissioner (Appeals) was held not to have erred in rejecting the jurisdictional plea. [Paras 31, 32]

Cross objections challenging jurisdiction and service of notice are dismissed; assessment is not quashed on that ground.

Final Conclusion: The Tribunal allowed the Revenue's appeal by restoring the addition of Rs. 1,28,52,217 as deemed dividend and dismissed the assessee's cross objections challenging jurisdiction and service of notice, holding the objection barred by section 124(3)(a) and not shown to have caused prejudice.

Ad-hoc disallowance of business expenditure - Section 40(a)(ia) - disallowance for failure to deduct tax at source - Section 194C/Section 194I - TDS on payments to cooperative housing societies - Section 14A read with Rule 8D - disallowance in respect of exempt income - Requirement of assessing officer's satisfaction before invoking Rule 8D

Ad-hoc disallowance of business expenditure - Section 37(1) - permissible business deduction - Deletion of ad-hoc disallowance of various expenses amounting to Rs. 21,90,000/- made by the Assessing Officer under section 37(1). - HELD THAT: - The Assessing Officer applied percentage-based (ad-hoc) disallowances across heads (conveyance, travelling, foreign travelling, telephone, electricity) without pointing to any defect in the books of account or specific vouchers or identifying personal expenditure. The Tribunal, following precedent that an addition based on pure guesswork or unsupported estimation is impermissible, agreed with the CIT(A)'s deletion of the disallowance. In the absence of any specific finding that the expenditures were not incurred for the purposes of business, the adhoc percentile disallowance could not be sustained. [Paras 3]

The deletion of the ad-hoc disallowance of Rs. 21,90,000/- is upheld and the Revenue's ground is dismissed.

Section 40(a)(ia) - disallowance for failure to deduct tax at source - Section 194C/Section 194I - TDS on payments to cooperative housing societies - Principle of mutuality and reimbursement - Disallowance of Rs. 7,02,261/- under section 40(a)(ia) for non-deduction of TDS on monthly maintenance charges paid to cooperative housing societies was deleted by the CIT(A) and that deletion is upheld. - HELD THAT: - The payments were reimbursement of common expenses by members to cooperative housing societies in respect of flats owned by the assessee. The CIT(A) found, and the Tribunal agrees, that (a) there was no privity of contract between the assessee and contractors engaged by the society so as to attract section 194C, and (b) such receipts do not constitute income of the society in the character contemplated by section 194I because the societies operate on principles of mutuality and no-profit-no-loss. Thus the payments were not chargeable to tax in the hands of the societies and did not attract TDS obligations under sections 194C/194I; consequently section 40(a)(ia) disallowance was not justified. [Paras 4]

The deletion of the disallowance under section 40(a)(ia) is upheld and the Revenue's ground is dismissed.

Section 14A read with Rule 8D - disallowance in respect of exempt income - Requirement of assessing officer's satisfaction before invoking Rule 8D - Whether the Assessing Officer was justified in invoking Rule 8D and making a large disallowance under section 14A; matter remitted for fresh consideration on the specific question of whether the AO recorded requisite satisfaction and, if so, application of Rule 8D. - HELD THAT: - The Assessing Officer invoked Rule 8D to disallow expenses attributable to exempt income. The CIT(A) held that the AO's dissatisfaction with the assessee's claim (that no expenses related to exempt income) was not discernible from the record and accordingly restricted disallowance to demat charges. Having regard to the law that recording of satisfaction may be inferred from the AO's analysis (and that express formulae in Rule 8D must be applied when satisfaction exists), the Tribunal found that the question of whether the AO had properly recorded satisfaction is year-specific and requires re-examination. Consequently the Tribunal restored the issue to the CIT(A) to first determine whether the statutory prerequisite of satisfaction as to incorrectness of the assessee's claim exists; if satisfied, the CIT(A) is to proceed to apply the Rule 8D methodology in accordance with law, giving the assessee opportunity to be heard. [Paras 5]

Issue remitted to the CIT(A) for fresh adjudication on whether the AO recorded requisite satisfaction to invoke Rule 8D and, if so, for fresh computation under Rule 8D in accordance with law; matter restored for decision afresh.

Final Conclusion: The Tribunal partly allows the Revenue's appeal: deletions upheld in respect of (i) ad-hoc disallowance of business expenses and (ii) disallowance under section 40(a)(ia) for payments to cooperative housing societies; the question of disallowance under section 14A read with Rule 8D is remitted to the CIT(A) for fresh decision on whether the AO recorded requisite satisfaction and, if so, for fresh computation under Rule 8D.

Re-opening of assessment under section 147 r.w.s. 148 - reasons to believe - new tangible material - change of opinion / review of assessment - treatment of TDS certificates as material

Re-opening of assessment under section 147 r.w.s. 148 - reasons to believe - new tangible material - change of opinion / review of assessment - treatment of TDS certificates as material - Re-opening of assessment was invalid as it was based on the same materials which were available and considered at the time of the original assessment. - HELD THAT: - The Assessing Officer recorded reasons to believe that interest income had escaped assessment on the basis of audit objections and apparent mismatch between interest credited in the accounts and amounts indicated in TDS certificates. However, the Tribunal found on record that the same TDS certificates and details had been filed and examined by the AO during the original scrutiny assessment under Section 143(3) r.w.s. 153A. Re-opening the assessment on the basis of the identical material therefore amounted to a review or change of opinion by the AO, which is not permissible. The Tribunal relied on the view of the co ordinate Bench in the assessee's own matters and the settled legal principle that reassessment cannot be initiated merely by re-examining records already available at the time of the original assessment (as held in Kelvinator of India Ltd. and other authorities referred to in the order). Consequently the re-opening was beyond jurisdiction and unsustainable. [Paras 7, 8]

Re-opening of assessment quashed; appeal partly allowed and the reassessment set aside.

Final Conclusion: The Tribunal held that reassessment for AY 2006-07 was invalid because it rested on the same material already available to and considered by the AO in the original assessment; accordingly the re-opening was quashed and the appeal was partly allowed, rendering the merits of the addition academic.

Reopening of assessment under section 147/148 - reason to believe - assumption of jurisdiction - borrowed satisfaction - use of information from Investigation Wing as basis for reassessment - addition under section 68 for unexplained share capital - identity, creditworthiness and genuineness of investors - onus on Assessing Officer to verify and investigate - right to confront and cross-examine third-party witnesses relied upon - nexus requirement between material and formation of belief

Reopening of assessment under section 147/148 - reason to believe - use of information from Investigation Wing as basis for reassessment - borrowed satisfaction - nexus requirement between material and formation of belief - Validity of reopening the assessment of the assessee for A.Y. 2005-06. - HELD THAT: - The Tribunal held that the Assessing Officer had specific information from the Investigation Wing, Delhi identifying the assessee, amounts, instrument numbers, dates and bank details of alleged accommodation entries totalling Rs.15 lacs; such material, being specific to the assessee, furnished a rational and intelligible nexus to form a prima facie belief that income had escaped assessment. The court rejected the contention that the AO's satisfaction was merely a borrowed satisfaction or irrelevant because the reasons did not name who carried out the investigation, observing that possession of tangible information with specific particulars suffices for formation of belief and assumption of jurisdiction under section 147. The Tribunal followed its earlier decision in M/s Choice Buildestate Pvt. Ltd. and held that sufficiency or adequacy of the material cannot be tested at the stage of assumption of jurisdiction so long as there is a rational nexus between reasons recorded and the belief formed. [Paras 10]

Reopening of assessment was valid; cross-objection challenging reopening is dismissed.

Addition under section 68 for unexplained share capital - identity, creditworthiness and genuineness of investors - onus on Assessing Officer to verify and investigate - right to confront and cross-examine third-party witnesses relied upon - Validity of addition of Rs.66 lacs to income as unexplained share capital under section 68. - HELD THAT: - The Tribunal found that although the AO formed a prima facie view based on information from the Investigation Wing, the AO failed to carry out independent verification and further investigation before making the addition. The assessee had produced documentary evidence - share application forms, bank statements, confirmations, return of allotment and PAN details - establishing identity, creditworthiness and genuineness of subscriptions aggregating Rs.46 lacs (and documentation for the other subscribers). The AO did not examine these documents, did not call for information under section 133(6) or summons under section 131, and did not confront the assessee with the investigative material or permit cross-examination of third parties whose statements were relied upon. In absence of established nexus showing that the subscription monies were the assessee's undisclosed funds, and given the AO's failure to investigate and to record reasons rejecting the explanations, suspicion alone could not sustain the addition. The Tribunal applied the jurisdictional High Court precedents and its own earlier decisions stressing that where the assessee furnishes evidence on identity, creditworthiness and genuineness, the AO must examine and record reasons if rejecting them. [Paras 21, 25]

Addition under section 68 is unwarranted; the deletion of the addition by the CIT(A) is confirmed and the Revenue's grounds are dismissed.

Final Conclusion: Both the Revenue's appeal and the assessee's cross-objection are dismissed: the reassessment was validly initiated, but the addition under section 68 was deleted for lack of adequate verification, failure to confront the assessee with investigative material and absence of proof establishing the subscriptions as the assessee's undisclosed income.

Country of origin - conclusive evidence of certificate of origin issued by designated authority - reliance on packing material markings - documentary evidence routed through banking channel - laboratory inconclusive evidence - benefit under Free Trade Agreement

Reliance on packing material markings - laboratory inconclusive evidence - Markings on packing material are not sufficient to determine country of origin or to deny preferential treatment under the ISFTA when laboratory tests are inconclusive. - HELD THAT: - The adjudicating authority correctly observed that merely markings on packing material cannot be the clinching evidence for determining the country of origin, particularly where laboratory tests did not establish Indonesian origin. The Tribunal agreed that reuse of old gunny bags bearing foreign marks does not justify denial of the claimed preferential rate, and noted the trial court/high court direction leading to provisional release of seized goods. Consequently, packing marks alone were insufficient to sustain the finding of misdeclaration of origin. [Paras 5, 8]

Packing marks were not a clinching proof of Indonesian origin and could not be the basis to deny the benefit under the ISFTA.

Country of origin - conclusive evidence of certificate of origin issued by designated authority - documentary evidence routed through banking channel - benefit under Free Trade Agreement - Certified documentary evidence and confirmations from designated authorities and banking channels established Sri Lankan origin, entitling the assessee to the concessional rate under the ISFTA. - HELD THAT: - The Tribunal accepted the statements and records showing that bills of lading and other import documents were genuine and routed through the supplier's bank and the importer's bank. Multiple expert laboratories did not confirm Indonesian origin, while the High Commission of Sri Lanka, Worldmark Commodities Pvt. Ltd., and the Sri Lanka Department of Commerce certified the goods as of Sri Lankan origin. Reliance was placed on precedent that certification of origin by the designated authority is conclusive evidence. In the totality of evidence, the Tribunal found no misdeclaration and no valid reason to discriminate between containers with similar documentation. [Paras 9, 10, 11, 12, 13]

Documentary certifications and confirmations established Sri Lanka as the country of origin and entitled the assessee to the concessional duty; the impugned order was set aside.

Final Conclusion: The appeal is allowed; the impugned adjudication is set aside on the finding that the goods were of Sri Lankan origin and the assessee was entitled to the concessional rate under the India-Sri Lanka Free Trade Agreement.

Eligibility for exemption under a notification effective from midnight - refund of export duty - effectiveness of notification from 00:00 hours on the date of notification - Let Export Order and its bearing on applicability of exemption - raising fresh grounds at the second appellate stage (prohibition on new grounds)

Eligibility for exemption under a notification effective from midnight - Let Export Order and its bearing on applicability of exemption - refund of export duty - Goods exported on 13.6.2008 are eligible for exemption under Notification No.77/2008-Cus. and claimant is entitled to refund of export duty paid. - HELD THAT: - The Tribunal applied its decision in Jindal Saw Ltd. holding that Notification No.77/2008 dated 13.6.2008 took effect from the midnight between 12th and 13th June 2008 and therefore exports in respect of which Let Export Order was given on 13.6.2008 fall within the exemption. The earlier rejection by the adjudicating authority based on a view that the notification was not applicable to goods exported on or before 13.6.2008 was disapproved. Relying on the Tribunal precedent, the appellate bench concluded that the exemption applies to the shipments with Let Export Order dated 13.6.2008 and accordingly the refund claim is entitled to consideration. [Paras 4]

Benefit of Notification No.77/2008-Cus. applies to goods with Let Export Order dated 13.6.2008 and refund claim is sustainable.

Raising fresh grounds at the second appellate stage (prohibition on new grounds) - Revenue cannot raise for the first time at the second appellate stage the ground that the assessment of the shipping bills was not challenged. - HELD THAT: - The Tribunal found that the contention regarding failure to challenge the assessment order was raised for the first time on appeal to the Tribunal. It applied settled law that Revenue is not permitted to introduce fresh grounds at the second appellate level and relied on Tribunal precedents to that effect. Consequently, the objection based on failure to challenge assessment could not be entertained by the Tribunal. [Paras 6]

The new ground regarding non-challenge of assessment raised by Revenue at the second appellate stage is impermissible and cannot be entertained.

Final Conclusion: The Revenue appeal is dismissed; exports with Let Export Order dated 13.6.2008 are eligible for exemption under Notification No.77/2008-Cus., and the fresh ground raised by Revenue at the second appellate stage is not admissible.

Mis-declaration - confiscation - redemption fine - penalty on importer - classification as Heavy Melting Scrap (HMS) - re-rollable scrap - high sea sale basis - finding of fact based on examination versus documents - reliance on Tribunal precedent

Mis-declaration - confiscation - classification as Heavy Melting Scrap (HMS) - re-rollable scrap - high sea sale basis - finding of fact based on examination versus documents - Whether consignments purchased on high sea sale basis and documented as Heavy Melting Scrap, but found on examination to contain significant quantities of re-rollable scrap, constitute mis-declaration attracting confiscation and penalties - HELD THAT: - The Tribunal majority accepted the view that where the importer purchased the consignments on high sea sale basis and the supplier's documentation (invoice, packing list, bill of lading and pre-shipment certificate) describe the goods as Heavy Melting Scrap (HMS), the presence of re-rollable material does not automatically convert the consignment into a different category so as to justify confiscation or penalty. The Judicial Member observed that attributing a wrongful motive to the importer is not warranted where the importer relied upon the seller's documents and would not know container contents, and that the classification adopted by the adjudicating authority itself was under the heading for waste and scrap. On that basis the Judicial Member set aside confiscation and penalties. The Technical Member, by contrast, treated the detection of 50% or more re-rollable scrap on examination as mis-declaration of what was declared in the bill of entry and upheld confiscation, while moderating the redemption fine and penalty. Having considered the Tribunal's earlier decision in Kuber Casting (adopted by the Judicial Member) and the facts of the present appeals, the majority agreed with the Judicial Member that the consignments were not mis-declared and that confiscation and penalties were not called for in these appeals. [Paras 6, 7, 8, 17]

Consignments so documented and sold on high sea sale basis, though found to contain re-rollable material, are not to be treated as mis-declared for the purpose of confiscation or imposition of penalty in these appeals; confiscation and penalties set aside.

Reliance on Tribunal precedent - mis-declaration - Whether the Tribunal's prior decision in Kuber Casting supports setting aside confiscation where goods were booked as HMS and supplier documents show HMS despite inclusion of some re-rollable scrap - HELD THAT: - The Judicial Member relied on the Tribunal's decision in Kuber Casting, which held that where the order was placed for Heavy Melting Scrap and the foreign supplier sent Heavy Melting Scrap, the presence of some re-rollable scrap does not convert the consignment such as to justify confiscation. The majority found that the facts of the present appeals are analogous and accepted that precedent as a persuasive basis for allowing the appeals and setting aside confiscation and penalties. [Paras 7, 17]

Kuber Casting precedent is applicable in the present facts and supports setting aside confiscation and penalties.

Final Conclusion: By majority order the impugned orders of confiscation and penalty are set aside and all three appeals are allowed.

Legislative competence of Parliament - scope of Entry 49 of List II (taxes on lands and buildings) - service tax on renting of immovable property - indirect nexus between tax and lands/buildings - conflict between judicial precedents - reference to a nine-Judge Bench for constitutional questions - deferment pending decision of a larger Bench

Legislative competence of Parliament - scope of Entry 49 of List II (taxes on lands and buildings) - service tax on renting of immovable property - indirect nexus between tax and lands/buildings - reference to a nine-Judge Bench for constitutional questions - Whether the question of parliamentary competence to levy service tax on renting of immovable property is to be adjudicated in these appeals or deferred pending the larger Bench reference. - HELD THAT: - The Court examined whether the impugned service tax provision relates directly or indirectly to the lands and buildings contemplated by Entry 49 of List II, a determination central to the question of legislative competence. The Bench observed that questions about the relevance of an indirect nexus and the proper scope of Entry 49 are integral to the dispute and that those very questions (including related conflicts between earlier Bench decisions) are pending consideration before a nine-Judge Bench in Mineral Area Development Authority v. Steel Authority of India and others. In view of the reference and the potential for the larger Bench to settle the underlying constitutional points (including whether taxes under Entry 49 contemplate a tax directly on land and the effect of conflicting precedents), the Court concluded that adjudication of the present appeals should await the decision of the nine-Judge Bench so that the issues can be considered in light of that authoritative determination. It was noted that after disposal by the larger Bench, the parties may be permitted to urge additional points as appropriate when these matters are taken up again.

Proceedings in these matters are deferred and adjourned until the nine-Judge Bench disposes of the referred constitutional questions; on disposal, these appeals will be re-listed for further hearing.

Final Conclusion: The Court deferred adjudication of the challenges to the service tax levy on renting of immovable property and related issues of legislative competence; all matters stand adjourned pending the decision of the nine-Judge Bench in Mineral Area Development Authority (supra), after which these appeals will be taken up again.

Relevant date for filing refund - preference of substantive statute over delegated legislation - Section 11B "date on which the ship ... leaves India" - Notification 17/2009-ST "date of export" as customs permitting clearance - remand for limited verification of timeliness

Relevant date for filing refund - Section 11B "date on which the ship ... leaves India" - Notification 17/2009-ST "date of export" as customs permitting clearance - preference of substantive statute over delegated legislation - The relevant date for computing the time limit for filing refund claims pursuant to exports is the date prescribed by Section 11B of the Central Excise Act, 1944, and not the date prescribed by Notification 17/2009-ST. - HELD THAT: - The Tribunal held that where there is a conflict between the substantive provision of the Act and delegated legislation, the substantive statute prevails. Applying the principle endorsed by the Apex Court in ITW Signode India Ltd., a rule or notification cannot override or curtail the scope of a statutory provision. Thus the "relevant date" for goods exported by sea must be the date on which the ship in which such goods are loaded leaves India, as stated in the Explanation to Section 11B(A)(i), and not the date of customs' order permitting clearance relied upon in Notification 17/2009-ST. The Tribunal also cited the Larger Bench decision in Bimetal Bearing Ltd. to the effect that circulars or instructions cannot enlarge or reduce statutory scope. For these reasons the Tribunal concluded that the time-limit inquiry must be governed by Section 11B.

Notification 17/2009-ST cannot alter the relevant date under Section 11B; the relevant date is the sailing date of the ship as per Section 11B.

Remand for limited verification of timeliness - Section 11B "date on which the ship ... leaves India" - Whether the refund claims in the two shipping bills were filed within one year from the date on which the ship left India. - HELD THAT: - The Tribunal noted that the sailing date stated by the appellant is 5.8.2008, but that the lower authorities' orders do not record this date. Consequently, the Tribunal set aside the impugned order and remanded the matter to the adjudicating authority for the limited purpose of ascertaining whether the refund claims were filed within one year from the ship's sailing date. The inquiry on remand is confined to timeliness measured from the Section 11B relevant date; if the claims are found timely, refund is to be sanctioned subject to other applicable provisions of Section 11B.

Matter remanded to the adjudicating authority to verify whether the claims were filed within one year from the ship's departure; if so, refunds to be sanctioned subject to other requirements of Section 11B.

Final Conclusion: The impugned order is set aside; the Tribunal holds that Section 11B governs the relevant date for export refunds (ship's sailing date), and remands the case for limited verification of timeliness-if the claims are within one year from that date, refunds shall be granted subject to other statutory conditions.

Service tax liability on advances/excess receipts - credit notes and accounting treatment vis - vis tax liability - royalty for hallmarking not an Intellectual Property Right service - non-taxability of hallmarking royalty as Intellectual Property Right service - application of precedent

Service tax liability on advances/excess receipts - credit notes and accounting treatment vis - vis tax liability - Whether the amounts shown in the appellant's suspense account (excess payments received from customers) attract an additional service tax demand despite service tax having been discharged on the total amounts when received, and whether raising credit notes converts the earlier tax position. - HELD THAT: - The Tribunal accepted the appellant's factual and legal position that initial receipts from customers were received along with appropriate service tax and that the appellant had discharged the tax liability to the exchequer on a cum-tax basis. The raising of credit notes to recognize amounts refundable or adjustable towards future services was held to be an accounting device to record the appellant's liability to its customers and does not nullify or recharacterise the fact that service tax was already paid on the amounts originally received. There was no allegation that the appellant had failed to discharge tax on the initial receipts or that higher marking charges than billed were collected. In these circumstances, sustaining an additional demand on the amounts lying in the suspense account would amount to double taxation; accordingly the demand was set aside. [Paras 5]

Demand on account of amounts in the suspense account/credit notes set aside; raising of credit notes is an accounting transaction and does not attract fresh service tax.

Royalty for hallmarking not an Intellectual Property Right service - non-taxability of hallmarking royalty as Intellectual Property Right service - application of precedent - Whether royalty charges collected from assayers/hallmark centres by BIS for hallmarking activity constitute a taxable Intellectual Property Right service attracting service tax. - HELD THAT: - The Tribunal relied on its earlier final order (No.43451-43454/2017 dt.21.12.2017) in which it was held that 'Hallmark' is a quality/conformity mark under the BIS regime and does not amount to an Intellectual Property Right as envisaged under the taxing entry. The earlier order found that the appellant did not possess or transfer any Intellectual Property Right in the manner of trademarks or similar rights, and that BIS's role under the Hallmarking Scheme relates to quality assurance, not to granting or permitting use of intellectual property. The ratio of that decision was held to apply identically to the royalty charges in the present appeals, and the demand was therefore unsustainable. [Paras 6]

Demand in respect of royalty charges for hallmarking set aside pursuant to the Tribunal's earlier decision that such royalty is not an Intellectual Property Right service.

Final Conclusion: Appeal allowed; demands and equal penalties confirmed by lower authorities on (a) amounts in suspense account/credit notes and (b) royalty charges for hallmarking are set aside, with consequential relief as per law.

Refund of unutilized input service credit - Cenvat Credit eligibility - time-bar under Section 11B - relevant date for refund claim - requirement of documentary proof for availment of credit - separate refund claims for multiple units - eligibility of input services including outward freight and office equipments

Requirement of documentary proof for availment of credit - Cenvat Credit eligibility - Whether the respondent had to produce documentary proof of having availed Cenvat credit and whether the credits claimed were eligible - HELD THAT: - The Commissioner (Appeals) examined the contentions regarding absence of entries in Cenvat registers and ER-2 returns and addressed the alleged ineligibility of certain inputs and input services. The appellate authority found, on analysis and in light of settled decisions, that the impugned credits related to inputs and input services were eligible and that the refund claim could not be rejected on the grounds urged by Revenue. The Tribunal records that the lower appellate authority gave reasoned findings on these points which are not assailable on the record before it.

Findings of Commissioner (Appeals) that the claimed credits are eligible and that absence of the specific documents/entries did not warrant rejection were upheld.

Time-bar under Section 11B - relevant date for refund claim - Whether the refund claim was hit by time bar - HELD THAT: - The Commissioner (Appeals) considered the controversy regarding the relevant date for computing the limitation period for filing the refund claim and concluded that the claim was not time barred. The Tribunal notes that the question of the relevant date for reckoning the limitation period is settled in favour of the respondent and accepts the appellate finding that the claim is not barred by Section 11B.

The order of Commissioner (Appeals) holding that the refund claim is not time barred was sustained.

Eligibility of input services including outward freight and office equipments - Cenvat Credit eligibility - Whether service tax paid on outward freight and credits on printers and photocopiers were eligible for refund - HELD THAT: - Revenue contested eligibility of service tax on outward freight and credit taken on printers and photocopiers. The Commissioner (Appeals) treated these questions and, having regard to a series of decisions on the subject, concluded that the credits in question were allowable. The Tribunal records that this controversy has been settled in favour of the respondent and finds no infirmity in the appellate conclusion.

The appellate conclusion permitting refund of credit relating to outward freight and office equipment was affirmed.

Separate refund claims for multiple units - refund of unutilized input service credit - Whether a combined refund claim by two separately registered units was permissible and what directions should follow - HELD THAT: - Although the respondents had filed a combined refund claim for two units having separate Central Excise registrations, the Commissioner (Appeals) set aside the rejection and directed the respondents to file separate refund claims for each unit. The appellate authority also directed the original authority to verify, process and sanction the separate refund claims in accordance with law. The Tribunal found these directions appropriate and did not disturb them.

Direction to the respondents to file separate refund claims and to the original authority to verify and sanction them was sustained.

Final Conclusion: The Commissioner (Appeals) order setting aside the original rejection of the refund claim and directing verification and separate filing for two units was upheld; the Tribunal dismissed Revenue's appeal, finding the appellate conclusions on eligibility of credits, time bar, and related directions to be sound and supported by precedent.

Renting of immovable property - one time premium / salami - distinction between premium and rent - taxable event limited to rent

One time premium / salami - renting of immovable property - distinction between premium and rent - taxable event limited to rent - Non-refundable one time premium (salami) charged by a local authority in leasing premises is not taxable as service under the head of renting of immovable property. - HELD THAT: - The Tribunal held that the one time premium is a payment for transfer of an interest in the property (a capital receipt) and is not consideration for continued enjoyment of the property. Rent, by contrast, is periodic consideration for use and occupation and alone falls within the taxable event of renting of immovable property. Service Tax liability under the renting head is therefore limited to the element of rent - whether collected periodically or in advance - and does not extend to the premium/salami paid for obtaining the lease. The Tribunal followed the reasoning in the coordinate Bench decision in Greater Noida Industrial Development Authority which distinguished premium from rent and held that Service Tax cannot be charged on premium paid for transfer of interest in immovable property. [Paras 4, 5]

The impugned order charging Service Tax on the non refundable one time premium is set aside and the appeal is allowed.

Final Conclusion: The appeal is allowed: a non refundable one time premium (salami) charged on grant of lease is not taxable as renting of immovable property; Service Tax is leviable only on the rent component.

Sale versus service - Incidental services to sale - Business Support Service - Extended period / beyond scope of show cause notice - Taxability of Ready Mix Concrete as manufacture

Extended period / beyond scope of show cause notice - Sale versus service - Validity of the demand for service tax on pumping, pouring and mobilization charges allegedly collected in respect of RMC batched by other manufacturers. - HELD THAT: - The show cause notice alleged that the appellant collected pumping and related charges in respect of RMC manufactured by others. The Commissioner, after examining documents and the appellant's replies, expressly found that there was no proof that the appellants had collected pumping or mobilization charges relating to RMC batched by others (as recorded in para 6.2 of the impugned order). The departmental demand was based solely on a clause reproduced from a single purchase order and lacked supporting material. Because the confirmed demand extended beyond the factual scope established in the show cause notice and contrary to the Commissioner's own factual finding that such charges were not received for RMC of others, the demand could not be sustained.

Demand for service tax in respect of pumping, pouring and mobilization charges alleged to relate to RMC batched by others is set aside.

Business Support Service - Incidental services to sale - Sale versus service - Whether the activity of pumping and pouring of RMC constitutes a taxable Business Support Service under the definition of BSS amended with effect from May 2011. - HELD THAT: - The Tribunal examined the definition of Business Support Service (as amended from May 2011) and found that the activity of pumping and pouring does not fall within that definition. Taking into account precedent where similar ancillary activities in the supply of RMC were held to be incidental to the primary contract of sale (as in the decisions relied upon by the appellant), the pumping and pouring performed to facilitate delivery were treated as incidental to the supply of goods. The Tribunal also noted that appellants had been discharging excise duty on RMC as production/ manufacture, which reflects that the primary transaction is the supply/ manufacture of RMC and ancillary acts of pumping/pouring are not independently exigible as BSS.

Pumping and pouring activities are incidental to the sale/supply of RMC and do not constitute Business Support Service liable to service tax.

Final Conclusion: The impugned order confirming service-tax demands (and penalties) is set aside: there is no proof that the appellants collected pumping/mobilization charges for RMC batched by others, and the pumping/pouring activity is incidental to the supply of RMC and not taxable as Business Support Service; the appeal is allowed with consequential relief, if any.

Refund claim time-barred - effect of higher forum decision on limitation - refund of wrongly paid tax - liability to pay service tax on construction services to State Housing Board - unjust enrichment - remand for fresh adjudication and verification of documents

Refund claim time-barred - effect of higher forum decision on limitation - refund of wrongly paid tax - Refund claims filed by the appellant on 11.05.2016 are within time in view of the subsequent decision of the High Court on 11.08.2016 that the appellant was not liable to pay service tax. - HELD THAT: - The appellant had paid service tax under departmental persuasion and filed refund claims on 11.05.2016. The question whether the appellant was liable to pay service tax was subsequently determined by the High Court in the appellant's own writ petition on 11.08.2016 in favour of the appellant. Where liability is in dispute and is finally settled by a higher forum, a refund claim by the assessee can be filed within one year from the date when the dispute is settled by that higher forum. Because the High Court's decision of 11.08.2016 held that no service tax was payable, the refund claims earlier filed are to be treated as within time. [Paras 7]

Refund claims held to be within time.

Unjust enrichment - remand for fresh adjudication and verification of documents - The question of unjust enrichment was not decided by the authorities below and is remanded for fresh consideration; the adjudicating authority is to decide unjust enrichment within 30 days and the appellant must produce required documents within 15 days. - HELD THAT: - The authorities below did not record any finding on unjust enrichment. Because unjust enrichment is a distinct prerequisite for refund, the matter is remanded to the adjudicating authority to examine and decide that issue. The appellant is directed to furnish the documents supporting the refund claim within the specified period to enable the adjudicating authority to undertake the necessary verification and pass a reasoned decision within the stipulated time. [Paras 8]

Issue of unjust enrichment remanded for adjudication within 30 days; appellant to produce documents within 15 days.

Final Conclusion: The appeal is disposed of by holding the refund claims to be timely in view of the High Court's decision that no service tax was payable; the question of unjust enrichment is remanded to the adjudicating authority for fresh decision within 30 days upon production of documents by the appellant within 15 days.

Limitation - Extended period of limitation - Provisions attracting extended period for suppression or fraud - Voluntary Compliance Encouragement Scheme (VCES) 2013 - Service tax demand and penalty

Limitation - Extended period of limitation - Provisions attracting extended period for suppression or fraud - Voluntary Compliance Encouragement Scheme (VCES) 2013 - Service tax demand and penalty - Show cause notice issued beyond the period of limitation and without allegation of suppression, fraud or collusion is barred and cannot sustain demand or penalties under the extended period. - HELD THAT: - The appellant admittedly rendered taxable business/services during April, 2008 to December, 2012 and filed a declaration under the VCES on 19.02.2014. A show cause notice was issued subsequently on 17.07.2015. The adjudicating authority did not invoke the extended period of limitation nor did the show cause notice allege suppression, fraud or collusion by the appellant. In the absence of any allegation or pleading that would attract the statutory provisions permitting invocation of the extended period, the proceedings initiated by the belated show cause notice are barred by limitation. Consequently, demands and penalties predicated on the extended period are unsustainable.

Impugned order setting demand of service tax, interest and penalties was set aside as barred by limitation; appeal allowed.

Final Conclusion: The appeal is allowed: the show cause notice issued beyond the limitation period and without alleging suppression or fraud could not sustain demand or penalties, and the impugned order is set aside with consequential relief if any.

Classification of services as Works Contract services - service tax liability from 01.06.2007 - abatement of 67% - taxability on 33% of value - extended period of limitation - show cause notice barred by limitation

Classification of services as Works Contract services - service tax liability from 01.06.2007 - Services rendered by the appellant are to be classified as Works Contract services and became liable to service tax with effect from 01.06.2007. - HELD THAT: - The appellant carried out finishing and completion works along with supply of materials. Applying the reasoning of the Hon'ble Apex Court in Larsen & Toubro Limited, the Tribunal found that the services merit classification as Works Contract services. Because Works Contract services were held taxable only from 01.06.2007, demands relating to periods prior to that date cannot be sustained. [Paras 5]

Demands prior to 01.06.2007 are not sustainable as Works Contract services became taxable only from 01.06.2007.

Abatement of 67% - taxability on 33% of value - For the post-01.06.2007 period, where the appellant provided works along with materials, the appellant is entitled to the abatement and service tax is leviable on 33% of the value. - HELD THAT: - The Tribunal accepted that the appellant executed works contracts inclusive of material. Relying on the Apex Court's classification, it held that the abatement of 67% applies and only the remaining 33% of the value constitutes the taxable portion on which service tax is payable. Consequently, gross invoice value inclusive of material is not fully taxable for the post-01.06.2007 period. [Paras 5]

For the period after 01.06.2007 the appellant is entitled to 67% abatement and taxable only on 33% of the value.

Extended period of limitation - show cause notice barred by limitation - The show cause notice issued for the period October 2007 to March 2009 by invoking the extended period of limitation is barred and the demand for that period is unsustainable. - HELD THAT: - The Tribunal noted that a show cause notice on the same issue had earlier been issued to the appellant for a prior period. Applying the principle in Nizam Sugar Factory v. CCE, AP, the later show cause notice invoking the extended period could not be sustained. Accordingly, the demand for October 2007 to March 2009, raised by invoking extended limitation, is barred. [Paras 5]

Show cause notice for October 2007 to March 2009 invoking extended limitation is barred and the demand is unsustainable.

Final Conclusion: Impugned proceedings are unsustainable: demands prior to 01.06.2007 are set aside; for the post-01.06.2007 period the appellant is taxable as a Works Contract service-provider with 67% abatement (taxable on 33%); and the extended period demand for October 2007-March 2009 is barred by limitation. The appeals are allowed with consequential relief.

Exemption notification - entitlement under Notification No. 89/95 - maintainability of appeal - Section 5A of the CEA, 1944 - by-product versus waste, parings and scrap - process of manufacture - by-products treated as manufactured products

Exemption notification - entitlement under Notification No. 89/95 - maintainability of appeal - Section 5A of the CEA, 1944 - Whether the appeal against a decision on entitlement under Notification No. 89 of 1995 is maintainable. - HELD THAT: - The court treated Notification No. 89/95 as an exemption notification issued under Section 5A of the CEA, 1944 and held that, in view of the court's earlier decision in Central Excise Appeal No. 10 of 2015 and connected cases, the present appeal was not maintainable. The point raised by the appellant concerning the scope of entitlement under the notification was not adjudicated on merits because the appellate remedy in the present forum was held to be impermissible. The dismissal was procedural in character and without prejudice to the appellant's right to seek appropriate relief in the correct forum.

Appeal dismissed as not maintainable.

By-product versus waste, parings and scrap - process of manufacture - by-products treated as manufactured products - entitlement under Notification No. 89/95 - Whether Spent Sulphuric Acid produced during manufacture of Acid Slurry is dutiable or qualifies as waste, parings and scrap for exemption under Notification No. 89/95. - HELD THAT: - The court did not decide the substantive question on the merits. Although the appellant formulated the question in the light of prior authorities holding that by-products arising from a process of manufacture may be treated as manufactured products, the court refrained from resolving that controversy because it found the appeal itself not maintainable. The determination of whether Spent Sulphuric Acid is an unintended produce falling within the exemption was therefore left undetermined and not adjudicated by this order.

Substantive question as to dutiability of Spent Sulphuric Acid left open for consideration in the appropriate forum.

Final Conclusion: The appeal is dismissed as not maintainable; the substantive dispute over whether Spent Sulphuric Acid is dutiable or qualifies as waste, parings and scrap under Notification No. 89/95 remains undecided and may be agitated by the appellant in the appropriate forum.

Rent-a-cab service as input service - Cenvat credit eligibility prior to 01.04.2011 - nexus with manufacturing activity - consequential relief for successful credit claim

Rent-a-cab service as input service - Cenvat credit eligibility prior to 01.04.2011 - nexus with manufacturing activity - Eligibility of Cenvat credit in respect of Rent a cab service availed prior to 01.04.2011 - HELD THAT: - The Tribunal examined whether rent a cab services availed by the appellant were input services qualifying for Cenvat credit for the period prior to 01.04.2011. The appellant consistently maintained that the service was used for official/business purposes and that employees used the service to reach the factory premises, thereby directly affecting manufacturing activity. The Revenue did not controvert that the service was so used nor demonstrate absence of nexus with manufacture. The Tribunal relied on precedents of this Court and the High Court which treat employee conveyance by rent a cab as an activity relating to business and as having direct bearing on manufacturing (including Sundaram Clayton Ltd. and CCE v. Stanzen Toyotetsu India Pvt. Ltd.), and noted the settled principle that input credit is available where service is used in or in relation to manufacture. Applying these principles to the undisputed facts, the Tribunal concluded that rent a cab service availed prior to 01.04.2011 qualified as an input service and credit could not be denied.

Cenvat credit in respect of rent a cab service availed prior to 01.04.2011 is allowable and the appellant is entitled to consequential relief, if any.

Final Conclusion: The appeal is allowed to the extent that Cenvat credit of rent a cab service availed prior to 01.04.2011 is held allowable; consequential relief shall follow.

Leviability of education cess and higher education cess on excise duty for DTA clearances by 100% EOU - education cess and higher education cess as surcharge on existing levies - measure of excise duty under proviso to Section 3(1) as aggregate of customs duties - prohibition on charging cess on cess (no double taxation of cess) - treatment of 100% EOU clearances to Domestic Tariff Area for fiscal incidence

Leviability of education cess and higher education cess on excise duty for DTA clearances by 100% EOU - education cess and higher education cess as surcharge on existing levies - prohibition on charging cess on cess (no double taxation of cess) - measure of excise duty under proviso to Section 3(1) as aggregate of customs duties - Education cess and higher education cess cannot be levied afresh for a third time on the excise duty computed under the proviso to Section 3(1) in respect of DTA clearances by a 100% EOU. - HELD THAT: - The Tribunal applied earlier decisions in Sarla Performance Fibers Ltd , the Larger Bench decision in Kumar Arch Tech Pvt Ltd , and Godrej Industries Ltd and concluded that education cess and S&H cess are levied as a surcharge on existing levies and their measure expressly excludes cess itself. For the purpose of the proviso to Section 3(1) the excise duty on DTA clearance of goods by a 100% EOU is determined by reference to the aggregate of customs duties on like imported goods. Since the cess is a surcharge whose base is the existing customs duties (basic and additional customs duty) and the legislative scheme and the mode of levy preclude inclusion of cess as part of that base, it is impermissible to treat the previously levied cess as part of the aggregate and then levy cess again. Applying that legal principle, the demand for education cess and higher education cess raised for the third time was held unsustainable.

The impugned order of the Commissioner (Appeals) sustaining the demand and penalty is set aside and the appeal is allowed.

Final Conclusion: Following consistent Tribunal precedent, the demand for education cess and higher education cess levied again by treating earlier cess as part of the relevant aggregate for proviso to Section 3(1) is not sustainable; the appellate order is set aside and the appeal is allowed.

CENVAT credit admissibility - receipt and utilization of inputs - self-assessment and burden of proof - adverse inference from documentary discrepancies - reliability of oral evidence vis-a -vis documentary evidence - reduction of penalty

CENVAT credit admissibility - receipt and utilization of inputs - adverse inference from documentary discrepancies - Denial of CENVAT credit availed against 12 invoices aggregating the first set of disputed entries - HELD THAT: - Revenue produced RTO reports and statements indicating that vehicle numbers in the 12 invoices were incapable of carrying the stated quantities (three-wheelers/auto-rickshaws etc.), and these discrepancies remained unexplained by the appellants. The Tribunal held that where documentary entries (vehicle numbers) relevant to establishing receipt of inputs are discrepant and unexplained, an adverse inference as to non-receipt is permissible. In the factual matrix, the appellants, operating under self-assessment, had the burden to explain the discrepancy and furnish positive evidence of receipt; failure to do so justified confirmation of the demand for the credit claimed against these invoices. [Paras 11, 12, 15]

Denial of CENVAT credit in respect of the 12 invoices (totaling the first disputed amount) is confirmed with interest and penalty.

CENVAT credit admissibility - reliability of oral evidence vis-a -vis documentary evidence - receipt and utilization of inputs - Admissibility of CENVAT credit availed against 39 invoices where vehicle-owner statements were largely unsigned or of disputed competence - HELD THAT: - For this group, although some vehicle-owner statements alleged non-use of the vehicles, most statements were by persons whose competence to depose was disputed and there was no other corroborative evidence from Revenue to establish non-receipt. The Tribunal accepted the appellants' contention that, in the absence of reliable corroboration, and where vehicle capability was not contested, the oral statements alone could not sustain denial of credit. Consequently, the Tribunal held that the credit against these invoices is admissible. [Paras 13, 15]

CENVAT credit in respect of the 39 invoices is admissible; the adjudication confirming demand on this count is set aside.

CENVAT credit admissibility - reliability of oral evidence vis-a -vis documentary evidence - receipt and utilization of inputs - Admissibility of CENVAT credit availed against 37 invoices where alleged defect related to handwritten weighment slips - HELD THAT: - Revenue relied on the proprietor of the weighbridge who initially stated that only computerized slips were issued; however, on cross-examination he admitted that manual weighment slips were issued by employees and that he was not personally present. There was no independent corroborative evidence to show non-receipt of goods and the vehicles in these invoices were capable of carrying the stated quantities. The Tribunal found the weighbridge proprietor's contradictory testimony insufficient to displace the documentary records maintained by the appellants and therefore held the demand unsustainable for this set of invoices. [Paras 14, 15]

CENVAT credit in respect of the 37 invoices is admissible; the adjudication confirming demand on this count is set aside.

Reduction of penalty - self-assessment and burden of proof - Personal penalties imposed on directors/authorized persons and their quantum - HELD THAT: - The Tribunal accepted that certain persons actively participated in issuance of invoices without movement of inputs for part of the period and thus were liable to penalty under the relevant rules. However, taking into account the appellate outcome which substantially reduced the confirmed demand, the Tribunal found the originally imposed penalties disproportionate. Accordingly, the Tribunal exercised its powers to reduce the quantum of personal penalties to amounts specified in the order. [Paras 15]

Personal penalty on the director reduced to a lower specified sum; penalties on the two suppliers' representatives reduced to lower specified sums; otherwise liability acknowledged for participation.

Final Conclusion: The appeals are partly allowed: denial of credit is upheld for the subset of invoices where unexplained documentary discrepancies warranted adverse inference; CENVAT credit is allowed for the other disputed invoice-sets where Revenue's oral evidence was either uncorroborated or self-contradictory; personal penalties are confirmed in principle but substantially reduced in quantum by the Tribunal.

Interest on delayed refund after three months from date of filing the refund claim - Refund of cenvat credit - Applicability of Section 11BB principle to refund as well as rebate claims

Interest on delayed refund after three months from date of filing the refund claim - Refund of cenvat credit - Applicability of Section 11BB principle to refund as well as rebate claims - Entitlement to interest on delayed refund of reversed cenvat credit from three months after filing the refund claim until realisation. - HELD THAT: - The Tribunal applied the ratio of Ranbaxy Laboratories Ltd., which held that an assessee is entitled to interest on delayed refund after three months from the date of filing the refund claim. The Tribunal found that the principle in Ranbaxy, decided with reference to the provisions of Section 11BB, is equally applicable to refund of cenvat credit and not confined to rebate claims. Since the refund claim filed on 22.01.2014 was sanctioned after the statutory three-month period, the appellant is entitled to interest for the intervening period up to sanction and realisation. The interest amount already paid to the appellant must be set off against the total interest due, and the balance interest is to be paid within 30 days of the order. [Paras 7]

Claim for interest allowed; balance interest (after deducting interest already paid) to be paid within 30 days.

Final Conclusion: Appeal allowed in part: Ranbaxy ratio applied to refund of cenvat credit; appellant entitled to interest from three months after filing the refund claim until realisation; interest already paid to be adjusted and the balance paid within 30 days.

Cenvat credit - job worker - intimation to the Department regarding job work - entitlement to credit on inputs sent to job worker - diversion of inputs - Notification No. 214/86 - denial of credit for non-receipt of inputs

Cenvat credit - job worker - intimation to the Department regarding job work - denial of credit for non-receipt of inputs - Whether Cenvat credit taken on inputs could be denied on the ground that inputs were not received at the appellant's factory and were diverted to a related unit which performed job work. - HELD THAT: - The appellant had, by letter dated 04.10.2011, informed the Department that M/s I.J. International was its job worker and that inputs would be sent to that job worker for processing in terms of Notification No. 214/86. The adjudicating authority alleged diversion of inputs and denied Cenvat credit taken on the strength of invoices. On verification of record the Tribunal finds that the authorities below did not dispute receipt of the intimation dated 04.10.2011. Where the Department has been duly intimated that the related unit is a job worker and inputs were sent for processing in terms of the notification, the charge that goods were diverted to the job worker and therefore credit must be denied is unsustainable. Applying the principle that inputs sent to an acknowledged job worker in accordance with the relevant notification do not defeat the assessee's entitlement to credit, the Tribunal held that the appellant was correctly entitled to take Cenvat credit on the inputs in question. [Paras 6]

Impugned order denying Cenvat credit set aside; appeal allowed and Cenvat credit sustained.

Final Conclusion: The Tribunal allowed the appeal, holding that since the Department was intimated that the related unit was a job worker and this was not disputed, the allegation of diversion was unsustainable and the Cenvat credit taken by the appellant must be allowed; the impugned order is set aside with consequential relief if any.

Interest on delayed refund under Section 11BB of the Central Excise Act - entitlement to interest after expiry of three months from filing refund claim - effect of appellate success on refund claim and interest - distinguishability from R.H.L. Profiles (Tribunal Larger Bench) - binding precedential effect of Ranbaxy Laboratories (Supreme Court) on refund interest

Interest on delayed refund under Section 11BB of the Central Excise Act - entitlement to interest after expiry of three months from filing refund claim - binding precedential effect of Ranbaxy Laboratories (Supreme Court) on refund interest - distinguishability from R.H.L. Profiles (Tribunal Larger Bench) - Assessee entitled to interest on delayed refund from three months after filing the refund claim until its realization. - HELD THAT: - The appeal concerned whether interest under Section 11BB is payable for the period after three months from filing the refund claim until sanction and realization. The Tribunal found the factual matrix distinguishable from R.H.L. Profiles (Tri.-LB) because this appellant did not seek interest from the date of deposit required during investigation but claimed interest from three months after filing the refund claim following the Commissioner (Appeal)'s order in the appellant's favour. The Tribunal relied on the Supreme Court's decision in Ranbaxy Laboratories Ltd., which examined the question and held that assessees are entitled to interest on delayed refunds after three months from the date of filing the refund claim until realization. Applying that principle to the admitted facts - refund claim filed on 31.12.2007 and sanction granted on 11.08.2014 - the Tribunal held the appellant entitled to interest for the intervening period from after three months of the claim filing until sanction/realization.

Appeal allowed and interest awarded for the period after three months from 31.12.2007 until 11.08.2014.

Final Conclusion: The Tribunal allowed the appeal and directed payment of interest on the delayed refund from three months after the refund claim (filed 31.12.2007) until sanction/realization (11.08.2014), distinguishing R.H.L. Profiles and following the Supreme Court's decision in Ranbaxy Laboratories Ltd.

Refund/self-credit of education cess - education cess as continuation of duty - eligibility for refund through PLA - effect of executive notifications on refund entitlement

Refund/self-credit of education cess - education cess as continuation of duty - Appellants are entitled to claim refund or self-credit of education cess and higher education cess paid by them. - HELD THAT: - The Tribunal applied the principle, as laid down by the Hon'ble Supreme Court in M/s. SRD Nutrients Pvt. Limited , that education cess and higher education cess constitute a continuation of the duty paid by the assessee. Consequently, where an assessee is entitled to refund of duty paid through PLA, the entitlement extends to the education cess and higher education cess paid on that duty. Applying this ratio, the Tribunal held that the appellants can claim refund or self-credit of the education cess/higher education cess through PLA. [Paras 3]

Entitlement to refund/self-credit of education cess and higher education cess upheld; appellants may claim refund/self-credit through PLA.

Effect of executive notifications on refund entitlement - eligibility for refund through PLA - Notifications No. 19/2008-CE and 34/2008-CE cannot be applied to restrict the appellants' claim for refund/self-credit under Notification No. 56/2002-CE. - HELD THAT: - The Tribunal noted that the validity and applicability of Notifications Nos. 19/2008-CE and 34/2008-CE were examined by the High Court of Jammu & Kashmir in Reckit Benckiser , which quashed those notifications. Relying on that decision and on this Tribunal's earlier decision in M/s. Biostadt India Limited & others, the Tribunal concluded that the restrictions contained in Notifications 19/2008-CE and 34/2008-CE cannot be used to deny refund/self-credit which is otherwise permissible under Notification No. 56/2002-CE. Accordingly, the appellants' claim under Notification No. 56/2002-CE could not be curtailed by the later notifications. [Paras 4, 5]

Notifications 19/2008-CE and 34/2008-CE do not operate to restrict refund/self-credit rights under Notification No. 56/2002-CE; appellants' claims under Notification No. 56/2002-CE are maintainable.

Final Conclusion: Appeals allowed; appellants entitled to refund or self-credit of education cess and higher education cess paid through PLA under Notification No. 56/2002-CE, and the restrictions in Notifications 19/2008-CE and 34/2008-CE cannot be invoked to deny such relief.

Area-based exemption - Increase in regular employment - Certificate of District Industries Centre

Area-based exemption - Increase in regular employment - Certificate of District Industries Centre - Entitlement to the benefit of the exemption notification where the unit produced the certificate of the General Manager, District Industries Centre certifying increase of more than 25% in regular employment. - HELD THAT: - The Tribunal held that, under the relevant condition of the notification, the benefit is available where there is an increase of more than 25% in regular employment and the manufacturer produces the prescribed certificate from the General Manager of the concerned District Industries Centre. On examination of the certificate and corrigendum issued by the District Industries Centre, Jammu, it was found that the respondent had increased regular employment by more than 25%. That certification satisfied the condition of the notification, and the authorities below had therefore rightly extended the exemption. [Paras 6, 8]

The respondent was held entitled to the benefit of Notification No. 56/2002-CE, as amended, and the Revenue's challenge was rejected.

Final Conclusion: The Tribunal upheld the order granting the exemption benefit to the respondent on the basis that the prescribed certificate established increase of more than 25% in regular employment. The Revenue's appeal was dismissed.

Demand of duty on surrendered income - Clandestine manufacture and clearance - Burden of proof and requirement of positive evidence - Admissions before Income Tax authorities - Assumptions and presumptions insufficient to create liability

Demand of duty on surrendered income - Clandestine manufacture and clearance - Burden of proof and requirement of positive evidence - Assumptions and presumptions insufficient to create liability - Whether duty can be demanded on income surrendered before Income Tax authorities in the absence of any positive evidence that such income pertains to clandestine manufacture and clearance of excisable goods. - HELD THAT: - The Tribunal found that the appellants had surrendered income before the Income Tax authorities but the Revenue produced no concrete evidence linking that surrendered income to clandestine manufacture or clearance of excisable goods. The adjudicating authority proceeded on assumptions and presumptions rather than on positive evidence establishing clandestine removals. The Tribunal applied the principle that mere surrender or admission to the Income Tax Department, without corroborative evidence demonstrating that the surrendered amount represents proceeds of clandestine manufacture or clearance, does not furnish a legal basis to impose duty. Reliance was placed on earlier Tribunal decisions to like effect, including CCE v. Zoloto Industries Ltd. and Arisudana Industries Ltd. v. CCE, Ludhiana , where the absence of positive evidence led to rejection of demands based on surrendered income. In the circumstances of the present case, issuance of a show cause notice and confirmation of demand on the basis of the surrender alone was held unsustainable.

Impugned demand and penalties set aside for lack of evidence linking surrendered income to clandestine manufacture/clearance; appeals allowed with consequential relief.

Final Conclusion: In the absence of positive evidence that the income surrendered before Income Tax authorities derived from clandestine manufacture or clearance of excisable goods, a demand of duty founded solely on such surrender, based on assumption or presumption, is unsustainable; the impugned order is set aside and the appeals are allowed.

Utilisation of basic excise duty for payment of education cess and higher education cess - refund of education cess and higher education cess under Notification No. 56/2002-CE - requirement of show cause notice for recovery or adjustment of interest - revenue neutrality in inter-unit clearances and its effect on interest demand

Utilisation of basic excise duty for payment of education cess and higher education cess - Appellant entitled to utilise basic excise duty for payment of education cess and higher education cess. - HELD THAT: - The Tribunal relied on the decision of the Hon'ble High Court of Gauhati in Union of India Vs. Kamakhya Cosmetics & Pharmaceutical Pvt. Ltd. as authority for the proposition that basic excise duty may be utilised for payment of education cess and higher education cess. Applying that precedent, the Tribunal concluded that the appellant's utilisation of basic duty for payment of the cesses was permissible and answered the issue in the appellant's favour.

Issue answered in favour of the appellant; utilisation held permissible.

Refund of education cess and higher education cess under Notification No. 56/2002-CE - Appellant entitled to refund of education cess and higher education cess under Notification No. 56/2002-CE dated 14.11.2002. - HELD THAT: - The Tribunal placed reliance on the decision of the Hon'ble Supreme Court in SRD Nutrients Pvt. Ltd. vs CCE, Guwahati , which held that education cess and higher education cess arise on account of payment of duty and are therefore refundable under the Notification. Applying that principle, the Tribunal held that the appellant's claim for refund of the cesses was admissible under Notification No. 56/2002-CE and answered the issue in the appellant's favour.

Issue answered in favour of the appellant; refund of cesses held admissible under the Notification.

Requirement of show cause notice for recovery or adjustment of interest - revenue neutrality in inter-unit clearances and its effect on interest demand - Interest could not be recovered or adjusted from the appellant without issuance of a show cause notice; additionally, revenue neutrality negated the necessity for interest adjustment in the circumstances. - HELD THAT: - The Tribunal held that demand or recovery/adjustment of interest required issuance of a show cause notice, a requirement which was not complied with by the Revenue. It relied on an earlier decision of the Tribunal in Punjab National Bank Vs. CC, Chandigarh-I to that effect. Further, because the short payment of duty arose on account of clearances to a sister unit and any duty payable could be refunded, the situation was revenue neutral; on that basis too the Tribunal concluded that adjustment or recovery of interest was not warranted. For these reasons the Tribunal answered the issue in favour of the appellant.

Issue answered in favour of the appellant; interest not recoverable/adjustable without show cause notice and not required on revenue neutrality grounds.

Final Conclusion: All issues were answered in favour of the appellant; the impugned orders are set aside and the appeals are allowed with consequential relief.

Provisional assessment - finalisation of provisional assessment without formal order - bonds and bank guarantees for provisional clearance - entitlement to deduction for post-sale discounts - requirement of show cause notice for confirmation of demand

Provisional assessment - finalisation of provisional assessment without formal order - bonds and bank guarantees for provisional clearance - Finalisation of provisional assessment is permissible where the assessee applied for provisional assessment, cleared goods on provisional basis, executed bonds and bank guarantee, and filed returns showing provisional clearances, despite absence of a formal order permitting provisional assessment. - HELD THAT: - The Tribunal held that the appellants had acted with due diligence in opting for provisional assessment: they applied for provisional assessment for Financial Year 2005-06, executed bonds and bank guarantee, cleared goods on a provisional basis and regularly reported such clearances in returns. Mere absence of a formal order permitting provisional assessment could not disentitle the appellant from finalisation of the provisional assessment where departmental inaction persisted and the assessee complied with the conditions for provisional clearance. The Tribunal also observed that the Commissioner (Appeals) erred in setting aside the adjudication on the ground that no formal order under the relevant rule was passed, particularly when no demand notice had been issued to the appellant. [Paras 5]

The finalisation of provisional assessment was upheld and the adjudication set-aside to the extent it concluded assessments were never provisional for want of a formal order.

Entitlement to deduction for post-sale discounts - The appellants are entitled to deduction from assessable value for discounts given to buyers after clearance of goods. - HELD THAT: - On the merits the Tribunal found that discounts were actually given to buyers after clearance and, in light of the Tribunal's decision in Triveni Glass Limited and the dismissal of the Revenue's appeal against that decision by the Apex Court, the appellants were entitled to claim the deductions. The Commissioner (Appeals) wrongly declined to apply the Tribunal's earlier decision on the ground that an appeal was pending before the Apex Court; that appeal having been dismissed, the principle in Triveni Glass governs and supports allowance of the discounts. [Paras 5]

Deductions for discounts granted post-clearance were allowed.

Requirement of show cause notice for confirmation of demand - Confirmation of demand could not be sustained where no show cause notice had been issued to the appellant. - HELD THAT: - The Tribunal noted that no demand notice had been served on the appellant. In those circumstances the Commissioner (Appeals) erred in confirming a demand against the appellant. The pending show cause notice dated 30.04.2008 was not the subject matter of the present appeal and did not cure the absence of a prerequisite show cause notice for the demand impugned in the order under challenge. [Paras 5]

The order confirming the demand was held unsustainable for want of a show cause notice.

Final Conclusion: The impugned order was set aside and the appeal allowed: the provisional assessment was finalised in favour of the appellant, deductions for post-sale discounts were permitted, and the demand could not be sustained in the absence of a show cause notice.

Challenge to sanctioned refund by invoking extended limitation under Section 11A/11AC - Finality of refund orders where statutory revisional remedy exists - Requirement to pursue prescribed statutory remedy rather than resort to Section 11A/11AC

Challenge to sanctioned refund by invoking extended limitation under Section 11A/11AC - Finality of refund orders where statutory revisional remedy exists - Whether a refund sanction order, not challenged by the Revenue under the statutory revisional remedy, can be reopened by issuing a show cause notice invoking extended period under Section 11A/11AC. - HELD THAT: - The Tribunal examined whether refund claims which had been sanctioned in favour of the assessee could be reopened by issuance of a show cause notice invoking the extended period under Section 11A/11AC. The Tribunal relied on the reasoning in the decision of the Hon'ble Gauhati High Court in Jellalpur Tea Estate (reproduced in the order) which held that where a final order in favour of the assessee was revisable by the Commissioner under the statutory scheme, the Revenue must pursue the prescribed revisional remedy and cannot circumvent that procedure by invoking Section 11A. Applying that principle, the Tribunal found that the Revenue had not availed the statutory revisional remedy against the refund sanction orders and therefore could not invoke Section 11A/11AC to challenge the sanctioned refunds. On that basis the Tribunal concluded that the provisions relied upon by the Revenue were not applicable to the facts of the case and the demands founded on such reopening were unsustainable.

Refund sanction orders could not be reopened by invoking Section 11A/11AC where the statutory revisional remedy was available and not pursued; demands based on such reopening are not sustainable.

Final Conclusion: The appeal filed by the assessee is allowed and the Revenue's appeal is dismissed; demands based on reopening sanctioned refund orders by invoking extended limitation under Section 11A/11AC are held unsustainable.

Benefit of Notification No.214/86-CE for job-worker on basis of undertaking by principal manufacturer - Liability of job-worker where principal's undertaking accepted by revenue - Extended period of limitation not invokable where activity was known and option claimed under notification

Benefit of Notification No.214/86-CE for job-worker on basis of undertaking by principal manufacturer - Liability of job-worker where principal's undertaking accepted by revenue - Appellant entitled to benefit of Notification No.214/86-CE where principal manufacturer filed an undertaking and the undertaking was accepted by the Revenue - HELD THAT: - The Tribunal found as an established fact that the principal manufacturer executed and filed a written undertaking in terms of Notification No.214/86-CE with the jurisdictional authority and that the Revenue had accepted this undertaking, thereby allowing the appellant to undertake job work without payment of duty. Given the acceptance of the written undertaking by the Revenue, the proceedings could not be sustained against the job-worker; the appellants were entitled to clear goods without payment of duty under the notification. The Tribunal applied its earlier decision in Bharat Industries (supra) to hold that where such an undertaking exists and is accepted, liability cannot be fastened on the job-worker. [Paras 6]

Demand of duty confirmed against the appellants was set aside and the appellants held entitled to the benefit of Notification No.214/86-CE.

Extended period of limitation not invokable where activity was known and option claimed under notification - Extended period of limitation could not be invoked for issuance of show cause notices in the present case - HELD THAT: - The Tribunal noted that the activity undertaken by the appellants was known to the Revenue and that the appellants had claimed the option under Notification No.214/86-CE on the basis of the undertaking filed by the principal manufacturer. In these circumstances, the tribunal concluded that invocation of the extended period of limitation was not permissible. Consequently, the show cause notices issued invoking the extended period were unsustainable. [Paras 7]

Invoking the extended period of limitation for the impugned show cause notices was held impermissible.

Final Conclusion: The impugned adjudication orders confirming demand, interest and penalties were set aside; the appeals are allowed and the appellants are entitled to clear goods without payment of duty under Notification No.214/86-CE, with consequential relief, if any.

Undervaluation - SSI exemption - CENVAT credit - corroborative evidence - benefit of doubt - show cause notice

Undervaluation - SSI exemption - corroborative evidence - benefit of doubt - Demand of duty and penalties on the ground that the appellants manufactured stainless steel ingots and undervalued goods, thereby crossing SSI exemption, is not sustainable. - HELD THAT: - The Tribunal examined the material relied upon by the Revenue and found that the investigation record did not contain corroborative evidence establishing that the appellants were manufacturing stainless steel ingots exclusively and clearing them as mild steel ingots. Statements of buyers did not support receipt of stainless steel ingots contrary to invoices which described the goods as mild steel ingots. In these circumstances, and in the absence of corroboration, the presumption that undervaluation had occurred could not be sustained. The benefit of doubt therefore favored the appellants and the demand and penalties founded on that presumption were set aside.

Demand of duty and penalties confirmed by the adjudicating authorities on the ground of manufacturing of stainless steel ingots and undervaluation is set aside.

CENVAT credit - show cause notice - corroborative evidence - Allowance of CENVAT credit on MS scrap and the existence of MS scrap/machinery undermined the Revenue's case that only stainless steel ingots were produced. - HELD THAT: - The Commissioner (Appeals) had allowed CENVAT credit on MS scrap and the record showed presence of MS scrap and furnaces/machinery suitable for producing both MS and SS ingots. That factual finding, not disputed by the Revenue, weakened the contention that appellants produced only stainless steel ingots. The show cause notices rested on assumptions and presumptions without adequate corroboration; consequently proceedings based on such material were held unsustainable.

The finding and relief relating to CENVAT credit and the factual record of MS scrap support the conclusion that proceedings based on assumed production of stainless steel ingots cannot be sustained.

Final Conclusion: The appeals are allowed; the impugned orders confirming duty and imposing penalties for the period January to November, 2007 are set aside, with consequential relief, given the absence of corroborative evidence to sustain the Revenue's case.

Deemed sale under Article 366(29A)(b) - transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract - goods in some other form - tax on the sale or purchase of goods - rejection of the dominant nature of contract test

Deemed sale under Article 366(29A)(b) - transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract - goods in some other form - Whether the materials used by the contractor in providing pest control services amount to a deemed sale within the meaning of Article 366(29A)(b) of the Constitution, rendering the transaction exigible to tax under the Gujarat Value Added Tax Act, 2003. - HELD THAT: - The Court applied the principle in Larsen & Toubro Ltd. (paragraph 56) that the expression in sub-clause (b) enlarges the concept of "goods" to include goods which have ceased to be mere movables and have assumed "some other form" in the execution of a works contract, thereby attracting a deemed sale. The Constitution Bench decision in Kone Elevator India Pvt. Ltd. was held to have accepted the correctness of that exposition and to have dispensed with the erstwhile determinative status of the "dominant nature" test. Applying these precedents to the facts - where materials/chemicals procured and used by the contractor in execution of the pest control contract were not separately traceable post-execution - the High Court's conclusion that there was no deemed sale was held to be untenable.

High Court order reversed; materials used in execution of the contract are to be treated as involving a deemed sale within the meaning of Article 366(29A)(b) and hence exigible to tax under the Gujarat VAT Act.

Final Conclusion: Appeal allowed; the High Court's contrary view set aside and the matter decided in accordance with Larsen & Toubro Ltd. and Kone Elevator (supra) that the goods used in the execution of the contract constitute a deemed sale under Article 366(29A)(b).

Discretionary power of the Commissioner to impose penalty - interpretation of the word "may" in a penal provision - discretion to determine quantum of penalty up to statutory maximum - penalty not mandatory despite establishment of breach

Discretionary power of the Commissioner to impose penalty - interpretation of the word "may" in a penal provision - discretion to determine quantum of penalty up to statutory maximum - Whether under Section 12(7) of the Gujarat Value Added Tax Act the Commissioner is bound to impose a penalty equal to twice the wrongly claimed tax credit once a breach is established, or whether the Commissioner has discretion both to impose penalty and to determine its quantum up to the maximum of twice the amount. - HELD THAT: - Section 12(7) uses the expression "may" when conferring power on the Commissioner to direct payment of a penalty equal to twice the amount of tax credit so claimed, after giving the dealer an opportunity of being heard. The use of "may" indicates that imposition of the penalty is discretionary and not mandatory upon proof of a breach under clauses (a) or (b). That discretion extends to the choice of the quantum of penalty, subject only to the statutory upper limit of twice the wrongly claimed tax credit. The statute prescribes an upper limit but does not prescribe a minimum or make the quantum mandatory. To construe otherwise would produce an incongruent result whereby the Commissioner could choose whether to impose a penalty but, once choosing to do so, would lack any discretion in fixing its amount. Authority referred to by the Court (a Division Bench decision of the Bombay High Court in a similar context) supports the view that the discretion to impose a penalty includes discretion as to its extent where the statute uses "may" and provides an upper ceiling without prescribing a mandatory quantum. [Paras 6, 7]

The Commissioner has discretion both whether to impose the penalty and as to the quantum of penalty up to a maximum of twice the wrongly claimed tax credit; the revisional order increasing the penalty to 200% was not sustained and the Tribunal's order was restored.

Final Conclusion: Petition dismissed; the Court upheld that Section 12(7) confers discretionary power on the Commissioner both to impose penalty and to determine its quantum up to the statutory maximum, and restored the Tribunal's decision.

Equal rights to daughter in coparcenary property - coparcenary - partition - succession - succession by survivorship - bona fide purchaser - protection of sale and compensation in lieu of disturbed title

Equal rights to daughter in coparcenary property - coparcenary - partition - Whether the appellants, married before commencement of the Hindu Succession (Tamil Nadu Amendment) Act, 1989, were entitled to claim partition as coparceners. - HELD THAT: - The Court held that Section 29-A of the Tamil Nadu Amendment confers the status and rights of coparcenary on a daughter only where she is an unmarried daughter of a living coparcener at the commencement of the Amendment. Clause (iv) excludes daughters married before commencement. The Court applied the principle that the rights under such an amendment attach only to living daughters of living coparceners, relying on precedent treating the temporal survivorship requirement as determinative. Both appellants were admitted to have married in 1981 and 1984 respectively, i.e., before the 1989 amendment; hence they were not coparceners entitled to institute a suit for partition at first instance and could not claim partitionary rights under the Amendment. [Paras 9, 10, 11, 15]

Appellants, being married before commencement of the 1989 Amendment, were not coparceners and were not entitled to claim partition as coparceners.

Succession - succession by survivorship - devolution by succession - protection of sale and compensation in lieu of disturbed title - bona fide purchaser - The manner of devolution of the deceased father's separate share and the entitlement of the appellants to succession shares and remedy in respect of earlier sales to third parties. - HELD THAT: - The Court found that the ancestral coparcenary property had been partitioned in the lifetime of the father between him and his son, leaving the father's portion as his separate property. On the father's death and thereafter on the mother's death, the father's and mother's shares would devolve by succession under the Hindu Succession Act to the children and widow in the proportions worked out by the Court. The Court determined the final shares of the parties (expressed as fractions of the whole) based on application of the applicable succession rules. The Court declined to disturb the sales executed in favour of Respondent Nos. 2 and 3, treating them as protected; instead, it afforded the appellants a remedy by way of entitlement to their legitimate succession share in the proceeds or equivalent property. The price is to be calculated at rates prevailing on the dates of the sale deeds with interest at 9% per annum from the respective dates of sale until payment or transfer. [Paras 12, 13, 14]

The Court fixed the devolution of shares by succession as indicated and upheld the sales to Respondent Nos. 2 and 3, while awarding the appellants their succession entitlement in money or equivalent property calculated at sale-date rates with 9% interest until payment or transfer.

Final Conclusion: The appeal is partially allowed: the High Court's admission-stage dismissal is set aside to the extent that the Court has declared the appellants are not coparceners under the 1989 Amendment and therefore had no partitionary claim; the Court, however, adjudicated succession shares, protected the two sales to purchasers, and directed that the appellants be paid their legitimate succession share (calculated at sale-date rates) with interest at 9% per annum until payment or transfer. Parties to bear their own costs.