TaxTMI Updates e-Newsletter
May 25,2019

Detention and release of goods under Section 129 of the CGST Act, 2017 - requirement of production of E Way Bill/Part B for transit compliance - bank guarantee as interim security for release of detained goods - right to fair and reasonable opportunity in adjudication under the GST law - judicial restraint in entertaining writ petitions at preliminary stage

Judicial restraint in entertaining writ petitions at preliminary stage - Whether the High Court should adjudicate the merits of detention and related notices at the preliminary stage - HELD THAT: - The Court declined to entertain the petition on merits at the preliminary stage, observing that the detention order under the GST scheme is part of a statutory process that includes provision for release upon compliance. The petitioner's challenge to the detention and notice was not finally adjudicated; instead the Court exercised restraint and disposed the petition by directing interim procedural steps consistent with the statutory scheme.

The writ petition is not entertained on merits at this stage and is disposed of with directions for interim compliance and adjudication by the authority.

Bank guarantee as interim security for release of detained goods - detention and release of goods under Section 129 of the CGST Act, 2017 - Interim release of detained goods on furnishing of bank guarantee and procedural timeline for release - HELD THAT: - The Court directed that if the petitioner submits a bank guarantee for tax and penalty as shown in the detention notice and applies for release within two days, the detaining authority shall release the goods within twelve hours of receipt of the bank guarantee. The bank guarantee is to be kept valid for six weeks from the date of the order. This direction implements an interim mechanism to balance the statutory power of detention with the assessee's interest in release of goods pending adjudication.

On furnishing the bank guarantee and application for release, the 1st respondent shall release the detained goods within twelve hours; the bank guarantee must remain valid for six weeks.

Right to fair and reasonable opportunity in adjudication under the GST law - detention and release of goods under Section 129 of the CGST Act, 2017 - Obligation of the authority to complete enquiry and afford opportunity within a specified time-frame - HELD THAT: - The Court directed the detaining authority to complete the enquiry, afford a fair and reasonable opportunity to the petitioner as envisaged under the Act, and pass and communicate a reasoned order within four weeks from the date of the order. The direction imposes a clear timeline for concluding the statutory process and prevents indefinite maintenance of the bank guarantee beyond the period specified.

The 1st respondent shall complete the enquiry, afford opportunity, and pass a reasoned order within four weeks.

Bank guarantee as interim security for release of detained goods - Consequence of authority's failure to pass final order within the directed period - HELD THAT: - The Court provided that if the authority fails to pass the order within the four week period, the petitioner shall not be obliged to keep the bank guarantee alive beyond six weeks from the date of the order. This protects the petitioner from indefinite liability and continuing cost of maintaining the guarantee where the authority does not complete adjudication in the stipulated time.

If the authority does not pass the order within the stipulated time, the petitioner need not keep the bank guarantee alive beyond six weeks.

Final Conclusion: Writ petition is disposed of without adjudication on merits; petitioner may procure interim release of detained goods by furnishing a bank guarantee and applying for release within two days, the authority to release goods within twelve hours of receipt, complete enquiry and pass a reasoned order within four weeks, and the bank guarantee shall remain valid for six weeks after which the petitioner is not obliged to maintain it if the authority has not complied.

Detention and release of goods - e-way bill validity - release on furnishing bank guarantee for tax and penalty - bond for value of goods in the form prescribed under Rule 140(1) of the CGST Rules - application of precedent

Detention and release of goods - e-way bill validity - release on furnishing bank guarantee for tax and penalty - bond for value of goods in the form prescribed under Rule 140(1) of the CGST Rules - application of precedent - Whether goods and vehicle detained for expiry of e-way bills must be released and on what security or conditions - HELD THAT: - The Court applied the ratio of the Division Bench in Renji Lal Damodaran v. State Tax Officer and directed that the detained goods and vehicle be released upon the petitioner furnishing a Bank Guarantee covering the tax and penalty found due and a bond for the value of the goods in the form prescribed under Rule 140(1) of the CGST Rules. The direction implements the precedent permitting conditional release on security where detention arose from invalid or expired e-way bills, rather than continued confiscation or prolonged detention without accepting appropriate security. [Paras 4]

Goods and vehicle to be released on petitioner furnishing bank guarantee for tax and penalty and a bond as prescribed under Rule 140(1) of the CGST Rules

Final Conclusion: Writ petition disposed by directing release of detained goods and vehicle on furnishing bank guarantee for tax and penalty and a bond in the prescribed form under Rule 140(1) of the CGST Rules, following the ratio of the earlier Division Bench decision.

Charitable purpose under the definition of Section 2(15) - imparting education - activities constituting business or commerce - exemption under Section 11(1) - rule of consistency in adjudication

Charitable purpose under the definition of Section 2(15) - imparting education - activities constituting business or commerce - exemption under Section 11(1) - Whether the Assessee's activities amounted to imparting education and thus fell within charitable purpose entitling it to exemption under Section 11(1), or whether those activities were business/commerce falling outside the definition of charitable purpose under Section 2(15). - HELD THAT: - The Assessing Officer denied exemption treating the Assessee's activities as business and added to its income. The Commissioner (Appeals) found as a factual matter that the Assessee was not engaged in trade, commerce or business and directed allowance of exemption under Section 11(1). The ITAT, noting that a coordinate bench had decided in favour of the Assessee for AY 2010-11, applied the rule of consistency and dismissed the Revenue's appeal. The High Court, after hearing the Revenue, found no substantial question of law arising from the ITAT's application of the rule of consistency and its factual conclusion that the Assessee's activities constituted imparting education rather than commercial trade, and therefore did not interfere with the Tribunal's order. [Paras 6, 7, 8]

The ITAT's dismissal of the Revenue's appeal is upheld and the Assessee's claim to exemption under Section 11(1) for the assessment year 2011-12 is sustained.

Final Conclusion: The appeal by the Revenue is dismissed; the Tribunal's order applying the rule of consistency and upholding the Assessee's entitlement to exemption for AY 2011-12 is maintained, no substantial question of law having been shown.

Aggregation of closely linked transactions using Transactional Net Margin Method - Transactional Net Margin Method - arm's length price - application of Section 37(1) of the Income Tax Act - adjudicating issues not arising from the order under challenge - remand to the Transfer Pricing Officer for fresh determination - withdrawal of challenge following Mutual Agreement Procedure settlement - Mutual Agreement Procedure under Article 27 of the DTAA

Withdrawal of challenge following Mutual Agreement Procedure settlement - Mutual Agreement Procedure under Article 27 of the DTAA - aggregation of closely linked transactions using Transactional Net Margin Method - Assessee permitted to withdraw its challenge to Question No.1 framed by the Court concerning the Tribunal's rejection of aggregation and use of TNMM. - HELD THAT: - The Assessee produced a letter showing a MAP settlement between the Competent Authorities of India and the UK in respect of the royalty issue for the assessment year in question and agreed to abide by that settlement. The Revenue raised no objection to permitting withdrawal of the appeal insofar as Question No.1 (relating to aggregation and application of the Transactional Net Margin Method and determination of arm's length price) was concerned. In these circumstances the Court allowed the Appellant to withdraw its appeal as to Question No.1, rendering that question academic. [Paras 5, 6]

Appellant permitted to withdraw the appeal insofar as Question No.1; the challenge on aggregation/TNMM stands withdrawn following the MAP settlement.

Remand to the Transfer Pricing Officer for fresh determination - adjudicating issues not arising from the order under challenge - application of Section 37(1) of the Income Tax Act - Second question regarding whether the ITAT erred in adjudicating issues not arising from the order under challenge (in relation to Section 37) no longer survives and requires no adjudication. - HELD THAT: - The ITAT's order had remanded the matter to the TPO for fresh determination of ALP and left open the possibility of additions under Section 37(1). However, because the remand and the transfer pricing dispute have been resolved by the MAP settlement and the first question is withdrawn, the consequential issue framed by the Court (Question No.2) becomes moot. The Court therefore declined to answer Question No.2 and held that the impugned ITAT orders no longer survive. [Paras 7]

Question No.2 not adjudicated as it no longer survives; the impugned ITAT orders stand rendered moot.

Final Conclusion: Because the assessee accepted and agreed to abide by a MAP settlement in respect of the royalty issue for AY 2011-12 and the Revenue raised no objection, the Court permitted withdrawal of the challenge on aggregation/TNMM; the remaining framed question was rendered moot and was not answered. The impugned ITAT orders dated 31-3-2016 and 31-3-2017 no longer survive; the appeal and the writ petition were disposed of.

Remand to the Assessing Officer for redetermination - reconciliation of seized documents with books of accounts - production of complete books of accounts and vouchers - remand for fresh examination where material not placed before revenue - no substantial question of law arising

Remand to the Assessing Officer for redetermination - reconciliation of seized documents with books of accounts - production of complete books of accounts and vouchers - Validity of the ITAT's remand to the AO to examine whether amounts appearing in seized documents were outstanding debtors by reconciling those seized documents with the complete books and vouchers of the alleged debtor company. - HELD THAT: - The ITAT examined the material and concluded that the trial balance and ledgers produced by the assessee, not audited and produced in isolation, were insufficient for reconciliation with the seized document (page No.6 of Annexure A-1). The ITAT required production of the complete books of accounts and vouchers of M/s Rashiwa International Ltd. so that the AO could verify whether the amounts in the seized document corresponded to outstanding debtors in the debtor's books as on the relevant date. The remand was founded on the absence of that reconciliatory exercise by the lower authorities due to the assessee's earlier failure to place the complete records on file, and on the assurance before the ITAT that all relevant documents would be produced if the matter were restored. The High Court found that the ITAT did not mechanically remit the issue but directed a fact-sensitive examination by the AO which was necessary for a judicious decision. [Paras 5, 6, 7]

The ITAT's remand to the AO for verification by reconciling the seized documents with the complete books and vouchers of M/s Rashiwa International Ltd. is upheld; the remand was not mechanical and is justified.

Final Conclusion: The appeal is dismissed; the High Court declines to interfere with the ITAT's order remanding the issue for factual verification by the AO and holds that no substantial question of law arises.

Prosecution under Section 276B for failure to deposit tax deducted at source - Deeming of person as assessee in default and consequences under Section 201 - Reasonable cause defence and onus under Section 278AA - Binding effect and evidentiary force of CBDT circulars/Standard Operating Procedures

Prosecution under Section 276B for failure to deposit tax deducted at source - Deeming of person as assessee in default and consequences under Section 201 - Whether prosecution under Section 276B could be sustained without prior adjudication under Section 201. - HELD THAT: - The Court held that failure to deposit tax within the statutory period gives rise to criminal liability under Section 276B independent of adjudication under Section 201. Section 201 deems a person to be an assessee in default without prejudice to other consequences, and the statutory scheme contemplates both adjudicatory consequences (penalty/interest) and prosecution. Reliance on the reasoning in Madhumilan Syntex and Rayala Corporation supports the view that prosecution is not made nugatory by the existence of Section 201 and that the power to prosecute is not restricted to cases where penalty alone would suffice. Therefore, absence of prior penalty determination does not preclude initiation of prosecution where material prima facie discloses failure to credit TDS within the prescribed time. [Paras 11, 12, 13, 14, 17]

Prosecution under Section 276B may be initiated notwithstanding that liability under Section 201 has not been adjudicated.

Reasonable cause defence and onus under Section 278AA - Effect of Section 278AA on criminal liability and allocation of burden of proof. - HELD THAT: - Section 278AA, with its non-obstante commencement, permits avoidance of penal consequences if the accused proves reasonable cause for failure. The Court observed that the statutory provision places the onus on the accused to establish reasonable cause, and matters relied upon by the petitioners (such as factual explanations constituting reasonable cause) are matters of defence to be established at trial. Consequently, the existence of a potential defence under Section 278AA does not by itself justify quashing the prosecution where prima facie material discloses failure to deposit TDS. [Paras 8, 15, 16]

Accused must prove reasonable cause under Section 278AA; the possibility of such defence does not preclude institution of prosecution.

Binding effect and evidentiary force of CBDT circulars/Standard Operating Procedures - Prosecution under Section 276B for failure to deposit tax deducted at source - Whether deposit of TDS within the timeframe contemplated by the CBDT circular absolves the petitioner from criminal prosecution. - HELD THAT: - The Court recognized that departmental circulars or SOPs may have binding force as a matter of administrative practice, but observed that the petitioners failed to place the relevant circulars/instructions on record or demonstrate compliance with any extended time limit. On the material before the Court the survey and subsequent allegations indicate that amounts were credited only after the survey, and therefore the factual foundation for claiming protection under the circular was absent. Accordingly, the asserted reliance on the circular could not be accepted on the present record to defeat prosecution. [Paras 5, 6, 10, 18]

Absent demonstrable compliance with the circular's timetable on the record, reliance on the circular does not bar prosecution under Section 276B.

Final Conclusion: Petition dismissed. The Court held that prosecution under Section 276B can be sustained notwithstanding absence of prior adjudication under Section 201; the defence of reasonable cause under Section 278AA lies on the accused to prove; and the petitioners' unproven reliance on departmental circulars did not negate prima facie commission of the offence. The observations are not to influence the trial Court on merits.

Deduction under Section 80IA - Proviso to Section 80IA(4) - Infrastructure facility - Recognition of transferee/contractor by the specified authority - Requirement of direct contract with Central/State Government or Local Authority - Effect of retrospective explanation inserted by Finance Act 2007

Deduction under Section 80IA - Proviso to Section 80IA(4) - Requirement of direct contract with Central/State Government or Local Authority - Assessee entitled to deduction under Section 80IA though it did not have a direct contract with the Government/authority, being a recognised contractor/transferee. - HELD THAT: - The Court held that the Proviso to Section 80IA(4) extends the benefit to a transferee or contractor who is approved and recognised by the concerned authority and undertakes development, operation or maintenance of an infrastructure facility. The Proviso does not mandate a direct agreement between the transferee enterprise and the specified authority for availing the deduction. The Assessing Authority's denial solely on the ground that the assessee had no direct contract with the Railways was therefore unsustainable. [Paras 2, 3]

Benefit under Section 80IA allowed to the assessee notwithstanding absence of a direct contract with the specified authority.

Infrastructure facility - Recognition of transferee/contractor by the specified authority - Railway sidings constituted an "infrastructure facility" and the assessee, being recognised as transferee/assignee to operate and maintain them, attracted the Proviso to Section 80IA(4). - HELD THAT: - The Court accepted the factual findings of the Tribunal and Assessing Authority that the assessee, under agreement, undertook development and operated and maintained the railway sidings. Such railway sidings fall within the Explanation defining "infrastructure facility". Given the assessee's recognition by the Railways as transferee/contractor, the first Proviso applied and conferred entitlement to deduction. [Paras 2, 3]

Railway sidings qualified as infrastructure facility and the assessee's recognised status attracted the proviso, entitling it to deduction.

Effect of retrospective explanation inserted by Finance Act 2007 - Deduction under Section 80IA - The Tribunal's conclusion that the assessee was eligible for Section 80IA deduction stands despite argument as to the explanation inserted by Finance Act 2007; the present controversy is covered by the court's earlier decision in the same assessee's case. - HELD THAT: - The Court observed that the matter was covered by its earlier judgment in the same assessee's litigation, which had construed the proviso and held entitlement under comparable facts. The Court found no parity with the Covanta Samalpatti decision relied upon by Revenue, as factual and statutory contexts differed. Consequently, the challenge based on the retrospective explanation did not overturn the entitlement found by the Tribunal. [Paras 2, 3]

Contentions regarding the retrospective explanation did not defeat the assessee's entitlement; appeal dismissed.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal's allowance of the assessee's claim for deduction under Section 80IA for Assessment Year 2012-2013 is affirmed.

Section 69B - addition for undisclosed investment - burden on the Revenue to prove understatement of investment - evidentiary value of seized photocopy agreement - rebuttable presumption under section 132(4A) - Section 36(1)(iii) - disallowance of interest on diversion of interest-bearing funds - maintainability of appellate order

Section 69B - addition for undisclosed investment - burden on the Revenue to prove understatement of investment - evidentiary value of seized photocopy agreement - rebuttable presumption under section 132(4A) - Deletion of addition of Rs. 2,27,00,000 under Section 69B in respect of alleged understatement of consideration in land purchase upheld. - HELD THAT: - The Court agreed with the CIT(A) and Tribunal that invocation of Section 69B required the Revenue to first establish that the assessee had expended an amount in excess of that recorded in books. The material relied upon by the Assessing Officer was a photocopy of an agreement seized from a third party which did not involve the assessee, the parties and witnesses declined to identify it, and there was no positive evidence of transfer of unaccounted consideration to the seller from the assessee. Although a rebuttable presumption arises under section 132(4A) in respect of parties to a seized document, that presumption could not be extended to a non-party or substituted for direct evidence of payment. The Assessing Officer's presumption, uncorroborated by evidence of payment or other positive material, was insufficient to displace the registered sale deed executed at circle rates and to sustain an addition under Section 69B. [Paras 8, 10]

Order of the Tribunal upholding deletion of the addition under Section 69B is affirmed.

Section 36(1)(iii) - disallowance of interest on diversion of interest-bearing funds - Disallowance of interest under Section 36(1)(iii) restricted by CIT(A) to Rs. 10,95,795 and so upheld by the Tribunal. - HELD THAT: - The Assessing Officer disallowed interest on the basis that interest-bearing funds were diverted as interest-free advances to relatives and associates. The CIT(A) examined the books and available computations, allowed interest credit for several identified credit/debit balances and adjusted amounts brought in as capital, and accordingly restricted the disallowance to the stated sum. The Tribunal found no illegality in those findings. The High Court found no error in the appellate authorities' approach or conclusions and therefore affirmed the restricted disallowance. [Paras 13]

Findings of the CIT(A) and Tribunal restricting the disallowance under Section 36(1)(iii) are upheld.

Maintainability of appellate order - Additional contention on maintainability of the Tribunal's order rejected as general and disposed in light of findings on the substantive issues. - HELD THAT: - An independent challenge to the maintainability of the Tribunal's order was raised but the Court, having considered and rejected the Revenue's substantive contentions on Sections 69B and 36(1)(iii), found no merit in the separate maintainability plea and rejected it accordingly. [Paras 14]

Maintainability objection to the Tribunal's order is rejected.

Final Conclusion: All six appeals filed by the Revenue are dismissed; no substantial question of law arises and the Tribunal's order is affirmed.

Addition under section 69C - treatment of unexplained credit under section 68 - powers of appellate authority co-terminus with assessing officer - no second innings / re-examination on same facts

Addition under section 69C - Validity of the addition made by the Assessing Officer treating purchases as bogus expenses and making an addition under section 69C. - HELD THAT: - The Assessing Officer found purchases from M/s Kumar Sales to be bogus after notices under section 133(6) sent to the supplier went unanswered and therefore made an addition treating the purchases as unsupported. The Tribunal noted that the purchases were duly recorded in the assessee's regular books and that sales made out of those purchases were accepted by the Assessing Officer. Given that the material showing books entries and corresponding sale invoices were on record and accepted at the assessment stage, the Tribunal held that the addition could not be sustained. The Tribunal further observed that the Assessing Officer could have enforced attendance or further verification by issuing summons to the supplier but the existing record did not justify sustaining the addition.

The addition of Rs. 4,97,589 made under section 69C is deleted.

Treatment of unexplained credit under section 68 - powers of appellate authority co-terminus with assessing officer - no second innings / re-examination on same facts - Permissibility of the Commissioner (Appeals) invoking section 68 to treat credit as unexplained when he did not himself examine the transaction, and whether the matter should be remanded for fresh adjudication. - HELD THAT: - The Commissioner (Appeals) concluded that section 69C was not attracted but proceeded to treat credits in the books as unexplained under section 68 and sustained an addition (though reduced to the quantum originally added by the AO). The Tribunal held that the powers of the Commissioner (Appeals) are co-terminus with those of the Assessing Officer and, therefore, if the appellate authority proposes to invoke section 68 it must itself examine the transaction and the supporting material. The Tribunal found that the Commissioner (Appeals) did not undertake the necessary examination of the records and supporting bank receipts and invoices but nonetheless invoked section 68. The Revenue's request for restoration to permit fresh examination was rejected because the same set of facts and material had been before the lower authorities and no fresh adjudicatory opportunity ought to be afforded merely to re-examine identical material.

The invocation of section 68 by the Commissioner (Appeals) without examining the transaction is not sustainable; no remand is ordered and the addition is deleted.

Final Conclusion: The Tribunal allowed the assessee's appeal, set aside the additions made under section 69C and the consequential invocation of section 68 by the Commissioner (Appeals), directed deletion of the impugned addition and refused to grant a fresh opportunity for re-examination on the same facts.

Penalty for concealment of income and furnishing inaccurate particulars under section 271(1)(c) of the Act - disallowance on estimate basis - genuineness of expenditure - imposition of penalty where disallowance is purely quantificatory - appellate acceptance of expenditure

Penalty for concealment of income and furnishing inaccurate particulars under section 271(1)(c) of the Act - disallowance on estimate basis - genuineness of expenditure - imposition of penalty where disallowance is purely quantificatory - Whether penalty under section 271(1)(c) could be sustained in respect of the 10% disallowance of sub brokerage payments which was made on estimate basis when the genuineness of the expenditure was not in dispute and 90% of the expenditure was allowed by the Tribunal and the High Court. - HELD THAT: - The Assessing Officer disallowed the entire sub brokerage claim treating it as bogus. On appeal the Tribunal allowed 90% of the expenditure and sustained a 10% disallowance purely on an estimate basis. The Revenue's challenge to that conclusion was dismissed by the Hon'ble Jurisdictional High Court which not only upheld the Tribunal's allowance but recorded that the genuineness of the expenditure was not disputed and that the remaining disallowance was quantificatory. Where the substantive genuineness of the expenditure is accepted by appellate authorities and the remaining addition is only an estimate of quantum, imposition of penalty under section 271(1)(c) - which requires concealment or furnishing of inaccurate particulars - is not sustainable. Applying these principles to the facts, the Commissioner (Appeals) was correct in deleting the penalty insofar as it related to the sub brokerage disallowance made on estimate basis. [Paras 6]

Penalty under section 271(1)(c) deleted in respect of the 10% estimated disallowance of sub brokerage since genuineness was not doubted and 90% of the claim was allowed.

Final Conclusion: The order of the Commissioner (Appeals) deleting the penalty insofar as it related to the estimated disallowance of sub brokerage is upheld and the Revenue's appeal is dismissed.

Penalty under section 271(1)(c) - computation of tax liability on book profit under section 115JB - additions/disallowances under normal provisions - survival of penalty when tax is computed under section 115JB

Penalty under section 271(1)(c) - computation of tax liability on book profit under section 115JB - Whether penalty imposed under section 271(1)(c) survives where the assessee's tax liability is ultimately computed on book profit under section 115JB. - HELD THAT: - The Tribunal found that although the Assessing Officer made additions/disallowances under the normal provisions and initially computed positive income, the final computation (while giving effect to the Commissioner (Appeals) order) recorded a loss under normal provisions and the tax liability was ultimately computed on the book profit under section 115JB. Applying the legal principle in CIT v. Nalwa Sons Investment Ltd. (as followed by the Coordinate Bench in Mehta Sulfites India Ltd.), the Tribunal held that penalty under section 271(1)(c) based on additions/disallowances under the normal provisions does not survive when the tax liability is determined under section 115JB. On these factual and legal bases the penalty was deleted. [Paras 7]

Penalty under section 271(1)(c) deleted as tax liability was ultimately computed under section 115JB.

Final Conclusion: Appeal allowed; penalty under section 271(1)(c) set aside because the assessee's tax liability was ultimately determined on book profit under section 115JB for Assessment Year 2006-07.

Deduction under section 35(1)(ii) - Explanation to section 35(1)(ii) - valid registration at the time of donation - retrospective withdrawal of approval

Deduction under section 35(1)(ii) - valid registration at the time of donation - retrospective withdrawal of approval - Explanation to section 35(1)(ii) - Deduction claimed by the assessee under section 35(1)(ii) in respect of donation to an institution which had valid approval at the time of donation cannot be denied on account of subsequent retrospective cancellation of that approval. - HELD THAT: - The Explanation to section 35(1)(ii) provides that deduction shall not be denied merely because approval granted to the institution is withdrawn subsequent to payment. The undisputed facts show that at the time of donation the recipient, School of Human Genetics and Population Health, held a valid approval; accordingly the subsequent CBDT order cancelling approval with retrospective effect does not nullify the donor's right to deduction. The Tribunal applied the statutory explanation and followed precedents which treated retrospective withdrawal as inapplicable to donations made while approval was valid, including CIT v/s Chotatingrai Tea, State of Maharashtra v/s Suresh Trading Co., National Leather Cloth Mfg. Co. v/s Indian Council of Agricultural Research, and the coordinate-bench decision in Motilal Dahya Bhai Jhaveri & Sons v. ACIT, as relied upon in the order. Conversely cited authorities of the Revenue were examined and held to be distinguishable on facts because they did not concern denial of section 35(1)(ii) deduction where approval existed at the time of donation. Applying the statutory Explanation and the cited ratio, the Tribunal deleted the addition of the disallowed deduction. [Paras 7, 8]

Disallowance of Rs. 17.50 lakh under section 35(1)(ii) deleted and deduction allowed.

Final Conclusion: Appeal partly allowed: the disallowance of the deduction under section 35(1)(ii) is deleted and the assessee is entitled to the claimed deduction for AY 2012-13; grounds challenging reopening and consequential interest were rendered academic and not adjudicated.

Principles of natural justice - ex-parte non-speaking order - remand for fresh adjudication - obligation to decide appeals on merits under Section 250(6) of the Income-tax Act - administrative order must be speaking - opportunity of being heard - penalty under section 271(1)(c)

Principles of natural justice - ex-parte non-speaking order - remand for fresh adjudication - obligation to decide appeals on merits under Section 250(6) of the Income-tax Act - opportunity of being heard - Whether the matters should be remitted to the Assessing Officer for fresh adjudication in view of an ex-parte non speaking order by the Commissioner (Appeals) and failure to decide the case on merits. - HELD THAT: - The Tribunal found that the Commissioner (Appeals) passed an ex parte, non speaking order without dealing with the issues on merits and without observance of the rules of natural justice. Having examined Section 250(6) of the Act and relying on the principle that even administrative orders must be speaking, the Tribunal held that the assessee's case ought to be decided on merits. In the interest of justice, and with the consent of parties, the Tribunal remitted the issues to the file of the Assessing Officer with directions to consider all aspects afresh, to take into account the documents contained in the Paper Book (pages 1-13) and to afford the assessee adequate opportunity of being heard. The Tribunal also imposed a duty on the assessee to cooperate with the AO and refrain from seeking unnecessary adjournments or filing further evidence without justification. The Tribunal's conclusion was informed by the settled principle that failure to furnish reasoned consideration and to afford hearing vitiates appellate action and requires remand for fresh decision on merits. [Paras 5, 6]

The issues are remitted to the Assessing Officer for fresh consideration and decision on merits after giving the assessee an adequate opportunity of being heard; the assessee must cooperate with the AO.

Final Conclusion: Both appeals are allowed for statistical purposes and the matters are remitted to the Assessing Officer to decide afresh on merits, considering the Paper Book and after affording adequate opportunity of hearing; the assessee is directed to cooperate in the proceedings.

Penalty under section 271(1)(c) for concealment of particulars of income - Validity of a defective show cause notice and curative effect of Section 292B - Deletion of penalty on technical/notice defects versus adjudication on merits - Remand for fresh adjudication on merits

Penalty under section 271(1)(c) for concealment of particulars of income - Validity of a defective show cause notice and curative effect of Section 292B - Deletion of penalty on technical/notice defects versus adjudication on merits - Whether the penalty deleted by the CIT(A) on the ground that the Assessing Officer failed to strike off the irrelevant column in the show cause notice was sustainable. - HELD THAT: - The Tribunal held that deletion of penalty solely on the ground of a defect in the language or form of the show cause notice was not sustainable. The Bench applied the legislative intendment of the provision curative in effect, viz., that mistakes, defects or omissions in notices or other proceedings which are in substance and effect in conformity with the intent and purpose of the Act cannot invalidate those proceedings. In view of the subsequent jurisprudence of the jurisdictional High Court which recognises the curative effect of Section 292B and the Tribunal's own precedents, the mere non-striking of an inapplicable column in the show cause notice did not automatically vitiate penalty proceedings where the assessee had responded to the proceedings and the notice, in substance, fulfilled its purpose. The CIT(A)'s deletion based on the ratio of Manjunatha Cotton and Ginning Factory was therefore held to be incorrect. [Paras 6]

CIT(A) erred in deleting the penalty on a purely technical defect in the show cause notice; such defect does not ipso facto invalidate penalty proceedings.

Remand for fresh adjudication on merits - Whether the matter should be remitted to the CIT(A) for decision on merits following the finding that the penalty could not be deleted on the technical ground relied upon. - HELD THAT: - Having concluded that the penalty could not be quashed merely on the basis of the notice defect, the Tribunal did not decide the merits of whether concealment or furnishing of inaccurate particulars was established. Instead, the Tribunal directed that the appeal be remitted to the CIT(A) for adjudication on merits so that the question of levy of penalty under section 271(1)(c) may be examined and decided afresh in accordance with law and on the material on record. [Paras 6, 7]

Matter remitted to the Commissioner of Income Tax (Appeals) for fresh adjudication on merits of the penalty issue.

Final Conclusion: The Revenue's appeal is partly allowed for the limited purpose of setting aside the deletion of penalty by the CIT(A) on a purely technical ground; the penalty issue is remitted to the CIT(A) for fresh adjudication on merits for Assessment Year 2014-15.

Entitlement of registered charitable trusts to carry forward and set off excess application of income - computation of income of charitable trusts on commercial principles with allowance for depreciation - prohibition against treating notional application of income in subsequent years - principle against permitting double benefits where acquisition cost claimed as application of income and depreciation

Entitlement of registered charitable trusts to carry forward and set off excess application of income - prohibition against treating notional application of income in subsequent years - Whether the assessee-trust is entitled to carry forward and set off brought forward excess application of income to subsequent years. - HELD THAT: - The Tribunal held that this question is no longer res integra and is resolved by the decision of the Hon'ble Supreme Court in CIT vs. Subros Educational Society, which recognizes that eligible trusts registered under section 12AA are entitled to carry forward and set off excess application of income. The Revenue's grounds challenging the CIT(A)'s allowance of carry forward and set off were therefore rejected as without merit. [Paras 6]

The claim for carry forward and set off of brought forward excess application of income is allowable and the Revenue's grounds on this point are dismissed.

Computation of income of charitable trusts on commercial principles with allowance for depreciation - principle against permitting double benefits where acquisition cost claimed as application of income and depreciation - Whether the assessee-trust is entitled to claim depreciation as an allowance in computing income under section 11 prior to the amendment, notwithstanding that cost of acquisition of assets was treated as application of income. - HELD THAT: - The Tribunal accepted the view of the Hon'ble Supreme Court in CIT vs. Rajasthan & Gujarati Charitable Foundation that income of a trust registered under section 12AA is to be computed under section 11 on commercial principles after providing for normal depreciation. This approach affirms the Bombay High Court's view in Framjee Casasjee Institute and differs from the Kerala High Court decision relied upon by the Revenue. Consequently, the CIT(A)'s allowance of depreciation as application of income before the amendment was upheld and the Revenue's contentions based on alleged double benefit were rejected. [Paras 7]

Depreciation as an allowance is permissible in computing the income of the registered charitable trust under section 11; the Revenue's grounds challenging the allowance are dismissed.

Final Conclusion: The Revenue's appeal is dismissed and the order of the Commissioner of Income Tax (Appeals) is confirmed.

Revisionary jurisdiction under Section 263 - erroneous and prejudicial to the interest of revenue - failure to make inquiry / lack of inquiry - assessing officer as investigator and adjudicator - independent inquiry and fresh assessment - differing treatment in consecutive assessment years - nexus between alleged activity and bank deposits

Revisionary jurisdiction under Section 263 - erroneous and prejudicial to the interest of revenue - failure to make inquiry / lack of inquiry - assessing officer as investigator and adjudicator - Validity of the CIT's exercise of powers under Section 263 to set aside the assessments. - HELD THAT: - The Tribunal upheld the CIT's exercise of revisionary jurisdiction under Section 263. On the material before it the Assessing Officer had accepted the assessee's shifting and inconsistent explanations regarding substantial cash deposits in an undisclosed ICICI bank account without conducting adequate independent enquiries. The assessee had not disclosed the bank account in the return and gave differing statements during assessment; the AO did not verify depositors, demat holdings, vehicle ownership, telephonic records or other indicia that could have tested the assessee's claim of cash-collection commissions. In these circumstances the AO's order was found to be erroneous within the meaning of Section 263 both because inquiries called for by the facts were not made and because the order was prejudicial to the interest of revenue. The Tribunal applied established authorities recognising that an AO must investigate where circumstances provoke inquiry and that failure to do so renders an order amenable to revision under Section 263, and accordingly found no reason to interfere with the CIT's order setting aside the assessment. [Paras 5]

CIT's invocation of Section 263 and order setting aside the assessment for being erroneous and prejudicial to revenue is sustained and the appeal is dismissed.

Independent inquiry and fresh assessment - nexus between alleged activity and bank deposits - differing treatment in consecutive assessment years - addition on account of peak credit - Directions to the Assessing Officer and remand for further inquiries and fresh assessment. - HELD THAT: - The Tribunal confirmed the directions given by the CIT that the Assessing Officer should conduct thorough and independent enquiries before completing a fresh assessment. The AO was directed to obtain and examine material called for in the questionnaire, verify the ICICI bank account credits and identity of depositors, obtain de-mat account details to verify investments and capital gains, check vehicle registration records and related expenses, verify telephone/mobile and credit card records, and examine the source of expenses and the capital available to the assessee. The Tribunal further endorsed the CIT's view that the income earlier offered could not simply be adjusted against the undisclosed deposits and that additions, including on account of peak credit, may be required to be made after proper verification. These matters were remitted to the AO for fresh consideration and assessment in accordance with law. [Paras 5, 6]

Matter remitted to the Assessing Officer with specific directions to make independent inquiries and determine undisclosed income; same course to be followed for both assessment years.

Final Conclusion: The Tribunal dismissed the assessee's appeals, upheld the CIT's order under Section 263 that the original assessments were erroneous and prejudicial to revenue, and directed remand to the Assessing Officer to carry out the specified independent enquiries and complete fresh assessments for A.Y. 2011-12 and A.Y. 2010-11.

Penalty under section 271AAB - Prior approval under section 274(2) - Mandatory nature of pre-approval - Void ab initio - Deletion of penalty for lack of jurisdictional approval

Penalty under section 271AAB - Prior approval under section 274(2) - Mandatory nature of pre-approval - Void ab initio - Validity of penalty levied under section 271AAB where Assessing Officer passed the penalty order before obtaining prior approval under section 274(2). - HELD THAT: - The Tribunal examined the requirement of prior approval under section 274(2) for imposition of a penalty falling in Chapter XXI and held that the statutory use of the word 'shall' renders prior approval from the JCIT/Additional CIT mandatory before an Assessing Officer may pass an order imposing such a penalty. The penalty order in the present case bears the date 29/09/2016 while the approval letter from the Additional CIT is dated 30/09/2016; the approval details in the penalty order were left blank and filled later on receipt of the approval letter. The contention that the chronology was a typographical mistake was rejected. Because the Assessing Officer imposed the penalty prior to obtaining the required approval, the order imposing penalty under section 271AAB was held to be without the jurisdictional prerequisite and therefore void ab initio. The Tribunal applied this reasoning to the other identical appeal mutatis mutandis. [Paras 8, 9]

Penalty imposed under section 271AAB deleted as void ab initio for want of prior approval under section 274(2).

Final Conclusion: Both appeals are allowed and the penalties under section 271AAB, sustained by the CIT(A), are deleted for having been imposed without the mandatory prior approval under section 274(2).

Anticipatory bail - summons under Section 108 of the Customs Act - compliance with summons - power of arrest by Customs Officer circumscribed by 'reason to believe' - not to examine merits at bail stage

Anticipatory bail - not to examine merits at bail stage - Whether anticipatory bail under Section 438 Cr.P.C. should be granted to the applicant - HELD THAT: - The Court applied settled law that merits of the prosecution are not to be exhaustively examined at the bail stage but must still assess whether allegations are frivolous or prima facie made out. Having considered the material placed on record, including summons, CDR/WhatsApp material and other incriminating material, the Court found the allegations against the applicant not frivolous. The nature and gravity of the allegations, the claimed nexus with the licensee and the material relied upon by the department persuaded the Court that it was not appropriate to grant anticipatory bail. Reliance was placed on the threshold principles that govern grant of pre-arrest bail while avoiding a detailed appraisal of evidence. [Paras 10, 11, 14]

Anticipatory bail is refused and the application is dismissed.

Summons under Section 108 of the Customs Act - compliance with summons - power of arrest by Customs Officer circumscribed by 'reason to believe' - Whether the applicant called under Section 108 is obliged to comply with the summons and the limits on the Customs Officer's power to arrest - HELD THAT: - The Court reiterated that a person called to give a statement under Section 108 cannot be treated as an accused merely by reason of the summons, and is bound to comply with such direction. At the same time the Court explained that the statutory power to arrest by a Customs Officer exists only where the officer has objective reason to believe that an offence under specified provisions has been committed; hence the power is circumscribed and not to be exercised arbitrarily. Applying these principles to the present facts, the Court held that the notice issued by a senior officer required compliance and that apprehension of inevitable arrest did not warrant anticipatory bail in the circumstances. [Paras 12, 13]

The applicant must appear and comply with the summons; the statutory arrest power is subject to objective limits and does not justify anticipatory bail here.

Final Conclusion: The petition for anticipatory bail is dismissed; the applicant is required to comply with the summons issued under Section 108 of the Customs Act and no protective order of pre-arrest bail is granted.

Effective date of a statutory notification - notification comes into force on publication in the Official Gazette - self-assessment under the Customs Act and maintainability of refund claims - effect of amendments to Sections 17 and 27 of the Customs Act w.e.f. 08.04.2011 - refund of duty paid under mistake

Effective date of a statutory notification - notification comes into force on publication in the Official Gazette - refund of duty paid under mistake - Whether the Anti Dumping Duty Notification dated 29.03.2016 was in force on 29.03.2016 when the Bills of Entry were presented and whether the ADD paid on that date was thus payable or paid by mistake. - HELD THAT: - The appellant produced the RTI reply from the Government of India Press showing that the draft Notification dated 29.03.2016 was received by the press only at 11 p.m. on 29.03.2016 and that publication in the Gazette occurred on 02.04.2016 at 9:11 a.m. The Tribunal applied the established principle that a notification takes effect from the date it is published in the Official Gazette. On the admitted material the Notification was not in force on 29.03.2016 when the Bills of Entry were filed and duties self assessed. Consequently the Anti Dumping Duty collected on 29.03.2016 was paid erroneously / under a mistake of law and is refundable in principle. [Paras 5]

Notification No. 29/2016 (dated 29.03.2016) came into force only upon Gazette publication on 02.04.2016; the ADD paid on 29.03.2016 was not payable on that date and was paid by mistake, entitling the appellant to refund subject to consequential proceedings.

Self-assessment under the Customs Act and maintainability of refund claims - effect of amendments to Sections 17 and 27 of the Customs Act w.e.f. 08.04.2011 - Whether a refund claim arising from duties self assessed in a Bill of Entry is maintainable without first challenging the assessment where assessments post amendment are self assessments. - HELD THAT: - The Tribunal examined the statutory scheme post amendment of Sections 17 and 27 w.e.f. 08.04.2011 and relied on judicial authorities recognizing that assessments in Bills of Entry are by self assessment and that there is no conventional assessment order for the importer to challenge. The Tribunal followed precedents, including the Delhi High Court decision discussed in the judgment, which held that after 08.04.2011 a person who has paid duty may file a refund claim under Section 27(1) and such claim must be entertained even in the absence of an appeal against any assessment order. The reasoning rejects the reliance on pre amendment Circular No. 24/2004 and earlier decisions addressing departmental assessments, and holds that an importer cannot be required to challenge its own self assessment as a precondition to a refund claim. [Paras 5, 6]

A refund claim for duty paid pursuant to self assessment is maintainable without first challenging an assessment order because, after amendments effective 08.04.2011, the Bill of Entry clearance is a self assessment and there may be no assessable order to be contested.

Final Conclusion: The impugned order is set aside. The Tribunal held that the Anti Dumping Notification dated 29.03.2016 was not in force until its Gazette publication on 02.04.2016, rendering the ADD paid on 29.03.2016 refundable as paid by mistake, and that a refund claim arising from self assessment is maintainable without first challenging an assessment in view of amendments to Sections 17 and 27 of the Customs Act; the appeal is allowed with consequential relief.

Provisional release of seized goods - mis-declaration and mis-classification - redemption fine and duty demand - Rule 41 of the CESTAT Procedure Rules - power to grant interim relief - delay and laches in seeking provisional relief - perishability as factor for provisional release - early hearing of appeal

Provisional release of seized goods - mis-declaration and mis-classification - Rule 41 of the CESTAT Procedure Rules - power to grant interim relief - delay and laches in seeking provisional relief - perishability as factor for provisional release - redemption fine and duty demand - Miscellaneous Application for provisional release of seized and confiscated goods during the pendency of the appeal. - HELD THAT: - The Tribunal dismissed the application for provisional release. It noted that the Bill of Entry was filed on 09.11.2016 and no application for provisional release was made before the adjudicating authority during the proceedings below; had such an application been made and rejected, the appellant could have appealed earlier (5.1). The appellant did not seek provisional relief at the earliest available opportunity and waited over two years before applying, exhibiting delay and lack of urgency (5.2-5.3). Granting provisional release at this stage would require examination of the merits because the show cause notice centres on alleged mis-declaration and mis-classification, and the adjudicating authority has confirmed those findings along with duty demand and redemption fine; therefore interim relief would encroach upon substantive issues (5.2). The Tribunal also observed that the goods are not easily perishable, reducing any necessity for immediate release (5.3). On these grounds the application for provisional release was refused. [Paras 5]

Miscellaneous Application for provisional release dismissed for want of early application, delay, absence of perishable nature of goods and because consideration would touch merits already adjudicated.

Early hearing of appeal - Miscellaneous Application for early hearing of the appeal. - HELD THAT: - Although the application for provisional release was dismissed, the Tribunal accepted the appellant's request for expedition of the appeal hearing. Taking note of the submissions, the Tribunal directed registry to list the appeal for hearing on 25.05.2019 and allowed the early hearing application (6). [Paras 6]

Miscellaneous Application for early hearing allowed and case listed for hearing on 25.05.2019.

Final Conclusion: The application for provisional release of the seized goods is dismissed for delay, absence of urgency and because relief would impinge on substantive findings of mis-declaration and mis-classification; the application for early hearing is allowed and the appeal is listed for hearing on 25.05.2019.

Classification of imported goods - exercise of jurisdiction under the Customs Act, 1962 - opportunity of hearing - retention of goods at port pending classification - compliance with notification S.O. 3966(E) dated 13.08.2018

Classification of imported goods - retention of goods at port pending classification - opportunity of hearing - Direction to respondent to classify the goods imported through Exts.P5 and P11, afford the petitioner an opportunity of hearing and pass a classification order within the time directed by the Court. - HELD THAT: - The petitioner challenged the respondent's inaction in not finally classifying goods presented by bills of entry Exts.P5 and P11 and in continuing to retain the goods at the port. The respondent relied on notification S.O. 3966(E) dated 13.08.2018 and contended that the goods fall under the relevant entry and were not accompanied by requisite documents, justifying non-release. The Court declined to adjudicate the factual/contention-based submissions in the petition but held that the continued non-exercise of classification jurisdiction was impermissible. Consequently the Court directed the respondent to consider and complete the classification of the goods covered by Exts.P5 and P11, to afford the petitioner an opportunity of hearing and to pass a reasoned classification order within the timeframe fixed by the Court, while preserving the petitioner's right to communicate the order and seek a hearing date for timely action. [Paras 5]

Respondent to consider and complete classification of goods imported through Exts.P5 and P11, afford opportunity of hearing to the petitioner and pass the classification order within three weeks from today; petitioner given liberty to communicate the order and seek a day for hearing.

Final Conclusion: Writ petition disposed of by directing the respondent to complete classification of the imported goods covered by Exts.P5 and P11 after affording hearing and to pass a classification order within the time fixed by the Court; petitioner granted liberty to communicate the order and seek a hearing date.

Pre-existence of dispute under Section 9(5)(2)(d) of the Insolvency and Bankruptcy Code, 2016 - admissibility of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - operational creditor - notice of dispute / contemporaneous communications as evidence of dispute - use of the Insolvency and Bankruptcy Code as substitute for debt enforcement - jurisdiction unaffected by change of registered office where registrar's order so provides

Pre-existence of dispute under Section 9(5)(2)(d) of the Insolvency and Bankruptcy Code, 2016 - notice of dispute / contemporaneous communications as evidence of dispute - admissibility of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Existence of a pre existing dispute between the parties and its effect on admission of the Section 9 petition. - HELD THAT: - The Tribunal examined contemporaneous emails placed on record by the Corporate Debtor dated October 2014 which complained of defects in the work (including defective sound proofing, cracks in marble, negligent electrification, substandard materials and lack of ventilation). Those communications pre dated the Invoices issued on 06.12.2014. On the material before it the Tribunal found an existing dispute prior to the date of the claim. In view of Section 9(5)(2)(d) of the Code, where notice of dispute has been received by the operational creditor or there is record of dispute in the information utility, the petition must be rejected. The Tribunal also relied on the Supreme Court's reasoning in K. Kishan (as cited in the order) that the Code cannot be used in terrorem and operational creditors must not deploy Section 9 where a real pre existing dispute exists. Although the Operational Creditor produced Form 26AS and argued that TDS/receipts were not an admission of liability, the Tribunal held that the contemporaneous complainant emails demonstrated an existing dispute and were determinative of admissibility under Section 9. [Paras 11]

The petition under Section 9 is not maintainable and is dismissed on account of an existing dispute pre dating the invoices; the petitioner remains at liberty to seek relief in any other forum as may be permissible.

Jurisdiction unaffected by change of registered office - Whether change of the Corporate Debtor's registered office altered jurisdiction for initiating legal action. - HELD THAT: - The Registrar of Companies' order dated 30.01.2017 permitting change of registered office expressly provided that there would be no jurisdictional change in legal proceedings between the Company and M/s. APDAX Constructions. On that basis the Tribunal held that the petition was properly adjudicated in Mumbai. [Paras 11]

The change of registered office to Gujarat did not oust the Mumbai Tribunal's jurisdiction to adjudicate the petition.

Final Conclusion: The Section 9 petition was dismissed for want of admissibility because contemporaneous communications established a pre existing dispute prior to the invoices; jurisdiction remained in Mumbai notwithstanding the company's change of registered office, and the petitioner may pursue other remedies if appropriate.

Valid service of demand notice by speed post and email - compliance with Section 9(1) and (2) of the Insolvency and Bankruptcy Code, 2016 - compliance with Section 9(3) clauses (a), (b) and (c) - admission of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - entitlement to simple interest on unpaid operational debt - tribunal to proceed under clause (a) of Section 16(3) for appointment of Interim Resolution Professional

Valid service of demand notice by speed post and email - Demand notice was validly served on the corporate debtor. - HELD THAT: - The Tribunal found that the demand notice in Form 3 and 4 was sent to the registered office address as per the corporate debtor's master data and was also sent by email. The record showed delivery attempts by postal authorities and an email dispatch which did not bounce, and the Tribunal observed there was valid delivery of the demand notice. [Paras 6, 9]

Demand notice held to have been validly served on the corporate debtor.

Compliance with Section 9(1) and (2) of the Insolvency and Bankruptcy Code, 2016 - compliance with Section 9(3) clauses (a), (b) and (c) - Petition complied with the statutory requirements of Section 9(1), (2) and (3) of the Code (invoice, affidavit as to non-dispute, and bank certificate). - HELD THAT: - The petitioner produced invoices for supplies, an affidavit by its authorised representative stating there was no notice of dispute or pending suit/arbitration, and a bank certificate showing no payment credited in the relevant period together with bank statements. The Tribunal held these documents satisfied the requirements of Section 9(3)(a), (b) and (c), and concluded that the petition met the requirements of subsections (1) and (2). [Paras 13, 15, 16, 17]

Statutory prerequisites under Section 9 were satisfied by the petitioner.

Admission of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - The petition under Section 9 was admitted and the Tribunal directed listing for formal orders including declaration of moratorium and appointment of Interim Resolution Professional. - HELD THAT: - Having found valid service and compliance with Section 9(3) requirements, and that the petitioner had established default, the Tribunal held that all requirements of clause (i) of Section 9(5) were fulfilled. Consequently, the petition was admitted under Section 9 and the matter was listed for passing of formal orders to declare moratorium and appoint the Interim Resolution Professional. [Paras 13, 20]

Petition admitted under Section 9; matter listed for formal moratorium order and appointment of Interim Resolution Professional.

Entitlement to simple interest on unpaid operational debt - Petitioner entitled to simple interest at 10% per annum on the unpaid balance from 01.02.2016; higher rate claim left open to civil court. - HELD THAT: - Although the petitioner claimed interest at 24% as per invoices, there was no contractual agreement between the parties for that rate. The Tribunal admitted the petition for the principal default and awarded simple interest at 10% per annum on the balance with effect from 01.02.2016 (the last payment having been made in January 2016). The Tribunal permitted the petitioner to pursue any claim for a higher rate of interest before the Civil Court. [Paras 18]

Interest at simple rate of 10% p.a. awarded from 01.02.2016; claim for higher rate left open for Civil Court.

Tribunal to proceed under clause (a) of Section 16(3) for appointment of Interim Resolution Professional - Petitioner is not obliged to propose the Interim Resolution Professional; Tribunal will proceed under Section 16(3)(a). - HELD THAT: - The Tribunal observed that an operational creditor is not required to propose the name of the Resolution Professional for appointment as Interim Resolution Professional. Accordingly, upon admission, the Tribunal will act in terms of clause (a) of Section 16(3) of the Code to appoint the Interim Resolution Professional. [Paras 19]

Tribunal to proceed under Section 16(3)(a) to appoint the Interim Resolution Professional; petitioner not obliged to propose a name.

Final Conclusion: The Tribunal held that the demand notice was validly served, the petitioner satisfied the statutory requirements of Section 9(1)-(3), and having established default the petition under Section 9 of the Code was admitted. The petitioner was awarded simple interest at 10% p.a. from 01.02.2016 on the outstanding balance; the Tribunal will proceed to declare moratorium and appoint the Interim Resolution Professional under Section 16(3)(a).

Liquidation under Section 33(1)(a) of the Code - committee of creditors' approval threshold - failure to receive a resolution plan before expiry of CIRP - non-cooperation of suspended directors affecting information memorandum - replacement of resolution professional for failure to give written consent - appointment of liquidator from IBBI panel - compliance with Liquidation Process Regulations

Liquidation under Section 33(1)(a) of the Code - committee of creditors' approval threshold - failure to receive a resolution plan before expiry of CIRP - Order for liquidation of the corporate debtor under Section 33(1)(a) of the Code was passed. - HELD THAT: - The Committee of Creditors' resolution for liquidation did not have the requisite approval since only 36.87% of voting share were present and the statutory threshold of not less than 66% for approving liquidation under Section 33(2) was not met. Independently, Section 33(1)(a) empowers the Adjudicating Authority to order liquidation where no resolution plan is received before the expiry of the CIRP. No resolution plan had been received within the CIRP period. Further, the RP explained that the information memorandum could not be prepared because the books and financial statements were not handed over due to non-cooperation and absconding of the managing director; despite proceedings under Section 19(2) the RP could not obtain required information. Having regard to the absence of a resolution plan and the RP's inability to complete the CIRP, the Adjudicating Authority exercised the power under Section 33(1)(a) and ordered liquidation in the manner provided in Chapter III of the Code. [Paras 6, 7, 8, 9, 10]

Corporate debtor ordered to be liquidated in accordance with Chapter III of the Code.

Non-cooperation of suspended directors affecting information memorandum - Non-cooperation and absconding of directors prevented completion of the information memorandum and impeded the CIRP. - HELD THAT: - The RP reported inability to prepare the information memorandum as the books of account and financial statements were not produced. Proceedings under Section 19(2) were initiated to secure cooperation from the suspended directors; two directors filed affidavits stating records were with the managing director, and the managing director was found to be absconding and subject to warrants. In these circumstances the RP could not obtain the required information and the CIRP could not be completed within the prescribed period, a material factor informing the order for liquidation. [Paras 8, 9]

Findings recorded that non-cooperation and absence of the managing director prevented completion of the information memorandum and obstructed the CIRP.

Replacement of resolution professional for failure to give written consent - appointment of liquidator from IBBI panel - Resolution Professional Shri Deepak Gupta was replaced as liquidator for failing to submit written consent; an IP from the IBBI panel was appointed as liquidator. - HELD THAT: - The RP had not filed the written consent in the specified form under Section 34(1). Section 34(4)(c) authorises the Adjudicating Authority to replace the resolution professional where such written consent is not furnished. Pursuant to the Board's guidelines and panel, the Adjudicating Authority directed the Board to propose a name and appointed Shri Kuljeet Singh (from the bench-wise IBBI panel) as liquidator for the liquidation process. [Paras 12, 13]

Shri Deepak Gupta replaced; Shri Kuljeet Singh appointed as liquidator from the IBBI panel.

Compliance with Liquidation Process Regulations - Directions and procedural requirements for the liquidation process were issued and mandated to be complied with. - HELD THAT: - The Adjudicating Authority directed strict compliance with Chapter III of the Code and the Liquidation Process Regulations, 2016. Specific directions included notice of discharge to employees, vesting of powers in the liquidator, obligation of corporate personnel to cooperate, publication of public announcement in Form B as per Regulation 12, timelines for submission of claims (30 days from liquidation commencement date), publication modalities under Regulation 12(3), and filing of the liquidator's preliminary and fortnightly progress reports as per Regulation 13 and the Rules. Financial creditors were not debarred from enforcing personal guarantees. [Paras 14]

Liquidation process to be conducted in accordance with Chapter III of the Code and Liquidation Process Regulations, with the specified directions to be followed by the liquidator.

Final Conclusion: The Adjudicating Authority ordered the corporate debtor to be liquidated under Section 33(1)(a) of the Code due to absence of a resolution plan and inability to complete CIRP; the incumbent Resolution Professional was replaced for failing to furnish written consent and an Insolvency Professional from the IBBI panel was appointed as liquidator, with directions for strict compliance with the Liquidation Process Regulations.

Transfer of land development rights - benefits arising out of land - immovable property exclusion from 'service' - service tax on declared services and advance receipt - point of taxation on advance consideration - extended period of limitation - bona fide doubt/absence of clarification

Transfer of land development rights - ownership and title of land - Whether the appellant transferred any land development rights to M/s DLF Ltd. - HELD THAT: - The Tribunal examined the contractual scheme and surrounding facts and found that the Business Development Agreement dated 02.08.2006 is prospective in nature and did not evidence any vesting of title or actual transfer of development rights in favour of the appellant. The sums received from DLF were advanced to the appellant for procurement of land and were forwarded to land owning companies (LOCs), who remained the owners of the land; no document was placed on record showing transfer of development rights from LOCs to the appellant. The appellant did not acquire physical title to the land and therefore could not have transferred development rights to DLF. These findings are drawn from the factual matrix described in the agreements, the parties' conduct, and the documentary record. [Paras 6, 7, 8, 11, 12]

Appellant did not transfer any land development rights to M/s DLF Ltd.; factual finding for the appellant.

Benefits arising out of land - immovable property exclusion from 'service' - Whether transfer of development rights constitutes a service chargeable to service tax or falls outside the definition of 'service' as a transfer of immovable property/benefits arising out of land. - HELD THAT: - The Tribunal applied Section 65B(44) read with the definition of 'immovable property' in Section 3(26) of the General Clauses Act and relevant judicial precedents. It held that transferable development rights (TDR/benefits arising out of land) amount to an interest in immovable property. Once a transaction is one in relation to land or benefits arising out of land, it is excluded from 'service' under Section 65B(44). Relying on precedents treating FSI/TDR and analogous rights as benefits arising out of land, the Tribunal concluded that transfer of such rights would fall outside the levy of service tax. [Paras 16]

Transfer of development rights is a transaction in immovable property (benefits arising out of land) and hence not a taxable 'service' under Section 65B(44).

Extended period of limitation - bona fide doubt/absence of clarification - Whether the Department could invoke the extended period of limitation for the demand. - HELD THAT: - The Tribunal noted repeated representations and requests for clarification from trade bodies and the taxpayer as to the taxability of transfer of development rights, and that the revenue had not provided a clear stance. Given this state of uncertainty and the absence of mala fide conduct or suppression by the appellant, the Tribunal held that the extended period of limitation could not be invoked against the appellant. [Paras 17]

Extended period of limitation is not invokable; demand is time-barred to the extent based on extended period.

Final Conclusion: On the facts and law the Tribunal held that the appellant did not transfer land development rights to DLF; transfer of development rights constitutes a benefit arising out of land (immovable property) outside the definition of 'service' under Section 65B(44); the extended period is not invokable; consequently the demand and penalty were set aside and the appeal allowed with consequential relief.

Refund of accumulated Cenvat credit - Rule 5 of Cenvat Credit Rules, 2004 - requirement of nexus between input services and exported services - Simplified scheme for refunds - CBEC Circular No. 334/1/2012-TRU dated 16.03.2012

Refund of accumulated Cenvat credit - Rule 5 of Cenvat Credit Rules, 2004 - requirement of nexus between input services and exported services - CBEC Circular No. 334/1/2012-TRU dated 16.03.2012 - Entitlement to refund of unutilized/accumulated Cenvat credit for the period January 2016 to March 2016 under the substituted Rule 5 of the Cenvat Credit Rules, 2004 without establishing a direct nexus between input services and exported services. - HELD THAT: - The Tribunal examined the claim for refund of accumulated Cenvat credit filed under Rule 5 of the Cenvat Credit Rules, 2004 for January 2016 to March 2016 and considered the Government of India, Department of Revenue, TRU communication dated 16.03.2012 which explains the substituted Rule 5 as introducing a simplified scheme for refunds. The communication states that the new scheme does not require the correlation previously necessitated between exports and input services, and entitles duties or taxes paid on inputs and input services to refund in the ratio of export turnover to total turnover. The Bench noted that an identical issue in the assessee's own case for a different period had been decided in favour of the assessee and that the Revenue did not produce any decision or material to distinguish those orders or the TRU circular. Applying the clarified scheme, the Tribunal found no reason to sustain the lower authorities' rejection of the contested portion of the refund claim and set aside the impugned order insofar as contested before it, allowing the appeal with consequential reliefs as per law.

The impugned order is set aside insofar as it rejected the contested refund; the appellant is entitled to the refund under the substituted Rule 5 as clarified by CBEC TRU circular dated 16.03.2012, and the appeal is allowed with consequential relief.

Final Conclusion: Appeal allowed; the Tribunal set aside the impugned order to the extent it rejected the refund claim for January 2016 to March 2016, holding that under the substituted Rule 5 of the Cenvat Credit Rules, 2004 (as clarified by CBEC TRU communication dated 16.03.2012) no direct nexus between input services and exported services is required for grant of refund, and granted consequential reliefs.

Eligibility of refund of unutilized CENVAT credit - definition of input service under Rule 2(l) of the CENVAT Credit Rules, 2004 - nexus between input service and output service - services used for modernization, renovation and repair as input services - Board D.O.F. No. 334/1/2012-TRU dated 16.03.2012 - Circular No. 943/04/2011-CX dated 29.04.2011

Definition of input service under Rule 2(l) of the CENVAT Credit Rules, 2004 - nexus between input service and output service - services used for modernization, renovation and repair as input services - eligibility of refund of unutilized CENVAT credit - Construction Service paid service tax is eligible for refund as unutilized CENVAT credit - HELD THAT: - The Tribunal applied the settled view of co-ordinate Benches and the Board's clarification to hold that construction services used for modernization, renovation and repair of premises qualify as input service under Rule 2(l) despite the exclusion for construction of building or civil structures. The requirement to demonstrate a direct nexus between the input service and the output service has been dispensed with by the Board's D.O.F. No. 334/1/2012-TRU dated 16.03.2012 and was followed by this Bench (citing M/s. Mckinsey Global Services India Pvt. Ltd.). The Revenue did not dispute that the services were used for modernization/renovation; therefore the denial of refund was set aside.

Rejection of refund qua Construction Service set aside; refund allowed.

Definition of input service under Rule 2(l) of the CENVAT Credit Rules, 2004 - services used for modernization, renovation and repair as input services - eligibility of refund of unutilized CENVAT credit - Interior Decorator Service is eligible as an input service when used for renovation/repair and refund cannot be denied on that ground - HELD THAT: - Following judicial precedent (including the Gujarat High Court decision in Commissioner of C.Ex., Ahmedabad-II v. Cadila Healthcare Ltd.) and consistent Tribunal decisions, interior decorator services used along with construction services for modernization, renovation and upkeep of office/premises fall within the inclusive part of the definition of input service. The authorities' denial based on absence of nexus or non-necessity for carrying out the output service was rejected and the impugned denial set aside.

Rejection of refund qua Interior Decorator Service set aside; refund allowed.

Definition of input service under Rule 2(l) of the CENVAT Credit Rules, 2004 - services used for modernization, renovation and repair as input services - Circular No. 943/04/2011-CX dated 29.04.2011 - eligibility of refund of unutilized CENVAT credit - Works Contract Services used for modernization, renovation and repair qualify as input services and refund cannot be denied by relying on the exclusion clause alone - HELD THAT: - Although Works Contract Services are mentioned in the exclusion clause of Rule 2(l), a harmonious reading of the inclusive part and the exclusion (as amended from 01.04.2011) supported by Board Circular No. 943/04/2011-CX clarifies that services used in relation to modernization, renovation or repair of factory/office remain eligible as input service. Co-ordinate Tribunal decisions endorsing this view were followed. The adjudicating authorities had recorded use for modernization/renovation but denied credit solely on the exclusion; that denial was held unsustainable.

Rejection of refund qua Works Contract Service set aside; refund allowed.

Nexus between input service and output service - Board D.O.F. No. 334/1/2012-TRU dated 16.03.2012 - eligibility of refund of unutilized CENVAT credit - Refund claim in respect of Air Travel Services cannot be denied for want of nexus where Board clarification dispenses with the nexus requirement - HELD THAT: - The Tribunal relied on the Board's D.O.F. No. 334/1/2012-TRU dated 16.03.2012, which removes the requirement to establish nexus between input and output services for refund eligibility. Since the lower authorities failed to apply the binding Board clarification, their denial of refund on the ground of absence of nexus was set aside.

Rejection of refund qua Air Travel Services set aside; refund allowed.

Scope of adjudication - grounds of appeal - No adjudication or order was passed on Rent-a-Cab Service as it was not taken up in the show cause notice or grounds of appeal - HELD THAT: - The Tribunal examined the record and found that Rent-a-Cab Service was never an issue at any stage of adjudication nor was it included in the grounds of appeal before the first appellate authority or this forum. Consequently, the Commissioner (Appeals) could not lawfully decide upon it and therefore no order is passed by the Tribunal on that service.

No order on Rent-a-Cab Service; matter was not adjudicated and is not decided.

Final Conclusion: The Tribunal allowed the appeals in part: refunds of unutilized CENVAT credit were permitted in respect of Construction, Interior Decorator, Works Contract and Air Travel Services for the periods April 2014 to March 2015, setting aside the lower authorities' denials; no adjudication was made on Rent a Cab Service as it was not an issue in the proceedings.

Refund of unutilized CENVAT credit - condition 2(h) of Notification No. 27/2012-CE (NT) dated 18.06.2012 - requirement to debit amount in accounts - no requirement to reflect debit in ST-3 returns - setting aside rejection of refund claim

Condition 2(h) of Notification No. 27/2012-CE (NT) dated 18.06.2012 - requirement to debit amount in accounts - no requirement to reflect debit in ST-3 returns - Whether non-reflection of the debited amount in ST-3 returns constitutes non-compliance with condition 2(h) leading to rejection of refund claims for unutilized CENVAT credit - HELD THAT: - The Tribunal examined condition 2(h) of Notification No. 27/2012-CE (NT) dated 18.06.2012 and held that the condition does not mandate that the debit of the amount claimed as refund must be reflected in the ST-3 returns. The legal requirement under the Notification is satisfied by debiting the claimed amount in the assessee's accounts; there is no express obligation to mirror that debit in the ST-3 return. The Department's basis for rejection - absence of the debit in ST-3 returns - therefore did not correctly apply the condition prescribed by the Notification. Applying this interpretation to the facts before it, the Tribunal found the rejection on the stated ground to be unjustified and liable to be set aside. [Paras 5, 6]

Rejection of the refund claims on the ground of non-compliance with condition 2(h) was unjustified; the impugned order is set aside and the appeals are allowed with consequential reliefs.

Final Conclusion: The Tribunal allowed the appeals, holding that condition 2(h) requires debit in the assessee's accounts but does not require that such debit be reflected in ST-3 returns; the impugned order rejecting the refund claims is set aside and consequential reliefs follow.

Rebate/refund of service tax on specified services in relation to export of goods - interpretation of "specified services" in Notification No.41/2012-ST and its amendment - use of services beyond factory or place of manufacture versus beyond place of removal - distinction between "specified services" for rebate and "input services" for Cenvat credit - appellate jurisdiction under proviso to section 86 regarding rebate on export of goods vis-a -vis export of services

Appellate jurisdiction under proviso to section 86 regarding rebate on export of goods vis-a -vis export of services - Tribunal's competence to entertain appeals against orders rejecting rebate claims of service tax paid in relation to export of goods. - HELD THAT: - The appellant contended that the proviso to section 86 bars appeals only where rebate relates to export of services and not where service tax paid relates to export of goods; the Tribunal may therefore entertain appeals in the latter category. The discussion in the order treats the proviso as inapplicable to rebate claims arising from export of goods and proceeds to adjudicate the substantive claim. The court accepted this distinction and proceeded to decide the merits of the rebate claim in favour of the appellant. [Paras 4, 14]

Tribunal competent to hear appeal against rejection of rebate on service tax paid in relation to export of goods (proviso to section 86 does not bar such appeals).

Interpretation of "specified services" in Notification No.41/2012-ST and its amendment - use of services beyond factory or place of manufacture versus beyond place of removal - distinction between "specified services" for rebate and "input services" for Cenvat credit - Whether services availed beyond the place of removal (at destination) in relation to export of goods are eligible for rebate under Notification No.41/2012-ST as amended. - HELD THAT: - The Tribunal examined the original and amended definitions of "specified services" in Notification No.41/2012-ST. The amendment replaced the phrase "beyond the place of removal" with "beyond factory or any other place or premises of production or manufacture of the said goods, for their export," which the court interpreted as making services used beyond the factory or place of manufacture (including at destination) eligible for rebate. The order rejects importing the definition of "input services" under Cenvat Credit Rules to deny rebate, noting that the notification supplies a distinct criterion for rebate and that the object is to make export of goods free from duty and taxes. The Tribunal also followed and relied on precedents holding that services such as ocean freight and destination handling, charged as part of the price for delivery to buyer, fall within the notified rebate eligibility. [Paras 9, 10, 11, 14]

Rejection of rebate on the ground that services were availed beyond the place of removal is unsustainable; specified services as amended are eligible for rebate and the disallowance is set aside.

Final Conclusion: The appeals are allowed: the impugned order is modified by setting aside the rejection of rebate in respect of the specified services and directing grant of rebate with consequential reliefs, the Tribunal being competent to decide such appeals.

Limitation - extended period of limitation - suppression of facts - change of opinion - CENVAT credit on capital goods - production of original documents - invocation of larger period of limitation

Extended period of limitation - suppression of facts - production of original documents - CENVAT credit on capital goods - change of opinion - Whether the Revenue could invoke the extended period of limitation to demand reversal of CENVAT credit availed on ATM machines for the financial years 2011-12 and 2012-13. - HELD THAT: - The Tribunal found that the Revenue's audit in 2013 had specifically enquired into the appellant's availment of CENVAT credit on ATM machines and the appellant had furnished copies of invoices and offered to produce originals on request; the Department even cross verified with the seller. Despite this, the Show Cause Notice was issued only on 19.10.2016. On these facts, the Tribunal applied the principle that extended limitation for concealment or suppression cannot be invoked where the relevant facts were disclosed to, or were within the knowledge of, the Department such that any delay thereafter amounted to a change of opinion rather than fresh discovery of suppression. Reliance was placed on the reasoning in the Allahabad High Court decision referred to by the appellant, where it was held that extended limitation is not available where the Department had earlier knowledge of the material facts and there was no suppression by the assessee. The Tribunal held that the Revenue failed to establish any suppression of facts or documentary concealment necessitating invocation of the larger period; nothing prevented the Department from issuing a show cause earlier once doubts arose. Consequently, the condition precedent for extended limitation was not satisfied and the demand beyond the normal period was time barred. [Paras 5, 6, 7]

Extended period of limitation cannot be invoked; demand for reversal of CENVAT credit beyond the normal period is time barred and the impugned order is set aside.

Final Conclusion: The appeal is allowed; the order confirming reversal of CENVAT credit under the extended period of limitation is set aside and consequential benefits, if any, to the appellant shall follow as per law.

Settlement Commission order - binding effect on co-noticees - Kar Vivad Samadhan (KVS) Scheme - extension to co-noticees - CESTAT duty to decide appeal on merits despite preliminary objections

Settlement Commission order - binding effect on co-noticees - Kar Vivad Samadhan (KVS) Scheme - extension to co-noticees - Whether the CESTAT was justified in declining to extend the benefit of the order passed by the Settlement Commission to the appellant - HELD THAT: - The Court held that the mere liberty granted by the Settlement Commission to proceed against co-noticees did not preclude those co-noticees from invoking the Settlement Commission order (and the KVS scheme) as a defense. The CESTAT failed to consider and apply the decisions of this Court in M/s Lesag HBB (I) Ltd. and Others v. CCE and of the Supreme Court in Union of India v. Omkar S Kanwar, and did not discuss the import of those authorities in reaching its conclusion. Given this omission, the question whether the appellant was entitled to the benefit of the Settlement Commission order under the KVS scheme requires fresh consideration by the CESTAT. [Paras 14]

Finding on this question set aside and remanded to the CESTAT for fresh consideration uninfluenced by the earlier order.

CESTAT duty to decide appeal on merits despite preliminary objections - Whether the CESTAT was obliged to consider the appeal on merits notwithstanding the preliminary objection raised by the Department - HELD THAT: - The Court observed that the order dated 5th June, 2018 contains no discussion on the merits and that acceptance of the Department's preliminary objection should have led to consideration of the appeals on merits thereafter. It was erroneous for the CESTAT to conclude that "nothing further remained to be adjudicated" after deciding the preliminary objection. Consequently, the question of merits was not adjudicated and must be reconsidered by the CESTAT. [Paras 15]

Finding that nothing remained to be decided set aside and remanded to the CESTAT to decide the appeal on merits.

Final Conclusion: Impugned CESTAT orders dated 5th June, 2018 and 21st February, 2019 are set aside; Customs Appeal No. C/361-363/2010 (SM) is restored to the CESTAT for fresh adjudication on (a) whether the benefit of the Settlement Commission order/KVS scheme extends to the appellant and (b) the merits of the appeal, uninfluenced by the earlier orders.

Manufacture versus clearance of parts - applicability of exemption to parts and components - liability for excise duty on complete goods - time bar/limitation - penalty for suppression or misstatement

Manufacture versus clearance of parts - applicability of exemption to parts and components - liability for excise duty on complete goods - Whether the clearances of syringe parts with packaging bearing buyer's name amounted to clearance of complete syringes attracting excise duty, or whether manufacture of complete syringes occurred at the buyer's premises making the exemption on parts applicable. - HELD THAT: - Revenue's case rested on the fact that the packaging sent with the parts bore the buyers' names and therefore the appellant had effectively cleared complete syringes liable to excise. The Tribunal examined the concurrent finding of the Jurisdictional Commissioner (Appeals) for the buyer's unit at Guwahati, which recorded that on receipt of parts the buyer undertook assembling, quality control checks, packing in a clean room, sterilization with ethylene oxide gas, quarantine and sterility testing before dispatch. Those processes were found to amount to manufacture by the buyer's Commissioner (Appeals). In that factual and legal matrix, the Tribunal held that manufacture of the complete syringe occurred at the buyer's premises and therefore what the appellant cleared were parts/components entitled to the exemption; the lower authorities' conclusion based solely on printed names on packaging was inadequate and failed to advert to the buyers' manufacturing processes. [Paras 6, 7, 8, 9]

Clearances were of parts/components and not of complete syringes; the exemption in respect of parts applies and the demand on merits is not sustainable.

Time bar/limitation - penalty for suppression or misstatement - Whether the demand (and consequential interest and penalty) is barred by limitation and whether penalty for suppression or misstatement could be justified. - HELD THAT: - The Tribunal found that the controversy involved a bona fide question of interpretation as to whether manufacture was consummated at the buyer's unit. Given that the parts sent by the appellant underwent further manufacturing processes at the buyer's premises and that the appellant had not committed suppression or misstatement, the demand raised beyond the normal period was held to be time barred. On that basis the Tribunal concluded that interest and the penalty imposed could not be sustained. [Paras 10, 11]

The demand, interest and penalty are time barred and unsustainable; the penalty for suppression/misstatement is set aside.

Final Conclusion: The impugned orders confirming duty, interest and penalty are set aside: the Tribunal held that manufacture of complete syringes took place at the buyer's premises so that the appellant's clearances were of exempt parts, and, further, the demand was time barred; the appeal is allowed with consequential relief.

Clandestine removal of goods - confirmation of demand based on recovered documents and GRs - right to cross-examination under Section 9-D - corroborative evidence requirement for clandestine clearances - remand for cross-examination versus setting aside on account of delay - penalty under Rule 26 of Central Excise Rules, 2002 - imposition of penalty under Section 11AC - interest recovery under Section 11AB

Confirmation of demand based on recovered documents and GRs - right to cross-examination under Section 9-D - corroborative evidence requirement for clandestine clearances - remand for cross-examination versus setting aside on account of delay - Sustainability of the demand confirmed on the basis of ledger entries, loose papers and GRs recovered during search for the period April 2002 to February 2003. - HELD THAT: - The Tribunal found that the demand was founded on documents and GRs recovered during investigation and on records from the Transport Union. The appellants had sought cross-examination of persons whose statements and of whom documents were relied upon, but no cross-examination was permitted; this amounted to a procedural violation of the protections under Section 9-D as applied in earlier decisions. In the absence of cross-examination and any independent corroborative evidence to prove clandestine removals (apart from admissions concerning one buyer), the portion of the demand based solely on those unproved materials could not be sustained. Considering the age of the matter (about 17 years), the Tribunal held that remanding the matter merely for cross-examination would serve no useful purpose and therefore set aside the demand attributable to the unproven ledger/GR entries, while confirming the duty admitted by the appellant and the part already paid together with interest; the paid amount attracted a reduced penalty percentage. The Tribunal applied the twin considerations of procedural fairness (right to cross-examination) and evidentiary sufficiency (need for corroboration) in reaching its conclusion. [Paras 11, 12]

Demand based on uncorroborated ledger entries and GRs set aside; remaining duty as admitted by the appellant confirmed and the portion paid is accepted with interest and reduced penalty.

Penalty under Rule 26 of Central Excise Rules, 2002 - imposition of penalty under Section 11AC - Correctness of penalty imposed on Shri Anil Kumar, Executive Director. - HELD THAT: - The Tribunal examined the record for any material or statement establishing that Shri Anil Kumar had knowledge of or participated in clandestine removals. Finding no statement or evidence to that effect, the Tribunal concluded that the penalty imposed on him could not be sustained. The absence of any indication that he supervised or authorised the alleged evasion made imposition of personal penalty unsustainable on the facts of the case. [Paras 13]

Penalty on Shri Anil Kumar set aside.

Penalty under Rule 26 of Central Excise Rules, 2002 - clandestine removal of goods - Sustainability and quantum of penalties imposed on other persons and the external buyer found connected with clandestine removals. - HELD THAT: - For those appellants whose statements and admissions during investigation implicated them in clandestine removals (including the buyer for whom admissions were made), the Tribunal held that liability to penalties remained. However, the Tribunal found several of the imposed amounts excessive and, exercising its corrective power, reduced the penalties: the penalty on the external buyer was markedly reduced, and the penalties on the other individual appellants were reduced to lower specified sums. The reductions reflect the Tribunal's assessment of proportionality having regard to the findings of involvement and the overall circumstances. [Paras 14, 15]

Penalties on the other appellants upheld but substantially reduced to the amounts directed by the Tribunal.

Final Conclusion: The Tribunal set aside the portion of the excise demand founded on uncorroborated ledger entries and GRs (confirming only the duty admitted and the amount paid with interest and reduced penalty), allowed the appeal as regards the penalty on the Executive Director, and upheld but substantially reduced the penalties imposed on the remaining persons; appeals disposed of on these terms.

Admissibility of statements without opportunity for cross-examination - clandestine manufacture and clearance - burden of proof on revenue to establish clandestine removal - standard of evidence for clandestine removal - reliance on documentary evidence and its authenticity - imposition of penalty under Central Excise Rules

Admissibility of statements without opportunity for cross-examination - Whether statements recorded at the time of search, not offered for cross-examination during adjudication, could be treated as evidence. - HELD THAT: - The Tribunal held that the Original Authority relied upon statements recorded on 12.09.2014 but did not permit cross-examination of the persons whose statements were relied upon. Applying the principle in Parmarth Steel/Iron (as followed by the Tribunal), statements which are not made available for cross-examination cannot be treated as admissible evidence in adjudication. Since the adjudicating authority refused the request for cross-examination and nevertheless relied on those statements, such reliance was impermissible and those statements could not support the demand or penalties. [Paras 8]

Statements not offered for cross-examination were not admissible evidence and could not be relied upon by the adjudicating authority.

Clandestine manufacture and clearance - burden of proof on revenue to establish clandestine removal - standard of evidence for clandestine removal - reliance on documentary evidence and its authenticity - Whether revenue established clandestine manufacture and clearance and thereby justified the demand and penalties. - HELD THAT: - The Tribunal examined the factual and evidentiary matrix and applied the established criteria for proving clandestine removal (including procurement/consumption of raw materials, discovery of finished goods outside factory, instances of actual removal or sale, receipt of sale proceeds, abnormal electricity usage, proof of transportation, and links between recovered documents and factory activities). It found that revenue failed to produce the necessary evidence: the relied-upon statements could not be used (see above), there was no evidence of finished goods discovered outside the premises, no proof of actual removal or sale of finished goods, no evidence of electricity usage to support large-scale manufacture, and no independent proof that the machines were in operation prior to the documents produced by the appellants. The Original Authority's conclusion that the documents were fabricated was not supported by positive evidence from revenue, whereas sellers and transporter (also appellants) confirmed authenticity of documents. In these circumstances the burden on revenue to establish clandestine manufacture and clearance remained unmet. [Paras 8]

Revenue failed to prove clandestine manufacture and clearance; the evidentiary foundation for the duty demand and penalties was insufficient.

Imposition of penalty under Central Excise Rules - reliance on documentary evidence and its authenticity - Whether the penalties and appropriation confirmed by the Original Authority were sustainable. - HELD THAT: - Given that the demand itself was not sustained for want of admissible and adequate evidence, and that the Original Authority's rejection of the appellants' documentary evidence was not supported by independent positive proof from revenue, the consequential penalties and appropriations founded on that demand could not be sustained. The Tribunal therefore concluded that the impugned adjudication and penalties lacked a valid evidentiary basis. [Paras 8, 9]

Penalties and appropriation confirmed in the impugned order were not sustainable and were set aside along with the demand.

Final Conclusion: The impugned Order-in-Original confirming the duty demand and imposing penalties was set aside for want of admissible and sufficient evidence; all appeals were allowed and appellants granted consequential relief as per law.

Valuation under Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - CAS-4 certificate and appointment of Cost Accountant - Valuation of clearances to sister units / captive consumption - Revenue neutrality of inter-unit clearances - Methodology of presumed material cost / arbitrary addition to invoice prices

CAS-4 certificate and appointment of Cost Accountant - Valuation under Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Methodology of presumed material cost / arbitrary addition to invoice prices - Sustainability of duty demand where department did not obtain CAS-4 by appointing a Cost Accountant and computed value by applying an arbitrary percentage to invoice-declared material cost. - HELD THAT: - The Tribunal found that the department had not followed the procedure under the Valuation Rules and had no basis in law for arriving at the assessable value by taking a fixed percentage of invoice-declared material cost (16.96% / addition of overheads and then 15%/10%). In the absence of a CAS-4 certificate procured through appointment of a Cost Accountant, the departmental method of valuation constituted an impermissible shortcut. The impugned demand was therefore not founded on the Valuation Rules and the Tribunal relied on earlier findings in the appellant's own matter that such methodology is against provisions of law. Consequently the demand could not be sustained. [Paras 5, 7, 8]

Demand set aside as valuation was not made on the basis of a CAS-4 certificate obtained through appointment of a Cost Accountant and the departmental methodology was legally impermissible.

Revenue neutrality of inter-unit clearances - Valuation of clearances to sister units / captive consumption - Applicability of the revenue-neutrality principle to demands raised for clearances made to sister units. - HELD THAT: - The Tribunal held that where goods are cleared to sister units and the receiving unit is eligible to take credit of any duty, the exercise is revenue neutral. Citing the Tribunal's decision in M/s. Anglo French Textiles (affirmed by the Supreme Court), the Bench observed that in revenue-neutral situations demands of duty on such intra-group clearances are unsustainable. The present facts established that the appellant would be eligible for credit in the sister units, making the demand revenue neutral. [Paras 5, 6]

Demand unsustainable on the ground of revenue neutrality; appeal allowed on this basis as well.

Final Conclusion: The appeal is allowed; the impugned order confirming duty, interest and penalty is set aside because the departmental valuation was not based on a CAS-4 certificate obtained through appointment of a Cost Accountant and, independently, the demand is unsustainable being revenue neutral; consequential reliefs, if any, to follow as per law.

Refund of deposit made under protest during investigation - unjust enrichment in refund claims - binding effect of earlier appellate order between officers of same status - remand and limited scope of appellate directions - appropriation of payments towards duty liability - pass-on of duty and its proof

Refund of deposit made under protest during investigation - unjust enrichment in refund claims - appropriation of payments towards duty liability - Entitlement of the assessee to refund of amounts paid under protest during investigation and applicability of unjust enrichment principle. - HELD THAT: - The Tribunal accepted that the amounts were paid under protest during the investigation and were appropriated towards duty liability in earlier adjudication (see earliest Order-in-Original). Relying on consistent judicial precedent, including the reasoning in the cited High Court decision, the Court held that deposits made during the pendency of adjudication/investigation are in the nature of deposits under protest and the principle of unjust enrichment does not apply to deny refund. In the circumstances, and given the appropriation recorded in the earlier order, the assessee is entitled to refund of the amounts paid under protest. [Paras 6, 8, 9]

The assessee is entitled to refund of the amounts paid under protest during investigation; the principle of unjust enrichment does not bar the refund.

Binding effect of earlier appellate order between officers of same status - remand and limited scope of appellate directions - Whether the adjudicating authority or a subsequent appellate officer could re-open, re-evaluate or sit over the findings/directions contained in the earlier Order-in-Appeal which had attained finality in absence of interference by a higher forum or a stay. - HELD THAT: - The Tribunal observed that once an Order-in-Appeal has been rendered and no higher forum has set it aside or stayed it, subsequent officers cannot repudiate or sit over its findings merely by adopting a different view; to do so would amount to change of opinion by officers of the same status. The remand order dated 03.01.2017 limited the scope of the adjudication and the Commissioner (Appeals) had earlier set aside the impugned order on wrong premises. Since the Revenue had withdrawn its appeal and the appellate findings stood unchallenged, those findings were binding on the Revenue and the adjudicating authority was bound to accept them. [Paras 4, 5, 8]

The adjudicating authority could not disregard or overturn the earlier unchallenged appellate findings; the scope of remand was limited by the appellate directions and those directions must be followed.

Pass-on of duty and its proof - Validity of the adjudicating authority's contention that the duty was passed on to the assessee's unit at Baddi and consequent effect on refund entitlement. - HELD THAT: - The Tribunal found the adjudicating authority's contention that duty was passed on to the Baddi unit to be unsustainable. The Commissioner (Appeals) in his remand order had observed that the amounts claimed for refund related to payments made after clearance of goods and were not passed on as contended in the Show Cause Notice; the impugned order was found to have been passed on a wrong premise and was set aside. There was no challenge by the Revenue to that finding, and in absence of any contrary finding the Tribunal held that the assessee did not pass on the duty element and therefore unjust enrichment could not be alleged. [Paras 8]

The claim that duty was passed on to the Baddi unit is rejected; the assessee did not pass on the duty element and is therefore entitled to refund.

Final Conclusion: The impugned order is set aside; the appeal is allowed and the assessee is entitled to refund with consequential benefits as per law, since the amounts were deposits made under protest, the principle of unjust enrichment does not apply, and earlier unchallenged appellate findings adverse to Revenue are binding on the adjudicating authority.

Refund of CENVAT credit - interpretation of Notification No. 27/2012-C.E. (N.T.) - reversal/debit of credit at the time of claim - procedural compliance versus substantive eligibility - grant of substantial relief despite procedural lapse

Refund of CENVAT credit - reversal/debit of credit at the time of claim - procedural compliance versus substantive eligibility - Whether denial of refund claim for CENVAT credit on the ground that the amount was not debited from the cenvat credit account at the time of making the claim is sustainable. - HELD THAT: - The Tribunal accepted the assessee's contention that the requirement to debit the amount of refund from the cenvat credit account at the time of making the claim is a procedural condition and not a dispositive bar to entitlement where eligibility and availability of credit are not in dispute. The Bench relied on its earlier decision in M/s. Synthesis Healthcare Services LLP and other orders which held that mere delay in reversal/debit of the credit is a procedural lapse that cannot defeat the substantive right to refund, particularly where the assessee had suo moto reversed the credit prior to issuance of the show cause notice and there was no dispute as to eligibility or receipt of export proceeds. Applying this reasoning, the Tribunal found the denial of refund to be unsustainable and set aside the impugned order.

Denial of refund set aside; appeal allowed and refund claim upheld with consequential benefits as per law.

Final Conclusion: The appeal is allowed; the impugned order rejecting the refund claim is set aside and the assessee's refund claim for October 2012 to December 2012 is accepted with consequential benefits, the Tribunal treating the contested debit-at-claim requirement as a procedural lapse not depriving substantive entitlement.

Refund of CENVAT credit - eligibility under Notification No. 27/2012-C.E. (N.T.) dated 18.06.2012 - debiting amount from Cenvat Credit Account at time of claim - procedural non-compliance versus substantive entitlement - denial of refund on technical grounds

Refund of CENVAT credit - debiting amount from Cenvat Credit Account at time of claim - procedural non-compliance versus substantive entitlement - Whether the refund claim for the quarter July 2012 to September 2012 could be rejected for failure to debit the amount from the Cenvat Credit Account at the time of making the claim under Notification No. 27/2012 - HELD THAT: - The Tribunal examined the identical condition in Notification No. 27/2012 that requires debiting the amount of refund claimed from the Cenvat Credit Account at the time of making the claim. Relying on this Bench's earlier decision in M/s. Synthesis Healthcare Services LLP and other orders which treated the condition as procedural, the Tribunal held that where availability and eligibility of credits are not disputed and other conditions of the notification are satisfied (including export of services and receipt of proceeds in convertible foreign exchange), mere non-debiting at the exact time of filing - particularly when the credit was reversed suo motu before issuance of show cause notice - is a procedural lapse and cannot defeat the substantive right to refund. The Tribunal therefore found the denial of refund on that technical ground to be unsustainable and set aside the impugned order. [Paras 5, 6]

Impugned order rejecting the refund is set aside and the appeal is allowed; the appellant is held entitled to the refund with consequential benefits as per law.

Final Conclusion: The Tribunal allowed the appeal, holding that non-debiting of the refund amount at the precise time of making the claim under Notification No. 27/2012 was a procedural irregularity which could not bar the substantive grant of refund for the quarter July 2012 to September 2012; the order rejecting the refund was set aside and consequential relief was awarded.

Refund of VAT - system generated zero (nil) demand order - non application of mind by assessing officer - remand to assessing authority and duty to pass fresh order within one year - remand does not revive earlier assessment orders - interest on delayed refund under Section 42 of the DVAT Act - limitation on reopening assessments

Refund of VAT - system generated zero (nil) demand order - non application of mind by assessing officer - Whether the petitioner was entitled to the refund claimed which was being denied on the basis of mechanically issued zero demand orders. - HELD THAT: - The Court found that the Respondents were denying the legitimately payable refund by relying on mechanically generated zero demand/adjustment orders issued without application of mind. The assessments which gave rise to the refunds had been set aside by the OHA/ATVAT and the VATO could not simply rely on prior demand orders; fresh orders were required. The factual stance that fresh assessment/reassessment could not be finalized because the petitioner did not appear before the VATO did not absolve the VATO of its duty to pass a fresh order and could not be used to deny the refund which was otherwise due. On these grounds the Court held that there was no justification to withhold the refund. [Paras 6, 7, 11, 12]

The petitioner is entitled to the refund claimed; denial based on system generated zero demand orders issued without application of mind was impermissible.

Remand to assessing authority and duty to pass fresh order within one year - remand does not revive earlier assessment orders - interest on delayed refund under Section 42 of the DVAT Act - limitation on reopening assessments - Consequences of remand by OHA/ATVAT and the obligation to pass a fresh order within stipulated time and the entitlement to interest on delayed refund. - HELD THAT: - Relying on precedent and the reasoning in earlier orders, the Court held that where the OHA/ATVAT sets aside earlier orders and remands the matter, the VATO is obliged to pass a fresh decision; failure to do so within the prescribed period (and within one year as treated in the earlier decisions) means there is no legal impediment to grant the refund. The Court noted the applicability of limitation principles to any attempt to reopen assessments and recorded that the VATO had not passed fresh orders within the relevant period following remand. Accordingly the petitioner was entitled to refund together with interest from the expiry of one month from filing of respective returns as provided under Section 42 of the DVAT Act; further penal interest would follow for non compliance with the direction. [Paras 8, 9, 12, 13]

VATO was required to pass fresh orders after remand and, having failed to do so within the stipulated time, the petitioner is entitled to the refund with interest under Section 42; further interest at 6% p.a. will be payable for any delay in compliance.

Final Conclusion: Writ petition allowed; Respondents directed to refund the specified amount to the petitioner for the stated periods with statutory interest from the expiry of one month from filing of the returns, and to pay additional simple interest for any delay in compliance.