TaxTMI Updates e-Newsletter
May 31,2017

Revenue expenditure on issuance of debentures - Convertible debentures treated as loans - Allowability of expenditure under section 37 - Distinction between issue of shares and debentures - Disallowance for want of evidence

Revenue expenditure on issuance of debentures - Convertible debentures treated as loans - Allowability of expenditure under section 37 - Distinction between issue of shares and debentures - Expenditure incurred in relation to issuance of convertible debentures is deductible as revenue expenditure. - HELD THAT: - The Tribunal examined conflicting precedents and followed the reasoning in the decisions of the Rajasthan High Court and the jurisdictional High Court (as applied in CIT v. ITC Hotels Ltd.), which held that debentures when issued are loans and that the convertible nature does not alter their character as borrowings. Reliance was placed on the principle in India Cements that a loan is not an asset of enduring nature and that the purpose of obtaining the loan (including subsequent conversion) is irrelevant to the character of expenditure incurred in raising the loan. The SLP against the Rajasthan High Court decision was dismissed by the Supreme Court, lending finality to that view. Applying these authorities, the Tribunal concluded that the stamp duty and related expenditure on issue of debentures are revenue in nature and allowable under the Act (section 37), and set aside the CIT(A) order to direct the AO to allow the expenditure. [Paras 5, 6, 7]

The expenditure incurred on issuance of convertible debentures is revenue expenditure and is to be allowed.

Disallowance for want of evidence - Sponsorship charges claimed by the assessee are not allowable for want of evidence. - HELD THAT: - The assessee contended the sponsorship was a business expenditure incurred to promote its real estate business. However, no supporting evidence was filed before the Tribunal, and the CIT(Appeals) had disallowed the claim for lack of proof. In the absence of any documentary evidence placed on record during the hearing, the Tribunal found no infirmity in the appellate authority's conclusion and confirmed the disallowance. [Paras 8]

The disallowance of sponsorship charges is confirmed for want of evidence.

Final Conclusion: The appeal is partly allowed: the expenditure on issuance of convertible debentures is held to be revenue in nature and is to be allowed; the disallowance of sponsorship charges is confirmed due to absence of evidence.

Reopening of assessment - notice under Section 148 of the Income Tax Act - block assessment proceedings - block assessment under Chapter XIV-B - parallel proceedings - escape of income - quashing of notice

Reopening of assessment - notice under Section 148 of the Income Tax Act - block assessment proceedings - parallel proceedings - quashing of notice - Validity of notices dated 31st May 2001 under Section 148 seeking reopening of assessments for AYs 1994-95 to 1996-97 when block assessment proceedings under Section 158BC were pending - HELD THAT: - The Court confined itself to whether, in the facts of this case, issuance of notices under Section 148/147 while block assessment proceedings under Chapter XIV-B (Section 158BC) were pending was permissible. The impugned notices were issued after search and seizure and after notices under Section 158BC(a) had been served and returns for the block period had been filed. The subject-matter of the block assessment - disallowance of depreciation on cinematographic films and income attributable to lease rentals - was the same material relied upon for reopening. Having initiated proceedings under Section 158BC for a block assessment, the Department's action to issue notices under Section 148 resulted in impermissible parallel proceedings based on the same materials. The Court relied on the reasoning in High Court decisions (including Cargo Clearing Agency and others) that once block assessment proceedings arise from a search, reopening under Sections 147/148 on the same material is not permissible and that Chapter XIV-B has primacy in such conflicts of procedure. Applying those principles to the record, the Court concluded that the impugned notices were unsustainable and liable to be quashed. The Court expressly refrained from expressing any view on the merits of the block assessment or the materials before the ITSC and left those matters to the ITSC's proceedings. [Paras 22, 23, 24, 25, 26]

Impugned notices dated 31st May 2001 under Section 148 are quashed as issuance during pendency of block assessment proceedings resulted in impermissible parallel proceedings; no view expressed on the merits of block assessment which remains for the ITSC.

Final Conclusion: The writ petition is allowed: the notices dated 31st May 2001 reopening assessments for AYs 1994-95, 1995-96 and 1996-97 are quashed as impermissible in view of pending block assessment proceedings; the Court did not adjudicate the merits of the block assessment and left those matters to the ITSC; no costs awarded.

Maintenance of books of account in accordance with prescribed accounting standards - addition to income on account of sales or investments treated as outside books of accounts - assessing officer's power to make additions where books are maintained and not rejected - rejection of books of account

Maintenance of books of account in accordance with prescribed accounting standards - addition to income on account of sales or investments treated as outside books of accounts - Deletion of additions of Rs. 30,73,542/- made on account of sale of rice treated as out of books of accounts - HELD THAT: - The Tribunal found that the assessee had maintained books of account in accordance with the prescribed accounting standards under Section 145 and that the assessing officer had not rejected those books. Having so found, the Tribunal held that the assessing officer could not legitimately make additions by treating the sale of rice as outside the books of account. The High Court recorded that this reasoning of the Tribunal covered the controversy and there was no basis to hold that the sale was effected beyond the books of account.

Addition made on account of sale of rice deleted; Tribunal's deletion upheld and appeal dismissed on this point.

Maintenance of books of account in accordance with prescribed accounting standards - addition to income on account of sales or investments treated as outside books of accounts - assessing officer's power to make additions where books are maintained and not rejected - Deletion of additions of Rs. 27,84,611/- towards investment in stock of wheat purchased out of books - HELD THAT: - Applying the same principle, the Tribunal concluded that where the books are maintained as per the prescribed accounting standards and have not been rejected by the assessing officer, additions on the premise that investments in stock were made outside the books could not be sustained. The High Court found no infirmity in the Tribunal's conclusion that no investment was established to be beyond the books of account.

Addition made for investment in stock of wheat deleted; Tribunal's deletion upheld and appeal dismissed on this point.

Final Conclusion: The High Court dismissed the appeal, upholding the Tribunal's deletions of the additions made for sale of rice and for investment in stock of wheat on the basis that the assessee's books, maintained in accordance with prescribed accounting standards, were not rejected and thus the assessing officer could not treat those transactions as outside the books of account.

Deduction under Section 80IB - excise duty refund/rebate - remand to the Assessing Officer - speaking order

Deduction under Section 80IB - excise duty refund/rebate - remand to the Assessing Officer - speaking order - Whether the claim for deduction under Section 80IB could be declined in respect of excise duty rebate/refund and whether the matter requires fresh adjudication by the Assessing Officer. - HELD THAT: - The Tribunal had proceeded on the basis that the issue was covered by an adverse decision in Liberty India's case, a fact disputed by the assessee which contended that the excise duty refund was a contra-entry adjusting duty paid on inputs and formed part of business profits eligible for deduction under Section 80IB. Having regard to the competing contentions and the assessee's challenge to the Tribunal's reliance on the concession in Liberty India's case, the High Court found that the question of entitlement to deduction in respect of the excise duty refund/rebate could not be finally resolved on the record before it. The Court therefore directed that the matter be re-adjudicated by the Assessing Officer after hearing the parties and passing a reasoned (speaking) order in accordance with law. [Paras 5, 6]

Matter remanded to the Assessing Officer to decide afresh after hearing the parties and passing a speaking order in accordance with law.

Final Conclusion: The appeal is disposed of by remitting the controversy concerning deduction under Section 80IB in respect of excise duty refund/rebate to the Assessing Officer for fresh adjudication; the Assessing Officer shall hear the parties and pass a speaking order in accordance with law.

Condonation of delay - extraordinary delay - appeal under Section 260-A of the Income Tax Act, 1961 - re-filing of appeal - duty of Revenue/Department to monitor filing and listing of appeals - standard of explanation for condonation

Condonation of delay - extraordinary delay - re-filing of appeal - standard of explanation for condonation - duty of Revenue/Department to monitor filing and listing of appeals - Whether the extraordinary delay of 910 days in re-filing the Revenue's appeal under Section 260-A could be condoned. - HELD THAT: - The application explained that the appeal initially filed on 20.08.2014 was returned by the Registry as defective and that this defect was not communicated to the Department; the senior standing counsel allocated to the matter did not inform the Department that the appeal remained defective; and the Department discovered a larger problem of defective appeals only in August 2015, after which an SOP was instituted. The Court found these explanations inadequate to justify an unexplained lapse of over two-and-a-half years before re-filing. The reasoning emphasised that the Department maintains a High Court cell supervised by a Deputy Commissioner of Income Tax which should track filing and listing of appeals and ensure follow-up with panel counsel; mere reliance on counsel and a subsequent institutional reform did not excuse the prolonged inaction. Given the length of the delay (910 days) and the absence of a satisfactory contemporaneous system of supervision or plausible interim follow-up, the standard of explanation required for condonation was not met and the condonation application could not be allowed. [Paras 4, 5, 6]

Application for condonation of delay is dismissed and the appeal is dismissed.

Final Conclusion: The High Court dismissed the Revenue's application for condonation of an extraordinary delay of 910 days in re-filing the appeal under Section 260-A and consequently dismissed the appeal for Assessment Year 2009-10.

Special audit under section 142(2A) of the Income-tax Act - jurisdiction to direct special audit - procedural safeguards of notice and approval of Chief Commissioner - perversity review of Assessing Officer's satisfaction - scope of terms of reference of special auditor - assessment under section 153A of the Income-tax Act

Special audit under section 142(2A) of the Income-tax Act - jurisdiction to direct special audit - procedural safeguards of notice and approval of Chief Commissioner - perversity review of Assessing Officer's satisfaction - Validity of the Assessing Officer's direction for special audit of the assessee's accounts. - HELD THAT: - The Court examined whether the Assessing Officer had jurisdiction to direct a special audit and whether that direction was vitiated by lack of procedural compliance or perversity. It recorded that the procedural prerequisites in section 142(2A) - including prior approval of the Chief Commissioner, issuance of notice and hearing - were satisfied. The satisfaction recorded by the Assessing Officer was an opinion formed on the material before him and was not shown to be perverse. The Court declined to substitute its view for that of the Assessing Officer where a reasonable and possible view has been taken. Consequently the direction for special audit was held to be within jurisdiction and not liable to be set aside. [Paras 4, 5, 10, 11]

Direction for special audit is valid and within the jurisdiction of the Assessing Officer; impugned order upheld.

Special audit under section 142(2A) of the Income-tax Act - Whether the special audit was directed merely as a device to secure more time to complete assessment. - HELD THAT: - The Court held that the statute does not prohibit the Assessing Officer from directing a special audit at any time before the last date for framing assessment if he forms the requisite opinion. The possibility that a special audit may extend the time for completing assessment does not render the direction impermissible. [Paras 5]

Grievance that special audit was a ploy to extend time is rejected.

Jurisdiction to direct special audit - Whether failure to direct special audit in respect of the assessee's wife and family members renders the direction bad. - HELD THAT: - The Court found that the necessity for special audit must be assessed on the material available in respect of the assessee concerned. Comparative treatment of family members is irrelevant to the validity of the direction in the assessee's case and no perversity was shown in the material relied upon by the Assessing Officer. [Paras 6]

Grievance based on non-direction of special audit for family members is without merit.

Special audit under section 142(2A) of the Income-tax Act - Whether the Assessing Officer erred in directing special audit without examining the books of account or without indicating reasons in the notice. - HELD THAT: - The Court noted that the show-cause notice and the impugned direction proceeded on verification of books and vouchers and, in any event, after the 2013 amendment to section 142(2A) a special audit can be directed not only for complexity but also where there are doubts about correctness, multiplicity or volume of transactions or specialised nature of accounts. The show-cause notice explicitly referred to volume and multiplicity of trades, complexity and doubts as the basis for the audit. [Paras 7]

Challenge that books were not examined or reasons not indicated is unfounded.

Scope of terms of reference of special auditor - special audit under section 142(2A) of the Income-tax Act - Whether the terms of reference impermissibly required the special auditor to prepare accounts rather than audit them. - HELD THAT: - Section 142(2A) permits the Assessing Officer to require the special auditor to furnish an audit report in the prescribed form and to seek other particulars necessary to complete assessment. The terms of reference required examination of accounts with supporting evidence; they were within the statutory scope and did not convert the auditor's role into impermissible preparation of accounts. [Paras 8]

Terms of reference do not vitiate the special audit; grievance rejected.

Assessment under section 153A of the Income-tax Act - special audit under section 142(2A) of the Income-tax Act - Appropriateness of directing special audit where the Assessing Officer's jurisdiction to assess certain years under section 153A was contested on the ground that regular assessments had been completed. - HELD THAT: - The Court treated this contention as premature when raised at the stage of challenge to the direction for special audit. It confined itself to the limited question of jurisdiction to direct the special audit, which was satisfied. The question whether assessment under section 153A for specific years is sustainable (where regular assessments under section 143(3) had earlier been completed) was left to be considered after completion of the special audit and in the context of any assessment proceedings. [Paras 9]

Contention on the sustainability of assessments under section 153A held premature and left open for adjudication later.

Final Conclusion: The High Court dismissed the petition and upheld the Assessing Officer's order dated March 10, 2016 directing a special audit under section 142(2A) for the assessment years 2008-09 to 2014-15, finding the direction within jurisdiction, procedurally compliant and not vitiated by perversity; the challenge to the competence to assess certain years under section 153A was held premature and left for future consideration.

Penalty under section 271(1)(c) of the Income Tax Act - Notice under section 274 of the Income Tax Act - Concealment of income - Furnishing inaccurate particulars of income - Estimation of income / additions by estimation - Principles of natural justice in penalty notices

Notice under section 274 of the Income Tax Act - Penalty under section 271(1)(c) of the Income Tax Act - Principles of natural justice in penalty notices - Concealment of income - Furnishing inaccurate particulars of income - Validity of penalty levied u/s 271(1)(c) where the section 274 notice did not specify whether proceedings were for concealment of income or for furnishing inaccurate particulars of income (A.Y. 05-06). - HELD THAT: - The Tribunal held that the notice issued under section 274 must specifically state the limb of section 271(1)(c) invoked so that the assessee knows the precise charge to be met; a generic or printed form listing all limbs does not satisfy the requirement and offends principles of natural justice. The existence of facts constituting concealment or furnishing of inaccurate particulars must be discernible from the assessment or appellate order or a clear direction recorded to initiate penalty proceedings; in the absence of a specific charge in the notice the penalty proceedings are invalid. Reliance was placed on decisions of the jurisdictional High Court and other authorities to support that initiation and imposition of penalty cannot proceed on an ambiguous notice and that mere acceptance of additions or payment of tax does not automatically permit levy of penalty unless concealment or inaccuracy is shown. [Paras 4]

Penalty levied u/s 271(1)(c) set aside and the AO directed to delete the penalty for A.Y. 05-06.

Penalty under section 271(1)(c) of the Income Tax Act - Estimation of income / additions by estimation - Concealment of income - Furnishing inaccurate particulars of income - Whether penalty u/s 271(1)(c) is sustainable where additions were made by estimating gross profit ratio after rejecting books, and no concrete evidence of concealment or furnishing inaccurate particulars exists (A.Y. 06-07). - HELD THAT: - The Tribunal found that where additions are made on the basis of estimation (application of a percentage to turnover after rejecting books) and there is no concrete evidence that the assessee concealed income or furnished inaccurate particulars, imposition of penalty under section 271(1)(c) is not justified. The assessee had furnished particulars and the addition resulted from estimation; in such circumstances, without material demonstrating concealment or false particulars, penalty cannot be sustained. [Paras 8]

Penalty levied u/s 271(1)(c) deleted and the AO directed to remove the penalty for A.Y. 06-07.

Final Conclusion: Both appeals by the assessee are allowed: the penalties imposed under section 271(1)(c) are deleted - in A.Y. 05-06 because the section 274 notice was defective for failing to specify the limb of penalty invoked, and in A.Y. 06-07 because the additions were by estimation without material to show concealment or furnishing of inaccurate particulars.

Deduction under Section 80-IA - business income - nexus between receipt and business operations - compensation for shortfall in guaranteed generation - precedent of coordinate Tribunal bench

Deduction under Section 80-IA - compensation for shortfall in guaranteed generation - nexus between receipt and business operations - Entitlement of the assessee to deduction under section 80-IA in respect of compensation received from the equipment supplier for shortfall in guaranteed power generation. - HELD THAT: - The Tribunal examined whether the amount received from Suzlon Energy Ltd. on account of failure of machines to generate guaranteed electricity units constituted income 'derived from' the windmill power undertaking and therefore was eligible for deduction under section 80-IA. It was an admitted fact that the assessee was engaged in wind power generation and that the payment was made because guaranteed generation was not achieved. The Tribunal held that the payment had a direct and proximate nexus with the business of power generation: it arose from shortfall in generation, went to recoup fixed and continuing costs of the undertaking and thereby reduced the cost of generation. Reliance was placed on decisions of co ordinate Tribunals holding similar compensation to be derived from the power undertaking. The Departmental contention that the amount was an incentive and temporary in nature was rejected as incorrect on the facts because the payment was compensatory for non generation rather than an incentive. Applying these principles, the Tribunal reversed the findings of the authorities below and allowed the deduction. [Paras 7]

The compensation received from Suzlon Energy Ltd. is business income closely linked to the windmill undertaking and is eligible for deduction under section 80-IA; the authorities below are reversed and the appeal is allowed.

Final Conclusion: Assessee's appeal allowed: the amount received from the equipment supplier for shortfall in guaranteed generation is held to be income derived from the windmill power undertaking and eligible for deduction under section 80-IA for AY 2009-10.

Deduction under section 80P(2)(a)(i) - Income earned in the course of providing credit facilities to members - Co-operative societies versus banking activity - Reliance on jurisdictional High Court precedent

Deduction under section 80P(2)(a)(i) - Income earned in the course of providing credit facilities to members - Co-operative societies versus banking activity - Reliance on jurisdictional High Court precedent - Whether the assessee, a co-operative society, is entitled to deduction under section 80P(2)(a)(i) in respect of interest income earned in the course of providing credit facilities to its members despite being engaged in banking-like activities. - HELD THAT: - The Tribunal examined the orders below and the rival submissions. The Assessing Officer disallowed the claim under section 80P(2)(a)(i) on the ground that the assessee was engaged in banking activities. The Commissioner (Appeals) allowed the deduction by following the judgment of the jurisdictional High Court and other High Court decisions, holding that income earned in the course of providing credit facilities to members falls within section 80P(2)(a)(i). The Departmental Representative did not point out any specific defect in the reasoning of the CIT(A). In view of the CIT(A)'s adherence to the jurisdictional High Court precedent and the absence of any infirmity identified by the revenue before the Tribunal, the Tribunal found no reason to interfere with the conclusion that the income earned in the course of providing credit facilities to members is eligible for deduction under section 80P(2)(a)(i). [Paras 4, 5]

The order of the CIT(A) allowing the deduction under section 80P(2)(a)(i) is confirmed and the revenue's appeal is dismissed.

Final Conclusion: The Tribunal affirmed the CIT(A)'s decision permitting deduction under section 80P(2)(a)(i) for income earned in the course of providing credit facilities to members of the co-operative society, and dismissed the revenue's appeal.

Income from business of real estate - long term capital gain - assignment fee and developer's payments - modus operandi of developer - readjudication and remand to Assessing Officer

Income from business of real estate - assignment fee and developer's payments - modus operandi of developer - readjudication and remand to Assessing Officer - Addition of Rs. 33,79,546 treated as business income on account of amounts allegedly received over and above the sale consideration was not finally adjudicated and was restored to the Assessing Officer for fresh consideration. - HELD THAT: - The Tribunal examined the sale agreement, the MoU and the developer's written statement dated 18.02.2015 recorded by the Assessing Officer. The developer's statement described a modus operandi under which developers would develop and sell plots on behalf of multiple landowners, the sale deed consideration reflected amounts paid to the owners and did not disclose separate assignment fee or developer margin retained by the developer, and additional sums (assignment fees/margins) were collected and paid or retained by the developer by various modes. The Assessing Officer had concluded that the assessee developed and sold sites through the developer and brought receipts to tax as business income but did not quantify any amount received by the assessee over and above the agreed sale consideration nor apply any formula to determine such receipts. In view of these lacunae, the Tribunal held that the matter requires fresh fact-finding and quantification: the AO should reassess the issue in the light of the developer's letter, the agreement for sale and the MoU, summon and examine the developer if necessary in the presence of the assessee, and determine whether and to what extent the assessee received amounts beyond the sale consideration, and if so assess the same as income of the assessee. [Paras 8]

The issue is restored to the file of the Assessing Officer for fresh adjudication on the specified aspects; the assessee's appeals are allowed for statistical purposes.

Final Conclusion: The Tribunal did not sustain the addition on merits but remitted the matter to the Assessing Officer to verify, quantify and, if justified, assess amounts received by the assessee over and above the sale consideration; the appeals are allowed for statistical purposes.

Admission during search - Bogus purchases declared in search - Opening balance treatment - Addition on basis of unverified admission - Afterthought doctrine - Verification of books and documents - Reassessment notice under section 148

Admission during search - Bogus purchases declared in search - Opening balance treatment - Addition on basis of unverified admission - Verification of books and documents - Validity of addition of Rs. 1,14,45,953/- made by the Assessing Officer by treating the assessee's higher declaration during search as final for assessment year 2005-06. - HELD THAT: - The assessee initially declared bogus purchases of Rs. 3,95,50,291/- during search proceedings but, on filing return in response to notice under section 148, offered a lower amount after excluding opening balances of Rs. 1,45,68,748/- which pertained to closing balances of the prior year (Financial Year 2004-05). The Assessing Officer made an addition of Rs. 1,14,45,953/- treating the search declaration as final and branding the later, lower offer as an afterthought. The Commissioner (Appeals) held that the AO made the addition without carrying out any verification and that an admission made during search can be corrected if shown to be based on books and documents; the Appellate Authority examined the ledgers and the letter/annexure filed shortly after search which demonstrated that the declared amount included opening balances. The Tribunal found that ledger extracts for the creditors were furnished and not controverted by the Revenue, and that the AO could not sustain an addition without enquiries or verification. Consequently, the Tribunal upheld the CIT(A)'s deletion of the addition. [Paras 6, 7, 8]

Addition of Rs. 1,14,45,953/- deleted by CIT(A) is upheld and the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal affirms the Commissioner (Appeals) in holding that the Assessing Officer erred in making the addition on the basis of the unverified search declaration; the deletion is sustained and the Department's appeal is dismissed.

Transfer pricing adjustment - International transaction - Arm's length price - AMP intensity adjustment - Most appropriate method (Resale Price Method) - Remand for fresh adjudication

International transaction - Arm's length price - Remand for fresh adjudication - Existence of an international transaction in respect of AMP expenses and determination of its ALP for AYs 2010-11 and 2011-12 - HELD THAT: - The Tribunal noted that the TPO had treated AMP expenditure as a separate international transaction and determined its ALP, but several later decisions of the jurisdictional High Court (including Sony Ericsson) and the Tribunal's own order in the immediately preceding year had not been considered by the TPO. In view of those developments and the Tribunal's prior direction in the assessee's own earlier year to decide the AMP issue afresh in the light of Sony Ericsson, the Tribunal set aside the impugned assessment orders and returned the matter to the AO/TPO for fresh adjudication. The AO/TPO is to examine whether AMP constitutes an international transaction and, if so, determine the ALP applying the relevant precedents, affording the assessee a reasonable opportunity of hearing. The Tribunal declined the assessee's request to substitute an AMP-intensity approach in place of the TPO's existing treatment, observing that doing so would traverse beyond the impugned orders. [Paras 6, 7, 11]

Impugned orders set aside and matter remitted to AO/TPO for fresh determination of whether AMP is an international transaction and for determination of its ALP in light of the cited jurisprudence; appeals allowed for statistical purposes.

AMP intensity adjustment - Most appropriate method (Resale Price Method) - Transfer pricing adjustment - Approach to determine ALP of the international transaction of import of finished goods for AY 2012-13, including validity of AMP intensity adjustment and choice of most appropriate method - HELD THAT: - For AY 2012-13 the TPO did not treat AMP as a separate international transaction but incorporated the effect of higher AMP intensity by adjusting the profit margins of comparables (AMP intensity adjustment) and computed an adjusted average margin. The Tribunal upheld treating AMP as a function and the use of AMP intensity adjustment, noting support in the jurisdictional High Court and Sony Ericsson. However, following the Tribunal's earlier reasoning for AY 2009-10, the Tribunal held that the Resale Price Method (RPM) should be applied as the most appropriate method to determine the ALP of the import transaction while carrying out the AMP intensity adjustment in the comparables' profit rates. The Tribunal directed that if such an adjustment cannot reliably be made, RPM should be discarded and another suitable method that captures the AMP effect should be adopted. Consequently the impugned order was set aside and the matter remitted to the AO/TPO to re-determine ALP in the manner directed, giving the assessee an opportunity of hearing. [Paras 14, 16, 20, 21]

Impugned order set aside and remitted to AO/TPO to re-determine the ALP of the import-of-finished-goods transaction applying RPM with AMP intensity adjustment (or an alternate suitable method if adjustment is not practicable); appeal allowed for statistical purposes.

Final Conclusion: All three appeals were allowed for statistical purposes; the Tribunal set aside the impugned assessment orders and remitted the AMP-related issues to the AO/TPO for fresh adjudication - for AYs 2010-11 and 2011-12 to decide whether AMP is an international transaction and its ALP in light of relevant precedents, and for AY 2012-13 to re-determine the ALP of the import transaction applying RPM with AMP intensity adjustment or another suitable method if required.

Transfer pricing - comparability and selection of comparables - Functional comparability and outsourcing versus in house model - Remand to Assessing Officer for de novo consideration of comparables - Section 10B - definition of "hundred per cent export oriented undertaking" and requirement of Board approval - Alternate claim under Section 10A - admissibility and remand for verification - Tribunal's power to entertain claims not made in the return

Transfer pricing - comparability and selection of comparables - Functional comparability and outsourcing versus in house model - Whether Coral Hubs Ltd. should be included in the final list of comparables for benchmarking the assessee's international transactions under TNMM. - HELD THAT: - The Tribunal considered the assessee's contention that Coral Hubs Ltd. (formerly Vishal Information Technologies Ltd.) is functionally different because it outsourced most of its work and therefore had a substantially lower employment cost profile compared to the assessee, which incurred a high proportion of cost on in house employees. The Bench noted the subsequent decision of the Hon'ble Delhi High Court in Rampgreen Solutions Pvt. Ltd. which excluded Vishal/Coral Hubs as a comparable on the ground that outsourcing produced a materially different cost and profitability profile. In view of that authoritative decision and the revised margin computation placed by the assessee showing that exclusion of Coral Hubs would bring the assessee within the 5% statistical range, the Tribunal remitted the matter to the Assessing Officer for fresh consideration of inclusion/exclusion of Coral Hubs in the light of Rampgreen, directing the AO to decide de novo after giving the assessee opportunity of hearing. [Paras 7]

Issue remitted to the Assessing Officer for de novo consideration of whether Coral Hubs Ltd. is a comparable, in light of the Rampgreen decision; ground No. 4 allowed for statistical purpose.

Transfer pricing - comparability and selection of comparables - Whether the other transfer pricing grounds (grounds Nos. 1, 2, 3 and 5) raised by the assessee succeed. - HELD THAT: - The Tribunal recorded that the assessee confined its arguments to exclusion of Coral Hubs and did not make submissions on the other TP grounds. In the absence of substantive argument or challenge before the Tribunal, those grounds were not sustained. [Paras 8]

Grounds Nos. 1, 2, 3 and 5 are dismissed.

Section 10B - definition of "hundred per cent export oriented undertaking" and requirement of Board approval - Whether deduction under section 10B can be allowed to the assessee which held approval from STPI but not from the Board appointed by the Central Government as required by Explanation 2(iv) to section 10B. - HELD THAT: - Section 10B's Explanation 2(iv) expressly defines a "hundred per cent export oriented undertaking" as one approved by the Board appointed by the Central Government under the Industries (Development and Regulation) Act. The assessee admitted it was not approved by that Board and only held STPI approval. The Tribunal found the statutory language unambiguous and concluded that STPI approval does not satisfy the specific requirement of Board approval under section 10B, and therefore the assessee is ineligible for deduction under section 10B. [Paras 9]

Claim for deduction under section 10B is rejected; ground No. 6 dismissed.

Alternate claim under Section 10A - admissibility and remand for verification - Tribunal's power to entertain claims not made in the return - Whether the assessee's alternate claim for deduction under section 10A should be considered despite having claimed section 10B in the return, and what is the appropriate course. - HELD THAT: - The Tribunal observed that the Assessing Officer cannot generally entertain a claim not made in the return, but the Tribunal has power to do so and prior coordinate decisions permit consideration of an alternate section 10A claim where section 10B is denied for want of Board approval. The Commissioner (Appeals) had summarily rejected the alternate plea without verifying eligibility under section 10A. Relying on earlier Coordinate Bench decisions that remanded similar claims for verification (subject to fulfillment of conditions and Form No.56F etc.), the Tribunal held that the assessee's alternate claim for section 10A entitlement should be remitted to the Assessing Officer for verification of eligibility and directed that the AO afford the assessee a reasonable opportunity of hearing. [Paras 11, 12, 13]

Alternate claim under section 10A is remitted to the Assessing Officer for verification of eligibility and adjudication in accordance with law; ground No. 7 allowed for statistical purpose.

Final Conclusion: The appeal is partly allowed for statistical purposes: the question of inclusion of Coral Hubs Ltd. as a comparable is remitted to the Assessing Officer for fresh consideration in light of Rampgreen; the transfer pricing grounds not pursued are dismissed; the claim under section 10B is denied for lack of Board approval; and the alternate claim under section 10A is remitted to the Assessing Officer for verification of entitlement with opportunity of hearing.

Deemed dividend under section 2(22)(e) of the Income-tax Act - true nature of transaction versus formal book entries - taxability of deemed dividend in the hands of the shareholder and not the recipient concern - binding effect of CBDT Circular No. 495 of 1987 - apportionment of deemed dividend vis-a -vis shareholding in the recipient concern

Deemed dividend under section 2(22)(e) of the Income-tax Act - true nature of transaction versus formal book entries - Characterisation of amounts advanced by M/s Caspian Capital and Finance Pvt. Ltd. as share application money or as loans/advances subject to deeming as dividend under section 2(22)(e). - HELD THAT: - The Tribunal accepted the finding that despite being reflected as share application money, the advances were in substance unsecured loans to the recipient companies and therefore fell within the ambit of transactions taxable under the deeming provision. The form of entries in books does not determine the true character of the transaction; the factual matrix (including authorised/issued capital and pending allotments) demonstrates the advances were in the nature of loans/advances. Applying section 2(22)(e) to the facts, the AO's addition was upheld and the CIT(A)'s conclusion sustaining part of the addition was affirmed. [Paras 10, 11, 13]

Advances treated as loans/advances and assessable as deemed dividend under section 2(22)(e); addition sustained.

Taxability of deemed dividend in the hands of the shareholder and not the recipient concern - binding effect of CBDT Circular No. 495 of 1987 - Whether a deemed dividend under the second limb of section 2(22)(e) is taxable in the hands of the recipient concern or in the hands of the shareholder on whose behalf the payment is made. - HELD THAT: - Following the reasoning of the Special Bench of the Mumbai Tribunal and the decisions of higher courts (as discussed by the Tribunal), the Tribunal held that the legislative purpose of section 2(22)(e) is to tax dividend in the hands of the shareholder. The deeming fiction enlarges the definition of 'dividend' but does not extend the definition of 'shareholder'; hence, where a payment is made to a concern for the individual benefit of a shareholder, the taxability lies with that shareholder. The CBDT Circular No. 495/1987 is clarificatory and not binding where judicial decisions of higher forums have interpreted the statute differently; consequently the Circular could not prevail over the settled judicial position. [Paras 11]

Deemed dividend is taxable in the hands of the shareholder, not the recipient concern; CBDT Circular No. 495/1987 is not binding to override judicial decisions to the contrary.

Apportionment of deemed dividend vis-a -vis shareholding in the recipient concern - deemed dividend under section 2(22)(e) of the Income-tax Act - Whether the addition under section 2(22)(e) should be restricted proportionately to the assessee's shareholding in the recipient companies or apportioned between spouses as directed by CIT(A). - HELD THAT: - The Tribunal held that section 2(22)(e) contains no mechanism for proportionate limitation of the deemed dividend on the basis of the shareholder's shareholding in the recipient concern. The legislative intent is to prevent diversion of accumulated profits to controllers of closely held companies; where conditions of clause (e) are satisfied in respect of a shareholder, the advance may be brought to tax in the hands of that shareholder. The CIT(A)'s directions for apportionment between the assessee and her spouse were noted: where an amount has been taxed in both spouses' hands, apportionment should follow the shareholding ratio in the payer company; where the amount has been taxed in only one spouse's hands, the entire amount may be taxed in that spouse's hands. The Tribunal rejected the argument that computation fails for lack of a specified formula and declined to limit the addition proportionately to the assessee's shareholding in the recipient companies. [Paras 11]

No restriction of the addition proportionate to shareholding in the recipient company; advances taxable in the hands of the shareholders as per the conditions of section 2(22)(e); apportionment between spouses to follow CIT(A)'s directional framework where applicable.

Final Conclusion: The appeals are dismissed. The Tribunal upheld the assessment of the advances as loans/advances attractable as deemed dividend under section 2(22)(e) and confirmed taxability in the hands of the shareholders (not the recipient concerns); the CBDT Circular 495/1987 was held not to override judicial precedent, and the plea for proportionate apportionment based on shareholding in the recipient companies was rejected, subject to the practical apportionment directions recorded by the CIT(A) where both spouses were taxed.

Exemption under section 10(23C)(vi) - charitable exemption under section 11 - violation of section 13(1)(c) read with section 13(3) - foreign travel expenditure and related-party benefit - treatment of corpus donations in income computation - recast of Income and Expenditure Account and appropriation entry - deductibility of provision for gratuity and section 40A(7)

Exemption under section 10(23C)(vi) - Denial of exemption claimed under section 10(23C)(vi) for the assessment years in question. - HELD THAT: - The Tribunal upheld the findings of the authorities below and, following the earlier Tribunal order in the assessee's own case, held the issue against the assessee. The assessee conceded that the earlier decision (paras 122-123 of that order) applies by parity of reasoning; consequently the claim for exemption under section 10(23C)(vi) was rejected. [Paras 6, 7]

Claim under section 10(23C)(vi) is dismissed.

Charitable exemption under section 11 - violation of section 13(1)(c) read with section 13(3) - Entitlement to exemption under section 11 and the extent to which exemption is denied on account of violations of section 13(1)(c). - HELD THAT: - Applying the Tribunal's earlier holdings, the assessee is entitled to exemption under section 11 for its charitable activities except insofar as income or expenditure falls foul of section 13(1)(c) r.w.s. 13(3). The Tribunal followed its prior decisions in the assessee's cases and held that while wholesale denial of section 11 exemption is not warranted where conditions are otherwise met, amounts relating to violations under section 13 must be brought to tax and cannot be exempted under section 11. [Paras 8, 12]

Exemption under section 11 allowed generally, but disallowances are confirmed to the extent of violations under section 13(1)(c) r.w.s. 13(3).

Foreign travel expenditure and related-party benefit - violation of section 13(1)(c) read with section 13(3) - Allowability of foreign travel expenses and whether they constitute benefits to related parties attracting section 13(1)(c). - HELD THAT: - The Tribunal examined trips to Hanoi (Robocon) and Paris (UNESCO). Expenditure on spouses of trustees/related persons was held not to be for the objects of the trust and therefore disallowed. Travel for the Robocon event by employees and faculty (not trustees/relatives) was held to be in furtherance of the trust's activities and allowable; travel by the Executive Director (a trustee/related person) was disallowed under section 13(1)(c). With respect to the UNESCO trip, the invitation indicated government sponsorship; the assessee produced a request for reimbursement but no payment was received. The Tribunal allowed the part of the expenditure matching the claim for reimbursement and directed the Assessing Officer to verify and allow the eligible amount (the Tribunal quantified an amount to be allowed and directed verification). The balance of the Paris expenditure was held to be disallowable under section 13(1)(c). The directive to the Assessing Officer to verify reimbursement and to verify whether interest disallowance to a related person was made are administrative verifications left for assessment records. [Paras 10, 11, 13, 14, 15]

Foreign travel expenses partly allowed (employees/non-related persons and qualifying reimbursable part of UNESCO trip); expenses for spouses and related persons and the non-qualifying balance are disallowed under section 13(1)(c); Assessing Officer directed to verify reimbursement and related entries.

Expenditure on World Peace Centre - charitable exemption under section 11 - Allowability of expenditure on World Peace Centre as being for the objects of the trust. - HELD THAT: - Following the earlier Tribunal finding in assessment year 2003-04 that the World Peace Centre's objects are educational and that expenditures incurred thereon qualify for exemption, the Tribunal held that the World Peace Centre expenditure incurred in the year under consideration is deductible and forms part of the trust's charitable outgoings. Prior non-intimation of change in trust deed was not held to negate the character of such expenditure. [Paras 16]

Expenditure on World Peace Centre is allowed and the ground of appeal on this issue is allowed.

Treatment of corpus donations in income computation - recast of Income and Expenditure Account and appropriation entry - Validity of additions based on recasted Income & Expenditure Account, inclusion of alleged corpus donations in income, and claim on appropriation entry. - HELD THAT: - The assessee did not press the claim for appropriation (the contested Rs. 24 crore appropriation entry) as a deductible item; that part of the objection was dismissed. The assessee admitted absence of donor letters for certain receipts claimed as corpus donations; consequently the Tribunal held those receipts are to be treated as income (and added back). The Assessing Officer's recasting and resultant income determination stand to the extent supported by those findings. [Paras 17, 18, 19, 21, 22]

Appropriation entry claim not pressed and dismissed; receipts lacking donor letters treated as income and added back.

Deductibility of provision for gratuity and section 40A(7) - Allowability of provision for gratuity under section 40A(7) in computing income under section 11 for assessment year 2010-11. - HELD THAT: - Relying on the Tribunal's earlier reasoning (paras 160-162 of its prior order), the Tribunal held that while assessing income under section 11 the disallowances under sections such as 43B, 40A(7) and 40A(3) could not be applied under sections 28-43; therefore the assessee's claim for provision for gratuity is allowable for the purpose of computing income under section 11 for the year in question. [Paras 25, 26, 27]

Provision for gratuity is allowed.

Final Conclusion: All appeals are partly allowed: claims under section 10(23C)(vi) are rejected; section 11 exemption permitted generally but reduced to the extent of benefits to related persons under section 13(1)(c); foreign travel disallowances and interest to related person upheld in part with directed verification by the Assessing Officer for specified reimbursements; World Peace Centre expenditure and gratuity provision allowed; receipts unsupported as corpus donations are added back and the recast appropriation claim not pressed is dismissed.

Valuation (Customs) - basis of quantity for assessment - shore tank receipt quantity - Transaction value - value at the time and place of importation - Post-importation events - exclusion of demurrage from transaction value - Rules 4 and 9 of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 - value determined at time and place of importation - Remand for redetermination of assessable value

Valuation (Customs) - basis of quantity for assessment - shore tank receipt quantity - Transaction value - value at the time and place of importation - Rules 4 and 9 of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 - value determined at time and place of importation - The quantity for determination of assessable value of imported crude oil is the quantity actually received into the shore tank at the Indian port and not the quantity shown in the bill of lading. - HELD THAT: - The Tribunal follows the binding ratio of the Hon'ble Supreme Court in the appellant's own case that the bill of lading quantity does not reflect the quantity of goods at the time and place of importation and therefore cannot be the basis for levy of customs duty. The statutory scheme and the valuation rules require value to be determined at the time and place of importation; duty is leviable only on goods brought into India. Accordingly, shore tank receipt quantity (dip measurement onshore) constitutes the appropriate measure for assessment. [Paras 7]

Bill of lading quantity rejected for valuation; shore tank receipt quantity to be adopted for determining assessable value.

Post-importation events - exclusion of demurrage from transaction value - Transaction value - exclusion of charges incurred after importation - Demurrage charges, being incurred after the goods reached the Indian port, are post-importation events and cannot form part of the transaction value for customs assessment. - HELD THAT: - Relying on the Supreme Court's decision (as applied in CC, Ahmedabad v. Essar Steel Ltd.), the Tribunal holds that demurrage arises after importation and therefore cannot be included in the transaction value. Such charges do not reflect the value at the time and place of importation and are excluded from assessable value. [Paras 8]

Demurrage charges shall not be included in the transaction value for customs duty.

Remand for redetermination of assessable value - The matter is remanded to the lower authorities to redetermine customs duty adopting shore tank quantity and excluding demurrage from the transaction value. - HELD THAT: - Having determined the applicable legal principles - (i) shore tank receipt quantity is the basis for assessment and (ii) demurrage is excluded as a post-importation charge - the Tribunal directs the Assessing/Adjudicating authorities to reopen the assessment and compute duty accordingly. The remand is for redetermination consistent with the Supreme Court rulings applied herein. [Paras 9]

Appeal allowed and matter remanded for fresh computation of customs duty adopting shore tank quantity and excluding demurrage charges.

Final Conclusion: The appeal is allowed; the impugned orders are set aside to the extent indicated and the case is remanded to the lower authorities to recompute customs duty using shore tank receipt quantity as the basis of valuation and excluding demurrage from the transaction value.

Refund of Special Additional Duty (SAD) - appropriate sales tax/VAT - nil rate VAT treated as payment of appropriate VAT - interpretation of Notification No.102/2007 regarding refund conditional on payment of appropriate sales tax/VAT

Refund of Special Additional Duty (SAD) - appropriate sales tax/VAT - nil rate VAT treated as payment of appropriate VAT - interpretation of Notification No.102/2007 regarding refund conditional on payment of appropriate sales tax/VAT - Whether a nil rate of VAT under a State exemption notification constitutes payment of the "appropriate sales tax/VAT" so as to entitle the importer to refund of SAD paid on import. - HELD THAT: - The Tribunal held that the condition in Notification No.102/2007 requiring payment of "appropriate sales tax or VAT" is satisfied where the relevant State notification exempts the goods and the effective rate of VAT is nil. The decision in Gazal Overseas was followed, which construed the notification and the CBEC Circular No.6/2008 to mean that the refund of SAD is admissible so long as appropriate sales tax/VAT is paid, irrespective of its rate, and that a nil appropriate rate results in nil tax payment which nonetheless fulfils the condition. Applying that precedent, the Tribunal concluded that the Kerala notification creating a nil rate for Rock Phosphate must be treated as payment of the appropriate sales tax/VAT for purposes of claiming SAD refund, and therefore the refund claims should be allowed.

Impugned orders rejecting SAD refund set aside; appellants entitled to refund of SAD paid as the nil rate VAT qualifies as payment of appropriate sales tax/VAT and appeals are allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeals, holding that a nil rate of VAT under the State exemption notification qualifies as payment of the appropriate sales tax/VAT required by Notification No.102/2007, and that the appellants are therefore entitled to refund of the SAD paid on import.

Confiscation of goods - imposition of redemption fine - penalty for wrongful claim of export benefit - DEPB classification and entitlement - clerical/typographical error defence - mis-declaration under Section 113(1) of the Customs Act

DEPB classification and entitlement - mis-declaration under Section 113(1) of the Customs Act - clerical/typographical error defence - Whether the appellant wrongly claimed DEPB benefit under an incorrect DEPB entry and whether the error was a mere clerical/typographical mistake without culpable intention. - HELD THAT: - The shipping bill described the exported runners/ made-ups as consisting of 70% (or 60%) silk and balance cotton, whereas the DEPB entry claimed by the appellant (89/47C) covers made-ups of manmade filament yarn. Test report of the Dy. Chief Controller showed composition inconsistent with the claimed entry and therefore the goods did not fall under the description of entry 89/47C. Although the appellant sought a re-test and contended that the silk border was not considered by the laboratory, no re-test was undertaken. The tribunal found it likely that the selection of the incorrect DEPB entry arose from a clerical or typographical error rather than deliberate mis-declaration; however, the factual findings establish a violation of Section 113(1) of the Customs Act by claiming the wrong DEPB entry.

Violation of Section 113(1) established for claiming DEPB under an incorrect entry; the appellant's clerical error defence accepted as mitigating rather than exculpatory.

Imposition of redemption fine - penalty for wrongful claim of export benefit - Appropriate quantum of redemption fine and penalty in view of the violation and mitigating circumstances. - HELD THAT: - Having concluded that the incorrect DEPB claim constituted a breach under Section 113(1) but was likely attributable to a clerical mistake and noting the appellant's request for re-test (which was not carried out), the tribunal exercised discretion in moderating the monetary consequences. The original redemption fine and penalty were found excessive in the facts of the case and were accordingly reduced to amounts considered proportionate and punitive yet mitigatory.

Redemption fine reduced to Rs. 2,00,000 and penalty reduced to Rs. 10,000; the appeal is otherwise partly allowed.

Final Conclusion: The appeal is partly allowed: the tribunal upheld that the appellant wrongly claimed DEPB under an incorrect entry constituting a breach of Section 113(1) of the Customs Act, accepted that the error was likely clerical, and moderated the monetary consequences by reducing the redemption fine and penalty to the amounts specified.

Re-export treated as not imported - Rule 8 recovery under Customs (Import of Goods at Concessional rate of Duty for Manufacture of Excisable Goods) Rules, 1966 - applicability of subsequently enacted Rule 7A retrospectively as guiding principle

Re-export treated as not imported - Rule 8 recovery under Customs (Import of Goods at Concessional rate of Duty for Manufacture of Excisable Goods) Rules, 1966 - Effect of re-export of unutilized imported goods on the invocability of Rule 8 recovery provisions - HELD THAT: - The Tribunal accepted that where imported goods brought in at concessional duty are subsequently re-exported as such without having been used, they may reasonably be treated as if they were never imported. On that premise, the obligation under Rule 8 to account for and repay duty in respect of goods not used for the intended manufacture does not arise in respect of goods re-exported in an unused condition. The factual finding that the goods in question were re-exported therefore removes the foundation for the demand under Rule 8 and for consequential interest and penalty imposed on that basis.

Demand under Rule 8 cannot be sustained in respect of the goods re-exported as such; the impugned order confirming recovery, interest and penalty is set aside.

Applicability of subsequently enacted Rule 7A retrospectively as guiding principle - Whether the principle introduced by Rule 7A (permitting re-export of unutilized imported goods) may be applied to earlier periods for adjudicatory fairness - HELD THAT: - Although Rule 7A was inserted after the period covered by the Show Cause Notice, the Tribunal held that the underlying principle permitting re-export of unutilized imports is a reasonable principle of adjudication that may be applied to material periods preceding the formal amendment. The Tribunal therefore applied that principle to the facts of the earlier period, treating the re-exported goods as not attracting Rule 8 recovery despite the amendment being subsequent to the relevant period.

Principle embodied in subsequently introduced Rule 7A is applied as a guiding principle to the earlier period; re-exported goods treated as not liable to Rule 8 recovery.

Final Conclusion: The appeal is allowed; the order-in-appeal confirming demand, interest and penalty is set aside because the imported goods were re-exported as such and therefore treated as not having been imported for the purpose of invoking Rule 8, applying the principle later embodied in Rule 7A.

Reversal of proportionate Cenvat credit under Rule 6(3A) of the Cenvat Credit Rules, 2004 - Option to pay 6% of the value of exempted services under Rule 6(3) of the Cenvat Credit Rules, 2004 - Reversal of credit after adjudication - Liability where output services include both taxable and exempted services

Liability where output services include both taxable and exempted services - Option to pay 6% of the value of exempted services under Rule 6(3) of the Cenvat Credit Rules, 2004 - Whether the respondent was liable to discharge the obligation in terms of Rule 6(3)/6(3A) of the Cenvat Credit Rules, 2004 and whether the original authority erred in permitting the respondent to follow either of the two statutory options. - HELD THAT: - The Original Authority found that the respondent provided both taxable and exempted services and therefore must comply with the consequences prescribed by Rule 6(3)/6(3A) of the Cenvat Credit Rules, 2004. The Commissioner framed the obligation as two alternative modes of discharge - pay an amount equal to 6% of the value of exempted services or reverse proportionate Cenvat credit attributable to exempted services - and held the respondent liable accordingly. The appellate tribunal accepted the factual finding that annuity products were exempted services for the period in question and consequently that one of the two statutory consequences must follow. The tribunal noted that the respondent did not originally elect the first option but, on receipt of the adjudicatory order, complied with the second option by reversing the proportionate credit and depositing interest and intimating the jurisdictional officer. In that factual backdrop, the tribunal held there was no basis to insist that the respondent should have paid 6% instead of reversing credit after adjudication, and found no error in allowing the consequence under the second option to be followed.

The respondent's compliance by reversing proportionate credit (with interest) following the adjudication satisfies the consequence under Rule 6(3)/6(3A); the Revenue's contention that the first option must have been mandatorily followed is without merit.

Reversal of credit after adjudication - Reversal of proportionate Cenvat credit under Rule 6(3A) of the Cenvat Credit Rules, 2004 - Whether the Revenue is entitled to demand the specific amount proposed in the show-cause notice and impose penalty for not having chosen the first option at the time of availing credit. - HELD THAT: - The Revenue sought recovery of an amount equal to 6% of the value of exempted services and imposition of penalty on the ground that the respondent had not exercised the option to pay that amount when availing credit. The tribunal observed that the impugned order characterised the annuity service as exempted and directed consequences in terms of Rule 6(3)/6(3A). The respondent thereafter reversed the proportionate credit and paid interest. Given the uncertainty at the material time about the taxability of the annuity service and the respondent's subsequent adherence to the alternative statutory mechanism, the tribunal found no justification for insisting on the first option or for sustaining the Revenue's demand and penalty claims.

Revenue's demand for 6% and its contention on penalties for not having exercised the first option at the time of availing credit are not sustained; appeal dismissed.

Final Conclusion: The appeal by the Revenue is dismissed: the Tribunal upheld the finding that annuity services were exempted for the period in question and accepted the respondent's reversal of proportionate Cenvat credit (with interest) after adjudication as fulfilling the consequences under Rule 6(3)/6(3A) of the Cenvat Credit Rules, 2004, rejecting Revenue's demand that the respondent must have paid 6% or be penalised for not having elected that option earlier.

Service tax liability on commission - export of service - Business Auxiliary Services - receipt in convertible foreign exchange - show cause notice - consequential relief

Service tax liability on commission - export of service - receipt in convertible foreign exchange - show cause notice - Sustainability of the show cause notice and demand for service tax on commission received for marketing foreign principals in India where the appellant claimed the activity was export of service and that consideration was realized in convertible foreign exchange. - HELD THAT: - The Tribunal found that the show cause notice selectively relied upon portions of the appellant's letter dated 25.09.2009 while ignoring the express contention that services were provided to foreign clients and amounted to export of service. The notice did not establish that the commission was received in INR and failed to examine the appellant's claim regarding realization in convertible foreign exchange and the characterisation as export. In absence of a clear factual foundation in the show cause notice that the consideration was not in convertible foreign exchange or that the activity did not constitute export of service, the notice was held unsustainable. Consequential relief flowing from quashing the notice was recognised as available to the appellant as per law. [Paras 5]

The show cause notice and the demand are not sustainable; appeal allowed and consequential relief granted as per law.

Final Conclusion: The Tribunal allowed the appeal, quashed the show cause notice and demand because the notice ignored the appellant's claim of export of service and failed to establish receipt of commission in INR; consequential relief granted as per law.

Service tax on spare parts and consumables separately invoiced with VAT - taxability of manufacturer-paid free services and pre-delivery inspection - tax point for service tax - receipt of consideration versus mercantile booking

Service tax on spare parts and consumables separately invoiced with VAT - Service tax liability on spare parts and consumables shown separately in the invoice and on which admissible VAT/Sales tax is charged or paid. - HELD THAT: - The Tribunal accepted that the earlier Larger Bench view relied upon by the Commissioner has been reversed by the Hon'ble Supreme Court in Larsen & Toubro Ltd. v. Union of India. Applying that authoritative position, the Tribunal held that where spare parts and consumables are shown separately in the invoice and admissible VAT/sales tax is charged or paid thereon, service tax is not leviable on those items. The determinative legal principle applied is that separately invoiced parts/consumables subject to VAT/sales tax do not constitute taxable service consideration for the purpose of service tax in the facts before the Tribunal. [Paras 4]

No service tax payable on spare parts and consumables shown separately in the invoice on which admissible VAT/Sales tax is charged or paid.

Taxability of manufacturer-paid free services and pre-delivery inspection - internal arrangement between manufacturer and dealer - Service tax liability on amounts received from the manufacturer by the dealer for providing free services (three free services) and pre-delivery inspection during the warranty period. - HELD THAT: - Relying on a coordinate bench decision in Commissioner of Central Excise & Customs, Nashik v. Automotive Manufacturers Ltd., the Tribunal treated payments by the manufacturer for free services or pre-delivery inspection as internal commercial arrangements forming part of the dealer's margin and not payments received from customers for services provided to car buyers. Since charges for those services are not received from customers, they do not attract service tax. The Tribunal therefore applied the principle that consideration not received from the service recipient (customer) but paid by the manufacturer as part of an internal arrangement is not taxable as service consideration under the facts of this case. [Paras 5]

No service tax payable on amounts paid by the manufacturer to the appellant for three free services and pre-delivery inspection during the warranty period.

Tax point for service tax - receipt of consideration versus mercantile booking - Leviability of service tax on rent that was shown as receivable in the books of account but was admittedly not received. - HELD THAT: - On the material placed by the appellant - ledger entries showing the amount as receivable and a Chartered Accountant's certificate confirming mercantile basis booking and non-receipt of payment - the Tribunal held that service tax was not chargeable merely on the raising of bills. The determinative finding is that service tax liability arises on receipt of consideration in these facts and not on mere mercantile booking of income which remains unrealized; accordingly, rental income booked but not received did not attract service tax. [Paras 6]

No service tax payable on rent receivable that was booked on mercantile basis but not received by the appellant.

Final Conclusion: The appeal is allowed on all three grounds; the impugned order is set aside and the appellant is entitled to consequential benefits in accordance with law.

Refund of service tax for services availed in the course of export - applicability of Notification No.17/2009-ST to exports prior to its issuance - refund claim to be filed within one year from date of export - Circular clarifying substitution of Notification No.41/2007-ST by Notification No.17/2009-ST - entitlement to refund with interest

Applicability of Notification No.17/2009-ST to exports prior to its issuance - Circular clarifying substitution of Notification No.41/2007-ST by Notification No.17/2009-ST - refund claim to be filed within one year from date of export - Notification No.17/2009-ST applies to exports made prior to 07.07.2009 subject to its conditions and as clarified by CBEC Circular - HELD THAT: - The Tribunal accepted the CBEC clarification that Notification No.17/2009-ST, which replaced Notification No.41/2007-ST, was intended to simplify the refund scheme and did not change the nature of the benefit to exporters. The Board clarified that the new notification applies also to exports made before its issuance, provided the conditions of the new notification are satisfied, in particular that refund claims are filed within one year from the date of export and that no refund has already been claimed under the previous notification. Having regard to this Circular, the question whether the new notification barred refunds for exports predating 07.07.2009 was resolved in favour of applicability subject to the stated conditions.

CBEC Circular settles that Notification No.17/2009-ST applies to earlier exports subject to the one year filing condition and absence of prior refund claim.

Refund of service tax for services availed in the course of export - entitlement to refund with interest - Appellant entitled to refund (with interest) of service tax paid on terminal handling, empty container offloading, transportation (ICD Delhi to Dadri), documentation and related services for the specified periods; commission agent service not pressed - HELD THAT: - Relying upon the Tribunal's precedents and the appellant's earlier favorable order, and in light of the CBEC Circular confirming applicability of Notification No.17/2009-ST, the Tribunal held that the refund claims for the specified services for the listed periods stand allowed. The Tribunal noted that the claim in respect of commission agent services was not pursued by the appellant because such commission related to payments made within the country. Consequently, the adjudicating authority was directed to grant the refunds along with interest according to the rules within 60 days of receipt of the order.

Appeals allowed (in part where applicable); refund to be granted with interest and directed to be paid within 60 days.

Final Conclusion: Appeals ST/9-11/2010 allowed; ST/867-868/2010 allowed in part. Refunds for specified export related services are directed to be granted with interest in accordance with rules within 60 days, subject to compliance with the conditions of Notification No.17/2009 ST (including the one year filing requirement) and absence of prior refund claims under the earlier notification.

SSI exemption - aggregate value for threshold exemption - clubbing of turnover - abatement under Notification No.1/2006-ST - gross amount under Section 67 - remand for computation of net tax

Aggregate value for threshold exemption - gross amount under Section 67 - abatement under Notification No.1/2006-ST - SSI exemption - Whether the amount to be considered for computing aggregate value for threshold (SSI) exemption is the gross receipts or the amount after abatement under Notification No.1/2006-ST. - HELD THAT: - The Tribunal examined the explanation B to Notification No.6/2005-ST which defines 'aggregate value' by reference to the 'gross amount' as prescribed under Section 67 but expressly excludes payments received towards such gross amount which are exempt from whole of service tax under any notification. Notification No.1/2006-ST grants an abatement in respect of 'Rent-a-Cab' services. Therefore the gross receipts must be reduced by the abatement exempted under Notification No.1/2006-ST when computing the aggregate value for the purpose of threshold exemption under Notification No.6/2005-ST. The Tribunal holds that only the net value received after applying the abatement is to be taken for determining entitlement to the SSI exemption. [Paras 6]

Only the net amount after abatement under Notification No.1/2006-ST is to be considered for computing aggregate value for SSI/threshold exemption.

Clubbing of turnover - SSI exemption - Whether the turnovers of the two appellants (husband and wife) could be clubbed for the purpose of denying threshold exemption. - HELD THAT: - The show-cause-notice did not propose clubbing of the two appellants' turnovers. The Adjudicating Authority aggregated their turnovers without recording reasons or framing the clubbing claim in the notice. The Tribunal found such clubbing impermissible in the absence of any proposal in the show-cause-notice and directed that each appellant be considered separately for threshold exemption. [Paras 6]

Clubbing of the appellants' turnovers is invalid; each appellant is entitled to be assessed separately for the threshold exemption.

Remand for computation of net tax - Remand for limited purpose of computation and finalisation of tax liability after applying the directions regarding abatement and separate consideration. - HELD THAT: - Having decided that net receipts after abatement are to be used and that the appellants are to be assessed separately, the Tribunal remanded the matter to the Adjudicating Authority to compute the net tax, if any, in accordance with the Tribunal's findings. The appellant was directed to file a copy of the calculation with the Adjudicating Authority along with a copy of the Tribunal order for finalisation. [Paras 6]

Matter remanded to the Adjudicating Authority for limited purpose of calculating net tax payable and finalising the adjudication in accordance with the Tribunal's directions.

Final Conclusion: The appeals are allowed: for SSI/threshold exemption purposes the gross receipts must be reduced by the abatement under Notification No.1/2006-ST and the two appellants' turnovers cannot be clubbed in the absence of a proposal in the show-cause-notice; the matter is remanded to the Adjudicating Authority for computation of net tax payable and finalisation.

Construction of Residential Complex Service - 12-unit threshold for levy of service tax - service tax liability for construction services provided to government/development authorities - penalty equal to tax under Section 78 - time-bar/limitation beyond five years

Construction of Residential Complex Service - 12-unit threshold for levy of service tax - service tax liability for construction services provided to government/development authorities - Whether service tax is leviable on the appellant's construction works for Ghaziabad Development Authority, Directorate of Married Accommodation (Ministry of Defence) and under JNNURM where each constructed block contains fewer than twelve units - HELD THAT: - The Tribunal found on the admitted facts that none of the constructed blocks in the projects adjudicated contain 12 or more units in a single block. The classification attracting service tax under the Construction of Residential Complex Service is triggered only where 12 or more units are constructed in one single block. The appellant's records and the impugned order itself show each block to be G+3 or otherwise having fewer than 12 units. The Tribunal noted precedent treatment on the threshold issue and concluded that, in absence of the statutory threshold being met, the show cause notice and the demand confirming service tax could not be sustained. Consequently the demand, including tax and consequential penalties premised upon levy under Construction of Residential Complex Service, was held to be untenable. [Paras 6, 8]

The demand of service tax confirmed in the impugned order is set aside insofar as it relates to the said residential construction projects; the appeal is allowed and the appellant is entitled to consequential relief in accordance with law.

Final Conclusion: The Tribunal allowed the appeal, holding that none of the impugned constructions attracted service tax under the Construction of Residential Complex Service as the requisite 12-or-more-units threshold was not met; the impugned Order-in-Original is set aside and consequential benefits granted.

Transaction value - assessable value - enforceable legal right - extraneous consideration - advertisement expenditure includible in assessable value

Transaction value - assessable value - extraneous consideration - advertisement expenditure includible in assessable value - Whether the portion of advertisement expenses borne by dealers (not reimbursed by the manufacturer) is an amount that the buyer is 'liable to pay to, or on behalf of' the manufacturer and therefore required to be included in the assessable/transaction value under Section 4 and the Valuation Rules. - HELD THAT: - The Tribunal examined pre- and post-1.7.2000 valuation law and identified the common requirement that the price be the sole consideration unless the buyer is liable to pay additional amounts. The determinative question was whether dealers were legally liable to pay the disputed portion of advertisement expenses as a condition of sale. The dealer agreement (clause 8(a)) merely stated that the dealer price includes 'advertising' among other possible additional charges, but there was no evidence that the manufacturer imposed or ever enforced a legal obligation on dealers to bear the unreimbursed 25% share. The arrangement by which the manufacturer reimbursed 75% and dealers bore the balance was found to be an internal, practical understanding-at best a 'gentleman's agreement'-and not a legally enforceable term giving the manufacturer a remedy in case of dealer default. The Tribunal held that the department produced no corroborative material (agreements, circulars, or instances of enforcement) to show compulsion or legal liability. The Tribunal further found that the advertisements benefited both manufacturer and dealers (synergy) and relied on precedent establishing that only when a legally enforceable right exists to compel the buyer to pay can such amounts be included. Applying the ratio of Philips India Ltd., TVS Motors, Surat Textile Mills and related authorities, the Tribunal concluded that the disputed dealer-borne 25% did not constitute an extraneous amount 'liable to be paid to or on behalf of' the manufacturer and therefore was not includible in assessable/transaction value. [Paras 6, 7, 8, 9]

The disputed portion of advertisement expenses borne by dealers is not includible in the assessee's assessable/transaction value; the impugned order is set aside and the appeal is allowed.

Final Conclusion: Appeal allowed. The Tribunal holds that the unreimbursed share of dealer-incurred advertisement expenses did not amount to an amount which the buyer was legally liable to pay to or on behalf of the manufacturer and therefore is not includible in the assessable/transaction value; the impugned order is set aside with consequential relief as per law.

Cenvat credit on input services for renovation and modernization - input service used in manufacture of dutiable goods - availability of credit despite plant being non-operational at time of receipt - exemption under Notification No.30/2004-CE

Cenvat credit on input services for renovation and modernization - input service used in manufacture of dutiable goods - availability of credit despite plant being non-operational at time of receipt - Entitlement to Cenvat credit in respect of input services incurred for renovation and modernization of a plant which was not operational at the time of receipt of services but was subsequently used for manufacture of dutiable goods. - HELD THAT: - The Tribunal found that the services for which Cenvat credit was availed were indisputably related to renovation and modernization of the appellants' plant and that the renovated plant was thereafter used for manufacture of dutiable goods. The mere fact that the plant was non-operational while modernization works were in progress does not disentitle the appellant to credit, since the input services were used in the manufacture of dutiable final products once the project reached completion. The Tribunal relied on an earlier decision in the appellant's own case dated 25/02/2016, which held that services employed for in-house manufacture of partially oriented yarn (POY) on which duty was discharged were not used for manufacturing exempted goods and therefore the Cenvat credit could not be denied. Applying the same reasoning, and noting that no goods were cleared under exemption during or after renovation, the Tribunal concluded that the services were properly creditable. [Paras 4, 5]

The impugned denial of Cenvat credit is set aside and the appeal is allowed; the appellant is entitled to Cenvat credit on the services used for renovation and modernization of the plant subsequently used for dutiable goods.

Final Conclusion: Cenvat credit for input services related to renovation and modernization is admissible where the refurbished plant is subsequently used to manufacture dutiable goods; absence of production during the gestation/renovation period does not defeat the entitlement to credit.

Valuation of depot clearances - assessable value at the depot at the time nearest to removal - rejection of depot invoices dated subsequent to factory clearance - time bar / limitation - adjustment of excess duty against demand and separate refund proceedings - penalty under Section 11AC and absence of mens rea/justification for penalty

Valuation of depot clearances - assessable value at the depot at the time nearest to removal - rejection of depot invoices dated subsequent to factory clearance - Whether depot invoices dated after the date of clearance from factory can be adopted to determine assessable value for stock transfers to depots. - HELD THAT: - For stock transfers from factory to depot, assessable value must be determined on the basis of the price prevailing at the depot on the date of removal from the factory or, if unavailable, the price nearest to that time. The duty is payable by the manufacturer at the time of clearance and the valuation must therefore be fixed with reference to depot invoices issued on or before the date of clearance. Adoption of depot invoice prices dated subsequent to the date of clearance is not contemplated by the valuation provisions and cannot be sustained. Consequently the part of the demand based on such subsequent-dated depot invoices was disallowed and set aside. [Paras 7]

Demand attributable to depot invoices dated after factory clearance is set aside.

Time bar / limitation - Whether the demand for differential duty was barred by limitation. - HELD THAT: - The adjudicating authority's finding that the demand was not time-barred was examined. The Tribunal agreed with the Commissioner that the demand did not merit being set aside on the ground of limitation, noting the appellant's conduct and the factual matrix considered by the adjudicator. [Paras 8]

The demand is not time-barred and the plea of limitation is rejected.

Adjustment of excess duty against demand and separate refund proceedings - Whether amounts paid in excess may be adjusted against amounts found short without separate refund proceedings. - HELD THAT: - The appellant had filed a separate refund claim for excess duty paid. The Tribunal declined to order adjustment in the present proceedings and refrained from adjudicating on the appellant's request for adjustment, leaving the separate refund claim to be considered in its own forum and proceedings. [Paras 9]

No direction for adjustment; refund claim to be dealt with in separate proceedings.

Penalty under Section 11AC and absence of mens rea/justification for penalty - Whether penalty imposed under Section 11AC was justified. - HELD THAT: - Given the transitional uncertainty in valuation practice after depot was defined as separate place of removal and amendment of valuation rules (with clarificatory Board circular), and the fact that the appellant commenced manufacturing immediately after starting operations, the Tribunal found no justification for imposing penalty. The historical flux in practice and law during the relevant period rendered penalty inappropriate. [Paras 10]

Penalty imposed under Section 11AC is set aside.

Final Conclusion: Part of the demand based on depot invoices dated after factory clearance (Rs. 14,61,527/-) is set aside; the remaining differential duty (Rs. 22,61,058/-) is upheld with interest; penalty under Section 11AC is set aside; no adjustment directed in these proceedings for excess payments, which are to be adjudicated through the appellant's separate refund claim.

End-use exemption - withdrawal of warehousing facility - duty liability on stock held on withdrawal date - binding effect of Board circular

End-use exemption - withdrawal of warehousing facility - Board circular para 4 - Whether stock of LSHS lying in installations on withdrawal of warehousing facility on 6/9/2004 remained eligible for clearance to specified end-users at nil duty under the exemption notification. - HELD THAT: - The Tribunal examined the Board circulars of 4-9-2004 and 4-1-2005 and earlier decisions of this Bench and the High Court in the appellant's own case. Paragraph 4 of the 4-9-2004 circular preserves exemptions allowing clearance without payment of duty to specified end-users and contemplates administrative measures where clearances are effected directly from refinery. The Tribunal found it admitted that the stocks in the installations were cleared only to specified end-users (KDPP and KPCL) entitled to exemption under the relevant notification. Relying on the settled position in earlier decisions that withdrawal of the warehousing facility does not defeat an otherwise subsisting end-use exemption, the Tribunal held that the goods in stock at the installation on the date of withdrawal were eligible for exemption when removed to the specified end-users and therefore not liable to duty. [Paras 7, 9]

Impugned orders confirming duty on the stock held on withdrawal of warehousing facility set aside; stock cleared to specified end-users entitled to exemption and no duty payable on such quantity.

Final Conclusion: Appeals allowed; Commissioner's orders confirming duty on LSHS stock as on withdrawal of warehousing facility quashed and exemption to specified end-users upheld with consequential reliefs, if any.

Payment of duty and interest on self-ascertainment before issuance of show cause notice - bar on issuance of show cause notice where Section 11A(2B) applies - exception for fraud, collusion, willful mis statement or intent to evade

Payment of duty and interest on self-ascertainment before issuance of show cause notice - bar on issuance of show cause notice where Section 11A(2B) applies - Validity of show cause notice issued after the assessee paid duty and interest on its own ascertainment and invoked the protection of Sub section (2B) of Section 11A of the Central Excise Act, 1944. - HELD THAT: - The Tribunal examined Sub section (2B) of Section 11A which provides that where an assessee, on his own ascertainment, pays the duty and interest before the issue of a show cause notice, a show cause notice demanding that amount cannot be served. The show cause notice in the present case acknowledged that the appellant had paid the duty and interest and had requested closure under Section 11A(2B). The adjudicating show cause notice did not address why the protection of Sub section (2B) would not apply, nor did it plead any of the exceptions set out in the proviso/explanation (fraud, collusion, willful mis statement, separation of facts or contravention with intent to evade duty). In the absence of any finding or material in the show cause notice or adjudication showing applicability of those exceptions, the pre condition for issuing a valid show cause notice under Section 11A(2B) was not satisfied. The Tribunal therefore concluded that the show cause notice was not tenable in law and the consequential adjudications based on it could not stand.

Show cause notice held not tenable; Order in Original and Order in Appeal set aside and appeal allowed with consequential relief as per law.

Final Conclusion: Where an assessee has, on its own ascertainment, paid duty and interest before issuance of a show cause notice and the adjudicatory order does not demonstrate any of the statutory exceptions (fraud, collusion, willful mis statement or intent to evade), the show cause notice is not legally sustainable; the impugned orders confirming demand and penalty were set aside and the appeal allowed.

Time-bar of show-cause notice - limitation - CENVAT credit - re-credit/rebate - suppression of facts

Time-bar of show-cause notice - limitation - suppression of facts - Whether the demand in the show-cause notice was time barred and liable to be rejected on limitation grounds. - HELD THAT: - The appellant had paid duty on export clearances and after pursuing the department for rebate/re-credit submitted an undertaking and subsequently took re-credit in its CENVAT account, intimating the department by letter dated 28.2.2008. The department, despite that clear intimation, issued the show-cause notice only after a lapse of approximately three years. The Tribunal found that there was no suppression of facts by the appellant since the taking of re-credit had been disclosed to the department. On these findings the Tribunal concluded that the demand raised by the belated show-cause notice was time barred and could not be sustained. The appeal was disposed of on limitation without adjudicating the merits.

The impugned order set aside and the appeal allowed on the ground that the show-cause notice was time barred.

Final Conclusion: Appeal allowed and impugned order set aside on limitation grounds as the show-cause notice was issued after a substantial lapse of time despite prior intimation of re-credit by the appellant; merits not decided.

CENVAT Credit admissibility - debit note as tax paying document - documentary requirements for availing CENVAT - Rule 4 of the Service Tax Rules, 1994 - Rule 9 of the Cenvat Credit Rules, 2004 - invoice or challan treated as proper document

CENVAT Credit admissibility - debit note as tax paying document - Rule 4 of the Service Tax Rules, 1994 - documentary requirements for availing CENVAT - Whether CENVAT credit of Service Tax on rent is admissible on the basis of a debit note issued by the premises owner. - HELD THAT: - The Tribunal examined the debit note and found it to contain the particulars required under the Service Tax Rules, namely the name of the lessor (service provider), debit note number and date, nature of service, Service Tax amount, Service Tax registration number and the name of the appellant as recipient. On that basis the debit note satisfied the documentary requirements laid down in Rule 4 of the Service Tax Rules, 1994 and could be regarded as a proper tax-paid document for availing CENVAT credit. The Tribunal distinguished precedents relied upon by the Revenue on their facts (absence of service particulars, ambiguity as to agency, or differing judicial formation) and relied on earlier Tribunal decisions where credit on debit notes was allowed, including a Division Bench view that any document containing details prescribed under the Rules may be treated as invoice or challan for CENVAT purposes. Having found that the debit note contained all necessary particulars, the denial of credit by the lower authorities on the ground that a debit note is not a valid document was not sustained. [Paras 1, 2, 4, 5]

The impugned order is set aside and the appeal is allowed; CENVAT credit on the debit note is admissible.

Final Conclusion: The Tribunal allowed the appeal, holding that the debit note contained the requisite particulars under the Service Tax Rules and therefore constituted a proper document for availing CENVAT credit; the impugned denial of credit was set aside.

Inclusion of excise duty paid on inputs in assessable value - inclusion of notional profit in assessable value - binding effect of tribunal's earlier decision in the same case - requirement of Cost Accountant certification for cost of manufacture - remand to adjudicating authority for ascertainment of correct value

Inclusion of excise duty paid on inputs in assessable value - inclusion of notional profit in assessable value - binding effect of tribunal's earlier decision in the same case - Whether excise duty paid on inputs and notional profit are includible in the assessable value of final products - HELD THAT: - The Tribunal recorded that the Commissioner (Appeals) had already decided the legal question that excise duty payable on inputs is not includible in the assessable value. With respect to notional profit, the Tribunal relied on its own earlier order in the appellant's case dated 23.8.2005, holding that no amount on account of notional profit can be added. Having regard to those earlier determinations, the Tribunal affirmed that neither the excise duty on inputs nor notional profit can be added to the assessable value of the final products. [Paras 4]

Excise duty on inputs is not includible in assessable value; notional profit cannot be added, following the Tribunal's earlier decision.

Requirement of Cost Accountant certification for cost of manufacture - remand to adjudicating authority for ascertainment of correct value - Validity of remand for verification of cost of manufacture and the requirement that cost be certified by a qualified Cost Accountant - HELD THAT: - The Commissioner (Appeals) remanded the matter because the cost of manufacture submitted by the appellant was certified by the company's Director rather than a qualified Cost Accountant and because the cost figures were said not to conform to prescribed cost accounting standards. The Tribunal held that this factual objection was not raised in the show-cause notice stage and that, given the age of the case, it would be impractical to insist at this stage on a Cost Accountant's certificate. Accordingly the direction to furnish a Cost Accountant's certificate was set aside. Nevertheless, the Tribunal found no error in remitting the matter to the adjudicating authority for ascertainment of the correct value, subject to acceptance of the cost certified by the appellant if the underlying Books of Account support the data. [Paras 4]

Direction to produce a Cost Accountant's certificate set aside; remand to adjudicating authority to ascertain correct value upheld, with cost certified by the appellant acceptable subject to verification from Books of Account.

Final Conclusion: The appeal is disposed of by holding that excise duty on inputs and notional profit are not includible in assessable value; the appellate direction to obtain a Cost Accountant's certificate is set aside, but the remand to the adjudicating authority to ascertain the correct value is sustained, with the appellant's certified cost acceptable if supported by Books of Account.

Exigibility of excise duty on gases vented to atmosphere - Board's Circular exempting gases vented to atmosphere - absence of consideration for vented goods - binding effect of departmental circular

Exigibility of excise duty on gases vented to atmosphere - Board's Circular exempting gases vented to atmosphere - absence of consideration for vented goods - binding effect of departmental circular - Duty of excise is not leviable on quantities of gases produced and allowed to escape into the atmosphere during continuous manufacture where such venting is technical/operational and no consideration was received. - HELD THAT: - The Tribunal applied its earlier decision in the appellant's own case and accepted the factual position that, due to the continuous manufacture process and technical necessity, some volumes of Oxygen, Nitrogen and Argon were vented into the atmosphere to avoid pipeline damage. The Department's show-cause notice conceded venting but did not produce evidence of any consideration received for the vented gases. The Board's Circular clarifying that gases produced in a factory and allowed to escape into the atmosphere are not to be regarded as manufactured goods liable to duty was held to be applicable. In view of the combination of (i) the operational necessity causing venting, (ii) absence of any price or consideration for the vented quantities, and (iii) the Board's clarification, the Tribunal found the excise demands unsustainable and followed the earlier binding pronouncement which the Department had accepted.

Impugned order setting aside the duty demands is upheld and the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal affirmed its earlier view that gases vented to atmosphere in the course of continuous manufacture, where no consideration is received and in light of the Board's clarification, are not exigible to excise duty; the Revenue's appeal is dismissed and the impugned orders are upheld.

CENVAT credit - 100% Export Oriented Unit - domestic tariff area clearances on payment of customs-equivalent duty - education cess and secondary and higher education cess - ineligibility of credit under rule 3 of CENVAT Credit Rules, 2004 - proviso to rule 3(7) of CENVAT Credit Rules, 2004 - penalty under section 11AC

CENVAT credit - education cess and secondary and higher education cess - 100% Export Oriented Unit - ineligibility of credit under rule 3 of CENVAT Credit Rules, 2004 - proviso to rule 3(7) of CENVAT Credit Rules, 2004 - Availment of CENVAT credit of education cess and secondary & higher education cess included in duties computed on DTA clearances by a 100% Export Oriented Unit - HELD THAT: - The Tribunal held that rule 3 of the CENVAT Credit Rules, 2004 specifically enumerates the duties eligible for credit and, by reference to the Central Excise Tariff Act, 1985, excludes the indiscriminate availment of the aggregate duty collected on DTA clearances by a 100% EOU. The duty levied on such clearances, though calculated to be equivalent to customs duties, comprises distinct components including basic customs duty and separate cesses. With the insertion of the proviso to rule 3(7) w.e.f. 7-9-2009, the availability of credit of cess included in the total levy was clearly curtailed. Applying these provisions to the facts, the Tribunal sustained the disallowance of CENVAT credit of the education cess and secondary & higher education cess claimed by the appellant for the period in question. [Paras 5, 7]

Credit of the education cess and secondary & higher education cess included in duties on DTA clearances by the 100% EOU is not allowable under rule 3 of the CENVAT Credit Rules, 2004; the disallowance is sustained.

Penalty under section 11AC - CENVAT credit - Imposition of penalty under section 11AC for availment of the impugned CENVAT credit - HELD THAT: - While the availment of the ineligible credit was upheld as incorrect, the Tribunal noted that the error arose from apparent confusion regarding the nature and composition of the levy and the existence of earlier Tribunal decisions that might have supported the appellant's belief. There was no indication of deliberate intent to evade duty. In view of these mitigating factors, the Tribunal found the imposition of penalty inappropriate and set aside the penalty. [Paras 8, 9]

Penalty under section 11AC is set aside.

Final Conclusion: The appeal is allowed in part: the disallowance of CENVAT credit of the education cess and secondary & higher education cess on DTA clearances by the 100% EOU for July 2010 to May 2011 is upheld, but the penalty imposed under section 11AC is set aside.

Input service - place of removal - CENVAT Credit Rules, 2004 - export goods and non-levy of excise - refund and alternative mechanisms for exporters

Input service - place of removal - CENVAT Credit Rules, 2004 - export goods and non-levy of excise - Whether CENVAT credit of duty/tax paid on services used for delivery and handling of goods up to the port of export (post-factory activities) qualifies as credit for an input service and is admissible under the CENVAT Credit Rules, 2004 where the goods are destined for export. - HELD THAT: - The Tribunal held that CENVAT Credit Rules, 2004 are designed to eliminate cascading of tax for manufacturers and service providers and that the mere existence of separate refund mechanisms for certain services used by exporters does not exclude other services from being treated as input service. Because excise duty is not leviable on goods intended for export, the statutory concept of place of removal-inserted in the Central Excise Act, 1944 to identify the point of collection of duty-cannot be stretched to restrict the scope of input services for export goods. For exported goods (for example on FOB terms) the place of removal may extend to premises such as the port where goods are deposited without payment of duty; services used up to such place of removal qualify as input service. The Tribunal relied on precedents holding that taxes should not be exported and that services subject to tax and used in exports should be facilitated for exemption/refund/credit by the appropriate mechanism to prevent export pricing from bearing domestic taxes. Applying these principles to the facts, the Tribunal found the services in question were rendered to the assessee and used in relation to goods exported and therefore the credit already availed could not be disallowed. [Paras 5, 6, 7]

Demand of tax, interest and penalty in respect of CENVAT credit taken on services used for delivery/handling of exported goods up to the place of removal is not sustainable; the appeal is dismissed.

Final Conclusion: The Tribunal dismissed the Revenue appeal and upheld the availment of CENVAT credit in respect of services used for delivery/handling of goods up to the place of export, holding that such services qualify as input service for goods destined for export and that the demand confirmed by the original authority cannot be sustained.

Recall of ex-parte order - power to set aside ex-parte orders - restoration of appeal - condition of costs for restoration - directions of the High Court - interest of justice

Recall of ex-parte order - power to set aside ex-parte orders - directions of the High Court - condition of costs for restoration - restoration of appeal - interest of justice - Recall of the Tribunal's ex parte Final Order dated 09.04.2015 in respect of M/s Chandravati Polymers Pvt. Ltd., and restoration of the appeal on conditions. - HELD THAT: - The Tribunal considered the direction of the Hon'ble Allahabad High Court to permit the appellant to move an application for recall and to decide it after hearing parties. The appellant filed a miscellaneous (recall) application alleging non service of notices and non appearance due to communication/address issues. Having regard to the High Court's direction and in the interest of justice, the Tribunal found it appropriate to set aside the ex parte final order and restore the appeal, while imposing a condition to guard against misuse of process. The recall is allowed subject to payment of costs to the Prime Minister's National Relief Fund, the registry is directed to restore the appeal to its original number, and a final hearing date is fixed with a specific direction against adjournment. [Paras 4, 5, 6]

Miscellaneous application for recall is allowed subject to payment of costs of Rs. 50,000 to the Prime Minister's National Relief Fund; Appeal No.E/902/2005 EX[DB] is restored to its original number and listed for final hearing on 08.06.2017 with no adjournment.

Final Conclusion: The Tribunal, following the High Court's direction and in the interest of justice, allowed the recall application, imposed costs as a condition of restoration, restored the appeal to its original number and fixed a final hearing date, directing that no adjournment shall be granted.

Proviso to Sub-section (1) of Section 11A of the Central Excise Act, 1944 (extended period for suppression of facts) - suppression of facts - issuance of subsequent show cause notice based on same record - principle in Nizam Sugar Factory regarding estoppel against re invoking extended period

Proviso to Sub-section (1) of Section 11A of the Central Excise Act, 1944 (extended period for suppression of facts) - issuance of subsequent show cause notice based on same record - principle in Nizam Sugar Factory regarding estoppel against re invoking extended period - Validity of the Show Cause Notice dated 30/12/2003 which invoked the proviso to Sub-section (1) of Section 11A for the period including Financial Year 1997-98 to 2001-02, when an earlier Show Cause Notice dated 31/03/2003 invoking the proviso had been issued on the basis of the same records. - HELD THAT: - The Tribunal applied the principle laid down by the Hon'ble Supreme Court in Nizam Sugar Factory that when a Show Cause Notice invoking the extended period on the ground of suppression of facts has been issued on the basis of particular records, the same facts cannot later be the basis for issuing another Show Cause Notice again invoking the proviso for extended period. In the present case the entire records on the basis of which both Show Cause Notices were issued had come to the knowledge of the Department on 11/03/2003. Therefore the later Show Cause Notice dated 30/12/2003, being based on the same material already within the Department's knowledge, was not tenable and was liable to be set aside in view of the cited principle.

The Show Cause Notice dated 30/12/2003 is not tenable and the Revenue's appeal is dismissed; respondents entitled to consequential relief in accordance with law.

Final Conclusion: Applying the Supreme Court's principle in Nizam Sugar Factory, the Tribunal held that a subsequent Show Cause Notice invoking the extended period cannot be sustained where the same records that formed the basis of an earlier extended period notice were already within the Department's knowledge; Revenue's appeal dismissed.

Applicability of Rule 7 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Provisional assessment and finalization consignment agent-wise - Valuation by reference to normal transaction value at place of consignment

Applicability of Rule 7 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Provisional assessment and finalization consignment agent-wise - Whether Rule 7 was applicable to finalize provisional assessments for goods partly sold at factory gate and partly transferred to consignment agent - HELD THAT: - The Tribunal applied its earlier decision recorded in Final Order No. 71113/2016 dated 29/11/2016, holding that the provisions of Rule 7 are attracted only where the entire quantity of goods manufactured by an assessee is transferred to depots or premises of a consignment agent and none of the goods are sold at the factory gate (the place of removal). In the present case the records admit that some goods were sold at the factory gate while others were sent to the consignment agent. Given that part of the manufacture was sold at the factory gate, Rule 7 could not be invoked to require consignment-agent-wise finalization of provisional assessments or to value the goods solely by reference to transaction value at the consignment place. Consequently the remand direction in the Commissioner (Appeals) order to re-finalize assessments consignment agent-wise under Rule 7 was not sustainable.

Provisions of Rule 7 are not applicable where some goods are sold at the factory gate; the Commissioner (Appeals) orders directing re-finalization under Rule 7 are set aside and the Orders-in-Original dated 14/08/2008 are restored.

Final Conclusion: The appeals are allowed; the Tribunal holds Rule 7 inapplicable where the assessee sells part of the manufactured goods at the factory gate and restores the Orders-in-Original dated 14/08/2008, permitting consequential relief in accordance with law.

Classification of goods as 'waste and scrap' or as 'goods' - reversal of Cenvat credit on removal of waste and scrap of capital goods under Rule 3(5A) of the Cenvat Credit Rules, 2004 - liability on removal of used/old capital goods

Classification of goods as 'waste and scrap' or as 'goods' - reversal of Cenvat credit on removal of waste and scrap of capital goods under Rule 3(5A) of the Cenvat Credit Rules, 2004 - Whether removal of old and used Brass Tubes to a job worker for remaking attracted reversal under Rule 3(5A) as removal of 'waste and scrap'. - HELD THAT: - The Tribunal examined the nature of removal and the documentary evidence on record, including sample bills showing removal as 'Brass Tubes' and not as 'waste and scrap'. On that factual and evidentiary basis the appellant's outward supply was held to be of used Brass Tubes as goods sent for remaking, and not a disposal of waste or scrap. Consequently the statutory obligation to reverse Cenvat credit on removal of waste and scrap under Rule 3(5A) was not attracted. The Tribunal also noted the revenue-neutral effect argued by the appellant but determined the primary question by reference to the characterisation of the removed items. In view of the characterisation and the inapplicability of Rule 3(5A), the impugned demand, interest and penalties were unnecessary and were set aside.

Removal of used Brass Tubes to job worker was not removal of 'waste and scrap' and Rule 3(5A) did not apply; appeal allowed and the demand with penalties set aside.

Final Conclusion: The appeal was allowed: removals of used Brass Tubes were held to be as goods sent for remaking and not as waste/scrap, Rule 3(5A) of the Cenvat Credit Rules, 2004 was held inapplicable, and the demand with interest and penalties was set aside for the period in dispute.

Maintainability of writ petition in presence of alternative statutory remedy - opportunity of hearing under Rule 24 of the Bihar Value Added Tax Rules - show cause notice and hearing under Section 33 of the Bihar Value Added Tax Act, 2005 - principles of natural justice

Maintainability of writ petition in presence of alternative statutory remedy - Whether the writ petition under Articles 226/227 is maintainable when an alternate statutory remedy of appeal is available. - HELD THAT: - The Court examined whether extraordinary constitutional jurisdiction should be exercised where the petitioner had not availed the statutory appellate remedy. Having considered the record and the preliminary objection, the Court held that the availability of the statutory remedy of appeal to the JCCT (Appeal) Purnea Division weighed against entertain ing the writ petition at this stage. The Court recorded that the matter involved challenges to re-assessment orders under the Act and that the appellate forum was competent to consider the contentions, including allegations of denial of natural justice. In these circumstances the Court declined to exercise writ jurisdiction and dismissed the petition on maintainability grounds, while observing that its findings were provisional for the limited purpose of deciding maintainability. [Paras 2, 9, 11]

Writ petition dismissed for non-exhaustion of the statutory appellate remedy; petitioner free to pursue appeal.

Opportunity of hearing under Rule 24 of the Bihar Value Added Tax Rules - show cause notice and hearing under Section 33 of the Bihar Value Added Tax Act, 2005 - principles of natural justice - Whether the reassessment orders were passed in violation of principles of natural justice by failing to grant the hearing contemplated under Rule 24. - HELD THAT: - The Court analysed Rule 24 and concluded that it contemplates issuance of show cause notice, opportunity for submissions and recording of the gist of accusations and reply; it does not mandate an oral personal hearing in every case. On the facts, contemporaneous records including show cause notices, proof of service by e-mail, vakalatnama filed by the petitioner's counsel, written objections, and the order-sheet indicated that the petitioner was given opportunity to be heard and did participate through counsel on the fixed date. The Court therefore found no prima facie case of a complete denial of hearing; this finding was recorded as provisional for the purpose of deciding maintainability and can be agitated afresh before the appellate authority. [Paras 5, 6, 7, 8, 10]

Provisional finding that Rule 24 did not require the specific form of personal hearing claimed and that an opportunity to be heard was, on the record, afforded to the petitioner; matter to be considered afresh on appeal.

Final Conclusion: The writ petition is dismissed as not maintainable because the petitioner has an effective statutory remedy of appeal; the Court made provisional findings that the procedure under Rule 24 and principles of natural justice were, prima facie, complied with on the record, but the petitioner may raise these objections before the appellate authority without prejudice to its contentions.

Imposition of penalty for suppression of turnover under KGST Act - requirement of deliberate suppression for penalty under Section 45A - inter state sale/import versus works contract turnover - application of Central Sales Tax provisions to transfers in execution of works contracts - deemed sale in works contract (Explanation 3A of Section 2(xxi) KGST)

Imposition of penalty for suppression of turnover under KGST Act - requirement of deliberate suppression for penalty under Section 45A - inter state sale/import versus works contract turnover - Whether the penalty imposed under Section 45A of the KGST Act could be sustained without a proper adjudication on whether the transactions constituted inter state sale/import or were part of the works contract turnover and whether there was deliberate suppression of taxable turnover. - HELD THAT: - The Court reviewed the competing contentions and authorities regarding when goods brought from outside the State and used in execution of a works contract amount to inter state sale/import or form part of the works contract turnover assessable under the KGST Act. The Court observed that imposition of penalty under Section 45A requires a finding of deliberate suppression of turnover. The assessing and revisional authorities had held that the goods were purchased inter state or imported and became property of the contractor only upon completion of the works, but the petitioner contended that other contractual terms relevant to that conclusion were not considered. Given that an assessment had been remitted earlier and that the penalty hinges on whether there was contumacious conduct in declaring the nature of the transactions, the Court concluded that the authorities must examine the full contract terms and the gamut of precedents before determining both (a) the characterisation of the transactions as inter state sale/import or works contract turnover and (b) whether deliberate suppression was proved. The Court therefore found it appropriate to set aside the revisional order and remit the matter for fresh consideration in accordance with law and the observations made in the judgment. [Paras 12]

Ext. P6 is set aside and the matter is remitted to the first respondent for fresh consideration of the revision petition in accordance with law and the observations made by the Court.

Final Conclusion: The revisional order confirming penalty (Ext. P6) is set aside and the matter remitted to the first respondent for fresh consideration of the revision petition, requiring a fresh adjudication on (i) whether the transactions constituted inter state sale/import or formed part of works contract turnover and (ii) whether deliberate suppression under Section 45A was established, having regard to the contract terms and applicable precedents.

Relaxation of recruitment rules - promotion eligibility and physical standards - discrimination and equality of treatment - policy-based relaxation for specified tribes/communities - separate classification of persons with disabilities - discretionary relief is not a matter of right

Relaxation of recruitment rules - promotion eligibility and physical standards - discretionary relief is not a matter of right - Petitioner not entitled to relaxation of the prescribed height requirement for promotion to the post of Inspector (Central Excise). - HELD THAT: - The recruitment rules prescribe a mandatory height requirement which the petitioner did not satisfy. The competent authority has not granted relaxation to individual employees; the only relaxation referred to by the authorities is a policy concession applicable to employees belonging to specified tribes and communities. Since that policy-based concession does not extend to the petitioner, and no discretion has been exercised in his favour, he cannot claim relaxation as a matter of right. The Tribunal rightly declined to direct relaxation in his case.

Claim for relaxation of height requirement rejected and relief denied.

Discrimination and equality of treatment - separate classification of persons with disabilities - Petitioner cannot claim parity with persons with disabilities for the purpose of relaxation reserved for that class. - HELD THAT: - The concession afforded to differently-abled persons arises from their status as a separate and distinct class under the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995. That statutory scheme and reserved relaxation for differently-abled persons do not entitle other employees who do not belong to that class to the same benefit. The Tribunal correctly rejected the plea for parity with differently-abled persons.

Claim of parity with differently-abled persons rejected.

Final Conclusion: The Tribunal's order refusing direction to relax the height requirement for promotion to Inspector (Central Excise) is affirmed; the OA is dismissed.